Agenda and minutes

To confirm the Minutes of the last meeting of the Audit Committee held on 13 September 2016 (to be laid on the table half an hour before the meeting).

The Minutes of the last meeting of the Audit Committee held on 13 September 2016 were confirmed as a correct record and signed.

To receive apologies for absence.

Apologies for absence were received from Councillor David Round.

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.

The Chairman to respond to any questions received from members of the public of which notice has been duly given in accordance with Procedure Rule 10.

There were no questions from members of the public received.

There are no matters for consideration under this category.

Following the demise of the Audit Commission, new arrangements are needed for the appointment of external auditors for the 2018/19 financial year. The Local Audit and Accountability Act 2014 requires authorities to either opt in to the appointing person regime or to undertake a local joint procurement exercise to establish an auditor panel and conduct their own procurement exercise.

The attached report considers the options open to the Council.

Recommendation

To recommend to Council that Waverley opts in to the appointing person arrangements made by Public Sector Audit Appointments (PSAA) for the appointment of external auditors from 2018/2019.

31.1    As part of closing the Audit Commission the Government novated external audit contracts to Public Sector Audit Appointments which is a sector-led body set up by the Local Government Association, on 1 April 2015. The audits were due to expire following conclusion of the audits of the 2016/17 accounts, but could be extended for a period of up to three years by PSAA, subject to approval from the Department for Communities and Local Government.

31.2    In October 2015 the Secretary of State confirmed that the transitional provisions would be amended to allow an extension of the contracts for a period of one year. This meant that for the audit of the 2018/19 accounts it would be necessary for authorities to either undertake their own procurements or to opt in to the appointing person regime through the sector-led body.

31.3    PSAA have been specified by the Secretary of State as an appointing person under regulation 3 of the Local Audit (Appointing Person) Regulations 2015. The appointing person is sometimes referred to as the sector led body and PSAA has wide support across most of local government. PSAA was originally established to operate the transitional arrangements following the closure of the Audit Commission and is a not for profit company owned by the Local Government Association.

            Option 1 - To make a stand-alone appointment

31.4    In order to make a stand-alone appointment the Council will need to set up an Auditor Panel. The members of the Panel must be wholly or a majority of independent members as defined by the Act. Independent members for this purpose are independent appointees, this excludes current and former Members (or officers) and their close families and friends. This means that Members will not have a majority input to assessing bids and choosing which firm of accountants to award a contract for the Council’s external audit. A new independent auditor panel established by the Council will be responsible for selecting the auditor.

            Advantages/benefits

31.5    Setting up an auditor panel allows the Council to take maximum advantage of the new local appointment regime and have local input to the decision.

            Disadvantages/risks

31.6    Recruitment and servicing of the Auditor Panel, running the bidding exercise and negotiating the contract is estimated by the LGA to cost in the order of £15,000 plus on-going expenses and allowances.

31.7    The Council will not be able to take advantage of reduced fees that may be available through joint or national procurement contracts.

31.8    The assessment of bids and decision on awarding contracts will be taken by independent appointees and not solely by Members.

            Option 2 - Set up a Joint Auditor Panel/local joint procurement arrangements

31.9    The Act enables the Council to join with other authorities to establish a Joint Auditor Panel. Again this will need to be constituted of wholly or a majority of independent appointees. Further legal advice will be required on the exact constitution of such a Panel having regard to the obligations of each Council under the Act  ...  view the full minutes text for item 31.

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

The Audit Committee will be aware that a key area of the Accounts and Audit Regulations 2015 made under the Local Audit and Accountability Act 2014 is the acceleration of financial close arrangements.

From the 2017/18 financial year, the timetable for the preparation and approval of accounts will be bought forward to a draft accounts deadline of 31 May and an audit deadline of 31 July.

For Members information, the current annual recurrent work programme is attached on light green paper. This sets out the major items required to be completed by the Audit Committee each year.

Also attached, on yellow paper, is a draft proposed target recurrent annual work programme to meet the new requirements in 2018.

Officers will be working together with our external auditors between now and 2018 to progress towards achieving the new timeline and the Audit Committee is invited to discuss the plan and consider any changes to the annual meeting schedule that may be required.

Recommendation

It is recommended that the Audit Committee

1. comments upon and notes the current, and the draft proposed target recurrent annual work programme for 2018 onwards

2. considers any changes to the annual meeting schedule that may be required

32.1    The Committee was reminded that one key area of the Accounts and Audit Regulations 2015 made under the Local Audit and Accountability Act 2014 was the acceleration of financial close arrangements.

32.2    From the 2017/18 financial year, the timetable for the preparation and approval of accounts will be bought forward to a draft accounts deadline of 31 May and an audit deadline of 31 July.

32.3    The Committee was advised that the current annual recurrent work programme was attached on green paper. This set out the major items that were required to be completed by the Audit Committee each year.

