Agenda and minutes

Audit and Risk Management Committee - Thursday, 29th September, 2016 7.15 pm

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

Contact: Metin Halil 

Items
No. Item

151.

WELCOME AND APOLOGIES FOR ABSENCE

Minutes:

Councillor Maguire (Chair) welcomed everyone to the meeting.

 

Apologies for absence were received from Councillor Lemonides (Cabinet Member for Finance & Efficiency), James Rolfe (Director – Finance, Resources & Customer Services) and Roy Baker (Assistant Head of Finance).

 

There was a private meeting between Members, BDO (External Audit) and Christine Webster (Head – Internal Audit & Risk Management) before the start of the scheduled Committee meeting.

152.

DECLARATION OF INTEREST

Members of the Committee are invited to identify any disclosable pecuniary, other pecuniary or non - pecuniary interests relevant to items on the agenda.

 

Minutes:

There were no declarations of interest.

153.

ORDER OF AGENDA

Minutes:

The Committee agreed to alter the order in which items on the agenda were considered at the meeting. The minutes reflect the order of items as listed on the agenda.

 

154.

BDO - AUDIT COMPLETION REPORT ON STATEMENT OF ACCOUNTS 2015/16 AND USE OF RERSOURCES - 19:30 - 19:40 pdf icon PDF 1 MB

To receive from BDO (external auditors) a report highlighting the key issues arising from the Council’s financial statements for the year ending 31 March 2016.

 

Additional documents:

Minutes:

RECEIVED from BDO (external auditors) the Audit Completion Report on the Statement of Accounts 2015/16 and the Use of Resources.

 

NOTED

 

1.    The report presented BDO’s audit findings of the 2015/16 Statement of Accounts, the financial statements opinion. The report was introduced by Andrew Barnes (BDO) who highlighted:

a.    In terms of the Key Audit and Accounting Matters, as detailed on pages 154 -167 of the report, highlighting significant risks that BDO had recognised, identified and first reported in the BDO Audit Planning report in February 2016:

·         Management Override of Controls – This was a difficult risk because, management can do effectively what they want to override controls that are in place. Posted journals are also looked at and BDO undertake a large data analysis exercise. Once the correct data format had been achieved, BDO were able to perform their work on journal entries and concluded that these were appropriate for the preparation of the financial statements.

·         Revenue Recognition – The key thing mentioned was that BDO found a small number of errors in the cycle, detailed at page 155 of the report. By looking at the overall effect of these errors, BDO were able to compare purchase statements in respect of where items are classed at and coded into wrong financial years.

·         Property, Plant and Equipment (PPE) Valuations – BDO had an issue with the reported valuations at the end of the year. This was due to valuations taking place at the start of the financial year, as detailed on page 156 of the report.

·         In terms of other risks, reported to the Committee at the start of the year, all of their work and all the work done by the accountants, BDO did not find any significant issues. All the work had been done in an appropriate manner.

·         Related Party Transactions (as detailed at page 158 of the report) – Issues had arisen during the course of the audit and in respect of PPE, this was around classifications of some assets under construction. This was due to project officers not informing the financial management team that some of the assets had been certified as complete, before the end of the year and were therefore misclassified. The expectation from the finance teams was that these assets were still ongoing. However, this didn’t make any difference to the overall effect in the balance sheets.

·         Writing Out of Depreciation – This identified error was a result of accumulated depreciation, reported in the accounts and detailed at Page 159 of the report.

·         Non-Enhancing Capital expenditure – BDO investigations suggested that the expenditure incurred was valid capital expenditure and therefore have agreed with the accountants’  that the figure of £68.9m will be moved to the Revaluation decrease recognised in the LBE row of the accounts.

·         Accumulated Staff Absences Provision – This affected teachers, where they had earned the right to holidays, up to 31 March 2016 and had not taken these. So there was an accumulated overspend of the accumulated provision, because of  ...  view the full minutes text for item 154.

155.

FINAL AUDITED STATEMENT OF ACCOUNTS 2015/16 -19:15 - 19:30 pdf icon PDF 78 KB

To receive the report of the Director of Finance, Resources & Customer Services presenting the audited annual statement of accounts for the 2015/16 financial year along with a schedule of the agreed adjustments between the draft and final statement.   

(Report No.91)

 

 

 

 

 

Additional documents:

Minutes:

RECEIVED the report from the Director of Finance, Resources and Customer Services requesting approval of the final audited 2015-16 Statement of Accounts for Member’s approval and to note the adjustments between the draft and final audited Statement of Accounts, in accordance with regulations.

