Top

Top

Agenda Item No.

 

AUDIT COMMITTEE

 

Minutes of a meeting held on 25th February, 2013.

 

Present: Councillor K. Hatton (Chairman); Mr. P.R. Lewis (Vice-Chairman); Councillors J.C. Bird, J. Drysdale, K.J. Geary and A.C. Williams.

 

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

 

 

888     APOLOGY FOR ABSENCE -

 

This was received from Councillor Mrs. P. Drake.

 

 

889     MINUTES -

 

RECOMMENDED - T H A T the minutes of the meeting held on 19th November, 2012 be approved as a correct record.

 

 

890     DECLARATIONS OF INTEREST -

 

No declarations were received.

 

 

891     WELFARE REFORM RISK (CRMG) –

 

In response to a request of the Audit Committee at its meeting held on 19th November 2012, a full report was presented detailing the risk management process using as an example, Welfare Reform risk.

 

At its meeting on 19th November 2012, the Audit Committee had been presented with the Corporate Risk Register, completed risk templates for each corporate risk and an undated copy of the Corporate Risk Management Strategy.  In order to further understand how the risk management process was carried out in practice, the Committee requested to be provided with a full report detailing the work being undertaken in relation to the Welfare Reform risk. 

 

The Corporate Risk Template detailed the Groups that had been established to manage the risk:

 

·               the Welfare Reform Working Group

·               the Member Task and Finish Group.

 

The risk was subdivided into separate, smaller risks, according to the number of different reforms due to be implemented.  These had then been given a priority status in accordance with the proximity of the changes, as well as whether the Council had the responsibility for implementing the change.  These were detailed in the Corporate Risk Template and subdivided risk table at Appendix 1, which also looked at the effect upon both customers and the Council, together with actions for mitigation.  Each subdivided risk area was categorised high, medium or low.

 

A second table at Appendix 2 to the report categorised the subdivided risks by the cross cutting issues: staffing, ICT and financial, in order to highlight these affected areas.

 

A stakeholder group had been set up with other affected agencies (Citizens Advice Bureau, Credit Union, Jobcentre Plus, housing associations) in order to work in partnership to mitigate the risk.

 

Affected service areas had also developed individual action plans to address the problems that were relevant to them.  An example of the Action Plan for Benefit Changes was attached at Appendix 3 to the report.

 

Corporate risks were monitored by the Corporate Risk Management Group which met on a quarterly basis.

 

RECOMMENDED – T H A T the ways in which the Corporate Risk Management Strategy was being followed in order to mitigate the risks identified in relation to the implementation of Welfare Reform legislation be noted.

 

Reason for recommendation

 

To facilitate the monitoring of the work of the Corporate Risk Management Group.

 

 

892     CERTIFICATION OF GRANTS AND RETURNS 2011-12 (MD) –

 

Committee received the Council’s External Auditor’s report on the Grant work undertaken for 2011-12. 

 

The Council received and certified 21 grant claims and returns from Government departments and other bodies requiring external audit certification in 2011-12, supporting income in excess of £116m. 

 

Grant Thornton UK LLP (GT), as the Council’s External Auditors and acting agents of the Wales Audit Office, is required to certify the claims submitted by the Council.  This certification typically took place some 6-12 months after the claim period and represented a final but important part of the process to confirm the Council’s entitlement to funding.

 

The report summarised the External Auditor’s overall assessment of the Council’s management arrangements in respect of the certification process and drew attention to significant matters in relation to individual claims.

 

The summary of all claims and returns subject to certification was provided 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 the Council had adequate arrangements in place for the production and submission of its 2011-12 grant claims.  None of the claims were qualified.

 

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

 

Reason for recommendation

 

To facilitate monitoring of the audit function.

 

 

893     ANNUAL FINANCIAL AUDIT OUTLINE (MD) –

 

Committee received the External Auditor’s Annual Financial Audit Outline for 2012-13. 

 

The Annual Financial Audit Outline had been prepared by the Council’s External Auditor to meet the requirement of the auditing standards and proper audit practices.  It set out the work to be undertaken by the Appointed Auditor at the Vale of Glamorgan Council under the Public Audit (Wales) Act 2004.

