Agenda and minutes

Governance and Audit Committee
Tuesday, 21st March, 2017 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 1 December 2016 pdf icon PDF 170 KB


Updates from previous meeting


    Minute item 42 referred to the Corporate Risk Register. During discussions on 1 December 2016, reference was made to a new countywide contract database which was due to be in place by January/February 2017. Members were advised that the new register was in the process of being rolled out and officers were receiving training, particularly in respect of new functionality in the system.


    Members were also advised that the update of the Corporate Enforcement Policy, which was referred to as part of the audit on Environmental Health – Pollution Control in minute item 41 had been completed.


Annual Report on grants and returns 2015/16 pdf icon PDF 261 KB

    Report of External Audit.                                                                      (Enclosure)


    Mike Norman from KPMG presented its annual report on grants and returns 2015/16, which was issued in January 2017. Two grants were covered by the return: the 2015/16 Housing Benefit Subsidy claim and the 2015/16 Pooling of Housing Capital Receipts return.


    The Housing Benefit Subsidy Claim was qualified because of errors identified in the return; this triggered further testing. The adjustments made to the claim led to a reduction of £4,616 in the amount of subsidy due to the authority. Members were given some assurance that in the context of a claim with a value of £30,607,829, an adjustment of less than £10,000 was not significant.


    No issues were identified in the Pooling of Housing Capital Receipts return and an unqualified report was given.


    The Committee was advised that the fee in relation to the Housing Benefit Subsidy claim had increased as a result of the extra work that was required.


    The report was noted.


External Audit Plan 2016/17 pdf icon PDF 1 MB

    Report of External Audit                                                                       (Enclosure)


    Mr Norman presented the external audit plan for 2016/17. He informed members that there had been no significant changes to the Code of Practice on Local Authority Accounting for 2016/17 however there had been a slight increase in the level of materiality.


    Members were advised that the risk of significant changes in pension liability due to the Local Government Pension Scheme Triennial Valuation had been identified in all local authorities’ external audit plans. Two other areas of audit focus had also been identified: changes to the formatting and reporting requirements for the Comprehensive Income and Expenditure Statement and the Movement in Reserves Statement and the new Expenditure and Funding Analysis, and business rate appeals provision.


    External Audit was also required to produce a value for money conclusion, which considered the council’s arrangements for securing economy, efficiency and effectiveness in the use of its resources. Medium term financial planning had been identified as a specific focus for continuing audit work in relation to the conclusion; this was consistent with the national picture.


    There were no changes to report in the audit team, who were on site carrying out interim work; at the time of the meeting nothing had arisen from that work that needed to be brought to the Committee’s attention. The main work on the audit would be undertaken during the summer.


    No changes were proposed to the audit fee, which was set nationally by Public Sector Audit Appointments. The Committee’s attention was also drawn to appendix three of the report which met the requirements relating to independence and objectivity. There were no issues in relation to this that needed bringing to the Committee’s attention.


    The Chairman asked that his thanks to officers be recorded as he felt that the quality of output was a reflection on how hard the officers of the Council worked.


    There was some discussion about the level of provision for business rate appeals. The Committee was advised that Audit would examine the robustness of the methodology used to determine the provision as the actual value, which was outside the Council’s control, could not be calculated.


    The Committee noted the external audit plan.


Internal Audit Reports pdf icon PDF 61 KB

    Report number CFM411 of the Corporate Finance Manager.      (Enclosure)


    Report number CFM411 of the Corporate Finance Manager gave an overview of internal audit activity between 18 November 2016 and 28 February 2017

    . During that period, 4 audits and one follow-up had been completed.


Internal Audit Progress Report pdf icon PDF 2 MB


    Kelly Waddoups, Assistant Manager for RSM, the Council’s internal auditor, presented the internal audit progress report, which covered four audits:


    ·         Income and bank, substantial assurance (1 low and 1 medium risk recommendations). The medium risk recommendation required the compilation of procedure notes to cover the income handling and banking functions for building control.


    ·         Income and debtors, substantial assurance (2 low and 1 medium risk recommendations). The medium risk recommendation related to the weekly reconciliation of the accounts receivable leger to the cash book.


    ·         Purchase orders and creditors, substantial assurance (1 medium risk recommendation). The recommendation was raised because in the sample of 20 invoices that were tested there were five instances of purchase orders being raised retrospectively. A further 15 invoices were sampled where purchase orders had not been raised, of those 15, there were 5 cases where orders should have been raised.


    ·         Absence management, reasonable assurance (1 low and 3 medium risk recommendations). The medium risk recommendations arising from this audit related to capturing information through the Managers Access System, specifically reasons for absence, completion of return to work procedures, identification of staff who hit absence triggers and long-term absences. While data input was completed by administrative officers within each team, it was the team manager’s responsibility to ensure information was correctly recorded . As a result of the audit, refresher training was being rolled out to existing managers and a programme put in place for training new managers. Members received reassurance from officers within the People and Organisational Development team that the current IT system that was used for logging sickness absence was fit for purpose however the team was looking to the market for a new system to better support the way in which the organisation wanted to move forward.


    A further report on allocations and lettings was in the process of being finalised with management.


    The contents of the internal audit progress report were noted.


