Audit and Risk Sub-Committee Minutes

Date:
Wednesday, 24th February, 2010
Time:
4.30pm
Place:
Committee Room 2, Council Offices, Gernon Road, Letchworth Garden City
 
 

Attendance Details

Present:
Councillor M.E. Weeks (Chairman),Councillor John Booth (Vice - Chairman), Councillor Paul Clark, Councillor J.M. Cunningham.
In attendance:
Strategic Director of Finance, Policy and Governance
Head of Finance, Performance and Asset Managment
Risk Manager
Audit Manager
Committee and Member Services Officer
Also Present:
From Grant Thornton
Nick Caley, Paul Winrow and Phil Westerman
Item Description/Decision
PART I
35 APOLOGIES FOR ABSENCE
An apology for absence was received from Councillor Deepak Sangha.
36 CHAIRMAN'S ANNOUNCEMENTS
The Chairman reminded Members that, in line with the Code of Conduct, any Declarations of Interest should be declared immediately prior to the item in question.

The Chairman welcomed Mr Phil Westerman from Grant Thornton who would be replacing Mr Paul Winrow and on behalf of officers and the Audit and Risk Sub - Committee thanked Mr Winrow for his support and advice during his time as Engagement Lead.

37 MINUTES
RESOLVED: That the Minutes of the meeting of the Audit and Risk Sub - Committee held on 25 November 2009 be approved as a true record of the proceedings and signed by the Chairman.

There were several ‘matters arising’ from the Minutes and officers confirmed that all outstanding items were being dealt with or that no action had been possible since the last meeting.
38 DATA QUALITY IMPLEMENTATION UPDATE
The Head of Finance, Performance and Asset Management (HF) advised the Committee that the Action Plan attached at Appendix A did not include commentary on actions prior to the last meeting, actions completed since the last meeting were shown for information and would subsequently be deleted. The HF advised the Committee that the Performance Manager had amended each action where appropriate following the request of the Committee at the meeting held on 24 September 2009 (Minute 18 refers).

The HF provided an update on the Implementation Plan regarding Crystal Reports; E learning Data Quality Training; and Feedback on Third Party Protocol. There were now three status levels for each action: Completed; On target and behind schedule. The Committee reviewed the Action plan at Appendix A and noted that of the 13 actions seven were complete, five were on target and one was behind schedule. The seven completed actions had enhanced commentary made in the Action Plan and the five actions on target were given current status and any outcome or expectation was also detailed at Appendix A and the Committee noted the progress for each one.

The HF confirmed that unfortunately there was one action that was behind schedule: Combination of the Data Quality Forum and Information Assurance Group in order to provide better co-ordination of existing information and data handling and sharing of services and wider electronic delivery agenda. The HF confirmed that the Head of Information Technology would lead on this action, the parameters had been scoped for the review and this action would be given a high priority.

In conclusion the HF advised the Committee that a standard paragraph had been added to the Job Description template for those posts which had a performance data quality role. The HF in response to an enquiry on symbols confirmed that this report would be presented at the next meeting using Covalent software. The HF also agreed to look at new targets for Data Quality Forum, that an allowance for Member Training should be made in e - learning and that an amendment would be made to the completion target for National Indicator 181 (Formerly BVP 178a and b - Benefits). Comment was also made as to the status of data for Housing Stock and the HF agreed to look at the problems with the Housing Strategy Team.

The Vice-Chairman advised the HF that he considered the text provided under the Objective column described the problem rather than providing an objective and the HF agreed to discuss with the Performance Manager how this could be addressed.

RESOLVED: That the progress made in the implementation of the agreed actions detailed in the Combined Data Quality Improvement Plan presented at Appendix A be noted.
39 AUDIT AND CONSULTANCY SERVICES' POSITION AGAINST THE 2009 - 2010 ANNUAL AUDIT PLAN AS AT 31 JANUARY 2010
The AM referred the Committee to Appendix A which detailed the completed audits between 1 November 2009 and 31 January 2010 and described the assurance levels. The AM took the Committee through the assurance levels for audits completed in the reporting period and the audits completed in the first seven moths of this financial year. The AM confirmed that Appendix A also contained details of non-audit projects and time spent on other activities including attendance at corporate groups and tender openings.

