Please Contact: Mary Howard
Please email: mary.howard@north-norfolk.gov.uk
Please Direct Dial on: 01263 516047
7 September 2012
A meeting of the Audit Committee of North Norfolk District Council will be held in the
Committee Room at the Council Offices, Holt Road, Cromer on Tuesday 18 September
2012 at 2.00 pm
Members of the public who wish to ask a question or speak on an agenda item are
requested to arrive at least 15 minutes before the start of the meeting. It will not always be
possible to accommodate requests after that time. This is to allow time for the Committee
Chair to rearrange the order of items on the agenda for the convenience of members of the
public. Further information on the procedure for public speaking can be obtained from
Democratic Services, Tel: 01263 516047, Email: democraticservices@north-norfolk.gov.uk
Sheila Oxtoby
Chief Executive
To: Mr N D Dixon, Mr B Jarvis, Mrs A Moore, Mr R Oliver, Mr S Ward and Mr D Young
All other Members of the Council for information.
Members of the Management Team, appropriate Officers, Press and Public
If you have any special requirements in order to attend this meeting, please let us
know in advance
If you would like any document in large print, audio, Braille, alternative format or in a
different language please contact us
Chief Executive: Sheila Oxtoby
Strategic Directors: Nick Baker and Steve Blatch
Tel 01263 513811 Fax 01263 515042 Minicom 01263 516005
Email districtcouncil@north-norfolk.gov.uk Web site northnorfolk.org
AGENDA
AGENDA NOTE:
For Item 10 summary reports and an audit letter are attached at Appendix C. These
documents are available to Members on request. Please contact Mary Howard (Tel.01263
516047 or email mary.howard@north-norfolk.gov.uk).
1.
TO RECEIVE APOLOGIES FOR ABSENCE
2.
PUBLIC QUESTIONS
To receive public questions, if any
3.
ITEMS OF URGENT BUSINESS
To determine any items of business which the Chairman decides should be
considered as a matter of urgency pursuant to Section 100B(4)(b) of the Local
Government Act 1972.
4.
DECLARATIONS OF INTEREST
Members are asked at this stage to declare any interests that they may have in any
of the following items on the agenda. The Code of Conduct for Members requires
that declarations include the nature of the interest and whether it is a disclosable
pecuniary interest.
5.
MINUTES
(Page 1)
To approve as correct records, the minutes of the meeting of the Audit Committee
held on 18 June 2012.
6.
AUDIT UPDATE AND ACTION LIST
(Page 9)
(Appendix A – page 10)
To monitor progress on items requiring action from the meeting of 18 June 2012,
including progress on implementation of audit recommendations.
7.
2011/12 STATEMENT OF ACCOUNTS
(Page 14)
(Statement Document bound separately)
Summary:
This report presents the Statement of Accounts for
2011/12 for review by the Audit Committee prior to
recommendation to Full Council for approval. The
outturn position for the year was reported to Members in
June and has been used to inform the production of the
statutory annual accounts for 2011/12.
Conclusions:
The Statement of Accounts for 2011/12 has been
produced in accordance with the Code of Practice on
Local Authority Accounting. The draft accounts were
produced by 30 June 2012 and since then have been
subject to external audit review.
8.
Recommendations:
Members are asked to consider and review the
Statement of Accounts for 2011/12 and recommend
their approval to Full Council.
Contact Officer
Karen Sly, 01263 516243,
Karen.sly@north-norfolk.gov.uk
REPORT TO THOSE CHARGED WITH GOVERNANCE (ISA 260)
(Page 16)
To discuss the Report to those charged with Governance.
9.
PROTOCOL FOR LIAISON BETWEEN INTERNAL AND EXTERNAL AUDITORS
(Page 38)
To discuss the Protocol for liaison between Internal and External Auditors 2012/13
10.
PROGRESS REPORT ON INTERNAL AUDIT ACTIVITY, APRIL TO SEPTEMBER
2012
(Page 66, appendix B page 70, appendix C page 72)
Summary:
Conclusions:
This report examines progress made between April and
early September 2012 in relation to delivery of the
Annual Audit Plan for 2012/13, and includes abbreviated
management summaries in respect of the audit reviews
which have been finalised in the course of this period.
Adequate assurance levels have been awarded in
respect of the three audits completed in the first five
months of the financial year.
It is further noted that the Annual Audit Plan has been
subject to some rescheduling of assignments (the timing
of 5 of the original 16 assignments featuring in the Plan
have been revised), whilst job budgets for 3 reviews
have been adapted to accommodate changes to audit
scopes – all revisions were at the request of
management. The Plan has also now been expanded
to incorporate an additional audit of the new Revenues
and Benefits Shared Services Partnership focusing on
Data Transfer, Governance and Risk. Following
discussions with management, this work is to be
delivered in two phases. Phase 1 has already been
undertaken and an audit letter was produced in July
2012 commenting on the data transfer arrangements.
To date, we have been able to absorb the above
changes to the Plan without any adverse impact on our
ability to deliver all assignments within the financial year
and hereby confirm that we are on schedule as we
approach the half yearly stage.
11.
Recommendations:
It is recommended that the Committee notes the
outcomes of the three audits completed between
April and August, together with recent amendments
made to the Annual Audit Plan for 2012/13.
Cabinet Members:
All
Wards:
Contact Officer
All
Sandra King, Head of Internal Audit
01508 533863
scking@s-norfolk.gov.uk
BUSINESS CONTINUITY
Cabinet member(s):
All
Contact Officer, telephone number,
and e-mail:
12.
(oral update)
Ward(s) affected:
All
Richard Cook
01263 516269
richard.cook@north-norfolk.gov.uk
AUDIT COMMITTEE WORK PROGRAMME
(Page 80)
To review the Audit Committee Work Programme
13.
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.”
Agenda Item
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.
Audit Committee
1
1
18 June 2012
5
7
AUDIT UPDATE AND ACTION LIST
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.
Audit Committee
2
2
18 June 2012
REVIEW OF THE ANNUAL EFFECTIVENESS OF INTERNAL AUDIT 2011/12
(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.
Audit Committee
3
3
18 June 2012
REVIEW OF THE ANNUAL EFFECTIVENESS OF INTERNAL AUDIT 2011/12
(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.
Audit Committee
4
4
18 June 2012
HEAD OF INTERNAL AUDIT’S ANNUAL REPORT AND OPINION FOR 2011/12
(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.
Audit Committee
5
5
18 June 2012
12 MONITORING OFFICER ANNUAL REPORT 2011/12
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.
Audit Committee
6
6
18 June 2012
14 BUSINESS CONTINUITY
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.
Audit Committee
7
7
18 June 2012
17 CORPORATE RISK REGISTER
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
8
8
18 June 2012
Agenda Item
6
AUDIT COMMITTEE 18 JUNE 2012 – ACTIONS ARISING FROM THE MINUTES
1. The Final
Accounts
To identify a date for a half-day session of training in
preparation for the report on the Final Accounts.
Mary Howard
Working lunch arranged for 18 September 2012
2. External Audit
Fees
3. Constitution
To discuss further with PWC the level of fees
Members
To flag up inconsistencies regarding Rights of
Access to records, assets, personnel and premises
to the Constitution Working Party.
Members
Notified to Constitution Working Party and
Monitoring Officer and put on file by Democratic
Services for inclusion in next review of the
Constitution.
4. Fraud Risk
The nominated Officer at the authority responsible
for Counter Fraud and Whistleblowing to develop in
consultation with Internal Audit a summary report for
Members on Counter Fraud activities.
Monitoring
Officer
Monitoring Officer to review Counter Fraud and
Whistleblowing Policies, followed by re-launch
through staff and Member briefings.
5. Implementation of
recommendations
To obtain an emailed update on the implementation
of recommendations regarding the following audit
reports:
• NN/11/01 Environmental Services
• NN/11/12 Development and Building Control
• NN/12/03 Waste Management Contract
• Computer Audit
Mary Howard
Updates emailed to Members on 19 July 2012.
The document has been revised to include
further updates and is appended to this Action
List at Appendix A.
6. Monitoring
Officer’s Report
That the Monitoring Officer’s report should include
more in-depth information about complaints.
Monitoring
Officer
7. Business
Continuity
To receive an update in September.
Richard Cook
8. Annual Report
To provide an update preceding the presentation of
the Annual Governance Statement at Full Council on
25 July 2012
On the agenda.
Completed
9
Cllr Nigel Dixon
Appendix A
UPDATES ON IMPLEMENTATION OF INTERNAL
AUDIT RECOMMENDATIONS – September 2012
NN/11/12 Development and Building Control
Recommendation 1 - Review of Procedural Guidance.
The process maps for planning applications and enforcement referred to under that
recommendation were last reviewed in April/May 2010 and new pre-application and
“Do I need planning permission” process maps were done in April 2012. They are
likely to be reviewed again when we look at our business processes following the
management changes and the outcome of the Pay and Grading Review.
This low priority recommendation has now been dealt with.
Recommendation 2 – National Requirements Check.
It is proposed that quarterly checks are carried out on a random set of applications to
monitor checking against the National requirements Checklist. To begin July 2012.
This low priority recommendation has now been dealt with.
Recommendation 3 – Monitoring of Outstanding Planning Enforcement Cases.
Managers have set up monthly caseload update meetings with the Enforcement
officers. There are quarterly reports to Development Committee on cases more than
3 months old. The team still currently has limited resources although at a recent
meeting of the Scrutiny Committee a report on the teams’ workload was presented
and the provision of additional temporary resources was agreed to assist with the
case load backlog. The most appropriate form of additional resource is being
considered.
Several meetings have been held (and will continue to be held) with the complete
group of officers involved in the enforcement functional to discuss process/procedural
matters.
Crystal Reports are used by the team and managers to monitor workloads and
progress.
Actions have been undertaken in response to this medium priority recommendation
and caseload monitoring will need to be on-going.
Recommendation 3 – Reconciliation of Income Received by the Planning
Department
Meetings have taken place regarding this audit recommendation and it was agreed
that a monthly report from the general ledger be produced by the Accountancy
Section and given to the Technical Officer (Development Management) who will
produce a Chrystal report regarding the fees entered on the Planning Departments
Acolaid system and compare the two reports to ensure that the amounts can be
reconciled to the General Ledger. A further meeting will be arranged to determine if
the system is working or if any further work needs to be undertaken.
10
Appendix A
Recommendation 5 – Legal fees for Section 106 Agreements
A revised time sheet has been produced to ensure that an accurate record of the
time spent by the Planning Legal Manager on the preparation of S106 Agreements is
kept, that the charges are calculated in accordance with the current charging rates
and the correct invoice raised and a record kept on the appropriate file. The
monitoring of the recovery of all payments in relation to invoices raised within the
Authority is done by the Exchequer Section and any non-payments are advised to
the relevant Department for further instructions as to how to proceed. Updated
procedure notes have been done.
This recommendation has now been dealt with.
Recommendation 6 – Monitoring of Section 106 Agreements
Several meetings have been held (and will continue to be held) with staff involved in
the Section 106 process. Written guidance on Section 106 procedures has been
prepared and documents amended as necessary and further work is being
undertaken regarding the use of the Acolaid system in recording Section 106
Agreements and monitoring conditions and trigger points for compliance.
The issue of detailing the roles and responsibilities for monitoring the key
requirements of Section 106 Agreements is currently on hold pending the outcome of
the current BPR relating to PA’s and Democratic Services.
Building Control
The Building Control and Access Manager reports that there is only one outstanding
low priority recommendation relating to the updating of procedural and work practice
notes. This is an on-going process and is being undertaken as and when time
permits. When updates are completed the date is recorded on the document for
future reference.
Computer Audits
NN0917 Cedar E-Financials, Password file encryption key: this will be reviewed
as part of the system upgrade later in the year. The revised deadline will be 30
November 2012.
It needs to be noted that the following recommendations were all allocated to Kate
Wilson who has left the Authority, so alternative arrangements are in place to finish
the outstanding recommendations when possible:
NN1022 Asset Register update, this is nearly complete but not yet finished due to
availability of staff. Kate Wilson has left, plus a member of the team is off long term
sick, meaning that the priority is on fixing day to day user calls. The scheduled
completion date is 30 September 2012.
NN1117 Intrusion Detection system. The licence for this functionality has been
provided as part of the new firewall installed in June 2012. It will be switched on once
the MPLS internet connection is not the primary link to Kings Lynn for the Revenues
11
Appendix A
and Benefits service, to ensure that it doesn’t cause any unscheduled disruption to
service.
NN1117 Network Strategy. The new Corporate ICT strategy is still in draft and on
hold pending the completion of the Management restructure. A Technical
Infrastructure guide which includes the Network strategy will be updated once the
strategy has been agreed. To enable the ICT service to plan in the meantime an
internal IT Technical plan is in use. These documents do exist and can be inspected
on request.
NN/11/01 Environmental Services (Information from TEN system)
Procedural Guidance
Procedural guidance has been reviewed and updated and is subject to periodic
review under Departmental Quality Management system to ISO 9001:2008. BSI have
tested the document control under the standard and are satisfied that this is
adequately managed.
Audit Trail for Licence Fees
Some problems.
Register of Contaminated Land Sites
All potential contaminated land site the Council are aware of are on the CLAND
system. 99% of sites have been inspected and risk assessed, only outstanding ones
are where access is proving difficult. Any new sites will be entered and risk assessed
as they are identified.
Contract with Norstead Kennels
Contract awarded and signed.
Pest Express Contract
Updated schedule for contract being agreed with Pest Express, specifically around
reporting of jobs received and time between visits, prior to formal contract paperwork
being signed.
NN/12/03 Waste Management Contract
Performance Indicator Review and Monitoring
The primary KPI being applied to the assessment of the performance of the contract
has been determined to be the number of Defaults issued under the contract in
respect of Cleansing activities. This covers the following functional areas: Street
Cleansing; Litter Bin Emptying, Emptying of Dog Waste Bins and cleaning of Public
Conveniences. The target for the service is 0 (Nil). A Default may arise because of
an irredeemable breach, a serious service failure whose remedy is insufficient to
overcome the failure, and failure to comply with a Rectification issued by the
Authorised Officer to remedy a defect in the service. Details have been agreed for
12
Appendix A
the monitoring of fuel use on the contract and that a base level of 1 December 2011
will be used. The KPI for the number of missed bins will be maintained for the year
as set out at the previous levels. Rationalisation of KPI measures allows greater
focus on necessary outcomes at this stage of the contract. Cleansing and waste
proforma monitoring sheets have been developed and are completed on monitoring
visits by NNDC staff. Reporting is through the Performance Monitoring Report,
Cabinet and Scrutiny as well as the Strategic Board.
System Integration and Validation Checks
The Improvement Plan for the year will be used to address the potential conversion
of NNDC to Whitespace for the collection, storage and sharing of data to remove the
risks associated with data integration which is proving less than satisfactory.
Trade Waste Arrears Recovery
Migration to the use of Whitespace for trade waste management as mentioned item
above will lead to a more consistent ability to track and resolve issues debt recovery.
13
Audit Committee
18 September 2012
Agenda Item No______7______
2011/12 STATEMENT OF ACCOUNTS
Summary:
This report presents the Statement of Accounts for
2011/12 for review by the Audit Committee prior to
recommendation to Full Council for approval. The
outturn position for the year was reported to Members in
June and has been used to inform the production of the
statutory annual accounts for 2011/12.
Conclusions:
The Statement of Accounts for 2011/12 has been
produced in accordance with the Code of Practice on
Local Authority Accounting. The draft accounts were
produced by 30 June 2012 and since then have been
subject to external audit review.
Recommendations:
Members are asked to consider and review the
Statement of Accounts for 2011/12 and recommend
their approval to Full Council.
Contact Officer
Karen Sly, 01263 516243,
Karen.sly@north-norfolk.gov.uk
2011/12 Statement of Accounts
1
Introduction
1.1
The Council’s statement of accounts must be produced and audited by 30 September
each year.
1.2
The Outturn report for 2011/12 was presented to Cabinet and Overview and Scrutiny in
June 2012. That report provided details of the variances on the revenue account in
expenditure and income compared with the revised budget and where a number of
underspends had been earmarked at the year end for ongoing and new commitments for
which there was no budget provision in 2012/13. The report also detailed the year end
position in respect of the capital programme and the updated capital programme for
2012/13 onwards.
1.3
The Code of Practice on Local Authority Accounting in the United Kingdom 2011/12 (the
Code) prescribes the form of the statutory accounts to be presented and published.
Consequently the format is very prescriptive and areas of non compliance are reported
by the External Auditors as part of their audit of the accounts (ISA 260 report also
included on this agenda). Whereas the outturn report to Cabinet and Overview and
Scrutiny provides information on the actual expenditure and income compared to
budget, the statement of accounts shows the financial position of the Council and
transactions in the year compared to the previous financial year.
1.4
There have been minimal changes to the reporting requirements within the accounts
compared to the previous year in terms of reporting requirements, changes are detailed
within section 3 of the explanatory foreword.
14
Audit Committee
18 September 2012
1.5
Since the production of the draft accounts by 30 June 2012 they have been subject to
external audit review for which the auditors report (ISA 260) is included as a separate
item on this agenda.
2
Statement of Accounts
2.1
A copy of the financial statements has been provided to members as an attachment to
this agenda. It is an audited version and has been updated for recommendations made
by the auditors. The final external audit review process is yet to be finalised and whilst
there are not expected to be any significant changes to the accounts now presented, any
changes will be reported verbally at the meeting.
2.2.
The main focus of Members should be on the financial statements i.e:
i)
The Movement in Reserves Statement
ii)
Comprehensive Income and Expenditure Account
iii)
Balance Sheet
iv)
Cash Flow Statement
v)
Collection Fund.
2.3.
Each of the statements are supported by a number of notes to the accounts. Other key
areas to consider at the end of the financial year are the level of reserves, both
earmarked and general balances. All balances will be reviewed as part of the update to
the revised Medium Term Financial Plan and forthcoming budget process.
3
Conclusion
3.1
The Final version of the Statement of Accounts for 2011/12 is presented to the Audit
Committee for review prior to recommendation to Full Council for approval. The
statements have been produced based on the information contained in the outturn report
for 2011/12 as reported in June 2012 and in accordance with statutory guidance.
15
www.pwc.co.uk
Government and Public Sector
North Norfolk District
Council
Report to those charged with
governance (ISA 260 (UK&I))
September 2012
2011/12 Audit
16
www.pwc.co.uk
The Members of the Audit Committee
North Norfolk District Council
Council Offices
Holt Road
Cromer
Norfolk. NR27 9EN
September 2012
Ladies and Gentlemen
We are pleased to enclose our report to the Audit Committee in respect of our audit of
North Norfolk District Council (“the Authority” ) for the year ended 31 March 2012,
the primary purpose of which is to communicate the significant findings arising from
our audit.
The scope and proposed focus of our audit work was summarised in our audit plan,
which we presented to the Audit Committee in March 2012. We have subsequently
reviewed our audit plan and concluded that our original risk assessment remains
appropriate. The procedures we have performed in response to our assessment of
significant audit risks are detailed on page 5.
We have completed the majority of our audit work and expect to be able to issue an
unqualified audit opinion on the financial statements on, or before, 30 September
2012. At the time of writing, the key outstanding matters, where our work has
commenced but is not yet finalised are provided on page 8.
We will provide an oral update on these matters at the meeting on 18 September
2012.
We look forward to discussing our report with you on 18 September. Attending the
meeting from PwC will be Julian Rickett and Charlotte Kennedy.
Yours faithfully
Julian Rickett
PricewaterhouseCoopers LLP
17
www.pwc.co.uk
Contents
Executive summary
4
Audit Approach
5
Significant audit and accounting matters
8
Fees update
12
Fees update for 2011/12
12
Appendices
13
Appendix 1: Letter of representation
14
Appendix 2: Control weaknesses and deficiencies
20
Code of Audit Practice and Statement of Responsibilities of Auditors and of Audited Bodies
In April 2010 the Audit Commission issued a revised version of the ‘Statement of responsibilities of
auditors and of audited bodies’. It is available from the Chief Executive of each audited body. The
purpose of the statement is to assist auditors and audited bodies by explaining where the responsibilities
of auditors begin and end and what is to be expected of the audited body in certain areas. Our reports
and letters are prepared in the context of this Statement. Reports and letters prepared by appointed
auditors and addressed to members or officers are prepared for the sole use of the audited body and no
responsibility is taken by auditors to any member or officer in their individual capacity or to any third
party.
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North Norfolk District Council
Executive summary
The purpose of this report
Under the Auditing Practices Board’s International Auditing Standard (UK and Ireland) 260 (ISA (UK&I) 260)
- “Communication of audit matters with those charged with governance” we are required to report to those
charged with governance on the significant findings from our audit before giving our audit opinion on the
accounts of North Norfolk District Council (‘the Authority’). As agreed with you, we consider that “those
charged with governance”, at the Authority, are the Audit Committee.
This letter contains the significant matters we wish to report to you arising from all aspects of our audit
programme of work in accordance with ISA (UK&I) 260.
Our audit work during the year was performed in accordance with the plan that we presented to you on 6 March
2012. An audit of financial statements is not designed to identify all matters that may be relevant to those
charged with governance. Accordingly, the audit does not ordinarily identify all such matters.
We have set out below what we consider to be the most significant matters that we have discussed with you in
the course of our work.
Significant Matters
There are no significant matters that we have discussed with management during the course of our work
affecting our ability to issue our “true and fair” opinion and therefore wish to raise with you. However, as is the
case with any audit, we have identified a number of other less significant matters which we have included in this
report for your information. These include:




The difficulties encountered in the extraction of the required data set through Computer Assisted
Auditing Techniques (CAATs) to facilitate our testing of the Authority’s manual journal transactions;
The appropriateness of inclusion of transactions as Contingent Liabilities;
The calculation of the Minimum Revenue Provision and the appropriate inclusion of finance leases
within this calculation and how it is reported to members; and
The inclusion of an accrual for over claimed benefit subsidy.
Please note that this report will be sent to the Audit Commission in accordance with the requirements of their
standing guidance.
We would also like to take this opportunity to express our thanks for the co-operation and assistance we have
received from the management and staff of the Authority throughout our work.
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North Norfolk District Council
Audit Approach
ISA (UK&I) 260 requires us to communicate to you relevant matters relating to the audit of the financial
statements sufficiently promptly to enable you to take appropriate action.
In the table below we have detailed the risks and planned responses shown in our March audit plan, as updated
for the work we have subsequently performed.
Audit plan risk
Significant Risks
Fraud and management
override of controls
ISA (UK&I) 240 requires that we
plan our audit work to consider
the risk of fraud, which is
presumed to be a significant risk
in any audit.
This includes consideration of the
risk that management may
override controls in order to
manipulate the financial
statements.
Recognition of income and
expenditure
Under ISA (UK&I) 240 there is a
(rebuttable) presumption that
there are risks of fraud in revenue
recognition.
We extend this presumption to
the recognition of expenditure in
local government.
Proposed Audit Approach
Outcome
We will perform procedures to:
 test the appropriateness
of journal entries;
 review accounting
estimates for biases and
evaluate whether
circumstances
producing any bias,
represent a risk of
material misstatement
due to fraud;
 evaluate the business
rationale underlying
significant transactions;
 perform ‘unpredictable’
procedures; and
 perform other audit
procedures if necessary.
A key process in this area is the
authorisation and supporting evidence
for journals.
We found no exceptions in relation to
our testing of journals.
We will obtain an understanding
of revenue and expenditure
controls.
We will evaluate and test the
accounting policy for income
and expenditure recognition to
ensure that this is consistent
with the requirements of the
Code of Practice on Local
20
We have reviewed the work of internal
audit around key financial systems
controls.
We have been able to place the planned
level of reliance on the work of internal
audit.
We have completed unpredictable
procedures as referred to in our audit
plan without additional indicators of
fraud or management override being
detected. These consisted of:
 review of transactions under
the waste management
contract.
We have reviewed management
estimates as part of our audit
procedures. Our audit testing did not
identify any areas of management bias
in respect of estimation techniques and
we are not minded to challenge the
appropriateness of estimates used in
the accounts.
We have considered the accounting
policies adopted by the Authority and
subjected income and expenditure to
the appropriate level of testing to
identify any material misstatement.
This included testing of selected income
and expenditure transactions, review of
journals and also testing on some
smaller value income and expenditure
items.
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North Norfolk District Council
Authority Accounting.
Other Risks
Heritage assets
For the first time in the 2011/12
Statement of Accounts, the Code
of Practice on Local Authority
Accounting in the United
Kingdom requires authorities to
present information about the
heritage assets that they hold.
Where it is practicable to obtain a
valuation (at a cost
commensurate with the benefits
to users of the Statement of
Accounts), the Code also now
requires material amounts of
heritage assets to be carried in
the Balance Sheet at that
valuation.
Valuation and accounting
treatment of leases
The Council continues to be party
to several significant and complex
leases. The Council changed the
supplier of its waste management
contract from 01 April 2011. The
terms of this new arrangement
will need to be carefully
considered against the
requirements of International
Financial Reporting
Interpretations Committee
(IFRIC) 4 – Determining whether
an arrangement contains a lease
and, if applicable, International
Accounting Standard (IAS) 17 –
Leases.
Redundancy costs
As a result of continuous increase
in pressure on budgets, the
Council will need to continue to
review its current workforce. Any
termination of contracts, in
particular in relation to senior
staff could be high profile and are
likely to result in initial one-off
costs.
We will assess the approach
taken by the Council to
implement the new accounting
requirements, including the
methods used to identify and
assess heritage assets.
We will assess whether the
Council has made all
appropriate accounting
disclosures in relation to
heritage assets, including
carrying material heritage assets
in the Balance Sheet.
We will assess the approach
taken by the Council in
determining the value and
classification of leases.
We found that the Authority had
followed its accounting policies in
accounting for transactions and that
these accounting policies were
appropriate and in line with the CIPFA
Code.
We have considered and are not
minded to challenge the approach
taken by the Council in identifying
heritage assets.
Our review of the treatment of heritage
assets identified a minor disclosure
issue which has been adjusted for by
the Council.
We have considered significant lease
transactions as part of our audit
approach and found no significant
matters to report to you in this context.
We will evaluate and test a
sample of leases to determine
whether the Council’s approach
to leases has been followed and
applied correctly.
We will review any significant
redundancies, early retirement,
severance and ex-gratia
payments as part of our audit
work on the accounts including,
where appropriate the Council’s
arrangements with respect to
consideration of the legality and
value for money of such
payments.
21
We have reviewed the exit packages
disclosed in the Council’s financial
statements. At the time of writing this
work is ongoing and we will therefore
provide members with a verbal update
at the meeting on 18 September 2012
6
North Norfolk District Council
Savings Plans
The Council continues to need to
achieve significant savings to
meet its medium term financial
plan, following a reduction in
central government funding.
We will continue to monitor the
Council’s progress against its
savings plans and budgets and
the actions it is taking to identify
future savings.
We have reviewed the Authority’s
savings plans as part of our value for
money conclusion work.
We identified the following matters:
 Whilst the Council is using
reserves in the short term to
balance its budgets, it is of the
view that a prudent level of
reserves remains on the
balance sheet.
 There remain significant
challenges in maintaining the
medium term financial stability
of the Council. In particular,
the Council should:
- Ensure savings are identified
early on and action taken to
address budgetary shortfalls;
- Consider very closely the use
of reserves in funding revenue
expenditure;
- Ensure members remain
actively involved in the budget
setting process so that the
budget is aligned to the
strategic direction of the
Council.
Our work has not identified any current
indications that the Council is not
putting in place appropriate procedures
to address these points.
22
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North Norfolk District Council
Significant audit and accounting
matters
Accounts
We have completed the audit of the financial statements in line with current Auditing Standards apart from the
following:









completion of our testing of exit packages;
review of the explanatory foreword to ensure consistency with the Code and the rest of the accounts;
conclusion of our testing of NNDR balances;
completion of our testing of related parties;
completion of our testing of members allowances;
completion of our internal review and quality control procedures;
our review of the final version of the financial statements with all of the agreed changes having been
made;
approval of the financial statements by the Audit Committee; and
receipt of all relevant signed statements and the management representation letter.
We will update the Audit Committee on our progress at its meeting on 18 September 2012.
Accounting issues
Testing of Manual Journals
As part of our planned audit approach, we have engaged with our Data Assurance team to assist us in extracting
a complete list of manual journals from the Authority’s general ledger system. This process was not as effective
as it could have been as the Authority could not provide the data extracted in the format required. At the time of
writing this report, we are working with the Authority to get to a satisfactory outcome. We will provide the
committee with a verbal update at its meeting on 18 September 2012.
Contingent Liabilities
The Authority included a number of contingent liabilities within its draft financial statements. We have
considered the appropriateness of these items under the relevant accounting standards. The Authority has
agreed to make a small number of changes to the disclosure of contingent liabilities to comply with the
prevailing accounting standards.
Minimum Revenue Provision
The Authority is required to report annually to members its MRP position under the CIPFA Prudential Code.
Whilst the Authority is ‘debt free’, it does have a number of finance leases in order to deliver the waste
management contract with Kier. These leases were excluded from the report to members in February 2012. The
Authority has agreed that it will report the MRP including the leases going forward and we have confirmed that
the provision in the financial statements has been calculated in line with the relevant guidance.
Housing Subsidy liability
A liability of £103,000 was included within the Authority’s draft financial statements in relation to the potential
claw back of housing and Council Tax subsidy income received by Authority from the Department of Work and
Pensions (DWP). The Authority based this amount on 0.5% of the subsidy within the 2011/12 claim. However,
the Authority is unable to provide evidence to demonstrate that the DWP had clawed back, or intended to claw
back or retain, subsidy due as a result of exceptions noted in previous audit certifications of the Housing and
Council Tax Benefit Subsidy claim. In addition, the Council could not provide any evidence to support the
liability at 0.5% of 2011/12 subsidy due.
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North Norfolk District Council
We do not consider that the £103,000 creditor meets the definition of liability because there is no contractual
obligation. The authority has agreed to adjust its accounts for this, thus creating a reserve for this potential
liability.
Valuation of Property
The Council’s accounting policy is for assets classified as infrastructure, community assets and assets under
construction to be valued at depreciated historical cost with all other assets being valued at fair value in existing
use.
The Council arranges for periodic, professional valuations of property every five years with interim valuations
considered in the intervening years to identify any factors that may indicate whether the fair value stated in the
Balance Sheet might be materially misstated.
The Council’s properties were valued by NPS or the Council’s internal valuers.
In estimating the fair value to be included in the 2011/12 accounts, management has utilised the expertise of the
Council’s internal valuers. However, the assumptions used by these experts remain the responsibility of
management.
Our internal valuers have reviewed the work performed by the Council. We are currently not minded to
challenge the Council’s property valuations.
Misstatements and significant audit adjustments
We are required to report to you all uncorrected misstatements which we have identified during the course of
our audit, other than those of a trivial nature (which we have agreed with you are those below £50,000). There
are no such misstatements to report to you.
We have also brought to your attention the misstatement relating to the DWP liability earlier in this report
which has been corrected by management but which we consider you should be aware of in fulfilling your
governance responsibilities.
Significant accounting principles and policies
Significant accounting principles and policies are disclosed in the notes to the financial statements. We will ask
the Audit Committee to represent to us that they have considered the selection of, or changes in, significant
accounting policies and practices that have, or could have, a material effect on the entity's financial statements.
Judgements and accounting estimates
The following significant judgments and accounting estimates were used in the preparation of the financial
statements:





Property, Plant and Equipment - Depreciation and Valuation – The Council charges
depreciation based on an estimate of the Useful Economic Lives for the majority of Property, Plant and
Equipment (PPE). This involves a degree of estimation. The Council also values PPE in accordance
with its accounting policies to ensure that the carrying value is appropriate. This involves some
judgement and reliance on the Council’s internal valuers.
Bad Debt Provision – The Bad Debt Provision for sundry debtors is calculated on the basis of age
and an assessment of the potential recoverability of invoices. There is an inherent level of judgement
involved in calculating these provisions and the Council relies on the knowledge of the Departments for
information on specific transactions.
Accruals - The Council raises accruals for expenditure where an invoice has not been raised or
received at the year end, but there is a known liability to be met which relates to the current year. This
involves a degree of estimation.
Provisions: Because provisions are liabilities of an uncertain timing or amount, there is an inherent
level of judgement to be applied.
Pensions: The Council relies on the work of an actuary in calculating these balances.
24
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North Norfolk District Council

Provision for accumulated absences - The Council calculates its accrual for untaken holiday and
employment benefits at the year-end based on returns completed by managers.
We will ask you to represent to us that you are satisfied with the assumptions made in arriving at these
judgements and estimates in the accounts.
Disagreements with management
There have been no disagreements with management during the course of the audit which individually or in
aggregate could be significant to your financial statements or our audit report.
Management representations
The final draft of the representation letter that we are requesting management to sign and those charged with
governance to approve is attached in Appendix 1. Whilst much of this letter is standard for local government
entities, we have specifically asked the Audit Committee to confirm the values attributed to the Authority’s
property, plant and equipment in the financial statements are not materially misstated.
Related parties
There are no significant related party matters to be communicated.
Audit independence
We confirm that, in our professional judgment, as at the date of this document, we are independent of the
Authority, within the meaning of UK regulatory and professional requirements and that the objectivity of the
audit engagement leader and the audit staff is not impaired.
Accounting systems and systems of internal control
You have to develop and implement systems of internal financial control and put in place proper arrangements
to monitor their adequacy and effectiveness. As auditors, we review these arrangements for the audit of the
financial statements and our review of the Annual Governance Statement.
We have no significant control issues to bring to your attention. We have included a report of minor internal
control issues in Appendix 2 to this report.
Annual Governance Statement
Local Authorities are required to produce an Annual Governance Statement (AGS), which is consistent with
guidance issued by CIPFA / SOLACE: ‘Delivering Good Governance in Local Government’.
We reviewed the draft AGS to consider whether it complied with the CIPFA / SOLACE ‘Delivering Good
Governance in Local Government’ framework and whether it is misleading or inconsistent with other
information known to us from our audit work. We found no areas of concern to report in this context.
Economy, efficiency and effectiveness
Our value for money code responsibility requires us to carry out sufficient and relevant work in order to
conclude on whether you have put in place proper arrangements to secure economy, efficiency and effectiveness
in the use of resources.
In accordance with guidance issued by the Audit Commission, in 2011/12 our conclusion is based on two
criteria:


The organisation has proper arrangements for securing financial resilience; and
The organisation has proper arrangements for challenging how you secure economy, efficiency and
effectiveness.
As was the case last year, but unlike in previous years, we have not had to reach a scored judgment on these
criteria and the Audit Commission has not developed ‘key lines of enquiry’ for each criteria. Instead, we have
25
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North Norfolk District Council
determined a local programme of audit work based on our audit risk assessment, informed by these criteria and
our statutory responsibilities.
We anticipate issuing an unqualified value for money conclusion.
Risk of Fraud
We discussed with the Audit Committee their understanding of the risk of fraud and corruption and any
instances thereof when presenting our Audit Plan.
In presenting this report to the Audit Committee we seek members’ confirmation that there have been no
changes to their view of fraud risk and that no additional matters have arisen that should be brought to our
attention. A specific confirmation from management in relation to fraud is included in the letter of
representation.
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North Norfolk District Council
Fees update
Fees update for 2011/12
We reported our fee proposals as part of the Audit Plan for 2011/12.
2011/12 proposed
Financial Statements
Whole of Government Accounts
Use of Resources
Grant Certification
Total
£118,750
£48,650
£167,400
As noted above, our audit is still ongoing at the time of writing this report. Until we have finalised our work, we
are not in a position to provide members with an update on actual fees for 2011/12. We will include this analysis
as part of our Annual Audit Letter to be issued later in the year.
Fees proposal for 2012/13
We are able to report to you the 2012/13 initial fee proposals as set out by the Audit Commission on its website
(http://www.audit-commission.gov.ukaudit-regime/audit fees/201213fees/pages/201213
feesandworkprogramme.aspx ).
The scale fee for North Norfolk District Council is as follows:
2012/13 Scale Fee
Financial Statements
Whole of Government Accounts
Use of Resources
Grant Certification
Total
71,250
36,000
107,250
This represents an overall reduction of 36%.
At this stage, we are not aware of any factors that would cause our fees to vary from the scale fee shown.
The Audit Committee may also wish to be aware that we are no longer required to rebate a proportion of our
audit fee to the Audit Commission for 2012/13 as we have done in previous years. This accounts for the
apparent disparity in fees.
27
12
[Date]
Appendices
13
28
North Norfolk District Council
Appendix 1: Letter of representation
18 September 2012
To: PricewaterhouseCoopers LLP
The Atrium
St Georges Street
Norwich
NR3 1AG
Your Ref: JCR/CK
Dear Sirs
This representation letter is provided in connection with your audit of the Statement of Accounts of North
Norfolk District Council (the “Authority”) for the year ended 31 March 2012 for the purpose of expressing an
opinion as to whether the Statement of Accounts gives a true and fair view, and has been properly prepared in
accordance with the CIPFA/LASAAC Code of Practice on Local Authority Accounting in the United Kingdom
2011/12 and the Service Reporting Code of Practice 2011/12.
My responsibilities as Chief Financial Officer for preparing the financial statements are set out in the Statement
of Responsibilities for the Statement of Accounts. I am also responsible for the administration of the financial
affairs of the Authority I also acknowledge that I am responsible for making accurate representations to you.
I confirm that the following representations are made on the basis of enquiries of other chief officers and
members of North Norfolk District Council with relevant knowledge and experience and, where appropriate, of
inspection of supporting documentation sufficient to satisfy myself that I can properly make each of the
following representations to you.
I confirm, to the best of my knowledge and belief, and having made the appropriate enquiries, the following
representations:
Financial Statements
I have fulfilled my responsibilities, for the preparation of the Statement of Accounts in accordance with the
CIPFA/LASAAC Code of Practice on Local Authority Accounting in the United Kingdom; in particular the
financial statements give a true and fair view in accordance therewith.
Where instances of non compliance with the CIPFA/LASAAC Code of Practice on Local Authority Accounting in
the United Kingdom have been identified within the Authority’s accounting policies, I confirm that the policies
adopted are the most appropriate to give a true and fair view for the authority's particular circumstances, as
required by the aforementioned Code.
All transactions have been recorded in the accounting records and are reflected in the financial statements.
Significant assumptions used by the Authority in making accounting estimates, including those surrounding
measurement at fair value, are reasonable.
All events subsequent to the date of the financial statements for which the CIPFA/LASAAC Code of Practice on
Local Authority Accounting in the United Kingdom requires adjustment or disclosure have been adjusted or
disclosed.
29
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North Norfolk District Council
Information Provided
I have taken all the steps that I ought to have taken in order to make myself aware of any relevant audit
information and to establish that you (the Authority's auditors) are aware of that information.
I have provided you with:

