Minutes of a meeting held on 29th April, 2013.
Present: Councillor K. Hatton (Chairman); Mr. P.R. Lewis (Vice-Chairman) Councillors Mrs. P. Drake, J. Drysdale, K.J. Geary, A.C. Williams and M.R. Wilson
Also present: Mr. J. Golding (Grant Thornton UK LLP), Mr. S. Barry (Wales Audit Office) and Ms. G. Turner (Audit Manager, Grant Thornton UK LLP).
1105 APOLOGIES FOR ABSENCE -
These were received from Councillor J.C. Bird.
1106 MINUTES -
RECOMMENDED - T H A T the minutes of the meeting held on 25th February, 2013 be approved as a correct record.
1107 DECLARATIONS OF INTEREST -
No declarations were received.
1108 INTERNAL AUDIT SHARED SERVICE (IASS) AUDIT PLANNING – PRESENTATION –
Committee received a presentation which outlined:
· the scope of Internal Audit section’s work
· key core deliverables for 2013/14
· demonstrated the approach to developing the Annual Audit Plan.
The scope of Internal Audit’s work involved a control environment comprising:
· risk management
· control and governance.
The presentation showed that the key core deliverables for 2013/14 comprised:
· delivery of the Annual Plan
· be responsive to transformational change
· meet the requirements of the External Auditors
· risk based approach
· implementation of Audit Recommendations
· counter fraud
· support the Audit Committee.
The presentation also demonstrated the approach to developing the Annual Audit Plan.
Members of the Committee were offered an opportunity to ask questions on the presentation.
RECOMMENDED – T H A T the contents of the presentation be noted.
Reason for recommendation
Having regard to the contents of the presentation.
1109 EXTERNAL AUDITORS PROGRESS REPORT (MD) –
The External Auditors’ report on progress in delivering their responsibilities as the Council’s External Auditors to the Audit Committee was submitted.
The update report on progress had been prepared by the Council’s External Auditors. It set out the work being undertaken by the Appointed Auditor at the Vale of Glamorgan Council under the Public Audit (Wales) Act 2004 and which provided an overview of progress to date.
The report was attached at Appendix A to the report and provided a position statement on the External Auditors progress in delivering their responsibilities as at 29th April 2013.
RECOMMENDED – T H A T the content of the report be approved.
Reason for recommendation
So that the Committee are aware of the work being undertaken by the Council’s External Auditor, Grant Thornton UK LLP.
1110 WALES AUDIT OFFICE – PRODUCTION OF THE ANNUAL GOVERNANCE STATEMENT – NATIONAL STUDY UPDATE (HARM) –
Committee received a report which submitted the findings of the Wales Audit Office National Study on the production of Annual Governance Statements insomuch as they relate to the Vale of Glamorgan Council.
From the 2010/11 financial year, local authorities had been required to prepare an Annual Governance Statement. This encompassed more than just a review of internal control; it also included a more detailed review of the wider governance framework.
Each year, the Wales Audit Office developed and presented a programme of work to be delivered by and on behalf of the Auditor General under various legislative measures. During 2012/13, the Auditor General had undertaken a study to evaluate the effectiveness of authorities’ reviews of governance across Wales. This was with a view to identifying whether it could be improved to give assurance that they were reliable mechanisms of self evaluation.
Attached at Appendix A to the report were the findings of the review insomuch as they related to the Council. It provided Committee with the key messages arising from the review, the overall outcome of which was extremely positive for the Council.
RECOMMENDED – T H A T the findings of the Wales Audit Office National Study on the production of Annual Governance Statements insofar as they related to the Vale of Glamorgan Council be noted.
Reason for recommendation
To provide the Committee with an overall level of assurance on the effectiveness of the Council’s governance framework and, in particular, the production of the Annual Governance Statement itself.
1111 UPDATE OF THE FORWARD WORK PROGRAMME 2012-13 (HARM) –
Committee were presented with the updated 2012/13 Forward Work Programme for the Audit 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, an updated Forward Work Programme was attached at Appendix A to the report.
RECOMMENDED – T H A T the updated 2012/13 Forward Work Programme be noted.
Reason for recommendation
To keep the Audit Committee informed.
