Agenda and minutes

To receive any apologies for absence

There were no apologies received on this occasion.

To note any changes to the membership of the Committee

Members welcomed Mr J Bell to the Audit and Assurance Committee and noted that he would replace Mrs C McCarron-Holmes as a permanent member of the Committee. Mrs C McCarron-Holmes’ previous role as Vice-Chair would now be held by Cllr Frank Morgan.

There were no disclosures made on this occasion.

There were no items on the agenda which required the exclusion of press and public.

To confirm as a correct record the minutes of the meeting of the Committee held on 11 March 2021 (copy enclosed).

RESOLVED that,     the minutes of the previous meeting held on 11 March 2021 be agreed as an accurate and complete record.

To consider a report from the Director of Finance (s151 Officer).

Members considered a report from the Director of Finance (s151 Officer) which provided a progress update on the Corporate Risk Register to 31 March 2021.

The Senior Risk Officer provided some background to the Quarter 4 period outlining how the further lockdown restrictions, alongside the NHS led COVID-19 Vaccination programme, had led to a steadily improving situation in case rates from January 2021. And it was this improving situation that led to the reduction in risk scores for 3 of the corporate risks at the end of March 2021.

Since the end of March 2021, there had been further easing of restrictions (entering Stage 3 of the Government’s four-step roadmap on 17 May) and although Cumbria’s case rate remained well below the National and Regional average rates, new cases in Cumbria were now on the increase.

The Health Protection Tactical Oversight Group would continue to monitor ongoing developments and the Council’s COVID-19 co-ordination arrangements will be adapted depending on the status of the case rates so as to allocate resources as required.

The Senior Risk Officer provided a summary of the Q4 Risk Register. Members heard that 12 risks remained on the Q4 Risk Register, 8 high risks and 4 medium risks. There had been no new risks added to the register and no risks had been closed off and removed from the register. There were three corporate risks, at the end of March/Q4, which had been reduced in score and there was still one notable evolving risk, that of Climate Change.

The Senior Risk Officer outlined the rationale for the risk score reduction of three corporate risks explaining that these reductions reflected the overall improving picture in terms of COVID-19, strong performance of the NHS led vaccination programme and effective risk controls. The three risks in question were:

·         Risk 4 - Health and Social Care Demand and System Failure risk - Risk score reduction from 20 to 16, meeting end of year target score.

·         Risk 6 - Impact of COVID-19 on the provision of Council Services risk - Risk score reduction from 20 to 15, coming in below the end of year target score.

·         Risk 7 - Cumbria COVID-19 Local Outbreak Control Plan - Risk score reduction from 20 to 15, meeting end of year target score.

Although many of the risk scores had not changed in the last quarter there was recognition that risk management improvement activity had continued over this period, as reflected in the further risk mitigation work undertaken and highlighted as part of Appendix 2 of the Corporate Risk Register report. The Senior Risk Officer focused in on the Safeguarding of Adults risk, where the risk score had not changed for a long period of time yet there had been significant risk management improvements over this period which had prevented the risk score increasing.

Members discussed the potential emerging risks that could arise from the proposed reform of Local Government. Officers were asked to provide assurance that there were arrangements in place to manage  ...  view the full minutes text for item 133.

To consider a report from the Director of Finance (s151 Officer).

Members considered the report from the Director of Finance (s151 Officer) which recommended to the Committee the corporate risks to be included within the 2021/22 Corporate Risk Register and provided a summary of the changes to the Quarter 4 risks as well as those risks to be closed off and those risks newly added to the register.

Members heard that the Risk Owners Group as well as Directorate Management Teams had been engaged in the review of the current corporate risks and had considered and agreed the removal of or addition of new risks and new evolving risks relevant to the future risk landscape of the Council.

The Committee were informed of the outcomes of the Risk Horizon Scan session provided by Zurich Municipal at the 29 April 2021 Risk Owners Group meeting and consideration of the global risks for 2021 and of how these may potentially impact UK Public Services. The Senior Risk Officer provided an outline of the key areas of reform, change and uncertainty for UK Public Services in general and Cumbria in particular, that could impact the Council over the following year. The areas discussed included:-

• The potential for further waves of COVID-19 & the emergence of new COVID-19 variants of concern.