access to all information of which I am aware that is relevant to the preparation of the financial
statements such as records, documentation and other matters, including minutes of the Council,
relevant committees including the pension fund management board and other relevant
management meetings;

additional information that you have requested from us for the purpose of the audit; and

unrestricted access to persons within the Authority from whom you determined it necessary to
obtain audit evidence.
So far as I am aware, there is no relevant audit information of which you are unaware.
Fraud and non-compliance with laws and regulations
I acknowledge responsibility for the design, implementation and maintenance of internal control to prevent and
detect fraud.
I have disclosed to you the results of our assessment of the risk that the financial statements may be materially
misstated as a result of fraud.
I have disclosed to you all information in relation to fraud or suspected fraud that we are aware of and that
affects the Authority and involves:

management;

employees who have significant roles in internal control; or

others where the fraud could have a material effect on the financial statements.
I have disclosed to you all information in relation to allegations of fraud, or suspected fraud, affecting the
Authority’s financial statements communicated by employees, former employees, analysts, regulators or others.
I have disclosed to you all known instances of non-compliance or suspected non-compliance with laws and
regulations whose effects should be considered when preparing financial statements.
I am not aware of any instances of actual or potential breaches of or non-compliance with laws and regulations
which provide a legal framework within which the Authority conducts its business and which are central to the
Authority’s ability to conduct its business or that could have a material effect on the financial statements.
I am not aware of any irregularities, or allegations of irregularities including fraud, involving members,
management or employees who have a significant role in the accounting and internal control systems, or that
could have a material effect on the financial statements.
Related party transactions
I confirm that we have disclosed to you the identity of the Authority’s related parties and all the related party
relationships and transactions of which we are aware.
30
15
North Norfolk District Council
Related party relationships and transactions have been appropriately accounted for and disclosed in accordance
with the requirements of Section 3.9 of the CIPFA/LASAAC Code of Practice on Local Authority Accounting in
the United Kingdom.
We confirm that we have identified to you all senior officers, as defined by the Accounts and Audit Regulations
2011, and included their remuneration in the disclosures of senior officer remuneration.
Employee Benefits
I confirm that the Authority has made you aware of all employee benefit schemes in which employees of the
Authority participate.
Contractual arrangements/agreements
All contractual arrangements (including side-letters to agreements) entered into by the Authority have been
properly reflected in the accounting records or, where material (or potentially material) to the financial
statements, have been disclosed to you.
Litigation and claims
I have disclosed to you all known actual or possible litigation and claims whose effects should be considered
when preparing the financial statements and such matters have been appropriately accounted for and disclosed
in accordance with the Code of Practice on Local Authority Accounting in the United Kingdom.
Taxation
I have complied with UK taxation requirements and have brought to account all liabilities for taxation due to
the relevant tax authorities whether in respect of any indirect taxes. I am not aware of any non-compliance that
would give rise to additional liabilities by way of penalty or interest and I have made full disclosure regarding
any Revenue Authority queries or investigations that we are aware of or that are ongoing.
In particular:

In connection with any tax accounting requirements, I am satisfied that our systems are capable of
identifying all material tax liabilities and transactions subject to tax and have maintained all documents
and records required to be kept by the relevant tax authorities in accordance with UK law or in
accordance with any agreement reached with such authorities.

I have submitted all returns and made all payments that were required to be made (within the relevant
time limits) to the relevant tax authorities including any return requiring us to disclose any tax
planning transactions that have been undertaken for the Authority’s benefit or any other party’s benefit.

I am not aware of any taxation, penalties or interest that are yet to be assessed relating to either the
Authority or any associated company for whose taxation liabilities the Authority may be responsible.
Pension fund assets and liabilities
All known assets and liabilities including contingent liabilities, as at the 31 March 2012, have been taken into
account or referred to in the financial statements.
Details of all financial instruments, including derivatives, entered into during the year have been made available
to you. Any such instruments open at the 31 March 2012 have been properly valued and that valuation
incorporated into the financial statements.
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16
North Norfolk District Council
Bank accounts
I confirm that we have disclosed all bank accounts to you including those that are maintained in respect of the
pension fund.
Going Concern
An assessment has been made of the financial health of the Authority for a period of at least one year from the
approval of the financial statements.
Accounting Estimates
Regarding the accrual for uncompensated absences, an accounting estimate that was recognised in the financial
statements:
 The Authority has used appropriate measurement processes, including related assumptions and odels,
in determining the accounting estimate in the context of the CIPFA/LASAAC Code of Practice on Local
Authority Accounting in the United Kingdom.
Assets and liabilities
All known assets and liabilities including contingent liabilities, as at the 31 March 2012, have been taken into
account or referred to in the financial statements.
Details of all financial instruments, including derivatives, entered into during the year have been made available
to you. Any such instruments open at the 31 March 2012 have been properly valued and that valuation
incorporated into the financial statements. When appropriate, open positions in off-balance sheet financial
instruments have also been properly disclosed in the financial statements.
The value at which assets and liabilities are recorded in the net assets statement is, in the opinion of the
Authority, the market value. We are responsible for the reasonableness of any significant assumptions
underlying the valuation, including consideration of whether they appropriately reflect our intent and ability to
carry out specific courses of action on behalf of the pension fund. Any significant changes in those values since
the date of the financial statements have been disclosed to you.
The Authority has no plans or intentions that may materially alter the carrying value and where relevant the fair
value measurements or classification of assets and liabilities reflected in the financial statements.
In my opinion, on realisation in the ordinary course of the business the current assets in the balance sheet are
expected to produce no less than the net book amounts at which they are stated.
The Authority has no plans or intentions that will result in any excess or obsolete inventory, and no inventory is
stated at an amount in excess of net realisable value.
The Authority has satisfactory title to all assets and there are no liens or encumbrances on the Authority's
assets, except for those that are disclosed in the financial statements.
I confirm that the current accounting for government grants whilst not in accordance with the CIPFA/LASAAC
Code of Practice on Local Authority Accounting in the United Kingdom is the most appropriate treatment to
give a true and fair view for the authority's particular circumstances, as required by the aforementioned Code.
I confirm that we have carried out impairment reviews appropriately, including an assessment of when such
reviews are required, where they are not mandatory. I confirm that we have used the appropriate assumptions
with those reviews.
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17
North Norfolk District Council
Using the work of experts
I agree with the findings of our valuation experts in evaluating the value of our non-current assets and have
adequately considered the competence and capabilities of the experts in determining the amounts and
disclosures used in the preparation of the financial statements and underlying accounting records. The
Authority did not give or cause any instructions to be given to experts with respect to the values or amounts
derived in an attempt to bias their work, and I am not otherwise aware of any matters that have had an impact
on the objectivity of the experts.
Retirement Benefits
All significant retirement benefits that Authority is committed to providing, including any arrangements that
are statutory, contractual or implicit in Authority’s actions, wherever they arise, whether funded or unfunded,
approved or unapproved, have been identified and accounted for in accordance with the CIPFA/LASAAC Code
of Practice on Local Authority Accounting in the United Kingdom and disclosed.
All settlements and curtailments in respect of retirement benefit schemes have been identified and properly
accounted for.
The following actuarial assumptions underlying the valuation of retirement benefit scheme liabilities are
consistent with my knowledge of the business and in my view would lead to the best estimate of the future cash
flows that will arise under the scheme liabilities:
Rate of Inflation
Rate of Increase in Salaries
Rate of Increase in Pensions
Discount Rate
Expected Return on Assets
Longevity at 65 for current pensioners
Men
Women
Longevity at 65 for future pensioners
Men
Women
3.3%
4.8% (1% until 2015)
2.5%
4.8%
5.5%
21.2 years
23.4 years
23.6 years
25.8 years
We have considered the assumptions made by our actuary in relation to the take-up of the entitlement to a
lump sum under Regulation 3 of the Local Government Pension Scheme (Amendment) Regulations 2006
(Statutory Instrument 2006/966), and, in our view, the assumption of 50% take-up reflected in the accounts is
the most appropriate assumption for the preparation of our financial statements and leads to the best estimate
of scheme liabilities.
Financial Instruments
All embedded derivatives and embedded leases have been identified and appropriately accounted for under the
CIPFA/LASAAC Code of Practice on Local Authority Accounting in the United Kingdom.
Where we have assigned fair values to financial instruments, we confirm that the valuation techniques, the
inputs to those techniques and assumptions that have been made are appropriate, and reflect market conditions
at the balance sheet date, and are in line with the business environment in which we operate.
33
18
North Norfolk District Council
As minuted by the Audit Committee at its meeting on 18 September 2012
Chief Financial Officer
For and on behalf of North Norfolk District Council
Date:
34
19
North Norfolk District Council
Appendix 2: Control weaknesses and
deficiencies
Ref
1
Description
Password Parameters
The password parameters for
eFinancials do not meet the
requirements of GSX Connect (also
known as CoCo).
The password parameters for Civica
do not meet the requirements of the
Authority’s own ICT security policy.
2
ITGC – Back Ups
No recoverability testing has been
undertaken or necessary in 2011/12.
3
ITGC – Back Ups
We were unable to obtain reports to
verify that back ups are run for the
Civca system and the Network on a
regular scheduled basis.
4
Collection Fund Reconciliation
The council reconciles its council
tax cash collections and refunds to
the council tax system on a monthly
basis however this reconciliation is
not evidenced as having taken
place.
Recommendation
Management Response
Password parameters,
should be set as follows:
 20 passwords
should be
remembered;
 Password expiry
time period should
be a maximum of
90 days;
 Minimum
password length
should be 7
characters; and
 Passwords should
have at least one
alpha numeric
digit.
Efin password
parameters:
10 remembered;
Max 30 days;
Minimum length
6;
At least one alpha
numeric.
Recoverability testing
should be run on a regular
basis to test the integrity of
back ups.
A script to transfer information
from the live system to the test
system, is run regularly which
provides a mitigating control.
Reports should be retained
to evidence that back ups
have taken place.
Records and reports are retained
to verify that backups have been
run for the old Civica system (now
read only) and the Network. These
can be inspected if required.
A formal reconciliation
process should be put into
operation.
Prior to the change of the cash
receipting system monthly three
way reconciliations (Cash
Receipting System – General
Ledger – Revenues System) were
being completed. Some initial
problems with reporting from the
new (cash receipting) system
meant that only two way
reconciliations were being carried
out. This has been rectified and
monthly reconciliations are now
being carried out which are
reviewed by the Revenues
Manager.
An annual reconciliation will be
completed for the position at 31
March.
35
Civica
parameters:
20
remembered;
Max 30 days;
Minimum
length 7;
At least one
alpha
numeric.
Efin upgrade is due to take place
November 2012, password
parameters will be reviewed as
part of the upgrade.
20
North Norfolk District Council
5
Officers’ Emoluments
In previous years, details of the
members of staff paid over £55k
from the GL were compared to
Payroll information to ensure all
details were accurately taken from
the GL. This was not completed this
year which resulted in
discrepancies. Amendments have
subsequently been made to the
accounts to ensure appropriate
disclosure.
Officers’ emoluments data
per the GL should be
reconciled to the payroll
system.
36
Agreed
21
In the event that, pursuant to a request which North Norfolk District Council has received under the Freedom
of Information Act 2000, it is required to disclose any information contained in this report, it will notify PwC
promptly and consult with PwC prior to disclosing such report. North Norfolk District Council agrees to pay
due regard to any representations which PwC may make in connection with such disclosure and North
Norfolk District Council shall apply any relevant exemptions which may exist under the Act to such report. If,
following consultation with PwC, North Norfolk District Council discloses this report or any part thereof, it
shall ensure that any disclaimer which PwC has included or may subsequently wish to include in the
information is reproduced in full in any copies disclosed.
©2012 PricewaterhouseCoopers LLP. All rights reserved. PricewaterhouseCoopers refers to
PricewaterhouseCoopers LLP (a limited liability partnership in the United Kingdom) or, as the context
requires, other member firms of PricewaterhouseCoopers International Limited, each of which is a separate
and independent legal entity.
37
North Norfolk District Council
Protocol for liaison between internal and external auditors 2012/13
201
September 2012
38
Sheila Oxtoby
North Norfolk District Council
Council Offices
Holt Road
Cromer
Norfolk NR27 9EN
September 2012
Dear Sheila,
Protocol for liaison between internal and external auditors 2012/13
Following changes to key personnel within both the internal and external audit teams, we have taken this opportunity to refresh the protocol between internal and
external audit. If you have any queries about this, please do not hesitate to contact either one of us.
Yours sincerely
Julian Rickett
Sandra King
39
Contents
Introduction
1
Background
2
Planning and Liaison
3
Reliance on the work performed by Internal Audit
5
Appendix A: Sample Sizes
8
Appendix B: Summary of Key Internal Financial Controls
10
In March 2010 the Audit Commission issued a revised version of the ‘Statement of responsibilities of auditors and of audited bodies’. It is available from the Chief
Executive of each audited body and on the Audit Commission’s website.
The purpose of the statement is to assist auditors and audited bodies by explaining where the responsibilities of auditors begin and end and what is to be expected
of the audited body in certain areas.
This report is prepared in the context of this Statement.
Reports and letters prepared by appointed auditors (PwC in this instance) and addressed to members or officers are prepared for the sole use of the audited body
and no responsibility is taken by auditors to any Member or officer in their individual capacity or to any third party.
40
Introduction
1
This document sets out the proposed working relationship between the PricewaterhouseCoopers LLP (PwC) audit team and the internal auditors of North
Norfolk District Council, (referred to as ‘Internal Audit’).
2
The purpose of this document is to set out the general approach and principles to be put in place to facilitate the delivery of a managed audit. This will aid
joined-up working, reducing duplication of audit work.
3
This document sets out:
4

