Agenda and minutes

Audit & Governance Committee
Thursday 19th July 2018 5.30 pm

Venue: Gipping Room, Grafton House

Contact: Trisha Sutton  01473 432512

Items
No. Item

1.

Election of Chair

Minutes:

Resolved:

 

that Councillor J Cook be elected as Chair of the Audit & Governance Committee for the municipal year 2018/19.

2.

Appointment of Vice-Chair

Minutes:

Resolved:

 

that Councillor A Leeder be elected as Vice-Chair of the Audit & Governance Committee for the municipal year 2018/19.

3.

Apologies for Absence

Minutes:

Apologies for absence were received from Councillors Cook and Goonan.

4.

Unconfirmed Minutes of the Meeting held on 27 February 2018 pdf icon PDF 84 KB

Minutes:

Resolved:

 

that the minutes of the meeting held on 27 February 2018, be signed as a true record.

5.

To Confirm or Vary the Order of Business

Minutes:

Resolved:

 

that the Order of Business be as printed on the agenda.

6.

Declarations of Interest

Minutes:

Councillor Leeder declared an interest in Item 10 – AG/18/04 Statement of Accounts 2017/18 and the Annual Report to those charged with Governance as he was a Director of Ipserv Ltd.

 

Councillor Knowles declared an interest in Item 10 – AG/18/04 Statement of Accounts 2017/18 and the Annual Report to those charged with Governance as he was a Director of Handford Homes Ltd.

 

Councillor Maguire declared an interest in Item 10 – AG/18/04 Statement of Accounts 2017/18 and the Annual Report to those charged with Governance as he was a Employee of Ipswich Buses Ltd.

7.

AG/18/01 Code of Corporate Governance & Annual Governance Statement 2017/18 pdf icon PDF 97 KB

Additional documents:

Minutes:

7.1         The Head of People and Governance, Ms Jarlett, introduced the report, explaining that the Committee was asked to note the Code of Corporate Governance and Annual Governance Statement.

 

7.2         Ms Jarlett explained that the Code of Corporate Governance showed how the Council ensured that its governance arrangements were appropriate, whilst the Annual Governance Statement showed how the Council had complied with its arrangements over the past year.

 

7.3         Councillor Knowles commented that the evidence presented on pages 34-35 of the agenda pack, which was intended to prove the Council’s compliance with the ‘Implementing Good Practice in Transparency’ Principle, was not very clear and needed more explanation. Councillor Knowles also noted that there was a reference to ‘Agenda Item 40’, which also needed further explanation.

 

7.4         Councillor Grant noted that there was no reference to Domestic Violence under the Principle ‘Respecting the Rule of Law’. Ms Jarlett agreed to look at the inclusion of a Domestic Violence Policy in the 2019 report.

 

7.5         Councillor Fisher commented that the evidence related to the ‘Openness’ Principle did not make reference to the Council’s Wholly Owned Companies. Councillor Fisher noted that the Council had made substantial loans to these companies and said that the companies ought to be more open. Ms Jarlett noted that the Council’s companies operated under different law to the Council, and that they operated in a commercially sensitive environment; there would therefore need to be a balance between openness and the Council’s interests.

 

7.6         Councillor Leeder said that the report presented a significant volume of evidence, however, he felt that future versions would benefit from a section saying whether the expected Cultures and Behaviours were being followed.

 

7.7         Councillor Fisher noted that the report referenced a Social Media Strategy under ‘Core Principle 2 – Ensuring openness and comprehensive stakeholder engagement’ however he argued that this needed to be expanded, particularly to use social media to engage more residents in consultations. Ms Jarlett agreed to pass Councillor Fisher’s suggestion to the Council’s Communications and Marketing team.

 

7.8         Mr Hanson asked whether the 4th Floor of Grafton House had been leased. Ms Jarlett confirmed that it was currently leased to Kier Group.

 

Resolved:

 

that the Code of Corporate Governance and the Annual Governance Statement for year ended 31st March 2018 be noted (prior to Council consideration and authorisation for the Chief Executive and Leader of the Council to sign and date the Statement).

8.

AG/18/02 Financial Outturn Report 2017/18 pdf icon PDF 607 KB

Minutes:

8.1         The Head of Finance and Revenue, Mr Chance, explained that the report gave a synopsis of the Council’s performance against its budget for 2017/18. It was noted that much of the content of the report was repeated in the Statement of Accounts.