• Post COVID-19 impact on Service Demands, impact on the Council and New Ways of Working and post COVID-19 Recovery across Cumbria

·         Financial Sustainability for the Council in context of the ongoing impact of COVID-19 and sustained uncertainty of funding for local government

·         The reorganisation of Local Government in Cumbria concurrent with the reform in other areas of Public Services

·         Ongoing impact of climate change and extreme weather events and of increasing environmental interest in relation to Council decisions

·         The collective impact of reform, change and uncertainty on workforce mental health and wellbeing.

The Senior Risk Officer summarised the proposed risks for 2021/22 and those still under consideration. There would be:-

• 12 risks in total

• 9 risks roll forward unchanged

• 2 risks and their risk descriptions would be slightly reworded

• 1 risk would be closed off from the register

• 1 new risk added to the register

• 2 areas of evolving risk, that of climate change and COVID-19 Recovery across Cumbria. 

In the context of significant organisational reform and post COVID-19 recovery, the Corporate Risk Register for 2021/22 demonstrated a high degree of similarity of corporate risks (with minor amendments) compared to 2020/21.

The additional areas of uncertainty would continue to evolve over time. For example, the risks associated with the potential impact of Climate Change and the post COVID-19 Recovery for Cumbria, including sustainable economic recovery. Members were assured that officers would continue to evaluate and report on these evolving areas of risk.

A discussion took place regarding Local Government Reform and the work to coordinate between partners including the district and borough Councils. The Executive Director – Corporate, Customer and Community Services stated that from the perspective of risk she could see this subject being a key area of focus for the Committee in  ...  view the full minutes text for item 134.

To consider a report from the Director of Finance (s151 Officer).

Members considered a report from the Director of Finance (s151 Officer) which provided a review of the work of the Audit and Assurance Committee against the core functions of an audit committee as defined within the CIPFA Position Statement on Audit Committees: Practical guidance for Local Authorities and Police 2018.

The Senior Manager - Accountancy (Deputy s151 Officer) explained that the Council were also required to include within the Annual Governance Statement reference to, and assessment of, the effectiveness of key elements of the governance framework including the Audit Committee.

The Committee met six times during 2020/21, in July, September, twice in November 2020, January and March 2021. The meeting that had been scheduled for 29 June 2020 was cancelled and re-arranged to July because of the impact of the ongoing COVID-19 outbreak and restrictions. 

The Senior Manager - Accountancy (Deputy s151 Officer) reminded members of some of the impact that COVID-19 had on the Committee’s workload, and timing of its workbut also highlighted some of the key work of the Committee in 2020/21. This included:

·         In July 2020, the Committee considered the Annual Governance Statement for 2019/20 and were advised that no significant governance issues had been identified. The Monitoring Officer highlighted that a review had also been carried out into the impacts of the COVID-19 outbreak on the Council’s governance. This review concluded that robust emergency planning and business continuity arrangements ensured that the Council could both respond effectively and maintain an effective response to the continuing pandemic whilst maintaining the provision of key services.

·         The Committee had continued to take a keen interest in the arrangements for effective risk management and seeking assurances that risk management arrangements are both robust and effective. In July 2020 the Committee received the Quarter 4 update on the Corporate Risk register 2019/20 which included key updates for Quarters 3 and 4 as the March 2000 Committee had been cancelled. The Committee has also received a number of deep dive presentations during the year to help it gain a deeper understanding of specific corporate risks and the arrangement in place to manage them.

• The Committee had continued to receive regular progress reports on the work of Internal Audit. During the year the Committee had actually approved two audit plans, the re-assessed 2020/21 audit plan (July 2020) and the 2021/22 audit plan (March 2021). The Committee also considered the Internal Audit annual report for 2019/20 in July 2020 and the Internal Audit annual report for 2020/21 was being considered at this meeting.

• The Committee also approved the Audited Accounts for 2019/20 for Cumbria County Council, Cumbria Local Government Pension Scheme and the Port of Workington Harbour.

