Agenda and minutes

Apologies for absence were received from Councillors B Anota, I Devereux, I Gourlay and P Hodson.

To approve the minutes from the Audit and Risk Committee held on 24 November 2015.

The minutes of the Audit and Risk Committee meeting held on 24 November 2015 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.

There were no declarations of interest.

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.

There was no urgent business.

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 no Chairman’s correspondence.

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).

None.

Members received a Powerpoint presentation from the Borough Council’s Auditor.  A copy of which is attached to the Minutes.

The Chairman, Councillor Humphrey invited those present to ask questions, a summary of which is set out below.

In response to questions from Councillor Chenery regarding Members and risk, the Chairman, Councillor Humphrey commented that all Members should considered risk.  The role of the Audit and Risk Committee was to be satisfied that any mitigation identified was being addressed correctly.  The Auditor added that Councillors were able to challenge and risk.

The Assistant Director advised that the Council held a Corporate Risk Register but highlighlithed that there was a risk section in all cabinet reports which officers were required to fill in.  Cabinet and Members would then have the opportunity to ask questions on the risk identified.

Councillor Blunt asked if the Council looked at the cost of monitoring against the cost of impact.  In response, the Auditor explained that there was a value for money question which brought the cost element into the equation.  The Auditor added that it was difficult to evaluate the true cost of risk without monitoring being undertaken.

The Chairman, Councillor Humphrey commented that it was the responsibility of service managers to identify risk and ensure monitoring took place, but that also service managers could give advice on how to mitigate any risk identified.

The Auditor informed Members that service managers could suggest how a risk could be mitigation but also have the option to forward any high risk they felt need a corporate opinion to an Executive Director. 

The Chairman, Councillor Humphrey thanked the Auditor for an informative and useful presentation.

Ernst & Young, the Council’s External Auditors will present the report.

Sappho Powell from Ernst & Young presented the Certification of Claims and Returns Annual Report 2014/2015.

The Committee’s attention was drawn to the following sections of the report,

·         Scope of Work – Housing Benefits Subsidy Claim.

·         2014-2015 Certification Fees.

·         Looking Forward.

Members were advised that the level of error identified had pushed the Council over the threshold and therefore the Department of Work and Pensions could withhold or clawback some of the subsidy (£120,000)

In summary, S Powell advised that £120,000 error identified out of the total Housing Benefits Subsidy Claim of £40.4m equated to 0.2% and was also common across other councils.

The Committee was invited to ask questions/comment, a summary of which is set out below.

The Chairman, Councillor Humphrey commented that although the error identified was a small percentage of the total claim it was important that lessons were learned to avoid any clawback from the Department of Work and Pensions.

The Assistant Director explained that in the January Budget Monitoring Report there was a section which provided the statistics relating to the local government error.

RESOLVED:  That the Audir and Risk Committee noted the contents of the Audit Report.

RESOLVED:  The Audit and Risk Committee noted the contents of the Audit report.

Ernst and Young, the Council’s External Auditors will present the Audit Plan.

Sappho Powell, Ernst & Young presented the Borough Council’s Audit Plan for year ending 31 March 2016.  The purpose of the plan was to provide the Audit and Risk Committee with a basis to review the proposed audit approach and scope for the 2015/2016 audit in accordance with the requirements of the Local Audit and Accountability Act 2014, the National Audit Office’s 2015 Code of Audit Practice, the Statement of Responsibilities issued by Public Sector Audit Appointments Ltd, auditing standards and other professional requirements.  It was highlighted that the Audit Plan was also to ensure that Ernst & Young audit was aligned with the Committee’s service expectations.

Members’ attention was drawn to the following sections of the report:

·         Overview.

·         Financial Statement Risks.

·         Responsibilities in respect of Fraud and Error.

·         Value for Money Risks.

·         Audit Process and Strategy.

·         Independence.

·         Appendix A – Fees.

·         Appendix B – UK required communications with those charged with Governance.

·         Appendix C – Detailed Scopes.

In response to a question from the Chairman, Councillor Humphrey regarding Section 3 – Value for Money, page 21 last paragraph, S Powell agreed to amend the wording.

In response to further questions from the Chairman, Councillor Humphrey on how Ernst and Young took into account any information from the Council’s Internal Audit Team, S Powell advised that Ernst and Young received and read all reports produced by the Internal Audit Team, but did not entirely rely on this work, Ernst & Young undertook a substantive audit.

Following comments from the Chairman, Councillor Humphrey on the timetable set out within the plan, the Assistant Director advised that the information was included in the briefing note set out in the next Agenda item.  S Powell explained that from 2017/2018 the report would be issued by 31 July each year.

The Assistant Director explained that currently the Borough Council was required to publish the accounts by end of June and presented to the Audit and Risk Committee in September.  However, in 2017/2018 the timetable would mean that the Borough Council would need to close down and publish the accounts at an earlier date, by end of May 2017.

