Agenda and minutes

Audit and Risk Management Committee - Thursday, 3rd March, 2016 7.30 pm

Venue: Conference Room, Civic Centre, Silver Street, Enfield, EN1 3XA. View directions

Contact: Metin Halil 

Items
No. Item

448.

WELCOME AND APOLOGIES FOR ABSENCE

Minutes:

The Chair welcomed everyone to the meeting and apologies for absence were received from Councillor Robert Hayward, Councillor Guney Dogan and Isabel Brittain (Assistant Director – Corporate Finance).

 

449.

DECLARATION OF INTERESTS

Members of the Audit Committee are invited to identify any dis-closable pecuniary, other pecuniary or non – pecuniary interests relevant to ite3ms on the agenda.

Minutes:

There were no declarations of interest.

450.

ORDER OF AGENDA

Minutes:

AGREED that the order of the agenda be varied. The minutes follow the order of the meeting.

 

 

451.

2015/16 DRAFT AUDIT PLANNING REPORT - BDO - 19:35 - 19:50 pdf icon PDF 132 KB

To receive a report from BDO (External Auditors) presenting their draft 2015/16 Audit Plan.      

 

Minutes:

RECEIVED a report from BDO (External Auditors) providing a planning report on the external audit plan for the year ended 31 March 2016. The report was introduced by Andrew Barnes and David Eagles.

 

NOTED

 

1.    This was the first draft Audit Plan for the Council.

2.    That the title of the report included the wrong year and should have read ‘2015/16 Draft Audit Planning Report’.

3.    As detailed at page 6 of the report, the engagement timetable outlines how the audit process will run and the timeline for this.

4.    In terms of materiality, as detailed on page 8 of the report. This had been based on BDO’s planning materiality level and the level of expenditure the Council incurred in 2014/15 financial year. BDO’s draft proposal level is £21M, which is based on 1.75% of the Council’s expenditure. This level is in BDO’s middle range which is acceptable as a materiality level and is a slightly reduced level (so as to acknowledge that risk) until BDO familiarise themselves with the Council’s financial processes. BDO will base the final assurances on the Council’s actual outturn financial statements and will report back to Committee on the adjustment and non-adjustment of materiality levels.

5.    In terms of Key Audit Risks and other matters, these have been detailed at pages 10 – 16 of the report around the financial statements and the use of resources.

6.    The following issues raised by Members in response to the report:

a.    Councillor Neville raised the issue of materiality again in connection to concerns he has regarding dis-closure and objections to the accounts by local tax payers/electors. The accounts were quite complex for most people to understand, partly because of the way they are produced and as much the fault of CIPFA. There was an ongoing issue of local objectors objecting to items in the accounts which they feel did not represent proper expenditure of their money and the issue that was raised about this was the level at which the dis-closure notes were to be made or not. It would be quite difficult for the average objector to spot something, that is dealt with, in the accounts. However, they may spot something if it is listed in the disclosure notes. A change has now been bought in to significantly increase the sum for those disclosure notes. He remained unconvinced that this was right in terms of what legislation sets out to achieve.

The Chair advised that there were other avenues open to objectors besides looking at the annual accounts i.e. a monthly list of expenditure of £500K on the Council web pages.

David Eagles (BDO) further advised that materiality is used to determine whether something should or should not be disclosed. The primary purpose of that is to try and strip out small discreet amounts so as to see only significant amounts. However, BDO would use different and usually lower levels of materiality for things like pay bandings, where amounts may be trivial to the Council but  ...  view the full minutes text for item 451.

452.

TREASURY MANAGEMENT STRATEGY & PRUDENTIAL INDICATORS - 20:35 - 20:50 pdf icon PDF 380 KB

To receive a report from the Director of Finance, Resources & Customer Services presenting the Council’s proposed 2016/17 Treasury Management Strategy & Prudential Indicators.    

Minutes:

 RECEIVED a report from the Director of Finance, Resources & Customer Services setting out the Council’s 2015/16 Treasury Management Strategy Statement & Prudential Indicators.

