Agenda and minutes

To confirm the appointment of Cllr John Gray as Chairman of the Audit Committee for the Council year 2017/18.

RESOLVED that Cllr John Gray be appointed as Chairman of the Audit Committee for the Council year 2017/18.

To confirm the appointment of Cllr Richard Seaborne as Vice Chairman of the Audit Committee for the Council year 2017/18.

RESOLVED that Cllr Richard Seaborne be appointed as Vice Chairman of the Audit Committee for the Council year 2017/18.

To confirm the Minutes of the Meeting held on 21 March 2017 (to be laid on the table half an hour before the meeting).

RESOLVED that the Minutes of the Meeting held on 21 March 2017 be confirmed and signed.

To receive apologies for absence.

Apologies for absence were received from Councillors Mike Band and Anna James.

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 in relation to items on the agenda.

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 none.

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.

The purpose of this report is for the Audit Committee to review and recommend the approval of the revised CPRs.

Recommendation

That the Audit Committee recommends to Council that the revised CPRs be approved, and for them to come in to use, effective immediately.

Patrick Tuite, Procurement Officer, presented the updated Contract Procurement Rules to the Committee. The revised CPRs are attached at Annexe 1 to these minutes. The Committee was informed that the Contract Procurement Rules (previously the Contract Procedure Rules) were last updated in 2015. A re-write was therefore required to incorporate:

1.         updated thresholds with regards to our internal value bands and the European Union regulation thresholds;

2.         new procedures as permitted in the Public Contract Regulations 2015 that allow us to vary our route to market dependant on what we are purchasing;

3.         a new approach to the opening of tenders;

4.         the councils responsibility to incorporate the Social Value Act 2012 in our tenders; and

5.         a comprehensive glossary to reflect the members requirement for an accessible and useable document.

The Committee queried whether Britain’s withdrawal from the EU would affect the CPRs, however officers assured members that at present there were unlikely to be any changes as a result of Brexit as the European regulations were predominantly based on WTO guidelines which would remain unaffected.

The Committee thanked Patrick Tuite for the work he had put in in bringing the CPRs up to date and for presenting them in such a clear and accessible manner. The Audit Committee therefore

RECOMMENDS that:

1.    The revised Contract Procurement Rules be approved, and for them to come into use effective immediately.

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

To receive the External Audit Finding Report from Grant Thornton [to follow] and for Members to raise any relevant questions and observations they may have.

Recommendation

It is recommended that the Audit Committee endorses the External Audit Findings Report.

Sophia Brown, Grant Thornton Engagement Manager, presented the 2016/17 Audit Findings Report to the Committee. She explained that since its publication, some of the areas shown as outstanding in the report had now been completed; these included work on plant, property and equipment; and work on financial instruments. The key messages of the report were that the draft financial statements had been prepared to a very high standard and that a minimal level of issues had been identified. Sophia added that Waverley was well placed to meet the earlier statutory accounts deadlines from next year.

It was queried whether from next year some areas would be able to remain outstanding as they did in this report. Sophia Brown clarified that this would be acceptable at this stage next year, as there were certain pieces of work that could only be completed at the end of the process. Iain Murray, Grant Thornton Engagement Lead, added that the County Council had been signing off their accounts at the end of July for the last two years, so there were no problems anticipated in respect of linking up with the County.

The Committee was informed that the Grant certification work on the Council’s Housing Benefit subsidy on behalf of the DWP would be completed by the end of November and that time had been allocated in October to undertake this. Iain Murray added that Grant certification work had not been included within the recent procurement process for the Council’s auditors and therefore this would need to be undertaken separately.

There had been no significant issues identified in regard to the risks as set out in the report, additionally Sophia Brown updated the Committee that there were no significant issues identified in relation to valuation of plant, property and equipment; or valuation of pension fund net liability as this work was shown as still outstanding at the time of producing the report.

