Agenda and draft minutes

Audit Committee - Monday, 2nd March, 2020 7.00 pm

Venue: Council Chamber, Council Offices, The Burys, Godalming

Contact: Kimberly Soane  Democratic Services Officer

Items
No. Item

AUD 43/19

Minutes

To confirm the Minutes of the Meeting held on 26 November 2019 (to be laid on the table half an hour before the meeting).

Minutes:

The Chairman asked the committee to agree the minutes of the last meeting held on 26th November 2019.

 

The committee AGREED  the minutes of the meeting however:

 

Cllr Seaborne advised that, although he did not disagree with the record of the meeting, he did questioned the clarity of what was agreed in AUD 33/19 as he felt it did not clarify the decision in the meeting.  He felt that the committee had agreed to the Section 151 Officer being able to approve ‘limited’ tactical changes to fees and charges, whereas he felt the minutes suggested ‘carte blanche’ to agreeing changes. He asked if democratic services could clarify.

 

He highlighted I.10 (ii), of the Constitution, which stated delegation to officers did not include ‘The setting of off-street car parking charges’ as this was reserved to the Council. He felt it was not in the remit of Audit to recommend to the Council a change to the Constitution but could recommended to Standards who could then in turn recommend to Council. 

 

Cllr Dear agreed with the comments made by Cllr Seaborne and felt that clarification was needed that the delegation to the Section 151 Officer ‘throughout the year’ for minor adjustments did not deny Council the ability to scrutinise.

 

Cllr Floyd-Douglass agreed with the above comments.

 

Cllr Cole responded by saying he disagreed and had understood in the meeting that delegated powers were to make any changes to the fees and charges as necessary and he objected to this issue being brought back to the committee.

 

Graeme Clark advised he would get the details of the discussion of the meeting scrutinised to clarify the exact discussion.  Tom Horwood advised he had, during the discussion, looked at the constitution and Audit Committee report directly to Council not Standards.

 

Cllr Davidson commented that we could not amend the minutes but could clarify the discussion that took place and the decision.

 

ACTION: The recording of that item of the November 2019 meeting should be transcribed to ascertain the discussion that took place and the recommendation made to Council.

AUD 44/19

Apologies for Absence

To receive apologies for absence.

Minutes:

Apologies for absence were submitted by Cllr Michaela Gray.

AUD 45/19

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:

There were no disclosure of interest submitted.

AUD 46/19

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 Monday 24th February 2020.

Minutes:

There were none.

AUD 47/19

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 Monday 24th February 2020.

 

 

Minutes:

There were none.

AUD 48/19

Air Quality Management Investigation Outcome and Findings pdf icon PDF 183 KB

This report details the outcome of the process carried out by Waverley Borough Council and the subsequent action taken by the Police and the Crown Prosecution Service, which resulted in the criminal conviction of a former member of Waverley Borough Council staff.

 

Recommendation

 

It is recommended that :

The strengthened governance arrangements are considered and endorsed by Audit Committee.

 

Additional documents:

Minutes:

Tom Horwood, Chief Executive of Waverley Borough Council read out a statement to the Audit Committee. (Copy attached to these minutes).

 

Annie Righton advised she was happy to answer any questions from the committee.

 

Cllr Jerry Hyman had registered to speak on this matter.  He advised that he had been part of a group, along with the gentleman who had made the Freedom of Information request.  He advised that the report noted there were no specific trends within the falsified data.  Cllr Hyman asked what action has been taken to avoid this ever happening again.

 

Cllr Hyman enquired why the names of the officers interviewed had been redacted when it was all in the public domain.  He also queried why the report did not contain information that Councillors were interviewed also.

 

Cllr Hyman went on to raise concern that a legal notice had been submitted by Waverley Borough Council to Crest Nicholson on the 29/12/2010 by the AQ Officer at the time (not the one referred to in the report), advising they could not approve the Brightwells planning application due to an incomplete EIA.  However this was not considered when the application was approved.  He felt this was a matter of governance and did not feel it was suitable for this administration to say the issue was closed when it clearly was not.