 

NOTED

 

1.         The Strategy was presented by Paul Reddaway (Head of Finance Treasury & Pensions), who highlighted the following issues and key areas:

a.    The report itself references the economic climate and looks at and considers 2 aspects; the Council’s borrowing requirement and the Council’s investments.

b.    Investments were low by choice, due to below average interest rates. Due to the differential in borrowing costs, it did not benefit the Council to hold cash reserves. From cash reserves the Council only earnt between 0.5% - 0.6% and expect these rates to remain unchanged over the next financial year. The Council had used a substantial amount of its internal cash reserves to finance the Capital Programme because it was the cheapest option to do so. This has been the main strategy now for the past 6 years.

c.    However, this year and ongoing future years, the Council were at a different point with their cash backed investments cushioning capital expenditure.  Paul referred members to table 2 (page 107) of the report, which highlights the Council’s Capital Financing requirement and potential to borrow up to £582M.

d.    The CIPFA’s code for Capital Finance in Local Authorities recommends that the Authority’s total debt should be lower than its highest forecast CFR over the next 4 years. Table 2 (page 107) shows that the Authority expects to comply with this recommendation during 2016/17. The Authority currently holds £364M of loans, and increase of £51M on the previous year, as part of its strategy for funding previous year Capital Programmes. The forecast in Table 2 shows the Authority expects to borrow up to £336M in 2016/17. The Authority may also borrow additional sums to pre-fund future years’ requirements, providing this does not exceed the Authorised Limit for borrowing of £900M.

e.    The Council will need to borrow externally because all other resources have been used. External borrowing will increase in relation to capital expenditure. The current timing for this has been good as interest rates have been low and going forward they will be low. The Council will only be borrowing for capital expenditure and not borrowing to fund the capital programme. The Council has to look at when is a good time to borrow and took an opportunity to borrow in February 2015 whilst there was a crisis in China and equity markets. The Council has also taken the opportunity and will continue to borrow at the shorter end of up to 1 – 2 years as that represents good value of 0.6 of 1%. There is a risk if rates start to go up with an exposure to short term interest rates. However, controls have been put in place, through management instruction, stating that the Council can only put 25% of all borrowing into borrowing in year. This being a control mechanism. Financial institutions are saying that interest rates were not likely  ...  view the full minutes text for item 452.

453.

2015/16 AUDIT & RISK MANAGEMENT SERVICE PROGRESS REPORT - 19:50 - 20:00 pdf icon PDF 606 KB

To receive the report of the Director of Finance, Resources & Customer Services summarising the work that the Internal Audit and Risk Management Service (ARMS) has completed for the period 1 April 2015 to 31 January 2016.

(Report No.209)

Minutes:

RECEIVED the report of the Director of Finance, Resources & Customer Services (No.209) summarising the work of the Internal Audit & Risk Management Service for the period between 1 April 2015 to 31 March 2016.

 

NOTED

 

1.    During the review period, the Internal Audit team has commenced 81 assignments (100% of the current plan) of which 51 (63%) have reached draft report stage. A summary of the progress in delivering  the 2015/16 audit plan had been provided in Table 1 (3.4 – page 24) of the report, with a more detailed analysis of the status of each review, set out in Appendix 1 (pages 34-40) of the report.

2.    Breakdown of assurances for completed assignments, to date (33 in total), are detailed at Table 2 (page 25) of the report. Eleven assurances for completed audits had been completed using management letters rather than audits.

3.    The number and priorities of recommendations arising from completed reviews, to date, were detailed in Table 3 (page 25) of the report. There had been 243 recommendations raised including 18 that were of high importance.

4.    Changes to the 2015/16 audit plan, since approved by Audit Committee in March 2015, are all detailed at Appendix 2 (pages 41-43) of the report. 37 assignments had been added and three reviews had been deferred / cancelled. These changes included agreed school and IT audits to reflect key risks faced by the Council in 2015/16.

5.    Since the last report to Audit Committee, two audits had been completed resulting in Limited assurance. These are detailed at para 3.11 – 3.12 (pages 27-28) of the report.

6.    Managers’ progress with implementation of internal audit recommendations, due to be implemented by 31 January 2016 are presented at Table 4 (page 28) of the report. The results for high priority recommendations showed that 77% of recommendations followed up had been fully implemented and 23% had been progressed towards mitigating the original risk identified.

7.    Table 5 (page 29) of the report, details the implementation of medium risk recommendations and shows that 54% of recommendations had been fully implemented with 44% in progress and 2% not implemented.

8.    In terms of counter fraud achievements, Table 7 (page 29) of the report details Council housing recoveries, temporary accommodation recoveries, fraud prevention workshops and the savings made from frauds prevented. The total savings achieved were £819,319 as at 31 January 2016. Further details of the Counter Fraud Team’s workload and outcomes achieved are detailed at Appendix 3 (pages 44-45) of the report.

9.    Quality assurance, as detailed at para 3.20 (page 30) of the report included 3 missing letters from each of the bullet points. These should read Performs, Operates, Is & The (para 3.21).

