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AUDIT COMMITTEE

 

Minutes of a meeting held on 6th February, 2014.

 

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

 

Also present: Mr. S. Barry (Wales Audit Office); Ms. G. Turner and Mr. O.P. Smith (Grant Thornton UK LLP).

 

 

801     MINUTES -

 

RESOLVED - T H A T the minutes of the meeting held on 26th November, 2013 be approved as a correct record.

 

 

802     DECLARATIONS OF INTEREST -

 

No declarations were received.

 

 

803     PLAN TO REPORT - HOW AN AUDIT IS UNDERTAKEN -

 

Planning - Preparing for the Assignment -   

  • Refer to Annual Audit Plan
  • Assign Job Entity to the most appropriate Auditor (raise job via APACE)
  • Prepare Audit Brief (specific Objectives, Scope, Audit Criteria and Methodology)
  • Meeting with Auditor to discuss assignment
  • Make initial contact with Auditee
  • Notify Auditee in writing/schedule opening meeting.

 

Planning - Preparing for the Assignment - Lead Auditor -   

  • Gain an understanding of the nature of the work, activity, organisation or initiative being audited
  • Attend opening meeting with Auditee
  • Prepare standard documentation (Control Evaluation Sheets, Working Papers, Report Format)
  • Commence Audit field work.

 

Conducting the Audit - Recording and Evaluating the System -   

  • Identify and document the system -
    • normally achieved through discussions with Directorate Management
  • The Objectives of recording system -

    • help the auditor to understand the procedure for processing, recording and controlling its transactions
    • help assess the overall security of the system by evaluating controls and any weaknesses
    • help assess the efficiency of the system.
  • The methods of recording -
    • System notes
    • Descriptive Questionnaires (I.C.Q.s)
    • Flow charts and block diagrams
  • Sources of information -
    • Previous audit files, guides, manuals, desk instructions, interviews with staff who operate the system, observations, organisational charts, job descriptions etc.

 

Conducting the Audit - Continued

 

Example - Payroll System -  

  • Control Objectives - 'Pay and related costs should be incurred only in respect of staff currently employed in authorised posts.’
  • Expected Controls - 'Each department should periodically be required to confirm the accuracy of a schedule containing names of all employees currently charged to the department, the post held, grade and cost code of each post.’
  • Identifying risks - 'Ghost employees may be set up on the payroll system and go undetected resulting in fraudulent payments being made.’

Determine Actual Controls: this is achieved by testing and evidence.

 

Types of tests - 

  • Walk Through Tests - follows a transaction or process through the system
  • Compliance Tests - seeks to provide evidence that internal control procedures identified within the system are actually operating in a manner intended by management
  • Substantive Tests - tests the completeness, accuracy and the validity of transactions (tends to be directed at the outputs of the system) 

Fully document findings on the appropriate working papers (including Control Evaluation Sheets)

 

Comparison of Benchmark (Expected) Control with Actual Control as determined from the outcome of the tests performed and the evidence gathered

 

Provide an overall assessment of the system.

 

 

Reporting

  • The aim of every report should be to
    • Prompt management action to implement recommendations for change leading to improvement in performance and control
    • Provide a formal record of points arising from the audit and, where appropriate, the the actions agreed with management
  • Internal audit reports must be accurate, clear, concise and constructive and issued promptly
  • Draft report prepared - the auditor will use the results of the tests performed and the assessment of weaknesses found to draw conclusion about the quality and reliability of the system under review, including an overall opinion on the internal control environment
  • Discuss with Client Manager - normally takes the form of a debrief session at the conclusion of the fieldwork
  • Reviewed by Group Auditors/Principal Auditors
  • Review points documented and addressed
  • Draft report issued to Auditee including implementation Action Plan for completion
  • Response received from Auditee and reviewed to ensure acceptance of recommendations, timeliness of implementation and accuracy
  • Final PDF Audit Report issued (incorporating Management Responses), Internal Audit diarise key recommendations for follow up, particularly those where risks are high
  • Client satisfaction questionnaire sent for feedback on conduct of the Audit. 

Mr. Lewis, in referring to the production of the Audit Plan following risk assessments, enquired if all Council functions were considered prior to the publication of the Audit Plan. 

 

Committee were advised that all Council activities were risk assessed, and included within a document that constantly evolved. 

 

Mr. Lewis sought assurance that nothing would 'fall between the cracks'.

 

Committee were advised of the existence of a 5-year Plan for audit purposes which ensured that all functions of the Council were kept under review.  The Plan was constantly evolving.

 

The Audit Plan was regularly reported to this Committee.

 

Furthermore, external auditors reviewed aspects of the Council’s activities.

