Agenda and minutes

Governance and Audit Committee
Friday, 23rd September, 2016 1.00 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 28 July 2016 pdf icon PDF 156 KB



    The minutes of the meeting held on 28 July 2016 were proposed, seconded and agreed as a correct record.


Updates from previous meeting

    ·         Aids and adaptations

    ·         Tenancy management


    Members of the Committee were advised that the recommendations relating to aids and adaptations and tenancy management, which had been scheduled for implementation by August 2016 and September 2016 respectively, would be included in the follow-up report scheduled to be undertaken in October and reported to the Committee at its meeting on 1 December 2016.


    The Committee had also requested that the Scrutiny Committee look at the process for green bin renewals and encouraging customers to pay for their green bin by direct debit. This item had been considered by the Scrutiny Committee at its meeting on 13 September 2016. Members were advised that the action notes summarising the deliberations of the Scrutiny Committee had now been published.


Annual Governance Report 2015/16 pdf icon PDF 390 KB

    Report of External Audit.                                                                      (Enclosure)


    Mike Norman from KPMG presented the Annual Governance Report 2015/16. He stated that KPMG anticipated giving an unqualified opinion on the Council’s 2015/16 accounts and would report that the Annual Governance Statement was consistent with the guidance issued by CIPFA/SOLACE. Audit Standards required External Audit to report on certain categories of adjustments; Mr. Norman stated that no material mistakes had been identified and that there were no uncorrected or non-material differences that needed to be brought to members’ attention.


    External Audit was required to identify potentially significant financial risks as part of the External Audit Plan 2015/16. The key risk identified for South Kesteven District Council related to the level of provisioning for business rate appeals; this was reflected nationally. This issue had been highlighted nationally as the value could be material and the provision could only be based on estimates and assumptions. No concerns were raised following the testing of the provision made by South Kesteven District Council. Examination was also undertaken of two standard risks identified as part of professional standards, regarding revenue recognition and management override of controls; there were no issues to report in relation to either.


    In advising members about the accounts production process, Mr. Norman stated that the draft accounts were received well ahead of the 30 June 2016 deadline and that External Audit had no concerns about regarding accounting policies, accounting estimates and financial statement disclosures. The requested working papers were supplied at the start of the audit progress and the officer response to requests for further working papers was efficient.


    The report stated that KPMG was satisfied with the progress the authority had made in relation to the recommendations in its ISA 260 Report 2014/15 relating to the financial statements and that consequently they would not be rolled over.


    External Audit was required to provide a separate value for money conclusion. No significant risks were identified. The report stated that KPMG anticipated issuing an unqualified value for money conclusion by 30 September 2016.


    The report also highlighted the next steps that would be taken to complete the audit. Subject to the Committee approving the Financial Statements and the letter of representation, External Audit expected to complete the remainder of procedures in time to allow the publication of the accounts on the Council’s website by 30 September 2016.


    Finally, Mr. Norman confirmed that all the requirements relating to objectivity and independence had been complied with.


    Following completion of the audit, a de-brief session would be held between KPMG and SKDC officers to identify any improvements that could be made to carry out the audit more effectively in future years.


    Members were given the opportunity to ask questions about the report. One of the key questions related to the level of materiality, which was £1.2m. This was based on 1.5% of the organisation’s gross expenditure; a lower level of performance materiality would then be set, which would influence the bulk of testing and sample size. A number of factors were taken into account in  ...  view the full minutes text for item 27.


Statement of Accounts 2015/16 pdf icon PDF 79 KB

    Report number CFM384 of the Strategic Director and Corporate Finance Manager.         (Enclosure)

    Additional documents:




    The Governance and Audit Committee


    1.    Approves the revised Statement of Accounts 2015/16 as per appendix 1 of report number CFM384 and as amended by the addendum circulated at the meeting

    2.    Notes the commentary on the outcome of audit work

    3.    Approves the publication of the summary of accounts on the Council’s website

    4.    Approves the signing of the Letter of Representation

    The Financial Accountant Team Leader introduced report number CFM384 which presented the Council’s Statement of Accounts 2015/16. It covered requirements of the Account and Audit (England) Regulations 2015, Section 21(2) of the Local Government Act 2003, the revised Statement of Accounts and commentary on the outcome of the audit of the Statement of Accounts. An addendum was also circulated to members at the meeting. Members were reminded that the draft Accounts were presented to the Committee at its meeting on 28 July 2016.