 

NOTED that

 

·         The 2015-16 draft Statement of Accounts were approved by James Rolfe on 30th June 2016 and presented to the Audit & Risk Management Committee on the 4th July 2016 for information.

·         On 1st September 2016, the Audit & Risk Management Committee went through the Draft Statement of Accounts in more detail and raised questions.

·         Once approved and the Chair of the Audit & Risk Management Committee and the Director of Finance, Resources and Customer Services certify the audited Statement of Accounts, the Statement must be published by 30th September 2016 together with the Audit Opinion.

·         At the time of preparing the report, BDO (external auditors) had not completed their audit. Any new adjustments identified and their impact will be provided to the Members accordingly.

·         As the audit process was not complete, the Chair requested that the Audit Committee approve the Statement in its current form and give James Rolfe and the Chair, permission to sign off the accounts once the external auditors are happy with the final version.

 

AGREED that the Final Audited Statement of Accounts for the year ending 31 March 2016 be approved and the Certification of Accounts and Annual Governance Statement signed by the Chair (Councillor Maguire).

 

 

156.

2016/17 AUDIT AND RISK MANAGEMENT SERVICE PROGRESS REPORT - 19:40 - 19:50 pdf icon PDF 554 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 2016 to 19 September 2016.

 

 (Report No.90)

 

Minutes:

RECEIVED the report of the Director of Finance, Resources & Customer Services summarising the work that the Internal Audit and Risk Management Service (ARMS) had completed for the period 1 April 2016 to 19 September 2016.

 

NOTED

 

1.    During the review period, the internal audit team had commenced 47% of the current plan of which 4% had been completed.

2.    Some changes had been to the 2016/17 Audit Plan, primarily to help the Council achieve savings by reducing the cost of internal services. This has meant that that the service has reduced and re-thought how they are going to deliver some of the current audit plan. Details are shown in table 2 (page 3 of the first agenda) of the report. In summary, this has resulted in a reduction of the total days the team audits the plan by 200 days which will save approximately £60k - £70k through a reduction in the PwC contract. There would be no impact on the in house team from that.

3.    Arising from the Audit meeting in July 2016, there had been some updates on the audits that were completed during 2015/16 but were given ‘no assurances’. At the July 2016 meeting the committee requested updates on those 3 audits. These were:

·         Payments to families with no recourse  to public funds

·         Private sector leasing

·         IT disaster recovery

           Pages 4,5 & 6 of the report provide paragraphs from the responsible managers for those audits and who are in attendance today. Christine Webster (Head – Internal Audit & Risk Management) invited the Committee to ask any further questions to the responsible managers in response to their reports and the Chair asked manager’s if there was anything further they wished to add to their reports. The manager’s were Julian Edwards from Children’s Services, Madeleine Forster from Enfield Council Housing and Steve Durbin from Corporate IT.

a.    Julian Edwards – He agreed that the audit process had been helpful. The system in place wasn’t sufficiently tight and wasn’t working effectively. Other Local Authorities were bringing in different systems and the new system that the department were developing was very much in line with that of Lewisham Council. Details of the Lewisham model had now been sent out to all London Borough’s. The new system positions a Counter Fraud officer alongside social workers and Housing staff at the initial screening stage as regards payments to families with no recourse to public funds (NRPF). The new system comes into operation next week after a pilot scheme, with a review built in for January 2017.  Over the 14 families that the department saw during the pilot period of the system, 10 were accepted as legitimate and legally needed to be supported by the Council. However, there were 4 families that were refused as a result of counter fraud involvement. This is a significantly improved system and will allow the department to turn the curve in total expenditure patterns.

The following issues raised by Members in response to the report and clarified by  ...  view the full minutes text for item 156.

157.

AUDIT COMMITTEE EFFECTIVENESS AND LEARNING DEVELOPMENT PLAN - 19:50 - 20:00 pdf icon PDF 338 KB

To receive the report of the Director of Finance, Resources & Customer Services, presenting the results of the Audit & Risk Management Committee’s self-assessment of effectiveness and the results of Member’s self-assessments of skills and experiences, to identify potential training needs.

 

 (Report No.88)

 

 

Minutes:

RECEIVED the report of the Director of Finance, Resources & Customer Services (No.88) presenting the results of the Audit & Risk Management Committee’s self-assessment of effectiveness and the results of Member’s self-assessments of skills and experiences, to identify potential training needs.

