Agenda and minutes

Audit Committee
Tuesday, 25th September, 2018 7.00 pm

Venue: Committee Room 1, Council Offices, The Burys, Godalming

Contact: Amy McNulty  Democratic Services Officer

Items
No. Item

AUD 19/18

Minutes

To confirm the Minutes of the Meeting held on 24 July 2018 (to be laid on the table half an hour before the meeting).

Minutes:

RESOLVED that the Minutes of the Meeting held on 24 July 2018 be confirmed as a correct record and signed.

AUD 20/18

Apologies for Absence

To receive apologies for absence.

Minutes:

Apologies for absence were received from Cllrs Mike Band, Pat Frost, Stephen Mulliner and Sam Pritchard.

AUD 21/18

Disclosure of Interests

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.

Minutes:

Cllr John Gray declared a non-pecuniary interest in a suggestion made by him under Item 15, Committee Work Programme, as he was a resident of Dunsfold, a member of the Parish Council, a member of CPRE and was acquainted with members of POW.

AUD 22/18

Questions by Members of the Public

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.

 

The deadline for receipt of questions is 5pm on Tuesday 18 September 2018.

Minutes:

There were no questions received from members of the public.

AUD 23/18

QUESTIONS FROM MEMBERS

The Chairman to respond to any questions received from Members in accordance with Procedure Rule 11.

 

The deadline for receipt of questions is 5pm on Tuesday 18 September 2018.

Minutes:

There were no questions received from Members.

PART I - RECOMMENDATIONS TO THE COUNCIL

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.

AUD 24/18

TAX STRATEGY pdf icon PDF 51 KB

The Council is required to have in place a Tax Strategy to fulfil its responsibilities under the Legislation in Criminal Finances Act 2017, and to undertake to respond appropriately to the Corporate Criminal Offence guidance from HMRC issued September 2017.

 

Recommendation

 

It is recommended that the Audit Committee recommends to the Council that the proposed Tax Strategy be approved.

Additional documents:

Minutes:

Peter Vickers informed the Committee that the Council was required to have in place a Tax Strategy in order to fulfil its responsibilities under the Criminal Finances Act 2017. In September 2017, HM Revenue and Customers (HMRC) also issued guidance on the legislation for the corporate offence of failure to prevent the criminal facilitation of tax evasion.

 

The Government set out that relevant bodies should be criminally liable where they fail to prevent those who act on their behalf from criminally facilitating tax evasion. In order to demonstrate that the Council acknowledges its responsibilities with regard to tax it is required to prepare an annual Tax Strategy (attached at Annexe 1).

 

The guidance issued by HMRC focuses on the failure to prevent the crimes in regard to tax of those who act for or on behalf of the Council and states that it should be easier to hold to account and attribute criminal liability to the relevant body (The Council) for the criminal acts of employees, agents or those that provide services for on its behalf.

 

The guidance contains six principles to help relevant bodies understand the processes and procedures that can be put in place to prevent criminal activity with regard to tax. These principles are addressed in the Tax Strategy and are to be applied proportionately to the perceived risk of the offence.

 

Members suggested that the wording of paragraph 2.1 should be reviewed as it was open to misinterpretation in regard to evasion of tax. Peter agreed to re-phrase this sentence, and confirmed that while the Council would always seek to minimise its tax costs, for the benefits of residents, it would never enter into illegal transactions designed to evade tax. Members made some further typographical suggestions which officers agreed to review.

 

The Committee thanked officers for producing a good, easy to read document and now

 

RECOMMENDS that:

 

1.    The Tax Strategy be approved.

AUD 25/18

FINANCIAL REGULATIONS UPDATE pdf icon PDF 48 KB

The Audit Committee is asked to consider the update to the Financial Regulations and recommend them to the Council, in compliance with the Audit Committee Terms of Reference under Article 8 of the Constitution.  Specifically, the Audit Committee is required to maintain an overview of the Council’s Constitution in respect of financial regulations.

 

Recommendation

 

It is recommended that the Committee recommends the update to the Financial Regulations to the Council for adoption.

Additional documents:

Minutes:

Peter Vickers presented a report outlining proposed updates to the Financial Regulations. He advised that the Financial Regulations were last updated in November 2017. In line with the commitment of continual review within the Annual Governance Statement the Financial Regulations had been reviewed and two changes were proposed.

 

The objective of the update to the Financial Regulations was to enhance the Council’s governance arrangements, taking into account recent internal audit recommendations; to ensure statutory compliance; and to incorporate changes which provide improvements in process and efficiency.

 

The update covers the following areas which are detailed as Annexe 2 to these minutes.

·        Large contracts

o   Contracts involving stage payments

o   Final Payments

·        Debts Write-off

 

A query was raised regarding how the delegations set out in the Financial Regulations related to the Scheme of Delegation. Officers clarified that the Scheme of Delegation included a reference to the Financial Regulations to avoid overlap and duplication.

