AUDIT AND RISK SCRUTINY COMMITTEE

Minutes of the Meeting held on Thursday,25thMay 2017 at Worksop Town Hall

Present: Councillor R Carrington-Wilde (Chairman);

CouncillorsD Challinor,C Entwistle, G Freeman, A Simpson, M Storey, A D Tromans and C Troop.

Officers: D Hill, E Whittles and N Wilson.

Others present: A. Ali - RSM (Agenda Item Nos 6(a) and 6(b))

R. Pressley –KPMG (Agenda Item No 6(d))

(Meeting commenced at 6.30pm.)

The Chair welcomed all to the meeting and read out the fire alarm/evacuation procedure. There were no members of the public or press in attendance.

38.APOLOGIES FOR ABSENCE

There were no apologies for absence.

39.DECLARATIONS OF INTEREST BY MEMBERS AND OFFICERS

(a)Members

There were no declarations of interest by Members.

(b)Officers

There were no declarations of interest by officers.

40.MINUTES OF THE MEETING HELD ON 7TH FEBRUARY 2017

RESOLVED that the Minutes of the meeting held on 7thFebruary 2017 be approved.

41.MINUTES FOR ACTION AND IMPLEMENTATION

RESOLVED that the Minutes for Action be received.

42.OUTSTANDING MINUTES LIST

RESOLVED that the Outstanding Minutes List be received.

SECTION A – ITEMS FOR DISCUSSION IN PUBLIC

Key Decisions

None

Other Decisions

43. REPORT(S) OF THE DIRECTOR OF CORPORATE RESOURCES

(a)Internal Audit Progress Report Quarter 4 2016/17

Members were presented with information regarding the following internal audits:

1)NNDR (20.16/17)

2)Follow Up 2 (23.16/17)

3)Payroll (24.16/17)

4)Administration of the Choice Based Lettings Policy (25.16/17)

5)Council Tax (26.16/17)

6)Officer Expenses (27.16/17)

7)Mobile Device Management (28.16/17)

8)Budgetary Control & Setting (29.16/17)

9)Right To Buy (30.16/17)

10)Strategic Housing (31.16/17)

11)Treasury Management (32.16/17)

12)Safeguarding (33.16/17)

13)GIS (34.16/17)

14)Security Access Review (35.16/17)

15)Risk Management (36.16/17)

16)Corporate Governance (37.16/17)

17)Follow Up 3(38.16/17)

Mr Ali of RSM briefly outlined details of each of the internal audits and explained that 60 management actions have been agreed in total, of which two have been classified as High Risk, 30 as Medium Risk and 28 have been classified as Low Risk. The two ‘high’ priority management actions were in the audit of Safeguarding. There were no ‘red’ audit reports. The Internal Audit Plan for 2016/17 has been completed.

There were 15 positive opinions. Mr.Alireferredto the internal audits of Safeguarding and Corporate Governance, whichreceived a partial assurance. Management have accepted the findings of both audits and agreed action plans.

Members asked questions regarding safeguarding systems that had been put in place by the Council including staff training to recognise safeguarding issues. In response, it was stated that a corporate data systemhas been finalised for implementation but more detailed information will be circulated to Members. Also, Members asked for further clarification on the role of Licensing Committee in safeguarding and the issuing of taxi licences.

In response to questions the Corporate Governance internal audit, it was confirmed that the Corporate Risk Register has an action to map trees in the district. It was proposed that the minutes of the Bassetlaw District Council’s Health and Safety Committee be circulated to the Finance Manager and Internal Audit for information to assist the monitoring process.

RESOLVED that:

  1. The audit reports be received and the actions taken be noted.
  2. The Director of Corporate Services circulate information on the progress and implementationof staff training systems and safeguarding recording systems.
  3. The Chair of the Audit and Risk Scrutiny Committeewrite to the Chair of Licensing Committee and the Council Solicitor to provide an explanation of the actions that have beentaken in response to the internal audit actions on Safeguarding

4.The minutes of Bassetlaw District Council’s Health and Safety Committee be circulated to the Finance Manager and Internal Audit to inform actions in the Corporate Governance internal audit.

44.CHANGE OF AGENDA ORDER

The Chairman advised that there would be a change to the order of Agenda items to receive the information previously circulated to Members updating the Internal Audit Outstanding Service Recommendations 2016/17.

RESOLVED that Agenda Items be re-arranged to receive the information previously circulated to Members updating the Internal Audit Outstanding Service Recommendations 2016/17.

