AUDIT COMMITTEE

 

Minutes of a meeting held on 25th September, 2008.

 

Present:  Councillor A.C. Williams (Chairman); Councillor J. Clifford (Vice-Chairman); Councillors J.F. Fraser, K. Hatton and C.L. Osborne. 

 

 

Also present:  Mr. J. Golding and Claire Thomas (External Auditor - Grant Thornton).

 

 

338     APOLOGIES FOR ABSENCE -

 

These were received from Councillors Ms. P. Drake and N. Moore.

 

 

339     MINUTES -

 

RECOMMENDED - T H A T the minutes of the meeting held on 5th June, 2008 be approved as a correct record.

 

 

340     DECLARATIONS OF INTEREST -

 

No declarations were received.

 

 

341     AUDIT OF THE FINANCIAL STATEMENTS - REPORTING TO THOSE CHARGED WITH GOVERNANCE (DFICTP) -

 

Committee received the Wales Audit Office report prepared by the Council's External Auditors, Grant Thornton UK LLP to those charged with governance following the audit of the Council's Financial Statements for 2007/08.

 

Council was responsible for the preparation of Financial Statements that presented fairly its financial position as at 31st March, 2008.  Grant Thornton UK LLP, as the Council's External Auditors, were responsible for reporting whether, in their opinion, this was indeed the case.

 

The draft Statement of Accounts for 2007/08 were reported to Council on 26th June, 2008.  With the audit of these Financial Statements now substantially complete, a report detailing the key matters arising from the audit must be reported by Grant Thornton UK LLP to those charged with governance, in accordance with the International Standard on Auditing (ISA260).  In line with its terms of reference, the Audit Committee represented the appropriate body to which this report must be communicated. 

 

With the consent of the Chairman, the Committee's attention was drawn to a recent significant matter which had potential implications for the Council's accounts, and which needed to be brought to the Committee's attention. 

 

The provisional findings of Grant Thornton UK LLP on the audit of the Financial Statements (including the reported urgent matter) were that:

 

·                    there were no concerns with the qualitative aspects of the Council's accounting practices and financial reporting

·                    there were four uncorrected misstatements (none of which were deemed to be material in nature)

·                    there were no expected modifications to the standard auditor's report

·                    the audit did not identify any material weaknesses in internal control

·                    there were no other matters which needed to be reported as required by other ISA's and

·                    there were no other significant audit matters of governance interest to report.

 

It was therefore the intention of Grant Thornton UK LLP to issue an unqualified auditor's report on the Financial Statements once the Council had provided an updated and resigned Letter of Representation.  Grant Thornton's conclusion as to whether the Council had made proper arrangements for securing economy, efficiency and effectiveness in its use of resources would be reported separately in the Relationship Manager's Audit Letter.

 

RECOMMENDED - T H A T the report of Grant Thornton UK LLP on the Audit of the Council's Financial Statements for 2007/08 be endorsed and that the Financial Statements including the final Letter of Representation be recommended for signature by those authorised.

 

Reason for decision

 

To ensure that those charged with governance had considered the results of the audit of the Council's Financial Statements for 2007/08.

 

 

342     INTERNAL AUDIT PLAN ACTUAL OUTTURN APRIL TO AUGUST 2008 (DFICTP) -

 

Committee were informed of actual Internal Audit performance against the 2008 - 09 Plan for the period 1st April to 31st August, 2008.

 

The figures showed that 1,171 productive days had been achieved against the available days of 1, 425.  It was reported that the shortfall could be directly attributed to vacant posts.  The impact of vacancies within the Section had meant that work planned on Value for Money reviews had been suspended in order to ensure that all high risk areas, and in particular the major financial systems, were completed. 

 

A summary of audits undertaken during the period April 2008 to August 2008 was detailed at Appendix C to the report.  This provided the Committee with details of the reviews completed during the year, together with an overall Audit Opinion for each area. 

 

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

 

Overall the reviews undertaken during the first five months of the financial year had not identified any significant weaknesses in the system of internal financial control. 

 

RECOMMENDED - T H A T the report on actual Internal Audit performance during the first five months of the Financial Year be noted.

 

Reason for decision

 

To facilitate monitoring of the audit function.

 

 

343     MAKING THE CONNECTIONS: UPDATE ON INTERNAL AUDIT SHARED SERVICES IN SOUTH EAST WALES (DFICTP) -

 

Committee were updated on the progress of the Internal Audit South East Wales Shared Services Projects.

 

Audit Committee had been advised on the initiation of multi-agency project to evaluate the feasibility of sharing certain 'back office' and professional support services as part of the 'Making the Connections' agenda at its meeting held on 29th January, 2007. 

 

Price Waterhouse Coopers (PWC) were commissioned to produce a Strategic Outline Case for the provision of shared services for a range of support services.  They recommended that a special resource model be developed for Internal Audit covering school audits, IT and contract auditing.  This would be developed in three years into a full shared service covering the ten authorities provided from a single base. 