 

Members also made comments relating to the presentation and wording of paragraphs 5.9 and 5.10 and officers agreed to review these in the context of the whole of section 5 order to make it clearer.

 

The Committee RECOMMENDS that:

 

2.    The update to the Financial Regulations be approved.

AUD 26/18

CONTRACT PROCUREMENT RULES UPDATE SEPTEMBER 2018 pdf icon PDF 47 KB

The Contract Procurement Rules form part of the Council’s Constitutional framework. They should be maintained and updated as and when required to adopt legislative changes, reflect best practice in the industry and support the Council’s corporate objectives.

 

Recommendation

 

It is recommended that the Audit Committee recommends to the Council that the proposed amendments to the Contract Procurement Rules be approved.

Additional documents:

Minutes:

Patrick Tuite presented a report outlining proposed updates to the Contract Procurement Rules (CPRs) which had last been updated in July 2017 and approved by full Council in October 2017. While the CPRs were still fit for purpose there were a small number of recommendations which had come about either from the Council’s internal auditors, the Council’s senior leadership team or the Council’s Legal Services team.

 

Patrick explained that after a year’s use, this was an ideal time to review how the CPRs had worked in practice and whether any improvements could be made. Updates were proposed to the following five areas which are detailed as Annexe 3 to these minutes.

·        Turnover sign off

·        Large contracts – stage / final payments

·        Contract sign off levels / sealing

·        Contract extensions

·        Waivers

 

It was queried whether the Council monitored when it was expecting final payments on large invoices etc. and officers responded that the daily cash flow was closely monitored through treasury management processes.

 

The Committee was pleased to note that only relatively minor amendments were proposed, which demonstrated that the previous year’s substantial re-write had been very effective. The Committee now

 

RECOMMENDS that:

 

3.    The proposed amendments to the Contract Procurement Rules be approved.

PART II - MATTERS OF REPORT

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

AUD 27/18

Annual Audit Letter 2017/18 pdf icon PDF 373 KB

The attached Annual Audit Letter, produced by Grant Thornton, summarises the key findings arising from the work they have carried out at Waverley Borough Council for the year ended 31 March 2018.

 

The Letter provides a commentary on the results of Grant Thornton’s work to the Council and its external stakeholders, and highlights issues they wish to draw to the attention of the public.

 

Recommendation

 

It is recommended that the Audit Committee receives and comments on the Annual Audit Letter from Grant Thornton.

Minutes:

Iain Murray from Grant Thornton presented the Annual Audit Letter to the Committee. This document was a more public-facing version of the External Audit Findings Report that had been received by the Committee in July. It had been updated to take into account the comments made by Members at the last meeting and Cllr Gray again reiterated the importance of having a complete Audit Findings Report at the Committee’s July meeting.

 

The Committee was very pleased with the content of the Annual Audit Letter, and felt that this was a compliment to the hard work of Waverley’s officers. There was only one recommendation identified in the course of the audit, and this related to outstanding debts. Officers reported that a review of corporate debt was under way as part of the Finance Service Plan, and confirmed that any unrecoverable debt was covered by reserves.

 

The Committee RESOLVED that the Annual Audit Letter 2017/18 be received and noted.

AUD 28/18

Audit Committee Terms of Reference 2018/19 pdf icon PDF 61 KB

Each year, the Audit Committee is invited to review its Terms of Reference. A comprehensive review was carried out in November 2017 and the current Terms of Reference are attached.

 

Recommendation

 

It is recommended that the Audit Committee reviews its Terms of Reference and recommends any amendments to the Standards Committee and Council.

Minutes:

The Committee considered its Terms of Reference. Cllr Townsend queried whether the IT systems were covered under the Terms of Reference. Officers responded that this was included under ‘non-financial performance (processes and controls)’ and while individual areas were not listed separately, nothing was excluded.

 

Cllr Gray raised concern over a potential overlap between the roles of the Audit Committee and the Value for Money O&S Committee. He planned to raise this matter with the Strategic Director and Head of Policy and Governance and therefore moved that the Committee defer further consideration of the Terms of Reference until this matter had been clarified.

 

The Committee RESOLVED to defer the item to its November meeting to enable clarification to be sought on the roles of the Audit Committee and Value for Money O&S Committee.

AUD 29/18

AUDIT COMMITTEE ANNUAL ACTIVITY REPORT 2017/18 pdf icon PDF 170 KB

This report details the work undertaken by the Audit Committee over the municipal year 2017/18. The purpose of this annual appraisal of the work of the Committee is to help Members review the previous year’s work and plan for the coming year.

 

Recommendation

 

It is recommended that the work carried out by the Audit Committee in 2017/18 be noted.

Minutes:

The Committee considered the Audit Committee Annual Activity Report which provided a summary of the work undertaken by the Committee in 2017/18.

 

Members felt that this was a useful review of the items considered by the Committee over the last year, and requested that this be forwarded to Council for information as Annexe 4 to these minutes. Having reviewed the recent O&S Annual Report, Cllr Gray felt that it would be appropriate to revise the format of the report for future years to include features such as a Chairman’s Foreword.

