Agenda and minutes

Governance and Audit Committee - Thursday, 22nd March, 2018 2.00 pm

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

Contact: Anita Eckersley 

No. Item



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    The Committee to be notified of any substitute members


    The Committee was notified that Councillor Mike Exton was substituting for Councillor David Mapp for this meeting only.



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    Apologies for absence were received from Councillor David Mapp and Councillor Damian Evans.


Disclosure of interests

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    Members are asked to disclose any interests in matters for consideration at the meeting.


    No interests were disclosed.


Minutes of the meeting held on 14 December 2017 pdf icon PDF 167 KB

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    The minutes of the meeting held on 14 December 2017 were proposed, seconded and agreed as a correct record.


Updates from previous meeting

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    The Chairman noted that an update on the HRA Capital Programme was a separate item on the agenda.


HRA Capital Programme Update pdf icon PDF 88 KB

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    Report Number RIM404 of the Cabinet Member for Finance


    Additional documents:


    The Housing Development and Improvements Service Manager referred to the meeting of the Committee in December 2017 when Members had considered the HRA Capital Programme and asked for a further update on expenditure and delivery. The report circulated in the agenda pack provided Members with an update on the programme with specific regard to expenditure and delivery against the profile and the overall budgets to the end of period 11of the 2017-18 financial year.


    The Committee was informed there had been a marked improvement in performance in respect of the expenditure on the programme following the implementation of a number of measures that had been outlined and agreed at the meeting of the Committee in September.


    The committed expenditure (this referred to orders placed) at the end of December was 86% of the forecasted profile.  With the actual expenditure (this referred to completions) being 70% of the current forecasted expenditure profile.


    HRA Capital programme delivery had continued into quarter four and at the end of period 11 Committed expenditure (orders placed) had been 83% of the current forecasted profile. Actual expenditure (completions) being 78% of the current forecasted expenditure profile. Appendix A in the report contained a summary of the period 11 budgets.


    Reference was made to the £1.54m included in the capital programme for stock growth and acquisitions. The Committee was informed that the Council’s bid for one of three potential sites had been unsuccessful. Negotiations were progressing on the remaining sites.  If the purchases were agreed, expected completion would be after the financial year end. This meant that the majority of the budget for 2017–18 would be committed, subject to final approval, but not spent.


    In respect of the New Build Housing Programme, the main contractor had submitted a claim for additional costs of £200k across the three schemes. This claim had been challenged by SKDC and negotiations with the Contractor, including assistance from the framework operator East Midlands Property Alliance (EMPA), resulted in agreement had being reached and a significant reduction in additional costs.  The additional costs payable by the Council were contained within the existing scheme budgets.


    Electrical Re-wiring Programme – Measures to mitigate the impact of issues in respect of refusals and no access had been highlighted in previous reports but performance on the re-wires programme had still been affected. The forecasted expenditure against the current committed budget was £115k.


    Replacement Doors & Windows – A number of window replacements had been undertaken and outstanding work in progress when invoiced would result in the budget being fully spent by year end.



    The outturn position for Period 11 at year end was forecasted to be £7.116m against the HRA Capital budget of £8.991m (80%).  Performance had been influenced by expenditure on the stock growth and acquisitions budget. 


    A comparison of projected outturn position for all HRA Capital budgets for 2017-18 against last year’s outturn (2016-17) was provided:


    During 2016–17 the budget was £9.700m but actual spend had been £5.746m which was 60% spend.


    During 2017–18 the  ...  view the full minutes text for item 41.


Annual Report on Grants and Returns 2016/17 pdf icon PDF 252 KB

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    Report of External Audit



    Mike Norman from KPMG presented the annual report on grants and returns 2016/17, which had been issued in January 2018. Two grants covered by the return: the 2016/17 Housing Benefit Subsidy claim and the 2016/17 Pooling of Housing Capital Receipts return.


    The Housing Benefit Subsidy Claim had a qualified report with a minor adjustment due to an identified error in the return which had triggered further testing. An adjustment was made to the claim which culminating in a reduction of £169 in the amount of subsidy due to the authority. Members were assured that in the context of a claim an adjustment of £169 was not significant.  The certified amended claim was submitted to the DWP by the deadline of 30 November 2017.


    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 2017/18 pdf icon PDF 1 MB

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    Report of External Audit



    John Cornett from KPMG presented the external audit plan for 2017/18. He informed Members that there had been no significant changes to the Code of Practice on Local Authority Accounting for 2017/18 however there had been a change in the level of materiality which was now set at £75,000.


    Members were reminded of the statutory responsibilities and powers set out in the Local Authority Accountability Act 2014 The National Audit Office’s Code of Audit Practice and the PSAA Statement of Responsibilities. There were two key objectives when auditing and reviewing to report on:


    Financial statements: To provide an opinion on the council’s accounts, review the Annual Governance Statement and Narrative Report and report exceptions on these.


    Use of  Resources: The “Value for Money Conclusion” which considered the Council’s arrangements for securing economy, efficiency and effectiveness in the use of its resources.  It did not mean providing an opinion on whether the Council provided value for money.