Internal Audit Follow Up Report pdf icon PDF 470 KB


    The internal audit follow-up report reviewed progress made against management actions arising from audits. 10 medium risk recommendations were included in the follow-up report, all of which had been implemented, leading to an audit opinion that good progress had been made. Members noted the improvements made in the last year in implementing audit recommendations.


Indicative Internal Audit Strategy pdf icon PDF 56 KB

    Report number CFM412 of the Corporate Finance Manager.      (Enclosure)

    Additional documents:


    Rob Barnett, the Risk Assurance Director for RSM presented the Internal Audit Plan for 2017-18, which was attached to report number CFM412. He explained the process through which audit topics were identified, which began with the council’s risk register and an analysis of other audit work completed in the last three years. Internal audit had also spoken to the management team and looked at any previous audits that only received limited assurance, which were re-audited. Internal audit worked closely with the external auditors to make sure they were not duplicating one another. Audit outcomes were also shared.


    Two areas of the plan were particularly drawn to members’ attention: cyber security and software development and Data Protection. The IT elements had been included because of the threats and opportunities arising from its evolution. Data Protection had been included in anticipation of changes to Data Protection that would become effective in 2018.


    Members were asked whether they felt that the priority given to the proposed audits within the three-year plan was appropriate. If there were any proposed audits in years two and three of the plan that members felt were of great priority, they could be swapped with something from year 1 that was considered a lower priority.


    A question was asked about the spread of audits through the year as a majority were scheduled for quarters three and four. Members were advised that transactional reviews needed to be done later in the year so that there was sufficient time to generate sampling data.


    One member asked whether there was an opportunity to look at economic development activity. The distinction between the effectiveness of a strategy and the control framework was emphasised. The suggestion was made that the audit could look at collaborative arrangements for economic development. The original intention behind the economic development audit had been to test the new strategy that was being developed, however if members felt appropriate the audit could be an advisory one to support the development of the strategy. To help refine the scope, a suggestion was made that the previous economic development audit could be supplied to Committee members.


    It was proposed, seconded and agreed that the internal audit plan be approved.


Statement of Accounting Policies and Pension Assumptions 2016/17 pdf icon PDF 185 KB

    Report number CFM408 of the Corporate Finance Manager.      (Enclosure)

    Additional documents:


    The Corporate Finance Manager presented report number CFM408 on the Statement of Accounting Policies and the IAS19 (pension assumptions) for use in the preparation of the 2016/17 accounts. There was no requirement to change the accounting policies for the year however some formatting adjustments would be required.


    Copies of the pension assumptions had been circulated to all members however the specific financial implications for the authority were not known at the time of the meeting. Members noted that the pension assumptions were not monetary transactions but balance sheet entries that affected the Council’s net worth; accounting entries would need to be made to reflect that position.


    Members at the meeting felt that based on the information available, they were comfortable with the assumptions, however instead of approving them outright it was suggested that when further detail was available, the Section 151 Officer should consider the financial implications of the assumptions and could, if he felt appropriate and necessary, reconvene the committee.


    It was proposed seconded and agreed that the Statement of Accounting Policies as set out at Appendix A to report number CFM409 be used in the production of the 2016/17 financial statements.


    It was proposed, seconded and agreed that the Committee approved the pension assumptions for inclusion in the 2016/17 financial statements as they stood and delegated authority to the Section 151 Officer to review the detailed information and, if it caused him concern, refer that information to the Committee.


Local Code of Corporate Governance pdf icon PDF 58 KB

    Report number CFM413 of the Corporate Finance Manager.      (Enclosure)

    Additional documents:


    Report number CFM413, which informed the Committee about the Local Code of Corporate Governance, was presented by the Corporate Finance Manager. He explained that the framework and guidance for delivering good governance, which was published by CIPFA/SOLACE had been updated during 2016. As a result, the Council’s framework needed substantial review. The framework also asked for evidence showing how the requirements were met and where further investment needed to be made. The original framework focussed on policies and procedures while the new framework had values and behaviours at its core. The examples that had been given in the draft document, which was appended to the report was not an exhaustive list but examples that would help stakeholders who read the document understand what the authority was doing.


    The new code would be subject to audit during quarter 3, which would allow time for it to become embedded. The framework, which would be subject to annual review, would form the basis for the Annual Governance Statement.


    One member asked about Covalent, the information hub. Officers explained that this software was the Council’s performance management system. Officers stated that references to specific software would be removed from the document.


    Members also asked for more information about monitoring through residents’ surveys, community forums and panels including the mechanism through which their feedback was implemented. Consultation was mainly used by services when they were considering the way in which they deliver. The citizen’s panel was the corporate consultation database to test and evaluate potential directions in policy, for example council tax consultation and refreshing priorities.


    Members were also interested in how any risks that were identified were dealt with. Officers explained that the Committee played a key role in managing the authority’s risk at a corporate level, while business managers dealt with operational risks. All reports to decision-makers included a section on risk so that they were aware of the potential impact of their decision. Individual projects and programmes of work would have their own risk-based methodology, which were reviewed regularly by officers. Members asked whether internal audit could carry out work on risk assumptions associated with specific, significant projects; they confirmed that they could


    It was proposed, seconded and agreed that the draft Local Code of Corporate Governance appended to report number CFM413 be approved subject to the alteration of wording where software systems had been named.


Close of meeting