The Chairman, Councillor Humphrey welcomed the reduction in fees as set out on page 28 of the Plan.

RESOLVED:  The Committee noted the External Audit Plan for year ending 31 March 2016.

Ernst and Young, the Council’s External Auditors will present the report.

Sappho Powell, Ernst & Young presented the Local Government Audit Committee Briefing which covered the following issues:

·         EY Item Club Forecast.

·         Local Government Devolution.

·         Spending Review 2015.

·         Consultation:  New Homes Bonus.

·         Local Authority Revenue Expenditure and Financing.

·         Response to Flooding.

·         Council Tax Support.

·         Public Sector Exit Payment Recovery Regulations.

·         Faster Close Update.

·         Value for Money Guidance.

·         New Arrangements for the Exercise of Public Rights.

·         Consultation:  HRA Accounting.

·         Report on the Results of the Auditors’ Work 2014-2015.

Members’ attention was drawn to the closedown of arrangements for the accounts in 2017/2018.  S Powell advised that Ernst and Young was working with the Borough Council for earlier closedown of accounts in 2016 in order to assist Ernst and Young going forward in future years.

The Chairman, Councillor Humphrey thanked Ernst and Young for the useful quarterly briefing note.

RESOLVED:  The Committee noted the quarterly briefing note.

The Audit Manager presented the report which provided Members with the opportunity to review the proposed Strategic Internal Audit Plan for 2016/2021.

The Strategic Internal Audit Plan was attached to the report as Appendices 1 and 2.

The overall strategy of the Internal Audit was reviewed on an annual basis and was attached as Appendix 3.

Members were reminded that the purpose of the Strategic Audit Plan was intended to:

·         Ensure all areas were audited over the life of the plan, taking into account client’s audit requirements and the major risks facing the Council.

·         Ensure there were adequate resources to undertake the required audits.

·         Provide a basis for monitoring actual performance of the Internal Audit function.

The Committee’s attention was drawn to the following sections of the report:

·         Preparing the Plan.

·         Format of the Plan.

·         Outcomes.

The Audit Manager explained that within the plan there were 8 core audits which were considered to be fundamental and covered systems that were essential to the business of the Council.  In the past those systems had been audited extensively every year with high levels of assurance achieved repeatedly over several years.  However, it was highlighted that it was now felt that more effective use could be made of internal audit resources by allocating additional time to cover other areas.  Therefore coverage of the core systems would consist of audits in alternate years unless there were any significant changes in the area concerned.

Members were informed that a more proactive approach had been taken with major projects and an allowance had been made within the plan for the Audit Team to provide ‘critical friend’ support.

The Committee’s attention was drawn to section 3.6 of the report and the Audit Manager explained that for some audits, for example, health and safety and CCTV, external specialists reviewed the Councils systems.  This arrangement reduced the need for Internal Audit to review the systems and duplicate work.

In response to questions from the Chairman, Councillor Humphrey regarding the working arrangement with the Council’s Audit Team and the External Auditors, the Audit Manager explained that all audit undertaken by the Council’s Audit Team were available to be viewed by Ernst and Young.

The Chairman, Councillor Humphrey referred to page 49- Operational and Service Delivery – Allotments being identified as a medium risk and no assurance given and asked for an explanation.  The Audit Manager explained that when the audit was undertaken in 2015/2016 no assurance had been given, however, since the audit a significant amount of work had been carried out to improve the position and a follow up had been also carried out.  It was noted that an audit would be undertaken in 2017

Following further questions from the Chairman, Councillor Humphrey regarding Care and Repair being given limited assurance in 2013/2015, the Audit Manager explained that each audit report requiring improvement was accompanied by an action plan and a follow up audit was undertaken six months later to monitor progress.

In response to questions from the Chairman,  ...  view the full minutes text for item AR86

Members are invited to discuss any future training opportunities that they might find useful.

The Chairman, Councillor Humphrey informed Members that this item would appear on all Panel agendas.

Members were invited to forward any suggestions for future training to the Chairman, Councillor Humphrey or the Democratic Services Officer.

Councillor Middleton asked if there was an opportunity for Councillors to become involved in the day to day audit process. In response, the Chairman, Councillor Humphrey explained that all audit reports were available for Members to view on Insite.

The Audit Manager invited Councillor Middleton or any Councillor to visit the Audit Section to receive an overview of how their work was undertaken.

The Group Accountant presented the report and reminded the Committee that the Council was required to receive and approve a Treasury Management Strategy Statement, Minimum Revenue Provision Policy Statement and Annual Investment Strategy which covered:

·         Capital Plans, including prudential indicators.

·         A Minimum Revenue Provision (MRP) Policy.