10.The following issues raised by members in response to the report:

a.    Councillor Maguire enquired when the remaining high and medium priority recommendations, due to be implemented by 31 January, 2016, would be completed. Christine Webster clarified that these would be reviewed again and would carry on reviewing until the end  ...  view the full minutes text for item 453.

454.

DRAFT 2016/17 INTERNAL AUDIT PLAN AND INTERNAL AUDIT CHARTER - 20:00 - 20:10 pdf icon PDF 168 KB

To receive the report of the Director of Finance, Resources & Customer Services presenting the draft 2016/17 Internal Audit Plan

(Report No.191)

Additional documents:

Minutes:

RECEIVED the report of the Director of Finance, Resources & Customer Services (No.195) presenting the draft 2016/17 Internal Audit Plan and Internal Audit Charter.

 

NOTED

 

1.    The report was introduced by Christine Webster, Head of Internal Audit & Risk Management.

 

a.    This report included the draft internal audit plan 2016/17 and the refreshed Internal Audit Charter.

b.    The approach taken this year had been risk based and the steps taken are detailed at the table on page 53 of the report.

c.    Starting with steps 1/2 – understand corporate objectives and risks, assess the inherent risk.

d.    Looked at the strength of the control environment within each risk, which was quite risky at present due to all the changes happening within the Council.

e.    From that, ARMS calculate the audit requirement rating and find some auditable limits in the different risk areas and under the different departments.

f.     The scope of audit work is then determined in the audit plan.

g.    In summary, the audit plan for 2016/17, shown in the table at pages 56-60 of the report equates to 1,310 audit days, which was similar to the figure last year.

 

2.    The following issues raised by members in response to the report:

a.    The draft 2016/17 internal audit plan had not been shared in detail yet with external audit until some areas of potential duplication had been identified. Internal Audit would liase with BDO (external audit).

b.    Councillor Neville’s request regarding Enfield 2017 auditing. A number of people would be taking on additional work and extra responsibility, at all levels. Unless they have adequate support, they would not be able to fulfil these responsibilities and in terms of the committee’s concern, the risk would be large. He hoped that Internal Audit would be looking at this. Christine Webster clarified that one of internal audit’s key concerns within departments was the operation of the new hubs and in particular how they integrate with departments. They are keen to address this issue.

c.    The Chair reported that he would not be attending the joint OSC/Audit Committee meeting scheduled for 8 March 2016 regarding the Enfield 2017 item. He was hoping the following issues would be discussed:

·         KPI’s of the hubs.

·         The savings they are producing.

·         The impact on the general public.

·         Inability to get through to departments on the phones

·         Difficulty in navigating the Council’s web pages.

AGREED that the draft 2016/17 Internal Audit Plan & Internal Audit Charter be approved, subject to any final comments or amendments from members or officers.

 

 

455.

WHISTLEBLOWING POLICY - 20:10 - 20:20 pdf icon PDF 365 KB

To receive a report from the Director of Finance, Resources & Customer Services providing an update on the Whistleblowing Policy.

(Report No.192 )

 

 

 

Minutes:

RECEIVED the report of the Director of Finance, Resources and Customer Services (No.192) detailing a refreshed policy and updated guidance of the Council’s Whistleblowing Policy.

 

NOTED

 

1.    The whistleblowing policy was last reported in 2010. The whistleblowing policy is a framework to enable and encourage reporting of any concerns regarding any aspect of the Council’s work.

2.    In terms of how to raise a concern, this is detailed on pages 71-73 of the report. Initially, any concerns should be reported (preferably in writing) to respective line managers or the manager of a person giving cause for concern. If the matter is extremely serious, sensitive or involves that persons line manager, them they may report the matter straight to their Director.

3.    Appendix 2 (page 72) details a list of Council individuals that can be contacted if the previously mentioned reporting lines are not appropriate. Staff can also raise issues anonymously if they wish.

 

AGREED that the Committee endorse the updated whistleblowing policy, and guidance for its implementation.

 

456.

DEPARTMENTAL AND CORPORATE RISK REGISTERS - UPDATE REPORT - 20:20 - 20:35 pdf icon PDF 165 KB

To receive a report from the Director of Finance, Resources and Customer Services providing an update of the Council’s Departmental & Corporate Risk Registers.

(Report No.210   )

 

Additional documents:

Minutes:

RECEIVED the report (No.210) of the Director of Finance, Resources & Customer Services providing a summary of the Council’s Departmental and Corporate risk registers.

