Meeting documents

Audit Committee
Wednesday 25th April 2018

Chairman: Councillor Glover
Venue: Civic Centre, Scunthorpe, (Function Room 1)
Time: 10 am
E-Mail Address: matthew.nundy@northlincs.gov.uk

AGENDA

1. Substitutions (if any)
2. Declarations of Disclosable Pecuniary Interests and Personal or Personal and Prejudicial Interests (if any).
3. To take the minutes of the meeting held on 19 January 2018 as a correct record and authorise the chairman to sign.
4. External Audit Reports - Technical Update
5. Treasury Management and Investment Strategy - Quarter 4 report 2017/18
6. Internal Audit Update (Including the Updated Audit Charter)
7. Internal Audit Plan 2018-19
8. Anti Fraud and Corruption Strategy
9. Risk Management Progress Report
10. Annual Fraud Report
11. Any other items which the chairman decides are urgent by reasons of special circumstances which must be specified.

Note: Reports are by the Director: Governance and Partnerships unless otherwise stated.

MINUTES

PRESENT: – Councillor Glover in the chair

Councillors T Foster (Vice-Chair), Clark, Gosling, Kirk, Perry and K Vickers.

Also in attendance was a representative of KPMG (the council’s external auditor).

The committee met at the Civic Centre, Scunthorpe.

498 DECLARATIONS OF DISCLOSABLE PECUNIARY, PERSONAL OR PERSONAL AND PREJUDICIAL INTERESTS – There were no declarations of interests made at the meeting.

499 MINUTES – Resolved – That the minutes of the proceedings of the meeting held on 19 January 2018, having been printed and circulated amongst the members be taken as read and correctly recorded and be signed by the chairman.

500 (21) EXTERNAL AUDIT REPORTS - TECHNICAL UPDATE - A representative of KPMG, the council's external auditor, submitted its external audit progress report for April 2018.

The update provided members with a high level overview on progress in delivering KPMG's responsibilities as the council's external auditors.

The update also summarised the progress that was being made by the council in meeting its deliverables, as set by KPMG.

Members commented on particular aspects of the report to which the representative of KPMG and the Director: Governance and Partnerships responded to.

Resolved - That following consideration of the reports and discussion of their content, the committee agreed that the technical update be received and noted.

501 (22) TREASURY MANAGEMENT AND INVESTMENT STRATEGY - QUARTER 4 REPORT 2017/18 - The Director: Governance and Partnerships submitted a report on the council's Treasury Management and Investment Strategy for quarter 4 of 2017/18. The benchmark for measuring performance was the treasury strategy which the council set at its meeting on 16 February 2017.

The annual treasury management and investment strategy was prepared in line with -

  • The CIPFA Code of Practice in the Public Service Fully Revised 2011
  • The CIPFA The Prudential Code Fully Revised Second Edition 2011
  • DCLG Guidance
  • Local Government Act 2003

The code of practice required that Council receive a report on treasury management strategy at the start of the financial year, at mid-year and at year end. In addition the committee were to receive reports quarterly to provide it with assurance on the effectiveness of treasury management arrangements.

The High Level objectives of the council's treasury management activities were set out in the Treasury Management Policy Statement.

The Code also required the Council to maintain suitable Treasury Management Practices (TMPs), setting out the manner in which the organisation would seek to achieve its Treasury Management policies and objectives, and prescribing how it would manage and control those activities. The Treasury Management Practices adopted by the Council were reviewed on a regular basis.

The report provided members with a detailed assessment of how the council had performed during quarter 4 of 2017-18.

The report also provided a list of approved counterparties, key investment and borrowing statistics and prudential guideline indicators.

The Director and council officers responded to members' questions on aspects of her report.

Resolved - (a) That following consideration of the report and appendices and discussion of their content, the committee agreed that the Treasury Management and Investment Strategy quarter 4 report provided sufficient assurance on the effectiveness of arrangements for treasury management, and (b) that the Treasury Management performance for the 2017/18 financial year to date and the steps taken to maintain the widest possible access to markets be noted.

502 (23) INTERNAL AUDIT UPDATE - The Director: Governance and Partnerships submitted a report that updated the committee on Internal Audit activity up to 28 February 2018 and the outcome of the external inspection of Internal Audit, undertaken in March 2018.

Members were informed that it was a requirement of the Public Sector Internal Auditing Standards (PSIAS) for the committee to receive regular updates on the activities of Internal Audit, in particular:

  • provide assurance that sufficient work would be carried to provide a reliable risk based annual opinion on the effectiveness of the control environment and any amendments to the audit plan;
  • bring to the committee's attention any issues identified during the course of the 2017/18 audit which could impact on the annual opinion; and
  • provide assurance on Internal Audit's compliance with PSIAS.

Appendix 1 of the report prepared by the Head of Audit and Assurance provided an update on the delivery of the audit plan up to 28 February 2018.

Sufficient work should be carried out by 31 May 2018 to provide a reliable opinion on the council's control environment. It also showed a significantly improved position compared to that reported as at 30 November 2017.

The appendix also referred to the outcome of the recent five-yearly external inspection of Internal Audit. The draft report was issued on 4 April 2018, whereby it concluded that:

'It is our overall conclusion that the internal audit function for North Lincolnshire Council generally conforms with the Public Sector Internal Audit Standards'.

The committee noted that 'generally conforms' was the top rating available.

The Director and council officers responded to members' questions on aspects of the report.

