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AUDIT COMMITTEE

 

 

Minutes of a meeting held on 17th September, 2012.

 

Present:  Councillors J.C. Bird, J. Drysdale, K.J. Geary, K. Hatton and Mr. P.R. Lewis (Lay Member).

 

Also present: Mr. J. Golding (Grant Thornton UK LLP), Mr. S. Barry (Wales Audit Office) and Ms. G. Turner (Grant Thornton UK LLP).

 

 

336     APPOINTMENT OF CHAIRMAN –

 

Having regard to the Statutory Guidance for the Local Government Measure 2011 which stated that “the Chair of the Committee is to be decided upon by the Committee Members themselves.  It can be a Councillor or a Lay Member but, in the former case must not be a Councillor who belongs to a Group with Members in the Executive”, it was

 

RESOLVED – T H A T Councillor K. Hatton be appointed Chairman of the Audit Committee.

 

Councillor Hatton took the Chair.

 

 

337     APPOINTMENT OF VICE-CHAIRMAN –

 

RESOLVED – T H A T Mr. P.R. Lewis be appointed Vice-Chairman of the Audit Committee.

 

 

338     APOLOGY FOR ABSENCE -

 

This was received from Councillor Mrs. P. Drake.

 

 

339     MINUTES -

 

RECOMMENDED - T H A T the minutes of the meeting held on 23rd February, 2012 be approved as a correct record.

 

 

340     DECLARATIONS OF INTEREST -

 

No declarations were received.

 

 

341     REGULATORY PROGRAMME FOR PERFORMANCE AUDIT 2012 – 13 (MD) –

 

Committee received the Council’s Regulatory Plan which was produced annually by the Wales Audit Office. 

 

The Local Government (Wales) Measure 2009 and the Local Government Act 1999 required the Auditor General to carry out an annual Improvement Assessment to determine whether the Vale of Glamorgan was likely to comply with the requirements of Part 1 of the Measure.  This involved:

  • a review of the Council’s arrangements to secure continuous improvement
  • improvement studies of areas which may hinder improvement or transformation or give rise to inefficiencies
  • bespoke pieces of work related to the Council’s improvement objectives and arrangements
  • an audit of the Council’s published improvement plans and its self assessment of performance.

The Regulatory Plan outlined work to be undertaken in the Council during April 2012 and March 2013 by and on behalf of the Auditor General under the Local Government (Wales) Measure2009 and Parts 2 and 3A of the Public Audit (Wales) Act 2004.

 

A copy of the Regulatory Plan and timetable were attached to the report. 

 

Having reviewed the Regulatory Plan for 2012 – 13 it was

 

RECOMMENDED – T H A T Cabinet endorse the Regulatory Plan for 2012–13.

 

Reason for recommendation

 

In order to review and progress the Regulatory work programme.

 

 

342     2011 / 12 ANNUAL INTERNAL AUDIT OPINION (HARM) –

 

Committee were advised of the Head of Accountancy and Resource Management’s (as the Head of Internal Audit) annual opinion report on the overall adequacy of the Council’s internal control environment.

 

Attached at Appendix A to the report was a detailed report (including the outline for 2011–12) on the work undertaken by Internal Audit during the financial year 2011/12.  The purpose of the report was to satisfy the requirements of the Accounts and Audit (Wales) Regulations 2005 as amended and the Head of Internal Audit’s annual reporting requirements set out in the CIPFA Code of Practice for Internal Audit in Local Government in the United Kingdom 2006.  This Code specifies that the following information should be forthcoming:

  • include an opinion on the overall adequacy and effectiveness of the organisation’s control environment
  • disclose any qualifications to that opinion, together with the reasons for the qualification
  • present a summary of the audit work from which the opinion was derived, including reliance placed on work by other assurance bodies
  • draw attention to any issues the Head of Internal Audit judges particularly relevant to the preparation of the Annual Governance Statement
  • compare the actual work undertaken with the planned work and summarise the performance of the Internal Audit function against its performance measures and targets
  • comment on compliance with the Standards of the Code
  • communicate the results of the Internal Audit quality assurance programme.