 

Mr. Barry expressed the view that

  • he was confident that the Plan covered virtually all areas of the Council’s activities
  • the Plan also included controls to protect against risk
  • the existence of benchmarking groups opened up new lines of enquiry
  • the Committee could take some assurance that the Wales Audit Office had confidence in the way that the Council discharged its responsibilities.

RESOLVED - T H A T the contents of the presentation be noted.

 

 

804     AUDITOR GENERAL FOR WALES: IMPROVEMENT ASSESSMENT LETTER DECEMBER 2013 (MD) -

 

Committee were advised of the results of the assessment by the Auditor General for Wales in relation to whether the Council had discharged its statutory duties in respect of improvement planning. 

 

A copy of the Auditor General’s letter was attached at Appendix 1 to the report.  In summary the Auditor General found that: 

  • the Council approved and published its Annual Review of Performance 2012/13 within the statutory deadline of 31st October, 2013
  • the Review assessed the Council’s performance in the preceding financial year (2012-13)
  • the Review included details on performance and comparisons as measured by some national statutory performance indicators and the Council subsequently provided a link to all the national statutory performance indicators which it routinely published
  • the Review included a section outlining the key collaborative activities the Council was involved in and a summary of progress in achieving their outcomes
  • the Review was available in the English and Welsh in hard copy and on the Council’s website.

No further recommendations for improvement were made, although there were comments that there was scope to refine arrangements by: 

  • ensuring the report set out how the Council had sought to discharge its duties under the Measure
  • further extending the use of a wider evidence base to strengthen the Council’s evaluation of performance.  The review had made use of case studies and included reference to more qualitative information than in the previous year but the predominant evidence used was still quantitive performance indicators.
  • Extending the use of comparative information including historic performance and more targeted comparisons with other similar Councils and outlining what the Council had done in light of this information.

RESOLVED -

 

(1)       T H A T the contents of the report be noted.

 

(2)       T H A T the report be referred to Cabinet for information purposes.

 

Reasons for decisions

 

(1)       To keep Audit Committee informed.

 

(2)       To provide for scrutiny and review of the Auditor General’s letter.

 

 

805     UPDATE ON THE PERFORMANCE AUDIT PROGRAMME 2013-14 (MD) -

 

Committee received an update on the Performance Audit Programme 2013/14 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 of 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 Performance Audit Programme outlined work to be undertaken in the Council between April 2013 and March 2014 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.

 

RESOLVED - T H A T the update on the Performance Audit Programme for 2013-14 be noted.

 

Reason for decision

 

In order to review and progress the Performance Audit Programme.

 

 

806     2012-13 LOCAL GOVERNMENT ACCOUNTS (MD) -

 

Committee received the Auditor General for Wales Annual Local Government Accounts Report for 2012-13.

 

The Auditor General for Wales appointed auditors to all local government bodies in Wales to audit and issue an opinion on their accounts.  The Public Audit (Wales) Act 2004 required appointed Auditors to examine and certify the accounts, and satisfy themselves that the accounts 

  • give a true and fair view of the audited bodies financial position
  • complied with all relevant legislative requirements
  • had been prepared in accordance with proper accounting practices.

This was the third annual report produced by the Auditor General for Wales on local government bodies accounts and provided a summary of the results of auditors work for 2012-13.  The report was attached at Appendix A to the report.

 

In considering the report, Members enquired about the Accounting Convention for Public Bodies particularly in relation to general issues around correctly accounting for depreciation as referred to at page 11 of the report.  Members expressed an interest into the difference between the accounting practices of public and private finance in particular Members enquired if the Council was heading towards the private sector model. 

 

Members were advised that, in addition there were International Accounting Conventions. 

 

It was suggested that a report on this subject be reported to the next convenient meeting of the Audit Committee.

 

RESOLVED -

 

(1)       T H A T the contents of the report be noted.

 

(2)       T H A T a report on the Accounting Conventions for Public Bodies as it relates to the Council’s Depreciation Policies be made to Audit Committee.

 

Reasons for decisions

 

(1&2)  To facilitate monitoring of the audit function.

 

 

807     CERTIFICATION OF GRANTS AND RETURNS 2012-13 (MD) -

 

Committee received the Council’s External Auditors Report on the grant work undertaken for 2012-13.

 

The Council received and certified 23 grant claims and returns from government departments and other bodies requiring external audit certification in 2012-13, supporting income in excess of £117 million.

 

Grant Thornton UK LLP (GT), as the Council’s external auditors and acting agents of the Wales Audit Office were required to certify the claims submitted by the Council.

 

The report before Committee summarised the External Auditors 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.