 

8.2         Councillor Phillips referred to the underspend on Executive Corporate Management and asked whether this resulted from the Council’s companies being charged for senior staff time. Councillor Leeder noted that the Council was required to recharge its companies for staff time at a commercial rate to comply with state aid rules.

 

8.3         Councillor Phillips asked for more information about the overspend in Housing benefit. Mr Chance explained that the predictions of what payments would be made had been inaccurate; measures had been put in place to improve the accuracy of forecasting for 2018/19.

 

8.4         Councillor Phillips asked why the Development Service Group had needed to spend £20,000 on external legal advice. The Head of People and Governance, Ms Jarlett, explained that there had been a number of vacancies in the Council’s Legal team, meaning that more work had needed to be outsourced, whilst there were a number of schemes in Development which required very complex specialist advice which the Council’s team could not provide.

 

8.5         Councillor Phillips noted the £167k shortfall in iCard, casual and hirings  income and asked whether the cost of issuing free iCards to children between the ages of 5 -16 had been quantified. Mr Chance explained that the financial impact of the scheme was still being assessed.

 

8.6         Councillor Knowles expressed concern about the performance of the Council’s procurement arrangements, noting that none of the £340k target had been achieved in 2017/18 and that a recent Internal Audit report had given only a limited assurance. Councillor Knowles commented that future budgets would need to include a realistic target for procurement savings. Mr Chance accepted that the target for 2017/18 had been overambitious but explained that much work had been done in the year which meant that he expected the 2018/19 target to be achieved.

 

8.7         Councillor Leeder was concerned that despite the final outturn being relatively close to the budget, Chart 1 showed that forecasting had not been accurate through the year. Mr Chance explained that provisions which had been made had not been needed and that the pace of lending to companies had been slower than anticipated which had also had an effect.

 

Resolved:

 

1.            that the contents of the 2017/18 Out-turn report be noted.

2.            that the budgets carried forward to 2017/18 for the General Fund (as detailed in paragraph 3.2 and Appendix 5 of the report), the Housing Revenue Account (as detailed in paragraph 8.2 and Appendix 7 of the report) and the Capital Programme (as detailed in paragraph 10.3 and Appendix 10 of the report) be noted.

3.            that the transfers to/from reserves (as detailed at paragraphs 4.9, 4.12 and 8.3 of the report) be noted.

9.

AG/18/03 Treasury Management Performance 2017/18 Year End pdf icon PDF 125 KB

Minutes:

9.1         The Head of Finance and Revenues, Mr Chance, explained that the main change to the Council’s Treasury Management over the past year had been the increase in loans made to the Council’s Wholly Owned Companies.

 

Resolved:

 

that the Treasury Management Operations for the period 1 April 2017 to 31 March 2018 be noted.

10.

AG/18/04 Statement of Accounts 2017/18 and the Annual Report to those charged with Governance pdf icon PDF 90 KB

Additional documents:

Minutes:

10.1      The Head of Finance and Revenues, Mr Chance, confirmed that the Accounts for 2017-18 had been closed and that a significant amount of information had subsequently been provided to the External Auditors.

 

10.2      The External Auditor, Mr Suter, apologised that the Audit Results Report had not been circulated with the original agenda and explained that this was because of new shorter deadlines for the publication of accounts.

 

10.3      Mr Suter explained that there was still more work to do on the Audit, with a small number of disclosure notes yet to be considered. Mr Suter said that the Council’s Finance staff had managed to complete their preparations for the Audit both earlier and to a higher standard than in previous years.

 

10.4      Mr Suter brought the Committee’s attention to a number of areas of significant risk, which were:

- The Potential for Management Override of Control

- The Risk of Fraud in Revenue and Expenditure Recognition

 

10.5      Mr Suter also highlighted that the Audit had spent some time considering the Valuation of Land and Buildings and that it had taken some time to get the relevant information. Mr Suter noted that a full valuation was to be carried out in 2018-19 and that the External Auditors had shared their requirements so that these could be met as part of the valuation.

 

10.6      Mr Suter explained that there had been a £44 million difference between the Suffolk Pension Fund’s estimated value and the actual valuation in March 2018. The Pension Fund Actuary had provided a revised IAS19 report which meant that there were no outstanding issues relating to the Council’s Pensions Liability.

 

10.7      Mr Suter highlighted that there had been changes to IFRS 9 and 15 which would need to be considered by the Council in 2018-19.