    Three areas of risk had been identified that had required specific audit attention and procedures to address the likelihood of a material financial statement:


    Valuation of PPE (Property, Plant and Equipment) – The Council currently operated a cyclical revaluation approach in respect of the valuation of all land and buildings.  Direction was required on assets not subject to in-year valuation to ensure they were not being misstated materially.


    Pension Liabilities – A review of the processes in place along with consideration of the assumptions and determination of the valuations would need to be undertaken to ensure accuracy of the data provided to the Actuary.


    Faster Closedown – The timetable for the production of the financial statements had been advanced significantly.  The draft accounts now had to be prepared by 31 May instead of 30 June and the final accounts signed off by 31 July rather than 30 September.  The Auditors were working with officers to agree the steps being taken to meet the new deadlines.


    The Audit Team remained the same and were noted in the report. Nothing had been identified that needed to be brought to the Committee’s attention. Work on the audit would continue to be undertaken during the summer.


    No changes were proposed to the audit fee, which was set nationally by the 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 to bring to the Committee’s attention.


    The Chairman asked for the Committee’s appreciation be recorded to as he felt that the quality of the reports was a reflection of how hard the Officers of the Council worked.


    Discussion took place on central Government changes to funding in future years and how this impacted on the auditors assumptions and whether the assumptions and opinions referred to current budget levels?  The Committee was reminded that the Auditors role was to assess the Risk Assessment Plans the Council had in place to respond to changing times.


    Further discussion took place  ...  view the full minutes text for item 43.


Indicative Internal Audit Strategy pdf icon PDF 511 KB

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    Report of Internal Audit



    Amjad Ali, RSM presented the Internal Audit Plan that covered a three year period for 2018/19 – 2020/21, and had been included in the agenda pack. A number of issues were taken into consideration when formulating the Audit Plan. Initially the process began with looking at the Council’s risk register, this was followed by an analysis of other audit work completed during the last three years. Internal audit then spoke with the management team to ascertain whether there were any issues to be included. Previous audits would also need to be taken into consideration. Internal audit worked closely with the external auditors to ensure there was no duplication of work and all audit outcomes were shared. The Plan included a contingency of 14 days for any additional work that may be required. This would not be billed as extra days. The report also outlined the Internal Audit Strategy (Appendix B),The Internal Audit Charter (Appendix C); Client Core Standards (Appendix D).


    The Chairman noted he had e-mailed Members of the Committee for their comments and then invited them to seek any clarification they required.


    In response to a members query about how additional work would be incorporated into the plan, Members were informed that a discussion would be undertaken with the Senior Management and where appropriate included in the plan. It was noted that the Council was proactive in highlighting areas they felt may require assessment.


    Discussion took place on the impact the recent cold weather had on boilers in Council properties. It was noted there had been issues with the condensation pipes freezing at the point of exit from some properties. Members expressed concern about the communication between the gas company and the Council; how resident satisfaction was noted; whether the Council was aware of what the problems were and whether the Council was charged for the callouts.


    Members were informed there was a designated officer representing the contractor who met regularly with the Council to discuss highlighted issues.  Quarterly open book reviews were held where performance was closely scrutinised. The new contract with the provider included callouts to frozen condensates as a fixed part of the contract so the Council would not incur any additional charges. The Council had been kept informed of the number of incidents and properties affected. Senior Management had been updated on a 4 hourly basis including over the weekend period.


    Further discussion took place around whose responsibility it was to ensure this issue was addressed and the length of time it had been an issue.  It was generally felt that the issue was one the boiler manufacturer would need to remedy and changes would have to fall in line with any building regulation updates which were anticipated. The impact on residents was acknowledged. In addition the temperatures over the winter had been significantly low for some periods of time.


    Action Point: Members requested that they be provided with a further update on how this issue was monitored and what options there were to  ...  view the full minutes text for item 44.


Internal Audit Reports pdf icon PDF 927 KB

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    (10a) Internal Audit Progress Report



    (10b) Internal Audit Follow Up Report


    Additional documents:


    Internal Audit Progress Report


    Amjad Ali Manager from RSM presented the Internal Audit Progress Report. He informed Members that Internal Audit was on schedule to complete its annual audit plan. It was reported that 72% of the audits within the 2017/18 plan had been completed, 22% were in progress with 6% not yet due.


    Since the last progress report had been presented to Committee, further work requested by the Committee at a previous meeting regarding missed Refuse Collections had been undertaken. This work was additional to the assignments set out on the initial Audit Plan. The findings identified that the controls in place were adequately designed and found to the correctly applied. No findings had been identified that required management attention. The conclusion had been one of Substantial Assurance with an impact on Annual Opinion being positive.  Page 80 in the report provided more detail of the work and findings.


