Agenda and minutes

Governance and Audit Committee
Thursday, 3rd December, 2015 2.00 pm

Venue: Witham Room - South Kesteven House, St. Peter's Hill, Grantham. NG31 6PZ. View directions

Contact: Jo Toomey 

Items
No. Item

33.

Apologies

    Minutes:

    An apology for absence was received from Councillor Paul Wood. Apologies for absence were also received from Councillor Terl Bryant (Portfolio Holder: Strategic Resources – Well Run Council), Councillor Kelham Cooke (Portfolio Holder: Governance and Communication) and John Cornett from KPMG.

34.

Disclosure of interests

35.

Minutes of the meeting held on 24 September 2015 pdf icon PDF 357 KB

                                                                                                                      (Enclosure)

    Minutes:

    The minutes of the meeting held on 24 September 2015 were agreed as a correct record.

36.

Updates from previous meeting

    ·         Verbal update: ICT Strategy – risks and mitigation

    Minutes:

    At the Committee’s meeting on 25 June 2015, members had discussed the risk related to the ability for ICT infrastructure and support systems to be adapted and configured in order to provide a resilient framework, specifically to meet the challenges of agile working and the customer access strategy. At June’s meeting, it was reported that this risk had been moved from green to amber.

     

    The Executive Manager, Commercial informed members that since 25 June 2015 a new, 2-year ICT Strategy had been developed and was awaiting sign-off by the Portfolio Holder for Governance and Communication. There were two key strands to the strategy: running the IT department as a professional business and supporting council strategies going forward. The risk had been reviewed but remained at amber as the strategy had not yet been implemented. The objective of the new strategy was to ensure that there was a robust platform in place from which the council could deliver key programmes of work.

     

    The Executive Manager, Commercial also explained that there was a commitment to develop a corporate applications register with a view to rationalisation. Any new software requests would be considered by a project review panel that would look at the corporate fit, standard and compatibility.

     

    Members sought assurance that there were sufficient skills to support the council’s portfolio of applications and resources in place to implement the strategy. A skills assessment had been undertaken with primary and secondary skills to ensure that there was cover for all key applications. Resources within the IT team would be ringfenced to deliver the strategy and any IT support required as part of new programmes would need to be costed into the projects. The Council was working closely with Boston Borough Council to share expertise while wider discussions were taking place about where potential benefits could be gained from working with the private sector.

     

    On a separate matter the Chairman confirmed that the member who had asked about the occupancy of Bourne core area units had received a reply from the officer.

37.

Annual Audit Letter 2014/15 pdf icon PDF 62 KB

    External Audit to present the Annual Audit Letter 2014/15.     (Enclosure)

    Minutes:

    Mike Norman from KPMG presented the annual audit letter 2014/15, which summarised the work that had been carried out during the year.

     

    The letter, issued on 28 September 2015, reported that the authority had been issued with an unqualified conclusion on its arrangements for securing value for money. The conclusion was based on the Council’s financial governance, financial planning, financial control processes, and the prioritisation of resources and improving efficiency and productivity.

     

    Members were advised that there had been no changes to the audit fee for the core audit for 2014/15. Mr Norman added that work was in progress around the certification of grants and returns, which would be presented to Committee at its next meeting on 24 March 2016.

     

    Committee members noted the report.

38.

Internal Audit - upate pdf icon PDF 59 KB

    Report number CFM351 of the Corporate Finance Manager.      (Enclosure)

    Minutes:

    The Corporate Finance Manager introduced report number CFM351 which summarised the results of three audits and a follow-up report that had been undertaken between 8 September 2015 and 18 November 2015.

38a

Internal Audit Progress Report pdf icon PDF 751 KB

    Minutes:

    Amjad Ali, the client manager from RSM presented the internal audit progress report and informed members that the plan was on track to be delivered by 31 March 2016. During the period covered by the report, three audits had been completed: insurance, safeguarding and the general ledger, all of which were given a positive, green assurance.

     

    One low risk and two medium risk actions were raised during the insurance audit. The medium risk actions related to the Council not having an overarching documented policy on compensation payments and the Governance and Risk Officer not being informed of all compensation payments. This meant that the Council’s insurance provider could not determine whether the claim could be defended without financial loss to the Council. Examples were given of those types of claim that would be contested. The recommended actions would address the risk of the Council offering to make payments in situations where it was not at fault for the harm caused. Officers confirmed in response to members’ questions that the amounts involved were not material in the context of the accounts of the authority.

     

    No actions were raised during the safeguarding audit, which found that there were good controls in place.

     

    During the general ledger audit, one low risk and one medium risk action was raised. The medium risk action related to the timeliness of bank account and control account reconciliation and arrangements for the independent review of reconciliations in a timely manner. Members asked about the testing of disaster recovery arrangements; an external partner tested back-up tapes annually to ensure that the restore process worked and the information restored was in a workable state. After the meeting, and in response to a question raised by a member, the Executive Manager Commercial confirmed that the facility to reapply daily transaction logs up to the point of system failure did exist and was enabled. Therefore the only data at risk of being lost were those transactions that were not fully completed/saved at the actual point of failure.