The AM next referred the Committee to Appendix B which detailed the current status of audit assignments for 2009-2010 at 31 January 2010 and to Appendix C which detailed the good performance of Internal Audit in the first ten months of 2009 -2010 against the internal audit performance indicators. The Committee reviewed the progress against the Internal Audit Action Plan at Appendix D and noted that all actions had been addressed and appropriate action taken.

The AM advised the committee that with regard to the Hertfordshire Wide Pathfinder Initiative a draft business case for the development of options for internal audit services across the county would be considered at the Chief Executive’s Co-ordinating Group Meeting in March 2010 and that some form of shared service with more than one District or all Districts would be considered as well as the potential for some form of outsourcing.

In response to an enquiry the AM advised that not all the outstanding audits would be completed during this audit plan year and had accordingly been incorporated into the plan for 2010 - 2011. The AM advised that this carry forward would not impinge on the audit plan for 2010 - 2011 and then described the progress to date on outstanding audits for this year and that there remained only one audit to commence and this would start soon with preparation work conducted by the trainee auditor.

A Member questioned the Moderate Level of Assurance assigned to Debt Recovery as there were six High Risk Recommendations and the AM advised that there were few sundry debtors and acknowledged that it could be difficult to assess the true situation without actual numbers of sundry debtors. There had been difficulties with the Northgate software but it was intended to make improvements wherever possible including the reconciliation of information held by debt collection agencies and NHDC.

The Chairman thanked the Audit Manager for the report and detailed update on progress against the Audit Plan for 2009-2010 and the outstanding audits moved to the Plan for 2010 - 2011.

RESOLVED:

(1) That the position of Audit and Consultancy Services against the agreed annual audit plan for 2009-2010 at 31 January 2010 be noted;

(2) That the performance of Audit and Consultancy Services for the first ten months against the internal performance indicators be noted;

(3) That the current situation regarding partnership working be noted.

REASON FOR DECISION:
To ensure that the recommendations made allowed the Audit and Risk Sub - Committee fulfil its obligations as the Audit Committee for North Hertfordshire District Council.



40 PROPOSED ANNUAL AUDIT PLAN FOR 2010 - 2011
The Audit Manager (AM) presented the report of the Head of Finance, Performance and Asset Management which described the adopted approach to plan and allocate internal audit resources for NHDC in the 2010 - 2011 financial year.

The AM advised the Committee that the Annual Audit Plan was designed to ensure that Audit and Consultancy Services could provide pro - active and responsive services throughout the year and concentrate on issues of immediate significance to NHDC. The Committee noted that the Plan allowed a contingency for fraud and consultancy work and reviewed Appendices A, B and D which detailed the Internal Audit Strategy for 2010-2011, Mapping of the Council’s risk to the Proposed Annual Audit Plan for 2010-2011 and Internal Audit Performance Indicators for 2010 - 2011 respectively.

The AM confirmed that eight uncompleted audits for 2009-2010 had been included in the risk assessment in order to identify which audits should be included in the 2010 - 2011 plan. The AM confirmed that two of these audits, Building Control and Pest Control would be considered for audit from 2011 - 2012.

The Committee reviewed the Audit Plan for 2010 - 2011 as presented at Appendix C with the timings set for each audit and noted the breakdown of audit days for the full year. The AM confirmed that the external auditor Grant Thornton had been consulted on the Audit Plan and their comments had been incorporated into the proposed plan.

RESOLVED:

(1) That the Internal Audit Strategy for 2010 - 2011 as presented at Appendix A be agreed;

(2) That the mapping of Audits in the proposed Annual Audit Plan for 2010 - 2011 against identified risks as presented at Appendix B be noted;

(3) That the proposed Annual Audit Plan for 2010 - 2011 as presented at Appendix C be agreed;

(4) That the internal audit performance indicators targets for 2010 - 2011 as presented at Appendix D be agreed.

REASON FOR DECISION:
To ensure that the recommendations meet the requirements of Accounts and Audit Regulations 2006 and assess the performance of Audit and Consultancy Services in 2010-2011.

41 ANNUAL GOVERNANCE STATEMENT 2008 - 2009 PROGRESS ON ACTION PLAN
The Risk Manager (RM) presented the report of the Strategic Director of Finance, Policy and Governance which was a review of progress against the action plan that arose from the 2008-2009 Annual Governance Statement and to be implemented in 2009-2010.