 

10.8      Mr Suter said that there had been significant investment into the Council’s Wholly Owned Companies and that a Value for Money Risk had been identified in relation to the adequacy of the governance arrangements and financial planning for these loans. Mr Suter explained that the External Auditors had given this area an adequate assurance rating but that there was scope to improve the Council’s Constitution, the recording of decisions related to the loans and the Council’s consideration of its minimum level of reserves.

 

10.9      Mr Suter explained that Ernst and Young had provided other services to the Council over the past year, but that these had been kept separate to Audit work and that the External Auditors were independent of the Council. Mr Suter confirmed that an Unqualified Opinion was expected to be given on the Council’s Statement of Accounts.

 

10.10   Councillor Knowles referred to page 11 of the report and asked what an ‘internal external expert’ was, and what the benefits of a valuation of the Council’s assets would be. Mr Suter explained that the report should simply read internal expert and that the person in question was a RICS qualified valuer. The valuation would both be useful because it  ...  view the full minutes text for item 10.

11.

AG/18/05 Review of IBC Corporate Risk Register 2018/19 pdf icon PDF 103 KB

Additional documents:

Minutes:

11.1      The Head of People and Governance, Ms Jarlett, explained that the Corporate Risk Register was reviewed monthly by CMT and was brought biannually to the Audit and Governance Committee. Ms Jarlett explained that a new corporate risk related to Major Health and Safety incidents had been identified and added to the register.

 

11.2      Councillor Fisher noted that CRR-4 ‘Failure to deliver the Council House Building Programme and provide access to the right type of housing’ had many control measures but that these were mostly ongoing. Councillor Fisher asked when mitigation would have taken place to reduce the risk level. Ms Jarlett explained that due to the nature of the mitigation measures these were likely to be ongoing but that the measures should prove their effectiveness by March 2019.

 

11.3      Councillor Leeder asked that those risks which are significantly greater than in 2017-18 either before or after mitigation be identified so that the committee could consider these. Ms Jarlett agreed to arrange for this analysis to be done.

 

Resolved:

 

1.         that the updated Corporate Risk Register 2018/19, included as Appendix 1 to report Ref No. AG/18/05, be agreed.

 

2.         that the Corporate Risk Register be reviewed by the Audit and Governance Committee at its meeting in December 2018.

 

12.

AG/18/06 Corporate Fraud - Annual Report 2017/18 pdf icon PDF 258 KB

Minutes:

12.1      The Audit Partnership Manager, Ms Martin, explained that the Corporate Fraud Team consisted of 2 full time Financial Investigators. The Corporate Counter Fraud Business Plan for 2017-18, which included the action plan for the service had been considered by the Committee in February 2018.  

 

12.2      Ms Martin explained that in 2017-18, 16 Right to Buy sales had been stopped as a result of the Corporate Fraud Team’s work. The team had also achieved good results on tenancy fraud, with 8 properties recovered, 4 more notices to quit served and 1 application prevented. Further work to embed an anti-fraud culture had been undertaken and this would continue.

 

12.3      Ms Martin explained that the work of the Corporate Fraud Team had delivered notional savings of £1,917,466.

 

12.4      Councillor Knowles said that he welcomed the active role of the Corporate Fraud Team and asked whether there was any scope to review Right to Buy sales which had taken place before the team had been set up. Ms Martin explained that work was being done Right to Buy on earlier years and that 1 property had already been recovered after its sale.

 

12.5      Mr Hanson asked what the Corporate Fraud Team cost to run. Ms Martin said that the service cost around £120,000 per annum.

 

12.6      Councillor Knowles asked whether the Corporate Fraud Team carried out any work on Single Person Council Tax Discounts. Ms Martin explained that a National Fraud Initiative covered fraud related to this discount and that the process for applying for a Single Person Council Tax Discount had been tightened to reduce the opportunity for fraud.

 

12.7      Councillor Phillips asked whether the Corporate Fraud Team had access to all relevant data. Ms Martin confirmed that the team could access all of the Council’s data using exemptions from the General Data Protection Regulation.

 

Resolved:

 

that the report be noted.

13.

AG/18/07 Internal Audit - Annual Report 2017/18 pdf icon PDF 185 KB

Minutes:

13.1      The Audit Partnership Manager, Ms Martin, explained that the Audit function continued to be delivered in partnership with Suffolk Coastal District Council and Waveney District Council. This arrangement meant that the team was better skilled than it could otherwise be and also ensured the function’s independence. Ipswich Borough Council’s Internal Audit function was supported by the equivalent of 5.5 full time staff.