 

The formal roles and responsibilities of the Appointed Auditor were outlined in Appendix A of the report.  The Appointed Auditor was required to examine and certify the accounts of the Council, satisfy himself that the accounts gave a true and fair view of the Council’s financial position, comply with all the relevant legal requirements and had been prepared in accordance with proper practice.

 

In addition, the Appointed Auditor was required to satisfy himself that the Council had made proper arrangements for securing economy, efficiency and effectiveness in its use of resources; certify that the audit had been completed in accordance with the Public Audit (Wales) Act 2004 and certify claims and returns.

 

The report highlighted the key elements of the audit engagement at the Vale of Glamorgan Council and confirmed that there were no known threats to the independence of the Appointed Auditor or other audit staff.

 

The planned work addressed identified risks and was based on the information currently available.  Changes to the Outline may be required if significant new risks emerge.  However, no changes would be made without first discussing them with officers and, where relevant, those charged with governance.

 

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

  

Reason for recommendation

 

So that the Committee are aware of the work to be undertaken by the Council’s External Auditor Grant Thornton UK LLP.

 

 

894     UPDATE ON THE REGULATORY PROGRAMME FOR PERFORMANCE AUDIT 2012-13 (MD) –

 

Committee were presented with an update on the Regulatory Programme as produced 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) Measure 2009 and Parts 2 and 3A of the Public Audit (Wales) Act 2004.

 

A copy of the Regulatory Programme update was attached at Appendix 1 to the report.

 

RECOMMENDED – T H A T the update on the Regulatory Programme for Performance Audit 2012-13 be noted.

 

Reason for recommendation

 

In order to review and progress the regulatory work programme.

 

 

895     AUDITOR GENERAL FOR WALES: IMPROVEMENT ASSESSMENT AUDIT LETTER (HARM) –

 

Committee were advised of the results of the audit and assessment work by the Auditor General for Wales (AGW) in relation to whether the Council had discharged its duties and met the requirements of the Local Government (Wales) Measure 2009 ('the Measure').

 

The AGW had a duty under the Measure to undertake and report upon his audit and assessment work in relation to whether the Vale of Glamorgan Council (the Council) had discharged its duties and met the requirements of the Measure.

 

Specifically, this included the AGW’s views on:

 

·               whether the Council had discharged its statutory duties in respect of improvement reporting

·               the Council’s arrangements to undertake effective self evaluation

·               further proposals for improvement and / or recommendations.

 

The AGW’s letter was attached at Appendix A to the report.  Matters of note included:

 

·               The Council had discharged its improvement reporting duties under the Measure.  There was scope for the Council to act more in accordance with Welsh Government guidance by:

-                 Explaining more fully on how the Council had evaluated its performance e.g. peer reviews ,scrutiny assessment or benchmarking

-                 Performance indicators were the prime measure of achievement used in the Plan, however other methods used and developed by the Council should be utilised in the future to present a fuller picture of service quality and of users’ experiences.

-                 The Council should include assessment of performance against other comparable bodies.

-                 Reporting on collaboration should also include details of whether a collaborative activity had achieved its intended outcome and whether collaboration supported the achievement of improvement objectives.

·               The Council was improving its performance reporting arrangements by developing outcome-focused measures but the information available for 2011/12 meant the Plan could not provide a complete picture of performance and there was scope to make the Plan more readily accessible.

·               No proposals for improvement were being made in the letter however the AGW would continue to monitor and report on the progress made by the Council in implementing the proposals set out in previous reports and letters.

 

RECOMMENDED – T H A T the results of the Improvement Assessment and Audit be noted and that the contents of the Auditor General’s letter be referred to Cabinet for noting and action, where necessary.

 

Reason for recommendation

 

To keep the Audit Committee apprised and to provide for scrutiny and review of the Auditor General’s letter.

 

 

896     PUBLIC SECTOR INTERNAL AUDIT STANDARDS (HARM) –

 

Committee received a report which provided a summary briefing on the new Public Sector Internal Audit Standards (PSIAS) which the Chartered Institute of Public Finance and Accountancy (CIPFA) had developed in collaboration with the Chartered Institute of Internal Auditors (CIIA) and which would come into force from 1st April 2013.

 

The new Standards were intended to promote further improvement in the professionalism, quality and effectiveness of internal audit across the public sector.  They reaffirmed the importance of robust, independent and objective internal audit arrangements to provide Accounting Officers with the key assurances they need to support them both in managing the organisation and in producing the annual governance statement.