The RM provided an update on the Completed Actions (AGS001, AGS005, AGS007, AGS009 AGS012 since the meeting held on 25 November 2009 and advised that the milestone for AGS 004 (Challenge Board to agree Service Reviews for 2009-2010) had been amended to allow this item to be presented to PARC at the meeting to be held on 25 March 2010. The Committee noted that AGS002 remained to be completed and close off the Envirocrime external audit recommendations.

The RM also advised the Committee that there had been some slippages to completing some of the actions due to staff changes and the senior management restructure viz. AGS010 and AGS011. The RM expected closure on both actions soon, the scope had been completed for AGS010 and that three actions remained outstanding and were included as specific milestones on the action plan for AGS011.

The RM concluded the report by confirming that the Local Code of Corporate Governance (Appendix B) had been reviewed and amended to reflect the Council’s priorities. This Code would be next reviewed in 2013 unless there were any significant amendments in the interim. The Assurance Statement (2008 - 2009) to support the production of the Annual Governance Statement for 2009-2010 was attached at Appendix C for reference and the Chairman noted that he would be asked to complete an Assurance Statement for 2009-2010 in March 2010.

RESOLVED:

(1) That the progress against actions arising from the Annual Audit Letter and the 2008-2009 Annual Governance Statement be noted;

(2) That the revision to the Local Code of Corporate Governance as presented at Appendix B be agreed;

(3) That the proposal not to make any further amendments to the Local Code of Corporate Governance until March 2013 - unless there were any further changes in the interim - be noted;

(4) That the Chairman of the Audit and Risk Sub - Committee be requested with officers to provide an Assurance Statement to support the development of the Annual Governance Statement for 2009-2010.

RECOMMENDED TO PARC: That PARC be requested to note the recommendation of the Audit and Risk Sub - Committee and agree the revision to the Local Code of Corporate Governance.

REASON FOR DECISION:
To provide the Audit and Risk Sub - Committee with the opportunity to monitor progress against delivery of improvements against the Council’s Local Code of Corporate Governance.

42 RISK MANAGEMENT UPDATE
The Risk Manager (RM) presented the report of the Head of Finance, Performance and Asset Management which provided the Committee with an update on the management of Strategic and Corporate risks owned by the Corporate Management Team and Cabinet.

The RM referred the Committee to Appendix A and confirmed that all Top Risks had been reviewed and where appropriate changes had been made to the scope of the risk and updates made to progress against the mitigating actions

The RM was please to advise the Committee that there had been no changes to any of the assessment scores since the last updating at the meeting held on 25 November 2010.

The Chairman thanked the Risk Manager for the report.

RESOLVED:

(1) That the minor changes to the descriptions and actions relating to the Top Risks be noted;

(2) That the confirmation of no changes to the overall assessments of the Top risks be noted.

REASON FOR DECISION:
To ensure that the recommendations made at Paragraph 4 were made in accordance with the NHDC Risk and Opportunities Management Strategy.

43 USE OF RESOURCES AT NORTH HERTFORDSHIRE DISTRICT COUNCIL - 2009
Declaration of Interest:
Councillor Paul Clark declared a personal interest in respect of Recommendation 4 - Partnership Resources as he was Chairman of the local trustee board for the Citizens Advice Bureau.

Mr Nick Caley of Grant Thornton thanked the Chairman and advised the Committee that the report before them presented the results of the Value for Money and Use of Resources work in 2008-2009. A new framework had been introduced by the Audit Commission in 2009 for Use of Resources assessment in local government which emphasised outcomes over processes and introduced new areas of assessment such as environmental and workforce management. The new assessment was a more robust challenge to local authorities and had different scoring criteria and consequently the current scores did not necessarily reflect an objective change by NHDC in performance. Mr Caley referred the Committee to Appendix A - Action Plan for the 13 recommendations arising from the review and the priority for each.

The Use of Resources scores for NHDC were: Managing Finances = 2; Governing the business = 2 and Managing resources = 3. These scores equated to NHDC meeting the minimum requirements in for the first two categories and performing well in the third category. The breakdown of these scores using the 10 Key Lines of Enquiry were presented at Table 3 to the report and Mr Caley provided a detailed account of the assessment for each KLOE as applicable to each of the three main categories and described the recommendation for each.

