Agenda and minutes

To confirm the appointment of Cllr John Gray as the Chairman of the Audit Committee for the Council Year 2016/17.

The Committee confirmed the appointment of Cllr John Gray as the Chairman of the Audit Committee for the council year 2016/17.

To confirm the appointment of Cllr David Else as the Vice-Chairman of the Audit Committee for the Council Year 2016/17.

The Committee confirmed the appointment of Cllr Richard Seaborne as the Vice-Chairman of the Audit Committee for the council year 2016/17.

To sign and confirm the minutes of the last meeting of the Audit Committee held on 15 March 2016 as a correct record (to be laid on the table half an hour before the meeting).

The Minutes of the last meeting of the Audit Committee held on 15 March 2016 were agreed and confirmed as a correct record.

To receive apologies for absence.

Apologies for absence were received from Cllr Mike Band.

To receive from Members, declarations of interests in relation to any items included on the Agenda for this meeting, in accordance with the Waverley Code of Local Government Conduct.

There were no disclosures of interest received from Members.

Background Papers

Unless specified under an individual item, there are no background papers (as defined by Section 100D(5) of the Local Government Act 1972) relating to the reports in Part I of these minutes.

Each year, the Audit Committee is invited to review its Terms of Reference. The aim of this report is to propose some minor changes to the Terms of Reference of the Audit Committee for the year 2016/17 in order that their wording better reflects current internal titles and policies.

Recommendation

It is recommended that the Audit Committee:

1.         reviews its terms of reference;

2.         agrees to adopt the proposed changes highlighted in red to be adopted by Council;

3.         recommends any further amendments it wishes to be adopted by Council (if necessary)

The Committee was invited to agree the proposed changes to the Terms of Reference for the Audit Committee for 2016/17, as well as to make any further amendments.  Officers explained that the proposed changes were minor and had been requested in order that the Terms of Reference more accurately reflected the role of the Committee, current organisational wording and policies.

Members agreed the changes requested but asked for clarification that the use of the word `approve` in relation to item 1.6 and item 3.3 was appropriate. Officers responded that this was the correct term to use. The Audit Committee had a number of powers delegated to it by the Council regarding governance and this included the approval of the Council’s Annual Governance Statement and the Internal Audit Service Plan. Once the Audit Committee had approved these documents, the decision could not be overruled by the Council.

The Terms of Reference, showing the proposed changes, are set out at Annexe 1.  The Committee, having reviewed the document now

RECOMMENDS that

1.         the proposed changes to the Terms of Reference, highlighted in red, be agreed and the revised Terms of Reference for the Audit Committee be adopted.

The background papers relating to the following items are as set out in the reports included in the original agenda papers.

Good practice indicates that an annual appraisal of the work of the Committee would be beneficial and an Annual Activity Report for 2015/16 is attached.

Recommendation

It is recommended that the work carried out by the Audit Committee in 2015/16 be noted.

Robin Pellow, Monitoring Officer, introduced the Annual Activity Report and explained that its purpose was to provide a summary of the key work of the Audit Committee over the previous year.

Members found the report very useful and suggested that it should be circulated more widely than just the Audit Committee.  It was agreed to attach the report as an Annexe to these minutes which would be submitted to the Council meeting.

With regard to the (Exempt) information contained within the report, Members asked whether all of the content needed to remain exempt or whether some items might be included in the open document. Officers responded that, following some discussion, it was likely that the content of paragraph 4.2 could now be made open since press releases had been published regarding the incidents covered. The contents of paragraphs 4.3 and 4.4 however described events that were still live and so they could not be made public.

Officers agreed to move the content of paragraph 4.2 into the open section of the Annual Activity Report,  attached as Annexe 2.

RESOLVED  that the work carried out by the Audit Committee in 2015/16 be noted.

The Committee’s Terms of Reference include provision for the Committee to comment on the progress made in the achievement of the Audit Plan. An update on the current position of the reviews in 2015/16 and 2016/17 is presented.

Recommendation

It is recommended that the Committee:

1.         notes the progress for the Internal Audit Plan 2015/16 as attached at Annexe 1;

2.         notes the progress for the Internal Audit Plan 2016/17 as attached at Annexe 2

The Internal Audit Client Manager, Gail Beaton, tabled updated Annexes to the report that provided details on the current position of the Internal Audit reviews for 2015/16 and 2016/17 as at 21 June 2016.