1112 2012/13 ANNUAL INTERNAL AUDIT OPINION (HARM) –
Committee received the Head of Accountancy and Resource Management (HARM) (as the Head of Internal Audit) annual opinion report on the overall adequacy of the Council’s internal control environment.
The report gave a brief description of the role of Internal Audit, the control environment within which Internal Audit operated and also provided a summary of work carried out during the year to 31st March 2013. A statement of overall opinion on the internal control environment was also given in support of the Annual Governance Statement which the Council was required to include with the Statement of Accounts.
Attached at Appendices A and B to the report were detailed reports (including the outturn for 2012-13) on the work undertaken by Internal Audit during the financial year 2012/13. 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. The Code specified in Section 10.4 that the following information should be forthcoming:
· include an opinion of 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 judged 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. Included within Appendix B to the report was the supporting evidence with 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 2012/13 and taking into account all available evidence, it was the opinion of the Head of Accountancy and Resource Management (as the Head of Internal Audit) that a reasonable assurance level could be applied to the standards of internal control at the Vale of Glamorgan Council for the year ended 31st March 2013.
Key governance, risk management and internal control issues had been identified during the year and related specifically to compliance matters as outlined in paragraph 2.3 of Appendix A to the report, in particular concerns relating to the adequacy and effectiveness of the financial and quality monitoring arrangements surrounding the contractual partnership and arrangements between the Council and the Leisure Centres’ service provider. It was essential to the Council’s interests, and to mitigation risk, that robust arrangements were in place. In addition, with significant savings required throughout the Council, there was an inherent risk of breakdown in the systems of control particularly where roles, responsibilities and systems were changing.
(1) T H A T the report on the 2012/13 Head of Audit’s Annual Internal Audit Opinion be approved.
(2) T H A T any concerns about the effectiveness of the financial and quality monitoring arrangements surrounding the contractual partnership and arrangements between the Council and the Leisure Centres’ service provider be the subject of a further report to this Committee if appropriate.
Reason for recommendations
(1&2) To keep the Audit Committee informed.
1113 COMPLIANCE OF INTERNAL AUDIT TO THE STANDARDS AS CONTAINED WITHIN THE CIPFA CODE OF PRACTICE FOR INTERNAL AUDIT IN LOCAL GOVERNMENT IN THE UNITED KINGDOM 2006 (HARM) –
Committee received a report which informed of the findings of the Self-Assessment Checklist – measuring the compliance of Internal Audit to the Standards as contained within the Code of Practice for Internal Audit in Local Government.
The Code of Practice defined the way in which the Internal Audit service should undertake its functions. It consisted of 11 standards together with a checklist for assessing compliance with the Code.
In order to assist the Audit Committee in discharging its obligations under the Constitution, and to facilitate the monitoring of the Internal Audit function to ensure that a continuously effective level of performance was maintained, compliance with the Code of Practice for Internal Audit was mandatory.
A checklist was included as an appendix to the Code, which offered the Head of Internal Audit a means to measure the service provision against the Standards within the Code. It was suggested that the results of this review should be used as part of the Annual Internal Audit Report to those charged with governance to demonstrate compliance with the Code and identify any areas for further action.
Attached at Appendix A to the report were the results of the self-assessment by the Vale of Glamorgan Council’s Internal Audit Shared Service against the checklist. Committee were pleased to note that overall the Section had achieved 100% compliance with the Code. Such compliance would be subject to a separate annual review by the Council’s External Auditors – Grant Thornton UK LLP.
This was the final year of undertaking a self-assessment against the CIPFA Code of Practice as the Code was being superseded by the Public Sector Internal Audit Standards from 1st April 2013. It was unclear at present as to how compliance to the new Standards would be assessed for the 2013/14 Financial Year although CIPFA were due to publish an application note to support the implementation of the new Standards which it envisaged would also include guidance on demonstrating compliance.
RECOMMENDED – T H A T the results of the Self-Assessment Checklist and the overall compliance of the Internal Audit section with the Code of Practice be noted.
Reason for recommendation
To keep the Audit Committee informed and to report on the outcome of the assessment of Internal Audit to the Code of Practice.
1114 DRAFT ANNUAL GOVERNANCE STATEMENT 2012-2013 (HARM) –
Committee received the draft Annual Governance Statement for review and were requested to recommend its adoption by the Leader of the Council and the Management Director.
