Audit and Risk Committee Minutes

Date:
Wednesday, 15th September, 2010
Time:
4.30pm
Place:
Committee Room 3, Council Offices, Gernon Road, Letchworth Garden City
 
 

Attendance Details

Present:
Councillor M.E. Weeks Chairman), Councillor John Booth (Vice-Chairman), Councillor Mrs A.G. Ashley, Councillor Paul Clark, Councillor J.M. Cunningham, Councillor Bill Davidson and Councillor Deepak Sangha.
In attendance:
Norma Atlay - Strategic Director of Finance, Policy and Governance
John Robinson - Strategic Director of Customer Services
Fiona Timms - Performance and Risk Manager
Margaret Mulkerrin - Audit Manager
Tim Neill - Accountancy Manager
Ian Gourlay - Committee and Member Services Manager
Also Present:
Grant Thornton: Phil Westerman
Item Description/Decision
PART I
13 APOLOGIES FOR ABSENCE
There were no apologies for absence.
14 MINUTES
RESOLVED: That the Minutes of the meeting of the Committee held on 29 June 2010 be approved as a true record of the proceedings and signed by the Chairman, subject to the addition of the name of Councillor Bill Davidson to the names of those Members who had submitted their apologies for absence for the meeting.
15 NOTIFICATION OF OTHER BUSINESS
There were no other items of business for consideration.
16 CHAIRMAN'S ANNOUNCEMENTS
The Chairman welcomed everyone to this meeting of the Audit and Risk Committee and thanked officers for arranging the training prior to the meeting.

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.
17 PUBLIC PARTICIPATION
There was no public participation.
18 AUDIT AND CONSULTANCY SERVICES: POSITION AGAINST THE ANNUAL AUDIT PLAN AS AT 31 JULY 2010
The Audit Manager presented the report of the Head of Finance, Performance and Asset Management which detailed the progress of Audit and Consultancy Services (Internal Audit) against the 2010-11 Annual Audit Plan; summaries of internal audit work undertaken during the period 1 April 2010 to 31 July 2010; and internal audit performance indicator information relating to the period 1 April 2010 to 31 July 2010.

The Audit Manager referred the Committee to Appendix A to the report, which detailed the completed audits between 1 April 2010 and 31 July 2010 and described the assurance levels. The Audit Manager took the Committee through the assurance levels for audits completed in the reporting period. The Audit Manager 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 Audit Manager next referred the Committee to Appendix B to the report, which detailed the current status of audit assignments for 2010/11 at 31 July 2010, and to Appendix C which detailed the performance of Internal Audit in the first four months of 2010/11 against the internal audit performance indicators.

The Committee expressed concern at the significant level of high risk recommendations in various follow up audits which had not been fully addressed, and agreed that the responsible officers for these outstanding actions be requested to provide the Committee Chairman with details of the reasons for the delay in their implementation. It was further agreed that, following the receipt of these details, the Chairman be authorised to take a view on whether such officers should be invited to the next meeting of the Committee to explain the reasons for the delay.

RESOLVED:

(1) That the position of Internal Audit against the agreed annual Audit Plan for 2010-11, as at 31 July 2010, be noted;

(2) That the performance of Internal Audit for the first four months of 2010/11 against its performance indicators be noted.

(3) That the responsible officers for the outstanding high risk recommendations in various follow up Audit reports be requested to provide the Committee Chairman with details of the reasons for the delay in their implementation, and that, following the receipt of these details, the Chairman be authorised to take a view on whether such officers should be invited to the next meeting of the Committee to explain the reasons for the delay.

REASON FOR DECISION: To ensure that the Audit and Risk Committee fulfils its obligations as an essential component of corporate governance and gains independent assurance that the Internal Audit function is fulfilling its statutory obligations.
19 RISK MANAGEMENT UPDATE
The Performance and Risk Manager 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 Performance and Risk Manager advised that, due to matters outside of the Council’s control, such as the Government’s forthcoming Comprehensive Spending Review and interest rate levels, it was recommended that the probability of the Financial Management risk was increased to 3. She explained that a score of 3 for probability meant that “this event was likely to occur on numerous occasions (4 or more) within the next 12 months”. This, in turn, increased the overall score of this risk on the risk matrix to a 9, one of the three highest risks faced by the Council at the present time.

The Performance and Risk Manager stated that one of the areas for action in 2010/11 identified in the Annual Report on Risk Management was to carry out a risk management maturity benchmarking exercise with other local authorities.

The Committee was informed that the members of the Risk Management Group had participated in an assessment exercise against the Alarm National Performance Model for Risk Management in the Public Services, which tested the extent to which risk management was having a positive effect and which assessed maturity at one of five levels. In all areas apart from one, the Group assessed the Council’s performance at a level 3 (risk management is “working” for NHDC). The only area found to be at a level 2 (risk management is “happening” within NHDC) was in Partnership, Shared Risk & Resources Processes.