Resolved - That following consideration of the report and appendix, and discussion of their content, the Internal Audit progress report at Appendix 1 of the report contributed to a sufficient level of assurance on the adequacy of internal control arrangements.

503 (24) INTERNAL AUDIT PLAN 2018-19 – The Director: Governance and Partnerships submitted the council's Internal Audit Plan for 2018-19.

The Accounts and Audit Regulations 2015 required the council to ensure there were sound systems of internal control and to undertake effective internal audit to evaluate the effectiveness of its risk management, control and governance processes. Internal audit must take into account Public Sector Internal Auditing Standards (PSIAS) and guidance.

The PSIAS required that an Internal Audit Plan was agreed by the Audit Committee annually. The audit plan must be risk-based and take into account the organisation's risk management framework and reflect changes in the organisation's business, risks, operations, programmes, systems and controls. The plan also confirmed the resources available and required to support a reliable year-end Audit opinion.

The Audit Charter, approved by the Audit Committee in January 2018 defined the internal audit activity's purpose, authority and responsibility and defined the scope of internal audit activities. The audit plan was included at Appendix 1 of the report, and was prepared by the Head of Audit and Assurance. It provided Members with an outline of the Audit Plan, a commentary on the methodology for compiling the plan, and assurance on compliance with auditing standards.

The Director and council officers responded to members' questions on aspects of the report.

Resolved - (a) That the Internal Audit Plan for 2018-19 provided the committee with a sufficient level of assurance to fulfil its role, and (b) that the Internal Audit Plan for 2018-19 be approved.

504 (25) ANTI FRAUD AND CORRUPTION STRATEGY – The Director: Governance and Partnerships submitted the council's revised anti-fraud and corruption strategy. Approval of the revised strategy would provide a clear and consistent message that the risk of fraud and corruption was real, would not be tolerated and was the responsibility of all council employees to minimise.

The Anti-Fraud and Corruption Strategy was last reviewed in December 2015. Since then, there had been significant changes to the council's fraud responsibilities and response. Namely the creation of a shared fraud resource as part of the council's shared service arrangements with North East Lincolnshire Council and the moving of responsibility for Housing Benefit fraud investigations to the Department for Work and Pensions as part of single fraud investigation service.

The revised strategy was strongly influenced by the 'fighting fraud and corruption locally – The local government counter fraud and corruption strategy 2016-2019', published by the Chartered Institute of Public Finance and Accountancy (CIPFA) Counter Fraud Centre. The strategy reaffirmed the council's commitment to tackling fraud and corruption.

The strategy acknowledged the council's current fraud response, but also highlighted areas where further work would be necessary to ensure that response was as robust as possible to protect public funds.

The Director and council officers responded to members' questions on aspects of the report.

Resolved - (a) That the revised Anti-Fraud and Corruption Strategy be approved, and (b) that the committee oversee an annual review of the effectiveness of the strategy.

505 (26) RISK MANAGEMENT PROGRESS REPORT - The Director: Governance and Partnerships submitted a report that informed members of the key issues arising from risk management work.

The committee heard that regular reporting on risk management issues was an important source of assurance for members to enable them to fulfil their role and to provide supporting evidence for the annual approval of the Governance Statement.

The report provided a comprehensive update of the initiatives and developments that were in place to manage risk. The council's Risk Roundup magazine was attached to the report as an appendix.

The Director and council officers responded to members' questions on aspects of the report.

Resolved - That following consideration of the report and appendix, and discussion of their content, the Risk Management Progress Report provided adequate assurance in respect of the council's risk management arrangements.

506 (27) ANNUAL FRAUD REPORT - The Director: Governance and Partnerships submitted the council's Annual Fraud Report for 2017-18. The aim of the report was to demonstrate to the general public, councillors, employees and partners the progress that the council had made during the year to develop an anti-fraud culture.

The council's framework to combat fraud, corruption and misappropriation was approved by this committee in January 2016. The framework followed national guidance as laid out in the document 'Fighting Fraud Locally', and was based upon three key principles:

  • Acknowledging and understanding fraud risks
  • Preventing and detecting fraud
  • Pursue – Being stronger in punishing fraud and recovering losses

The annual report was attached to the report as an appendix. It highlighted the work which had been carried out by the council in each of these areas, and demonstrated the council's continuing commitment to minimise the risk of fraud.

The Director and council officers responded to members' questions on aspects of the report.

Resolved - (a) That the Annual Fraud Report provided the committee with a sufficient level of assurance on the adequacy of counter fraud arrangements, and (b) that the Director: Governance and Partnerships publicise and promote the Annual Fraud Report to demonstrate that fraud prevention was considered a very serious matter and the council would exhaust every avenue of enquiry to trace and prosecute offenders.

507 APPOINTMENT OF NEW EXTERNAL AUDITOR - MAZARS - The Director: Governance and Partnerships informed the committee that, following a tender process, Mazars was to provide the council's external audit services. The contract was for the financial years 2018-19 to 2022-23. The Chairman considered this item as a matter of urgency due to the need to inform the committee that following the tender process conducted by Public Sector Audit Appointments (PSAA) in 2017, Mazars contract had commenced on 1 April 2018.

The Director conformed that the KPMG's contract would end on the conclusion of the 2017-18 work.

The Director and council officers responded to members' questions on her verbal update.

Resolved - (a) That the verbal update be noted, and (b) that a representative of Mazars be invited to a future meeting.

Reports