32.4    Also attached, was a draft proposed target recurrent annual work programme to meet the new requirements in 2018.

32.5    The Committee was informed that officers would be working together with Grant Thornton, the Council’s external auditor, to progress towards achieving the new timeline.

32.6    Members discussed the timing of meetings and the fact that the meeting that had been in June would now need to be moved to early July. This would allow the Committee to meet the new requirements whilst allowing the external auditor as much time as possible to produce the accounts. The Audit Committee accordingly

RESOLVED that

1.    the recurrent annual work programme and the draft proposed target recurrent annual work programme for trial in 2017/18 and implementation in 2018/19 be noted; and

2.    The Audit Committee currently scheduled for June be moved to early July from 2017.

To receive the attached External Audit Annual Audit Letter from Grant Thornton.

Recommendation

It is recommended that the Audit Committee comments upon and notes the Grant Thornton Annual Audit Letter.

33.1    Iain Murray of Grant Thornton introduced the Annual Audit Letter to the Committee.

33.2    The purpose of the letter was to summarise the key findings arising from the work that they had carried out for the Council for the year ended 31 March 2016. A number of risks had been identified in the audit plan, namely;

·                    Fraudulent transactions included in the revenue cycle

·                    Management over-ride of controls

·                    Operating expenses

·                    Valuation of property, plant and equipment

·                    Valuation of pension fund net liability

33.3    Grant Thornton had focused their work on these areas and did not identify any significant issues to report from some revisions to the accounts to correct the overstatement of the pension fund liability in the balance sheet.

33.4    Iain Murray confirmed that Grant Thornton were satisfied that they had been provided with all the information they asked for, including minutes of meetings, and that the Council had put in place appropriate measures to mitigate the risks identified.

33.5    Cllr Jerry Hyman disagreed with the Value for Money findings and conclusions of the Annual Audit Letter specifically relating to the Local Plan on page 21 and the Brightwell’s development on page 22 and wanted this to be recorded in these Minutes. The Audit Committee accordingly

RESOLVED that the External Annual Audit Letter from Grant Thornton be noted.

To receive the revised Governance policies in Annexe 1, 2, 3 & 4 that require revision as part of the scheduled cyclical review, to reflect changes in legislation, organisational restructure affecting job titles and positions and the developed Counter Fraud Strategy in Annexe 5 requires endorsing:-

a)    Annexe 1 Whistleblowing Policy

b)    Annexe 2 Prosecution Policy

c)   Annexe 3 Anti-money Laundering

d)   Annexe 4 Anti Fraud, Corruption and Bribery Strategy

                              a. Code of Conduct for Investigators (Annexe 4a) Policy

e)   Annexe 5 Counter Fraud Strategy

Recommendation

It is recommended that the Committee;

1. endorses and recommends to Council that the revised policies are amended as set out in Annexe 1, 2, 3 & 4, and that the Counter Fraud Strategy as set out in Annexe 5 be adopted; and

2. instructs that officers cascade and publicise these documents.

34.1    The Committee received the revised governance policies and was advised that changes were mainly minor including those that were required to reflect changes in job titles, and suggested changes from best practice guides from professional institutions.

34.2    The Committee felt that the terminology contained within the reports was wrong and were concerned that there was confusion and overlap between policies, strategies and plans. They also highlighted some further concerns about the perception of the public reading the documents, inconsistencies, and areas of vagueness. Many felt it very important that the correct language be used.

34.3    Members asked about the effectiveness of the plans and what sanctions were in place for handling failure to adhere to them. Officers responded that they could look at incorporating details on possible penalties but that there was scope for the use of judgement within the documents. The Audit Committee accordingly

RESOLVED that

1.    Officers be asked to re-draft the documents following receipt of further observations of Members; and

2.    The item be revisited at the next meeting in March 2017.

The Committee’s Terms of Reference include provision for the Committee to comment on the progress made in achievement of the Internal Audit Plan. An update on the current position of the review for 2016-17 is presented.

Recommendation

It is recommended that the Committee notes the progress for the Internal Audit Plan 2016-17 as attached at Annexe 1.

35.1    The Committee received an update on the progress being made in achieving the Internal Audit Plan for 2016/17. Members were advised that report no. IA17-00 `Accuracy of Tenancy Information` on page 110 and `Corporate Governance` on page 111 had now been completed.

35.2    Members asked that from the next meeting, they be given a brief overview of those items listed as `partial assurance` and that the colour of items in the `overall opinion` column be changed to match their status.

35.3    It was agreed that officers provided Cllr Holder with a copy of the final report on `Recruitment of permanent and agency staff and performance management` (IA17-02) and feed back his observations to Cllr Gray before the next meeting. The Audit Committee accordingly

RESOLVED that the progress for the Internal Audit Plan 2016-17 be noted.

