AUDIT
COMMITTEE
RECORD OF MEETING
HELD ON 18th SEPTEMBER 2007
Present:
Councillor G Fenton, Chair; Councillors H
Curran, C Goff, S Hogben, A C Johnson.
Officers in attendance:
P
Ancell Chief
Executive
J
Cross Executive
Director, Treasury & Corporate Support
A
Devin Principal
Auditor
P
Goodwin Assistant
Director, Accountancy and Audit
M
Scott
Principal Accountant
J
Smith Democratic
Services Officer
Also in attendance:
D
Buxton
External Auditor, Baker Tilly
8.
DECLARATION OF
INTERESTS
No Member declared any personal or prejudicial
interest in respect of any item of business on the agenda.
9. RECORD
OF MEETING
AGREED: That the record of the meeting
held on 21st June 2007 be approved as
correct.
10.
AUDITOR’S COMMUNICATION OF AUDIT MATTERS (ISA
260)
The External Auditor, Baker Tilly attended
the meeting to report the Auditor’s view of the Council’s 2006/07
Statement of Accounts in accordance with the International
Standards on Auditing No 260 (ISA no 260).
The Auditor provided a brief summary of the
report and commented that no errors which required adjustment were
identified. He stated that the draft accounts and supporting
working papers were of a high quality and were accompanied by high
level analytical review.
The Council’s overall Use of Resources
score remained at level 3 which reflected continued good
performance particularly in relation to the financial standing of
the Council. The Council’s scores had improved on 2006 scores
within both Financial Reporting and Financial Management. However,
the Council had been assessed as a level 2 (level 3 in 2005) for
the management of significant business risks.
In conclusion the Auditor explained that
they proposed to issue an unqualified opinion on the financial
statements following receipt of a letter of representation from
management and the signing of the financial statements, including
the Statement on Internal Control.
Use of Resources Scores – Risk
Management:
A Member queried why the score in respect
of managing business risks had fallen to level 2.
The Auditor explained that to achieve level
3 the Council would have to show evidence that risk management had
been embedded in the organisation for at least a year and this had
not happened between 2005 and 2006. The review for 2007 had just
begun which would assess whether level 3 had been achieved with the
outcome due to be published in December 2007.
The Auditor stated that Member training was
one of the reasons for the failure to achieve level 3. He also
explained that it was felt that all Members should have some form
of training on risk management. Risk Management Training had
been made available for Members but attendance was poor.
Members discussed the problems associated
with ensuring all Members attended training sessions and it was
noted that attendance at Member training sessions had been raised
as an issue by both Scrutiny Organisation Committee and the Member
Development Advisory Group.
The Auditor commented that many other local
authorities had received a similar score on this area of internal
control due to the difficulties in embedding risk management into
the organisation. He explained that there were examples of
good practice authorities on the Audit Commissions web-site which
could be used to assist with the process.
RESOLVED:
(A)
That the Auditor’s Communication of Audit Matters (ISA 260)
be received; and
(B) That all
Members be reminded of the importance of on-going risk management
training and be encouraged to attend risk management training
sessions.
11. ANNUAL
AUDIT AND INSPECTION PLAN 2007/08
The Committee considered the Audit
Commission’s Annual Audit and Inspection Plan 2007/08.
The Annual Audit and Inspection Plan
2007/08 had been developed by the Relationship Manager and the
appointed Auditor. It set out the audit and inspection work
that was proposed to be undertaken for the 2007/08 financial
year. The plan was based on the Audit Commission’s risk-based
approach to audit planning and the requirements of Comprehensive
Performance Assessment (CPA).
The appointed External Auditor introduced
the report on behalf of the Audit Commissions Relationship Manager
and provided a summary of the main areas of the 2007/08 plan.
The Auditor explained that Local Government
Reorganisation (LGR) was highlighted as a significant potential
risk and he commented that there would be an additional role for
the auditors if the unitary proposals were to go ahead.
Members discussed the role of Members and
Officers in Local Government Re-organisation and whether the need
for preparatory work by Officers would be required.
The Director of Treasury & Corporate
Support explained that as part of the Budget preparations for
2008/09 there was a need to consider the consequences of LGR and
there was a requirement to have an understanding of the
implementation guidance. She felt that Officers should have
the opportunity to attend meetings/seminars to gain an
understanding of the implications of the various aspects of
LGR.
The Auditor explained that they had no
clear instruction from Government on preparatory work for LGR at
the present time but the Audit Commission had established working
groups nationally and the North West group would be looking at the
potential generic risks that may arise and considering appropriate
responses to these risks.
RESOLVED:
That a recommendation be made to
the Board as follows:
In the interests of good
governance, Officers and Members should be permitted to seek
information and guidance, where appropriate, to all potential
outcomes of Local Government Re-organisation.
12.
INTERNAL AUDIT TERMS OF REFERENCE AND INTERNAL AUDIT
STRATEGY
The Code of Practice for Internal Audit in
Local Government, issued by CIPFA defined the way in which the
Internal Audit Service should undertake its function. The Code
contained Standards which required Internal Audit to have Terms of
Reference and a Charter. The Council was required to
demonstrate adherence to the Code which was reviewed for compliance
by the External Auditor.
The Principal Auditor introduced the report
and provided a summary of its content. He explained that the
Code was split into 11 standards which required Internal Audit to
have Terms of Reference and a Charter. Additionally the
Chief Internal Auditor must produce an Internal Audit
Strategy. The Terms of Reference and Charter together with the
Internal Audit Strategy were appended to the report.