The opinion contained within the report related to the system of internal control at the Council and the overall control environment in place.  The system of internal control was designed to manage risk to a reasonable level rather than to eliminate the risk of failure to achieve corporate / service policies, aims and objectives.  It could therefore only provide reasonable and not absolute assurance of effectiveness.  Attached at Appendix B to the report was the supporting evidence which listed all those assignments which had been completed during the year where an audit opinion had been applied. 

 

On the basis of Internal Audit work undertaken in 2011/12, and taking into account all available evidence, it was the opinion of the Head of Internal Audit that a satisfactory assurance level could be applied to standards of internal control at the Vale of Glamorgan Council for the year ended 31st March 2012. 

 

Members discussed the contents of the Opinion, and a number of issues were raised:

  • Paragraph 4.2 - it was requested that this information be presented in table form.
  • Table, Paragraph 5.1 - Members felt that the inclusion of the Job Numbers was irrelevant and that there was some overlap between the information contained in Paragraph 5.1 and that contained in Appendix B.  Additionally, it was suggested that only reviews which had resulted in an Assurance Level of C or less be reported.
  • The view was also expressed that the Committee should receive further reports concerning the Social Services budget, as appropriate.

RECOMMENDED -

 

(1)       T H A T the report on the 2011/12 Annual Internal Audit Opinion be noted.

 

(2)       T H A T Committee receive further reports on the Social Services budget, as appropriate.

 

Reasons for recommendations

 

(1)       To keep the Audit Committee informed.

 

(2)       To receive updates on the progress made in delivering the Social Services Budget Programme.

 

 

343     DRAFT ANNUAL GOVERNANCE STATEMENT 2011/12 (HARM) -

 

Committee considered the draft Annual Governance Statement with a view to recommending its adoption by the Leader of the Council and the Managing Director. 

 

The Annual Governance Statement (AGS) related to the mechanism used to demonstrate that, during the financial year ended 31st March, 2012 the Council had an adequate governance regime in place and all business was conducted in compliance with the existing arrangements.  However, significant events for developments relating to the AGS that occurred between the balance sheet date and the date on which the Annual Statement of Accounts was signed by the responsible financial officer should also be reported. 

 

A draft AGS for the 2011/12 financial year was attached to the report at Appendix A.  It had been drawn up with regard to the Code of Practice on Local Authority Accounting in the United Kingdom.  It also had regard to guidance issued by CIPFA/SOLACE in its publication 'Developing Good Governance in Local Government' and the Council's Code of Corporate Governance. 

 

The overall Annual Governance arrangements within the Vale of Glamorgan Council for the financial year 2011/12 were considered to be satisfactory.  However, issues relating to the continuing challenges facing the Council due to reductions in Welsh Government funding and a significant deterioration in the ability of the Social Services Directorate not only to achieve their set savings target, but also to remain within the overall budget as set was reflected in Section 11 - Significant Governance Issues of the draft AGS.

 

Having considered the draft Annual Governance Statement, views were expressed that whilst the Statement referred to robust procedures being in place, the Statement did not state what the outcomes were. 

 

Mr. Barry advised that a study was to take place across Wales in the coming months, the essence of which was to identify 'what happens on the ground'.  The results of the study would be reported to the Audit Committee in due course.  Members stated that they looked forward to receipt of the report. 

 

RECOMMENDED - T H A T the draft Annual Governance Statement for 2011/ 2012 be recommended for adoption by the Leader and the Managing Director. 

 

Reason for recommendation

 

To provide for a review of the governance framework and the system of internal control, which had been in place within the Council for the year ended 31st March, 2012.

