Agenda and minutes

Audit and Assurance Committee
Monday, 25th September, 2017 10.30 am

Venue: Cumbria House, Carlisle

Contact: Jackie Currie  Email: jackie.currie@cumbria.gov.uk

Items
No. Item

18.

APOLOGIES FOR ABSENCE

To receive any apologies for absence

Minutes:

There were no apologies for absence on this occasion.

 

19.

MEMBERSHIP

To note any changes to the membership of the Committee.

Minutes:

There were no changes of membership for this meeting.

 

20.

DISCLOSURES OF INTEREST

Members are invited to disclose any disclosable pecuniary interest they have in any item on the agenda which comprises

 

1          Details of any employment, office, trade, profession or vocation carried on for            profit or gain.

 

2          Details of any payment or provision of any other financial benefit (other than from the authority) made or provided within the relevant period in respect of any expenses incurred by you in carrying out duties as a member, or towards your election expenses.  (This includes any payment or financial benefit from a trade union within the meaning of the Trade Union and Labour Relations (Consolidation) Act 1992.

 

3          Details of any contract which is made between you (or a body in which you have a beneficial interest) and the authority

 

(a)       Under which goods or services are to be provided or works are to be executed; and

 

            (b)       Which has not been fully discharged.

 

4          Details of any beneficial interest in land which is within the area of the authority. 

 

5          Details of any licence (alone or jointly with others) to occupy land in the area of the authority for a month or longer. 

 

6          Details of any tenancy where (to your knowledge)

 

            (a)       The landlord is the authority; and

 

            (b)       The tenant is a body in which you have a beneficial                                                         interest.

 

7          Details of any beneficial interest in securities of a body where

 

(a)       That body (to your knowledge) has a place of business or land in the    area of the authority; and

 

 

(b)       Either –

 

(i)      The total nominal value of the securities exceeds £25,000 or one            hundredth of the total issued share capital of that body; or

 

(ii)     If that share capital of that body is of more than one class, the total nominal value of the shares of any one class in which the relevant person has a beneficial interest exceeds one hundredth of the total issued share capital of that class.

In addition, you must also disclose other non-pecuniary interests set out in the Code of Conduct where these have not already been registered.

 

Note

 

A “disclosable pecuniary interest” is an interest of a councillor or their partner (which means spouse or civil partner, a person with whom they are living as husband or wife, or a person with whom they are living as if they are civil partners).

Minutes:

There were no disclosures of interest made for this meeting.

 

21.

MINUTES pdf icon PDF 177 KB

To confirm as a correct record the minutes of the meeting of the Committee held on 12 September 2017

 

(To Follow)

 

Minutes:

RESOLVED that,     the minutes of the previous meeting held on 12 September 2017 be agreed as a true and accurate record.

 

22.

EXCLUSION OF PRESS AND PUBLIC

To consider whether the press and public should be excluded from the meeting during consideration of any item on the agenda.

Minutes:

RESOLVED that,     the press and public be not excluded from the meeting during consideration of any item of business on the agenda.

 

23.

2017/18 QUARTER 1 CORPORATE RISK REGISTER pdf icon PDF 134 KB

To consider a report from the Corporate Director – Resources and Transformation (copy enclosed)

 

Additional documents:

Minutes:

The Audit and Assurance Committee considered a report from the Corporate Director – Resources and Transformation which provided members with an update on progress with the 20178-18 Quarter 1 corporate risks for the period 1 April 2017 to 30 June 2017.

 

A high level summary of the corporate risks position was presented as Appendix 1 to the report, which included all risk scores and risk profile as of end June 2017; and showed the direction of travel compared with the previous quarter (31 March 2017) as well as the direction of travel compared with the same period 12 months ago (30 June 2016).

 

Members were also provided with a detailed register of all individual corporate risks.  For each corporate risk, information was included about the causal factors for the risk; activity undertaken during the previous quarter to manage the risk; and a forward look at the mitigating actions planned to further manage or tolerate the risk.

 

The Assistant Director – Transformation specifically highlighted the following for members:-

 

·      Internal Audit of Risk Management – an internal audit review of risk management had been agreed as part of the 2016/17 Internal Audit Plan.  This audit commenced during Quarter 1. The outcomes of the audit may identify further improvements to help the corporate risk management function to better support managers and employees in ensuring effective Risk Management was in place

·      Review of Performance & Risk Management Framework - additionally, a review of the Performance and Risk Management Framework had commenced with the aim of improving the integration of Risk Management within general Performance Management as well as clarifying the responsibilities and accountabilities of managers for assuring compliance to Performance and Risk Management arrangements. 