45. REPORT(S) OF THE DIRECTOR OF CORPORATE RESOURCES

(a)Internal Audit Outstanding Service Recommendations Quarter 4 2016/17

The Corporate Finance Manager updated the Committee regarding medium risk audits outstanding in the areas of:

  • Emergency Planning and Business Continuity (Business Impact Analysis)

(Original implementation date June 2016 - revised implementation date April 2017. Completed 2nd May 2017)

  • Emergency Planning and Business Continuity (Emergency Plan)

(Original implementation date September 2016 - revised implementation date July 2017)

  • Facilities Management (Requests for repairs and maintenance)

(Original implementation date October 2015 - revised implementation date previously April 2017 but amended to August 2017)

  • Payroll (ITrent System)

(Original implementation date March 2016 - revised implementation date previously April 2017 but superceded by a new action in Payroll Audit Report 2016/17)

  • Customer Services and One Stop Shop Areas (Queens Building)

(Original implementation date October 2016 - revised implementation date previously April 2017. Completed)

  • Customer Services and One Stop Shop Areas (Queens Building)

(Original implementation date June 2016 - revised implementation date previously March 2017. Ongoing)

  • Estates – Investment and Miscellaneous Properties(Information Systems)

(Original Implementation date April 2016 - revised implementation date March 2018)

Members raised concerns/asked questions regarding Emergency Planning and Business Continuity (Emergency Plan) and the ongoing contract issues on the lease agreementwith DWP, which has not been completed, to date. The Committee was advised that the Chief Executive is working with the DWP to resolve the legal issues. However, the Council is receiving rental income. It was agreed that clarification was required on the Council’s current legal position, the financial costs incurred in negotiating the lease internally and who is liable to pay and the financial benefit to the Council of the leasing arrangement.

The Chair, on behalf of the Committee, thanked all the officers in the Finance team for their hard work in reducing the number of Internal Audit Outstanding Service Recommendations from 120 to 8.

A. Ali explained that internal audit has worked closely with the Head of Property and Finance

and Corporate Finance Manager who have taken a pro-active approach. Internal audit will continue to do follow up work. In 2017/18 it has been agreed that all audit actions will be recorded and monitored in the Council’s performance management system COVALENT.

RESOLVED that:

  1. The progress of actions identified against the agreed medium risk recommendations be noted.
  2. The Head of Property and Finance provide financial information on the costs that the Council is incurring negotiating the lease agreement for the Customer Services and One Stop Shop Areas (Queens Building) and the financial benefit to the Council of the lease agreement.
  3. The Council Solicitor provide information on the Council’s current legal position in negotiating the lease agreement for the Customer Services and One Stop Shop Areas (Queens Building)
  4. The Head of Property and Finance pass on the congratulations of the Audit and Risk Committee to all officers in the Finance team for their hard work in reducing the number Internal Audit Outstanding Service Recommendations.

(b)Internal Audit Annual Report 2016/17

Members were presented with a formal report on the activities of Internal Audit during the financial

year 2016/17, which included the role of Internal Audit and the Governance Statement and an opinion on the overall adequacy and effectiveness of the Council’s internal control environment.

Mr. Ali reported that 38 internal audit reviews were undertaken in 2016/17. These comprised of 35 assurance reviews and three follow-ups (of which 8 were joint reviews with A1 Housing Bassetlaw Ltd). Of the 35 assurance reviews, 19 (55%) resulted in substantial assurance being provided, 11 (31%) resulted in reasonable assurance, 4 (11%) resulted in partial assurance, and 1 review relating to Creditors and E-Procurement (3%) resulted in no assurance being provided.

The overall opinion issued to Bassetlaw District Council for 2016/17 is that “The Council has an adequate and effective framework for risk management, governance and internal control. However, our work has identified further enhancements to the framework of risk management, governance and internal control to ensure that it remains adequate and effective.”

RESOLVED that the report be received and accepted as presented.

The Chairman thanked A. Ali for his attendance at the meeting.

(c)Changes to the Financial Statements and Accounting Policies for 2016/17 and Regulatory Changes for 2017/28

Members were presented with information on the changes to the main Financial Statements for the 2016/17 Financial year and the Accounting Policies used to create the Financial Statements for 2016/17.

The Head of Finance and Property and Corporate Finance Manager provided guidance to Members to understand the regulatory changes for the financial year 2017/18 and changes to the presentation of the financial information in 2016/17.

Regulatory Changes

The constitution of Audit and Risk Scrutiny Committee has been changed so that it approves the Statement of Accounts. The Council needs to change the way it works to meet the new statutory timescales for the production of the draft and final accounts in 2017/18. It is proposed that the Council uses an estimation technique and sets its own internal materiality figureof £250,000, which should portray a true and fair view of the accounts. Below this figure, the accounts would not be amended for factual information but above this figure, officers will use discretion to decide whether it is appropriate to amend the accounts.

Changes to the Financial Statements and Accounting Policies 2016/17

The Statement of Accounts is prepared in accordance with the CIPFA/LASAAC Code of Practice and Service Reporting Code of Practice for the particular year. For the financial year 2016/17, the Code has changed from 2015/16 and requires the Council’s Comprehensive Income and Expenditure Statement to be based on its organisational structure. In addition, the Council has to prepare a new statement based on an Expenditure Funding analysis. In order to comply with the new requirements, the Council has liaised with external audit who have agreed that the accounting policy in relation to overhead apportionment should be removed from the statement of accounts.