Members heard that the key message from the report reflected the opinion that: ‘The Audit and Assurance Committee compares well against the CIPFA core purpose statements for audit committees’.

RESOLVED that,                 Members noted the report and confirmed the assessment of conformance with the core functions of an audit committee per the 2018 CIPFA Guidance as set  ...  view the full minutes text for item 135.

To consider a report from the Director of Finance (s151 Officer).

Members considered a report from the Director of Finance (s151 Officer) which provided an update with regards to Accounts Preparation for both the Council and the Cumbria Local Government Pension Scheme.

The Senior Manager - Accountancy (Deputy s151 Officer) informed members of the outcome of the MHCLG consultation in February on extending the deadline for publishing the accounts. Members heard that the final accounts publication date had now been changed to 30 September 2021 with the unaudited accounts publication date now 31 July. The accounts timeline had since been updated and the aim would be to publish unaudited accounts on 30June 2021 a full month ahead of the statutory deadline. The first draft of the statement of accounts was completed on 8 June, ahead of the 11June target date.

The Senior Manager - Accountancy (Deputy s151 Officer) described the Members briefing session which took place on 18 May and looked at the material estimates for both the Council and the Cumbria Local Government Pension Scheme as identified by the auditors and covered areas such as the methods, models and assumptions used as well as the process followed in making accounting estimates. Members shared the opinion that it had been important opportunity to challenge the approach and methods used in order to be assured that the process and assumptions were reasonable.

With regards to the significant risks identified by Grant Thornton in their audit planning work for the Council the Senior Manager - Accountancy (Deputy s151 Officer) provided the committee with assurance that these risks were included in the planning for the preparation of the 2020/21 statement of accounts.

Members noted that it had now been confirmed that the VFM deadline was now the end of December 2021 and so the outcome of the auditor’s work would be reported to the 3December meeting and not the 27 September as previously stated.

The Senior Manager - Pensions and Financial Services highlighted the key areas of the Accounts Preparation for the Cumbria Local Government Pension Scheme. In terms of the timetable of preparation the process for the production of the accounts had been consistent with that applied in previous years. The cut-off date for estimates was mid-May and the draft accounts were presented to the Pensions Committee at its meeting 8 June 2021.

Members heard that after raising some excellent questions on the draft accounts, the Pensions Committee agreed to submit them to the Audit and Assurance Committee for approval on behalf of the Council later this year.

The risks identified by the auditor remain unchanged from last year and relate to the potential for managements override of controls and the valuation of both directly held investment property and level 3 investments. In addition, a further risk had been identified relating to the details of the resolution to the McCloud age discrimination case. The estimated impact of the expected resolution had been incorporated into the accounts but if the final details were to be announced before the sign-off of the  ...  view the full minutes text for item 136.

To consider a report from the Group Audit Manager.

Members considered a report from the Group Audit Manager which provided a summary of all internal audit work for the year and builds on the quarterly progress reports that have been presented to CMT and Audit & Assurance Committee during 2020/21.

Members heard that the Group Audit Manager was able to provide ‘Reasonable’ assurance over the effectiveness of the Council’s arrangements for governance, risk management and internal control for 2020/21.

The Group Audit Manager explained that from all the assurance work (including schools) undertaken in the year (completed and draft reports), 74% resulted in ‘Reasonable’ or ‘Substantial’ assurance. There had been no audit reviews in 2020/21 which received the lowest assurance level of ‘limited’. 71% of risk-based audits had resulted in ‘Reasonable’ or ‘Substantial’ assurance. Which showed a slight reduction on 2019/20 outcomes where 77% received ‘Substantial’ or ‘Reasonable’ assurance but was better than the 65% achieved in 2018/19.