To inform the Audit Committee of Senior Management’s progress in implementing the recommendations raised by the 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 likely to be implemented later than target date.

Recommendation

It is recommended that the Audit Committee considers the information contained in Annexe 1 and identifies any action it wishes to be taken.

36.1    The Committee received a report detailing the latest position regarding the implementation of Internal Audit Recommendations.

36.2    Members were advised that all items listed as overdue or due within the next month had now been completed since publication of the Agenda except item IA/26.003 `Training` in the DBS procedure. Research had been undertaken into fulfilling the agreed action but no training courses had been found. The Committee was invited to comment on the situation and suggest an alternative course of action.

36.3    Members felt that the best solution would be to bring in an external expert from another local authority to spend a couple of days with the responsible officer and train them that way. The Audit Committee accordingly

RESOLVED that officers should bring in an external expert from another local authority to train the responsible officer in respect of item IA/26.003 `Training` in the DBS procedure.

The report provides an update to the Committee on the progress made by Waverley Borough Council officers on the Housing Tenancy Fraud Investigation work being completed as part of the Surrey Counter Fraud Partnership.

Recommendation

That the Audit Committee comments upon and notes;

1. the success of the investigation activity and continues to support the work being completed to safeguard Waverley’s assets and ensuring that only those that are legitimately eligible to receive our services are successful; and

2. the Council’s participation in the National Fraud Initiative and the Surrey Counter Fraud Partnership Data Hub to assist in identifying fraudulent activities.

37.1    The Committee was advised that the value of financial savings detailed in Annexe 1 for Quarter 2 of 2016-17 was £443,661 based on Audit Commission notional figures.

37.2    The Committee was very pleased with the progress being made and asked officers to add the previous quarters figures to the bottom of Annexe 1 from the next meeting to help Members to identify the trend. They also asked that they be provided with the progress report relating to the Surrey Counter Fraud Partnership Data hub referred to in paragraph 7 on page 121. The Audit Committee accordingly

RESOLVED that

1.    The success of the investigation activity be noted and to continue to support the work being completed to safeguard Waverley’s assets and ensure that only those that are legitimately eligible to receive our services are successful; and

2.    The Council’s participation in the National Fraud Initiative and the Surrey Counter Fraud Partnership Data Hub to assist in identifying fraudulent activities be noted.

To consider the following recommendation on the motion of the Chairman;

Recommendation

That pursuant to Procedure Rule 20 and in accordance with Section 100A(4) of the Local Government Act 1972, the press and public be excluded from the meeting during consideration of the following item(s) on the grounds that it is likely, in view of the nature of the business to be transacted or the nature of the proceedings, that if members of the public were present during the item(s), there would be disclosure to them of exempt information (as defined by Section 1001 of the Act) of the description specified in the appropriate paragraph(s) of the revised Part 1 of Schedule 12A to the Local Government Act 1972, namely;

Paragraph 3: Information relating to the financial or business affairs of any particular person (including the authority holding that information).

RESOLVED that, pursuant to Procedure Rule 20 and in accordance with Section 100A(4) of the Local Government Act 1972, the press and public be excluded from the meeting during consideration of the following item on the grounds that it is likely, in view of the nature of the business to be transacted or the nature of the proceedings, that if members of the public were present during the item, there would be disclosure to them of exempt information (as defined by Section 100I of the Act) as specified in the following paragraphs of the revised Part 1 of Schedule 12A to the Local Government Act 1972, namely;

                        Paragraph 3. Information relating to the financial or business affairs of any particular person (including the authority holding that information).

To receive the attached report considering the continued effectiveness of the current Risk Management Policy and Process Document.

Recommendation

It is recommended that the Audit Committee;

1. approves the Risk Management Policy and Process Document as set out in Annexe 1; and

2. considers the revised Corporate Risks Register at (Exempt) Annexe 2 and passes comment and observations to officers and the Executive.

39.1    The Committee received the Risk Management Policy report and the Process Document.

39.2    Members were advised that local authorities, with their wide-ranging   responsibilities and duties, faced a significant number of risks. A risk             was the threat that an event or action would adversely affect an        organisations ability to achieve its objectives. The effective       management of risk was an essential element in the overall operation      of the Council and the delivery of its services.

39.3    Members noted that local authorities were required to demonstrate to their residents that managing risk was at the heart of their governance framework and that they had effective arrangements in place to identify and respond to them. The Risk Policy and Process, including the format of the Register, had been produced in conjunction with the Audit Committee in recent years.

39.4    Officers then moved on to discuss the Risk Management Report by Zurich Municipal. The Audit Committee accordingly

RESOLVED that the Committee revisit this item at the next meeting in March 2017 following an informal risk workshop with Zurich Municipal in January 2017.