One internal control issue had been identified regarding to related party transactions. At the time of drafting the report, eight declarations from councillors had been outstanding, however they had since all been received. Sophia Brown explained that this was still an issue as they should have been received before the financial statements were drafted, however, now that all declarations been received, there was no longer a need to include a specific reference to this in the letter of representation. Graeme Clark added that there had been a change to the way the information had been collected this year, using an online survey method. The response to this had been very good overall however inevitably there were some members who needed to be reminded. An ideal opportunity would have been to remind councillors at the April Council meeting, and this would be done in future years. It was also agreed that next year Graeme Clark and Cllr Gray would write a joint email to all councillors emphasising the importance of completing the declaration promptly.

The report set out the impact of one uncorrected  ...  view the full minutes text for item 8.

The purpose of this report is for the Audit Committee to consider and approve the Statement of Accounts for the year ended 31 March 2017.

Recommendation

It is recommended that the Audit Committee

1.    approves the Statement of Accounts for the financial year ended 31 March 2017 at Annexe 1 [to follow]; and

2.    approves the Letter of Representation for 2016/2017 at Annexe 3; and

3.    confirms that the accounts have been prepared on a going concern basis.

The Audit Committee received the report on the Statement of Accounts for 2016/17; the Committee had received a briefing on the accounts on 20 June which both members and officers agreed had been a very constructive session. Officers had taken on board members comments and had been able to incorporate many of these into the final version. The document had also been independently proof-read by a member of Council staff.

Following confirmation from Sophia Brown that it was no longer required, Graeme Clark proposed removing paragraph 25, regarding related party transactions, from the letter of representation.

Cllr Hyman asked where the SANG funds were detailed in the accounts. It was explained that this did not have an individual entry, and was incorporated within the ‘Section 106 Contributions’ line. The Committee agreed that it would be useful to separate this out in future as it was a specific reserve. Graeme Clark added that projections indicated that the SANG reserves were sufficient although this could always be affected by the financial climate.

Cllr Hyman also queried whether the laws referred to in paragraphs 22 and 24 of the letter of representation referred to all legislation, including planning laws, to which Graeme Clark confirmed that this covered all activities of the Council. In view of this, Cllr Hyman chose to abstain from the vote on recommendation 2. Cllr Gray added that he was confident that all legal requirements and process of the Council were being followed correctly, and he was not aware of any issues being supressed.

The Committee RESOLVED to:

1.         Approve the Statement of Accounts for the financial year ended 31 March 2017;

2.         Approve the letter of representation for 2016/2017 with the removal of paragraph 25; and

3.         Confirm that the accounts have been prepared on a going concern basis.

The purpose of the this report is for the Audit Committee to consider and approve the Annual Governance Statement (AGS) for the year ended 31 March 2017.

Recommendation

It is recommended that the Audit Committee approves the attached Annual Governance Statement 2016/17.

Peter Vickers, Head of Finance, presented the updated Annual Governance Statement to the Committee. A briefing on the AGS had been held for the Committee on 20 June and at this session, members of the Committee had raised several issues to test against the principles set out in the AGS. Peter Vickers reported that he had met with the Robin Taylor, Head of Policy and Governance, to review this list and identify any governance issues that should be identified in the AGS according to the statutory guidance.

The first issue related to planning inquiries and judicial reviews. Significant public interest had been generated by this and a minor change to the constitution had been required, however this was now resolved. The Committee felt that it was important to acknowledge that there had been a constitutional issue and to show that it had been dealt with. Peter Vickers concluded that ultimately it was for the Committee to decide whether or not this was a significant governance issue.

Several other issues raised by members of the Committee at the briefing had been reviewed by officers and found to not meet the requirements to be included in the AGS as set out in the Code of Practice.

A further issue had been raised in relation to safeguarding, and while there were no significant governance issues to report in the AGS, the Committee felt that it was important that members were properly included within the policy.

Cllr Gray reminded the Committee that the Council didn’t have to be infallible and that as these issues were in the public domain it was important to show that they had been acknowledged and dealt with. While Peter Vickers agreed that it was important to respond to these issues, they weren’t all necessarily governance issues.