Confirmation of the liaison arrangements between Internal and External Audit;

The requirements to be followed in order that PwC can place the desired level of assurance on the work of internal audit;

PwC requirements on sample sizes; and

A detailed summary of controls and suggested testing that PwC consider to be key in proving the internal financial control systems.
These arrangements are subject to regular review by both parties and amendments can be made subject to mutual agreement.
1
41
Background
5
North Norfolk District Council (“the Council”) has a responsibility to put in place proper arrangements for the governance and stewardship of its resources.
Internal Audit is an important part of these arrangements. In the course of discharging its responsibilities, Internal Audit is required to deliver a service
which meets the professional standards laid down in the CIPFA Code of Practice for Internal Audit in Local Government in the United Kingdom 2006 and
CIPFA’s published Statement on the Role of the Head of Internal Audit in Public Service Organisations 2010.
6
Under the Audit Commission Act 1998 and the Code of Audit Practice the external auditor appointed by the Audit Commission is responsible for reviewing
and reporting on the Council’s:

Financial Statements and Annual Governance Statement;

Arrangements for securing economy, efficiency and effectiveness in its Use of Resources: and,

Grant certification (if required).
7
Internal Audit evaluates the effectiveness of the control environment in achieving the organisation’s objectives. In part fulfilment of these responsibilities,
Internal Audit carry out reviews of systems and key controls, including evaluation and testing of those controls.
8
The external auditor does not have a role in directing the work of Internal Audit, nor does it have a direct role in the quality assurance process.
9
Although internal and external auditors carry out their work with different objectives in mind, many of the processes are similar in respect of the review of
the controls in place over the Council’s financial systems. Therefore, it is appropriate that they should work together closely. Every effort is made to ensure
effective co-operation between the two bodies, in order to minimise duplication of effort and maximise the benefits and value achieved from the Council’s
total audit resource. An open and constructive relationship is thus cultivated between the two bodies, audit plans are shared and wherever possible, reliance
is placed upon each other’s work.
10 The Audit Commission emphasises this need for co-operation in a number of its publications:

The Code of Audit Practice 2005 states that external auditors should establish effective co-ordination arrangements between internal and external
audit and seek to place maximum reliance on the work of Internal Audit wherever possible;

‘It Takes Two’ (published in 1996) is a good practice guide to assessing and improving co-operation between internal and external auditors; and

The Managed Audit Good Practice Guide 1995 promotes a more efficient audit by encouraging reliance on the control environment, which includes
Internal Audit.
2
42
Planning and Liaison
11 To facilitate effective planning and liaison between PwC and Internal Audit the following communications will be made:

Quarterly liaison meetings;

Communication of the respective Audit Plans;

Informing the other party of significant changes in the audit approach compared to the Audit Plan, including delays to the scheduled/expected work
plan;

Forwarding of all finalised external audit reports arising as a result of work performed and internal audit reports relating to the Council’s
fundamental financial systems (see appendix B) and any other reports considered to be relevant once finalised;

Communication of the annual reports/letters;

Communication of fraud investigations and alerts initiated on a timely basis; and

Significant concerns regarding the internal controls or financial performance of the Council.
12 Internal Audit will also provide PwC with the following upon request:

Terms of Reference;

The risk analysis on which they have based their programme of work;

Statement of assurance/opinion on the Council’s systems of internal control, as reflected in the Council’s Annual Governance Statement; and

Audit files.
13 All communications will be made on a timely basis.
3
43
14 The key points of contact will be as follows:
Name
Position
Email Address
North Norfolk District Council
Sheila Oxtoby
Chief Executive
sheila.oxtoby@north-norfolk.gov.uk
Karen Sly
Head of Finance
karen.sly@north-norfolk.gov.uk
Sandra King
Head of Internal Audit
scking@s-norfolk.gov.uk
Emma Hodds
Deputy Audit Manager
ehodds@s-norfolk.gov.uk
Internal Audit
PricewaterhouseCoopers LLP
Julian Rickett
Engagement Leader
julian.c.rickett@uk.pwc.com
Charlotte Kennedy
Engagement Manager
charlotte.kennedy@uk.pwc.com
Phil Beecher
Engagement Team Leader
philip.e.beecher@uk.pwc.com
4
44
Reliance on the work performed by Internal Audit
15 In accordance with Clarity International Standard on Auditing (ISA) 610, in order to place reliance on the work performed by Internal Audit, it will be
necessary for PwC to review the working papers and reports of Internal Audit and re-perform testing on a sample basis. To facilitate this, PwC will need to
satisfy itself that:

The scope of the work is appropriate;

Audit programmes are adequate;

Working papers adequately document work performed;

Conclusions are appropriate in the circumstances;

Reports are consistent with the results of work performed;

Any exceptions or unusual matters are properly resolved; and

Supervision and review within Internal Audit appears to have been appropriately carried out (e.g. review by senior audit personnel of work
performed).
16 PwC will also need to ensure that the conclusions made by Internal Audit have been reached using testing sample sizes that are equal to, or in excess of, the
sample sizes PwC would have needed to apply to reach the same conclusions. PwC provide further guidance as to the sample sizes required and this is
included in Appendix A.
17 The degree to which PwC can place reliance on the work of Internal Audit is also affected by the timing and/or completion of the audits. In order that PwC
can place reliance on the work of Internal Audit, the timetables detailed below will be adhered to.
18 Under the Audit Commission’s Code of Audit Practice (“the Code”) the key aspect of PwC’s work is relating to the accounts, including a review of the
Statement of Internal Control.
Accounts
19 As detailed in PwC’s Audit Plan, the accounts audit is carried out in accordance with the Accounts Code objective. It requires PwC to comply with the Clarity
International Standards on Auditing (ISAs) (UK & Ireland) issued by the Auditing Practices Board (APB). PwC plan and perform their audit so as to be able
to provide reasonable assurance that the financial statements are free from material misstatement and give a true and fair view. PwC use professional
judgement to assess what is material. This includes consideration of the amount and nature of transactions.
20 PwC’s audit approach is based on a thorough understanding of the Council’s business and is risk-driven. It first identifies and then concentrates resources on
5
45
areas of higher risk and issues of concern to the Council. This involves breaking down the accounts into components. PwC assess the risk characteristics of
each component to determine the audit work required.
21 PwC adopts a top-down, controls-based approach to the audit, where a thorough drill down of the management structure and review key business processes
is carried out. From this, PwC focus their work on verifying, evaluating and validating, where possible, the controls management use to ascertain how much
assurance can be drawn from them. The work on the Council’s key controls is supplemented with detailed analytical procedures and additional substantive
tests as necessary.
22 It is the review of key business systems and controls on which PwC will seek to place reliance on the work of Internal Audit wherever possible. To enable this,
Internal Audit will complete this work prior to the commencement of PwC’s initial fieldwork. Estimates are that this will be in Spring 2013. Should the timing
need to be brought forward or changed, this would be discussed and agreed as part of the liaison meetings.
23 The most significant matters on which PwC plan to place reliance on the work of Internal Audit are:

The understanding, evaluating and validating of the controls over the following key financial systems, including:

Purchasing and payables/creditors;

Income receivable/debtors;

Payroll and pensions;

Fixed assets;

Cash/Treasury Management;

Housing and Council Tax Benefits;

Council Tax;

National Non-Domestic Rates;

General ledger maintenance;

Budgetary controls - including budget setting and monitoring; and

Car parks income.

Review of the assurance given by Internal Audit in relation to the Annual Governance Statement; and

Assessment of fraud risk (as required under ISA240). This will primarily relate to the review of any assessment undertaken by internal audit to
inform their programme of work and review/discussion of the results of any internal audit reviews and/or investigations in so far as they relate to the
risk of fraud within the Council.
24 Appendix B details the key controls Internal Audit will test as part of the work on the Council’s key financial systems. If these were not tested for any reason
then PwC would need to perform additional work to gain the audit assurance required for PwC’s opinion on the Council’s financial statements.
6
46
Grant certification
25 At present there are no formal arrangements for joint working in respect of grant certification. However a dialogue will be maintained in order to share
matters of concern so that both parties can consider them when planning work in this area.
Fraud
26 Internal audit will notify PwC promptly of all frauds exceeding £10,000. PwC will, in turn, notify the Audit Commission of such frauds including any cases of
corruption or any fraud cases of particular interest of complexity, via an AF70 for submission to the Audit Commission Counter-Fraud Unit. If appropriate,
PwC will offer support and assistance to Internal Audit in investigating significant frauds.
27 In the event that PwC suspect a fraud, PwC will pass the case over to the control of Internal Audit who will then be expected to oversee the investigation of
the case and keep PwC informed of progress. PwC reserve the right to retain control over a fraud investigation, although this is only likely in exceptional
circumstances.
7
47
Appendix A: Sample Sizes
PwC Sample sizes
In relation to manually performed controls, the following sample size ranges should be used:
Frequency of Control
Annual
Quarterly
Monthly
Weekly
Daily
Multiple times a day
Number of items to test for
low assurance
Number of items to test for
medium assurance
1
2
3-4
10
30
45
2
5
20
25
Number of items to test for high
assurance
5
15
40
60
Frequency of Control
The reference to “items” refers to the number of occurrences for the control. For example, in relation to testing bank reconciliations where the control is
undertaken monthly, PwC would expected either 2, 3, 4 or 5 reconciliations to be tested dependent on the level of assurance required (see below) from
undertaking the test.
Where it is not possible to ascertain the frequency of the control as this is done on an ad-hoc basis, PwC would expect a yearly estimate, based on past
performance, to be calculated to determine the frequency of the control. For example, at the time of the audit review in October, 37 individuals joined the Council
in the period 1 April – 30 September. An expectation of the yearly number of starters would therefore be 37 x 2 = 74. This equates to between a weekly, (control
operates approximately 52 times a year), and a daily, (control operates approximately 260 times a year), control. Therefore, in testing the controls surrounding
starters on the payroll system PwC would expect the frequency of the control to be weekly (nearest approximation to the frequency that the control has/will have
operated during the year).
8
48
Level of Assurance
The level of assurance required from the audit testing and therefore the choice of the number of items to test in relation to a specific control will be based on:

The significance of the risk addressed by the control, (the greater the risk, the greater assurance is required);

The importance of the control to addressing the risk, (the greater the importance, the greater the assurance required);

The degree to which the control is cumulative, (cumulative controls will lower the assurance required);

The relevance and reliability of the audit evidence to be obtained in supporting that the control prevents, or detects and corrects, material
misstatements at the control assertion level. (The assertions are: completeness, accuracy, validity and restricted access). For example third party
evidence used in testing the control will lower the assurance required;

The extent to which audit evidence is obtained from tests of other controls related to the assertion. Therefore, if other controls tested verify the
accuracy of items, it may be considered that a items for a lower level of assurance would be appropriate for testing if the control addresses this same
audit assertion; and

The amount of assurance required from the testing of the control (e.g. for a new control a high level of assurance would be considered appropriate).
Documentation of sample sizes
In all cases, the justification for the sample sizes chosen for testing should be documented.
Choosing a sample
Sample sizes should be chosen from across the whole financial year, up to the date of testing, to ensure that appropriate consideration is given to whether the
control is in place and working effectively over this period.
Identification of Errors
If errors or uncertainties are identified within the controls testing undertaken an extended sample should be chosen for testing to focus further on the specific
area of risk identified.
.
9
49
Appendix B: Summary of Key Internal Financial Controls
The following tables set out the key controls that PwC seek to understand and evaluate on an annual basis to support the external audit work under the Code of
Audit Practice. The tables do not detail a complete list of all controls within the financial system and therefore it may be appropriate to supplement these with
further controls to meet Internal Audit objectives.
The tables cover the following areas:

Purchasing and payables/creditors;

Income receivable/debtors;

Payroll and pensions;

Fixed assets;

Cash/Treasury Management;

Housing and Council Tax Benefits;

Council Tax;

National Non-Domestic Rates;

General ledger maintenance;

