Agenda and minutes

Governance and Audit Committee - Thursday, 21st March, 2019 2.00 pm

Venue: River Room, Jubilee life centre, 5 London Rd, Grantham NG31 6EY

Contact: Anita Eckersley 

No. Item



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    Apologies for absence were received from Councillors Paul Wood and Peter Stephens.


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 13 December 2018 pdf icon PDF 188 KB

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    The minutes of the meeting held on 13 December 2018 were proposed, seconded and agreed as a correct record.


Updates from previous meeting

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    A Member referred to the action point at minute 35 noting the Committee would be kept informed of the findings from the Communities and Wellbeing OSC in respect of the issue of frozen pipes. The Chairman noted that the item had not been on the agenda for the February meeting of the Communities and Wellbeing OSC.  It was also noted the issue had been raised at Council. 


    Clarification from the Assistant Director of Housing prior to the meeting had been sought and he noted that a discussion had been had with the Chair of the Communities and Wellbeing OSC. It had also been explained that mitigating actions were still being completed as were the measures of effectiveness of the actions and outcomes.  These would be included in a report that would go to the OSC in the new Municipal year.


    Members expressed their concerns at the length of time it had taken to resolve the issues and receive feedback. 


    Further discussion took place on how faults were reported and it was noted that fault reports went directly to Liberty Gas but it was not clear if the Council received notification of all the faults. Discussion ensued on the potential contractual issues and the need to determine what detail was in the contract regarding the process of dealing with reporting faults to the Council.


    A Member proposed and this was seconded that a meeting with the Chief Executive should be arranged in order to outline the concerns.  The Chairman commented that he would meet with the Chief Executive and convey the Committee’s concerns.


    Action point:

    That a meeting of the Chairman and the Chief Executive is arranged in order to discuss the Committee’s concerns in respect of this issue.


    The Assistant Director, Resources provided an update on the action point referring to the recent Land Charge changes. He explained that the Government initiative to transfer local land charges data to HM Land Registry’s national digital service would impact on 365 councils. Five Councils had migrated to the new system during 2018 and the anticipated end date of 2023 could prove challenging. It was noted that a number of councils such as Peterborough, East Lindsey and North East Leicestershire would be migrating during the current year. 


    Members queried whether Councils would need to be fully digital and whether there was a date for SKDC to transfer.  It was noted that Councils would need to be fully digital.  SKDC was only part digital and would not be transferring yet.


    The updated was noted.


Certification of Grants and Returns 2017/18 pdf icon PDF 197 KB

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    Report of the Cabinet Member for Finance

    Additional documents:


    The Assistant Director for Resources referred to the report which summarised the work completed by KPMG during 2018/19 and provided the Committee with an update on the findings from the audits of the 2017/18 Housing Benefit Subsidy claim and the 2017/18 Pooling of Housing Capital Receipts Return.  The letter received from KMPG referred to the 2017/18 Housing Benefit Subsidy Claim and was the only claim covered by Public Sector Audit Appointments Ltd.


    The audit had been qualified due to a small number of errors being identified during the sample testing of Rent Allowances and this had led to an incorrect calculation of earnings.  An action plan was being developed to address this during 2019/20. The action plan would included: increasing the sample rate, increased training and support for staff and mentoring of newly appointed staff. 


    The audit of the Housing Benefit Subsidy Claim had identified a number of errors which resulted in amendments to the claim.  The overall impact to the claim was a £359 increase to the subsidy claimed against a total certified value of £28m.


    The audit of the Pooling of Housing Capital Receipts Return had identified two errors: (i) The recording of the right to buy sales figures should have been in pounds and pence but because the cell format had been determined by the Government Delta website, the return was submitted but the Council was unable to record the sums received in pounds and pence:  (ii) An expenditure of £1,140 had been included on the return for the quarter which was after the date of the invoice but the invoice was received and processed during the following quarter.


    Reference was also made to the increase of the fee by £2500 and how this was due to additional work and time spent calculating the impact of the errors and checking the amendments to the claim.  A Member queried whether the PSAA had been notified of the extra work and the Committee was informed that it was normal practice under PSAA regulations to increase the fee due to the requirement for increased testing.


    The Governance and Audit Committee accepted the report.


External Audit Plan 2018/19 pdf icon PDF 198 KB

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    Reports of the Cabinet Member for Finance and External Audit

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    The Engagement Manager from Grant Thornton explained that the report provided an overview of the planned scoping and timing of the statutory audit of the final accounts as well as the Value for Money work in respect of the financial year 2018/19. 