The Council, on 6th May 2009 approved the adoption of a Code of Corporate Governance.
Section 4(2) of the Accounts and Audit (Wales) Regulations 2005 as amended, required every Welsh Local Authority to conduct a review, at least once a year, of the effectiveness of its system of internal control and the governance arrangements with its Annual Statement of Accounts. The production of an Annual Governance Statement was a statutory requirement for local authorities in Wales to support the Annual Statement of Accounts.
The Annual Governance Statement (AGS) should relate to the mechanism used to demonstrate that, during the financial year ended 31st March 2013, the Council had an adequate governance regime in place and that all business was conducted in compliance with the existing arrangements. However, significant events or 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 2012/13 financial year relating to the activities of the Council was attached at Appendix A to the report. It had been drawn up with regard to the Code of Practice on Local Authority Accounting in the UK: A Statement of Recommended Practice. 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 2012/13 were considered to be satisfactory. However, issues relating to the continuing challenges facing the Council due to reductions in Welsh Government funding were reflected in Section 11 – Significant Governance Issues of the draft AGS.
RECOMMENDED – T H A T the draft Annual Governance Statement for 2012-2013 be adopted by the Leader and the Managing Director subject to the following additions:
· the inclusion of examples of the efficiency gains that had been developed with Procurement Officers to assist them in achieving efficiency gains (Paragraph 4.12A)
· in referring to "a number of positive indicators for "Achieving Value for Money"" (Paragraph 4.14), the identification of those indicators.
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 2013.
1115 INTERNAL AUDIT SHARED SERVICE CHARTER 2013/14 (HARM) –
Committee received the Council’s Internal Audit Shared Service Charter for 2013/14.
As at 1st April 2013, the Public Sector Internal Audit Standards (PSIAS) came into force and superseded the Chartered Institute of Public Finance and Accountancy (CIPFA) Code of Practice for Internal Auditors.
The PSIAS was applicable to all areas of the United Kingdom public sector and was based on the Chartered Institute of Internal Auditors (CIIA) International Professional Practices Framework.
The new "Standards" brought in new mandatory requirements. The key areas were summarised as follows:
· The Internal Audit activity must be formally defined in an internal audit charter, which must be periodically reviewed and approved by the "Board". The Internal Audit Shared Service Charter was attached to the report at Appendix A.
· There was also a requirement to define the term "Board" and as such this was the relevant Audit Committee together with the Internal Audit Shared Service Board.
· There was a requirement to define Internal Auditing, ensuring there was compliance with the Code of Ethics, together with a clear process for reporting non-compliance.
· There were other specific local government requirements detailed throughout the document and these were referenced throughout the Charter by the Standard number.
CIPFA were publishing an application note to support the implementation of PSIAS, which was expected to be released during March 2013. However, the Internal Audit Shared Service Charter had been written without the ability to refer to this application note. Therefore, any required changes to the Charter would be referred to the Audit Committee.
RECOMMENDED – T H A T the Internal Audit Shared Service Charter for 2013/14 as appended to the report be approved.
Reason for recommendation
To keep the Audit Committee informed and to approve the Internal Audit Shared Service Charter for 2013/14 to ensure compliance with the Public Sector Internal Audit Standards.
1116 PROPOSED INTERNAL AUDIT SHARED SERVICE STRATEGY AND ANNUAL AUDIT PLAN 2013/14 (HARM) –
Committee received the Council’s proposed Internal Audit Shared Service Strategy and Annual Audit Plan for the year April 2013 to March 2014.
It was reported that Internal Audit planning was not an exact science, but it was felt that the proposed plan for 2013/14 struck a good balance between the risks identified, the Internal Audit resources available and the assurance work being carried out by other agencies. Therefore, the plan provided for 1,635 productive days being delivered during 2013/14 which equated to approximately 10 full time equivalent employees.
Attached at Appendix A to the report was the proposed Internal Audit Strategy document for 2013-14. It demonstrated how the Internal Audit Shared Service 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.
The 2013/14 proposed Annual Audit Plan of work had been formulated to ensure compliance with the Standards as contained within the PSIAS. In order to keep Members of the Audit Committee fully informed, and to ensure compliance with Standards for Internal Audit, a detailed plan was attached at Appendix B to the report.