 

NOTED

 

1.    This is a report on the Audit & Risk Management Committee effectiveness. Christine Webster (Head – Internal Audit & Risk Management) had asked members a series of questions about their views on whether the Council was effective against the standards issued by CIPFA.

2.    The paper presents the results of that session. The results are presented in Appendix 1 (pages 25-32) of the report, but Table 1 (pages 20-21) of the report summarises the areas for improvement. There are also some proposed actions to take the Committee further forward. Christine asked members if they can read these actions and consider if the service should be implementing those recommendations.

Some of those recommendations have been agreed and implemented. Private sessions have already been put in place with the Chair, external audit (BDO), Members of the Committee and Christine Webster.

3.    The results of a review of the skills of the committee are also presented in the report. That suggested, the Committee felt it needed further training in 3 areas. Christine Webster proposed that she would be addressing those 3 areas in future.

 

 

AGREED to note the results of the assessment of Committee effectiveness and actions for improvement.

 

 

 

 

 

158.

OPERATIONAL & STRATEGIC RISK REGISTERS UPDATE - 20:00 - 20:10 pdf icon PDF 256 KB

To receive a report from the Director of Finance, Resources and Customer Services providing a summary of the Council’s departmental (renamed ‘operational’ and strategic risk registers as updated in August/September 2016.

(Report No.89)

 

 

Additional documents:

Minutes:

RECEIVED the report of the Director of Finance, Resources & Customer Services providing a summary of the Council’s departmental (renamed ‘operational’) and strategic risk registers as updated in August/September 2016.

 

NOTED

 

1.    This report was a presentation of the Council’s operational and strategic risk registers and was presented by Vivian Uzoechi (Insurance and Risk Manager).

2.    To ensure that risk registers closely reflect the Council’s re-structure and operating model, the departmental risk registers have been renamed as an ‘operational risk register’. The table detailed at 3.7 (page 38) of the report shows how client departments fit into the new operating model.

3.    The graph detailed at 3.8 (page 39) of the report provides a snap shot of a percentage of risks within operational risk registers as green, amber and red. Overall, 7% of all risks in the operational risk register are red, 7%-8% are amber and 58% are green. A log of the operational risk register is detailed in Appendix 1 (pages 43-51) of the report.

4.    Some of these risks were outside of the Council’s control, mainly red risks. The strategic risk register is detailed at Appendix 2 (pages 53-54) of the report and mainly contains these red risks.

5.    Members attention was drawn to the reporting of risk registers and the team had prepared a time table at 3.15 (page 40) of the report, to enable the team to present risk registers in smaller chunks which will allow the committee to consider risks in more detail. There will also be a representative from each department (each quarterly meeting) attending meetings to provide further information and advice to members’ enquiries.

6.    Councillor Hayward requested that in future if report slides could be screened onto TV display screens so that colour coded risks could be seen clearly.

ACTION: Committee Administrator.

 

AGREED to note the risks recorded in the operational and strategic risk registers and the proposed staggered reporting of risk registers to each quarterly Audit & Risk Management Committee meeting.

159.

RIPA UPDATE - 20:10 - 20:20 pdf icon PDF 146 KB

To receive a report from the Director of Finance, Resources & Customer Services providing an update on the use of RIPA to ensure that it is being used in accordance with the law.

(Report No.92)

 

 

 

Minutes:

RECEIVED a report from the Director of Finance, Resources and Customer Services requiring the Audit Committee to receive an internal quarterly report  from the Monitoring Officer on the use of RIPA within the Council and to note that since the last report there has been one application for Directed Surveillance.

 

NOTED

 

1.    This is a standard report that comes to Committee with regards to the use of RIPA.

2.    Members attention was drawn to paragraph 3.13 (page 201) of the report. The authority did have one application for directed surveillance which went through the local magistrate’s court and they did approve the use of RIPA.

3.    Although the information collected did not lead to a prosecution, it did lead to an internal disciplinary and 2 members of staff from the authority being dismissed. Because this is a public meeting, if members would like more detailed information, Asmat Hussain would be happy to arrange meetings with Members for the actual details.

4.    Asmat Hussain (Assistant Director – Legal & Governance) reported that the RIPA authorisation had now been cancelled as the matter had been concluded.

 

AGREED to note the requirements for the Audit & Risk Management Committee to receive quarterly reports from the Monitoring Officer on the use of RIPA within the Council and to note the use of the legislation in the last quarter.

 

160.