The Committee felt that it would be useful to review potential governance issues at Audit Committee meetings throughout the year so that they could inform the AGS next year; Cllr Gray also felt that it would be useful for Robin Taylor to attend the meeting to discuss the potential issues. Iain Murray added, from an external audit perspective, that the bar of what needed to be included in the AGS was set very high so there was no specific requirement to include the issues that had been discussed by the Committee, however this didn’t prevent the Committee from reviewing such areas. He also reminded the Committee that their remit was risk and assurance, and therefore these were the areas that needed to be focused on when reviewing issues. He also added that it was very positive that the Council was viewing the AGS as a working document, not just a year end task.

The Committee RESOLVED that:

1.    the Annual Governance Statement 2016/17 be approved; and

2.    the Annual Governance Statement be added to the Committee’s work programme for review at the November meeting.

The Accounts and Audit Regulations 2015 (Part 2 s3) require local authorities to have a sound system of internal control.  Internal Audit is part of this system of internal control whereas (Part 2 s5) of the regulations state an authority must undertake an effective internal audit to evaluate the effectiveness of its risk management, control and governance processes. 

This report is a summary of the work carried out by Internal Audit during the financial year 2016-17 and also provides an assurance opinion to support the Annual Governance Statement on the organisations control environment which will also be considered by the Committee at its meeting on 24 July 2017.

Recommendation

It is recommended that the Audit Committee notes the contents and comments on the report.

Gail Beaton, Internal Audit Client Manager, presented the Annual Internal Audit Report to the Committee. She informed members that she had taken on board their comments from previous years, and had revised the content and format of the report. She had made the report more accessible and provided as much information as possible, with clear links to the Audit Plan.

The Committee welcomed the updated format, and was pleased to note the good performance of the contractor. Cllr Holder queried whether it would be possible to reduce the target for the average number of day between Contractor exit meeting and the issue of the draft report, as this had been consistently over achieved for the past three years. Gail Beaton explained that this was a contractual target but that she could look to review it in the future.

Cllr Seaborne emphasised the importance of ensuring that where identified, remedial actions were embedded within the organisation. Gail Beaton explained that tests would be carried out by ongoing sampling; additionally, she was pitching audit reviews to Heads of Service as a good thing, as it effectively constituted free consultancy.

The Committee expressed particular concern over IA17-17 – Procurement Arrangements, where five areas for improvement had been identified, including the fact that 75% payments to contractors had not been supported by a purchase order. Officers explained that a new purchase order system had recently been implemented which would force officers to follow correct procedures. Cllr Gray felt that this was a significant issue that should be brought to the attention of the Executive. Officers reported that they were already aware of this issue, and had sought to put mitigation in place, including the appointment of the new Procurement Officer. Cllr Hyman queried what, if any, financial impact there was of not following the correct procedures. Graeme Clark explained that it was difficult to quantify this, but the important thing was getting the proper controls in place going forward.

Having commented on the contents of the report, the Committee RESOLVED that the Annual Internal Audit Report 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 2016/17 and 2017/18 is presented.

Recommendation

It is recommended that the Committee:

1.         notes the progress for the Internal Audit Plan 2016/17 as attached at Annexe 1;

2.         notes the progress for the Internal Audit Plan 2017/18 as attached at Annexe 2, and endorse the inclusion of the additional reviews covering the Production of the Final Accounts Process and the Completeness of the Fire Safety Assessment Checks as indicated in blue.

Gail Beaton updated the Committee on progress with the 2016/17 and 2017/18 Audit Plans. There were only two reviews outstanding from the 2016/17 plan; the approval of invoices on Agresso had been carried forward to the 2017/18 plan, and the report on data protection was now available.

In regard to the 2017/18 plan, members noted that the review of petty cash was considered to be a high priority. Gail Beaton explained that it had been given this rating was because it was an area that had not been reviewed for some time, rather than being an area of specific concern. It was also queried why the Agresso review, which had been deferred from the previous year had been scheduled for Quarter 4 rather than earlier in the year. Peter Vickers explained the Finance Service was currently implementing a programme of improvements with the financial systems, and that as the integration with the housing ‘Orchard’ system was not yet up and running, it would therefore be more appropriate to conduct the review in Quarter 4 when the integration was in place.

