Agenda and minutes

To confirm the Minutes of the Meeting held on 24 July 2017 (to be laid on the table half an hour before the meeting).

RESOLVED that the minutes of the meeting held on 24 July 2017 be confirmed and signed.

To receive apologies for absence.

Apologies for absence were received from Cllr Pat Frost.

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.

There were no matters falling within this category.

Background Papers

The background papers relating to the following report items in Part II are as specified in the agenda for the Committee.

Each year, the Audit Committee is invited to review its Terms of Reference. The current Terms of Reference are attached.

Recommendation

It is recommended that the Audit Committee reviews its terms of reference and recommends any amendments it wishes to be adopted by Council (if necessary).

The Committee reviewed its Terms of Reference for 2017/18. Cllr Seaborne noted the use of terminology such as ‘consider’ and ‘monitor’ and felt that it was unclear as to what the Committee’s responsibility was in relation these statements. Graeme Clark, Strategic Director – Finance and Resources, agreed that some of the language could be amended to more explicitly reflect the Committee’s role in relation to each item. Cllr Seaborne also requested that the terms of reference be amended to include the Committee’s authority to endorse the Internal Audit Charter.

Cllr Gray expressed some concern over the overlap between the Audit Committee and the Standards Panel in relation to recommending changes to the constitution. He explained that he would be meeting with the Head of Policy and Governance and Chairman of the Standards Panel to discuss this further and hoped that it could be resolved prior to the Committee’s November meeting.

The Committee RESOLVED that officers be asked to review the wording of the Terms of Reference to ensure it accurately reflects the Committee’s responsibilities, and that the revised Terms of Reference be brought back to the Committee’s next meeting in November for review.

Good practice indicates that an annual appraisal of the work of the Committee would be beneficial and an Annual Activity Report for 2016/17 is attached.

Recommendation

It is recommended that the work carried out by the Audit Committee in 2016/17 be noted.

The Committee received a report setting out an appraisal of the Audit Committee’s work over the 2016/17 council year. The Committee felt that the report provided an accurate summary of the work that it had undertaken over the previous year and requested that it be submitted to Council for their information as an annexe to these minutes.

The Committee RESOLVED that the work carried out by the Audit Committee in 2016/17 be noted.

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.

The Committee received an updated Internal Audit Charter which had been developed in accordance with the updated Public Sector Internal Auditing Standards (March 2016).

Cllr James queried whether it was usual practice for a council to contract out its audit service. Officers explained that it varied between organisations but that Waverley was part of a consortium that allowed it to make use of a more specialist team of auditors than if the service was run in-house. There were several advantages to this arrangement, and Gail Beaton, Internal Audit Client Manager, was still able to undertake reviews of the most sensitive work where necessary. Cllr Gray asked when the contract with RSM was due for renewal and officers responded that this would be in 2019 and a report would come to the Committee on it in due course.

Cllr Hyman was unsure about wording for the ‘mission’ of internal audit however acknowledged that it did summarise the role fairly accurately. Other members agreed that it could potentially be re-phrased but noted that as the wording had come from the PSIAS it be left as written for the time being.

The Committee RESOLVED that the Internal Audit Charter be approved.

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 2017/18 is presented.

Recommendation

It is recommended that the Committee notes the progress for the Internal Audit Plan 2017/18 as attached at Annexe 1.      

The Committee received a report outlining the latest position on the reviews included within the 2017/18 Audit Plan. Gail Beaton advised the Committee of some changes that would be made to the agreed schedule, namely; the tree management review that was scheduled for Q1/2 would now be completed in October; similarly the responsive repairs and voids review would also be completed in Q3 rather than Q1/2.

Cllr Holder expressed concern that the reconciliations review would not be undertaken until Q4 and felt that this should be given a higher priority. Officers assured the Committee that managers still ensured that correct procedures were followed all year round, but that the purpose of the audit was to provide additional assurance on top of this.

The Committee RESOLVED that the progress on the Internal Audit Plan 2017/18 be noted.

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.

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 received a report setting out Senior Management’s progress in implementing the internal audit recommendations that were overdue or likely to be implemented later than the target date.

There had been a request for a time extension for three recommendations relating to data protection and information governance. Cllr Band expressed concern over the continuing delay in relation to these actions; he noted that the issues appeared to be resource-driven and felt that the Committee needed assurance that adequate resources would be deployed in order to meet the proposed date before agreeing to it. Cllr Gray agreed, stating that more details and a plan for implementation was required before the Committee could agree to the extension.

Graeme Clark informed the Committee that this was being treated as a high priority and that a report would be submitted to the Executive in October seeking approval to procure a new resource in the form of an external specialist. The specialist would work alongside an internal project manager to ensure that the council met its GDPR requirements in time.

Cllr Hyman asked whether it was possible that any of the three recommendations could be achieved earlier than the requested date of 1 April 2018. Graeme responded that he was confident that the Executive would approve the resource request, but that it would take the specialist some time to complete a gap analysis, which was a very technical assessment. He indicated that it may be possible to bring forward the date for IA16/22.004 [Procedure].

