AUDIT COMMITTEE
Minutes of a meeting of the Audit Committee held on 18 June 2012 in the Committee
Room, Council Offices, Holt Road, Cromer at 2.00 pm.
Members Present:
Committee:
Mr N D Dixon (Chairman)
Mrs A Claussen-Reynolds
Mr B Jarvis
Mr D Young
Officers in
Attendance:
The Financial Services Manager, the Head of Internal Audit, the Civil
Contingencies Manager (for minute 14) the Policy & Performance
Management Officer and the Democratic Services Team Leader (MMH).
1
APOLOGIES
Apologies were received from Mrs A Moore, Mr R Oliver, Mr S Ward and the Interim
Monitoring Officer.
2
SUBSTITUTES
Mrs A Claussen-Reynolds was substitute for Mr R Oliver.
3
PUBLIC QUESTIONS
None received.
4
ITEMS OF URGENT BUSINESS
None
5
DECLARATIONS OF INTEREST
None
6
MINUTES
The Minutes of the meeting of the Audit Committee held on 6 March 2012 were
approved as a correct record.
7
AUDIT UPDATE AND ACTION LIST
Audit Committee
18 June 2012
Members were updated on progress on actions arising from the minutes of the meeting
of 6 March 2012.
a) All items on the Action List had been completed or were on the Agenda for the
meeting of 18 June 2012.
b) The Democratic Services Team Leader was tasked with identifying a date for a halfday session of training in preparation for the report on the Final Accounts.
8
THE FUTURE PROVISION OF EXTERNAL AUDIT
Since the demise of the Audit Commission was announced by the Coalition Government
in August 2010 there had been a great deal of work carried out by both the Audit
Commission and the Department for Communities and Local Government to ensure a
smooth transition. The work was now coming to a conclusion and the Council had
recently received notification of a consultation on the appointment of its External Auditors
from September 2012. A recent letter from the Audit Commission indicated that
PricewaterhouseCoopers LLP (PWC) would be reappointed as External Auditors to the
Council.
The Council was happy with this arrangement and Members of the Audit Committee
agreed that it made sense to build on the good relationship that had been formed with
PWC.
In 2011 the Committee had challenged PWC on the level of fees. The response had
been that there was no scope for reduction. However, there was no reason why the
Committee could not return to this topic and it would be added to the Action List.
RESOLVED
to note the contents of the report.
9
REVIEW OF THE ANNUAL EFFECTIVENESS OF INTERNAL AUDIT 2011/12
The report set out the results of an annual review of the effectiveness of Internal Audit,
undertaken to satisfy criteria in the Accounts and Audit Regulations 2011. Internal
Audit’s performance and quality assurance framework had been examined to enable the
Audit Committee to confirm whether Internal Audit Services were effective, and that the
assurances provided in the Internal Audit Annual Report and Opinion could be relied
upon, and used to inform the Council’s Annual Governance Statement for 2011/12.
The Head of Internal Audit had a performance and quality assurance framework in place
to demonstrate the effectiveness of Internal Audit. The criteria were:
a) Delivering the Aims and Objectives of Internal Audit.
b) Complying with CIPFA’s Code of Practice for Internal Audit in Local Government.
c) Complying with CIPFA’s Statement on the Role of the Head of Internal Audit in Local
Government.
d) Quality Standards applying to the Internal Audit Service.
e) Strengthening the Council’s Systems of Internal Control.
f) Improving Service Delivery and Adding Value.
REVIEW OF THE ANNUAL EFFECTIVENESS OF INTERNAL AUDIT 2011/12
Audit Committee
18 June 2012
(Continued)
g) External Audit’s Reliance on Internal Audit’s Work.
h) Supporting an Effective Audit Committee.
The outcomes of the Effectiveness Review were presented in the report, confirming that
Internal Audit was meeting all the criteria. Reliance could therefore be placed on the
opinions expressed by the Head of Internal Audit, which could then be used to inform the
Council’s Annual Governance Statement.