Cllr Holder noted that the Gas Maintenance and Asbestos reviews had been scheduled for Quarter 4 and Quarter 3 respectively, and asked whether these should be conducted sooner. Gail Beaton explained that these reviews had both been carried out two years ago, and the reason for adding them to the 2017/18 plan was to ensure that the recommendations from the previous review were embedded.

The Committee noted the proposed inclusion of a review of Fire Safety Assessment Checks. Gail Beaton explained that there was ongoing reporting of Fire Safety Assessments to Management Board, however the Head of Housing Operations had sought further assurance by requesting an audit opinion. The Committee therefore suggested that the auditor’s report draw out the fact that several measures were already in place, and the purpose of the review was more for assurance purposes.

The Committee RESOLVED to:

1.    Note the progress fro the Internal Audit Plan 2016/17; and

2.    Note the progress for the Internal Audit Plan 2017/18 and endorse the inclusion of the additional reviews covering the Production of the Final Accounts Process and the Completeness of the Fire Safety Assessment Checks.

To inform the Audit 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 likely to be implemented later than the target date.

Recommendation

It is recommended that the Committee:

1.         considers the information contained in Annexe 1 and, following discussion at the Audit Committee meeting, identifies any action it wishes to be taken, particularly in relation to the Information Security Governance recommendations which are linked to the recent Data Protection review completed in preparation for the General Data Protection Regulations (GDPR) that comes into force in May 2018.

2.         agrees an appropriate implementation date for the recommendations listed in Annexe 2, where a request has been made by the Head of Service for a change in the previous implementation date.

The Committee reviewed the report detailing the latest position regarding the implementation of Internal Audit Recommendations. Officers provided an update on the three overdue recommendations relating to Information Security Governance; they explained that the Information Security Group had now met, however it had become apparent that the current resourcing for this role was not sufficient to do it justice. Some catch-up work would be required and there was a need to maintain good policies and procedures. A new Information Governance Board had now been established and would be chaired by the Strategic Director – Finance and Resources.

Cllr Hyman noted that the recommendations showed 50% progress and asked what work had been done to support this figure. Graeme Clark explained that the 50% figure was a judgement based on the extent to which the Council had met the recommendations. Generally, Waverley had a good track record with information governance but this was an incredibly important piece of work to enable the Council to consolidate and build on its current position.

Cllr Gray endorsed the comments made by Cllr Hesse at the last meeting where he had emphasised the importance of having the correct processes in place. This was not a criticism of the Legal Service, but they had numerous work pressures which meant that additional resources were needed. Graeme Clark added that several other local authorities were appointing dedicated Information Managers to ensure correct custody and usage of data.

Officers emphasised that the Council did manage data well, and had passed all government requirements such as PSN compliance, however the existing resource didn’t have sufficient capacity to meet the growing demands and new legislation, and there was a need to invest more in order to move forward. The Committee felt it was important that the Council was seen to be prioritising information governance and therefore agreed to forward their concerns over this matter to Executive, endorsing any requests for additional resource/growth that may be required in order to take this forward.

In regard to the recommendation regarding Financial Regulations and CPRs, Officers reported that a lot of work had already been completed by Patrick Tuite, but that the Financial Regulations also required updating. The Audit Committee would be involved in this process, with a briefing to be scheduled in due course. The updated Financial Regulations would be presented to the Audit Committee in November and Council in December 2017. The Committee agreed, that given the fact that the new Financial Regulations would be approved in December 2017 and the implementation of the enhanced Agresso functionality would be in place by the end of January 2018, the deadline for this recommendation (IA16/12.001) be extended to 31 January 2018.

The Committee RESOLVED to:

1.     Pass its concerns to the Executive over the delay in implementing the recommendations relating to Information Security Governance, emphasising the importance of this area of work, and endorsing any additional resource requests that may be required in order to move this forward; and

2.    Agree that the implementation  ...  view the full minutes text for item 13.

Recommendation

The Audit Committee is invited to note the recurrent annual work programme, attached.

The Committee considered its recurrent annual work programme, and agreed to review it in more detail at the September meeting.

RESOLVED that the recurrent annual work programme be noted, with the inclusion of the Annual Governance Statement to be brought back to the meeting in November.