Audit Panel

Minutes of the Meeting held on 31 May 2011

Time Commenced: 2.00pm   Time Terminated: 3.10pm

Present:

Councillor V Ricci (Chair)
Councillors Baines, Fairfoull, J Fitzpatrick and Miah

Apologies for Absence:

Councillors Sidebottom, Harrison and Whitehead.

1. Declarations Of Interest

There were no declarations of interest to report at this meeting.

2. Minutes

The Minutes of the meeting of the Audit Panel held on 1 February 2011 were signed as a correct record.

3. Audit Commission – The Audit Fee Letter 2011/12

The Borough Treasurer reported that the Audit Commission had written to confirm the audit work it proposed to undertake for the Authority and the audit fee for 2011/12 together with a comparison of fees for 2010/11.

Resolved

That the Audit Fee of £230,922 plus £41,200 for certification for claims and returns for 2011/12 as detailed be noted.

4. Audit Commission – Audit Progress Report 2010/11

Consideration was given to a report of the Audit Commission which reported on the progress in delivering the Audit Commissions’ responsibilities as the Council’s external auditor and highlighted key emerging national issues and development that could be of interest to Members.

The Audit Commission reported that detailed audit work for 2010/11 was now underway and furthermore;

• The audit plan for 2010/11 and its assessment of audit risks had been presented to the previous Audit Panel. A detailed update of the progress of the programmed was provided at appendix 1 of the report;
• The interim accounts opinion work to update the Commission’s understanding of the Council and its financial systems was nearly completed; and
• The Commission’s planned work to reach the 2010/11 value for money conclusion had been discussed with officers.

The report highlighted the timetable for annual accounts audit for 2010/11 and drew the attention of Members to new clarified International Standards on Auditing (ISAs) which expected auditors to communicate various matters with those charged with governance.

Resolved

That the report be noted.

5. International Financial Reporting Standards – Transition Progress Update

Consideration was given to a report of the Assistant Executive Director (Finance) which provided progress to date and the key issues for Members to be aware of further to the announcement in the 2007 budget that public sector bodies would in future be required to conform to the International Financial Reporting Standards (IFRS). Local councils had been engaged on a transition from the previous framework (UK GAAP) to the IFRS basis.

Members were informed that a partial transition had been made during 2009/10 which had been evident in the accounts of that year. Furthermore a full transition would be required for the accounts 2010/11 with the result that the accounts for this year would be fully International Financial Reporting Standards compliant.

The report detailed the progress to date and particular reference was made to the key changes in the 2010/11 accounts.

Resolved

That Members considered the impact of the changes contained in the report and noted the progress made to date.

6. New Accounting Regulations

Consideration was given to a report of the Assistant Executive Director (Finance) which set out the changes made to the accounting regulations further to recent consultation undertaken by Department for Communities and Local Government (DCLG), and advised Members of the next steps required.

He reported that the Department for Communities and Local Government had consulted with Councils on proposals to revise and consolidate the existing Accounts and Audit Regulations. A letter was issued to confirm the outcomes of those proposals and the consultation on them. He reported that the majority of the proposals related to small changes to the statutory accounting regulations, although there was a key change to the process of approving the accounts. The full letter was appended to the report. The areas of change were:

• Statement of Accounts - approval by elected members. The previous requirement was to have the pre-audit accounts approved by the Audit Panel by 30 June. The Audited accounts were then brought to the Overview (Audit) Panel by 30 September. This had now been replaced by a requirement that the Chief Finance Officer (the Executive Director of Finance) sign off the pre-audit accounts with the audited accounts being brought before Members by 30 September. However, it was regarded as best practice that the financial position of the Council for the year just ended was shared with Members at the earliest reasonable opportunity.
  
  
  It was therefore recommended that the 30 June planned meeting of the Audit Panel should be replaced with a training session on Council finances which would enable Members to be presented with the key points of the pre-audit accounts and the need to consider the whole document in a formal meeting;
  
  
• Annual Governance Statement (AGS) – to ‘accompany’ the accounts rather than be ‘included’ within them. This would mean that the Annual Governance Statement would appear as an agenda item separate from the accounts in future. Due to the timing of future Audit Panel meetings, it was recommended that the Executive Director of Finance (Borough Treasurer) was given delegated authority to sign off the Annual Governance Statement. The draft of the Annual Governance completed document would be reviewed by the Executive Director of Finance (Borough Treasurer) at the point when the pre-audit accounts were signed off (30 June). The Annual Governance Statement would then be brought back to the Audit Panel alongside the audited Statement of Accounts in September;
  
  
• Slight changes to the work internal audit (access to documents and the requirement for an annual review); and
  
  
• Clarification of the methodology for disclosing senior officer pay.