·      Risk Management Reporting - a review of the Council’s own documentation used for reporting risk had led to the introduction of new look risk management reports which were presented to members in Appendices 1 and 2. These were aimed at streamlining the previous reports, removing duplication and providing a more comprehensive picture of the status and effectiveness of risk management arrangements for each Corporate Risk.

·      Cyber Incident - during May 2017 the Council was impacted by the WannaCry ransomware cyber-attack through our network connection to the NHS. The Council’s response to the incident was well managed and the County Council learned a number of lessons from this event that would further strengthen Cyber security measures. As a result, further policies, procedures and business continuity arrangements were being improved.  

 

The Assistant Director then took members through the summary of changes of Corporate Risks compared with the previous quarter.  No risks had been removed and one further risk had been added – Cyber Threat.

 

Members asked about progress with the Apprenticeship Levy and the Corporate Director – Resources and Transformation offered members a written briefing on this.  This was AGREED.

 

One of the members asked if officers were confident that plans were in place to deal with the emerging risk of non delivery of statutory services.  The Assistant Director – Transformation confirmed this  ...  view the full minutes text for item 23.

24.

RISK DEEP DIVE MANAGEMENT OF ATTENDANCE UPDATE pdf icon PDF 110 KB

To consider a report from the Corporate Director – Resources and Transformation (copy enclosed)

 

Additional documents:

Minutes:

Members considered a report from the Corporate Director – Resources and Transformation, which provided an update of the management of attendance by the Council, following reports considered by Audit and Assurance Committee in March 2016.

 

In the context of absence management, the role of the Audit and Assurance Committee was to provide independent assurance to members on the adequacy of the risk management framework and the internal control environment. 

 

High sickness absence levels impact on capacity and the available resources required to deliver council services and to meet the priorities of the community.  Audit and Assurance Committee at its meeting in March 2016 received an update on action taken to manage absence.  At that committee, it was agreed that a further update would be provided to members of the Audit & Assurance Committee in September 2017.

 

The issue of high workforce absence had been of concern to elected members of the Council for some years and a Task and Finish Review of the issue was undertaken by Scrutiny in 2012.  The Review made a number of recommendations to improve management of absence, most of which were accepted by Cabinet and had been implemented. Further actions had since been identified and implemented to support the improvement in performance.

 

The Deep Dive identified trends in absence performance and external factors.  Data was analysed on a corporate, directorate and service level to understand the reasons, duration and frequency of absence.  Updates were provided to CMT and DMTs at a detailed level highlighting key themes and issues for each service area.  The Deep Dive analysis created an evidence base to inform a detailed action plan to address the risks posed by absence.  Scrutiny Management Board, with a focus on performance, had also received a detailed update relating to absence management and fed back that the actions being taken had positively impacted on performance.

 

Members were provided with the detailed action plan as Appendix A of the report.  The plan had been fully implemented with actions falling under three key themes:

 

   prevention,

   intervention and

   resolution. 

 

The report detailed progress on the action plan and the positive impact that had been realised so far.  Increased corporate prioritisation of the absence agenda had been seen since November 2016 including;

 

     A priority for Chief Executive, Corporate Management Team and Extended Leadership team

     A rigorous corporate focus, with relentless attention to detail

     Assistant Director – Transformation chairs a weekly meeting to drive the action plan

     A ‘whole team’ approach by People Management staff at all levels

     Monthly updates to CMT and DMT

     Detailed action plan to drive improvement

     Increased governance and scrutiny of performance at all levels

     Refreshed policies and procedures to drive improvement whilst ensuring a person centre approach to managing absence

     Increased employee communications, CMT 3 key messages and Chief Executive’s blog

     Engagement and support of Trade Unions

     Greater visibility of the Employee Wellbeing Service (Occupational Health) and Lead Clinician Dr Abbas

     Assistant  ...  view the full minutes text for item 24.

25.

INTERNAL AUDIT PROGRESS REPORT TO 31 JULY 2017 pdf icon PDF 106 KB

To consider a report from the Corporate Director – Resources and Transformation (copy enclosed)

 

Additional documents:

Minutes:

The Group Audit Manager presented a report which provided a summary of the work of Internal Audit in the four months to 31 July 2017.  Audit work completed to draft report stage by 31 May 2017 had previously been reported within the 2016/17 annual internal audit report.

 

The internal audit plan for 2017/18 was prepared using a risk-based approach and following consultation with senior management to ensure that internal audit coverage was focused on the areas of highest risk to the council.  The plan had been prepared to allow the production of the annual internal audit opinion as required by the Public Sector Internal Audit Standards (PSIAS).

 

The detail below showed the number of internal audit reviews completed, in progress and still to be started for both the 2016/17 and 2017/18 audit plans. 

