Agenda and minutes

Governance and Audit Committee
Thursday, 26th March, 2015 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 4 December 2014


Updates from previous meeting


    The Chairman and Vice-Chairman of the Committee reported that they were still awaiting details of the failure rate for repairs and the targets for reducing that level.


    Following consideration of the annual Health and Safety Report at the Committee’s meeting on 4 December 2014, the Chairman stated that he had received additional information to clarify the accident rates within the Council’s leisure centres. As a number of discrepancies between the figures presented at the meeting on 4 December 2014 and the update that was subsequently provided, it was suggested that an interim report be presented at the next meeting of the Committee.


External Audit Plan 2014/15

    The Committee will consider the External Audit Plan for 2014/15.



    Mike Norman from KPMG, the Council’s External Auditor, presented the External Audit Plan 2014/15. He informed members that the audit would give an opinion on the authority’s financial statements and a conclusion on measures taken by the Council to secure economy, efficiency and effectiveness in its use of resources. The audit would be carried out in accordance with the Audit Commission’s Code of Practice and the Audit Commission Act 1998.


    Initial risk assessments on the audit of financial statements and the value for money conclusion did not identify any significant risks that would require additional work.


    The plan outlined the four stages that would form the audit: planning, control evaluation, substantive procedures and completion and included anticipated timings. The report included a number of declarations around independence and quality framework arrangements. Notification was also given of a change to the Audit team.


    Members noted an increase in the audit fee of £900; this was a national increase and reflected additional work KPMG was required to carry out on business rates. External Audit explained that the increase in fee was offset by the removal of the cost for the certification of non-domestic rates as this work was no longer required by the Department of Communities and Local Government.


    A question was asked regarding proposals to bring forward the deadline for the production and audit of accounts from 2017/18. Members were informed that no changes to the timetable had been made however they were anticipated given the trend to bring forward the production of accounts across the wider public sector. Consideration was given to this as part of the report on accounting policies and the review of year end procedures for 2014/15 (minute number 47).


    Representatives of KPMG confirmed that to date, they were on track to deliver the audit plan as presented.


    The Committee noted the External Audit Plan 2014/15.


Certification of grants and returns annual report 2013/14


    Mr Norman presented the Certification of Grants and Returns for 2013/14. Certification was carried out on the Housing Benefit Subsidy Claim and the Capital Receipts Pooling Return. Both of these were submitted to the relevant government department and KPMG by the relevant deadlines.


    The Committee was informed that a small adjustment had been made and agreed with managers in relation to the Housing Benefit Subsidy Claim. Members noted that no recommendations had been made to the Council in relation to its claims completion process.


    The report also included details of the fees and charges for certification work. Members’ attention was drawn to an adjustment that had been made by the Audit Commission to increase fees as a full certification testing programme had to be carried out, making the process for 2013/14 more complex than that of 2012/13. This additional work was required every three years.


    Members of the Committee noted the report.


Internal audit progress report and follow up report

    Report CFM315 from the Corporate Finance Manager.



    The Corporate Finance Manager introduced report number CFM315 on the Internal Audit Progress Report covering 19 November 2014 to 28 February 2015.


    Amjad Ali presented the report on behalf of Baker Tilly, which provided the Internal Audit service to the Council. He informed members that since their last update, five reports had been finalised; one had been given an amber-green opinion (building control) and four had been given a green opinion (contracts management, risk management, performance management and arts and events – Gravity Fields Festival).


    Committee members noted that no recommendations had been raised during the contracts management and risk management audits.


    Four medium and three low risk recommendations were raised and accepted by management as a result of the audit of building control. The medium risk recommendations were summarised for members’ information and the Committee was reassured that the recommendation relating to the storage and banking of cheques had already been implemented. One low risk recommendation had arisen from the performance management audit.


    Members asked a number of questions about the two medium risk recommendations raised during the Arts and Events – Gravity Fields Festival Audit. Concerns were voiced about actual expenditure for the festival exceeding the budgeted level. Officers informed the Committee that the figures used for the audit were forecast figures and that a number of the items related to broader infrastructure costs, which would need to be redistributed to other budget heads. Following the movement of this expenditure, the estimated overspend was anticipated as approximately £8k. While the council had a reserve to fund events and festivals, it was hoped that any overspend could be absorbed by wider corporate underspends. Members suggested that when a report mentioned an item that exceeded budgeted levels, it might be appropriate to include a brief note or appendix to provide contextual information. Councillors also recognised the need to retain the logs of ticket sales for events not held at the arts centres so that there was a record against which monies could be reconciled.


