Agenda item _5_
AUDIT COMMITTEE
Minutes of a meeting of the Audit Committee held on Tuesday 17th June 2014 in the
Committee Room, Council Offices, Holt Road, Cromer at 2.00 pm.
Members Present:
Committee:
Officers in
Attendance:
1.
Mr N Dixon (Chairman)
Mrs A Moore
Mr D Young
Miss B Palmer
Mr R Reynolds
The Head of Finance, Richard Sadler on behalf of the Internal Audit
Consortium Manager, the Civil Contingencies Manager, the Democratic
Services Officer
APOLOGIES
Mr B Jarvis
2.
PUBLIC QUESTIONS
None received.
3.
ITEMS OF URGENT BUSINESS
None received.
4.
DECLARATIONS OF INTEREST
None
5.
MINUTES
The Minutes of the meeting of the Audit Committee held on 17 March 2014 were
approved as a correct record and signed by the Chairman.
6.
AUDIT UPDATE AND ACTION LIST
The Chairman commented that the Internal Audit Consortium Manager seemed to
have all issues in hand.
7.
AUDIT COMMITTEE WORK PROGRAMME
The Chairman raised a number of issues, including amending a number of dates,
which the Democratic Services Officer agreed to action. The Chairman queried
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whether September was the appropriate time for the Business Continuity Update to
come to committee. Following a discussion with the Civil Contingencies Manager, who
was present to give a verbal update, the committee agreed to defer the item to receive
a written report in December.
Mrs A Moore queried why one item was designated ‘Quarterly Summary of Completed
Audits’ when it was only presented half yearly. The Head of Finance explained that this
was due to terminology; the report did come quarterly but was called a ‘half yearly’
report in other months.
8.
BUSINESS CONTINUITY PLAN REVIEW
Minutes note: this item was dealt with following item 61. Work Programme, as the Civil
Contingencies Manager was in attendance to present the item.
The Civil Contingencies Manager introduced this item. He explained that there had
been five incidents since he last report to the committee, including the St Jude’s storm,
district-wide coastal flooding in December, the USAS helicopter crash in January, and
the Fakenham town fire. All of these events had involved emergency and business
continuity plans. He further explained that these events to a certain extent proved that
their business continuity plans were effective. He also noted that Revenue and
Benefits still had to put a business continuity plan in place. With regards to business
continuity he concluded that he was looking to create a ‘bottom up’ approach to the
process, wherein the plans were produced with reducing duplication and acrossservice understanding in mind.
He also discussed business continuity training which was due to take place, allowing
managers to understand the business continuity process in more detail.
With regards to disaster recovery and the work action recovery site, the Civil
Contingencies Manager explained that this work was still in process, but that the
council office at Fakenham would be used in such a situation and would take little
reconfiguration to bring it to standard. He also discussed the business continuity
working group which he planned to restart in order to supplement the production of
business continuity plans.
The Chairman queried when the working group was due to meet, and the Civil
Contingencies Manager replied that it would hopefully take place in August. The
Chairman then invited members to ask questions.
1. Mr R Reynolds queried whether the upstairs area of the Fakenham Connect
building would be utilised in a disaster recovery situation. The Civil Contingencies
Manager replied that the area had viability but that there were cost implications. He
also explained that there was the potential for the area to be a rentable space to
increase usage. Regarding the whole of the Fakenham Connect building, there
was a hope that the building would be utilised more for day-to-day usage.
The Chairman thanked the Civil Contingencies Manager for the information provided
and reminded the committee that the Business Continuity plan was an on-going, ‘live’
document, adapting where and when necessary. He added he looked forward to
receiving the further report in September.
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9.
PROGRESS ON INTERNAL AUDIT ACTIVITY
The Acting Internal Audit Consortium Manager introduced this item. He explained it
provided an update on the previous update report, and at this point all revised targets
had been delivered upon. He explained that the vast majority had a positive
assurance, but the item without one regarding a tourist information centre had still had
action taken on it, which showed progress. The Chairman invited members to ask
questions.
