Agenda and minutes

Governance and Audit Committee
Thursday, 24th March, 2016 2.00 pm

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

Contact: Jo Toomey 

No. Item




Disclosure of interests


Minutes of the meeting held on 3 December 2015 pdf icon PDF 185 KB



    The minutes of the meeting held on 3 December 2015 were agreed as a correct record.


Certification of Grants and Returns Annual Report - 2014/15 pdf icon PDF 78 KB

    Report of KPMG.                                                                                   (Enclosure)


    Mike Norman, the Manager from KPMG (the Council’s External Auditor), presented the Certification of Grants and Returns for 2014/15, which was a requirement of the Public Sector Audit Appointment body. Certification was carried out on the Housing Benefit Subsidy Claim and the Housing Pooling Return.


    A qualified certificate was given on the Housing Benefit Subsidy claim after a miscalculation was identified in a sample tested in line with the mandated methodology. Further testing was required, which again used a mandated methodology resulting in a claim report and with that an automatic qualification. Members were given reassurance that the amounts involved were low, totalling approximately £8.5k in a claim of approximately £30m


    While a small adjustment was required to the Housing Pooling return, an unqualified certificate was given.


    The report also included details of the fees and charges for certification work. Public Sector Audit Appointments set fee levels for the work carried out on housing benefit, however the Council was subject to an additional charge to meet the cost of the further work required. The fee for testing the housing pooling return was agreed directly with the Council and based on the amount of work that was required.


    Members of the Committee noted the report.


External Audit Plan 2015/16 pdf icon PDF 173 KB



    John Cornett, the Director from KPMG presented the External Audit Plan 2015/16. He informed members that the audit would give an opinion on the Council’s financial statements and a conclusion on measures taken by the Council to secure economy, efficiency and effectiveness in its use of resources.


    Through a process of risk assessment and identification, one significant risk was identified both locally and nationally, which related to provision for business rate appeals. This was highlighted because of the value associated with the provision, the volatility of appeals and that they were outside the control of the Council. External Audit was also required to take account of two other potential risks: management overriding of controls and fraudulent revenue recognition.


    Members queried how the levels of materiality that were specified in the plan compared to the figures used in 2014/15. An explanation was given that the levels of materiality had been adjusted and were driven by the financial risk faced by all authorities and the need to achieve savings and drive efficiencies.


    The Committee noted the draft plan.


Internal audit - update pdf icon PDF 61 KB


Internal Audit Progress Report pdf icon PDF 1 MB


    Amjad Ali presented the report on behalf of RSM, which had been re-awarded the contract for providing internal audit services to the Council. He confirmed that all the work on the internal audit plan for 2015/16 had now been completed with seven reports finalised since the Committee was last updated. Of those audits, 3 were given a positive, green assurance with no management actions raised (treasury management, elections and planning fees) while risk management was given a green assurance with three low risk recommendations raised. The remaining three audits were given positive opinions with an amber/green level of assurance: 6 low risk recommendations were raised in relation to green waste, 5 low and 2 high risk recommendations were raised in relation to gas servicing and 3 medium and 3 low risk recommendations were raised in relation to tenancy management.


    Further detail was discussed in relation to gas servicing. In response to a member’s question, the Business Manager, Assets and Facilities explained that information relating to the number of properties where gas servicing had been completed had been consolidated and reconciled on the core asset management database. A 3-month monitoring period was underway during which the old and new systems would run parallel with one another to ensure that there was confidence that the new system was running correctly. The testing phase was due to be completed by May 2016.


    One member asked questions regarding the sample testing which identified instances where the four-week tenancy notice period was not being adhered to. Tenancies started on a Monday and ended on a Sunday, however, of the sample tested, a number were identified where the notice period began part-way through the week, rather than commencing the following Monday, which ultimately resulted in lost. Members noted that a wholesale review of tenancy agreements was underway, which could provide an opportunity to address the internal audit recommendations by changing the date from which the four-week notice period would commence.