 

Audit plan year         Audit Status                          Number of reviews

 

2016/17                      Audits completed                             5

                                    Audits in progress                            9

                                    Audits not yet started                       3

 

2017/18                      Audits completed                             0

                                    Audits in progress                            8

                                    Audits not yet started                       15

 

The Group Audit Manger informed member that an amendment to the approved audit plan had been discussed and agreed with management.  The planned audit of Duty Management Systems in Cumbria Fire and Rescue had been replaced with an audit of Fire Safety Inspection Programme. 

 

This amendment had been agreed by the Chief Fire Officer and reported to Corporate Management Team.  The removal of Duty Management Systems was agreed on the basis there was an external inspection taking place this year and management were aware of areas for improvement in the system meaning an audit may not represent the best use of resources this year. 

 

Fire Safety Inspections was identified as an appropriate area for internal audit review given the tragic fire at Grenfell Tower in June 2017 and the Chief Fire Officer’s request to be assured that the arrangements in Cumbria were appropriate and effective to mitigate risk.  The Chair noted that ordinarily she would expect amendments to the audit plan to come to the committee for approval, but she was aware that this may have occurred during the time the Council had no administration in place.

 

Audits completed at 31st July comprised five audits; four risk based and one school audit.  Of these, two (Capital Receipts and Accounts Receivable) resulted in Reasonable Assurance.  Two audits received Partial assurance (St Bridget’s Primary School, Parton and ICT Projects), and one audit (Periodic Payments to External Providers) resulted in Limited Assurance.

 

In line with the outcomes of internal audits during 2016/17, finalised reports in the first quarter of 2017/17 continued to identify gaps in the arrangements for risk management and performance management.  Audit & Assurance Committee had received a detailed management response to the issues identified in the annual report and internal audit would continue to report on these matters through quarterly progress reports.

 

Members were concerned to note that the judgement for the Children and Families Services Audit on Periodic Payments to External Providers was only limited assurance, and asked how they could be assured  ...  view the full minutes text for item 25.

26.

ANNUAL GOVERNANCE STATEMENT 2016/17 and ACTION PLAN 2017/18 pdf icon PDF 99 KB

To consider a report from the Corporate Director – Resoures and Transformation (copy enclosed)

 

Additional documents:

Minutes:

The Corporate Director – Resources and Transformation presented a report which detailed the final draft Annual Governance Statement, as Appendix 1 of the report, following review by the Council’s external auditor, Grant Thornton.  Significant governance issues were highlighted in the Annual Governance Statement and actions to tackle these were set out in a draft Action Plan appended to the Annual Governance Statement.

 

The Corporate Director stated that the final Annual Governance Statement must be published with the Statement of Accounts by no later than 30 September 2017.

 

Custom and practice at Cumbria County Council was that the draft Annual Governance Statement and Action plan was ordinarily presented to the Audit and Assurance Committee prior to publication (in draft form) in June.  However, due to there being no meeting of the Committee in June 2017, the draft Annual Governance Statement and Action Plan were published this year without input from the Committee.  This report was therefore the first occasion that the Committee had had the opportunity to consider the Annual Governance Statement and Action Plan.

 

The Council’s governance arrangements include oversight of the effectiveness of its arrangements by the officer led Corporate Governance Group, Corporate Management Team and the Audit and Assurance Committee.  Annually a detailed review is carried out of the Council’s arrangements drawing on a range of information.

 

The review of corporate governance 2016/17 had identified two significant governance issues, which related to Children’s Services and the Amey Litigation.  The Action Plan for 2017/18 (in parts A and B) attached to the Annual Governance Statement for 2016/17 set out the proposed work to be undertaken to manage these issues. 

 

Members asked whether the issue before them was one of quality or process.  The Corporate Director said it was about the process and governance of Scrutiny, and ensuring proper scrutiny arrangements were in place.  In terms of the effectiveness of Scrutiny this was dependent upon the individual work programmes of the boards.

 

RESOLVED that

 

(1)       members approve the final Annual Governance Statement of Cumbria County Council for 2016/17;

(2)       members RECOMMEND the final Annual Governance Statement of Cumbria County Council for 2016/17 is signed by the Leader of the Council and the Chief Executive prior to publication.

 

The Committee then broke for lunch at 12pm and resumed at 12.30pm.

27.

ACCOUNTS 2016/17 OVERVIEW pdf icon PDF 139 KB

To consider a report from the Assistant Director – Finance (not yet available)

 

Minutes:

The Assistant Director – Finance (Section 151 Officer) presented this report and explained to members that the Unaudited Accounts for the Council and the separate Cumbria Local Government Pension Scheme (Cumbria LGPS) 2016/17 were published on 30th June 2017, having been authorised by the Assistant Director – Finance (Section 151 Officer) in line with the Accounts and Audit Regulations 2015.