Mr Caley advised the Committee of the key actions required by NHDC as per the agreed Action Plan at Appendix A which would contribute to the next Use of Resources Assessment due for 2009-2010 and as presented at Appendix D to the report.

The Chairman thanked Mr Caley and Grant Thornton for the Use of Resources report and the Committee noted scoring for the three main categories.

The Committee reviewed the 13 recommendations against the requirements of the KLoE 1.1, 1.2, 1.3, 2.1, 2.2 and 2.3. Comment was made at Paragraph 3.2 as to the level of member involvement and Grant Thornton confirmed that NHDC were at Level 3. With regard to KLoE 1.1 comment was made as to the need to say what NHDC will not be undertaking opposed to what NHDC did. Comment was then given to Recommendation 3 with reference to the variations made to the Herts Waste Aware contract and the award of contract to one company to manage all NHDC leisure contracts. A member observed that Recommendation 6 was fulfilled by NHDC but Grant Thornton advised that there was little evidence for this found in the Audit hence the comment in the report.

Grant Thornton stated that the audit in 2009-2010 would look at the management of Natural Resources (Recommendation 8) and that in the next audit for 2009-2010 there would be a more rigorous examination of Members personal development plans and the training available and undertaken by Councillors and good evidence would be required to attain Level 3 for Governance.

The Chairman thanked Grant Thornton for the comprehensive Use of Resources Letter 2008-2009 and the comments and responses made in the discussions on the report.

RESOLVED:

(1) That the key messages, conclusions and findings in the Use of Resources report prepared by Grant Thornton be noted;

(2) That the following Use Of Resources scores for 2008-2009 listed be noted:
a. Managing Finances = 2
b. Governing the business = 2
c. Managing resources = 3

(3) That the proposals made within the Action Plan presented at Appendix A be noted;

(4) That the Comprehensive Area Assessment and new Use of Resources Framework presented at Appendix B be noted;

(5) That the scoring criteria and rules presented at Appendix C be noted;

REASON FOR DECISION:
For the Audit and Risk Sub - Committee to receive and comment on the findings and conclusions of the Use of Resources for 2008-2009 conducted by Grant Thornton.

44 USE OF RESOURCES AT NORTH HERTFORDSHIRE DISTRICT COUNCIL - RESPONSE BY THE CORPORATE MANAGEMENT TEAM
The Risk Manager (RM) presented the report of the Head of Finance, Performance and Asset Management which was the response of the Corporate Management Team to the Use of Resources Assessment by Grant Thornton (see Minute 43 above).

The RM confirmed that the Corporate Management Team had reviewed the scoring and recommendations made by Grant Thornton and agreed the draft action plan which was presented at Appendix A. In addition to the draft action plan a Use of Resources Working Party had been established for the 2009 - 2010 assessment process and Lead officers had been assigned to each Key Line of Enquiry, and that there would be one new KLOE in 2009- 2010 i.e. KLOE 3.1 - Environmental Management.

The RM referred the Committee to the Tables at 4.2 and 4.3 which gave the Use of Resources scores for 15 audit nearest neighbours and the nine Hertfordshire neighbours respectively. NHDC were equal at Score 2 with eight nearest neighbours and only one Hertfordshire Neighbour had an overall score of 3. NHDC was the only Hertfordshire Authority to score 3 for KLOE 2.4 (Internal Control) and one of two who scored 3 for KLOE 3.3 (Managing Resources/Workforce Planning). The RM next referred the Committee to the Table at 4.4 which summarised the Use of Resources scores for the 201 District Councils. The four scores for NHDC at 3 represented above average performance for the relevant KLOE and indicated strength compared to the majority of other local authorities.

The RM confirmed that a more detailed Action Plan had been prepared as Appendix A and that AGS 014 - Member Personal Development Plans ‘due date’ for Programme of Core Member Development Activities of 3 May 2010 would be amended. The Committee agreed that Members should be encouraged to complete Personal Development Plans.