In response to questions, the Chairman advised the Committeethat ongoing guidance would be provided to Members to understand the new process.

RESOLVED that the Audit and Risk Scrutiny Committee:

  1. Approve officers’ recommendation of £250,000 as an internal materiality level, below which the Council would not look to amend its statement of accounts.
  2. Notes the changes to the Comprehensive Income and Expenditure statement and the new main statement – the Expenditure Funding Analysis.
  3. Approves the change in accounting policies to remove the policy in relation to overhead apportionment.

(d)Draft Statement of Accounts 2016/17

Members werepresented with the Council’s draft Statement of Accounts (incorporating the Annual Governance Statement) for the 2016/17 financial year.

The Corporate Finance Manager explained that Audit and Risk Scrutiny Committee is now the constituted body charged with approving the Statement of Accounts, as delegated from Council on 15th December 2016. The Committee has to consider whether the accountingpolicies are appropriate for the Council to use to account for its transactions and that they have been applied properly, and consider whether there are any concerns arising from the financial statements and audit reports that need to be brought to the attention of Council and consider the external auditors report. He highlighted key areas in the Unaudited Statement of Accounts the Bassetlaw District Council Annual Governance Statement 2016/17 to consider.

:

  1. The Narrative Report is the financial summary report, which has been produced, in a new plain English style. The net cost of services shows an underspend of £1.095 million in 2016/17
  2. Explanation of Financial Statements which describes the Core Statements in the Statement of Accounts
  3. Statement of Responsibilities for the Statement of Accounts which sets out the responsibilities of the Council and Chief Financial Officer
  4. Expenditure and Funding Analysis - comparing 2015/16 with 2016/17 balances increased by £3.362 million which has been appropriated into reserves.
  5. Core Financial Statements
  • Comprehensive Income and Expenditure Statement - comparing 2015/16 with 2016/17 there has been a significant increase in net expenditure to £67.696m. In response to a question, it was explained that the discount rate applied to the valuation of social housing increased from 34% of market rate in 2015/16 to 42% in 2016/17 producing a revaluation increase of £64.346million.
  • Movement in Reserves Statement – shows an increase in usable reserves in 2016/17 of £5.6 million and £62 million increase of unusable reserves.
  • Balance Sheet - the Council’s assets have increased by £76.136m in 2016/17 due to the revaluation of social housing. In response to a Members comment, it was agreed that the Corporate Finance Manager look at the possibility of reporting the 2016/17 change to the discount rate applied to the valuation of social housing in the Narrative Report.
  • Cash Flow Statement records the increase in cash and cash equivalents to £17,887,000 at 31st March 2017 from £9,558,000 at 31st March 2016, an increase of £8.3m.

6.Supplementary Statements including the Housing Revenue Account, Collection Fund Account, Council Tax base and National Non-Domestic Rates (NNDR)

7. Notes to the Core Financial Statements including Accruals of Income and Expenditure, Exceptional Items, Events after the Balance Sheet Date, Property Plant and Equipment, Depreciation, Provisions, Officers’ Remuneration and Related Parties

8.Accounting Policies – the 22 policies provide the framework

Members raised questions regarding the Valuation Techniques to Determine Level 2 Fair Values for Surplus Assets with reference to land in Retford. The Head of Finance and Property explained that the value in the accounts might not reconcile with the sale value as the accounting policy isprescribed with a prudent view of valuation. The Chairman added that the criteria for valuing land as an asset are not the same as the criteria for market value. He requested that the Head of Finance and Property circulate the Council’s policy on the sale of land and if possible amend the information in the Notes to the Core Financial Statements to include details of the Council’s policy.

In response to a question on investing and financing activities, the Head of Finance and Property advised that major difference in net cash flows between 2015/16 and 2016/17 was due to the authority making use of another Money Market Fund (in accordance with the Treasury Management Policy) CCLA which increased the options for investment. This fund ensures that cash is available with less than 24 hours notice, and hence can be classed as cash and cash equivalent, rather than investing with the Debt Management Organisation (which is a Government Agency) where the investment is for a set period, and hence cannot be classed as cash or cash equivalent.

RESOLVED that:

1. Members receive the Draft Statement of Accounts and consider and review.

2. The Corporate Finance Manager look at the possibility of reporting the 2016/17 change to the discount rate applied to the valuation of social housing in the Property, Plant and Equipment note to the accounts.

3. The Head of Finance and Property circulate the Council’s policy on the sale of land and if possible amend the information in the Notes to the Core Financial Statements to include details of the Council’s policy.

SECTION B – ITEMS FOR DISCUSSION IN PRIVATE

Key Decisions

None.

Other Decisions

None.

46.ANY OTHER BUSINESS WHICH THE CHAIR CONSIDERS TO BE URGENT

As there was no further business to consider, the Chair closed the meeting.

(Meeting closed at8.10pm).