1. Mr D Young queried if the issue at the TIC had been resolved by replacing tills.
The Head of Finance replied that there had been software issues which had been
resolved by till replacement or upgrading. Mr D Young further queried if this issue
could be faced elsewhere and suggested spot checks to ensure effectiveness. The
Head of Finance also explained that manual checks had been put in place to
ensure that the issues faced would not arise again. The Acting Internal Audit
Consortium Manager confirmed that spot checks would be carried out.
2. Mr R Reynolds referred to page 23 of the agenda, which suggested that the
incident had been an isolated case. He queried how this had come about. The
Head of Finance replied that whilst she did not know the technical details, it may
have been due to bugs in the existing software. The Chairman commented that he
had a concern that such a basic issue had not been picked up. He also
commented that there had been an audit in 2011/12 and prior to this in 2009/10,
and queried if the software had been in use then. The Head of Finance replied that
issues would have been picked up where there were discrepancies, and the Acting
Internal Audit Consortium Manager commented the auditor raised this as an issue
in 2013. The Chairman commented that he was surprised it wasn’t picked up until
the audit in 2013, and the Head of Finance replied that NNDC had flagged it as an
issue prior to this. The Chairman asked for Head of Finance and the acting Internal
Audit Consortium Manager to follow this up and report back with details on when
the software was introduced and this initially became an issue.
The Chairman commented that the report seemed positive and that the authority had
progressed significantly. The committee agreed to
NOTE
The report
10.
FOLLOW UP ON INTERNAL AUDIT RECOMMENDATIONS 1 NOVEMBER 2013 TO
31 MARCH 2014
The acting Internal Audit Consortium Manager introduced this item. He explained that
there were no outstanding high priority actions, but that there were 19 remaining
medium-low recommendations (45%) which was deterioration in progress. The Head
of Finance provided an update to the outstanding recommendations, commenting that
to date there were now only 14 remaining recommendations (33%), and explained that
of those remaining, some had yet to be implemented and others had been but had not
yet been fully completed. She concluded that they were continuing to chase officers on
remaining recommendations.
The Chairman commented that the good news seemed to be that there were less
recommendations in the first place, which suggested the authority were doing better
overall, however it was important that recommendations were dealt with quickly and
effectively. The acting Internal Audit Consortium Manager commented that in his
experience this seemed to be an on-going issue at a number of authorities, where
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there was a fluctuating level of completion of recommendations. He did suggest that
compared to elsewhere, the authority were not performing badly. He also reiterated
that it was particularly good news that there had been no high priority
recommendations. The Chairman agreed and commented that there had been 40
recommendations in total in October 2013 and there were now 27 as of March 2013,
showing that the direction of travel was right. He also raised that as they were smaller
numbers, it made percentages less representative.
Mrs A Moore commented that having being on the Audit committee for the last 6 years,
the authority was certainly going in the right direction and that issues had significantly
improved in this time.
The committee agreed to
NOTE
The report.
11.
INTERNAL AUDIT CONSORTIUM MANAGER’S ANNUAL REPORT AND OPINION
FOR 2013/14 IN RESPECT OF NORTH NORFOLK DISTRICT COUNCIL
The acting Internal Audit Consortium Manager introduced this item. he explained that
this was one of the most important reports at it provided the assurance for the control
environment at the authority, and there was a requirement to produce it annually. He
explained that the Internal Audit Consortium Manager had been able to give an
adequate opinion on the framework of governance at the authority. He further
explained that this meant that there were no significant issues at the authority and that
the audit service was compliant with public sector audit standards. He further
explained that the CIPFA compliance check compares the authority with ‘best practice’
and that whilst there were one or two issues, the authority was working effectively. He
outlined the issues as firstly, the internal audit service and its relation with senior
officers and Head of Finance, explaining that the frequency of meetings may need to
be increased and this was worthy of discussion. He also explained that it may be
useful to call these ‘formal meetings’ in order to reassert them in the audit calendar. He
explained that the second issue was with regards to the audit charter, which did not
show process should there not be sufficient resourcing for internal audit. He explained
this could be added when the charter was reviewed.