RECOMMENDED – T H A T the proposed Internal Audit Shared Service Strategy and Annual Audit Plan for 2013/14 as appended to the report be approved.
Reason for recommendation
To keep the Audit Committee informed and to approve the proposed Internal Audit Shared Service Strategy and Annual Audit Plan for 2013/14 to ensure compliance with the Public Sector Internal Audit Standards.
1117 PROPOSED FORWARD WORK PROGRAMME 2013-14 (HARM) –
Committee received the proposed Forward Work Programme 2013/14 for consideration and approval.
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 work programme for 2013/14 was attached at Appendix A to the report for approval.
It was suggested that in future reports, any variations to the previous report be shown in bold type for ease of reference.
(1) T H A T the proposed 2013/14 Forward Work Programme be approved, subject to the following additions:
- Committee to receive information outlining how the Council’s IT systems operate / interact
- Committee to receive a demonstration on how an Audit is undertaken
- Committee to receive information demonstrating what the Council’s External Auditors look at when undertaking an Audit (to be undertaken by Mr. J. Golding, Grant Thornton UK LLP)
- To receive information concerning Assurance and Governance matters (to be undertaken by Mr. Barry, Wales Audit Office).
(2) T H A T the dates of the future meetings of the Committee as contained in Appendix A to the report be adopted, subject to the date shown as 27th January 2014 being amended to 10th February 2014.
Reasons for recommendations
(1) To keep the Audit Committee informed.
(2) To approve a schedule meeting dates.
1118 RISK MANAGEMENT UPDATE (CRMG) –
Committee received a report which:
· provided an update with the current position of the Corporate Risk Register
· presented the updated Corporate Risk Management Strategy.
The Corporate Risk Management Group (CRMG) met on a quarterly basis to consider the position of each risk detailed on the Corporate Risk Register. The Group considered any changes in either the internal or external environment, including the introduction of mitigating controls which may cause each risk to be re-evaluated.
Audit Committee in November 2012 received a report on the Corporate Risk Register, where the need was identified to include a risk regarding the potential negative consequences of not having an adopted Local Development Plan. The last meeting of the CRMG was in early April 2013 and this was presented with an update on the Corporate Risk Register in mid-April 2013.
An update to the Corporate Risk Management Strategy was also presented to Audit Committee in November 2012. The Committee made a number of suggestions for improvement to the Strategy, which had subsequently been incorporated.
Attached at Appendix 1 to the report was the Corporate Risk Register as at 22nd April 2013. A summary page had been added to the Register which included a list of all current risk scores and statuses. Key tables explaining colour coding and direction of travel symbols were also included. Colour coding and direction of travel symbols had been added to all risks in response to suggestions made by this Committee in November 2012. A twelfth risk had been added to the Register relating to the newly established Local Development Plan.
Attached at Appendix 2 to the report was the updated Corporate Risk Management Strategy. The following amendments had been made in response to comments by this Committee:
(i) Figure 1 had been updated to include the role of Audit Committee in the Council’s risk management process.
(ii) Table 4 had been updated to show how the achievement of specific objectives aligned to the risk management process contributed to the Council’s corporate priority outcomes as identified in the Corporate Plan 2013-2017.
In considering the Corporate Risk Register, it was observed that the items listed for each risk under the heading "Countermeasure(s) to improve / mitigate the risk" were actions that were to be taken in any event.
Furthermore, Members felt that it would be helpful to them in developing the Risk Register if a Risk Manager were invited to attend before Committee.
(1) T H A T the amendments to:
- the Corporate Risk Register
- the Corporate Risk Management Strategy
(2) T H A T consideration be given to the inclusion of the Major Repairs Allowance within the Corporate Risk Register.
(3) T H A T Mr. Clifford Parish, Operational Manager, Visible and Housing Services, be invited to attend the next meeting of the Committee to assist the Committee in the preparation of the Corporate Risk Register.
Reasons for recommendations
(1) To recognise amendments to the Corporate Risk Register and ensure that all fundamental risks facing the Council are regularly monitored, addressed, reviewed and updated.
(2) To consider the addition of "Major Repairs Allowance" within the Corporate Risk Register.
(3) To ensure that the current Risk Management Strategy is in place.