Budgetary controls - including budget setting and monitoring; and

Car parks income.
10
50
Purchasing and payables/creditors
Key Control
Type of testing expected
Appropriately authorised orders should be raised for all purchases.
Review of orders to check for appropriate authorisation.
Invoices received should be matched to orders and GRNs (where
applicable) for accuracy and confirmation of receipt of the goods/service.
Review of invoices against orders and GRNs.
Invoices should be appropriately authorised.
Review of invoices to check for appropriate authorisation.
Invoices input into the system for payment should be checked for
accuracy.
Review of information recorded within the payments system back to the
invoice to ensure accuracy of information recorded.
BACS payments should be appropriately authorised.
Review a sample of BACS runs to ensure they have been appropriately
authorised.
Creditor control accounts/purchasing system to general ledger system
interfaces should be reconciled and all reconciling items should be
identified, investigated and resolved on a timely basis. An independent
review of the reconciliation should be performed on a timely basis.
Review reconciliations to ensure they have been appropriately prepared
and reviewed (and evidenced as such) on a timely basis.
Agreement of system balances as noted on the reconciliation to prints
from those systems.
Testing of reconciling items to ensure these have been investigated and
are appropriate reconciling items.
Appropriate segregation of duties and restricted access should be
ensured.
Consideration of whether duties are appropriately segregated between
those responsible for ordering and those responsible for payments.
Review of access rights to the purchasing and payables system.
Amendments to standing data (eg new vendors, suppliers’ details) should
be appropriately authorised and accurately input on to the system.
Obtain a list of amendments made to supplier’s details (from the system)
and check against appropriate supporting documentation to confirm
accuracy of change to data and that the change was appropriately
authorised.
Tendering procedures should be followed for all purchases above the
limit set.
Review of procedures and testing to ensure that procedures were
followed.
11
51
Income receivable/debtors
Key Control
Type of testing expected
Invoice requisitions should be appropriately authorised and raised in a
timely manner.
Review of invoice requisitions to check for appropriate authorisation.
Invoices raised should be checked to invoice requisition to ensure
accuracy and completeness of invoices raised.
Check of invoices raised to invoice requisitions to agree value of invoice
raised.
Receipt of income should be reconciled to the amount banked.
Review a sample of income reconciliations to ensure they have been
appropriately completed and reviewed.
Debtor control accounts/receivables system to general ledger system
interfaces should be reconciled and all reconciling items should be
identified, investigated and resolved on a timely basis. An independent
review of the reconciliation should be performed on a timely basis.
Review reconciliations to ensure they have been appropriately prepared
and reviewed (and evidenced as such) on a timely basis.
Agreement of system balances as noted on the reconciliation to prints
from those systems.
Testing of reconciling items to ensure these have been investigated and
are appropriate reconciling items.
Appropriate segregation of duties and restricted access should be
ensured.
Consideration of whether duties are appropriately segregated between
those responsible for raising invoices and those responsible for recording
income.
Review of access rights to the receivables system.
Refunds/credit notes should only be issued following the appropriate
authorisation.
Review of credit notes to check for appropriate authorisation.
Appropriate procedures should be in place for monitoring the
recoverability of aged debts.
Document the procedures undertaken to recover aged debts.
Reports used for the purposes of monitoring debts are accurately
produced.
Review of a sample of reports to check for accuracy.
Bad debts should be written off after appropriate authorisation per the
financial regulations.
Testing of write-offs to confirm the appropriate authorisation was
obtained prior to write-off.
Testing of aged debts to ensure that appropriate procedures have been
followed.
12
52
Payroll and Pensions
Key Control
Type of testing expected
New starter forms should be appropriately authorised by management
and completed by the HR department and employee (based on the
employment contract) prior to input into the payroll system. Input of
details into the payroll system should be checked for accuracy.
Testing new starters per the system back to starter forms and employee
contracts to confirm appropriate authorisation, the accuracy of the input
into the system and appropriately completed supporting documentation
exists.
Leaver forms must be appropriately authorised and accurately input into
the payroll system.
Testing leaver forms to ensure that they have been correctly authorised
and input into the payroll system.
Amendments to standing data must be authorised by the employee and
appropriate manager and accurately input into the payroll system
Testing amendments per the system back to amendment forms to
confirm the accuracy of the change on the system and that the
amendments have been appropriately authorised.
Payroll control accounts/payroll system to general ledger system
interfaces should be reconciled and all reconciling items should be
identified, investigated and resolved on a timely basis. An independent
review of the reconciliation should be performed on a timely basis.
Review reconciliations to ensure they have been appropriately prepared
and reviewed (and evidenced as such) on a timely basis.
Agreement of system balances as noted on the reconciliation to prints
from those systems.
Testing of reconciling items to ensure these have been investigated and
are appropriate reconciling items.
Payroll and pensions are appropriately authorised prior to payment.
Testing monthly payrolls to ensure that they have been correctly
authorised prior to payment.
Managers should be asked to verify the completeness and accuracy of
employee information on the payroll system on at least a quarterly basis.
Review the positive pay returns issued and received, ensuring all have
been received and action taken as appropriate.
Appropriate segregation of duties and restricted access should be
ensured.
Consideration of whether duties are appropriately segregated between
those responsible for inputting details and those authorising payments.
Review of access rights to the payroll system.
13
53
Fixed assets
Key Control
Type of testing expected
All capital additions should be appropriately authorised in accordance
with procedures.
Testing of capital additions to ensure appropriate authorisation has been
obtained.
All capital disposals should be appropriately authorised in accordance
with procedures.
Testing of capital disposals to ensure appropriate authorisation has been
obtained.
The fixed asset register is reconciled to the general ledger on a regular
basis. The reconciliation should be signed and dated by the preparer as
evidence of completion. An independent review of the reconciliation
should be performed and evidenced by the reviewer (signature and date).
Testing of the reconciliations between the fixed asset register and the
general ledger.
Restricted access to the fixed asset register should be ensured.
Review of access rights to the fixed asset register.
Capital expenditure should be monitored and controlled against budget.
The budget set should be realistic and based upon appropriate
assumptions.
Review the processes in place for setting and agreeing the capital budget.
Review the controls in place to monitor and control performance against
the capital budget.
14
54
Cash and Treasury Management
Key Control
Type of testing expected
Bank reconciliations for all bank accounts should be performed on a
monthly basis and all reconciling items fully identified, investigated and
resolved as necessary. The reconciliation should be signed and dated by
the preparer as evidence of completion. An independent review of the
reconciliation should be performed and evidenced by the reviewer
(signature and date).
Review reconciliations to ensure they have been appropriately prepared
and reviewed (and evidenced as such) on a timely basis.
Appropriate segregation of duties and restricted access should be
ensured.
Consideration of whether duties are appropriately segregated between
those responsible for purchasing and those responsible for payments.
Agreement of system balances as noted on the reconciliation to prints
from those systems.
Testing of reconciling items to ensure these have been investigated and
are appropriate reconciling items.
Review of access rights to the cash receipting system.
15
55
Housing and Council Tax Benefits
Key Control
Type of testing expected
Claimant details are input correctly and the appropriate supporting
information obtained.
Test a sample of claimants and ensure their details have been correctly
entered onto the benefits system and appropriate supporting evidence
has been retained.
Review the system in place for sample checking claims processed to
ensure operating effectively.
Backdated claims are supported by a backdating form and are subject to
authorisation by the backdating officer to ensure this is performed in
accordance with the rules.
Test a sample of backdated claims and ensure appropriate evidence has
been retained of the backdating officer’s review and that backdating was
appropriately awarded.
BACS payments should be appropriately authorised.
Review a sample of BACS runs to ensure they have been appropriately
authorised.
Cheques should be appropriately authorised.
Review a sample of cheque runs to ensure they have been appropriately
authorised.
All payments over the Council approved limit should be subject to
independent review to ensure accuracy of the payment.
Test a sample of payments exceeding the approved limit and ensure there
is evidence of review.
Overpayments are checked to ensure they have been accurately classified
and calculated.
Test a sample of overpayments to ensure correctly classified and
calculated.
Overpayments per the benefits system are reconciled to the debtors
system.
Test a sample of reconciliations between the benefits and debtors system
to ensure overpayments have been correctly raised.
The recovery of overpayments is monitored and action taken to collect
debts.
Review the process for monitoring overpayment recovery and ensure
action is taken on a timely basis to collect debts outstanding.
16
56
Key Control
Type of testing expected
The benefits system is reconciled to the Council Tax and General Ledger
systems on at least a monthly basis.
Review reconciliations to ensure they have been appropriately prepared
and reviewed (and evidenced as such) on a timely basis.
Agreement of system balances as noted on the reconciliation to prints
from those systems.
Testing of reconciling items to ensure these have been investigated and
are appropriate reconciling items.
Appropriate segregation of duties and restricted access should be
ensured.
Consideration of whether duties are appropriately segregated between
those responsible for inputting details and those authorising payments.
Review of access rights to the benefits system.
17
57
Council Tax
Key Control
Type of testing expected
The Council ensures the record of properties as per the Council Tax (CT)
system reconciles to the list of properties notified to them by the
Valuation Office.
Test a sample of reconciliations between the CT system and the Valuation
Office reports/notifications.
CT exemptions/discounts are reviewed on a weekly basis to identify
exemptions due for review in the next 7 days, exemptions which have no
end date and exemptions passed their review date but which have not
been reviewed.
Test a sample of exemption reports and ensure evidence of review and
appropriate follow-up of exceptions.
There is a sample check of all CT processing.
Review evidence of sample checking and ensure being performed. Reperform a sample of the checking to ensure being performed to the
required standard.
CT precepts per property band are input onto the CT system before the
start of the financial year and reviewed for accuracy by a senior officer.
Obtain evidence that the precepts entered onto the CT system have been
evidenced as reviewed by a senior officer. Agree the precepts to those
approved by the Council and notified by the parish and County Councils
and Police Authority.
A reconciliation of returned Direct Debits’ is performed against the value
of reversals on the CT system.
Test a sample of reconciliations and ensure there is evidence of review
and follow-up and resolution of reconciling items.
There is a daily reconciliation of cash receipts / cash postings / reversals
against movement on outstanding debt.
Test a sample of reconciliations and ensure there is evidence of review
and follow-up and resolution of reconciling items.
Refunds are authorised by a senior billing officer. Refunds over £1,000
must have a payment voucher authorised by the Head of Revenues.
Test a sample of refunds and ensure appropriately authorised.
The Council Tax system is reconciled to the General Ledger and benefits
systems on at least a monthly basis.
Review reconciliations to ensure they have been appropriately prepared
and reviewed (and evidenced as such) on a timely basis.
Agreement of system balances as noted on the reconciliation to prints
from those systems.
Testing of reconciling items to ensure these have been investigated and
are appropriate reconciling items.
18
58
Key Control
Type of testing expected
Appropriate segregation of duties and restricted access should be
ensured.
Consideration of whether duties are appropriately segregated between
those responsible for inputting details and those processing payments.
Review of access rights to the council tax system.
19
59
National Non-Domestic Rates
Key Control
Type of testing expected
The Council ensures the record of properties and their total rateable
value as per the National Non-Domestic Rates (NNDR) system reconciles
to the list of properties and total rateable value notified to them by the
Valuation Office.
Test a sample of reconciliations between the NNDR system and the
Valuation Office reports/notifications.
NNDR exemptions/discounts are reviewed on a weekly basis to identify
exemptions due for review in the next 7 days, exemptions which have no
end date and exemptions passed their review date but which have not
been reviewed.
Test a sample of exemption reports and ensure evidence of review and
appropriate follow-up of exceptions.
There is a sample check of all NNDR processing.
Review evidence of sample checking and ensure being performed. Reperform a sample of the checking to ensure being performed to the
required standard.
The NNDR rateable value multiplier is put onto the NNDR system
reviewed for accuracy by a senior officer.
Obtain evidence that the multiplier entered onto the NNDR system have
been evidenced as reviewed by a senior officer. Agree the multiplier used
to notification received.
A reconciliation of returned Direct Debits’ is performed against the value
of reversals on the NNDR system.
Test a sample of reconciliations and ensure there is evidence of review
and follow-up and resolution of reconciling items.
There is a daily reconciliation of cash receipts / cash postings / reversals
against movement on outstanding debt.
Test a sample of reconciliations and ensure there is evidence of review
and follow-up and resolution of reconciling items.
Refunds are authorised by a senior billing officer. Refunds over £1,000
must have a payment voucher authorised by the Head of Revenues.