    Members also gave additional consideration to recommendations in relation to green waste. One Councillor made comments about the way in which payment for green bins was changing; residents were offered a reduced rate for signing up to pay annually by direct debit. No discount was offered to customers who paid by debit card, for which the Council was not subject to transaction fees, about which some concern was expressed. Members also raised concerns about the availability of the offer for those residents who did not have access to the internet. Officers provided some reassurance that a lack of internet access would not prevent a customer from setting up a direct debit, explaining that customer services advisors were able to arrange this over the telephone. Some members also made comment about difficulties that had been experienced with the system through which the direct debit had to be set up. Committee members recommended that the decision to offer reductions to residents signing up for direct debit and the way in which systems had operated during the renewal period  ...  view the full minutes text for item 48a


Internal Audit Follow-up Report pdf icon PDF 291 KB


    Since the last meeting of the Committee, Mr. Ali reported that an internal audit follow-up report had also been completed. The report, which reviewed progress against the implementation of medium and high risk recommendations made by internal audit, stated that little progress had been made in implementing management actions. Four of the recommendations had been completed while two were in progress and two had not been implemented. The next follow-up report presented to the Committee would provide an update on those recommendations where implementation was ongoing or had yet to begin.


    Members of the Committee noted the contents of the report.


Indicative Internal Audit Strategy and Plan - 2016/17 pdf icon PDF 56 KB

    Report number CFM360 of the Corporate Finance Manager.      (Enclosure)

    Additional documents:


    Mr Ali from RSM presented the draft internal audit plan for 2016/17. In preparing the plan Internal Audit had considered the Council’s corporate objectives, risk profile and assurance framework together with other factors affecting South Kesteven District Council including emerging issues that would impact on the whole local government sector. The draft plan also incorporated any requests for work made by the Council’s management team. As well as the detailed plan for 2016/17, the report also outlined a 3-year strategy.


    This plan was the first one produced under the new contract, which had seen a reduction in audit days to allow an overall contract saving. In total 100 days had been allocated with 20 contingency days for any matters that emerged during the year that officers or members felt it appropriate to look at.


    Committee members were reminded that they had direct access to RSM and the suggestion was made that regular meetings could be scheduled with internal audit outside of the formal committee meeting.


    Members were generally supportive of the proposed plan however, following a recent virus incident at Lincolnshire County Council, an additional suggestion was made that resilience of IT systems to cyber-attack should be tested. All members of the Committee agreed that this would be worthwhile and suggested that the scope of the proposed audit of IT resilience could be worded in a way that enabled testing members’ concerns.


    Members approved the draft internal audit plan for 2016/17.


Statement of Accounting Policies pdf icon PDF 180 KB

    Report number CFM365 of the Corporate Finance Manager.      (Enclosure)


    The Financial Accountant Team Leader presented report number CFM365 which asked the Committee to approve the accounting policies for use in the production of the 2015/16 financial statements. Members noted that very few changes had been made to the policies that were used in the production of the 2014/15 financial statements. The only substantive change brought to the Committee’s attention related to the introduction of IFRS 13 Fair Value Measurement which impacted on the accounting policy Investment Property and Financial Instruments.




    The Committee approves the Statement of Accounting Policies as set out in appendix 1 of report number CFM365 to be used in the production of the 2015/16 financial statements.


Pension Assumptions pdf icon PDF 108 KB

    Report number CFM367 of the Corporate Finance Manager.      (Enclosure)


    The Financial Accountant Team Leader presented report number CFM367 on the underlying assumptions to be used to calculate International Accounting Standard 19 pension figures in the 2015/16 Statement of Accounts. The assumptions were based on price inflation, pension increase rate, salary increase rate and demographic assumptions. Members noted that the assumptions in the report were based on figures from January 2016 and that the final version would be based on information that was correct as at 31 March 2016.




    The Committee approves the International Accounting Standard 19 assumptions to be used in the production of the 2015/16 Statement of Accounts.


Risk Management - Corporate Risk Register Update pdf icon PDF 62 KB

    Report number CFM362 of the Corporate Finance Manager.      (Enclosure)

    Additional documents:


    The Corporate Finance Manager drew members’ attention to report number CFM362 on the corporate risk register. Since the register was last presented to Committee in June 2015, it had been subject to a fundamental review to take away those actions that were no longer relevant and reposition risks on a strategic basis, including listing out new risk categories with longer timelines attached.