 

 

344     AUDIT OF THE 2011/12 FINANCIAL STATEMENTS - REPORTING TO THOSE CHARGED WITH GOVERNANCE (MD) -

 

Committee were presented with the report of the Appointed Auditor, Anthony Barratt of the Wales Audit Office following the audit of the Council's Financial Statements for 2011/12. 

 

The report of the Appointed Auditor together with the 2011/12 Statement of Accounts incorporating all agreed amendments and final Letter of Representation was attached to the report.  The Annual Governance Statement that supported the Statement of Accounts had been the subject of a separate report to the Audit Committee.

 

The provisional findings of Grant Thornton UK LLP on behalf of the Appointed Auditor on the audit of the Financial Statements were that:

  • they had concluded on all the risks identified in the Annual Audit Outline
  • there were no concerns with the qualitative aspects of the Council's accounting practices and financial reporting
  • they did not encounter any significant difficulties during the audit
  • there were some uncorrected statements and matters significant to the oversight of the financial reporting process to be reported.

It was the intention of the Appointed Auditor to issue an unqualified audit report on the Financial Statements, once the relevant Council officers had provided a signed Final Letter of Representation. 

 

As part of the process, Mr. Golding enquired of the Members of the Committee if they were aware of any acts (or allegations) of fraud against the Council and was advised that no member of the Committee was aware of any such incidents.

 

RECOMMENDED - T H A T the report of the Appointed Auditor on the audit of the Council's Financial Statements for 2011/12 be approved and that the Financial Statements including the Final Letter of Representation be recommended for signature by those authorised.

 

Reason for recommendation

 

To ensure that the Members of the Audit Committee, as those charged with governance, have considered the results of the audit of the Council's Financial Statements for 2011/12.

 

 

345     CERTIFICATION OF GRANTS AND RETURNS 2010/11 (MD) -

 

The Council's External Auditors reported on the Grant work undertaken for 2010/11.

 

A summary of all claims and returns subject to certification was provided within a report attached at Appendix A to the report, together with the certification fee and outcome of the External Auditor's Review.  The key message from the review was that whilst the Council had generally adequate arrangements in place for the production and submission of its 2010/11 grant claims, the External Auditors had concluded that there was scope for improvement.  These improvements included:

  • consider training for those individuals having responsibility within their departments for letting contracts (however small) to ensure that they were aware of the correct procedures to be followed
  • the implementation of additional procedures to ensure that individual grant scheme rules were always adhered to throughout the Authority
  • the implementation of systems and controls to ensure that where the grant was passed to a third party to spend, that the organisation was complying with grant scheme rules by keeping adequate records of expenditure.

RECOMMENDED - T H A T the content of the report be noted.

 

Reason for recommendation

 

To facilitate monitoring of the audit function.

 

 

346     EXTERNAL AUDITORS ACCOUNTS AUDIT APPROACH MEMORANDUM (MD) -

 

Committee received the Council's External Auditors Accounts Audit Approach Memorandum 2011/12.

 

The report summarised the findings from the interim stage of Grant Thornton's work where they had considered the following:

  • the effectiveness of the internal audit function
  • internal Audit's work on the Council's key financial system
  • a review of close down procedures in preparation for the final accounts under International Financial Reporting Standards
  • review of Information Technology controls
  • the work of valuation experts employed during the accounting period
  • walk through testing and tests of controls to confirm whether controls are implemented as per Grant Thornton's understanding in areas where they had identified significant accounting assertion risks.

Overall, Grant Thornton had concluded the following:

  • that the Internal Audit Service continued to provide an independent and satisfactory service to the Council and that Grant Thornton could take assurance from this work in contributing to an effective internal control environment at the Council
  • Grant Thornton were pleased to note that there were no issues identified from the review of internal audit work and that the files reviewed were produced to a high standard
  • the Council had established a suitable timetable and expected to meet the deadline for submission of the accounts; Grant Thornton had also stated that the Council also expected to be able to provide detailed working papers to support the accounts at the start of their final accounts audit field work, as well as providing the draft Annual Governance Statement and explanatory foreword
  • no significant issues were noted and in-year internal controls were observed to have been implemented and operated satisfactorily in accordance with Grant Thornton's documented understanding
  • Grant Thornton's information systems specialist performed a high level review of the general IT control environment, as part of the overall review of the internal control systems;  it was concluded that, from the work undertaken to date, there were no material weaknesses which were likely to adversely impact on the Council's financial statements.