 

NOTED

 

 

1.    The report was presented by Christine Webster, Head – Internal Audit & Risk Management, highlighting the following:

a.    The report provides a summary of the Council’s departmental and corporate risk registers, updated in January/February 2016 to illustrate changes to mitigating actions and to show current risk assessments.

b.    The number of risks in each departmental risk register is summarised by their current status, as detailed in the table at 3.6 (page 80 of the report). The figures show that 9 (17%) of all risks across departments were classified as green, 36 (66%) were classified as amber and 9 (17%) were classified as red.

c.    Appendix 1 (pages 85-95) of the report provided a log of each individual department’s risk registers. Appendix 2 (pages 97-103) of the report provided a summary of departmental risk registers higher priority risks which form the Corporate Risk Register.

2.    The following issues raised in response to the report:

a.    The external auditors, BDO, would be looking at the Departmental and Corporate risk registers .

b.    Councillor Neville highlighted the number of red risks, as detailed at 3.6 (page 80) of the report. He wanted to know what they were and which areas of those affected departments were running those sort of risks and not effectively mitigating them. Christine Webster clarified that this was an extract from their departmental risk registers and showed who is accountable and what they are doing on a day to day basis. In addition, each area is accountable in mitigating the red risks. Christine would need to go through each risk individually to establish what they related to. Councillor Neville enquired if there was anything in particular  with the 9 red risks (across 3 departments) which internal audit are concerned about that is not dealing with the risks as they should be.

Christine Webster further clarified that The DoLs (Deprivation of Liberty Safeguards) issue was bought to Audit Committee before and it continued to be an area of concern. It had gone back into the Audit Plan for next year, due to concern about the additional resource requirement. Resources would probably be a key feature for this issue.

Further clarified by James Rolfe, that the DoLS position was that operationally, the team were managing although there was a volume issue. The issue is the financial impact because the assessments that need to be taken, takes up a lot of time and it does require a lot of additional personnel to cover assessments. This issue is regularly talked about by officers both from finance and HHASC. This was one of the Council’s fundamental responsibilities.

Councillor Maguire pointed out that the red risks come from external pressures which the Council had little control over i.e. lack of affordable private rented accommodation, DoLS and welfare reforms. The problem being that these risks were all high profile and will have a  ...  view the full minutes text for item 456.

457.

LOCAL AUTHORITIES TRADING COMPANIES UPDATE - 20:50 - 21:05 pdf icon PDF 85 KB

To receive a report from the Director of Finance, Resources & Customer Services presenting an update on Local Authorities Trading Companies.

 

(TO FOLLOW)

Minutes:

RECEIVED a presentation from James Rolfe (Director – Finance, Resources & Customer Services) regarding an update on the London Borough of Enfield’s wholly owned subsidiaries.

 

NOTED

 

1.    The presentation was given under  the following headings:

·         Background/Context

·         1. Housing Gateway Limited (HGL ltd)

·         HGL ltd – Progress to date

·         2. Enfield Innovations Limited (EIL ltd)

·         EIL Ltd – Progress to date

·         3. Lea Valley Heat Network (LVHN ltd)

·         LVHN ltd – Progress to date

·         Governance arrangements – LVHN ltd

·         Governance arrangements – HGL & EIL ltd (1) – The Board

·         Governance arrangements – HGL & EIL ltd (2) – Scheme of delegation approval levels

·         Accounting & Financial governance

·         Future companies

2.    The Chair’s comments that the presentation was quite involved and Members’ would need to discuss this, so the item should be bought back again to committee. At the next meeting the Committee would need to decide if they are satisfied  controls are working,robust and the impact it will have. This was a new topic for Members. Members agreed to add this item to the November 2016 committee meeting.

ACTION: Committee Administrator.

3.    A copy of the power point presentation will be attached to these minutes.

458.

AUDIT COMMITTEE NAME CHANGE AND REVIEW OF TERMS OF REFERENCE - 21:05 - 21:15 pdf icon PDF 233 KB

To receive a report from the Director of Finance, Resources & Customer Services proposing a name change and revised Terms of Reference of the Audit Committee.

 

(Report No.211)

Additional documents:

Minutes:

RECEIVED the report of the Director of Finance, Resources & Customer Services (No.211) proposing a name change and revised Terms of Reference of the Audit Committee.

 

The report was introduced by Asmat Hussain (Assistant Director – Legal and Governance.