RESOLVED:
(A)
That the Internal Audit Terms of Reference and Charter
be adopted; and
(B)
That the Internal Audit Strategy be adopted.
13. INTERNAL
AUDIT INTERIM REPORT 2007-08
The Committee considered the report of the
Principal Auditor which provided an interim report on audit
activity. The report provided a commentary on the results of
the main areas of audit activity for the period April to August
2007.
RESOLVED:
That the Internal Audit Interim
Report be received.
14.
LOCAL GOVERNMENT REVIEW:
CONSULTATION SPENDING REVIEW
At its meeting held on 21st July
2007 the Committee discussed the decision-making process followed
in respect of how the approved funding for consultation on Local
Government Review was spent. The Committee considered that the
process should be reviewed to ensure that it was in line with the
Council’s arrangements for Corporate Governance and a report had
been prepared for presentation at the meeting.
The Assistant Director, Treasury and
Corporate Support introduced the report and summarised the
content. The report detailed the Terms of Reference for
the review; Background and Context; Stakeholder Consultation –
Background; Consultation Process and Procedures and Review of
Spending Against Budget.
The Principal Auditor explained that the
report was a factual report on how the process had evolved and
how the budget was spent.
The Chief Executive updated Members on the
position in respect of the contribution from Congleton Borough
Council and confirmed that they would be making a
contribution of £5,000 towards the shared activities.
Members raised the following
queries/comments:
Review of Spending against Budget
The report identified that there was an
£18,729 overspend on the authorised budget and a Member queried
whether this was classed as normal variance within materiality
levels.
The Assistant Director explained that
approved budgets were effectively financial limits, to be
applied to a particular set of circumstances, be it
service delivery or specific projects. On this particular
matter, Members had the opportunity to set a budget of
£150,000 but agreed a budget of £100,000 at full
Council. It is recognised that, with projects of this nature,
events could occur where extra expenditure was
required. Certain flexibility in
financial management was available through the Council’s
Financial Regulations, which set out arrangements for
obtaining approval for virement or supplementary budgets.
The Executive Director, T&CS added
that, in this instance, budgetary control was not exercised in
accordance with expectations. However due to the complex and
fast-moving nature of the exercise it was felt that
broad compliance within budgetary parameters was achieved. The
contribution from Congleton BC was welcomed and it was felt
that this was an equitable contribution from them.
The need to review the approval process
used in respect of the additional budgetary requirements to
ensure a better approach to Corporate Governance was
highlighted.
The external Auditor endorsed the comments
made overall and he felt that that as the overspend was not a
significant amount there was no particular concern from the
External Auditors.
A Member commented that he felt that this
was not a satisfactory outcome as full Council had approved a
specific budget and there should be a method of recording the
additional virement within the decision-making process.
Ad Hoc Member Panel
A member stated that the Council had
clearly approved a cross-party Ad-hoc Member panel be set up to
make the decisions on the consultation process but that this
group had only met once. The Member felt that the objective of
the Council decision to have a cross-party panel was not
met and queried how the Leader and the Deputy Leader had
continued to attend weekly meetings without the rest of the
group. He also queried the setting
up of the Communications group and how constitutional this was as a
limited number of members were
involved in the decision making process.
The Committee felt that the process by
which resolutions were presented at Council should be reviewed to
ensure that the decision-making process accorded with the
Council’s Constitution. Councillors should, where
possible, provide advance notice of resolutions to ensure that
the appropriate officer had the time to consider the
resolution and provide advice, where necessary.
Chief Executive’s Comments:
The Chief Executive stated that Officers
were aware of the difficulties that had occurred during the process
and the importance of learning from the outcome of the review to
ensure that procedures were put in place to minimise the risk
of the Council repeating this experience.
He explained that the difficulties arose
with the decision to establish the panel. He felt that the
resolution was not properly discussed/addressed at Council and
therefore may not have been ‘fit for purpose’. There were
two strands of work to be carried out:
- Member input on the Consultation
exercise: This was the primary work of the panel, there was a
very short timescale and this work was dealt with atthe meeting of
the ad hoc panel.
- The detailed work on the publicity
materials: This was not dealt with by the ad hoc panel and the
Communications group were involved in finalising
the details.
The scope of the panel’s work should have
been agreed at the initial stages but there were time
pressures which made this difficult.
In respect of the budget for the exercise
the Chief Executive stated that as there was a lot of work being
carried out by various officers and external companies it was
difficult to monitor the budget effectively.
Executive Director, Treasury &
Corporate Support Comments:
The Executive Director, Treasury &
Corporate Support commented that in this case the budget could have
been more tightly-controlled with greater consideration given to
the terms of reference for the ad-hoc panel. This had been
acknowledged by Officers and recommendations would be taken forward
to ensure this did not happen again.
RESOLVED:
That the contents of the report be
noted and that the issues arising from the outcome of the review be
taken forward by the relevant Officers to ensure that mechanisms
were in place to improve the future management of such
projects.
15. DATE OF NEXT
MEETING
December/January 2007
The Committee discussed the
timing/frequency of Audit Committee Meetings to inform the draft
Timetable of Public Meetings for 2008/09. Meetings would need
to be held in May/June and September to approve various audit
documents. The Committee stated a preference to meet on a quarterly
basis.
RESOLVED:
That the Committee meet on a
quarterly basis with the schedule of meetings to be guided by the
reporting cycles of the Internal and External
Auditors.
…………………………
Chair