Test a sample of refunds and ensure appropriately authorised.
The NNDR system is reconciled to the General Ledger system on at least
a monthly basis.
Review reconciliations to ensure they have been appropriately prepared
and reviewed (and evidenced as such) on a timely basis.
Agreement of system balances as noted on the reconciliation to prints
from those systems.
Testing of reconciling items to ensure these have been investigated and
are appropriate reconciling items.
20
60
Key Control
Type of testing expected
Appropriate segregation of duties and restricted access should be
ensured.
Consideration of whether duties are appropriately segregated between
those responsible for inputting details and those processing payments.
Review of access rights to the NNDR system.
21
61
General Ledger Maintenance
Key Control
Type of testing expected
All manual journals raised are appropriately authorised and input into
the system.
Testing of manual journals from the system back to supporting
documentation to confirm accuracy of input.
Testing of manual journals from supporting documentation to the system
to confirm accuracy of input and completeness of processing.
Access rights to the system should be reviewed regularly to ensure that
the appropriate access levels have been given to the appropriate
individuals and to allow segregation of duties.
Review and testing of controls regarding setting of access rights and
monitoring of these rights.
Review of access rights to the general ledger.
22
62
Budgetary Control
Key Control
Type of testing expected
Budgets should be approved prior to the start of the financial year and be
based upon appropriate and reasonable assumptions.
Review of the approval of the budget and the underlying assumptions.
Budgets should be assigned to appropriate personnel and should be
monitored regularly throughout the year.
Review of procedures in place regarding budgetary control. Testing to
ensure procedures are being followed, including discussion of procedures
with budget holders and obtaining evidence to corroborate their
explanations for variances against budget.
Budgetary information should reconcile to the general ledger.
Agreement of budget reports (including those presented to Members)
back to the general ledger.
23
63
Car Parks Income
Key Control
Type of testing expected
Cash collected from car park ticket machines is reconciled to that
expected per the ticket machine records. Any significant differences are
investigated.
Review and testing of the reconciliation process across all of the Council’s
car park ticket machines.
Cash recorded within the bank statement matches that collected from the
car park ticket machines.
Review and testing of the reconciliation process between cash banked
and that per the car park ticket machines.
Car Park income is monitored against budget and between locations and
machines.
Review and testing of the car park income budget monitoring process.
24
64
In the event that, pursuant to a request which North Norfolk District Council has received under the Freedom of Information Act 2000, it is required to disclose any information contained in this
proposal, it will notify PwC promptly and consult with PwC prior to disclosing such information. North Norfolk District Council agrees to pay due regard to any representations which PwC may
make in connection with such disclosure and North Norfolk District Council shall apply any relevant exemptions which may exist under the Act to such information. If, following consultation with
PwC, North Norfolk District Council discloses any such information, it shall ensure that any disclaimer which PwC has included or may subsequently wish to include in the information is reproduced
in full in any copies disclosed.
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requires, other member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity.
65
Audit Committee
18 September 2012
Agenda Item No_____10________
Progress Report on Internal Audit Activity, April to September 2012
Summary:
This report examines progress made between April and early
September 2012 in relation to delivery of the Annual Audit Plan
for 2012/13, and includes abbreviated management summaries
in respect of the audit reviews which have been finalised in the
course of this period.
Conclusions:
Adequate assurance levels have been awarded in respect of the
three audits completed in the first five months of the financial
year.
It is further noted that the Annual Audit Plan has been subject to
some rescheduling of assignments (the timing of 5 of the original
16 assignments featuring in the Plan have been revised), whilst
job budgets for 3 reviews have been adapted to accommodate
changes to audit scopes – all revisions were at the request of
management. The Plan has also now been expanded to
incorporate an additional audit of the new Revenues and
Benefits Shared Services Partnership focusing on Data
Transfer, Governance and Risk. Following discussions with
management, this work is to be delivered in two phases. Phase
1 has already been undertaken and an audit letter was produced
in July 2012 commenting on the data transfer arrangements.
To date, we have been able to absorb the above changes to the
Plan without any adverse impact on our ability to deliver all
assignments within the financial year and hereby confirm that we
are on schedule as we approach the half yearly stage.
Recommendations:
It is recommended that the Committee notes the outcomes of
the three audits completed between April and August, together
with recent amendments made to the Annual Audit Plan for
2012/13.
Cabinet member(s):
All
All
Wards:
Contact Officer,
telephone
number, and
e-mail:
Sandra King, Head of Internal Audit
01508 533863
scking@s-norfolk.gov.uk
66
Audit Committee
18 September 2012
1.
Background
1.1
The Annual Internal Audit Plan was approved by the Audit Committee on 6
March 2012. This report represents the first progress update on the Annual
Audit Plan for 2012/13.
2.
Amendments to the Annual Audit Plan
2.1
Following our previous report to the Committee in March, some changes to the
Plan have occurred, all of which were initiated by management. The key
changes to planned provisions have involved:
2.2
•
Expansion of the Property Services audit to include extra focus on the
Measured Term Contract for the provision of coastal repairs and other minor
coastal works, which led to the job budget being increased from 14 to 19 days
to afford coverage of this additional element.
•
In the course of formulating the 2012/13 Audit Plan in February 2012, the
Corporate Leadership Team requested that an audit be developed to examine
data verification and governance arrangements applying to the newly formed
Revenues and Benefits Shared Services Partnership between North Norfolk
District Council and the Borough Council of Kings Lynn and West Norfolk.
Although the Audit Strategy for 2012/13 alluded to this fact, the Annual Plan
approved by the Audit Committee in March 2012 did not contain specific
provisions as such to undertake such an audit. As a result of meetings with
management in April 2012, there has since been agreement to carry out this
work by way of two phases. A budget of 14 days has been provided and so
far, Phase 1 completed in July 2012 has utilised 2.5 days of those made
available for this purpose. We envisage the second phase will be performed
in September / October 2012.
•
The Corporate Leadership Team had further sought to reduce the job budgets
in relation to 2 computer audits, namely reviews of the Cash Receipting
Application and the Council’s IT Project Management arrangements. Having
revisited the scopes of these two pieces of work, we have been able to
commute the job budgets and still ensure that assurances can be produced,
tailored to management’s specific requirements.
•
It has also proved necessary to re-schedule some of our assignments in order
to secure maximum benefit from audit input and minimise disruption to
service areas. The re-timetabling of planned work is noted in Appendix B to
this report.
The resultant revisions to the Plan have led to a 14 day increase overall in the
total audit days to be delivered in 2012/13. The Audit Committee had approved
212 days in March 2012, whereas this figure has since risen to 226 days.
67
Audit Committee
18 September 2012
3.
Delivery of Programmed Audit Work in accordance with the Revised
Annual Audit Plan
3.1
As demonstrated in Appendix B, 80 days of programmed work had been
completed at the time of writing this report. This figure equates to 35% of the
revised audit planned days earmarked for completion in 2012/13. The status of
individual audits can be summarised thus:
•
Three assignments have been completed and final reports issued (Audit
Nos. NN/13/01, NN/13/02 and NN/13/03);
•
A draft report has been provided in relation to Audit No. NN/13/15 and
management responses are currently awaited;
•
The audit fieldwork has been completed for 3 additional audits (Audit Nos.
NN/13/04, NN/13/13 and NN/13/14) with corresponding draft reports
imminent.
•
We have circulated the audit brief for Audit No. NN/1306 and should be
commencing audit fieldwork shortly.
•
An ad-hoc review (Audit No. NN/13/17) has also been requested by the
Corporate Management Team, which is being carried out in two stages. To
date, Phase 1 has been finalised with an audit letter produced and
circulated.
4.
Outcomes of Work Undertaken
4.1
With reference to work completed between April and early September 2012, as
mentioned above, we have been able to finalise three audits during this period
and their respective management summaries are attached at Appendix C to
the report.
4.2
In the case of the Property Services & Coastal Protection audit (Audit No.
NN/13/01) and the Strategic Housing & Homelessness review (Audit No.
NN/13/02), we were able to confirm that the adequate assurance levels
awarded this year were consistent with the audit opinions provided the last time
these areas were examined. In relation to the audit of Corporate Policy,
Planning and Performance Management (Audit No. NN/13/03), this was the first
time that we had analysed operational arrangements and it is pleasing to note
that we were able to give an adequate assurance level to the provisions in
place.
4.3
With reference to the additional audit commissioned by the Corporate
Leadership Team applying to the Revenues and Benefits area, when carrying
out Phase 1, we examined data transfer developments, in particular conducting
verification checks on the accuracy and adequacy of the data transfer from the
existing North Norfolk District Council Civica Revenues and Benefits System to
a new OpenRevenues (Civica) platform, which in the future will be used jointly
as part of the overall partnership arrangements. Although our audit comprised
high level verification of systems totals and did not include looking at individual
accounts / account balances, we have been able to conclude that:
•
Data integrity checks have been applied to all systems parameters
appearing on Civica with any discrepancies fully investigated.
68
Audit Committee
18 September 2012
•
Data integrity checks have been applied to all systems parameters following
transfer of North Norfolk District Council data to the OpenRevenues system,
before going live, with any discrepancies fully investigated.
•
Aged debt balances should be agreed between North Norfolk District
Council and the Borough Council of Kings Lynn and West Norfolk before
transfer of data as part of the former merger.
•
Documentary evidence should be retained in support of all integrity checks,
including evidence of independent check and agreement of outcomes from
both North Norfolk District Council and the Borough Council of Kings Lynn
and West Norfolk.
•
The Steering Group should sign off all agreed balances.
We are intending as part of our work in relation to Phase 2 to evaluate the
status of the Partnership, including governance arrangements and an overview
of IT provisions. The Phase 1 letter was issued to management in July 2012.
5.
Conclusion
5.1
Good progress has been made with the delivery of the Audit Plan to date, and
all current work scheduled is underway as expected.
6.
Recommendation
6.1
That members note the outcomes of the three completed audits and the recent
amendments made to the Annual Audit Plan for 2012/13.
Appendices attached to this report:
Appendix B – Review Work delivered in accordance with the Annual Audit Plan for
2012/13 plus Ad-Hoc Work requested by Management
Appendix C – Abbreviated Management Summaries of Completed Audit Assignments
Appendix C (1) NN/13/01 Property Services and Coastal Protection
Appendix C (2) NN/13/02 Strategic Housing and Homelessness
Appendix C (3) NN/13/03 Corporate Policy, Planning and Performance Management
69
Appendix A
Review Work delivered in accordance with the Annual Audit Plan for 2012/13 plus Ad-Hoc Work requested by Management
Audit No.
Description of Audit
Frequency of
Audit Coverage
Original Days
Planned
Revised
Days
Planned
Days
Delivered
Scheduling
PLANNED SYSTEMS AUDIT WORK
NN/13/01
Property Services and Coastal Protection
3-yearly
14
19
19
May
NN/13/02
Strategic Housing and Homelessness
2-yearly
15
15
15
July
NN/13/03
3-yearly
10
10
10
July
NN/13/04
Corporate Policy, Planning and
Performance Management
Procurement
3-yearly
12
12
10.5
August
NN/13/05
Partnerships
3-yearly
7
7
NN/13/06
Leisure Complexes, Sports, Arts and
Entertainment, Pier Pavilion
3-yearly
10
10
1
September
October
September
NN/13/07
Council Tax and NNDR
2-yearly
20
20
NN/13/08
Payroll, Human Resources, Expenses
2-yearly
19
19
NN/13/09
Housing Benefit CTB
2-yearly
20
20
November
early
December
2-yearly
Annually
Annually
15
10
9
15
10
9
December
January
February
Annually
8
169
8
174
55.5
32%
Ad-hoc request
10
8
7
August
NN/13/10
NN/13/11
NN/13/12
Exchequer Services - Creditors etc
Work to support the AGS
Corporate Governance and Risk
Management
Systems Audit Follow Up
TOTAL PLANNED SYSTEMS AUDIT WORK
PLANNED COMPUTER AUDIT WORK
NN/13/13
Cash Receipting Application
Project Management
3-yearly
10
7
6
August
NN/13/15
Data Centre, Back Up, Disaster Recovery
3-yearly
10
10
9
NN/13/16
Cedar Financial Application
3-yearly
9
9
September
July
October
Late February
Annually
4
43
4
38
22
58%
212
212
77.5
37%
TOTAL PLANNED WORK
Complete
Final Report issued 10 August 2012
Complete
Final Report issued 10 August 2012
Complete
Final Report issued 23 August 2012
Audit Fieldwork completed.
Draft Report imminent.
Audit Brief issued and fieldwork
scheduled to start 17 September 2012.
October
November
November
NN/13/14
Computer Audit Follow Up
TOTAL PLANNED COMPUTER AUDIT WORK
Status
70
Audit Fieldwork completed.
Draft Report imminent.
Audit Fieldwork completed.
Draft Report imminent.
Draft Report issued 22 August 2012.
Assurance
Level
applicable
Summary Report
Details presented to
Members
Adequate
Audit Committee
18 September 2012
Audit Committee
18 September 2012
Audit Committee
18 September 2012
Adequate
Adequate
Audit No.
Description of Audit
EXTRA WORK REQUESTED
NN/13/17
Revenue and Benefits Partnership - Data
Transfer, Governance and Risk
Frequency of
Audit Coverage
Original Days
Planned
Revised
Days
Planned
Days
Delivered
Scheduling
Status
Assurance
Level
applicable
Summary Report
Details presented to
Members
Ad-hoc request
0
14
2.5
Phase 1 June
Phase 1 - Letter produced 13 July 2012.
Phase 1 - Not
Applicable
Not Applicable
Phase 2 - Audit Brief issued 15 June
Phase 2 - 2012 but final timetabling of work has yet
September / to be confirmed with management.
October
TOTAL OF EXTRA WORK UNDERTAKEN
GRAND WORK TOTAL
0
14
2.5
18%
212
226
80
35%
71
Management summaries in respect of completed audit assignments
Appendix C (1)
Report No. NN/13/01 – Final Report issued 10 August 2012
Audit Report on Property Services and Coastal Protection
Audit Opinion
Adequate Assurance given