 

Overall, it appeared that most of the content within the Standards looked to be a continuation of existing best practice.  The report listed some of the key points for the consideration of the Audit Committee, i.e.:

 

·               The Scope of the PSIAS applied to all internal audit service providers whether in-house, shared services or outsourced.  They set out that the provision of assurance was the primary objective of internal audit.  The Head of Audit was required to give an annual internal audit opinion based on an objective assessment of the framework of governance, risk management and control.

·               All Internal Auditors in the United Kingdom public sector organisations were required to conform to the Code of Ethics of both the Institute of Internal Auditors and their own professional organisation.

 

There was a requirement that the purpose, authority and responsibility of the internal audit activity was formally defined in an internal audit charter which was subject to regular review and there was a requirement for the Head of Audit to confirm to the appropriate part of the organisation on an annual basis the organisational independence of the internal audit activity.

 

Finally, PSIAS stipulated that the quality assurance and improvement programme must include both internal and external assessments.  External assessments must be conducted at least once every five years by a qualified, independent assessor or assessment team from outside the organisation.

 

Implementation of the Standards was not expected to involve considerable work; however, some minor revision to the Internal Audit Terms of Reference and the formulation of an Internal Audit Charter would be required.

 

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 copy of the Public Sector Internal Audit Standards was attached at Appendix A to the report.

 

RECOMMENDED – T H A T the Public Sector Internal Audit Standards (PSIAS) be adopted with effect from 1st April 2013.

 

Reason for recommendation

 

To keep the Audit Committee informed and to ratify the adoption of the PSIAS.

 

 

897     INTERNAL AUDIT - OUTTURN REPORT – APRIL TO DECEMBER 2012 (HARM) –

 

Committee were informed of actual Internal Audit performance against the 2012-13 Plan for the period 1st April to 31st December 2012. 

 

The actual position for the nine months compared against the Plan was detailed at Appendix A to the report.

 

The figures showed that 1,059 actual productive days had been achieved, which equated to 93.5% of the overall planned productive time available.  The shortfall of 73 days was directly attributable to sickness absence and staff shortages.

 

A summary of audits completed during the period April to December 2012 was attached at Appendix B to the report.  This, together with Appendix A, provided the Committee with details of the reviews completed, together with an overall Audit Opinion which would support the annual audit opinion at the end of the financial year.

 

Overall, with the exception of eight reviews where either no assurance or limited assurance could be given, the remainder of the reviews completed during the nine months of the financial year had not identified any significant weaknesses in the system of internal financial control.  Of the eight reviews were weaknesses had been identified, these related to Waste Management ; Waste Bags; St. Helens RC Junior School, Energy Management; Cowbridge Comprehensive School – Unofficial Fund; Palmerston – loss of income, Intake and Family Support and Leisure Services Contract Monitoring. 

 

From a Governance perspective, the Leisure Services Contract Monitoring review was viewed as a major issue and as a result Internal Audit will be closely monitoring arrangements to deal with the control issues.  The remaining seven reviews would receive follow up visits during the last quarter of the financial year but it was not envisaged that any of these would have a detrimental effect on the Council’s Governance arrangements.

 

RECOMMENDED – T H A T the actual Internal Audit performance during the nine months of the financial year be noted.

 

Reason for recommendation

 

To facilitate monitoring of the audit function.

 

 

898     NATIONAL FRAUD INITIATIVE (HARM) –

 

Committee were advised of the National Fraud Initiative (NFI) 2012/13. 

 

The NFI is a biennial data match exercise conducted by the Audit Commission.  All local authorities had a statutory obligation to participate in this exercise.  The Wales Audit Office monitor activity in Wales and had reported that the 2008/09 exercise had produced savings of £4.5m. and the 2010/11 exercise produced savings of £6m. 

 

The purpose of the exercise was to match data sets provided by the Council with the Council’s own internal data and with data sets provided by outside bodies such as other Councils across the UK, the Department for Work and Pensions, Immigration and the National Health Service in order to identify fraud and error.

 

Data sets provided to the Audit Commission by the Council were: Payroll; Trade Creditors payment history and standing data; Housing; Housing Benefits; Private Supported Care Home residents; Transport passes and permits – including residents parking, blue badges and concessionary travel; Insurance claimants; Licences including market traders, taxi drivers and personal licence to supply alcohol.

