Agenda and minutes

To approve the minutes from the Audit and Risk Committee held on 17 October 2016.

The Minutes of the Audit and Risk Committee held on 17 October 2016 were agreed as a correct record and signed by the Chairman.

Please indicate if there are any interests which should be declared.  A declaration of an interest should indicate the nature of the interest (if not already declared on the Register of Interests) and the agenda item to which it relates.  If a disclosable pecuniary interest is declared, the Member should withdraw from the room whilst the matter is discussed.

These declarations apply to all Members present, whether the Member is part of the meeting, attending to speak as a local Member on any item or simply observing the meeting from the public seating area.

Councillor Smith declared an interest in A66 - Audit and Fraud Half Year Progress Report and left the meeting during consideration of the item.

To consider any business which, by reason of special circumstances, the Chairman proposed to accept as urgent under Section 100(b)(4)(b) of the Local Government Act 1972.

The Chairman reminded the Committee that a late report – Review of Financial Regulations had been sent out and would be considered later in the meeting.

Members wishing to speak pursuant to Standing Order 34 should inform the Chairman of their intention to do so and on what items they wish to be heard before the meeting commences.  Any Member attending the meeting under Standing Order 34 will only be permitted to speak on those items which have been previously notified to the Chairman

There were no Members present under Standing Order 34.

There was none.

To receive comments and recommendations from other Council bodies, and any responses subsequent to recommendations, which the Committee had previously made.  (NB some of the relevant Council bodies may meet after dispatch of the agenda).

The Committee received a presentation from the Performance and Efficiency Manager on the Annual Governance Statement (a copy of the presentation is attached to the minutes).

In response to a question, the Performance and Efficiency Manager explained that she had not received any feedback from the public on the Annual Governance Statement.

The Panel agreed that they would like to see a draft of the Annual Governance Statement before the final version was produced.

The Chairman, Councillor Pope thanked the Performance and Efficiency Manager for the presentation.

The Committee was reminded that at its meeting in September 2016, the Audit Committee approved the Council’s Annual Governance Statement covering and reflecting back on the 2015/16 year.  At that meeting, it was suggested that the Committee might want to receive an update halfway through the year on the progress being made with the Action Plan for the 2016/17 year.  The report provided that update. 

The Committee noted the progress with the Action Plan, which consisted of 11 actions.  One entry had been completed, the remaining 10 were on track to be completed by the target date of March 2017.

The Assistant Director/Performance Efficiency Manager responded to questions relating to:

·        Item 7 - whether the West Norfolk Strategy Group would continue to operate when the County Council discontinued the Second Homes payments to the Borough Council.

·        Item 3 - whether the cash receipting system had gone live yet?  It was subsequently confirmed that the new release V10 went live on 18^th November.  Implementation went smoothly and there was no additional downtime than the 1 day scheduled in.

·        Item 2 - a number of ICT Servers are due to be taken out of circulation.  It was subsequently confirmed that the reason for decommissioning these servers is that the operating systems (Windows 2003 Server) are outdated and not compliant with Public Services Network Guidelines.  These are live machines with business applications running on them that are accessed by Council staff.

            The steps taken for each server prior to decommissioning and removal are:

·         Check business application software currently residing on server (e.g. HR system) and compatibility with later operating systems.

·         Install and configure new server with test version of software and latest operating system.

·         Once testing has successfully completed backup original server and migrate all live data to new.

·         Close down / decommission old server and take out of circulation.

·         Dispose of Servers as per asset disposal guidelines.

RESOLVED:   That the Committee noted the progress made and endorsed the approach being taken to achieve the actions on the Council’s 2016/17 AGS Action Plan.

Sappho Powell, Ernst and Young presented the Annual Audit Letter for the year ended 31 March 2016. 

It was explained that the purpose of the Annual Audit Letter was to communicate the key issues arising from the External Auditor’s work to the Members and external stakeholders, including members of the public.

It was further explained that matters reported in the Annual Audit Letter were those Ernst and Young considered most significant for the Borough Council of King’s Lynn and West Norfolk.