 

Cllr Hyman thanked officers for a very open report and acknowledged that the redactions were mainly concerning employment issues.

 

Cllr Hyman’s last comment related to paragraph 3.7 of the report which was exempt but which he hoped members of the committee would consider and question.

 

Cllr Dear commented about the fact that there appeared to be no motive, personal or financial gain for the officer involved and therefore it was baffling as to why the data was falsified.

 

The committee AGREED that the way forward was to strengthen controls.

 

Richard Homewood reported that lessons had been learnt and it was clear that one person in charge of a process was not appropriate. Waverley had now introduced 2 contracts. One for diffusion tubes and one to manage the Automatic Air Quality Monitors plus the raw data was published monthly so it was in the public domain.  One company also does quality assurance checks on the other and Richard himself gets a checklist each month.    Richard emphasised there were much tighter controls now.

 

Cllr Floyd-Douglass asked if there were any other areas of the council where only one staff member is responsible for a specific function.

 

Graeme Clark advised that we were not aware of any others but that internal audit routinely look at this within the control network.  Internal audit will endeavour to eliminate any risk of this and look at strengthening any risks.

 

Cllr Wilson asked if the fact the officer concerned was in secondary employment was a factor and questioned whether we have tightened up on secondary employment by council employees.  Annie Righton explained that this had been looked at but was not thought to have  ...  view the full minutes text for item AUD 48/19

AUD 49/19

External Audit Plan for 2019/20 pdf icon PDF 267 KB

To receive the 2019/20 External Audit Plan from Grant Thornton.

 

Additional documents:

Minutes:

Mark Bartlett, Audit Manager at Grant Thornton, outlined the External Audit Plan for the year ending 31 March 2020.

 

Mark outlined the scope of the audit and highlighted the key areas of significant risk.

 

The significant risks identified were:

 

·      The revenue cycle includes fraudulent transactions – this was rebutted after the auditor concluded there was little evidence of any risk;

·      Management over-ride of controls – this will be evaluated by Grant Thornton;

·      Valuation of land and buildings – this will be evaluated by Grant Thornton; and

·      Valuation of pension fund net liability – this will be evaluated by Grant Thornton

 

Mark highlighted other risks identified which were the implementation of International Financial Reporting Standards (IFRS) 16 Leases which had been issues but not adopted.  This would be implemented from April 2020 and Mark advised Grant Thornton would evaluate the processes adopted to limit impact.

 

The committee were updated on the proposed fee variations this year.

 

Cllr Hyman had registered to speak on this item.

 

He asked why the falsification of figures risk had not been included within the significant risks.  He commented that the falsification of the transport assessment for the Brightwells scheme in Farnham which the Air Quality Officer had identified in 2010 had not been considered and, in his view,  this posed an enormous risk to Farnham and to Waverleys’ reputation.

 

He also commented on the lack of implementation of the European Court of Justices ruling 2018 (Sweetman ruling) which we had to abide to by law and which had cost us a huge sum in appeals.  Cllr Hyman expressed his view that there was an assumption that an assessment for mitigation was in LPP1 but it is not.

 

Cllr Hyman asked that the committee take this forward as he felt we are selling mitigation to developers.

 

Cllr Floyd-Douglass asked where the Corona virus sits within this as a risk.  Mark advised it would be the same as Brexit (e.g. non-financial risk).  Graeme Clark assured the committee that senior management were very aware of the operational and strategic risks involved in this.

 

Peter Vickers commented that members had received a presentation from Zurich not long ago and that there would be another member briefing on risk soon.

 

Cllr Davidson asked what Grant Thornton had experienced from other local authorities with regard to risks we may encounter.  Mark highlighted the risks around shopping centres as set out in the Value for Money risks in the report.