 

13.2      Ms Martin reported that in 2017-18, Internal Audit had issued 32 reports. Areas of concern raised through the team’s work were included in the Council’s Annual Governance Statement. The two areas where governance and controls had been identified to need improvement were Asset Management and Procurement, as detailed in the report.

 

13.3      Ms Martin explained that her opinion as Head of Internal Audit, given under CIPFA requirements, was that Reasonable Assurance could be placed on the adequacy and effectiveness of the Council’s systems of governance, risk management and internal control in the year to 31 March 2018.

 

13.4      Councillor Fisher asked why the Maintenance and Contracts Review Process had been removed from the Internal Audit Team’s programme of work. The Audit Manager, Ms Ashdown, explained that the Maintenance and Contracts team had undertaken an internal service review which had been completed before the Audit could start. It had been assessed that completing the Audit would have been of no value.

 

13.5      Councillor Phillips commented that Asset Management and Procurement had been areas of concern for some years and expressed a hope that they would improve and not have to be noted in the 2018-19 Annual Governance Statement. Ms Martin explained that Internal Audit work was planned for these areas in the 2018-19 programme of work which should help to ensure that the necessary improvements were made.

 

13.6      Councillor Fisher asked whether it was concerning that no whistleblowing investigations had taken place during 2017-18. Ms Martin explained that only whistleblowing where formal protection was needed would be reported in this section. A number of issues had been brought to the attention of Internal Audit by staff but these had not been considered as whistleblowing. Ms Martin reassured the Committee that protections for whistleblowers were promoted amongst staff.

 

13.7      Councillor Leeder asked how Internal Audit’s programme of work was developed. Ms Martin explained that the team’s programme of work was aligned to the Corporate Risk Register as well as being driven by the team’s own detailed risk assessments which covered a wide range of factors including the monetary value of a service, staffing changes, the results delivered, computer systems used and whether outsourcing arrangements were used.

 

Resolved:

 

1.         that the Internal Audit performance/outturn for 2017/18, be noted.

 

2.         that the Head of Internal Audit’s Annual Opinion for 2017/18, be noted.

14.

AG/18/08 Internal Audit - Recently Issued Reports pdf icon PDF 96 KB

Additional documents:

Minutes:

Resolved:

 

that the contents of the Audit reports on the following be noted, and the recommendations within each report be endorsed:

 

1.     National Non Domestic Rates 2017-18 [SRPi015]

2.     Council Tax 2017-18 [SRPi016]

3.     Debtors 2017-18 [RM046]

4.     Real Asset Management ICT Key Controls 2017-18 [RM044]

5.     Creditors 2017-18 [RM045]

6.     Cash and Bank Reconciliations 2017-18 [RM047]

7.     Housing Benefits 2017-18 [SRPi017]

8.     NRB ICT Key Controls 2017-18 [SRPi018]

9.     Paris ICT Key Controls 2017-18 [RM042]

15.

AG/18/09 Audit & Governance Committee - Future Work Programme 2018/19 pdf icon PDF 77 KB

Additional documents:

Minutes:

15.1      Councillor Phillips suggested that the Committee could add items on Asset Management and Procurement to the work programme. Councillor Leeder noted that these issues would be reported to the committee following the completion of the planned Internal Audit reports and so did not need to be added to the work programme separately.

16.

Exclusion of Public

To consider excluding the public (including the Press) from the meeting during consideration of the following items under section 100 (A) of the Local Government Act 1972 as it is likely that if members of the public were present during that item there would be disclosure to them of exempt information as defined within paragraphs 3 & 4 of Part 1 of Schedule 12A of the Act.

 

Minutes:

Resolved:

 

that the public (including the Press) be excluded from the meeting during consideration of the remaining items under section 100 (A) of the Local Government Act 1972 as it was likely that if members of the public were present during these items there would be disclosure to them of exempt information as defined within paragraphs 3 & 4 of Part 1 of Schedule 12A of the Act.

 


 

NOT FOR PUBLICATION

17.

Unconfirmed Exempt Minutes of the Meeting held on 27 February 2018

18.

AG/18/10 Internal Audit - Status of Recommendations

19.

AG/18/11 Internal Audit - Exempt Recently Issued Reports