It was explained that there were no matters to report.

The Auditor responded to questions relating to:

·        Property Plant and Equipment and why this was a significant risk.

·        Audit Fees – it was explained that the work was completed last week and the certificate would be claimed. It was anticipated that the Council would receive a rebate. There had been a reduction in the number of errors and work that Ernst & Young had to do.

The Committee considered that the letter was clear and well displayed.  The Committee asked for staff to be complimented on their work which had resulted in a reduction in the number of errors and the positive letter from the Auditors.

RESOLVED:   That, the Annual Audit Letter for the year ended 31 March 2016 be noted.

The Committee was reminded that the Council had formally adopted the Chartered Institute of Public Finance and Accountancy’s (CIPFA) Code of Practice on Treasury Management (2011) and remained fully compliant with its requirements.

One of the primary requirements of the Code was:

Receipt by Council of an annual strategy report (including the annual investment strategy report) for the year ahead, a mid-year review report an annual review report of the previous year.

The Mid-Year review report had been prepared in compliance with CIPFA’s Code of Practice, and covered the following:

·        A review of the Treasury Management Strategy;

·        The Council’s capital expenditure (prudential indicators);

·        An economic update for the first six months of 2016/2017 – Appendix 5;

It was agreed that the Committee still wished to receive Appendix 5.

The Group Accountant/Assistant Director responded to questions relating to:

·        Borrowing – it was explained that during the period where the Council did not collect Council Tax (February and March) there was less cashflow, therefore the Council would take out short term borrowing to cover that period.

·        Could the Council Tax payments be spread out over 12 months rather than 10.  It was explained that there was an option for Council Tax to be paid over 12 months but over a 10 month period this enabled all of the Council Tax to be collected 2 months before the year end.  It was further explained that when collecting Council Tax the Borough Council was holding balances for Norfolk County Council and the Police Authority, therefore the Council’s day to day balances were much higher.

·        It was explained that the Council was currently preparing a Capital and Investment Strategy, which would be presented to Cabinet in January 2017.  The Internal Property Strategy was also being updated.

·        Could the mechanism of reporting balances be regularised.  It was explained that it was prescribed that Council’s statements were prepared in that way and was standard practice across all local authorities.

·        Page 44 – there was no end date for the NWES investment. 

·        Page 44 – there was no end date for Gaywood Community Centre. 

RESOLVED:   That, the Committee reviewed the report and the treasury activity.

Councillor T Smith left the meeting during consideration of the item.

The Chairman introduced Kathy Woodward who would be replacing the Audit Manager when she retired in March 2017.

The Committee received a report which showed the Internal Audit activity against the Strategic Audit Plan 2016/17 and fraud work for April to October 2016.

The following audits had been carried out:

·        ICT Disaster Recovery

·        Housing Benefits

·        Business Continuity

·        Creditors and Payments

·        Asset Register and Inventories

·        Council Tax and Business rates

·        Food Hygiene, Health and Safety and Public Hygiene

·        Careline

·        Communications – Social Media

·        Safeguarding Children

·        General Ledger

·        Planning Enforcement

·        Attendance Management

·        Recruitment follow-up

·        Performance and Appraisal follow-up

·        Data Protection, Freedom of Information and Environmental Information regulations follow-up

·        Civics follow-up

The Committee noted the work on-going and other work carried out by Internal Audit.

The Committee made the following comments:

·        Reference was made to the £114,671.30 fraud/error/additional revenue which had been identified.

·        Attendance Management – high levels of TOIL being accrued by staff and not reduced.  It was explained that this was something that Management Team were looking into.

·        Up-coming Audits – what were the key headlines that would be looked at. 

RESOLVED:   That the Committee notes the work completed and was satisfied with the progress against the agreed plan.

The Panel was informed that the Risk Management Policy and Risk Management Strategy were presented to the Audit Committee in February 2016 and approved by Cabinet on 1^st March 2016.

