Meeting documents

Audit Committee
Tuesday, 28th June, 2016 9.30 am

Date: Tuesday 28th June 2016 Time: 9.30 a.m. Place: Council Chamber, Civic Centre, Ebbw Vale

Please note: all Minutes are subject to approval at the next Meeting

PresentAndWithReport toReport of
COUNCILLOR J. MASON (CHAIR)

Councillors M. Cross
K. Chaplin
G. Collier
M. Dally
N. Daniels
Mrs. A. Lewis
H. McCarthy, B.A. (Hons)
D. Owens
Mrs. D. Rowberry

Mr. Peter Williams – Lay Member
Item
No
Item/Resolution Status Action
PUBLIC
1. APOLOGIES

The Vice-Chair welcomed everyone to the meeting and introductions were made.

Apologies for absence were received from Derwyn Owen, Wales Audit Office.

Noted
2. DECLARATIONS OF INTEREST AND DISPENSATIONS

No declarations of interest or dispensations were reported.

Noted
3. AUDIT COMMITTEE - APPOINTMENT OF CHAIR

The Vice-Chair sought nominations for the appointment of Chair of the Audit Committee for 2016/2017.

The Leader of the Minority Group proposed that Councillor Clive Meredith be appointed to the role, and this proposal was seconded.

Another Member proposed that Councillor J. Mason be appointed to the role, and this proposal was also seconded.

Upon a vote being taken it was

RESOLVED that Councillor John Mason be appointed as Chair of the Audit Committee for 2016/2017.

Agreed
4. AUDIT COMMITTEE
Minutes 26.04.2016 (153K/bytes)

The minutes of the Audit Committee held on 26th April, 2016 were submitted, whereupon:-

A Member referred to the discussions that took place regarding Members' grant donations, and sought an update on progress.

The Chair confirmed that this would be highlighted as an action point for the next meeting.

RESOLVED, subject to the foregoing, that the minutes be accepted as a true record of proceedings.

Agreed
5. AUDIT COMMITTEE
Minutes 22.03.2016 (165K/bytes)

The minutes of the Audit Committee held on 22nd March, 2016 were submitted, whereupon:

WAO Final Audit Plan 2015/16

The WAO representative referred to the first paragraph on page 11 of the minutes and explained that the report set out the proposed work of the Audit Committee for 2015/16 in accordance with statutory functions.

RESOLVED, subject to the foregoing, that the minutes be accepted as a true record of proceedings.

Agreed
6. DRAFT STATEMENT OF ACCOUNTS 2015/2016
Report (129K/bytes)
Appex (14M/bytes)

Consideration was given to report of the Chief Finance Officer.

The Chief Accountant Corporate Services presented the Draft Statement of Accounts for 2015/2016.

He reported a number of amendments to the report, as follows:-

Paragraph 5.2 should read:-

The statutory accounts for 2015/2016 report a provisional net revenue overspend position of 0.862m. This overspend, in conjunction with:

- A prior year adjustment of - 0.130m.

- Net drawings from earmarked reserves of - 1.291m (including amounts from the Downsizing, Redundancy and Transitional Costs reserve, the Budget Implementation Reserve and the Budget Contingency Fund);

- And net application of Capital Grants Unapplied of - 0.269m results in the net increase of 0.828m in the

Council Fund General Reserve.

Paragraph 5.3 should read:

Usable Capital Receipts decreased by 1.803m during the year, as a result of their application to fund capital expenditure, and they included Capital Grants applied.

The Officer said the Draft Accounts were presented in accordance with the Accounts and Audit (Wales) Regulations 2014 which required a provisional Statement of Accounts to be fully prepared by the end of June and signed by the Chief Finance Officer as presenting a true and fair view of the Authority's financial position, and its income and expenditure for the year ended 31st March, 2016.

The Local Government (Wales) Measure 2011 required the Audit Committee to consider and comment on the Authority's draft accounts prior to signing by the Chief Finance Officer.

The Officer said before signing, the Chief Finance Officer was required to consider all material events that may have an impact on these accounts. He said Members would be aware that the UK voted to leave the European Union last Thursday, and this would probably count as a material event for consideration.

Whilst the result came too late to include relevant disclosure in the accounts, an initial assessment was that:

- There are significant uncertainties around the process and ultimate date for leaving. However, it was considered unlikely that any balances held by the Authority at 31st March, 2016, such as outstanding grant funding or expenditure defrayed, would not be recompensed by the EU;

- While EU Regulations remain in effect, any other liabilities reflected in the accounts would also be unlikely to change in the short term;

- Consequently, the 2015/16 Accounts would probably be unaffected by the decision to the leave the EU.

In the longer term, there could potentially be a range of financial impacts, including:

- Funding streams (if EU grants are lost and not replaced by the UK or Welsh Government);

- Treasury Management (further changes in UK credit status);

- Employer pension contribution rates (if equity and bond markets suffer significant and on-going impairment).

However, it was not possible at this early stage to quantify the impact or certainty of these possible events.

On the basis of any additional information available, the Final Statement of Accounts would be amended, where necessary, to reflect any potential impact that could be determined at that time.