The Head of Internal Audit alerted the Committee to some inconsistencies in the
Constitution regarding Rights of Access to records, assets, personnel and premises.
Although these rights of access had been correctly observed when the auditors were
carrying out their work at the authority, they were not documented in the latest version of
the Council’s Financial Regulations. This would be notified to the Constitution Working
Party.
The report was discussed:
a) In relation to the Assurance Framework and Counter-Fraud activities: it was agreed
that Internal Audit develop a greater understanding of provisions in these areas in
2012/13.
b) There had been significant improvement in Internal Audit’s quality standards during
2011/12.
c) 100% of high priority recommendations had been implemented by the Council for 2
successive years. This was a good achievement with NNDC being only one of two
Councils in the Consortium to have achieved this level of performance.
d) 75% of the opinions given to individual audit assignments had been positive, i.e. had
received Good or Adequate assurances. It had also been noted that 3 areas had
been awarded Good assurance with working practices found to mirror best practice.
e) Wherever possible External Audit had sought to place reliance on the work of Internal
Audit. This, in turn, helped to reduce the amount of work that the former were then
required to do and enabled their fees to be kept to a minimum.
f) Supporting an Effective Audit Committee: the self assessment had shown 83.3%
compliance against criteria reviewed.
g) Remaining with the subject of an effective Audit Committee, there was next some
debate over key issues highlighted as requiring further enhancement by the self
assessment. It was noted that foundation training for Members of the Audit
Committee had taken place on 18 June 2012 and the Head of Financial Services
would be providing further training before the receipt of the Financial Statements.
h) It was further acknowledged that the Chair of Audit had met in private with the Head
of Internal Audit and the External Audit Manager on 13 February 2012.
i) Increased clarity regarding counter-fraud measures adopted by the authority: the
Head of Internal Audit gave examples of the type of counter-fraud activities that
should be supported by the Council and suggested that there was a need for Internal
Audit to link up with the officer responsible for these matters, to confirm that a proactive stance was being adopted. Members were accepting of this proposal and
sought to receive a summary report examining what steps were being taken to raise
officer/Member awareness. That said, until the senior management restructure was
complete, it would be difficult to progress this requirement as the officer responsible
for Counter Fraud and Whistleblowing at the Council had yet to be named.
REVIEW OF THE ANNUAL EFFECTIVENESS OF INTERNAL AUDIT 2011/12
Audit Committee
18 June 2012
(Continued)
j)
Members also discussed the requirement for further work to be done on developing a
mechanism for use by the Committee to assess the performance of External Audit.
RESOLVED
to note the findings of the review, and the evidence gathered in support of the
effectiveness of the Internal Audit Service, and take these into consideration when
receiving the Head of Internal Audit’s Annual Report and Opinion, and the Council’s
Annual Governance Statement
10 HEAD OF INTERNAL AUDIT’S ANNUAL REPORT AND OPINION FOR 2011/12
This report had been developed to satisfy the requirements of the Accounts and Audit
Regulations 2011 ‘to undertake an adequate and effective internal audit of its accounting
records and of its system of internal control in accordance with the proper practices in
relation to internal control,” and to meet the Head of Internal Audit’s annual reporting
obligations as set out in the CIPFA Code of Practice for Internal Audit in Local
Government. To confirm that the organisation had complied with the above, the Head of
Internal Audit had produced an Annual Report and Opinion, which examined and utilised
the outcomes of Internal Audit work undertaken in 2011/12 to formulate an opinion on
the overall internal control environment which had been operating at the Council over the
last twelve months.
On the basis of Internal Audit work performed during 2011/12, the Head of Internal Audit
was able to confirm that overall standards of internal control at the Council were
adequate and so too were Corporate Governance arrangements and systems of Risk
Management.