The Committee reiterated that this was an essential piece of work as the council had a statutory deadline to comply with. It felt that it was unable to agree to an extension to the deadlines without having some evidence that a plan was in place. Members therefore asked that a detailed update be provided at the Committee’s November meeting and that if this was unsatisfactory they would escalate the issue to full Council.

The Committee RESOLVED that officers be asked to provide an update on the implementation plan and resources relating to recommendations IA16/22.001, IA16/22/002 and IA16/22.004 to the Committee’s November meeting in order to provide assurance that the council was on track to comply with the requirements of GDPR.

The report provides an update to the Committee on the progress made by Waverley Borough Council officers on the work being completed in investigating all types of fraud, primarily focusing on Housing Tenancy fraud, enhanced by the co-operation and supported by all the members of the Surrey Counter Fraud Partnership and extended partners including Registered Social Landlords.

Recommendation

It is recommended that the Audit Committee notes:

1.         the success of the investigation activity and the results achieved; and

2.         the Council’s participation in the Surrey Counter Fraud Partnership data matching exercises and the work to be completed to assist in identifying fraudulent activities throughout the council’s services not currently covered through the NFI.

The committee received a report that summarised the work that had been undertaken in relation to housing fraud during Quarter 1 of 2017/18. The Committee noted that the financial value for this quarter was £72,990 and that the total for the previous year had been £688,866. Officers explained that so far this year there had been no right to buy cases determined, and these were where the biggest returns were. Additionally, the notional figures in the report did not represent the real value to the council as the cost to build a new house was approximately £200,000.

The Committee thanked Gail Beaton and her colleagues for the work they had done in investigating cases of housing fraud. Cllr Hyman added that the council had a social responsibility to undertake this work and that it was positive that the costs in officer time were greatly outweighed by the returns.

The Committee RESOLVED that

1.    the success of the investigation activity and the results achieved be noted; and

2.    the council’s participation in the Surrey Counter Fraud Partnership data matching exercises and the work to be completed to assist in identifying fraudulent activities throughout the council’s services not currently covered through the NFI be noted.

At its meeting on 15 November 2016, the Audit Committee agreed to recommend to Council that Waverley opt-in to the appointing person arrangements made by Public Sector Audit Appointments (PSAA) for the appointment of external auditors from 2018/19. This recommendation was approved by Council on 13 December 2016.

PSAA is therefore responsible for appointing an external auditor to each opted-in authority. Grant Thornton (UK) LLP was successful in winning a contract in the procurement, and PSAA proposes to appoint them as the auditor of Waverley Borough Council for a period of 5 years from 2018/19. The appointment will start on 1 April 2018.

The PSAA will consult on scale fees for 2018/19 in due course and will publish confirmed scale fees for 2018/19 for opted-in bodies on their website in March 2018.

Recommendation

It is recommended that the Audit Committee notes the PSAA’s appointment of Grant Thornton (UK) LLP as the council’s external auditor for a period of 5 years from 2018/19.

Graeme Clark reminded the Committee that at its meeting in November 2016 and subsequent Council meeting in December 2016, Waverley had agreed to opt-in to the appointing person arrangements made by the Public Sector Audit Appointments for the appointment of external auditors from 2018/19. Following the PSAA’s procurement exercise, the council had been informed that Grant Thornton had been appointed as its external auditor for a period of five years. The appointment would be finalised in December and a consultation on fees would be undertaken in due course; this would be followed by a cooling-off period.

Cllr Hyman expressed concern over Grant Thornton’s handling of the fraud incident in 2014 and was wary of them continuing as the council’s external auditor, however Cllr Gray assured members that he had confidence in Grant Thornton’s policies and procedures and that he had no significant concerns going forward.

The Committee RESOLVED that the PSAA’s appointment of Grant Thornton (UK) LLP as the council’s external auditor for a period of five years from 2018/19 be noted.

Recommendation

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

The Committee RESOLVED that the its recurrent annual work programme be noted.

[NB Cllr Nicholas Holder left the meeting at 8.03pm prior to the consideration of the following item]

This report presents the latest corporate risk register as refreshed by Heads of Service.

Recommendation

It is recommended that the Audit Committee considers the revised corporate risks register at (Exempt) Annexe 1 and passes comments and observations to officers.

Prior to the meeting a briefing session had been held with members of the Audit Committee to enable them to ask questions on the more detailed aspects of the risk register.

The Committee received a report presenting the latest corporate risk register as refreshed by Heads of Service. Peter Vickers, Head of Finance, explained that since the Committee had last reviewed the risk register at the beginning of the year, it had been updated by officers along with a representative from Zurich and now included a change log and list of emerging risks. Peter also informed the Committee that the Risk Policy, which sits above the register was being reviewed in consultation with Zurich and would be coming to the Committee at its November meeting.

Members noted that the mitigation measures relating to some of the risks appeared to be out of date, and did not reflect current mitigation work that had been identified or was under way. Officers agreed to review the mitigation text to ensure that it reflected the most up to date position. Cllr Hyman also requested that the axes on the risk matrix be labelled for clarification purposes.

The Committee welcomed the inclusion of the change log and list of emerging risks and looked forward to receiving the updated policy document at its next meeting.

The Committee RESOLVED that the revised corporate risk register be noted and the observations above be passed to officers consideration.