Resolved

1. That the next meeting of the Audit Panel on 27 June 2011 be cancelled as it was no longer required in order to comply with the accounting regulations. Instead, it was proposed that the 27 June 2011 was used as a discussion on training and what areas of Council finance Members would like training in; and
2. That the Executive Director of Finance (Borough Treasurer) be given delegated authority to approve the Annual Governance Statement alongside the pre-audit accounts.

7. Clg Consultation – The Future Of Local Public Audit

Consideration was given to a report of the Assistant Executive Director (Finance) which provided a context to the consultation started by the Department of Communities and Local Government on the future of local public audit, following the announcement of the abolition of the Audit Commission. The report provided the key points emerging and proposed responses to it.

Members were informed of the dual role of the Audit Commission in the public sector and that on 13 August 2010, the Secretary of State had announced that the Audit Commission would be abolished by the Government. Since the announcement there had been ongoing discussion about how the statutory element of the role of the Audit Commission would continue in the future.

The report set out the audit context and Members were informed that apart from the Audit Commission, the market for audit services was divided between the big audit firms (PwC, Deloitte’s KPMG and Ernst and Young) and a large number of smaller firms.

Reference was made to the future of local public audit and Members were informed that the consultation was divided into 5 main sections, dealing with:

• Regulation of the auditors;
• The local audit market;
• The structure of the audit committee;
• The scope of the audit; and
• The audit of smaller bodies.

Particular reference was made to the consultation proposal for a wider role for local audit committees – chiefly the ability to appoint external auditors, or to recommend the appointment of such to Full Council. It was also recommended that the structure of the audit committee was revised to more closely reflect the Standards Committee.

He further reported that the future of the Audit Commission remained uncertain. It was anticipated that the Audit Commission would cease to exist from December 2012. However, there would continue to be some audit requirement for the outgoing Primary Care Trusts (PCTs) to March 2013. Furthermore, there were legislative delays in appointing replacement auditors for the current Audit Commission teams which would mean a further delay to December 2013 before the Commission could be formally wound up.

Members were asked to consider the list of consultation questions and proposed responses appended to the report. Discussion ensued and Members sought clarification regarding the options and were informed that it related to the appointment of an independent Chair. Furthermore Members expressed concern at the treatment meted to staff of the Audit Commission with regard to the winding down of the Commission.

Resolved

1. That the content of the report be reviewed and discussed; and
2. That Members considered the proposed responses and confirm them, subject to any changes.

8. Amendments To Accounting Policies

Consideration was given to a report of the Assistant Executive Director (Finance) which informed Members that as part of the transition from UK Generally Accepted Accounting Principles (GAAP) to International Financial Reporting Standards (IFRS), a number of small changes had to be made to the declared accounting policies of the Council. The report detailed the changes to policies which were proposed and the reason for them.

The report detailed the following:

• Format of the Statement of Accounts; and
• Accounting Policies.

Resolved

That the amended statement of accounting policies be agreed.

9. Review Of Internal Audit

Consideration was given to a report of the Executive Director (Finance) which reviewed the effectiveness of internal audit and measured practices and performance of Internal Audit with the standards set out in the CIPFA Code of Practice for Internal Audit in the United Kingdom 2006. The report informed the Audit Panel of the background to the review, the requirements of the CIPFA Code of Practice for Internal Audit, which had been followed in the review, the process that had been adopted and details of the review.

Reference was made to the standards expected by the Code of Practice, together with an assessment against each of them and a comparison of the results for March 2011 compared to the position as at March 2010.

The report concluded that against each of the standards, Internal Audit had achieved all the requirements of the Code and that the Internal Audit Service contributed to the overall control environment of the Council. The outcome of the review, together with the positive comments received from the external auditors and the positive comments received from Senior Management Teams/Executive Members demonstrated that the Council had an adequate and effective system of internal audit.

Particular reference was also made to the Terms of Reference for Internal Audit.

Resolved

1. That the report be noted;
2. That the Terms of Reference for Internal Audit be agreed as set out in Appendix 2 to the report; and
3. That the updated Strategy for Internal Audit as set out in Appendix 3 be agreed.

10. Risk Management And Audit Services – Annual Report 2010/2011

Consideration was given to a report of the Head of Risk Management and Audit Services which summarised the work performed by the Service Unit and provided assurances as to the adequacy of the Council’s systems of internal control.

The report set out the Authority’s Risk Management and Audit Services Unit’s Mission Statement. Furthermore a definition of Internal Audit as defined by CIPFA Cod of Practice for Internal Audit in Local Government in the UK 2006 was provided which stated that it objectively examined, evaluated and reported on adequacy of the control environment as a contribution to the proper, economic, efficient and effective use of resources. The control environment comprised the systems of governance, risk management and internal control.