The report was discussed:
a) 3 Good assurances had been awarded to Affordable Housing, Coastal Change and
Pathfinder Management and Electoral Registration.
b) There had been a very slight deterioration in the assurances awarded since the
previous year.
c) One high priority recommendation had been due to be implemented in 2011/12 and
this had been appropriately actioned. The recommendation had related to Waste
Management and, more specifically, Garden Waste and Bulky Waste.
d) Separate reports on progress achieved in relation to the implementation of audit
recommendations were provided by Internal Audit in line with half yearly cyclical
Committee reporting requirements.
e) Only one extra day had been delivered against the days originally planned.
f) Concern was expressed that 50.6 % of recommendations due to be completed in the
course of 2011/12 had yet to receive any action.
g) A Member asked if NNDC should be aiming for higher than Adequate assurances.
The Head of Internal Audit explained that Good was indicative of best practice but
the authority should primarily be aspiring to satisfactory/adequate levels of
assurance. To seek to achieve best practice in all areas of operations would not
necessarily be the best use of resources for the authority. The Head of Financial
Services also endorsed this view.
HEAD OF INTERNAL AUDIT’S ANNUAL REPORT AND OPINION FOR 2011/12
Audit Committee
18 June 2012
(Continued)
RESOLVED to
1) Receive and note the Annual Report of the Head of Internal Audit;
2) Note the overall standards of internal control at the Council were adequate for the
year ended 31 March 2012.
3) Note that an adequate assurance has been given in respect of Corporate
Governance arrangements and systems of Risk Management for the year ended 31
March 2012.
4) Note that the opinions expressed have been given due consideration when
developing the Council’s Annual Governance Statement.
11 THE STATUS OF AGREED AUDIT RECOMMENDATIONS DUE FOR
IMPLEMENTATION BY 31 MARCH 2012
The report updated Members on progress made in implementing the agreed audit
recommendations due for completion by 31 March 2012. It provided an overview as to
how recommendations had progressed since the previous report was presented to
Committee on 6 December 2011, and also drew attention to the efforts made by
management throughout 2011/12 to ensure that ongoing improvements to the internal
control environment were taking place.
The report was discussed:
a) There had been deterioration in the number of recommendations implemented. The
Interim Accountancy Manager had done some additional follow-up work in Quarter 1
of 2012/13 and there was some discussion that Members should be provided with an
update in consequence. The other important item arising from this report was the fact
that the high priority recommendation requiring action in 201112 had been
appropriately resolved.
b) Attention was next given to outstanding audit recommendations in relation to 3
specific audits and reference was additionally made to outstanding agreed actions
pertaining to computer audits. The audits were:
• NN/11/01 Environmental Services
• NN/11/12 Development and Building Control
• NN/12/03 Waste Management Contract
• Computer Audit
In the case of the Computer Audits four separate reviews were involved. The relevant
managers would be asked to provide an update by email, to be provided to the
Committee within the next 2 or 3 weeks. The outcomes would be reported to the
Performance and Risk Management Board. It was possible that some of these
recommendations had now been cleared following the Interim Accountancy
Manager’s push for further updates from management regarding the status of their
agreed audit recommendations.
RESOLVED
to note the current position regarding the overall status of audit recommendations as at
31 March 2012, and the areas where further work is required.
12 MONITORING OFFICER ANNUAL REPORT 2011/12
Audit Committee
18 June 2012
Members were advised that any specific questions would be relayed to the Interim
Monitoring Officer.
The report was discussed:
a) It would be helpful to know how many Code of Conduct complaints there had been,
and the outcomes. It was understood that the Standards Committee had a matrix
which recorded this information.
b) Training on the new Code of Conduct had not yet been provided. This issue would be
taken up with the interim Monitoring Officer.
c) The Constitution had recently been revised. Copies of the latest version would be
provided for Members.
RESOLVED
to note the report.
13 LOCAL CODE OF CORPORATE GOVERNANCE AND ANNUAL GOVERNANCE
STATEMENT 2011/12
The Corporate Governance framework was made up of the systems and processes,
culture and values by which an organisation was directed and controlled. For local
authorities this included how a council related to the community it served. The Local
Code of Corporate Governance was a public statement of the ways in which the Council
would achieve good corporate governance. It was based around six principles which
were identified in the joint publication by the Chartered Institute of Public Finance and
Accountancy (CIPFA) and the Society of Local Authority Chief Executives (SOLACE).