 

Whilst the Finance Directors welcomed the opportunities which shared working offered, they did not believe that the case for a single internal audit service was proven.  Projected savings were relatively small when considered as an annual amount per Council and would be difficult to verify as to whether it represented a reduction in staff with or without a diminution of service.

 

It was agreed that the Heads of Internal Audit would undertake further work in developing proposals and options for shared services.  This work would concentrate on eight core activities over which internal audit could be reviewed.

 

RECOMMENDED -

 

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

 

(2)       T H A T the way forward proposed by the Directors of Finance in developing shared services in the provision of Internal Audit services across the ten South East Wales local councils be endorsed.

 

Reasons for decisions

 

(1)       To keep the Audit Committee abreast of progress on the Internal Audit Shared Services initiative in South East Wales.

 

 

344     UPDATE ON THOMPSON STREET COMMUNITIES FIRST PARTNERSHIP (DFICTP) -

 

Committee were provided with an update on Thompson Street Communities First Partnership (TSCFP).

 

Audit Committee, on 5th June, 2008, had received the findings of the External Auditor's report on TSCFP.  The Committee had endorsed both the report and the draft Action Plan which was subsequently referred to Cabinet for approval on 11th June, 2008.

 

The Director of Learning and Development submitted a further report to Cabinet on 25th June, 2008 at which Cabinet had resolved that no further commitment be made by the Council acting as Grant Recipient Body in respect of TSCFP until the identified concerns set out in the Grant Thornton UK LLP report had been addressed and the Action Plan adopted by the Partnership Board.

 

In the intervening period, Internal Audit had prepared draft documentation in respect of TSCFP Constitution, Code of Conduct and Service Level Agreement.  Procurement Guidance had also been drawn up and training dates for both TSCFP and Gibbonsdown Communities First Partnership staff organised. 

 

Internal Audit had met with the Chairperson of TSCFP to involve her as part of the consultation process and her comments, where appropriate, had been taken into account, revising the documents.  Comments had also been invited from the Director of Learning and Development and the Head of Lifelong Learning and all documents had been subject to review by the Council's Legal Services Division. 

 

In addition, details of all TSCFP expenditure since 2005/06 had been analysed by Internal Audit and submitted to the Welsh Assembly Government for comment.

 

It had been hoped that a meeting of the Partnership Board would take place during August/September to receive and approve the draft documentation.  This had not transpired and Committee were advised that a meeting of the Partnership Board was scheduled for 3rd October, 2008. 

 

It was reported that the outcome of that meeting would be reported to the next meeting of the Audit Committee. 

 

RECOMMENDED -

 

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

 

(2)       T H A T a further report be submitted following the meeting of the Thompson Street Communities First Partnership Board.

 

(3)       T H A T before any future commitment by the Council to participate as a partner to local regeneration groups which seek external funding, the Constitution of such groups should be approved by the appropriate officer.

 

Reasons for decisions

 

(1-3)    To keep the Audit Committee informed.

 

 

345     MATTER WHICH THE CHAIRMAN HAD DECIDED WAS URGENT -

 

RESOLVED - T H A T the following matter which the Chairman had decided was urgent for the reason indicated be considered.

 

 

346     REPORT BY THE WELSH ASSEMBLY GOVERNMENT - PROVIDER AUDIT AND GOVERNANCE SERVICE (PAGS) ON THE INTERNAL AUDITORS WORK IN RELATION TO SIXTH FORM SCHOOLS (DFICTP) -

(Urgent by reason of the need for this matter to be considered prior to the next meeting of the Committee)

 

Committee were informed of the outcome of the review undertaken by PAGS focussing on the work programme undertaken by Internal Audit in relation to sixth form schools and community learning. 

 

During 2006 the National Council for Education and Training for Wales (ELWA) published its final version of the Local Authority Audit Guidance, the primary purpose of which was to provide the Chief Executive of the National Council, as Accounting Officer for public funding received by LA's with assurance that LA's have established appropriate arrangements for internal control to ensure that they satisfied the requirements of the conditions of grant funding. 

 

In order to obtain assurance, PAGS relied heavily on the work of LA's own internal auditors and thereby to avoid duplication of effort, carried out a peer review of the work of the internal audit function. 

 

This was the second review of the Council carried out by the PAGS on behalf of the Department for Children, Education, Lifelong Learning and Skills. 

 

The overall outcome of the review was extremely pleasing with a positive overall opinion, and with no significant matters being highlighted as a result of the review.  PAGS were particularly pleased to note that the systems and controls were reviewed, on the basis of risk and on an annual basis.

 

RECOMMENDED - T H A T the report issued by the Provider Audit and Governance Service be noted.

 

Reason for decision

 

To keep the Audit Committee informed.