    One of the new themes that had emerged as part of the review was working in a commercial way, which recognised risks associated with entering new spheres of operation to ensure that the organisation had the appropriate culture and skills to meet the challenge.


    Members discussed how the Council’s risk register related to its appetite for risk. The risk register incorporated the larger strategic risks that the authority would face and the actions put into place to mitigate the risk and reduce the residual risk. It was suggested that risk appetite could be reflected in the risk register by including a target risk level.




    The Committee notes the contents of report number CFM362 and approves the updated Corporate Risk Register as attached at appendix A to the report.


Counter-fraud Strategy pdf icon PDF 62 KB

    Report number CFM361 of the Corporate Finance Manager.      (Enclosure)

    Additional documents:


    The Governance and Risk Officer presented report number CFM361, to which the draft revised counter-fraud strategy was appended. The document had been refreshed in-line with the CIPFA Code of Practice on Managing the Risk of Fraud and Corruption. In October 2015, CIPFA also published a counter-fraud assessment tool which included 68 statements against which the Council could judge the level it was currently at and identify and map where it wanted to be in the future. The assessment was due to be carried out imminently and members were advised that the findings would be reported back to a future meeting of the Committee.


    Members also noted that proactive work was underway developing the counter-fraud culture in the organisation, some measures for which were being led by the Lincolnshire Counter Fraud Partnership.


    Members complimented the draft strategy and how easy it was to understand.




    The Committee approves the updated counter-fraud strategy appended to report number CFM361


Financial Regulations pdf icon PDF 75 KB

    Report number CFM366 of the Corporate Finance Manager.      (Enclosure)

    Additional documents:


    The Corporate Finance Manager presented report number CFM366 on proposed updates to the Financial Regulations. Members were asked to recommend the changes to the Financial Regulations to Council for its approval on 21 April 2016.


    Changes to the Regulations proposed in the report included amendments to reflect the current management structure of the Council following the corporate redesign and the subsequent adjustment of levels of authorisation for team leaders with increasing limits across all layers outlined in the scheme. Other proposed additions were a reference to the procedure for compensation payments and an updated layout to ensure that Regulations were clear and easy for users to understand.


    While recognising that in some areas team leaders had replaced service managers and that the subsequent reduction of service managers had broadened the remits of business managers, members of the Committee expressed some concerns about the proposed increases to the levels for virement. The comments made reflected a view that the delegated limit for Executive Members was too high. Since the introduction of the previous limits there were only a small number of occasions when full Council was asked to authorise a virement that exceeded the delegated level. To this end members suggested that there was no evidence of a need to increase the point at which Council authorisation would be required.


    Officers stated that the proposed changes to the limits had arisen from consultation with officers which identified that the limits in place were not sufficient to allow them to carry out their daily work without having to elevate decisions through the management structure. Members did not feel that this provided sufficient justification to increase the limits for which members of the Executive had delegated authority to sign-off and consequently agreed to recommend that Council approve the statements subject to the substitution of the proposed authorised levels with those that were currently in place.




    The Committee recommends to Council the approval of the updated Financial Regulations as appended to report number CFM366 and their inclusion in the Council’s Constitution subject to the substitution of the proposed delegated/authorised limits for virement set out in appendix b to the report with the limits within the existing scheme.


Contract and Procurement Procedure Rules pdf icon PDF 64 KB

    Report number CFM364 of the Corporate Finance Manager.      (Enclosure)

    Additional documents:


    The Corporate Finance Manager presented report number CFM364, appended to which were the updated contract and procurement procedure rules (CPPR), which set out the regulations that must be followed by the council in the procurement of goods, services and works. The review, which was led by Procurement Lincolnshire, incorporated mandatory and proposed discretionary changes that reflected changes in statute and emerging best practice. Members were also reassured that although not reflected in existing documentation, the Council had been operating in compliance with the latest Public Contracts Regulations which came into effect in February 2015.


    Members were supportive of the proposed revisions to the CPPR, mentioning specifically provisions that made it easier for small local businesses to engage with the council in procurement matters and subsequent opportunities through this to recycle the local economy.




    The Committee recommends to Council the approval of the updated Contract and Procurement Procedure Rules and their inclusion in the Council’s Constitution


Close of meeting