 

Appendix A to the report gave a summary of all claims and returns subject to certification together with the certification fee and outcome of the External Auditors Review.  The key message from the Review was that the Council had adequate arrangements in place for the production and submission of its 2012-13 grant claims. 

 

Overall, the External Auditors certified 23 grants and returns; 16 were unqualified with no amendments; 6 were unqualified but required an amendment to the final figures; none required a qualification to the External Auditors Certificate and 1 was qualified but required an amendment to the final figure.

 

In considering the report of the Wales Audit Office, in particular the details of Audit Adjustments headed 'Welsh in Education', repeated as follows: 

  • 'A qualification was raised on £76,242 worth of expenditure that was made to the Consortia.  The monitoring documents provided by the Consortia was not considered to contain sufficient detail in order to enable an understanding of expenditure made by the Consortia in the Vale and outcomes achieved by the Consortia'.

The Auditor advised Committee that the qualified amount had been payable to the Joint Education Service but that the Auditors could not be sure that the authorisation was signed properly.

 

Members expressed the view that this showed the need for greater scrutiny of the Joint Education Service. 

 

RESOLVED -

 

(1)       T H A T the contents of the report be noted.

 

(2)       T H A T the Joint Education Service be advised that the qualification contained within the Council’s External Auditors Report demonstrated the need for scrutiny of the Joint Education Service. 

 

Reason for decision

 

(1&2)  To facilitate monitoring of the audit function.

 

 

808     OUTTURN REPORT - APRIL TO DECEMBER 2013 (HARM) -

 

Committee received a report which informed of actual Internal Audit performance against the 2013-14 Plan for the period 1st April to 31st December 2013. 

 

The actual position for the nine months compared against the Plan was as detailed below:

 

Directorates

2013-14

Full Year

Plan Days

Proportion of

Plan Days Available for

April to Dec.

2013-14

April to Dec.

Actual Days

 

Corporate & Customer Services

55

41

16

Resources

440

330

294

Development Services

150

112.5

81

Visible Services and Housing

110

82.5

68

Learning and Skills

220

165

183

Social Services

155

116

76

Cross Cutting

280

210

95

Contingency - unplanned

125

94

406

Contingency - Fraud & Error

100

75

112

TOTAL PRODUCTIVE DAYS

1,635

1,226

1,331

 

The figures showed that 1,331 actual productive days had been achieved, which equated to 108% of the overall planned productive time available for the period. 

 

A summary of audits completed during the period April to December 2013 was detailed in the Head of Accountancy and Resource Management’s progress report attached at Appendix A to the report.  This, together with Appendix B, provided the Committee with details of the reviews completed, together with an overall Audit Opinion and this would support the annual Audit Opinion at the end of the financial year.

 

Detailed reports were issued to the relevant Service Managers on the results of individual audits and where significant weaknesses were identified, these would be followed up to ensure high priority recommendations were implemented.

A Member enquired as to Section 106 monies and asked how this would be consulted upon.  In reply, the Committee were advised that the Audit Plan identified this area as being subject to review during the year 2014/15.

 

A Member referred to the last bullet point of paragraph 9.4 of Appendix A to the report which raised concerns relating to the adequacy and effectiveness of the financial and quality monitoring arrangements surrounding the contractual partnership arrangements between the Council and the Leisure Centres’ service provider.  Committee were advised that a report on this would be brought before the next meeting of the Committee. 

 

RESOLVED - T H A T the report on actual Internal Audit Performance during the nine months of the financial year be noted.

 

Reason for decision

 

To facilitate monitoring of the Audit function.

 

 

809     UPDATED FORWARD WORK PROGRAMME 2013-14 (HARM) -

 

Committee were requested to approve an updated Forward Work Programme for 2013/14. 

 

RESOLVED - T H A T the amendments to the updated 2013/14 Forward Work Programme be noted.

 

Reason for decision

 

To keep the Audit Committee informed

 

 

810     AUDIT COMMITTEE: TIMETABLE OF MEETING FOR THE MUNICIPAL YEAR 2014/15 (MD) -

 

RESOLVED - T H A T the timetable of meetings for the municipal year 2014/15 be as follows: 

  • 2014

28th April, 2014 (Monday)

1st July, 2014 (Tuesday)

16th September, 2014 (Tuesday)

18th November, 2014 (Tuesday)

  • 2015

24th February, 2015 (Tuesday)

28th April, 2015 (Tuesday).

 

Reason for decision

 

To note the timetable of meetings for the Audit Committee for the municipal year 2014/15.

 

 

811     UPDATE ON THE SOCIAL SERVICES BUDGET PROGRAMME (REF) -

 

Scrutiny Committee (Social Care and Health) on 2nd December 2013 received an update on the progress made in delivering the Social Services Budget Programme. 