 

Cllr Marriott asked Mark if future trends were considered when looking at property valuations and risks.  Mark advised predicted trends were considered.  Cllr Seaborne asked if financial stability was what he was actually meaning.  Mark clarified this by saying they consider how robust the planning for the budget is.

 

Cllr Seaborne noted that the sentence ‘We will keep you informed of changes to the financial reporting requirements for 2018/19 through on-going discussions and invitations to our technical update workshops’, which had been in last year’s report, was omitted from this years.  Mark assured  ...  view the full minutes text for item AUD 49/19

AUD 50/19

Accounting Policies for 2020/21 pdf icon PDF 143 KB

The report provides an update on Waverley Accounting Policies in line with changes to the CIPFA Code of Practice.

 

Recommendation

 

It is recommended that the Audit Committee notes the proposed changes in accounting policy.

Additional documents:

Minutes:

Peter Vickers gave an update on the Waverley Accounting Policies in line with changes to the CIPFA Code of Practice.

 

He advised that as reported last year the 2019/2020 Code had introduced no substantial reporting requirements in 2019/20.  In 2020/21 there was one substantial financial reporting standard which would be implemented from 1 April 2020.  International Financial Reporting Standard (IFRS) 16 Lease accounting changes how leases are accounted for to represent the value of assets and liabilities.

 

He advised that a lot of work had already been done around this change.  The report outlined the areas affected and the impacts of the change.

 

Cllr Marriott highlighted that under impacts it stated ‘short term leases’ were exempt.  He enquired what constituted a short term lease.  Peter advised this was a lease under 12 months.  He also highlighted this change would mean that those buildings on a peppercorn lease which previously were not recorded or assessed would now be valued as an asset.

 

Cllr Seaborne asked how the lease register would be monitored.  Mark Bartlett advised this would be looked at by Grant Thornton in preparation for IFRS16.

 

Cllr Dear asked if there was a ‘summary’ of the principles under IFRS16 which would make it simple to understand.  Mark Bartlett advised he had some slides which he could provide.(attached to minutes)

 

Cllr Cole asked if the rule to value property was set out in regulations.  Peter Vickers advised that the Chartered Institute of Chartered Surveyors Regulations were used.

 

The committee noted the proposed changes in accounting policy.

 

AUD 51/19

Annual Governance Statement - Consideration of Potential Governance Issues pdf icon PDF 357 KB

Peter Vickers to report on the Annual Governance Statement.

 

To enable the Committee to raise any potential emerging governance issues that may need to be addressed.

 

Recommendation

 

The Committee is invited to raise any potential emerging governance issues for consideration.

Minutes:

Peter Vickers outlined the Annual Governance Statement.  He explained this was an overarching document which follows a template set out by CIPFA. He outlined each section of the document in turn.

 

The committee were then asked to consider the report and whether it reflects the Governance arrangements.

 

Cllr Davidson if there were any adjustments from previous years.  Peter advised only updates in section 5.

 

Cllr Hyman had registered to speak on this item.  He highlighted that in section 5.2 Statutory Challenges it had outlined the two High Court Judgements but had not mentioned the issues around the impact of not implementing the European Court of Justices ruling 2018 (Sweetman ruling) which we have to abide to by law and which has cost us a huge sum in addressing appeals.

 

Cllr Hyman also raised that at the end of section 10 of the report it stated’ …no matters of significance have been omitted from this statement.’ Yet there was no mention of the two ‘elephants’ in the room – the Sweetman judgement and the falsified transport assessment of 2010.

 

Cllr Marriott commented that some aspects of this had already been covered but invited Tom Horwood to comment on the mitigation issue.

 

Tom Horwood reminded the committee that this was a draft statement and officers would take on board the comments made by Cllr Hyman and the committee and consider items that need including.  The Air Quality issue had been covered in previous year’s statements and would be added in again reflecting the guidance given.