Background

The External Auditor (WAO) would shortly commence a detailed financial audit of the individual disclosure notes and accounts that comprise the overall statement, and was expected to finalise the Audit of Financial Statements Report in early September.

The Accounts and other specified documents would be available for public inspection for 20 working days from Monday, 25th July, 2016 until Friday, 19th August, 2016 inclusive.

The documents available for public inspection are specified by regulation and the security and control of this information is managed by senior staff within Accountancy and Financial Planning during the period. Any objection to the accounts by a member of the public would have to be made directly to the External Auditor following the inspection period (from 23rd August, 2016).

Any issues arising from the external audit of the Statement of Accounts or objections raised during the inspection period would be presented to the Audit Committee in September as part of the Auditor's formal Audit of Financial Statements.

Any matters arising from objections made to the External Auditor following public inspection that are deemed to be of particular significance may also be reported subsequently by the External Auditor as a 'Report in the Public Interest'.

Financial Implications

The draft Statement of Accounts reported a net increase in the Council Fund of 0.828m. This was in line with the net favourable variance of 0.823m reported by Portfolios.

Useable Capital Receipts decreased by 1.803m during the year, as a result of their application to fund capital expenditure.

The level of earmarked reserves has been determined in accordance with the Authority's reserves protocol, and had decreased by 1,291,000, largely due to amounts drawn from the Downsizing, Redundancy & Transitional Costs Reserve, the Budget Implementation Reserve and the Budget Contingency Fund.

Overall, the level of usable reserves available to the Authority had reduced by 2.535m in 2015/16.

Provisions have increased by 0.622m, with the most significant provisions held at year-end being in respect of Early Terminations ( 530,000), Insurance ( 895,000) and Waste Services Penalties ( 432,000).

Conclusions

The completion of the annual Statement of Accounts represented the compilation, interpretation and reporting of every financial transaction that occurred within the Authority and required the interfacing of all the Authority's corporate and departmental financial systems, together with a high degree of co-operation between staff.

Faced with these challenges, it was a credit to the colleagues and staff of all departments that these accounts are presented by the statutory deadline.

The Chief Finance Officer would like to take this opportunity to thank the Accountancy & Financial Planning colleagues for their continued dedication and professional commitment, which has again ensured that the Council was able to meet the prescribed target.

The following points were then raised by Members:-

Annual Governance Statement

In response to a question raised by a Member regarding monitoring of recommendations for improvement through an action plan. The Head of Internal Audit confirmed that measures would be put in place to address further no assurance or limited assurance reports coming to Committee. They would be disseminated at each DMT, with a briefing on actions reported to Committee on a quarterly basis.

Monwel Ltd.

In response to concerns raised by a Member, the Head of Financial Services explained that Monwel became a social enterprise in 2013. The Authority supported its creation and provided some initial stock for business continuity, and some of the debt related to the purchase of stock items. Every effort was made to recover the debt, but unfortunately Monwel was placed into liquidation. However, it was hoped to recover of some of the debt, and discussions were taking place with the liquidator.

The Chair commended the report and said the amount of work that had gone into it its preparation was a credit to the Team and all involved, and asked the Chief Accountant to convey his comments to Officers.

RESOLVED, subject to the foregoing, that the report be accepted, and:-

i. the Audit Committee accept the Draft 2015/16 Statement of Accounts; and

ii. In monitoring budgets for 2016/17, setting a Revenue Budget for 2017/18 and in developing future medium term spending plans, the Council takes into consideration the financial standing of the Authority as reported within the attached Draft Statement of Accounts for 2015/2016.

Agreed
7. STATEMENT OF ACCOUNTS 2014/2015
Report (99K/bytes)

Consideration was given to report of the Chief Finance Officer.

The Chief Accountant Corporate Services presented the Statement of Accounts for 2014/15 for approval.

He explained that the Statement of Accounts had been presented previously on the 29th September, 2015, however, it was not possible to provide a certificate of completion of audit at that time due to the need to consider outstanding issues raised by members of the public.

The Wales Audit Office had now concluded their review of the matters raised, and no further action was intended. The members of the public had been notified of this conclusion and no further response had been received.

The Officer pointed out that there had been no amendments made to the Statement of Accounts previously approved by the Audit Committee, and signed off by the Chief Finance Officer, Chair of the Audit Committee and the External Auditor on the 30th September, 2015.

In response to a question raised by a Member the WAO representative explained that members of the public were able to inspect accounts, and during last year's inspection period a number of issues were raised with the Authority and the Wales Audit Office. Issues that would need to be considered by the WAO would relate to its duties and responsibilities in terms of certifying accounts.

Following consideration of the issues raised they were deemed as having no impact on the accounts, and not within the WAO responsibilities. He confirmed that relevant matters had been discussed with Officers in terms of where improvements could be made, but they did not impact on the true and fair nature of the accounts presented.

RESOLVED that the report be accepted and the Statement of Accounts 2015/14 be approved by the Audit Committee under the delegated authority of the Council.

Agreed
8. ANNUAL REPORT OF THE HEAD OF INTERNAL AUDIT 2015/16
Report (122K/bytes)

Consideration was given to report of the Head of Internal Audit.