Mr D Young queried where this was in the report. The acting Internal Audit Consortium
Manager commented that it could be found at 5.3.3 and 5.3.4. He also commented
that whilst he had never seen an issue arise with regards to insufficient resourcing, it
was important to have it covered in the charter. The Chairman commented that there
had been constraints previously regarding getting work done, so it was important for
this to be covered. The acting Internal Audit Consortium Manager also commented
that it was also important to bear in mind during the audit plan process, particularly
with regards to days allocated; auditors could be under pressure to reduce days
because of financial constraints, so it was important to ensure that there was suitable
provision. The Head of Finance commented that it might be useful for management
team to have a discussion with the Internal Audit Consortium Manager regarding these
issues. She commented that within the authority there was currently no pressure with
regards to reducing days, and they only reduced days where there were good
assurances, not because of financial concerns.
The acting Internal Audit Consortium Manager also commented that 5.1.4 explained
that internal audit would be subject to an external assessment within 5 years, so by
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March 2018. He explained that discussions were taking place regarding this and it
would be brought to the committee when there was a recommendation. He explained
the limitation on this was that it couldn’t be done by anyone within the consortium.
The acting Internal Audit Consortium Manager then went on to discuss performance
indicators, as discussed at 5.2. He explained that the year had been an unusual one,
particularly with regards to mitigating circumstances, but that turnaround times were
not currently at target, and incentivising these may be an issue. He also explained that
post audit feedback was requested from managers on completion of an audit but only
5 out of 13 had so far responded. The explained the form for feedback was being
looked at to encourage responses. The Chairman queried who would be filling these
in, and the acting Internal Audit Consortium Manager replied that the managers of the
service being audited were the respondents. Mr D Young commented that a lack of
return of forms may be a good sign as often forms would only be returned where
someone wished to complain. He also commented on the presentation of statistics at
5.2.2 which were not presented in an easily understood manner. The acting Internal
Audit Consortium Manager agreed and commented that he would feed this back to the
Internal Audit Consortium Manager.
The committee agreed to
NOTE
The report.
12.
AUDIT COMMITTEE SELF-ASSESSMENT
The acting Internal Audit Consortium Manager introduced this item. he explained that
the self-assessment was a checklist to compare and confirm activities of the
committee, to establish its effectiveness. He asked members if they had any
comments.
1.
The Chairman commented that they often struggled in the early parts of forming a
committee, reducing the stability of the group which was not an effective check and
balance over audit procedure. He asked that audit be covered more effectively during
the induction procedure so that members firstly understood what the audit committee
was, and secondly were willing to be a committed member. Mr R Reynolds agreed
with this, particularly with regards to overcoming the misunderstanding of the
committee as dealing just with financial information. The Democratic Services Officer
commented the she would ensure this was put on the Member Development work
programme for the upcoming induction process. Mrs A Moore commented that the
committee seemed more stable now, and agreed that effective training would be
useful. The Chairman concluded that it would be useful for audit to have a specific slot
in the induction programme in order to facilitate understanding.
The committee
NOTED
The report.
13.
CORPORATE RISK REGISTER
The Head of Finance introduced this item. She explained that the first item on the risk
register had previously been named ‘central government funding’ but they had
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changed this to encapsulate the wider financial risk. She also explained the risk
register would recognise the localised council tax support scheme. Two of the newer
items on the register were ‘loans to registered providers’ and ‘home working’ and risks
surrounding these were explained on the register in more detail.