 

The Directorate was currently required to find savings totalling £6.0m by the end of 2016/17.  Savings totalling £6.189m had currently been identified and the surplus would be used to mitigate any additional savings to be found in future years.

 

The approved savings targets and the savings identified as shown below, including the £403,000 identified in 2012/13 in excess of the saving target for that year;

 

Year

Savings Required

£000

Savings Identified

£000

In Year Surplus/ (Shortfall)

£000

Cumulative Surplus/   (Shortfall)

£000

Additional 2012/13 savings

 

403

403

403

2013/14

2,150

2,040

(110)

293

2014/15

838

579

(259)

34

2015/16

1,700

1,776

76

110

2016/17

1,315

1,391

76

186

TOTAL

6,003

6,189

 

 

 

Progress for each project currently identified was shown in Appendix 1 to the report. 

 

The current financial position for each of the identified Social Services savings for 2013/14 were as follows:

 

Project

Target Saving (£000)

Projected Saving (£000)

Position

CHILDREN'S

 

 

 

LAC Residential Care Placements

200

0

Jointly funded budget is currently overspending

Reduction in Contract Spend to fund SLAs

80

80

Achieved

Managed Budget Reduction

190

190

Achieved

Administrative Support

 

20

20

Achieved

TOTAL CHILDREN'S

490

290

 

Project

Target Saving (£000)

Projected Saving (£000)

Position

ADULTS

 

 

 

Reconfigure VCRS

40

40

Achieved

 

Meals on Wheels

 

32

20

Price have increased but budget currently overspending by £12k

Care Packages Budget Reduction

685

0

Budget is currently overspending

Managed Budget Reduction

183

183

Achieved

Supported Accom Learning Disabilities

150

150

Achieved

Residential Services

 

200

25

Negotiations still on-going with Hafod, however partly offset by savings on Council homes

Service Level Agreement

40

40

Achieved

Income Generation

 

100

100

Achieved

Provision of Food to Trinity

 

13

13

Achieved

Office Accommodation

 

7

7

Achieved

TOTAL ADULTS

1,450

578

 

 

 

 

 

 

BUSINESS MGT & INNOVATION

 

 

 

Managed Budget Reduction

75

75

Reorganisation is only partially complete; however, staff vacancies will contribute to achieving the saving

Funding to Carers Support Services

 

25

25

Achieved

TOTAL BUSINESS, MGT & INNOVATION

100

100

 

 

 

 

 

TOTAL SOCIAL SERVICES

2,040

968

 

 

Whilst the majority of identified savings had been achieved this year, Community Care packages continued to be a volatile budget.  It was noted that the identified savings were currently £293,000 more than the required target for the budget programme as a whole at this stage, as additional savings were realised in 2012/13.  There were, however, areas of underspends elsewhere in the budget which could be used to offset this position.  In Children’s Services, the overspend on residential placements for Looked After Children was offset by an underspend in other areas where children were previously receiving a provision prior to their transfer into a residential setting.  In Adult Services, planning was already underway for the savings required for 2014/15 and, where possible were being achieved ahead of target.  An overspend of £140,000 was therefore currently being projected for the Directorate, however, work was being undertaken to address this position and overall a balanced budget was anticipated by year end. 

 

The Social Services Directorate was committed to achieving a balanced budget.  The Corporate Programme Board and Project Teams overseeing the plan would continue to develop it further and ensure delivery and progress.  Progress updates would be reported as part of the overall financial monitoring report for the Directorate.

 

In noting the targets saving of £200,000 for Residential Services and that negotiations were still on-going with Hafod, a Member enquired as to the Council’s current position and was informed that the Council should conclude its negotiations with Hafod by Christmas. 

 

In noting the overall targeted savings of £2,040,000 as compared with the projected savings of £968,000, Members recognised the level of the challenge facing the Directorate. 

 

A Member commented that the Meals on Wheels service had been reviewed recently but the service was still overspending.  The question was asked if the Service would be the subject of a further review. 

 

Members were advised that the reason for the review had been to reduce the level of subsidy.  Prices had been increased last April, and would increase again in the near future.

 

Scrutiny Committee had

 

RECOMMENDED – T H A T the progress made in delivering the Social Services Budget Programme be noted and that the report be referred to Cabinet and Audit Committee for information.

 

Reason for recommendation

 

That Members are aware of the progress made to date in delivering the Social Services Budget Programme and endorse the proposed amendments.

 

Having considered the reference, Audit Committee

 

RESOLVED - T H A T the progress made to date in delivering the Social Services Budget Programme be noted.

 

Reason for decision

 

Having regard to the contents of the report.

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