Members heard that the Group Audit Manager had concluded that overall audit coverage had been sufficient to provide an opinion in terms of the level of coverage and across the directorates. It was highlighted that CIPFA recognised that COVID-19 would potentially have a greater impact on the 2020/21 Head of Internal Audit opinion than it did on the 2019/20 opinion. The key focus of the CIPFA guidance issued in November 2020 was whether Heads of Audit would be able to issue a complete annual opinion or whether there would need to be a limitation of scope. The Group Audit Manager confirmed that he was able to give the annual opinion without any limitation of scope as there had been sufficient assurance across each of the three aspect of the opinion: governance, risk management and internal organisation as well as sufficient assurance across significant areas of operation of the Council.

The opinion was based on 27 reviews completed or at draft stage (compared with 34 reviews for 2019/20) and represents 60% of the overall audit plan and 69% of audit reviews that would have been given a scored assessment.

Members heard that a separate commentary on arrangements for risk management, governance and internal control had been provided. Overall, the message showed the Council continued to make progress in several areas and was continuing to work on these. It also comments upon how the Council had responded to COVID-19 and its impact on the three areas covered by the opinion. The Group Audit Manager explained that there had been some positive areas of response including in operational risk management during COVID-19 and real time risk management responsive for Personal Protective Equipment (PPE) availability as well as managing COVID-19 outbreaks in care homes.

There had been improvements that had strengthened assurance on officer decision making with Officer Decision Records for both key decisions and other significant decisions made by officers.  Decision logs had been maintained by all directorates and were reviewed on a regular basis by the Corporate Governance Group.

Members heard the Group Audit Manager recommend that further progress was required to ensure more  ...  view the full minutes text for item 137.

To consider a report from Chief Legal Officer (Monitoring Officer). 

Members considered the draft Annual Governance Statement 2020/2021 presented to the Committee by the Chief Legal Officer (Monitoring Officer).

The Chief Legal Officer provided some background to the report stating that following the annual review of the effectiveness of the Council’s corporate governance framework, no significant governance issues had been identified.  While the Council experienced significant disruption to its day-to-day operations as a result of the coronavirus pandemic, the governance arrangements that the Council had in place prior to the pandemic provided a strong foundation for the governance of the Council’s response to the pandemic. Therefore, there had been no significant impact on the Local Code of Governance or the governance arrangements within the Council.

Members heard that in line with guidance issued by CIPFA in February 2021 “Application of the Good Governance Framework 2020/21” the annual governance statement 2020/21 included a specific commentary around the impacts of the coronavirus pandemic on the Council’s governance. This guidance included details of any significant changes which had been made to the governance arrangements, whether the arrangements remain fit for purpose and any new challenges or actions needed to restore governance arrangements that might have lapsed during the year. 

In line with CIPFA guidance the statement also included the conclusion of an initial assessment of the organisation’s compliance with the FM Code and details of the steps the Council had taken to ensure compliance. 

Members heard that in undertaking the review the Monitoring Officer gathered evidence from a number of sources including senior managers as well as from corporate information and reports assessing the performance of the Council in various aspects of its work.

Members were assured that this had been a comprehensive review of governance despite the disruption caused by the pandemic and the Monitoring Officer gave specific thanks to ELT for prioritising the compilation of the Annual Governance Statement 2020/21.

Members heard that the conclusion of the Draft Annual Governance Statement 2020/21 was that there had been no significant governance issues identified. The Monitoring Officer stated that the outcome was one to be proud of given the events of the previous year. Both the Chair and the Monitoring Officer gave thanks to everyone who contributed to the Statement.

RESOLVED that,                 members reviewed the draft Annual Governance Statement of Cumbria County Council for 2020/2021 before its publication as a draft on the Council’s website.

The Senior Audit Manager – Grant Thornton introduced the report and provided a detailed outline of the Audit Plan for Cumbria County Council beginning with the significant risks identified. These were:-

• Management override of controls - A presumed risk across all audit plans. In response to this risk a detailed testing of journal entries, estimates and judgements made by management would be carried out.

• Valuation of land and buildings – Risk regarding valuation estimates. In response to this the process of arriving at these estimates would be reviewed.

• Valuation of Pension Fund Net Liability – Risk regarding valuation on a ISA basis. In response to this actuary estimates would be assessed with support from PwC.

• ISA 240 Improper Expenditure Recognition – Presumed risk of income and expenditure recognition around the way that new funding streams should be reflected in the accounts.