    The Audit Plan highlighted potential risks that required special audit consideration and procedures to be put in place to address the likelihood of a material financial error. The risks were not unique to the Authority but were risks facing all local authorities and had been identified as:


    ·         Valuation of property, plant and equipment

    ·         Valuation of pension fund net liability 

    ·         Management override of controls


    The level of materiality for errors was usually set by the annual external audit and for 2018/19 this had been set at £1.4m which equated to 2% of the Council’s gross expenditure in the previous year. The “clearly trivial” level was also set by the auditors and for 2018/19 had been set at £70k. Uncorrected omissions or misstatements in the accounts above this level would be reported to the Committee.


    The value for money element focussed on whether the Council had appropriate arrangements in place to secure value for money. Grant Thornton had assessed a potential significant risk surrounding financial sustainability due to the Council’s unbalanced budget for both 2020/21 and 2021/22. This was similar to many local authorities due to the impact of the national funding review.  During 2019/20 the Council would work to ensure a balanced position was achieved.


    The annual audit fee of £36,400 had been set by the Public Sector Audit Appointments Limited (PSAA) and was incorporated into the 2019/20 budget. The recurring non-audit fee was £5000.


    Discussion took place on the relevance of information contained in this first report and how future reports would be refined. Further discussion took place on financial systems and potential risks and what comment would be provided on financial sustainability. The Committee would receive a report on sustainability at their July meeting. The audit progress report provided a timeline for audit deliverables and included a sector update summary of emerging national issues and developments. Also included were Issues that could impact the Council, the NHS and the wider public sector.


    In response to a Member’s query about whether Grant Thornton would be undertaking an audit of the Council’s companies and the use of funds transferred to these companies from the public purse, the Committee was informed that Grant Thornton had been appointed to audit the Council not the companies.  The monies transferred were below the £1.4m material threshold but the companies would require auditing should they grow. The Committee recognised the need for the companies to be held to account but at the moment they didn’t qualify for audit. A new Companies Committee would be in place in the new Municipal year and part of their role would be to scrutinise the Company’s Terms of Reference. The Auditors would also consider the companies under the value for money banner.


    General discussion took place on the  ...  view the full minutes text for item 46.


Internal Audit Updates pdf icon PDF 200 KB

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    Reports of the Cabinet Member for Finance and Internal Audit


    ·           Internal Audit Progress Report

    ·           Internal Audit Follow Up Report

    ·           Internal Audit Plan 2019-20 SKDC

    Additional documents:


    The Assistant Director, Resources, referred to the Internal Audit plan that had been approved by the Governance and Audit Committee on 22 March 2018. The Progress Report at Appendix A, provided details of the final six audits of the internal audit plan which was now 100% complete. It was suggested that questions were asked prior to the introduction of the 2019/20 Internal Audit Plan.


    Amjad Ali, RSM, presented the Internal Audit Plan noting that since the last Audit Report all audit work had been completed.  Reference was made to the seven reports included in the Progress Report,  these being: Temporary Staff, Construction Regulations, Fire Safety, Payroll and Expenses, Housing Benefits, Corporate Governance and the Follow Up 2 (2018/19). The Fire Safety Report had resulted in a Partial Assurance opinion but the rest of the reports had been given a positive opinion. 


    With regards to the Fire Safety Report and as a result of testing, five medium and two low priority management actions had been identified.  Management actions were agreed in respect of these findings.


    The medium priority findings were in relation to:


    From a sample of 20 housing properties, three instances were identified where no evidence of a fire risk assessment had been undertaken in 2017. In addition one property had a fire alarm fitted but there was no evidence of a weekly check.


    From a sample of 20 general/commercial properties, five properties had no evidence of a fire risk assessment in 2017, one showed as not being undertaken since 2015.  In addition four had evidence of annual inspections of emergency lighting and fire alarm systems, but no evidence of weekly checks could be provided. A further five general/commercial properties could not provide any information.


    Seven out of 20 commercial properties could not confirm an annual service of fire extinguishers had taken place. The list of trained users for the evacuation chair was out of date and there was no evidence that trained staff undertook practice sessions.  The buddy list was also not updated.


    A property survey had been commissioned but it was noted that until completed it would be seen as not be the most appropriate option. A fire drill had not been conducted since April 2017 which was an annual requirement.