The Committee noted that it was felt that risk management was handled well in NHDC’s contractual partnerships, but could be improved in its partnerships with other public bodies. It was agreed that the Performance and Risk Manager would liaise with the Head of Policy Partnerships and Community Development to see what improvements could be made in this area. In addition, the Performance and Risk Manager had contacted other Hertfordshire District Councils to see if they would like to benchmark using the Alarm Model. To date, only Welwyn Hatfield Borough Council had expressed an interest.

RESOLVED: That the amendments to the Top Risks, as set out in the report, be noted.

RECOMMENDED TO CABINET: That the increase in the assessment of the Financial Management Top Risk be agreed.

REASON FOR DECISION: To ensure compliance with the NHDC Risk and Opportunities Management Strategy and to allow Cabinet to accept ownership of new Top Risks in their ownership.
20 ANNUAL GOVERNANCE STATEMENT
The Performance and Risk Manager presented the report of the Head of Finance, Performance and Asset Management inviting the Committee to note the Annual Governance Statement (AGS) for 20091/0, including the period between 1 April 2010 and the completion of the Statement of Accounts, and to review progress against the Action Plan arising from the 2009/10 AGS.

The Performance and Risk Manager referred to Appendix A , the revised AGS, and drew attention to Section 5 of the report, which set out those items of the Action Plan that had been completed since the last meeting, and Section 6 which detailed actions that had revised target dates. The updated Action Plan was set out at Appendix B to the report.

The Performance and Risk Manager commented that the next version of the Annual Governance Statement Action Plan would contain details of the Cabinet Portfolio Holder responsible for each of the actions. She also confirmed that the new IT security firewall had been installed successfully.

In response to a question, the Strategic Director of Finance, Policy and Governance undertook to provide a response to Members of the Committee regarding the responsibilities on councillors (if any) under Freedom of Information/Date Protection in respect of the retention of documentation.

RESOLVED:

(1) That it be noted that the revised Annual Governance Statement, as discussed at the Council meeting held on 2 September 2010, is included in the Annual Statement of Accounts 2009/10;

(2) That the progress against the actions arising from the 2009/10 Annual Governance Statement, as detailed in the report, be noted.

REASON FOR DECISION: To oversee the production of the Annual Governance Statement (AGS) and the delivery of the AGS Action Plan.
21 ANNUAL REPORT TO THOSE CHARGED WITH GOVERNANCE
Mr P. Westerman (of Grant Thornton, the Council’s external auditors) presented the Annual Report to those Charged with Governance.

It was explained that the purpose of the report was to highlight the key issues arising from the audit of the Council’s financial statements for the year ending 31 March 2010. The report satisfied the mandatory requirements of the International Standard on Auditing (ISA) 260 in reporting the outcome of the audit to those charged with governance. The requirements of ISA 260, and how Grant Thornton had discharged them, were set out in detail in Appendix A to the report.

The Committee’s attention was drawn to the outcome of the audit of its financial statements, as set out in Section 2 of the report and Appendices B and C. In providing an opinion on the financial statements, Grant Thornton were required to reach a conclusion o n the adequacy of the Council’s arrangements for ensuring economy, efficiency and effectiveness in its use of resources (the Value for Money conclusion). Mr Westerman was pleased to report that Grant Thornton proposed to issue an unqualified Value for Money conclusion, further details of which were also included in Section 2 of the report.

The Committee acknowledged that matters arising from the financial statements and Value for Money audit had been discussed with the Strategic Director of Finance, Policy and Governance. One recommendation for improvement had been made, which was set out in the Action Plan at Appendix C to the report. This recommendation had been agreed with the Strategic Director of Finance, Policy and Governance and her senior finance team.

RESOLVED: That Annual Report on those charged with Governance, as provided by Grant Thornton, be noted.

REASON FOR DECISION: To meet the mandatory requirements of the International Standard on Auditing (ISA) 260 in reporting the outcome of the audit to those charged with governance.
22 AUDIT PROGRESS
Mr P. Westerman (of Grant Thornton, the Council’s external auditors) presented an update report on Audit progress.

The Committee was advised that Grant Thornton’s audit of the 2009/10 financial statements was fundamentally complete. Grant Thornton’s emphasis would now be on working with the Council to support it with the introduction of International Financial Reporting Standards (IFRS) in 2010/11 and the re-statement of the approved 2009/10 accounts.

The Committee was informed that the Audit Commission had published information on the new approach to local Value for Money (VFM) work following the cessation of Comprehensive Area Agreements. Grant Thornton would to continue to provide a conclusion on whether the Council had proper arrangements for securing VFM, based on two criteria specified by the Audit Commission related to the Council’s arrangements for securing financial resilience; and challenging how the Council secured economy, efficiency and effectiveness. Grant Thornton would be discussing with the Council in the coming weeks the areas of focus for the work to ensure that a local programme of VFM audit work was agreed.