 

The matched data became available via a secure web application on 29th January 2013.  Matches on the secure webs application were prioritised, based on the quality of the matched data and the significance of the match. For instance, a match of national insurance numbers was considered a top quality match, as was any match involving immigration data.  In addition, a filter had been incorporated by the Audit Commission in order to identify those matches that were recommended as the most likely to lead to a result and also to enable matches with the highest monetary value and therefore the greatest potential saving, to be prioritised.

 

A total of 4,177 matches were received.  Of these, 2,309 related to trade creditors and 177 were recommended matches.  The purpose of these matches was to identify potential duplicate creditors, invoices and payments. 

 

The remaining 1,868 matches related to Payroll, Housing Benefits, Insurance claimants, housing rents and licence holders, blue badge holders and of these matches, 313 remained once the recommended filter had been applied.

 

Initial work on these filtered matches had commenced and results would be reported to the Audit Committee in due course.

 

It was noted that for this current exercise, there were no residential care home, residential parking permit or concessionary travel permit matches received and blue badge matches were minimal, only 9 being received and all of these as a result of customers requesting a blue badge from two local authorities at the same time.  The lack of matches in these areas was due to the Council’s introduction of 'tell us once'.  When a death was notified to Registrars, permission was sought to share the information with different agencies including Council Departments and the Department for Work and Pensions (DWP).  Permits could then be cancelled in a timely manner and matches with the DWP deceased records were avoided.

 

Matches included some Housing Benefits claimants where Income Support or Jobseekers Allowance was in payment.  Potentially fraudulent claims identified would be investigated under joint working arrangements currently in place with the DWP.

 

In October 2013, Council Tax records would be matched to the Electoral Register in order to identify cases where single person discount was being improperly claimed.

 

RECOMMENDED – T H A T the contents of the report be noted and that further reports be presented to the Committee in order to provide updates on the progress of NFI 2012/13.

 

Reason for recommendation

 

To be informed of the progress of the NFI as part of the data match exercise in 2012/13.

 

 

899     SINGLE FRAUD INVESTIGATION SERVICE (SFIS) (HARM) –

 

Committee were advised of progress with the Single Fraud Investigation Service (SFIS). 

 

The Department for Work and Pensions (DWP) and Her Majesty’s revenues and Customs (HMRC) had produced a strategy for 'Tackling Fraud and Error in Government'.  The aim was to reduce fraud and error overpayments in the Welfare System by one quarter, i.e. £1.4 billion by March 2015.

 

 A key part of the strategy was the launch of the SFIS to provide for investigation covering the totality of welfare benefit fraud.  Investigators would have powers to investigate all social security benefit, housing benefit and tax credit claims. 

 

In April 2013, Council Tax Benefit would be replaced by the Council Tax Reduction Scheme.  This new scheme would be administered directly by the Council and would not be included under the SFIS remit.  Investigation of fraud involving this scheme would be the responsibility of the Council and legislation was in place to allow this.

 

The formation of SFIS would bring together expertise from DWP, HMRC and local authorities with the aim of all working together under a single policy and set of operational procedures.

 

A consultation was conducted in September 2011 amongst the participants and a decision was taken that in the short term, Investigators would stay with their original employing organisation, retaining their terms and conditions, while working under one banner of SFIS with the planned start date of April 2013. 

 

However, against a background of wider welfare reform, it had not been possible to implement SFIS as quickly as planned.  The Welfare Reform Act 2012 would see the introduction of Universal Credit as a replacement for Income Support, Jobseekers Allowance, Working Tax Credits, Child Tax Credits, Employment Support Allowance and Housing Benefit.

 

A Household Benefit Cap would restrict the maximum amount of benefit that could be received by a family; an accommodation size restriction would ensure customers were only paid for the size of accommodation they need; payments would change to monthly from weekly to encourage budgeting; rent payments would no longer be paid directly to landlords but instead to the tenants; Disability Living Allowance would change to Personal Independence Payments with a much stricter assessment criteria; Council Tax Benefit would be replaced by a Local Council Tax Reduction Scheme and Pension Credits would have an additional Housing and Child premium element.

 

All of these changes were individually large projects and this was the biggest reform to Welfare since it began.  The majority of these Welfare reforms were either at pilot stage or due to start being phased in within the next year and SFIS was a vital part of the overall strategy.