FINANCIAL RESILIENCE CAPACITY BUILDING PROGRAMME UPDATE - 20:20 - 20:30

To receive a verbal update from the Director of Finance, Resources & Customer Services regarding the Financial Resilience Capacity Building Programme.

 

 

Minutes:

RECEIVED the verbal update from Isabel Brittain (Assistant Director – Corporate Finance) on the Financial Resilience Capacity Building Programme.

 

NOTED

 

1.    This was a leadership programme for finance managers/leaders devised by  the Society of London Treasurers and Grant Thornton, back in 2014.

2.    The programme started in 2015 and is in its second year. It provides the opportunity, across London Council’s, for finance staff to interact and learn together.

3.    Last year there were 2 cohorts (2 groups of people) that went through the programme, equating to 54 officers who took part in the programme in 2015. By the end of 2016, where there are 3 cohorts, 72 officers would have taken part in this programme across London Council’s.

4.    Speakers include Finance Directors and lead Members. The programme helps people who have not worked at certain levels, to understand exactly what direction and strategy they should be looking at including what objectives other Councils have.

5.    Feedback from the latest cohort was very positive and inspirational providing help and support to finance officers.

6.    The programme is not an overly expensive commitment for the Council and costs approximately £5k per year to participate. For that, each cohort is allowed to send 3 members of staff. To date, 12 members of Isabel’s staff have been through this process.

7.    Presently, more senior managers have gone through this process. The Committee which organises the training meet regularly to discuss how the programme is progressing and what the next steps are. There is another year for the programme to run and after that the Council will decide how that will continue.

 

 

AGREED to note the verbal update of the Financial Resilience Capacity Building Programme.

 

161.

MINUTES pdf icon PDF 99 KB

Audit & Risk Management Committee

 

a.         To receive and agree the minutes of the Audit Committee meeting held on Thursday 1 September 2016, as a correct record.

 

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

 

Additional documents:

Minutes:

NOTED the progress update on actions identified at previous meetings.

 

AGREED that the minutes of the Audit & Risk Management Committee held on Thursday 1 September 2016 be approved and signed as a correct record.

 

 

 

 

 

162.

AUDIT & RISK MANAGEMENT COMMITTEE WORK PROGRAMME 2016/17 pdf icon PDF 172 KB

The Committee is asked to agree the Work Programme put forward for the 2016/17 municipal year along with the timetabling of each issue on the Work Programme.

 

Minutes:

RECEIVED and noted the Committee’s updated work programme for 2016-17.

 

AGREED  that

 

1.     

a.    BDO further work on the statement of accounts 2015/16. Communications between BDO and the committee regarding further identified errors above their trigger level, can be communicated through the Chair and distributed through the Committee Administrator.

b.    Report on ‘Managing the Savings’ to be added to the Work Programme and bought to the next meeting on 1 November 2016 – Isabel Brittain

c.    Report on the review of the new system regarding NRPF in January 2017 – Julian Edwards.

d.    Further information from Madeleine Forster regarding whether gas certificates were being obtained, in the past, before tenants were placed in council properties – Madeleine Forster.

e.    Report on the outcome of the new processes & system regarding IT disaster recovery, after November 2016 – Steve Durbin.

f.     Follow up Audit - IT disaster recovery – Christine Webster

g.    An agreed timetable for Directors to attend committee for missing target implementation dates for high assurance risks.

h.    Future colour report slides to be projected and viewed through tv display screens.

 

2.    In terms of the report regarding ‘managing the Savings’ Isabel Brittain clarified that what Finance tended to do, as regards the revenue monitor, was provide a high level view of those savings that have been delivered. That high level view can be bought back to the next meeting with some more detail, because there is a list of those savings already written into the Medium Term Financial Plan. We can show where we are at the half way stage of the financial year in delivering those savings and the Council’s ability in delivering those savings within year.

3.    In light of the external auditors report, Councillor Neville wanted to see what was being done to deliver those savings, whether they are partially being delivered and what sort of sums involved.

 

 

 

 

 

163.

DATES OF FUTURE MEETINGS

To note the dates agreed for future meetings of the Audit Committee:

 

Tuesday 1 November 2016

Thursday 12 January 2017

Tuesday 7 March 2017

 

 

(All meetings to commence at 7.00pm unless otherwise agreed.)

 

Minutes:

NOTED the dates of future meetings:

 

Tuesday 1 November 2016

Thursday 12 January 2017

Tuesday 7 March 2017

 

 

(All meetings to commence at 7.00pm unless otherwise agreed.)