    A follow up report, which reviewed progress against the implementation of medium and high risk recommendations made by Internal Audit, gave an opinion that ‘good progress’ had been made. Of those recommendations that were followed up, 77% had been implemented, 8% implementation was ongoing and 15% (3 medium risk recommendations) had yet to be implemented. Two of those related to the Data Protection audit while the third was a long-standing recommendation that related to cash and banking at Bourne Community Access Point (CAP). The implementation of the recommendation that related to the CAP was complicated by the joint working arrangements between South Kesteven District Council and Lincolnshire County Council. Committee members were advised that the recommendation related to immaterial sums collected for overdue library books and a pragmatic approach might have to be taken on implementation.


    The Committee accepted the report.


Internal Audit Plan 2015/16

    (To follow)


    Rob Barnett from Baker Tilly presented the draft internal audit plan for 2015-16. In preparing the plan Internal Audit had considered changes to potential risks for the year and the Council’s risk registers, spoken to officers, considered the findings of historic audits and Sector issues. The plan provided a brief overview of the proposed audit and more detailed scopes would be developed prior to the commencement of each audit.


    The Committee was notified that there had been an increase in contingency days from 18 to 25 and members were reminded that changes could be made to the programme through the year if new risks or concerns emerged.


    The Committee was asked to consider whether it felt the draft plan was fit for purpose and if so, to endorse the plan.


    Members of the Committee were pleased that gas servicing had been included in the draft plan and suggested that if possible it should be brought forward from quarter 3.


    The final stage that would be undertaken in the development of the draft plan was consultation with External Audit. International Standards on Auditing stipulated that External Audit must not direct Internal Audit.


    A new Committee would be appointed following the election and it was recognised that the plan would be reviewed during the course of the year where amendments could be made if the Committee were so minded. Committee members queried what would happen if an urgent matter arose between its meetings. Any serious issues that arose would be raised with the Section 151 Officer and the Corporate Finance Manager (the Council’s Audit sponsor) and direct contact could be made with the Chairman of the Committee.


    Internal Audit thanked the officers with whom they had been working, together with the management team, for their input in the production of the plan.


    The Committee agreed the draft Internal Audit Plan 2015-16.


Accounting policies and Review of Year End Procedures 2014/15

    Report CFM314 from the Corporate Finance Manager.



    The Corporate Finance Manager presented report number CFM314 on the Statement of Accounting Policies and review of yearend procedures 2014/15. Following a review of the Code for the 2014/15 accounts, no substantive changes had been made that would require a change to the Council’s accounting policies. Officers were working with External Audit on removing any non-essential notes to the Accounting Statements that were not considered to add value to the reader of the accounts.


    Consultation proposing new timescales for the production of accounts by local authorities had been undertaken however any changes going forward had yet to be announced. In anticipation of the introduction of earlier deadlines, the report highlighted a number of changes that would be introduced for the closedown of accounts for 2014/15. Further work would also be required to ensure the Council met an earlier closedown deadline; areas that had been identified that could help reduce the timeframe would be reviewed in parallel with the closedown of accounts for 2014/15. Any other strategies used by colleagues around the region to reduce the production time for the  statements would also be considered.




    The Governance and Audit Committee approved the Statement of Accounting Policies to be used in the production of the 2014/15 financial statements and approve the proposed changes to the production of the 2014/15 financial statements.


Pension assumptions

    Report CFM316 from the Corporate Finance Manager.



    The Financial Accountant Team Leader presented report number CFM316 on the underlying assumptions to be used to calculate IAS19 pension figures in 2014/15 Statement of Accounts.


    IAS19 – Employee Benefits was one of the financial reporting standards that had to be complied with during the production of the annual Statement of Accounts. It required that an organisation should account for retirement benefits at the time it was committed to give them irrespective of when they would be paid out. The scheme actuaries used assumptions to reflect expected future events including forecasts of price inflation, pension increase rates, salary increase rates, the expected return on assets, the discount rate and demographic assumptions to produce a best estimate of future cash flows under the scheme liabilities.


    SKDC used the calculated costs and underlying assumptions based on the advice of the actuary of the Lincolnshire County Council Pension Fund and the administering authority (Lincolnshire County Council), in preparing the annual Statement of Accounts.


    Formal actuarial valuation was carried out every three years (last undertaken in 2013). The figures produced for 31 March 2015 were estimates based on that actuarial valuation rolled forward and allowing for changes in underlying assumptions.


    While members of the Committee acknowledged that the assumptions could only be based on estimates, they were given confidence from the model through which the assumptions were developed.




    That the Governance and Audit Committee supports the IAS19 (International Accounting Standard 19) assumptions that are to be used in the production of the 2014/15 Statement of Accounts.


Close of meeting