Members heard that the materiality of the audit as a percentage of the Council prior year gross expenditure for the year was 1.3% which reflected Grant Thornton’s view that the profile of the Council accounts was consistent with the previous year.

The Senior Audit Manager drew members attention to the additional work of the External Auditor including areas of Going Concern and Value for Money judgements.

The Chair observed the increased complexity for the External Auditor, as well as with regards to the Committee’s role in relation to estimates and the Finance team’s role in accounting for the COVID-19 related funding streams. Members were reminded that the aim was for the unaudited accounts to be published by the end of June and on this basis the Chair sought assurance from the External Auditor that timescales would be met to ensure the Committee was able to agree the audited accounts on 27 September 2021.

The Senior Manager confirmed that the intention was to deliver the audit in keeping with the September 2021 timetable but highlighted that there were areas outside of Grant Thornton’s control, he cited the forthcoming McCloud judgement which could impact potential liability. With regards to the reporting timetable for the Value for Money conclusion, the deadline had been amended to December 2021 and it was Grant Thornton’s intention to use that extra time and bring the report to the December 2021 meeting.

The Senior Manager - Accountancy (Deputy s151 Officer) provided assurance to the Committee with regards to the risks identified by the External Auditor. In terms of the ‘Improper Expenditure Recognition’ there had been a significant amount of work done as part of the closure of accounts. Almost 35 distinct funding streams (in the region of £70 million) had been closely inspected throughout the year as were their terms and conditions.

With regards to the additional expenditure on audit fees, the Senior Manager - Accountancy (Deputy s151 Officer) informed members that it had been announced that there would be additional funding nationally and the Council awaits its allocation that would offset some of the additional cost.

The Senior Audit Manager explained that the at the time of producing the plan, the Scheme’s latest fund asset valuation showed a significant increase in the value of net assets of the Fund. At 31 March 2020, the Scheme reported net assets of £2.574 billion. This valuation was lower than had previously been forecast, due to the volatility experienced in financial markets in March 2020, directly linked to the COVID-19 pandemic. Since then, the financial markets have recovered significantly and the Scheme has seen large increases in the value of their assets, with the value of the Scheme in excess of £3 billion as of 31 December 2020.

The Senior Audit Manager provided a detailed outline of the Audit Plan for Cumbria Local Government Pension Scheme beginning with the significant risks identified. These were:-

• Management override of controls

• Valuation of Directly-held Investment Property

• Valuation of Level 3 Investment

Members heard that planning materiality had been set at £30.08 million based on 1% of the overall assets of the fund. The Senior Audit Manager explained that the External Auditor was obliged to report unconnected omissions or misstatements other than those considered ‘clearly trivial’ to those charged with governance. ‘Clearly trivial’ materiality had been set at £1.504 million.

The Senior Manager - Pensions and Financial Services gave assurances to members that completion of the annual report for the pension fund was on schedule with the intention of meeting the statutory deadline of 1 December 2021.

The Senior Account Manager explained that in relation to Audit fees for the Cumbria County Council accounts, the changes to auditing standards and the increased scope of audit practice there would be a requirement that more time be spent on the audit which would result in an increase in the estimated fee of £19,000 (21.5%).

The Audit of the Cumbria Local Government Pension Scheme accounts would see a similar increase in scope particularly around enhanced audit procedures for Directly-held Property and the increased audit requirements of the ISA revisions.

To note the Forward Plan for the Audit and Assurance Committee and agree any additional items (copy enclosed).

It was AGREED that the Senior Information Risk Owner (SIRO) and Information Governance Annual Report be brought to the 14 September meeting of Committee rather than the 27 September and that the Forward Plan be updated to reflect this.

It was AGREED that the item listed as External Audit – Audit Progress due to be brought to 3 December meeting of Committee be amended to read  ‘External Audit - Annual report’.

The next meeting will be held on 14 September 2021 in Conference Room A/B, Carlisle at 10:30 am.

The next meeting of the Audit and Assurance Committee is due to take place on 14 September 2021.