AUDIT COMMITTEE
Minutes of a meeting of the Audit Committee held on 13 September 2011 in the
Council Chamber, Council Offices, Holt Road, Cromer at 2.00 pm.
Members Present:
Committee:
Mr N D Dixon (Chairman)
Mrs A Claussen-Reynolds
Mrs A Moore
Mr D Young
Officers in
Attendance:
The Deputy Chief Executive, the Acting Financial Services Manager, the
Deputy Audit Manager, the ICT Manager (for minute 30), the
Environmental Health Manager (for minute 31) and the Democratic
Services Team Leader.
Also in
Attendance
Julian Rickett, Sarah Brown (PriceWaterhouseCoopers), David Ablett
19 APOLOGIES
Apologies were received from Mr R Oliver and Mr J Punchard.
20 SUBSTITUTES
Mrs A Claussen-Reynolds was substitute for Mr J Punchard.
21 PUBLIC QUESTIONS
None received.
22 ITEMS OF URGENT BUSINESS
None
23 DECLARATIONS OF INTEREST
None
24 MINUTES
The Minutes of the meeting of the Audit Committee held on 7 June 2011 were approved
as a correct record.
Audit Committee
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13 September 2011
25 AUDIT UPDATE AND ACTION LIST
Members were updated on progress on actions arising from the minutes of the meeting
of 7 June 2011.
a) The Chairman had met with David Ablett to move forward on the Corporate Risk
Register. A review of low and medium risks was on the agenda for the current
meeting.
b) Use of natural resources: as requested by the Committee the Deputy Chief Executive
had contacted PriceWaterhouseCoopers (PWC) about any work that they had
completed. She was advised that the Key Line of Enquiry was in 2 parts and that the
following considerations had been conducted:
•
•
Understanding and quantifying the use of natural resources: whether the
Council had a strategy that showed how it will reduce its own use of natural
resources and its impact on the environment. A strategy that is supported by
delivery plans, for example to address climate change mitigation and
adaptation, to achieve energy and water efficiency, and optimise the use of
renewable resources.
Managing performance to reduce impact on the environment and
managing environmental risks: whether the Council is establishing systems
and processes to manage its own performance to reduce its use of energy,
fuel, water and raw materials etc. Whether the Council is incorporating targets
into its arrangements and establishing the systems it needs to monitor
progress in achieving these targets, i.e. biodiversity, reduced usage etc
and/or the Council has reliable information which it uses to monitor its
performance and manage progress in achieving its strategy. It is
communicating its performance against its strategy to the public, stakeholders
and staff and it is reducing its environmental impacts and consumption of
natural resources.
The conclusion reached by PwC at the time of the work was that there was evidence
to indicate that the Council had in place key policies and strategies and was
developing an understanding of its impact, but that further work was required to fully
report on the outcomes arising from its actions.
The Use of Resources was part of a performance regime that was no longer in
existence. Members therefore
RESOLVED
to close the matter.
c) The Future of Local Public Audit: the final version of the Council’s response had been
provided to Members. A system needed to be in place that enabled any consultations
to be notified to the relevant Members with sufficient time for response. The Deputy
Chief Executive explained that all consultations were now entered on the Council’s
Performance System, TEN.
26 REVIEW OF THE FINAL ACCOUNTS APPROVAL PROCESS
This item had arisen from a perceived need to move the date of future September Audit
Committees to later in the month, in order to accommodate the ISA 260 report from
PWC. The ISA 260 Report had been “To follow” for 2 consecutive years because the
Audit Committee
2
13 September 2011
REVIEW OF THE FINAL ACCOUNTS APPROVAL PROCESS
(Continued)
Audit Committee was held too early to be in line with PWC’s timetable. September was
also the month in which the Final Accounts needed to be approved, so the timing was
crucial if the Audit Committee was to make a recommendation to Full Council.
The Council’s Constitution was ambiguous about the approval of the Final Accounts,
giving the remit to the Audit Committee in one section and Full Council in another.
Clarification had been sought from the Monitoring Officer who agreed there was an
ambiguity and had advised that the formal approval of the Final Accounts should be a
matter for Full Council although the Audit Committee would approve the accounts from
an audit perspective. He suggested that, when the Constitution was reviewed and
updated later in the autumn the Audit Committee Terms of Reference should be changed
from “approve” to “review” to avoid any future confusion.
RESOLVED
1. That the Audit Committee Terms of Reference should be changed from “approve
the Final Accounts” to “review the Final Accounts”
2. That the September meeting of the Audit Committee should be scheduled one
week later than previously to accommodate timely receipt of the ISA 260 report.