The Chairman thanked the Risk manager for the response report to the Grant Thornton recommendations as detailed at Paragraph 5 and proposed that congratulations should be offered to the Audit and Consultancy Services Team for attaining a Level 3 score for Internal Control.

RESOLVED:

That the improvement actions put in place (additional sub-actions and milestones) following the recommendations made by Grant Thornton (Minute 43 (3) above refers) be agreed;

That progress against the Action Plan shown at Appendix A be noted and that the availability ‘live’ on Covalent be welcomed;

That the proposal for progress reports against these actions ((2) above) by expansion of the quarterly update on the Annual Governance Statement Action Plan to future meetings of the Audit and Risk Sub - Committee be agreed;

That performance by NHDC against the Use of Resources framework in comparison with other District Councils be noted;

That the Use of Resources assessment already underway for 2009-2010 be noted;

That the Head of Finance, Performance and Asset Management be requested to pass on the congratulations of the Audit and Risk Sub - Committee to the Audit Team and Risk Manager for attaining a Level 3 Score - Internal Control.

REASON FOR DECISION:
To ensure that the Audit and Risk Sub - Committee were satisfied with the Council’s response to the recommendations made by Grant Thornton and to ensure that progress against the Action Plan could be monitored by Members at any time and by the Audit and Risk Sub - Committee at its meetings.

45 NHDC ANNUAL AUDIT LETTER 2008 - 2009
Mr Nick Caley of Grant Thornton thanked the Chairman and advised the Committee that this report ‘Annual Audit Letter’ included an unqualified opinion on the Council’s accounts for 2008-2009 issued at 24 September 2009. Mr Caley re-confirmed the opinion relating to the Use of Resources (Minute 43 above) and that the Council’s Grant Claims and Returns assessment concluded that there were adequate overall arrangements in place for grant claims and returns. However, the Housing Benefit Subsidy Claim was qualified (Minute 47 below refers) where two cases did not have Job Seekers Allowance proven.

Mr Caley gave an overview of the Audit Letter regarding: The Council’s Accounts: Use of Resources and Grant Claims and Returns and identified the key area for action and advised that a more comprehensive report on Use of Resources and Grant Claims had been made outside of this report (Minutes 43 and 47 refer).

With regard to the Council’s Accounts Mr Caley advised that there had been a small number of misstatements to the financial statements but had no impact on the general fund balance. Mr Caley confirmed the findings of the audit as follows:
1. The Financial statements ‘present fairly’ the financial position of the Council;
2. The Annual Governance Statement was consistent with the GT knowledge of the Council;
3. No control issues were identified that presented a material risk to the accuracy of the financial statements;
4. The scope and conduct of internal work was appropriate to support the audit work;
5. The working papers provided were of a good standard which helped the smooth progress of the audit and;
6. Appropriate controls were in place in the high profile areas such as Members’ Allowances and Treasury Management.

The Committee noted the audit reports produced by Grant Thornton in 2008 -2009 as presented at Appendix A and the Audit Fees for 2008 -2009 as detailed at Appendix B.

Comment was made to a possible disparity in the statement in the Audit Letter under Use of Resources compared to the Use of Resources Report where the Management Response clearly stated that evidence was gathered from the Sustainable Community Strategy, District Wide Survey and the Place survey. The HF confirmed that NHDC would not work in isolation and that there was a need to go forward with other partnerships and Grant Thornton acknowledged that NHDC was addressing these requirements set out in the Audit Letter.

RESOLVED:

(1) That the unqualified audit opinion on the NHDC accounts at 24 September 2009 be noted;

(2) That the findings concerning the NHDC grant claims and returns procedures be noted;

(3) That the positive Value for Money conclusion be noted;

REASON FOR DECISION:
To ensure that the Audit and Risk Committee were aware of the findings and conclusions made in the Annual Audit Letter.

46 NHDC RESPONSE TO ANNUAL AUDIT LETTER
The Strategic Director of Finance, Policy and Governance presented this report and confirmed that the unqualified opinion was welcomed by the Council together with the small reduction in the fee for the audit work on the Claims and Grants. The Strategic Director referred the Committee to Appendix A which detailed the response and actions from NHDC to the issues raised by Grant Thornton.