 

There were currently four pilots underway for SFIS around the UK.  These were being used to test different ways of working, a single investigation policy and the new legislation.  A single management board should be in place by April 2013 and this would guide the partnership approach. 

 

The pilots would be constantly evaluated and new ones added to ensure that new processes, emerging IT systems and the legislation were tested thoroughly and this should allow for a planned roll out of SFIS to all participants from April 2014 to March 2015. 

 

The SFIS project was drawing expertise from DWP, HMRC and local authorities and as a result, a Group Auditor based within the Internal Audit Section’s HB/CTB Fraud Investigation Team was to be seconded for six months to the project team, commencing on 4th March 2013.

 

RECOMMENDED – T H A T the contents of the report be noted and that further reports be presented to the Committee in order to provide updates on the progress of the Single Fraud Investigation Service.

 

Reason for recommendation

 

To be informed of the progress of the Single Fraud Investigation Service and the likely effect on service provision.

 

 

900     UPDATE OF THE FORWARD WORK PROGRAMME (HARM) –

 

Committee received the updated 2012/13 Forward Work Programme.

 

Committee were advised of the Terms of Reference of the Audit Committee, namely:

 

·               To consider the External Auditor's annual report and other relevant reports and to make recommendations on their implementation to Cabinet and / or Council as appropriate;

·               To consider specific reports as agreed with the External Auditor and to make recommendations on their implementation to Cabinet and / or Council as appropriate;

·               To maintain an overview of contract procedure rules, financial regulations and officers' Code of Conduct and behaviour and to make recommendations to Cabinet and / or Council as appropriate;

·               To monitor Council policies on "Raising Concerns at Work" and the anti-fraud and bribery strategy and the Council's complaints procedure and to make recommendations to Cabinet and / or Council as appropriate;

·               To oversee the production of the Council's Annual Governance Statement and to recommend its adoption;

·               To review the annual Statement of Accounts.  Specifically, to consider whether appropriate accounting policies have been followed and whether there are concerns arising from the financial statements or from the audit that need to be brought to the attention of the Council;

 

with delegated powers:

 

·               To consider and approve the Head of Internal Audit's annual report and opinion, and a summary of internal audit activity (actual and proposed) and the level of assurance it can give over the Council's risk management, internal control and corporate governance arrangements;

·               To consider and approve summaries of special internal audit reports as requested;

·               To consider and approve reports dealing with the management and performance of the providers of internal audit services;

·               To consider reports from internal audit on agreed recommendations not implemented within a reasonable timescale and approve necessary remedial action;

·               To comment on the scope and depth of external audit work and to ensure it gives value for money;

·               To commission work from internal and external audit;

·               To review and determine on any issues referred to it by the Head of Paid Service, Section 151 Officer, Monitoring Officer or by a Director, or any Council body;

·               To approve measures to ensure the effective development and operation of risk management and corporate governance in the Council;

·               To consider the Council's arrangements for corporate governance and to approve necessary actions to ensure compliance with best practice;

·               To approve the External Auditor's report to those charged with governance on issues arising from the audit of accounts.

 

The core functions of an effective Audit Committee are:-

 

·               To consider the effectiveness of the Council's risk management arrangements, the control environment and associated anti-fraud and corruption arrangements;

·               Seek assurance that action is being taken on risk related issues identified by auditors and inspectors;

·               Be satisfied that the Council's assurance statements properly reflect the risk environment and any actions required to improve it;

·               Oversee the work of internal audit (including the annual plan and strategy) and monitor performance;

·               Review summary internal audit reports and the main issues arising, and seek assurance that action has been taken where necessary;

·               Receive the annual report of the Head of Accountancy and Resource Management as the Head of Audit;

·               Consider the reports of external audit and inspection agencies, where applicable;

·               Ensure that there are effective relationships  between external and internal audit, inspection agencies and other relevant bodies, and that the value of the audit process is actively promoted;

·               Review the financial statements, External Auditor's opinion and reports to Members, and monitor management action in response to the issues raised by external audit.

 

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

 

Having considered the updated 2012/13 Forward Work Programme, it was

 

RECOMMENDED – T H A T the updated 2012/13 Forward Work Programme be endorsed.

 

Reason for recommendation

 

To keep the Audit Committee informed.

 

 

Share on facebook Like us on Facebook