 

Cllr Marriott commented on the planning presentation members had been given at the end of last year relating to habitats, biodiversity and environmental impacts.  It was stated that applicants are obligated to provide assessment reports in their application but that this was not happening.  It was suggested a ‘tick box’ approach was needed to ensure all consultations/assessments have been completed.  This has been raised already with Zac Ellwood. Many of the committee agreed with the Cllr Marriott’s  comments.

 

Graeme Clark highlighted that the reason for this discussion was to make recommendations for improvements and the committees comments would be taken on board.

 

Cllr Marriott raised the issue of the governance of project management.  He understood there had been a ‘lessons learnt’ report written on the overspend of Memorial Hall and asked if the committee could have sight of this.  The committee agreed. Cllr Davidson felt a similar report should be written for each major project.

 

Cllr Marriott highlighted that at the last Council meeting it was suggested that the Audit Committee should have some input into the investment strategy.  He asked what that would entail?  Graeme Clark agreed that as the Council had agreed a new revised property strategy it would be a timely for the audit committee to look at the governance and decision making around that.  He suggested to bring something back to the committee on governance of this.  He suggested an offline detailed discussion with committee members and to return with some recommendations.  ...  view the full minutes text for item AUD 51/19

AUD 52/19

Internal Audit Plan Progress 2019-20 DOTX 49 KB

The Committee’s Terms of Reference include provision for the Committee to approve, monitor and comment on the progress made in the achievement of the Internal Audit Plan. An update on the current position of the Internal Audit Plan for 2019-20 is presented for the Audit Committee to note progress being made.

 

Recommendation

 

It is recommended that the Audit Committee notes the contents of the Internal

Audit Plan progress report as attached in Annexe 1.

 

Additional documents:

Minutes:

Gail Beaton outlined the Internal Audit Plan progress report for 2019/20.  She highlighted it had been a difficult year having had limited in house internal audit resources which resulted in having to procure additional resources from our current provider Southern Internal Audit Partnership (SIAP).

 

65% work completed with the rest of the work in progress. The rolling work programme was outlined and work has progressed since the report was written.  The committee were directed to the review of the Air Quality which will be carried out by Gail to ensure all the action points coming out of the AQ have been addressed.

 

Cllr Hyman had registered to speak on this item.  He thanked Gail for highlighting the review of the AQ.

 

He then asked how much input she would be inviting on the ‘Management of Major Construction projects - lessons learned from Brightwells and Memorial Hall’ as there were still lots of ongoing issues.  Gail advised that this review would be looking at projects that have been completed since the Memorial Hall to review that project management experience and knowledge had been embedded now that senior staff had been provided with Project Management toolkit and training

 

Cllr Seaborne commented on the chart advising that % Positive Feedback stated that none had been received.  Gail explained this was because the annual questionnaire had not been sent out yet.

 

It was noted that only 129 days had been delivered out of the 204 total plan days, Cllr Seaborne asked how those extra 75 days will be supplied.  Gail advised that the majority would be supplied by SIAP.

 

Cllr Floyd-Douglass raised the overdue reviews on Vending Machines.  Gail explained the table would be covered in a later report.

 

The committee noted the contents of the Internal Audit Plan progress.

AUD 53/19

Proposed Internal Audit Plan for 2020-21 DOTX 41 KB

The Committee’s terms of reference include provision for the Committee to approve the proposed Internal Audit Plan for 2020-21.  This report presents the Draft Internal Audit Plan for 2020-21 and the Committee is invited to comment before the Plan can be adopted.  The plan has been drawn up by the Internal Audit Manager through consultation with Senior Management Team and completing a risk assessment of the audit universe of the council’s activities.

 

Recommendation

 

It is recommended that the Audit Committee comments and approves the proposed Internal Audit Plan for 2020-21 as attached in Annexe 1.