    Discussion took place on what types of commercial properties were involved, the need to ensure that Fire safety was improved as it was a legal requirement, whether action plans had been put in place and whether these checks would be implemented as a matter of urgency.  The Committee was informed that the auditors would be picking up the above points in their follow up report. A timetable to address the issues had been agreed and was being implemented.  An internal review would also be undertaken before the next meeting.


    Action points:


    1)    That the Assistant Director, Resources would ascertain whether the plan had been fully implemented and the issues addressed


    2)    That Internal Audit would undertake a review of the progress of the action plan that  ...  view the full minutes text for item 47.


Accounting Policies 2018/19 pdf icon PDF 192 KB

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    Report of the Cabinet Member for Finance

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    The Assistant Director, Resources, apologised for the late submission of the report.  He noted that the Statement of Accounts summarised the Council’s transactions for the 2018/19 financial year and its position at the year-end, 31 March 2019.  The Statement would be prepared in accordance with the Code of Practice on Local Authority Accounting in the United Kingdom 2018-19 (The Code) which was based on International Financial Reporting Standards (IFRS).


    All accounting policies had been reviewed for the 2018/19 financial year to ensure they complied with The Code and accurately reflected the transactions that had occurred and had been consistently applied. Appendix A provided detail of the accounting policies to be applied when preparing the Statement of Accounts 2018/19.


    In accordance with good practice the accounting policies had been reviewed to remove policies that were not applicable to the Council and to include the new accounting standard, IFRS 9 – Financial Instruments, which came into effect for Local Authorities on 1 April 2018. This standard set out the requirements for recognising and measuring financial assets and financial liabilities and were included in Appendix A.


    The accounting standard IFRS 15 – Revenue from Contracts with Customers also came into effect on 1 April 2018. This had been considered and deemed to have no material impact.


    A brief discussion took place on whether External Audit had been consulted with and whether some of the terminology was American.  It was noted that it was standard practice to have a discussion with the External Auditors and that some of the terminology was American.



    Following consideration of the Statement of Accounting Policies, as set out in Appendix A of the report, the Governance & Audit Committee approved the Statement for use in the production of the 2018/19 financial statements.


Corporate Risk Register Update pdf icon PDF 198 KB

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    Report of the Cabinet Member for Finance

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    The Assistant Director, Resources, noted that in accordance with the Terms of Reference for Governance and Audit Committee, the Corporate Risk Register should be presented to Committee twice a year.  The Committee had to monitor and review the risk management arrangements in place along with the activities undertaken to mitigate those risks. 


    The Corporate Risk Register was last reviewed by Committee in June 2018 and scheduled for the December meeting but due to changes in senior management, and line management of some services, the Corporate Risk Register had been deferred to the meeting today.  No material changes to the Corporate Risk Register required highlighting since it had been previously presented. 


    The Committee was informed of the risks the Corporate Risk Register captured:


    ·           Maintaining an effective internal control environment

    ·           Ensuring ongoing resilience and quality in third parties

    ·           Achieving future financial resilience

    ·           Building a suitable level of capacity, skills and culture within the Council workforce to achieve the change expected, whilst also still delivering business as usual

    ·           Ensuring robust security measures to protect the Council’s data and assets from cyber threats


    No Red (Very High) risks had been identified and all risks were classified as Amber (High) with actions in place to manage those risks and there were no concerns around the management of the risks.  Auditors had been consulted on the highlighted risks and had confirmed these were in line with a Council of our size.  Reference was made to Brexit and future resilience in respect of capacity, capabilities and skills.  The risk of cyber-attacks was mainly generic and plans were in place to reduce risks.


    It was noted that the Council’s response to risks had changed over the course of two years from being risk averse to risk aware.


    In conclusion the Assistant Director reported that the financial climate was a key driver and that new business had a risk, but a report would be brought to Committee later in the year providing an overview. A review would be undertaken in 2019/20 and would refresh and update the corporate risks, as well as define the Council’s overall risk appetite, with support from an external partner.  The findings from this review would be presented to the Governance and Audit Committee later in the year.


    Discussion took place on the themes and how pertinent they were to the current climate and how they would provide a degree of scope.



    Following a review of the Corporate Risk Register the Governance and Audit Committee noted the contents of the report and review and approved the Corporate Risk Register at Appendix A.


Close of Meeting

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    Best wishes from the Chairman were given to Members who were retiring.  Officers and the Auditors were thanked for their work during the year.


    The meeting closed at 3.14pm.