27 ISA 260 REPORT
The purpose of the ISA 260 was to report significant findings from the Audit Report
before recommendations were made on the Final Accounts.
a) The most significant matters were additional disclosures required in order for the
financial statements to be compliant with International Financial Reporting Standards
(IFRS) and the timeliness and quality of some of the working papers.
b) The following had been highlighted as significant risks in the audit plan:
• The first year of reporting under IFRS
• Income and Expenditure Recognition
• Management Override of Controls
c) The report listed some outstanding matters in respect of the accounts. Some of these
matters had since been completed and a subsequent events review was due to take
place on 29 September 2011.
d) Accounting issues:
• Housing Subsidy Liability: the auditors preferred to see this treated as an
earmarked reserve. Members agreed the de-recognition and transfer to
earmarked reserves of the Housing Subsidy Liability.
• Suspense Accounts: the auditors had discussed with the Accountancy Team the
need to end the use of suspense accounts.
• No uncorrected misstatements which would have a material effect on the
financial statements had been identified. The misstatements were included in
Appendix 1 to the report. Members agreed that the summary of uncorrected
misstatements should be accepted without amendment to the accounts.
• Judgments and accounting estimates had been included in the report for the first
time this year.
Audit Committee
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13 September 2011
ISA 260 REPORT
(Continued)
e) Subject to the completion of outstanding matters it was expected that the auditors
would issue an unqualified value for money conclusion.
f)
Fees: PWC had spent longer on the audit than they had estimated. The overall audit
fee was therefore, after a rebate from the Audit Commission, £1600 more than had
been quoted. In response to a question from the Chairman, Julian Rickett said that
extra time had been spent on the audit because of a number of reasons: some of the
working papers weren’t ready or weren’t what was needed; more work was needed
on valuations; work on journals, which required internal data specialists and which
hadn’t been planned.
g) Julian Rickett was asked how extra work on the audit and the resultant increase in
fee could be avoided in future. He said that a detailed debrief would be held to
explain exactly what PWC needed for each area of disclosure. The Acting Financial
Services Manager told the Committee that valid issues had been raised by PWC that
the Accountancy Team could learn from for next year. He planned to meet with the
relevant officers to discuss how best to arrange the working papers for the audit. The
volume of work this year had been significant. The introduction of IFRS had entailed
going back 2 years to re-state figures for comparison purposes.
h) Concerns were expressed about the use of data analysts. The existing system had
been in place for some time and the use of data analysts had never previously been
necessary. It was believed that the existing system was capable of delivering what
was needed by the auditors, rather than buying in expertise from elsewhere.
i)
The Deputy Chief Executive, although considering that the extra work caused by
IFRS should have been foreseen when the audit fee was set, said that it was a good
report with few issues raised despite the volume of work undertaken. She
congratulated the Acting Financial Services Manager and his team.
j)
Discussions would be held with PWC to ensure that a robust arrangement was in
place to complete the audit work for 2011/12 within the budgeted figure.
RESOLVED
1. To receive the Report to those charged with governance (ISA 260 [UK&I])
2. To hold discussions with PWC to ensure that a robust arrangement is in
place to complete the audit work for 2011/12 within the budgeted figure.
3. To delegate to the Deputy Chief Executive the work required on 2nd Homes
Council Tax receipts.
4. To accept the summary of uncorrected misstatements.
5. To agree the de-recognition and transfer to earmarked reserves of the
Housing Benefit Subsidy Liability.
28 FINANCIAL STATEMENTS 2010/2011
The Audit Committee had received a briefing, during which they had examined and
discussed the Final Accounts, on 7 September 2011. Since then some minor
amendments had been made, as explained to Members in the previous minute. These
amendments would be included in the final version that would go to Full Council on 21
September 2011.
RESOLVED to RECOMMEND TO FULL COUNCIL
1
2
To receive the Financial Statements 2010/2011
To hold discussions with the External Auditor (PricewaterhouseCoopers) to
ensure a robust arrangement is in place to complete the audit work for 2011/12
within the budgeted figure.
Audit Committee
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13 September 2011
FINANCIAL STATEMENTS 2010/2011
3
4
5
6
(Continued)
To delegate to the Deputy Chief Executive approval of the changes required to
the note to the accounts (number 39) in respect of the LSP
To accept the summary of uncorrected misstatements.
To agree that the Authority has undertaken the work necessary to ensure that
property valuations included in the financial statements are free from material
misstatement
To agree the correction of the transactions relating to Housing Subsidy liability
and reclassification of Assets Held for Sale as identified in the summary of
misstatements.
29 SUMMARY OF INTERNAL AUDIT PROGRESS, APRIL – AUGUST 2011
The report highlighted the progress made in delivering the Annual Audit Plan, and
included abbreviated management summaries in respect of the two audit assignments
completed at this stage. The full reports were available from the Democratic Services
Team Leader.
Internal Audit had been able to award a “good” assurance level in respect of the two
completed audits. Although changes had been made to the audit plan, it was not
expected these should have a impact on the authority itself, or the ability to deliver the
Internal Audit Annual Report and Opinion.
The Annual Internal Audit Plan had been approved by the Audit Committee on 8 March
2011. This was the first report outlining the progress made in delivering the plan. In
producing the plan it had been recognised that there would be a significant proportion of
work delivered during Quarters 3 and 4, and, as expected, there was limited progress to
report at present. Appendix A demonstrated that of the (revised) 216 days within the
2011/12 Annual Plan, 27 days had now been delivered.