RECOMMENDED - T H A T the contents of the report be noted.

 

Reason for recommendation

 

To facilitate monitoring of the audit function.

 

 

347     INTERNAL AUDIT'S TERMS OF REFERENCE (HARM) -

 

Committee received the Internal Audit's Terms of Reference for 2012/13 for its consideration and approval.

 

Part of the Chartered Institute of Public Finance and Accountancy Code of Practice for Internal Audit in Local Government was guidance that the Council should have Terms of Reference for its internal audit.  Committee considered Terms of Reference for the Vale of Glamorgan Council's Internal Audit Section which were attached at Appendix A to the report.

 

The Terms of Reference set out a number of areas, including Responsibilities and Obligations, Reporting Lines and Relationships, Independence and Accountability amongst others.

 

The approval of the Terms of Reference was an important function of the Committee and was an outcome that was tangible.  The Terms of Reference would be reviewed annually and would be presented to the Committee for approval each year. 

 

RECOMMENDED - T H A T the 2012/13 Internal Audit Terms of Reference be approved.

 

Reason for recommendation

 

To keep the Audit Committee informed.

 

 

348     PROPOSED INTERNAL AUDIT ANNUAL PLAN 2012/13 (HARM) -

 

Committee considered the proposed 2012/13 Annual Audit Plan. 

 

The 2012/13 Annual Plan of Work had been formulated to ensure compliance with the Standards as contained within the Code of Practice.  The Plan had been based upon six main areas of audit coverage across each Directorate, encompassing Corporate Governance, Performance Management, Risk Management (excluding the insurance function), Anti-Fraud and Corruption (excluding Housing Benefit and Council Tax Benefit Fraud), Assurance and Value for Money.  A copy of the Plan was attached at Appendix A to the report which detailed the proposed Schedule of Work. 

 

In addition, attached at Appendix D to the report was the Internal Audit Strategy document for 2012/13.  It demonstrated how the Internal Audit Section would be delivered and developed in accordance with the Terms of Reference and how it linked to the Council's objectives and priorities.  The strategy would be reviewed and updated annually in consultation with stakeholders, namely the Audit Committee, Corporate Management Team, External Auditors and senior management. 

 

It was noted that the Plan had been formulated to take account of the combined Internal Audit Shared Service with Bridgend County Borough Council during 2012/13.  As a result, the Plan did not include productive days for Housing and Council Tax Benefit Fraud although this would continue to be overseen by the Principal Auditor and reported regularly to the Audit Committee.  It also did not include time for the Insurance function as this would no longer be included within the functions of Internal Audit but would continue to remain in the responsibility of the Head of Accountancy and Resource Management.

 

Taking into account the points set out above, the Plan provided for 1,510 productive days being delivered during 2012/12 which equated to approximately 9 full time equivalent employees.

 

RECOMMENDED - T H A T the 2012/13 Annual Audit Plan be approved.

 

Reason for recommendation

 

To facilitate the monitoring of the Internal Audit function.

 

 

349     FORWARD WORK PROGRAMME (HARM) -

 

Committee considered the proposed 2012/13 Forward Work Programme for the Committee.

 

In order to assist the Audit Committee in ensuring that due consideration had been given by the Committee to all aspects of their core functions, a proposed Forward Work Programme was attached at Appendix A to the report. 

 

RECOMMENDED - T H A T the 2012/13 Forward Work Programme be approved.

 

Reason for recommendation

 

To keep the Audit Committee informed.

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