    The status of the five audits being undertaken was:


    ·         GDPR – In Progress

    ·         Health and Safety – In Progress

    ·         Contractor Review – In progress

    ·         Right to Buy – In Progress

    ·         Corporate Governance – Scheduled for completion on 26 March 2018


    The Committee was also informed that page 76 of the report referred to changes in the Audit plan that had already been highlighted at the previous meeting.  As a result of a discussion with management it had been agreed to remove the four continuous assurance reviews from the Internal Audit Plan and allocate these days to contingency.   Three advisory reviews had now been included in the audit plan 2017/18 and these were, Housing Benefits Overpayments, Complaints and Freedom of Information and Purchasing Cards.  The final reports had been issued to management for these advisory reviews.


    An update on progress was provided:


    The Recruitment and Retention Audit had been deferred due to the implementation of a new Payroll and HR System;


    Homelessness was being deferred due to changes to the existing service provision following the introduction of the Homelessness Reduction Action Act 2017, and


    IT – Software Development Lifecycle had been removed due to this now being managed by IT.



    Internal Audit Assignments completed to date were:


    ·         Asset Management Plan (HRA) (Substantial Assurance with 2 medium and 1 Low risk actions agreed)

    Follow up 1 (Reasonable progress – 2 Medium actions agreed)


    ·         Business Continuity (Reasonable Assurance with 4 medium and 1 Low risk actions agreed)


    ·         Cyber Security (Reasonable Assurance with 4 medium and 5 Low risk actions agreed)


    ·         Housing Benefit (Substantial Assurance with 2 medium and 1 Low risk actions agreed)


    ·         Payroll and Expenses (Substantial Assurance with 2 medium risk actions agreed)


    ·         Risk Management (Substantial Assurance with 1 medium and 1 Low risk actions agreed


    Follow up 2 (Good Progress with 1 medium risk action agreed)


    The Committee was given the opportunity to ask questions about the Internal Audit’s findings.


    In response to a query about the new payroll system, Members were assured that the new system was running in parallel with the current system. It was due to go live  ...  view the full minutes text for item 45.


Statement of Accounting Policies 2017/18 pdf icon PDF 202 KB

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    Report number CFM 455 of the Cabinet Member for Finance






    The Governance and Audit Committee recommended that the Statement of Accounting Policies as set out at Appendix A of Report CFM455 be approved and that the contents of the report be used in the production of the 2017/18 financial statements. 


    The Assistant Director for Finance introduced Alison Hall-Wright to the Committee and explained that part of her role would be assisting in the close down of the Accounts for the Council. Reference was made to the Council’s Accounting Policies and how these were reviewed on an annual basis prior to the preparation of the Statement of Accounts. This was undertaken to ensure that they were up to date and in line with the CIPFA Code of Practice on Local Authority Accounting in the United Kingdom.


    Members were reminded of the material interest the Council had in Gravitas Limited and that the nature of the relationship with the Company had been assessed and deemed as the Company being a subsidiary of the Council.  It was noted that at this particular time, the Council was not currently required to produce accounts due to no material activity having taken place during this accounting period.


    The Committee approved the Statement of Accounting policies to be used in the production of the 2017/18 financial statements.


Prevention of Right to Buy Fraud - Procedural Information pdf icon PDF 80 KB

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    Report number CFM456 of the Cabinet Member for Finance


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    The Governance and Audit Committee approved the Prevention of Right to Buy Fraud – Procedural Information as set out in Report CFM456.


    The Assistant Director for Finance referred to Report CFM456 in respect of the Prevention of Right to Buy Fraud.  Members were reminded that the Council had an obligation to protect property assets from fraudulent misuse by ensuring there were appropriate and robust risk and control frameworks in place to identify potential fraud.  These frameworks had to include clear plans for preventing, detecting and responding to fraud thereby ensuring that the sales of the Council’s housing stock were being sold to those applicants legally qualified to purchase the properties.


    To mitigate any risks of fraudulent applications being made by those not eligible to exercise the right to buy and to ensure anti-money laundering controls were in place, the Prevention of Right to Buy Fraud – Procedural Information, would strengthen the Council’s position. As part of the Committee’s remit, counter fraud was one of the key areas of focus and an essential element of delivering good governance.


    The Council’s Counter Fraud Framework would be due for review during the year and the Prevention of right to Buy Fraud – Procedural Information would be an integral component of the revised framework.


    In response to questions, the Committee was informed that Right to Buy Fraud was more prevalent in other areas, but the Council still needed to be vigilant and have measures in place to respond should it be required.


    Further discussion took place on the amount of discount allowed and the forthcoming changes in respect of greater discounts; whether the Council replaced properties on a 1:1 basis; and the requirement for certain types of properties to be protected especially if the Council had adapted property for tenants. The Council could not deny tenants the right to buy but this framework would enhance and provide more robust consideration of applications.


    One Member queried whether Cabinet would consider enforcing this as a permanent measure.


    The Governance and Audit Committee considered and approved the Prevention of Right to Buy Fraud – Procedural Information as set out in Report CFM456.


Close of Meeting

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    The Chairman thanked everyone for attending.

    The meeting closed at 3.56pm.