38b

Internal Audit Follow-up Report pdf icon PDF 391 KB

    Minutes:

    Actions related to six audits had been considered as part of the follow-up report. Of the 17 medium risk actions that had been followed-up, 1 had not been implemented and three were in progress of being implemented resulting in the conclusion that good progress had been made. The report included the status of each of the recommended actions, with further detail on those that were either in progress or had yet to be implemented.

     

    Officers confirmed that the completion date for the Asset Management Plan action in respect of the reconciliation of the Flare and Logotech asset registers was December 2015 and had been completed.

     

    Committee members discussed the action related to reconciliations between the finance system and the building control systems. Members challenged the amount of time it had taken to implement the actions and queried whether the delay was a result of further software developments required to ensure the programmes in use were fit for purpose. Officers assured Councillors that the software was fit for purpose but emphasised the intensive resource required to prepare and index new document management systems. The IDOX system had a phased implementation, going live in Building Control at the end of July, and in Planning at the beginning of November. The reporting side of the system had yet to be developed but the team were on schedule for completion in January 2016. APAS, the system IDOX was replacing, was scheduled to be turned off when the transition had been completed.

     

    The Executive Manager, Development and Growth updated members on progress against the action to add Section 106 Agreements to the Land Charges Register in a timely manner. At the time of the follow-up, there were 12 notifications to be updated in the system; these had all been added. Assurance was given that prior to the inclusion of those notifications on the system, manual checks were undertaken on those hardcopy documents.

     

    The final outstanding action related to the planned cyclical maintenance and capital programme of housing stock and the conduct of stock condition surveys.

     

    Members were advised that any recommendations still showing as outstanding would be picked-up as part of the next follow-up report. It was proposed that where there had been slippage in the completion date for actions of 6-months or more, the relevant officer should be on standby or invited to address the Committee to explain the reasons.

39.

Review of accounting policies pdf icon PDF 79 KB

    Report number CFM347 by the Corporate Finance Manager.     (Enclosure)

    Minutes:

    Report number CFM347 was presented by the Senior Financial Accountant. The report asked members to consider proposed changes to be used in the preparation of the 2015/16 Statement of Accounts, including a change to the valuation date of Council assets and an adjustment to the Council’s depreciation policy, the current approach to capital expenditure relating to the housing stock and the way the Building Control partnership was accounted for in the Statement of Accounts.

     

    Following a recommendation by External Audit from the closedown of the 2014/15, it was proposed that a change be made to the depreciation and valuation accounting policies. The CIPFA code required that assets should be revalued with sufficient regularity to give assurance that there was no material variation between the date of valuation and the date of reporting. Historically assets had been valued on the first day of the financial year and it was proposed that the revaluation date was moved to 31 March. This would provide clarity of the Council’s compliance with this area of the CIPFA code and avoid the risk of a second valuation being undertaken in the event of a significant change in the property market within the year.

     

    The second recommendation, relating to the componentisation policy was raised by external audit as the Code of Practice of Local Authority Accounting in the United Kingdom stated that large components of an asset should be broken down and represented separately on the balance sheet. The Council has maintained that the expenditure on the housing stock is to bring it up to Decent Homes Standard and any work carried out as part of this programme should not affect the value of the property as it would be expected to have that facility. Consequently the expenditure would be removed and the net effect on the property value and the balance sheet would be zero.

     

    The report also proposed maintaining the same approach for representing the Building Control Partnership on the balance sheet as in 2014/15. Due to the materiality of the building control partnership on the overall position of South Kesteven District Council, it was proposed that group accounts for the partnership should not be completed and the accounts would continue to show only the Council’s element of the income and expenditure in the accounts.

     

    Members of the Committee agreed the proposed changes to accounting policy outlined in the report.

     

    Decision:

     

    The Governance and Audit Committee approved:

     

    1.    The proposed change to the valuation date to 31 March for non-current assets and the change in depreciation policy set out in report number CFM347

    2.    The continuation of the current policy used to estimate the value of capital expenditure relating to the housing stock during the production of the Council’s Statement of Accounts

    3.    The continuation of the current approach for accounting for the Building Control Partnership in 2015/16 Statement of Accounts

40.

Counter Fraud Annual Report 2014/15 (including Lincolnshire counter-fraud partnership update) pdf icon PDF 90 KB

    Report number CFM337 of the Corporate Finance Manager.      (Enclosure)

    Minutes:

    The Corporate Finance Manager presented report number CFM337 on the Counter Fraud Annual Report 2014/15, which set out key outcomes from counter fraud worked delivered during the year relating to both welfare/benefit fraud and non-welfare/benefit fraud. It also summarised the results of national initiatives and looked at future arrangements following the abolition of the Audit Commission in March 2015 and the closure of the National Fraud Authority in March 2014.