Rationale supporting award of opinion
The audit work carried out by Internal Audit indicated that:
•
While there is a basically sound system of internal control, there are weaknesses, which
put some of the client’s objectives at risk.
•
There is evidence that the level of non-compliance with some of the control processes
may put some of the client’s objectives at risk.
•
This opinion is reflective of
the five medium priority and two low priority
recommendations raised, including three medium and one low priority recommendations
relating to coastal protection
•
The level of assurance has not changed since the previous audit.
Summary of Findings
Property Services
The Council has an Asset Management Plan, which contains the strategy in place over the
Council’s property portfolio. This is supported by subsidiary policies such as the Disposal,
Investment and Acquisition Policy and the Community Asset Transfer Policy.
Key tasks and priorities are currently indentified and documented within a timetable. When the
Concerto system is introduced within the Valuations Service, which is scheduled by the end of
July 2012, tasks can be entered into the system’s timetable, which will produce reminders when
they require completion. Acquisitions and disposals are appraised in line with the Disposal,
Investment and Acquisition Policy.
We identified one acquisition where no documentation was available to confirm the reasoning
behind the acquisition or that approval for the acquisition had been obtained in line with laid down
policy.
New leases and lease renewals were found to have been appropriately authorised. However, we
noted that lease details had not been notified to other departments (e.g. Sundry Income, NNDR)
in a timely manner.
Properties are promptly re-let upon becoming vacant.
The Council offers concessionary rents or rent-free periods to tenants where works or repairs are
required on the property and are being paid for by the tenant. Rental deposits are considered by
the service on a case by case basis where the service considers it prudent to do so.
End of tenancy inspections are conducted. Depending upon the type of property or repair, any
identified repairs are either recharged to the tenant or paid for by the Council.
Condition surveys are undertaken on a five-year rolling programme, with results collated into a
spreadsheet from which maintenance issues are programmed. The 2012/13 maintenance
72
programme was not in place at the time of the audit, although was being redrawn as the original
draft had been lost due to file corruption. Assurance within the audit was gained from the
2011/12 survey records in so far as evidence of maintenance works required could be identified.
Commercial properties owned by the Council are insured through a policy with Zurich Municipal.
Property Valuation
Council properties are re-valued every five years. A schedule is in place to help ensure that all
properties are valued at least once within this period. Valuations have been undertaken by the
Estates and Valuation Manager and by Norfolk Property Services (NPS) for 2012/13. Valuation
Reports are received to provide assurance that valuations have been conducted and the asset
register is updated accordingly.
Performance Information
Performance targets are in place and are documented within the Asset Management Plan and
the Performance Management System (TEN). Performance had not been updated within TEN for
2012/13. Performance has been updated within the Asset Management Plan to December 2011.
Risk Management
Risks are documented within the Asset Management Plan and in TEN. The status of risks had
not been updated for 2012/13.
Coastal Protection
Key responsibilities are set down within the contract for the MTC. The Coastal Engineer has
been appointed as the Contract Administrator, with the Property Project and Programme
Manager having been appointed the Construction Design and Management Coordinator.
We ascertained the proposed contract monitoring arrangements during the audit. Contract
meetings are to be undertaken on a monthly basis as set down within the contract. The Council
intends to monitor health and safety and the general operation of works, however, monitoring
arrangements and mechanisms for doing so, including those for reporting outcomes of key
performance indicators (KPIs) listed in the contract, have not been formally documented within a
formal contract monitoring manual.
Contract variations are to be issued where individual works exceed £7,500, as detailed in the
contract, and are to be raised by the Coastal Engineer and authorised by the appropriate Head of
Service. However, there is confusion over this limit with supporting approval documentation
stating this limit is £7,000. Contract variations are however expected to be the exception rather
than the rule.
A payments process is set down within the contract. The contractor is to provide a day worksheet
stating the costs of labour, plant and materials, providing receipts for all materials used. These
will be checked and authorised by the Coastal Engineer in order to monitor costs.
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The following number of recommendations has been raised:
Area of Scope
Adequacy
and
Effectiveness
Assessments
Adequacy
of
Controls
Effectiveness
of Controls
Recommendations
Raised
Property Services
Green
Amber
High
0
Property Valuation
Green
Green
0
0
0
Performance
Information
Green
Amber
0
1
0
Risk Management
Green
**Amber
0
0
0
Coastal Protection
Green
Amber
0
3
1
0
5
2
Total
**Recommendation raised within ‘Performance Information’.
High Priority Recommendations
No high priority recommendations have been raised as a result of this audit.
Management Responses
Management have accepted the recommendation raised.
74
Medium
1
Low
1
Appendix C (2)
Report No. NN/13/02 – Final Report issued 10 August 2012
Audit Report on Strategic Housing and Homelessness
Audit Opinion
Adequate Assurance given
Rationale supporting award of opinion
The audit work carried out by Internal Audit indicated that:
•
While there is a basically sound system of internal control, there are weaknesses, which
put some of the client’s objectives at risk.
•
There is evidence that the level of non-compliance with some of the control processes
may put some of the client’s objectives at risk.
•
This opinion results from the fact that we have raised one medium priority
recommendation. It is also based on the fact that all components of the Housing Strategy
have yet to be completed thus limiting our assessment of the overarching policies
governing this area.
•
The level of assurance has remained the same since the previous audit.
Summary of Findings
Homelessness
Assessments on homelessness applicants have been completed in 33 days, in line with the
Council’s Homelessness Policy and government legislation. Applications that are determined as
‘Full Duty’ are independently approved.
Homeless residents are housed within temporary accommodation where required, effectively in
bed and breakfast accommodation. Occupancy of temporary accommodation is monitored.
We established that not all lease agreements had been signed by the tenant to confirm
acceptance of repayment of accommodation rent and service charges.
Claims for housing benefits are made in a timely manner to cover rent costs. Invoices for rent are
received following occupancy, which typically cover the period of a week and are approved and
paid through the creditors system.
Monitoring of the prevention of homelessness is undertaken through the submission of statistics
via the P1E return to the Department for Communities and Local Government (DCLG).
Financial assistance is provided for rent deposits or advances.
The total outstanding debt for temporary accommodation charges as at 5th July 2012 amounted to
£50,862.30. This includes debts dating back to 2007. Recovery action is being pursued to
recover these outstanding payments, albeit with minimal repayments, due to the hardship of the
debtors.
The Council has introduced a new agreement for loan awarding and repayment to help to provide
a more secure basis for the recovery of assistance. As this is a new control, we were not able to
fully test its effectiveness. This will be reviewed in detail during the next audit undertaken on this
area.
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Management of Housing Register
Applications are checked to help to confirm that only eligible applicants are present on the
Housing Register. All eligible applicants are provided with a banding. Applicants who are to be
assigned a Band One or Band Two rating are subject to approval by a senior officer.
Applicants are made aware of their housing options at the point of application and during any
subsequent contact whether in person or over the phone and this is supplemented through
newsletters and through information present on the Council’s website.
Access to the LOCATA system is restricted by password prompt with user restrictions applied to
each account.
Properties are let through shortlists. These are allocated through the LOCATA system by
Registered Social Landlords under the conditions of the Your Choice Your Home Policy and are
monitored by the Council.
Strategic Housing
The Council is producing a Housing Strategy. The strategy is to take the form of three
documents covering different aspects of the service. The Council has completed the strategy
document relating to Housing and Infrastructure. The document was approved by Cabinet on 11
June 2012 and by Full Council on 25 July 2012. The remaining two documents relate to the
Council’s approach to existing housing stock and the approach for supporting residents to live
independently.
Two service plans are in place for the Housing Service relating to Housing Needs and Housing
Enabling. Targets and activities for completion during the year and progress against these have
been included within the service plan and are due for completion.
Strategic action points included within the Housing Strategy Action Plan have yet to be
incorporated into the service plan within the Performance Management System (TEN). The Head
of Financial Services has confirmed that this will be actioned, following approval of the Housing
Strategy, as part of the corporate arrangements as confirmed in the audit of Corporate Policy,
Planning and Performance Management (NN/13/03).
Performance Information
Performance measures are in place for the service, which are reported through TEN.
Council has met performance targets during the previous 12 months.
The
Risk Management
Risks for Strategic Housing and Homelessness have been included within the service plan.
Mitigation plans are in place and have been monitored.
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The following number of recommendations has been raised:
Area of Scope
Adequacy
and
Effectiveness
Assessments
Adequacy
of
Controls
Effectiveness
of Controls
Recommendations
Raised
Homelessness
Green
Amber
High
0
Management of
Housing Register
Green
Green
0
0
0
Strategic Housing
Green
Green
0
0
0
Performance
Information
Green
Green
0
0
0
Risk Management
Green
Green
0
0
0
0
1
0
Total
High Priority Recommendations
No high priority recommendations have been raised as a result of this audit.
Management Responses
Management have accepted the recommendation raised.
77
Medium
1
Low
0
Appendix C (3)
Report No. NN/1303 – Final Report issued 23 August 2012
Audit Report on Corporate Policy, Planning and Performance Management
Audit Opinion
Adequate Assurance given
Rationale supporting award of opinion
The audit work carried out by Internal Audit indicated that:
•
While there is a basically sound system of internal control, there are weaknesses, which
put some of the client’s objectives at risk.
•
There is evidence that the level of non-compliance with some of the control processes
may put some of the client’s objectives at risk.
This opinion results from the fact that we have raised one medium recommendation and
that the new performance monitoring arrangements are still in their infancy, which
resulted in some controls not being able to be fully assessed.
•
Summary of Findings
Corporate Plan/Performance Management
An Annual Action Plan 2012-13 is in place, which links to the priorities detailed in the Corporate
Plan 2012-2015.
Action plans have been entered into the Performance Management System (TEN) with
responsible officers being assigned for each action plan activity.
The Performance Management Framework provides structures by which the priorities and actions
within the Corporate Plan can be monitored.
Resource requirements have been considered by the Corporate Leadership Team (CLT) and
officers during the planning of the Annual Action Plan. Consideration of financial resources
required to meet the Corporate Plan has been incorporated into the Council’s budget setting
process.
As monitoring processes have not commenced and thus testing could not be undertaken, the
effectiveness of the planning process cannot be determined.
Reporting and monitoring processes set down within the Performance Management Framework
allow for issues relating to resources or the ability to meet targets to be identified with action
taken as required.
Data collection arrangements are in place within the Council. The Policy and Performance
Management Officer aided members of staff in producing robust data collection methods,
including templates for the collection of data. The Policy and Performance Management Officer
confirms that performance targets have been updated prior to performance information being
reported to Performance and Risk Management Board.
Validation of performance data is not currently undertaken within the Council outside of the
checks undertaken by Internal Audit, within service reviews through delivery of the annual audit
plans.
Reporting against targets for 2012/13 had yet to take place due to the infancy of reporting the
new arrangements, and given that training on the new arrangements was still being rolled out at
the time of our audit. As such, no testing could be undertaken on reporting of performance as
78
part of this audit, although checking of performance management is included as standard for all
system based audits and will continue to do so throughout delivery of the 2012/13 audit plan.
Risk Management
Risks have been identified within the Corporate Risk Register and within the TEN service
summaries. Mitigation plans have been put in place within the Corporate Risk Register and TEN
service summaries.
The following number of recommendations has been raised:
Area of Scope
Adequacy
and
Effectiveness
Assessments
Adequacy
of
Controls
Effectiveness
of Controls
Recommendations
Raised
Corporate Plan /
Performance
Management
Green
Amber
High
0
Risk Management
Green
Green
0
0
0
0
1
0
Total
High Priority Recommendations
No high priority recommendations have been raised as a result of this audit.
Management Responses
Management have accepted the recommendation raised.
79
Medium
1
Low
0
Agenda Item 12
AUDIT COMMITTEE WORK PROGRAMME 2012 - 2013
SEPTEMBER 2012
PWC
PWC 2011/12 Annual
Governance report
(ISA260)
DECEMBER 2012
MARCH 2013
JUNE 2012
Annual Audit Letter
(PWC)
Audit Plan (PWC)
Annual Grant
Certification Report
Half yearly progress
reports on the
overall performance
of the audit contract
Quarterly
Summaries of
completed audits
Annual Review of
the Effectiveness of
Internal Audit
Report on follow-up
work
Audit Plan
Annual Report and
Opinion
Protocol for liaison
between internal and
external auditors
Internal Audit
Quarterly Summaries
of completed audits
Status of agreed
actions
NNDC
Statement of
Accounts (+ informal
training)
Business Continuity
Plan Review
Business Continuity
Risk
Monitoring Officer’s
Report
Business Continuity
Review
Local Code of
Corporate
Governance and
Action Plan – update
Annual Governance
Statement 2012/13 –
update
Corporate Risk
Register
Business Continuity
Plan Review
80