The Terms of Reference for the Audit Committee included responsibility for monitoring the management of risk by Management Team.  To this end, the Committee received reports on a half yearly basis on the position of the Corporate Risk Register, with the last one being presented in April 2016.

This report presented the changes to the Risk Register since the last monitoring report in April 2016 and gave details of the risks falling into the ‘Very High’ category and the associated work to mitigate the effects.

The Committee made the following comments:

·        2.4 – 5-year land supply.  The Committee expressed concern in relation to this issue and the wider implications if there was a change in demand and the Plan could not be delivered, specific reference was made to the site at West Winch.  Discussion took place regarding which Panel/Committee would be best place to consider this. 

·        1.16 - Business Rates.  The Committee requested that a report be prepared for the next meeting on the impact of business rates, including the number of and value of appeals and how business rates worked as the Committee wished to understand the potential effect on Council finances.

·        1.17 - Channel Shift.  It was explained that the savings were partly dependant on One-Vu integration with the back office systems.  Focus had been on getting the front face available but to make sure that the savings were achieved, integration with back office systems needed to be developed.

RESOLVED:   (1)        That, the Panel noted the contents of the risk register and confirmed agreement with Management Team’s assessment of the risks to the Corporate Objectives.

(2)        That a report be presented to the next meeting of the Committee on Business Rates.

The Audit Manager explained that Section 3 of the Accounts and Audi Regulations 2015 stated that ‘A relevant authority must ensure that it has a sound system of internal control which ensures that the financial and operational management of the authority is effective’.

Financial Regulations were intended to ensure the Council meets its statutory obligations regarding financial management, especially in respect of the financial aspects of corporate governance.  It was essential that the regulations properly reflect the structure of the Council in terms of roles and responsibilities and they provide proper direction for Members and Officers in the conduct of the Council’s business.

The Financial Regulations were last reviewed in 2011/12 and were overdue for review.  In that time there had been a number of changes in the structure of the Council and new issues had arisen that needed to be included in the regulations.

The main changes to the regulations were:

·        8 – Employment Status Indicator (ESI)

·        9 – Construction Industry Scheme (CIS)

·        Appendix 2 – Inventory Procedures

·        Appendix 3 – ESI Procedures

·        Appendix 4 – Cash Limit Rules

Other sections had been expanded to reflect increasing or changes in use:

·        2 – Reference to External Audit had been included to reflect the new appointment arrangements;

·        14 – Use of Credit Cards.  Use of corporate credit cards was increasing, especially in relation to internet orders. 

·        15 – Grants To and From external organisations.  This section did not previously refer to ‘Grants From’.  This was an increasing source of funds for the Council and needs to be properly regulated.

·        18 – Travelling and Subsistence.  This included the use of Expenses on Demand and the new procedures for submitted VAT receipts that had recently been approved by Management Team.

·        19 – Insurance.  It had become increasingly important to ensure that any changes that might affect the level of insurance cover be identified and communicated to the Insurance Officer.  This also applied to changes in service provision.

The scope of the Financial Regulations had been extended to include the Council’s wholly owned companies, where the regulations were adopted by the Company Board.

No sections had been removed although the section on Treasury Management had been largely replaced by a reference to the Treasury Management Strategy to avoid the necessity for more frequent updates of Financial Regulations.

In response to a question it was explained that the Council had approximately 12 credit cards but different officer’s had different limits on the cards.

RESOLVED:   That, the Committee recommends to Cabinet the adoption of the revised Financial Regulations.

To note the Committee’s Work Programme for 2016/2017.

The Committee noted the Work Programme for 2016/2017.

It was agreed that Training on Treasury Management Strategy would replace the scheduled Training on How an Audit is undertaken at the next meeting scheduled for 13 February 2017.

To note that the date of the next meeting of the Audit Committee will take place on Monday 13 February 2017 at 5.00 pm in the Committee Suite, King’s Court, Chapel Street, King’s Lynn.

The next meeting of the Audit Committee will take place on Monday, 13 February 2017 at 5.00 pm in the Committee Suite, King’s Court, Chapel Street, King’s Lynn.