The Head of Internal Audit presented the report which provided an objective review of the Authority's system of internal control during the financial year 2015/16.

The Officer went through the report in detail and highlighted points contained therein.

The audit assignments conducted covered a range of activities and provided a reasonable indicator on the level of assurance for the Authority, however, they could not provide complete coverage and it was acknowledged that assurance procedures alone, could not guarantee that all significant risks are detected.

Whilst many aspects of the governance framework are improving as described in section 1.3 of the report, there had not been a significant improvement in the internal control environment, as evidenced through the work of the internal audit section. As such, the Authority's system of internal control during the financial year 2015/16 continued to operate at a level which gave limited assurance on the overall adequacy and effectiveness of the organisation's framework of governance, risk management and control.

The Officer confirmed that a service review would be undertaken for Internal Audit during 2016/17 to identify how the service could work with departments to improve internal controls to complement the progress being made with other aspects of the governance framework whilst maintaining its independent remit.

In response to a question raised by a Member regarding the limited assurance level, the WAO representative said it was not for the WAO to comment on the Authority's systems etc. The WAO would consider the Authority's framework and what it meant in terms of the risk and potential impact on the financial statements.

A Member referred to section 1.3.6 and asked the reasons for the increase in referrals received by the Section, and the number of actions that had not been implemented at follow-up audit.

The Head of Internal Audit explained that when weaknesses were identified by Audit, departments were able to develop an action plan to mitigate those weaknesses, and a follow-up audit undertaken to see if those actions had been implemented. The Officer said there were various reasons for non-compliance, i.e. resources or training, etc. A review of Internal Audit work was intended, and part of this review would be to analyse the reasons for non-compliance, and work with departments to improve their internal controls etc.

A Member referred to the Authority's continued level of Limited Assurance moving forward, and the difficulty in understanding and identifying issues if they are not being reported to Committee.

The Head of Internal Audit confirmed that progress reports would continue to be submitted to Committee on a quarterly basis. In terms of gradings, this would not become apparent until the year end, but progress moving forward would be reported quarterly.

RESOLVED that the report be accepted and the Audit Committee acknowledge the opinion set out in paragraph 8.2 of the detailed report.

Agreed
9. ANNUAL GOVERNANCE STATEMENT
Report (97K/bytes)
Appex (210K/bytes)

Consideration was given to the report of the Chief Finance Officer.

The Head of Internal Audit presented the draft Annual Governance Statement for 2015/16, which provided an assessment of the effectiveness of the Authority's governance arrangements. The Officer pointed out that the format of the document had changed last year to include conclusions and recommendations for improvement for each core principle.

RESOLVED that the report be accepted and the Audit Committee agree the contents of the Annual Governance Statement and its fitness for publication.

Councillor N. Daniels left the meeting at this juncture.

Agreed
10. 5 YEAR AUDIT PLAN 2016-2021
Report (104K/bytes)
Appex (297K/bytes)

Consideration was given to report of the Chief Finance Officer.

The Head of Internal Audit presented the 5 Year Audit Plan for the period 2016-2021, which included the rationale for implementing a one-year Operational Plan.

The Officer clarified points raised by a Member, and it was

RESOLVED that the report be accepted and the Audit Committee endorse the 5 Year Audit Plan for the period 2016-2021.

Agreed
11. UPDATE ON AUDIT ACTIVITES RELATING TO 2015/16 AUDIT PLAN
Report (93K/bytes)
Appex (421K/bytes)

Consideration was given to report of the Chief Finance Officer.

The Audit Manager presented the report which provided progress made on audits from the 2015/16 Audit Plan.

The Officer went through the report and highlighted points contained therein. She reported that four audits that commenced during the last quarter of 2015/16 which had not progressed sufficiently enough to report this time have been carried forward to next year's plan 2016/17, and w be reported to Committee as part of future progress reports.

A Member referred to Appendix B3 (systems audit - ICT User Access Financials), and expressed concern regarding the frequency that this was being report.

The Head of Financial Services said this weakness was reported regularly. She said Senior Managers needed to be reminded to refer to the authorised signatory list prior to authorising system access; and also system administrators needed to be responsible in checking that new users are authorised as per the authorised signatory list.

The authorised signatory list was compiled every 3-5 years, and over the course of time there were staff changes/movements etc., and it was important that Senior Managers within Directorates ensure that the most recent list was referred to.

The Corporate Procurement Manager reported that the e.purchasing system had now been rolled out to all areas, and many of the processes would be centralised within the ICT Section.

In response to a question raised regarding school meal debt within catering, the Audit Manager reported that the Officer from the Section was unable to attend the meeting, however they had reported the following:-

A new process had been implemented in January 2016 and the debt had decreased to 2,500. As part of the new process notifications are sent to schools termly.

RESOLVED that the report be accepted and that progress on activities from the 2015/16 Audit Plan be acknowledged.

Agreed
12. FUTURE TIME OF AUDIT COMMITTEE MEETINGS

A brief discussion ensued when it was

RESOLVED that future meetings of the Audit Committee continue to be held at 9.30 a.m.

Agreed
DECISIONS UNDER DELEGATED POWERS