 

Cllr Townsend noted that the Committee had previously discussed the implementation of a bespoke IT system in Planning and asked for further details. Graeme Clark responded that the Council had procured from a company the build of the system and that this was being monitored as part of the Planning Improvement Plan. He agreed to circulate further information after the meeting.

 

The Committee RESOLVED that the Annual Activity Report 2017/18 be noted.

AUD 30/18

INTERNAL AUDIT CHARTER pdf icon PDF 62 KB

The report provides an update to the Committee on the updated Internal Audit Charter that has been developed in accordance with the Public Sector Internal Auditing Standards. 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.

 

Recommendation

 

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

Additional documents:

Minutes:

Gail Beaton presented the updated Internal Audit Charter to the Committee. She explained that the majority of changes reflected operational changes such as job titles. She had also refreshed the introduction.

 

Members asked whether a reference should be made to the way in which the service was delivered, for example, in-house or by a contractor team. Officers, however, explained that the purpose of the Charter was to set out the function of the service and how its work was carried out rather than who actually did it. The same standards would apply whether it was an in-house team, shared services or outsourced.

 

Some further typographical suggestions were made by Members, and officers agreed to review the formatting and wording once the tracked changes had been included.

 

The Committee RESOLVED that the internal Audit Charter be approved.

AUD 31/18

PROGRESS ON THE INTERNAL AUDIT PLAN FOR 2018/19 pdf icon PDF 50 KB

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 2018-19 is presented.

 

Recommendation

 

It is recommended that the Committee notes the progress on the 2018-19 Audit Plan as attached in Annexe 1.

Additional documents:

Minutes:

Gail Beaton presented the report outlining the current position of the reviews in the 2018-19 Audit Plan. She advised that the Creditors and Building Control Processes reviews were now under way. Additionally, the Management of Flexible Tenancy review had now been completed. Gail also advised that two reviews had been moved from Quarter 1 to Quarter 3. These related to Local Land Charges, which was deferred at the request of the Head of Service. The Investment Board and Commercial Investment Venture which had been deferred due to the lack of activity to audit but the governance arrangements would be reviewed in quarter 3.

 

The Committee was keen that these deferred reviews did not slip any further and was also concerned that the high volume of reviews in Quarter 3 might put too much pressure on the contractor. Officers responded that the benefit of using a contractor was that they would have greater capacity and were able to respond to increasing demands.

 

Members asked officers if they had any concerns that the Audit Plan wouldn’t be completed by the end of the year. Gail responded that she was hopeful that all the work would be done, but reminded the Committee that 2017/18 had been the first time when all reviews had been completed by the end of the year.

 

The Committee RESOLVED that the progress on the 2018-19 Audit Plan be noted.

AUD 32/18

PROGRESS ON THE IMPLEMENTATION OF INTERNAL AUDIT RECOMMENDATIONS pdf icon PDF 47 KB

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 notes the current position.

Minutes:

The Committee was pleased to note that there were no outstanding audit recommendations due for completion at the end of the month after the date of the Audit Committee. Members thanked Heads of Service for their hard work in ensuring that audit recommendations were completed in a timely manner.

 

The Committee RESOLVED that the current position be noted.

AUD 33/18

Committee Recurrent Work Programme pdf icon PDF 53 KB

Recommendation

 

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

Minutes:

The Committee reviewed its work programme. Cllr Gray explained that he had received requests from Waverley residents that the Audit Committee look in to how the decisions to approve funding to defend recent legal challenges from POW and CPRE had been presented to Council. He stated that he had spoken with the Chief Executive about this matter, who had agreed that he could raise it as a potential item for the Committee’s work programme. Cllr Gray added that he considered that the matter fell within the Committee’s Terms of Reference, and highlighted his role as Chairman in reinforcing public confidence in the work of the Committee and the Council’s commitment to Value For Money.

 

Members felt that while there wasn’t necessarily anything wrong with how the decision had been taken, it would be a good opportunity to review the processes that had been followed and how the information had been presented, to ensure that the Council was delivering value for money for its residents. A vote was taken on this and there were 3 in favour and 1 abstention.

 

The Strategic Director advised that the review scope needed to identify which area of the Committee’s Terms of Reference the review fell under, what would be looked at, and the reason for examining this matter.

 

The Committee agreed to receive an update on this matter at its next meeting in November, and Cllrs Seaborne and Townsend would undertake some review work in the interim in order to determine whether there were any lessons to be learned.

 

In regard to risk management, it was noted that a workshop for Members would be held on 8 October to work on establishing the Council’s Risk Appetite. Following this, officers would produce a risk log based on the objectives within the Corporate Strategy. Peter Vickers advised that new Corporate Risk Registers would then be presented to the Committee in November or March.

 

Members also highlighted that with the new, earlier deadline for approving the Statement of Accounts, it would be important to arrange training for the new Committee members as soon as possible following the election in May.

 

The Committee RESOLVED to note its work programme.