The Committee noted that the Secretary of State had announced the disbanding of the Audit Commission in 2012. It was anticipated that the existing audit arrangements would continue in the current format for the financial years 2010/11 and 2011/12. Grant Thornton would update the Committee on future arrangements when more information became available.

RESOLVED: That the update report on Audit progress be noted.

REASON FOR DECISION: To keep the Committee updated with matters pertaining to Audit.
23 DATA QUALITY IMPLEMENTATION UPDATE
The Performance and Risk Manager presented the report of the Head of Finance, Performance and Asset Management which provided an update on the implementation of the Performance Combined Data Quality Improvement Plan.

The Committee was reminded that the last update report on the Plan to the former Audit and Risk Sub-Committee in February 2010 contained six outstanding improvement entries relating to Information Management (two improvements); Data Quality Checks; Performance Indicator Procedure Notes; National Indicator 35 - Building resilience to violent extremism; and National Indicator 181 - Average time taken to process Housing Benefit/Council Tax Benefit new claims and change events. The report detailed the measures taken under each heading to complete these actions.

RESOLVED: That the completion of the actions that formed the Combined Data Quality Improvement Plan that was previously reported to the former Audit and Risk Sub-Committee be noted.

REASON FOR DECISION: To assure the Committee that the internal and external audit recommendations that feed into the production of the Improvement Plan are now complete.
24 AUDITED STATEMENT OF ACCOUNTS 2009-2010
The Accountancy Manager (ACM) presented the report of the Strategic Director of Finance, Policy and Performance updating the Committee on the audited financial statements for 2009/10, as embodied within the Statement of Accounts, attached as Appendix A to the report.

The Accountancy Manager advised that, as a result of discussion with Grant Thornton, during the audit of the accounts, a number of adjustments/amendments had been made to the un-audited version of the accounts presented to the Committee in June 2010. The key matters arising from the audit of the accounts were described in the ISA 260 report and a full list of all changes to the accounts was set out in Table 1 of the report.

Other than minor changes, the Accountancy Manager stated that the key changes to the financial statements could be summarised as follows:

• Movement of balances in the Debtors and Creditors to correctly reflect the change in accounting policy for Council Tax and NNDR - no overall impact on the financial statements;
• The accounting for the 2008/09 year end adjustment of £1.417million on the pension fund liability in the 2009/10 financial year. The overall net liability on the Balance Sheet had not changed;
• Inclusion of an additional £193k cash in the bank account as at 31st March 2010 which had not been ‘banked’ into the Council’s system;
• Recognition of an additional debtor of £573k as a result of a confirmed VAT re-claim from HMRC. This was previously disclosed as a contingent asset;
• Movement of expenditure within the net cost of services lines to ensure consistent treatment with previous years.

The Accountancy Manager commented that the intention of Grant Thornton to provide an unqualified opinion on the financial statements, following approval by the Committee Committee, was welcomed. Although none of the issues raised during the audit had given Grant Thornton concern that the financial statements did not present a true and fair view of the Council’s financial position as at 31st March 2010, it was important that any necessary action was taken to address the issues for the production of the financial statements for 2010/11. Actions that would be undertaken were detailed in the final column of Table 1 of the report.

With the work on the production on the 2009/10 statement of accounts now complete, the Accountancy Manager stated that his team could focus on re-stating the 2009/10 accounts in order to be compliant with the new IFRS based Code of Practice. Work would continue on the project plan to produce a re-stated set of accounts by the end of December 2010. This would allow time for Grant Thornton to review the Council’s interpretation of the code and any judgements taken before work began on closing the accounts for 2010/11 in March 2011.

The Accountancy Manager referred to the proposed Letter of Representation to Grant Thornton in respect of the Financial Statements for the Year ended 31 March 2010, which was tabled at the meeting.

RESOLVED:

(1) That the 2009/10 Annual Statement of Accounts, as set out at Appendix A to the report, be approved and signed by the Chairman of the Committee.

(2) That the proposed Letter of Representation to Grant Thornton in respect of the Financial Statements for the Year ended 31 March 2010, as tabled at the meeting, be approved and signed by the Chairman of the Committee.

REASON FOR DECISION: To ensure that any queries raised are addressed before approval of the Statement of Accounts for 2009/10.
25 FUTURE TRAINING OF COMMITTEE MEMBERS
Following a brief discussion, it was agreed that the next training session for Members of the Committee (focussing on Risk Management arrangements and Auditing Standards) should take place at 4.30pm on Wednesday, 13 October 2010 in Committee Room 1.
Published on Tuesday, 12th October, 2010
Start - 4.30pm
End - 6.20pm