Several changes to the Annual Audit Plan had previously been agreed by the
Committee:
•
Arising from ongoing developments (including the change in political
administration at the Council, and changes in the national framework) the
audit of Corporate Policy and Performance Management had been deferred
to early in the 2012/13 Audit Plan.
•
The Business Continuity audit has been deferred to December due to service
management reviewing the resources required to deliver this function (as
noted to the Audit Committee in June 2011)
•
Some minor changes had been made to the scheduling of IT audits across
the Audit Consortium to accommodate requests for deferrals (such as the
Business Continuity audit). These were highlighted at Appendix A.
The Chairman congratulated the departments that had achieved such good audit
assurances. He asked the Deputy Audit Manager if the remaining work would be
manageable within the timeframe of the plan. She explained that the work was on
schedule but that any changes would be reported to the Committee.
RESOLVED
to note the outcomes of the audit work completed at this stage, and the
amendments made to the Annual Audit Plan.
Audit Committee
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13 September 2011
30 NETWORK INFRASTRUCTURE, SECURITY AND TELECOMMUNICATIONS AUDIT
The report was an update, requested by the Committee, on progress with the
recommendations of the Audit report on Network Infrastructure, Security and
Telecommunications. Good progress had been made in implementing the outstanding
actions identified as a result of the audit with 6 out of 7 actions being implemented since
the last report to the Committee, in June 2011. The 7th action was being implemented by
a manual review until the process could be automated. The Chairman said that the
progress that had been made was encouraging.
Replying to a Member’s question, the ICT Manager said that the ICT Strategy was
dependent on the Corporate Plan but would be produced within the next couple of
months. Members requested that confirmation that all recommendations had been
implemented should be received by the Committee on 6 December 2011.
RESOLVED
to note the progress made.
31 BUSINESS CONTINUITY
The Environmental Health Manager introduced Richard Cook who had been newly
appointed as Civil Contingencies Manager and would take up post on 26 September
2011. His was an internal appointment and he was, therefore, aware of business
continuity.
Since the previous update no progress had been made and there had been no
significant events. Member representation on the Business Continuity Working Group
was still to be decided.
RESOLVED
to receive a brief oral update in December and a report in March.
32 PARTNERSHIPS AND THE PARTNERSHIP RISK REGISTER
The report reviewed the current partnership framework and its applicability in the
financial and organisational environment and outlined the further work that was to be
undertaken.
a) Two partnerships (NORSE and Concessionary Fares) had ended.
b) With the introduction of Big Society it was expected that a number of organisations
would come together to share and deliver services. In light of this more work was
needed on the partnership framework.
c) It was important to distinguish between partnerships and other arrangements, e.g.
contracts.
d) Partnerships carried financial and reputational risks for the Council.
e) It was hoped that the work on partnerships would be more advanced and would
come back to the Audit Committee in December 2011. The work included
assessment of partnerships and governance arrangements.
RESOLVED
1.
2.
That the actions outlined in the report be developed to provide a revised
partnership framework for the Council that recognises the range of partners
and provides a sound basis for assessing and reporting on partnership
risk.
To receive an oral or written update report in December.
Audit Committee
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13 September 2011
33 AUDIT COMMITTEE WORK PROGRAMME
The following updates were made to the Audit Committee Work Programme:
a)
b)
c)
d)
The Audit Plan and Audit Letter would be received in March.
There would be no separate paper on the consideration of fraud risk.
The Final Accounts audit would be received in December.
A briefing on developments in public audit would be presented in December.
34 EXCLUSION OF THE PRESS AND PUBLIC
To pass the following resolution, if necessary:
“That under Section 100A(4) of the Local Government Act 1972 the press and public be
excluded from the meeting for the following items of business on the grounds that they
involve the likely disclosure of exempt information as defined in paragraphs 3 and 4 of
Part I of Schedule 12A (as amended) to the Act.”
35 EXTENSION TO THE INTERNAL AUDIT CONTRACT
The opportunity had arisen to make an option under the existing contract for Internal
Audit services to extend it beyond 30th September 2012. The report set out the options
for extending the contract beyond 30th September 2012.
Members discussed the report and considered the risks, which were minimal, and the
benefits. It was agreed that service continuity outweighed risk. It was also agreed that
any financial support to South Norfolk in respect of a challenge to this decision should be
limited to the value of the savings achieved as a result of the contract extension.
RESOLVED
to recommend to Cabinet the proposal to extend the Internal Audit contract by two
years in line with the details contained in the report.
The Committee also recommends to Cabinet that any financial support to South
Norfolk in respect of a challenge to this decision should be limited to the value of
the savings achieved as a result of the contract extension.
The meeting ended at 4.10 pm.
______________________
Chairman
Audit Committee
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13 September 2011