The Committee asked for more details about the deferral of the review of the Councils `Sharepoint` I.T. system from the 2015/16 to the 2016/17 review. Officers responded that the system allowed documents to be amended across the organisation from one central point. The delay in conducting the review had been caused by contractor staffing issues within their I.T. services and a lack of technical knowledge of Sharepoint.   Having now obtained alternative resources from Spelthorne Borough Council, the review had commenced and would be completed in Q1 2016/17.

Members also remarked on the format of the information presented in the annexes and made several suggestions as to how it could be improved. Officers responded that they were open to feedback and eager to ensure that presentation of information met the needs of the Committee. Members were invited to forward their ideas to Officers with a view to revising the format for the next Audit Committee meeting in September.

RESOLVED  that the progress of the Internal Audit Plan for 2015/16 and 2016/17 be noted.

To inform the Committee of Senior Management’s progress in implementing the recommendations raised by Internal Audit following a review in their service areas. This report will enable the Committee to consider what action is required in respect of those that are overdue or appear to likely to be implemented later than the target date.

Recommendation

1.         considers the information contained in Annexe 1 and identifies any action it wishes to be taken;

2.         agrees an appropriate implementation date for the recommendations listed in Annexe 2

Gail Beaton, Internal Audit Client Manager, presented an updated report and annexes on the progress on the implementation of Internal Audit recommendations to the Committee.

Members asked for clarification about the request to revise the implementation date of IA16/14.001 (Contract Procedure Rules) and the situation regarding the value of contracts that were required to be included on the Contract Register. Officers responded that the action recommended by the Internal Audit Service was to align the Contract Procedure Rules (that required contracts greater then £25k be included on the Contract Register) with the Transparency Code (that required contracts greater than £5k be included). It was remarked that the recommendation was a paper exercise because contracts of £5k and over were already being included on the Contract Register as the Council had implemented the full requirements of the Transparency Code when it had passed into law. As a result, the proposed delay would have had no material effect.

The Committee also raised the issue of IA16/05.001 (Deed of Variation). This item had been completed at the time of the meeting and so had not been included on the updated annexe provided by the Internal Audit Client Manager at the meeting. Members were pleased that this had been completed but expressed concern at the length of time it had taken and that the Contract Procedure Rules currently in place could allow such a delay. Officers responded that they shared those concerns and would work with those involved to ensure lessons were learnt.

Members requested that information included in the `all notes` section in Annexe 1 to the report should be more explanatory. Officers agreed to keep this in mind when producing future reports.

RESOLVED  that, having considered the information contained in Annexe 1 and identified the action to be taken, the implementation date for recommendations listed in Annexe 2 be agreed.

The report provides an update to the Committee on the revised Internal Audit Charter that has been developed in accordance with the updated Public Sector Internal Auditing Standards (March 2016).  The standards apply to all internal audit service providers, whether in-house, shared services or outsourced. The PSIAS (Attribute Standard 1000) requires organisations to have an Internal Audit Charter that formally defines the purpose, authority and responsibility of the internal audit activity, consistent with the Definition of Internal Auditing, the Code of Ethics and the Standards. The Charter is required to be approved by senior management and the board (Audit Committee).

Recommendation

It is recommended that the Audit Committee approves the Internal Audit Charter.

he Internal Audit Charter was presented to the Committee. Officers explained that the Council was required to have an Internal Audit Charter that formally defined the purpose, authority and responsibility of the internal audit activity and that clearly laid out the roles and duties of those involved.

Officers were asked about how often the Charter would be reviewed and it was agreed that it would be reviewed by the Internal Audit Client Manager annually. If changes were required it would be brought to the Audit Committee for approval.  However, if no changes were required, then the Internal Audit Charter would be presented every 2 years for approval.

Members requested some format changes to include dates being published on each version of the document agreed by Officers.

RESOLVED that the Internal Audit Charter be approved.

To receive the Audit Committee Update Report from Grant Thornton.

Recommendation

It is recommended that the Audit Committee notes the Update Report.

Julian Gillett from Grant Thornton, the Council’s external auditor, introduced the Committee to its progress and update report on the position of the external audit work completed.

Good progress had been made and the Audit was on track against the plan with the Fee Letter, Accounts Audit Plan and Interim Accounts audit all having been completed earlier in the year.

It was expected that the opinion of the external auditor and its value for money conclusion would be given before the 30 September 2016 deadline. Three risks had been identified in relation to the VFM conclusion including the Council’s financial position, the progress of the new Local Plan, and the Brightwells development in Farnham. Work proposed to deal with these risks included a review of the Council’s financial strategy, consideration of the current progress and impact of the new Local Plan, and monitoring performance and governance of the Brightwells development.

RESOLVED that the External Audit Update Report be noted.