    During discussion on the Statement of Accounts, one member asked a question about the way Section 106 Agreements were recorded; they were shown in the accounts amongst grants and contributions that had yet to be recognised as income. They were recorded in this way as the release of the funding was triggered by thresholds within developments and payable for specific activities. Failure to deliver the output by the deadline would mean that the funding was lost. Members were reassured that a register was kept of all Section 106 Agreements, which included their expiry dates. Proactive monitoring of trigger points and expiry dates to ensure monies were released and spent.


    The actuarial gains and losses shown on the Comprehensive Income and Expenditure Statement were also subject to discussion. Assumptions were made on a 3-yearly basis and 2015/16 fell at the end of that period. The changes reflected the differences between the financial and demographic assumptions made in 2013/14 and the position at year end in 2015/16.  Officers explained that the estimates would be more accurate for the 2016/17 as it would be the start of a new 3-year cycle. Members also noted that the Council had benefited after the last review from making a lump sum payment and it was suggested that a similar opportunity might be available following the next review.


    A question was raised about whether any of the leases where the Council was an interested party had break clauses that could impact valuations.


    Some discussion ensued on the proposed change of wording for the Annual Governance Statement (AGS) that was detailed in the addendum. An explanation was given that much of the wording in the AGS was based on a generic template and it was felt that the revised wording better reflected the governance position of the Council, particularly when taking account of the comments raised in the Annual Governance Report.


    13:38 – Councillor Lee entered the meeting


    The three recommendations listed in report number CFM384 were proposed, seconded and on being put to the vote, were agreed.


    13:39-13:55 – the meeting adjourned


    Following the adjournment, it was proposed and  ...  view the full minutes text for item 28.


Internal Audit progress report pdf icon PDF 60 KB

    Report number CFM388 of the Corporate Finance Manager.      (Enclosure)

    Additional documents:


    The Internal Audit Progress Report was attached to report number CFM388, which was introduced by the Governance and Risk Officer. A more detailed summary of the work undertaken between 1 April 2016 and 23 September 2016 was presented by Chris Williams from RSM.


    In that period, three reports had been issued, with a further two produced in draft format. The three audits related to health and safety – asbestos (three low risk and 1 medium risk recommendations raised), taxi licensing (1 medium and 1 low risk recommendations raised) and rent collection (four low and 1 medium risk recommendations raised). Details about the recommendations were included in the RSM report. All three audits were given a green opinion.


    One of the recommendations arising from the rent collection audit related to the debt sign-off authorisation limits. Members wanted assurance that the incident in the rent collection team were not replicated across the Council. Members were advised that the write-off levels had been revised as part of the new Financial Regulations which were adopted by Council on 22 April 2016 and that all staff were aware of their authorised limits.


    Discussion moved to the audit on health and safety – asbestos. Members highlighted a comment in the Internal Audit report which stated that from a sample of 20 asbestos removals, it was noted in two cases that the asbestos was collected and a consignment note issued, however a Statement of Cleanliness had not been received from the asbestos contractor. This caused concern for members from the perspective that unnecessary expenditure may be incurred re-surveying a property for which there is no Statement. The Committee also recognised that Statements from historic reviews would also be required to prevent unnecessary duplication and to ensure that they were still current. Members asked that the Business Manager, Property and Development provide a written statement confirming that both the consignment note and the Statement of Cleanliness were kept on file. Members also requested that Internal Audit follow-up the recommendations as part of their next follow-up in October 2016 with feedback to be presented at the meeting of the Committee on 1 December 2016.


    The audit of taxi licensing also prompted discussion. Members were concerned about taxi drivers who had points on their driving licences, highlighting specifically the risk of reputational damage. Mr. Williams reassured members of the Committee that Internal Audit was comfortable with the way the authority had responded to the recommendation and that management and officers had taken the matter seriously and were taking immediate action. Discussion moved to ongoing checks of taxi drivers, including DBS checks together with other measures put in place to safeguard children.


    Members requested an update on the planned audit of IT resilience. They were advised that the date for the audit had now been agreed and the specification was being drawn-up.


    The Committee noted the report.


Delivering Good Governance pdf icon PDF 103 KB

    Report number CFM382 of the Corporate Finance Manager.      (Enclosure)


    In presenting report number CM382, the Governance and Risk Officer explained that the new local code of corporate governance was being reviewed in line with the ‘Delivering Good Governance’ framework. The framework continued to be based around key principles with multiple sub-principles but moved away from the ‘nuts and bolts’ of good governance to a ‘hearts and minds’ approach, acknowledging that local authorities already had the components in place but it was about embedding them.