Additional documents:

Minutes:

Gail Beaton introduced and gave an overview of the proposed internal audit plan for 2020-21.  She advised that the work had been carried out by herself in consultation with the various Heads of Service.  The committee were advised there were a number of deferred reviews in this plan including Safeguarding, but there was flexibility in the plan to take on any areas highlighted by the committee.

 

Gail brought to the attention of the committee the fact that the property investment review had been deferred from 2019-20 due to the lack of property acquisitions.  As no acquisitions had taken place it was proposed to replace this review with an assessment of Waverley’s compliance with the new guidelines from CIPFA as discussed earlier in the meeting.

 

Cllr Floyd-Douglass enquired about the eight deferred assessments from 2019-20 and asked if risk assessments had been carried out.  Gail advised all had been risk assessed and she gave an example of payroll which had a payroll accuracy done so it was felt this would sufficiently cover it.

 

Cllr Seaborne highlighted the earlier discussion on the Air Quality Management reference ensuring other areas of the business did not have any officers working ‘solo’ without adequate monitoring.  Gail advised that Internal Audit will discuss the way forward.

 

Cllr Seaborne went on to ask why there was no statement of the number of days allocated to each audit.  Gail advised this would be allocated by next meeting as she needed the committee’s comments on any areas they felt needed including. Cllr Seaborne advised he found it difficult to approve a plan without any costings.  Graeme Clark suggested Gail would review the comments and come up with a costed plan and circulate before the next meeting.

 

Cllr Dear suggested a line should be included acknowledging risks associated with cost cutting.  Graeme Clark agreed and advised this would be added.

 

The committee approved the proposed plan subject to the comments and changes identified in the discussion.

AUD 54/19

Progress on the implementation of Internal Audit Recommendations DOTX 107 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 original agreed implementation date.

 

Recommendation

 

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

 

It is recommended that the Committee considers the Head of Service(s) justification for a change in the due date for the recommendations listed in Annexe 2 and agree an appropriate implementation date(s).

 

Minutes:

Gail Beaton updated the committee on Senior Management’s progress in implementing the recommendations raised by Internal Audit following a review of each service area.

 

Gail advised the actions set out in annexe 1 were either overdue or due by the end of March. All actions were on target to complete by the end of the month.  This includes the actions regarding processes relating to the restaurant and vending machines.  These actions were all underway and progressing with no concerns to raise.

 

The committee considered the information set out in annexe 1 and were happy with progress.

 

The committee noted there were no recommendations for changes in due dates.

AUD 55/19

Fraud Investigation DOTX 50 KB

The report provides an update to the Committee on the work being completed in investigating fraud, primarily focusing on Housing Tenancy fraud.   The report also includes the current outputs in relation to the National Fraud Initiative (NFI)

 

Recommendation

 

It is recommended that the Audit Committee notes the results of the fraud investigation activity, attached in Annexe 1 up to and including quarter 3 covering the period 01 April 2019 to 31 December 2019.

Additional documents:

Minutes:

Gail Beaton updated the Committee on the work being completed in investigating fraud.  On Annexe 1 it highlighted that there have been 5 houses handed back as well as investigations relating to disabled facility grants and other housing related actions.

 

Cllr Cole asked if the financial values stated in the annexe appear on our balance sheets.  Gail advised that they did not as they were Cabinet office figures so were indicative.

 

The Committee noted the results of the report.

AUD 56/19

Audit Committee Recurrent Work Programme pdf icon PDF 152 KB

The Committee’s annual recurrent work programme is attached.  The work programme details regular items, but other items can be submitted to each meeting on an ad hoc basis or at the request of the Committee.

 

Recommendation

 

The Audit Committee is invited to note its recurrent annual work programme.

Minutes:

The Chairman asked the committee to note the programme and asked if there were any comments. Mark Bartlett indicated that the External Audit Findings Report and Annual Governance Report set out for the July meeting were one and the same and that Annual Governance Report needed to be removed.

 

The committee noted the Recurrent Annual Work Programme