The Accounts and Audit Regulations require local authorities to maintain an adequate and effective internal audit of their accounting records and control systems. This report is a summary of the work carried out by Internal Audit during the financial year 2015/16 and provides an assurance opinion to support the Annual Governance statement.

Recommendation

It is recommended that the Audit Committee notes the progress and the activity completed by the Internal Audit Service for 2015-16

The Internal Audit Client Manager, Gail Beaton, presented the Internal Audit Activity Report for 2015/16. The report was a summary of the work carried out by Internal Audit during the year and also provided an assurance opinion to support the Council’s Annual Governance Statement on the organisation’s control environment.

The Committee was informed that the report, produced by RSM, had concluded that Waverley had an adequate and effective framework for risk management, governance and internal control. It had though identified further enhancements to the framework of risk management, governance and internal controls to ensure that it remained adequate and effective.

A total of 23 assignments had been completed in 2015/16. 7 were amber green, 10 were green, 5 were amber red, 0 red and 1 assurance review classified as reasonable assurance.  In terms of the level of assurance that could be taken, 5 had been classified as partial, 7 as reasonable and 10 as substantial.

The Committee expressed concern at the RSM report and were frustrated with the lack of explanatory information and detail provided. Comments were also made about the document being hard to understand.

Officers responded that they would take the comments on board and engage in an exercise to revise the report and provide the further detail requested.

RESOLVED    that the progress and activity completed by the Internal Audit Service for 2015-16 be noted and that officers provide the Committee with the additional explanatory detail requested at the next meeting.

Each year Waverley is required to produce an `Annual Governance Statement` which sets out the key elements of the Council’s internal control framework and identifies any issues that need addressing in the coming year. The draft Annual Governance Statement for 2015/16 is attached.

Recommendation

It is recommended that the Audit Committee passes comment on the draft Annual Governance Statement and proposes any amendments it wishes to be made.

Peter Vickers, Head of Finance, presented the draft Annual Governance Statement for 2015/16. He explained to the Committee that Waverley was responsible for ensuring that its business had been conducted in accordance with the law and proper standards, and that public monies were safeguarded and properly accounted for, and had been used economically, efficiently and effectively.

In discharging that overall responsibility, the Council was required to put into place proper arrangements for governing its affairs to help it exercise its functions, which included arrangements for managing risk. Waverley’s Code of Corporate Good Governance accorded with the CIPFA/SOLACE Framework “Delivering Good Governance in Local Government”. The draft Annual Governance Statement had been prepared in accordance with the proper practices as defined in the Code.

The purpose of the draft Annual Governance Statement was to explain how Waverley had complied with the principles of the Code.

The Committee expressed concern that the headings used in the document were too general and that the content should better reflect the good work being done to ensure proper governance arrangements were in place.  Officers were asked to take the comments of Members on board and present an updated version to the next meeting.

RESOLVED that the draft Annual Governance Statement be deferred until the next meeting in order to allow officers time to make the requested changes.

The report provides an update to the Committee on the progress made by Waverley Borough Council officers on the work being completed as part of the Surrey Counter Fraud Partnership, investigating all types of fraud (excluding Housing Benefit which is now investigated by the Department for Work & Pensions through the introduction of the Single Fraud Investigating Service).  This work has been supported with funding from the Department for Communities & Local Government to assist with combating fraud.

Recommendation

That the Audit Committee continues to support this investigation activity and notes the successes being achieved in safeguarding Waverley’s assets and ensuring that only those that are legitimately eligible receive housing services.

The Committee was presented with the Counter Fraud Report that provided an update on the progress made by Waverley on the work completed as part of the Surrey Fraud Partnership. The work had been supported with funding from the Department for Communities & Local Government to assist with combating fraud.

Officers explained that £1,073,710 of savings had been achieved based on Audit Commission notional figures. However, those notional figures did not include the real value to Waverley as it cost on average £200,000 to build a new house. When tenancies were relinquished, they were allocated to those on the housing waiting list. Seven tenancies had been recovered equating to £1.4million not being required to replace those properties.

The Committee was pleased with the savings being achieved and welcomed the Report as good news for the Council and its residents. Members did also ask about those investigations that had not lead to a positive outcome and remarked that it would be helpful to know the reasons why. It was suggested that Officers  carry out a simple analysis of those cases that had not resulted in a successful outcome to see if there were opportunities for refining the counter fraud process.

RESOLVED  that this investigation activity should continue to be supported and the successes being achieved in safeguarding Waverley’s assets and ensuring that only those that are legitimately eligible receive housing services be recognised.