The Annual Governance Statement was prepared following a review of all the evidences
available to the Council in seeking compliance with its Local Code.
The arrangements set out in the Local Code of Corporate Governance and the Annual
Governance Statement would allow the Council to move ahead with its corporate
planning processes confident that it could address the issues of governance and risk.
The report was discussed:
a) The Limited assurances in the Head of Internal Audit’s report had influenced the
Action Plan.
b) Complaints should not be included because they went to the Standards Committee.
However, information should be added about how often the Standards Committee
met.
c) 4.3.5, page 74: the final sentence should refer to South Norfolk, not Deloitte.
d) Icelandic banks, 5.2.14: this section should be re-worded to reflect that the Council
reviewed the international monetary situation on a daily basis.
e) The Chairman asked for more detail in the report in future.
RESOLVED
to approve, subject to amendments, the Annual Governance Statement along with the
updated Local Code of Corporate Governance and associated action plan.
14 BUSINESS CONTINUITY
Audit Committee
18 June 2012
Limited progress had been made on the completion of Team Business Continuity Plans
but 10 had now been received. 85 – 90% of the Civil Contingencies Manager’s time was
being taken up in putting arrangements in place for the Olympic Torch. Initially the extent
to which local authorities would be involved in these arrangements had not been
perceived. The impact was on officer time, rather than financial.
The senior management restructure had also disrupted the work on Team Business
Continuity Plans but it was still hoped to complete the work by August.
The Corporate Business Continuity Plan would be reported to the Audit Committee in
September. The Corporate Business Continuity Plan and the Team Plans ran in
conjunction. The Audit Committee would continue to monitor until the project was
completed.
RESOLVED
To receive an update at the September meeting.
15 PERFORMANCE MANAGEMENT FRAMEWORK INCLUDING PERFORMANCE
MANAGEMENT OF THE ANNUAL ACTION PLAN 2012/13
The Framework had been reported to Cabinet and Full Council in May 2012. The
Committee had seen the whole document in draft stages. It would be subject to a
forthcoming audit to ensure that it wouldn’t need further revision. The targets would be
assigned to individual officers.
An annual Performance report was published with a forward by the leader. This was in
the public domain. The final draft would be reviewed by the Performance and Risk
Management Board on 13 July 2012, after which the Leader and Chief Executive would
approve it for publication via the website and press releases. In response to a Member’s
question the Policy & Performance Management Officer said that, although the Annual
Report had been published in Outlook before, it was dependent on the amount of space
available and the other information which needed to be included.
RESOLVED
To note the report.
16 UPDATE ON REVIEW OF TEN SYSTEM
Enhancements to the system were being designed which would provide significant
improvements in managing performance. The decision to move forward would not be
taken until the findings of the audit report were known. The auditors would be asked to
review the work which had been done. The audit was due for completion in mid July and
a report made back to the Audit Committee in September. It was hoped to have the
enhanced system in place by the end of September.
A demonstration for Members of the TEN System would take place following the
meeting.
RESOLVED
To note the report.
17 CORPORATE RISK REGISTER
Audit Committee
18 June 2012
The Risk Register had been to the Performance and Risk Management Board in March
and would go again on 13 July 2012. The report was discussed:
a) Some of the figures were set by the Performance and Risk Management Board in an
independent assessment which was also seen by the Audit Committee.
b) The Risk Management Framework included criteria for assessing risks.
18 AUDIT COMMITTEE WORK PROGRAMME
a) A further review on Business Continuity was added to the Work Programme for
September.
b) In the past an Audit Committee Annual Report had been prepared but Members had
queried if this was necessary, especially with a reducing resource base. It would be
more appropriate for the Chairman to provide an annual summary to Full Council
when he introduced the Annual Governance Statement.
RESOLVED
that the Chair of Audit should provide an annual summary to Full Council on 25 July
2012.
The meeting ended at 4.10 pm.
______________________
Chairman
Audit Committee
18 June 2012