With regard to the Grant Claims qualification the Strategic Director advised the Committee that the two Housing Benefit Claims were received by the Council following emergency referrals for housing from the Police and the Probation Service. The Strategic Director confirmed that proof of entitlement had been obtained shortly after the claims had been paid. In fact at the time of the claim both individuals had been considered to be at risk and it was considered to be imperative for the claimants to be housed safely. The Strategic Director stated that the Head of Revenues and Benefits had sought advice from the Department of Works and Pensions on how guidance should be interpreted.



RESOLVED:

(1) That the unqualified opinion on the accounts for 2008-2009 be welcomed and noted;

(2) That the confirmation of good quality working papers for the audit be welcomed and noted;

(3) That the small reduction in the audit fee for claims be welcomed and noted;

(4) That the actions taken at NHDC to seek clarification from the DWP on benefit cases arising from emergency referrals from Police and Probation Services be noted;

(5) That the responses by NHDC to the issues raised by Grant Thornton and detailed at Appendix A be agreed.

REASON FOR DECISION:
To ensure that the Audit and Risk Committee note the actions of NHDC when responding to the findings of Grant Thornton made in the Annual Audit Letter for 2008-2009.


47 NHDC - GRANTS 2008 - 2009
Mr Nick Caley thanked the Chairman for the invitation and gave a synopsis of the audit of the Claims and Returns certified in 2008-2009. Mr Caley confirmed that three claims had been qualified and that these claims had to be highlighted due to instructions set down by the Audit Commission.

The Strategic Director of Finance, Policy and Governance provided a precise description of the circumstances in which the individuals had been housed as an emergency following a request from the Police and Probation Service. Grant Thornton accepted that the circumstances merited the action taken and acknowledged that the correct evidence of job seekers allowance had been obtained very quickly.

The HF advised that an approach had been made to the Department of Works and Pensions to clarify the approach to documentation and that a Customer Information System check would be completed in all cases.

RESOLVED:

(1) That the findings of the external auditor Grant Thornton on three grant claims and returns as detailed at Appendix B be noted;

(2) That the no qualification applied to LA01 - National Non Domestic Rates Return and HOU21 Disabled Facilities Grant be noted;

(3) That the qualification applied to BEN01 - Housing and Council Tax Benefits Scheme be noted;

(4) That the recommendation made by the external auditor concerning BEN01 - Housing and Council Tax Benefits Scheme be noted;

(5) That the proposal made by the Head of Revenues and Benefits to introduce a Customer Information System (CIS) check on all applications be agreed.

REASON FOR DECISION:
To allow the Audit and Risk Sub - Committee take note and comment if appropriate on the findings reported by the external auditor.

48 NHDC - THE AUDIT PLAN 2009 - 2010
Mr Winrow thanked the Chairman for the invitation and advised the Committee that there would be no extra items included in the Audit Plan for the financial year 2009- 2010 and referred the Committee to Item 5 in the report which listed the planned outputs. Mr Winrow confirmed the composition of the Engagement Team and advised the Chairman that this would be his last meeting for NHDC and that he would be succeeded by Mr Philip Westerman as Engagement Lead.

Mr Winrow was pleased to advise the Chairman that there was a slight reduction in the estimated fees for the forthcoming audit which reflected no substantial change to the audit risk for 2009-2010. However, the Committee were advised that the fee would inevitably rise for 2010 - 2011 due to the increased work and guidance on International Financial Reporting Standards (IFRS).

Mr Winrow concluded his presentation with more details on the introduction of International Financial Reporting Standards. The Committee noted that NHDC had started to make progress but more application would be required and a risk could be identified if the Council was not well prepared for the transition.

RESOLVED:

(1) That the Audit Plan for the financial year 2009-2010 as set out in the report at Item 5 be noted;

(2) That the indicative fees for Accounts Audit and Value for Money Audit be noted;

(3) That the programme for the planned outputs from the Audit Plan as presented at Section 5 be noted.

REASON FOR DECISION:
To ensure that the Audit and Risk Sub - Committee are aware of the proposed actions within the Audit Plan for 2009-2010.

49 DATES OF NEXT MEETINGS
The dates of the meetings of the Audit and Risk Sub-Committee for the next Civic Year 2010 - 2011 were yet to be determined.
Published on Monday, 22nd March, 2010
18.32 p.m.