    Once revised, the Code would underpin the Annual Governance Statement. A document template had been produced which was being completed and would be presented to the Committee at its meeting on 1 December 2016.


    Members noted the report.


Counter Fraud Annual Report 2015/16 pdf icon PDF 117 KB

    Report number CFM383 of the Corporate Finance Manager.      (Enclosure)




    That the Governance and Audit Committee approves the contents of the Counter-fraud Annual Report 2015/16, including the action plan.


    Report number CFM383, which was the Counter Fraud Annual Report 2015/16 provided a summary of the counter-fraud activity that had taken place during the year. The report, which was presented by the Governance and Risk Officer also included statistical information, providing a breakdown of the number of penalties and prosecutions. During the year there had been 11 whistle-blowing reports which included several made through the confidential telephone reporting line run by Lincolnshire County Council. No significant concerns had been raised about claims made against the Council’s insurance during the year.


    Training activity was scheduled to be rolled out, including an e-learning package, as part of the Lincolnshire Counter Fraud Partnership.


    Information was shared in relation to national fraud developments and any incidents of concern that were happening on a countywide basis. A document was also available that would help the authority check how it was performing and identify areas for further proactive work.


    During discussion on the item, members asked whether the savings made from preventing fraud and income received from penalties offset the cost of counter-fraud activity.


    Members asked whether the counter-fraud e-learning module would be available for councillors to complete. As an aside, members spoke about safeguarding e-learning for Councillors, the importance of safeguarding training for members and the need for further provision.


    It was proposed, seconded and, on being put to the vote, agreed that the Committee approve the contents of the Counter-Fraud Annual Report, including the action plan.


Ombudsman Annual Report 2015/16 pdf icon PDF 61 KB

    Report number LDS184 of the Executive Manager, Corporate.   (Enclosure)

    Additional documents:


    The Executive Manager, Corporate summarised report number LDS184 which informed the Committee about the contents of the Ombudsman Annual Review Letter for 2015/16, which was appended to the report. She explained that there had been 9 complaints received by the Ombudsman during the review period, which compared favourably with 2014/15 when 22 complaints had been received. This reduction was attributed to the way in which the Council now dealt with complaints: working proactively with the customer before entering into the formal complaints process. Of the 9 complaints that were received, three were referred back for local resolution, five were closed after initial enquiries were made with the Council and the final complaint was not upheld.


    Some concern was expressed about the format of the letter used by the Ombudsman. While recognising that the letter template was standardised, members felt that recording complaints for which another body was responsible did not provide a fair reflection. They highlighted complaints that had been made about adult care services and highways and transport, which were the responsibility of Lincolnshire County Council.


    The report was noted.


External Audit Procurement Arrangements pdf icon PDF 88 KB

    Report number CFM385 of the Corporate Finance Manager.      (Enclosure)




    The Governance and Audit Committee recommends to Council the appointment of external Audit through a national sector led body the Public Sector Audit Appointments


    Following a report at the Committee’s last meeting on 28 July 2016, members were asked to make a recommendation to full Council about the procurement arrangements for External Audit following the closure of the Audit Commission and the end of transitional arrangements at the conclusion of 2017/18 audits.


    Report number CFM385, which was presented by the Financial Accountant Team Leader, summarised three different ways through which external audit services could be procured. At its meeting in July, the Committee had indicated it had a preference for opting in to a sector-led body. Members reiterated that this was their preferred option; it was proposed, seconded and agreed that this approach should be recommended to full Council.


Treasury Management Strategy amendment pdf icon PDF 112 KB

    Report number CFM386 of the Corporate Finance Manager.      (Enclosure)




    The Governance and Audit Committee approves the amendments to the Treasury Management Strategy 2016/17 detailed within report number CFM386.


    Report number CFM386 asked members to consider changes to the Treasury Management Strategy which would allow the Council to place investments in any institution or building society for no more than 3 years (an increase from two years), and to increase the total investments that could be held in building societies from £6m to £10m to ensure that the Council’s investment portfolio is balanced between types of investment. Appendix A to the report included amendments relating to the non-specified investments section of the Strategy to provide clarification and enable the Council to be able to respond to changes in economic conditions as they occur.


    Members of the Committee were supportive of the proposals; the recommendation as laid out in the report was proposed, seconded and, on being put to the vote, agreed.


Close of meeting