Reference was made to the major achievements during 2010/2011. Furthermore coverage for 2010-11 provided details of the key areas covered during the period April 2010 to March 2011 and commented on any important issues arising from the work. Particular reference was made to the 35 schools which had been audited as part of the cyclical review programme and 18 post audit reviews had been undertaken of previous audits to ensure recommendations had been auctioned as agreed. 93% of agreed recommendations had been implemented.

With regard to the Anti-Fraud Work particular reference was made to the 17 cases of suspected fraud and irregularity which were reported to Internal Audit for full investigation. All cases had been investigated using standard protocol and procedure.

The report further detailed the following:-

• Risk management and insurance;
• Performance indicators; and
• Audit opinion based on results of 2010/11 activity.

The Chair made reference to the Anti Fraud work undertaken and requested information as to how much of the £302,535 from the identified 813 fraud recovery cases had been clawed back by the Authority. The Head of Risk Management and Audit Services stated that a report would be submitted at the next meeting detailing the figure.

Resolved

1. That the Head of Risk Management and Audit Services submit a report detailing the actual amount recovered by the Authority from the 813 fraud recovery cases as identified by the National Fraud Initiative 2008,to the next meeting of the Audit Panel; and
2. That the report, the overall audit opinion on the control environment and the performance of the Service Unit for 2010/2011 be noted.

11. Corporate Governance

Consideration was given to a report of the Assistant Executive Director (Finance) which sought Members views on:-

• The Draft Annual Review against the Code of Corporate Governance for 2010/11;
• The Draft Governance Statement for 2009/10; and
• The Code of Corporate Governance for 2010/11.

Members were reminded of the background to local government corporate governance and informed that in June 2007 CIPFA/SOLACE had produced a revised framework for corporate governance. The revised framework was an interrelated assessment that brought together an underlying set of legislative requirements, governance principles, and management processes that recognised that Local Government had been subject to continued reform intended to improve local accountability and engagement. The framework comprised of Six Core (and supporting) Principles and was adopted and approved by the Audit Panel in June 2010:

• Focusing on the purpose of the authority and on outcomes for the community and creating and implementing a vision for the local area;
• Members and officers working together to achieve a common purpose with clearly defined functions and roles;
• Promoting the values of the authority and demonstrating the values of good governance through upholding high standards of conduct and behaviour;
• Taking informed and transparent decisions which are subject to effective scrutiny and managing risks;
• Developing the capacity and capability of members and officers to be effective; and
• Engaging with local people and other stakeholders to ensure robust public accountability.

The outcome of a review assessing the Council’s position against the Code of Corporate Governance 2010/11 was appended to the report in order to demonstrate compliance, ongoing developments and improvements and to prepare for the compilation of this year’s Annual Governance Statement and Statement of Assurance. The draft Annual Governance Statement for 2010/11 was attached to the report for comment.

Resolved

1. That the draft annual review against the Code of Corporate Governance for 2010/11 be agreed; and
2. That the draft Annual Governance Statement for 2010/11 be agreed.

12. Annual Audit Plan 2011/12

The Head of Risk Management and Audit Services reported on the updated Internal Audit Plan 2011/12 and the planned work of the Risk Management and Insurance Team and National Anti Fraud Network Team.

She outlined how the Internal Audit Section planned its work over a five-year period and detailed the consultation process adopted to arrive at the Annual Plan.

She stated that audits were prioritised based on an assessment of risk, and allocated a risk score of High, Medium/High, Medium, Low/Medium or Low.

The Annual Plan for 2011/12 was appended to the report providing a summary of the key audits to be undertaken in each of the Service Areas, including those planned for the Greater Manchester Pension Fund. The total days needed to deliver the plan was 1873. However, it was noted that some areas had not yet fully assessed their risks in full due to significant changes in the organisation, the loss of staff and ongoing service reviews and it may be necessary to revise the plan on an ongoing basis to ensure that the audit service was responsive to service needs. The total days needed to deliver the plan detailed at Appendix 1 were 1873. Estimated resources for the year were 1907 which produced a surplus of 34 days. These days had been shown as Proactive/Responsive Work to support organisational change and would be allocated upon request.

Resolved

1. That the Internal Audit Annual Plan for 2011/12 as appended to the report be agreed; and
2. That the planned work of the Risk Management and Insurance Team, National Anti-Fraud Network Team be noted.

13. Urgent Items

The Chair reported that there were no urgent items for consideration at this meeting.

Chair