     

    Of the 654 fraud referrals made during the year, 20 resulted in action, which was a reduction when compared to the previous year. This was partly attributed to the availability of resources and the targeting of those resources on the cases that were most likely to result in direct action being taken.

     

    During the year, 6 whistle-blowing allegations had been made. All were investigated thoroughly based on the information available and no further action was taken. The increase in reporting was attributed to media campaigns that had been run by the Lincolnshire Counter-Fraud Partnership.

     

    Members were advised that from February 2016, the fraud investigation team would be transferred to the Department of Works and Pension as part of the Single Fraud Investigation Service. As part of this change, the Council would need to review legacy work and how it should be dealt with. Members would receive an update on the transfer and actions put in place to deal with legacy work when the counter-fraud framework was presented to the Committee in March 2016.

     

    Training on counter-fraud would be made available in the new year for members of the committee, the wider Councillor cohort and officers of the council. Reference was also made to the National Fraud Initiative and the CIPFA Counter Fraud Centre.

     

    Gillian Martin from the Lincolnshire Counter-Fraud Partnership gave a brief presentation, which covered:

     

    ·         The estimated cost of fraud in the UK and the public sector

    ·         The approximate fraud losses for local government losses (£2.1bn)

    ·         A breakdown of the estimated costs of fraud to local authorities per year

    ·         Negative impacts of fraud, e.g. reputational damage, distrust, poor morale, higher taxes, more expensive public services and funding for terrorist and criminal activity

    ·         A definition of fraud and the main ways of committing fraud established by the Fraud Act 2006

    ·         The creation of the Lincolnshire Counter Fraud Partnership and its core activities:

    o   Transfer of intelligence

    o   Co-ordinated and targeted fraud awareness campaigns

    o   Sharing specialist investigative resources

    o   Sharing best practice and expertise

    ·         Responsibilities of the committee in relation to fraud and how they complemented the work of the Lincolnshire Fraud Partnership

    ·         Different ways fraud comes to light and the warning signs of fraud

     

    Through questioning the officers present, members identified that, while there was no local information, based on the national breakdown of fraud offences, the council’s total exposure to fraud loss was £2.3m.

     

    Members were informed that no contribution was made by the district councils to the Lincolnshire Fraud Partnership; it was funded through a grant received from the Department of Communities and Local Government. The partnership  ...  view the full minutes text for item 40.

41.

Treasury Management Mid-Year Review pdf icon PDF 147 KB

    Report number CFM346 of the Corporate Finance Manager.      (Enclosure)

    Minutes:

    Report number CFM346, presented by the Corporate Finance Manager, summarised treasury management activity between April 2015 and September 2015 and proposed amendments to the Treasury Management Strategy for 2015/16 and 2016/17. The new treasury management strategy would be adopted as part of the Council’s budget on 29 February 2016.

     

    Members noted that no long-term borrowing had been undertaken during the period covered by the report. Details of all the Council’s borrowing, which sat with the Public Works Loans Board (PWLB) was listed in the schedule of loans outstanding attached at appendix A to the report. The Council had not undertaken any short-term borrowing.

     

    The average size of the investment portfolio during the period covered by the report was £51.1 million. Fluctuations were because of the council’s role as billing and collection authority, meaning that it held significant quantities of cash while making precept payments.

     

    A majority of the investment activity sat in short-term investments, with the Council’s Treasury Management Strategy stipulating that the Council should not hold more than 25% of investments as long term. During the period investment activity was maintained within the limits set out in the Prudential Code.

     

    Looking at the focus of the Council going forward, two areas around investment had been identified which would require changes to the current strategy. The first was investing in property funds and investing in properties on a portfolio basis to the value of £5m. Maturity of these areas was longer-term, meaning it was not compatible with the current strategy, which was subject to a limit of two years. The other change proposed was to allow the authority to invest within its local authority company should it receive Cabinet approval on 7 December 2015. Any funds lent to the company by the Council would be on a commercial basis.

     

    One member referred to a meeting of the Resources Policy Development Group held on 26 November 2015 and proposals put forward to enable investment in physical properties and queried how the two different property proposals related to one another. Officers explained that investment in bricks and mortar and property funds were part of a suite of opportunities the Council could consider to ensure it got the maximum yield from its investment. The different measures were designed to complement one another.

     

    Some concern was expressed about more money sitting with longer-term investments and depositing greater sums of money with the same institutions. To allay members’ fears officers explained that by broadening the strategy, a greater number of institutions would meet the Council’s investment criteria and provide the opportunity for a greater spread of funds.

     

    Having been reassured, members noted the mid-year activity and approved the amendments to the Treasury Management Strategy for 2015/16 and 2016/17.

     

    Decision:

     

    The governance and Audit Committee noted the mid-year activity position of 2015-16 (April 2015 to September 2015) and approved the amendments to the Treasury Management Strategy for 2015/16 and 2016/17 as detailed in report number CFM346.

42.

Close of meeting