 

NOTED

 

1.    This report was for Members to note and agree the amended change to the Audit Committee name which had been discussed at the Committee meeting. It was felt that in order to reflect the work of Internal Audit that this Audit Committee be renamed the Audit and Risk Management Committee. This could then go through the normal governance processes within the Council i.e. Member and Democratic Services Group and then to full Council to be agreed and adopted.

2.    Asmat also took the opportunity to bring the Audit Committee Terms of Reference aswell, which had last been reviewed in July 2014, for a refresh with a couple of adjustments. A track change document was tabled for Members to comment and provide any recommendations.

3.    The following comments were raised by Members in response to the report:

a.    The Chair commented that it was always up to 2 independent Members that could sit on the Committee.

b.    Suggestion by the Chair that the Committee already met 5 times a year but there may be a need to meet more frequently. Because more time needs to be spent on some of the agenda items i.e. The local authority trading companies are growing and will have significant implications for accountability. The Council is running commercial companies and it was important that directors have the correct skill sets to do this.

James Rolfe’s further comments to make the Committee aware that discussion’s were currently taking place  as to how best to discharge the Audit Committee requirements for the LVHN (Lea Valley Heat Network). At present he was thinking  to invite Audit Committee to do that. So as to avoid duplication of effort. This would be a further push  to the committee having more meetings of the Audit Committee as it is quite a complex subject.

Councillor Maguire requested that if there are to be more Audit Committee meetings then as many as possible to be included in the Council calendar.

The Chair requested if James Rolfe could think about how often Audit Committee should meet and report back at the next meeting.

ACTION: James Rolfe (Director – Finance, Resources & Customer Services).

c.    The Audit Committee annual report is produced yearly for full Council. This did not preclude the committee if there was a big fraud or some material issue that needed to be taken straight to Council.

 

AGREED to note the Audit Committee name change and the revised Terms of Reference.

 

459.

MINUTES pdf icon PDF 860 KB

Audit Committee

 

a.         To receive and agree the minutes of the Audit Committee meeting held on Tuesday 19 January 2016, as a correct record.

 

b.         To note the update on actions identified at the last meeting.

 

Additional documents:

Minutes:

AGREED that the minutes of the Audit Committee meeting dated 19 January 2016 be approved and signed as a correct record.

 

 

NOTED

 

1.    Isabel Brittain would be addressing financial resilience regarding a plan as to how the statement of accounts could be closed down quicker, by tying it in with Audit Committee effectiveness. There had been a discussion at the last Audit meeting around trading companies because for the first time  trading companies would have significant assets and members would need to understand how that links into the accounts. BDO would undertake a preliminary review regarding unusual patterns, trends or anomalies. BDO would go through that as part of their planning going through the accounts. The Council would also be responding back to BDO to help them understand what the issues may be. By the Council working together with BDO, this would give an additional view of the accounts.

2.    James Rolfe had raised the issue around the use of a range of valuers with GVA Grimley Ltd (Property Valuers) and they had now put additional controls in place. Now that Finance were getting nearer to starting the production of the 2015/16 accounts, these controls would be tested for real.

 

Action points above to be addressed at the next Audit & Risk Management Committee meeting in July 2016.

 

460.

WORK PROGRAMME - DRAFT WORK PROGRAMME 2016/17 pdf icon PDF 169 KB

To consider and comment on the Committee’s draft work programme for 2016/17.

 

Minutes:

RECEIVED an outline work programme for the Committee covering the 2016/17 Municipal Year Committee.

 

NOTED

 

1.    James Rolfe to report, at the next Audit Committee meeting (July 2016), the required frequency of Audit meetings.

2.    The Local Authority Trading Companies item to be included in the November 2016 Audit Committee agenda. This includes the Audit Committee dis-charge of requirements for LVHN.

 

AGREED to approve the outline work programme for 2016/17.

 

 

461.

DATES OF FUTURE MEETINGS

Members are asked to note:

 

(a)      that this is the last ordinary meeting of the Audit Committee scheduled for the 2015/16 Municipal Year;

 

(b)      that a new programme of dates for the 2016/17 municipal year are currently being prepared for inclusion and approval as part of the Council’s 2016/17 calendar of meetings, which is due to be considered and approved at the Annual Council meeting on 11 May 2016.

 

The provisional dates being included on the calendar for consultation purposes will be provided for members as soon as they have been finalised.

 

Minutes:

NOTED that this had been the last meeting of the Committee for the 2015/16 Municipal Year. A new programme of dates for 2016/17 are currently being prepared for inclusion on the Council’s calendar of meetings due to be approved at the Annual Council meeting in May 2016. These dates would then be subject to consultation with members of the Committee for 2016/17.