1. Mr D Young queried why the risk level for central government funding was so high
when there had been knowledge about the reduction in funding for some time. The
Head of Finance replied that there were a number of issues surrounding this,
including the changes to the business rates retention system which had produced
a shift in the risk. It also included risks around changes to the new homes bonus,
which would become a significant issue in the future. The risk tried to encompass
all of these
2. Mr D Young also referred to the downgrading of the co-op and queried why that
was still a high risk. The Head of Finance replied that as the co-op was still the
authority’s bank there was still an on-going risk. She explained it was a high risk,
however it was the lowest possible high risk. Mr D Young queried if this risk was
around the capacity for business continuity should the bank fail, as opposed to
actual financial risk to the authority. The Head of Finance replied that this was
correct; that the authority had to make contingency plans for this situation as they
would struggle to continue day-to-day banking if this happened. She also explained
that the new banking contract was currently out to tender and they hoped to award
the new banking contract in the summer.
3. The Chairman queried if March 2015 was when the new banking contract would
come into effect. The Head of Finance agreed that yes it was, however the cooperative bank had offered them the opportunity to pull out earlier if required.
However this would be dependent on the tender process allowing for such a move.
4. Mr D Young queried why the loans to registered providers were a risk when loans
had not been provided yet. The Head of Finance replied that as it was now
approved by Cabinet and in progress, they were picking the risk up early. Mr D
Young also queried why the risk was higher than the target risk when no action had
taken place as of yet. The Head of Finance replied that this was as the authority
had not provided loans previously, and the programme fell outside of treasury
management mitigation. They would continue to monitor the risk level once the
loans were in place. Mr D Young queried why the target was 10 when it seemed an
impossible goal; the Head of Finance agreed to feed member comments back to
the Performance and Risk Management board to consider a re-evaluation of risk
levels.
5. The Chairman commented that it was interesting that whilst they were improving
housing delivery across the district, one of the authority’s key priorities, this was
simultaneously creating a new risk. He asked if the authority would be lending as
the equivalent of a building society. The Head of Finance replied that the scheme
would charge market rate interest and would form part of the capital programme of
expenditure as it was outside of the treasury management strategy. She explained
that it was a new and different way of thinking for the authority. Mr D Young asked
what the level of security provided for the local investment strategy way. The Head
of Finance replied that as detailed in the Cabinet report, there would be 110%
security on the loan in the form of land assets.
6. Mrs A Moore queried if, as it seemed in the Cabinet papers, the authority within the
Local Investment Strategy would be lending the Broadland Housing Association
who would then lend on to Broadland St Benedicts. The Head of Finance replied
that in actuality, there would be two tranches of the loan, one part that went to
Broadland housing and one part that went to Broadland St. Bendicts. She also
explained that as Broadland St Benedicts were able to produce market housing,
this would shorten the loan time for their tranche, in order to recycle this amount for
Broadland Housing Association.
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7. The Chairman referred to page 72 of the report, Shared Services Plans and its
failure to incomplete, and asked what this was in relation to. The Head of Finance
replied that this was primarily in relation to Revenues and Benefits as a shared
service plan with Kings Lynn was now not going ahead. With regards to future
shared services, there had been no decision one way or another and consideration
of this would be an on-going process. The Chairman asked if there currently other
departments in the pipeline for shared service, and the Head of Finance replied
that if there were she was not currently aware of it.
8. The Chairman proposed that it would be useful if within the actions column of the
Shared Service plans, they could look more deeply at shared service proposals
with a consideration of risk mitigation for such proposals. He explained that as a
‘living document’ it should look forward and make considerations for those risks
also.
9. Mrs A Moore queried if the waste contract was a shared service. The Head of
Finance replied that the recycling contract was but via a consortium, and was a
service level as opposed to a corporate risk.
10. The Chairman referred to page 73 of the report, which considered Property Assets
and their risk, and asked if there were any particular issues regarding this at the
moment. The Head of Finance replied that as far as she was aware there was
nothing in particular at risk at the moment, as it would be flagged, but she would
capture any issues for the next meeting as they arose.
The Chairman thanked officers and members for their comments and it was agreed to
NOTE
The report.
The meeting ended at 4.05 pm
______________________
Chairman
Audit Committee
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