·         The Treasury Management Strategy.

·         An Investment Strategy.

Members were advised that the report covered the requirements of the Local Government Act 2003, the Chartered Institute of Public Finance Accountants (CIPFA) Prudential Code, the Department of Communities and Local Government (CLG) MRP Guidance, the CIPFA Treasury Management Code and the CLG Investment Guidance.

It was explained that the report looked at the period 2016/2020 which fitted with the Council’s Financial Plan and Capital Programme.  The report was based upon the Treasury Officers’ views on interest rates, supplemented with leading market forecasts provided by the Council’s Treasury Advisor, Capita Asset Services, Treasury Solutions.

In response to questions from the Chairman, Councillor Humphrey regarding the maturity structure for loans of 10 years and above, the Group Accountant explained that the Council currently had two lender option/borrowing option loans which were taken out in 2007, each of £5m for a 70 year period.  It was explained that if the Council wished to pay off the loans at an earlier date a penalty fee would be incurred.  The Assistant Director added that with these two loans there was a lender option to increase the rate, however, the Borough Council could respond that the increase was not acceptable.

The Group Accountant advised that with regard to the two 70 year loans taken out in 2007 were at a competitive rate and still remained at a competitive rate.

Councillor Hipperson commented that the Council had a high level of investments, why was it necessary to borrow rather than draw down some of its investment.  In response, the Group Accountant explained that the Borough Council did lend itself money internally and would in turn use an element of its investments to fund the the Capital Programme in future years.  The Chairman, Councillor Humphrey referred Councillor Hipperson to page 67 of the report which set out an explanation to his questions raised.

The Chairman, Councillor Humphrey enquired if the debt rescheduling would be reported to the Audit and Risk Committee in addition to Cabinet.  In response, the Group Accountant confirmed that any debt rescheduled would be reported to both the Audit and Risk Committee and Cabinet at the earliest meeting following its action.

RESOLVED:  The Committee support the recommendations to Cabinet as set out below, with an additional recommendation (5).

Cabinet is asked to recommend to Council:

1)            The Treasury Management Strategy Statement 2016/2017, including treasury indicators for 2016/2020.

2)            The Investment Strategy 2016/2017.

3)            The Minimum Revenue Provision Policy 2016/2017.

4)            Adopt the revised Treasury Management Practices (TMPs).

5)            That any debt rescheduling will be reported to both Cabinet and the Audit and Risk Committee at the earliest meeting following its action.

The Audit Manager presented the report and explained that the Council’s Risk Management Strategy was last reviewed and approved by Council on 28 January 2010.  It was explained that the latest review had split the existing document into two documents, Policy and Strategy, and linked risk management more closely to the achievement of the Council’s objectives.  The risk appetite was formally recognised within the Policy, and the Strategy provided a means of escalating risks from service and project level to the Corporate Risk Register if necessary.

The Committee’s action was drawn to the following sections of the report:

·         The Risk Management Policy was attached at Appendix A.

·         The Risk Management Strategy was attached at Appendix B.

·         Page 94: Section 1:  the next review date for both the policy and strategy was March 2019 to ensure that both documents were still fit for purpose.

·         Page 95:  Section 2:  Definitions, Section 3:  Benefits of Risk Management which could be linked with the Borough Council’s Corporate Strategy.

·         Page 96:  Section 5:  Risk Management Approach.

·         Page 87:  Risk Appetite

·         Page 99:  Strategy which provided more detailed information on how risks were identified, etc.

·         Pages 102 and 103:  Minimising, controlling and responding to risk, monitoring and reporting.

In response to comments from Councillor Morrison regarding the impact table on page 101, the Audit Manager undertook to look at wording and amend where appropriate.

Following comments from the Chairman, Councillor Humphrey on the acceptance of risk and that it had to be recognised that some risks could not be anticipated and the Council having liability insurance.  The Audit Manager explained that at an operational level, for example, risk assessments were undertaken in the grounds maintenance service area, however, it had to be accepted that there could be some risks which the Council could not prevent.  The Audit Manager provided clarification between inherent and residual risk.

The Chairman, Councillor Humphrey commented that it was a well written report.

RESOLVED:  The Committee support the recommendation as set out below:

That Cabinet recommend that Council approve the Risk Management Policy and Strategy.

To note the Committee’s Work Programme for 2015/2016 and Forward Decisions List.

The Committee noted the work programme.

The Chairman, Councillor Humphrey informed the Committee at the next meeting, Members would receive an interim report on Hunstanton Sailing Club via a powerpoint presentation from Councillor Hodson.

To note that the date of the next meeting of the Audit and Risk Committee will take place on

The next meeting of the Audit and Risk Committee will be scheduled once the Calendar of Meetings 2016/2017 had been agreed by Cabinet on 5 April 2016.