 

A robust training session had been held on 6 September 2017 where members received a presentation from the Finance Team and the auditor which set out:-

 

   the process by which the accounts had been prepared and audited,  assurance the committee had in relation to completeness and thoroughness of the accounts

   the approach the auditor had taken in relation value for money assessment

   the audit findings thus far to that point

   the headlines of the Accounts – presented the key financial statements, key figures, facts and answered lots of Questions – for example,  from accounting for defined benefit schemes of pensions through to Business Rate information provided by the District Councils and what asset classes the pension fund holds.

 

Grant Thornton had now completed their audit work and their Audit Findings Reports would be presented at agenda item numbers 11 and 12 to this meeting.

 

The key messages of the Audit Findings Reports were that Grant Thornton intended to issue an unqualified audit opinion on both the County Council and the Cumbria LGPS sets of 2016/17 Accounts. There were no recommendations in the Audit Findings Reports in relation to the financial statements.

 

Grant Thornton also intended to issue an “except for” Value for Money conclusion for Cumbria County Council in respect of securing economy, efficiency and effectiveness in the use of resources. The “except for” conclusion was in relation to the ongoing impact of the “inadequate” Children’s Services Ofsted inspection published in May 2015 and the outcome of the contractual dispute and the Council’s “lessons learned” review.  With the exception of the matters reported above the Auditors were satisfied that in all significant respect the Council put in proper arrangements to secure economy, efficiency and effectiveness in its use of resources.

 

The Assistant Director explained that the Audit and Assurance Committee was required to approve the audited set of accounts for the Council and Port of Workington at this meeting in accordance with the Accounts and Audit Regulations 2015, and the Council’s Constitution.

 

The Committee was also asked to consider the Letters of Representation, which provided Grant Thornton with assurance on the financial statements and governance arrangements upon which they would base their audit opinion.

 

The Assistant Director then took members through the recommendations contained within the report, and highlighted the following for members:-

 

   The unaudited accounts contained four misstatements in the primary statements, two of which were material and had been adjusted in the final audited accounts and two which were non material and had not been adjusted. There was no overall impact on the reported net financial position. In addition there were only a  ...  view the full minutes text for item 27.

27a

Cumbria County Council Letter of Representation pdf icon PDF 124 KB

To consider a report from the Assistant Director – Finance (not yet available)

 

Minutes:

Members received the representation letter to the Director of Grant Thornton regarding the Group Financial Statements of Cumbria County Council and its subsidiary undertakings for the year ended 31 March 2017 for the purpose of Grant Thornton expressing an opinion as to whether the group and parent financial statements gave a true and fair view in accordance with international reporting standards and the CIPFA/LASAAC (check these) Code of Practice on local Authority Accounting.

 

Discussion for this item took place at Agenda Item No. 10 – (Minute No. 27 refers)

 

27b

CLGPS Letter of Representation pdf icon PDF 107 KB

To consider a report from the Assistant Director – Finance (not yet available)

 

Minutes:

The Audit and Assurance Committee received the letter of representation for Cumbria Local Government Pension Scheme (Cumbria LGPS) – Financial Statements for the year 2016/17.

 

This representation letter was provided in connection with their audit of the financial statements of Cumbria LGPS ('the Fund') for the year ended 31 March 2017 for the purpose of Grant Thornton expressing an opinion as to whether the financial statements show a true and fair view of the financial transactions of the Fund during the year ended 31 March 2017, and of the amount and disposition at that date of its assets and liabilities other than liabilities to pay pensions and benefits after the end of the Fund year, in accordance with applicable law and the CIPFA/LASAAC Code of Practice on Local Authority Accounting in the United Kingdom 2015/16 ('the Code').

 

Discussion on this item took place at Agenda Item No. 10 – (Minute No 27 refers)

 

27c

Cumbria County Council Audited Accounts Financial Report 2016/17 pdf icon PDF 2 MB

To receive Cumbria County Council’s Audited Accounts Financial Report 2016/17

 

Minutes:

Discussion for this item took place as part of Agenda Item No.10 (Minute No. 27 refers)

27d

Port of Workington Statement of Accounts 2016/17 pdf icon PDF 311 KB

To receive the Port of Workington Statement of Accounts 2016/17

 

Minutes:

Discussion for this item took place as part of Agenda Item No. 10 (Minute No. 27 refers)

28.

Audit Findings report for Cumbria County Council 2016/17 pdf icon PDF 799 KB

To consider a report from Grant Thornton

 

(To Follow)

 

Minutes:

Members considered a report from Grant Thornton which highlighted the key findings arising from their audit that were significant to the responsibility of those charged with governance, which for Cumbria County Council was the Audit and Assurance Committee.

 

As auditor Grant Thornton was responsible for performing the audit, in accordance with International Standards on Auditing (UK & Ireland), which was directed towards forming and expressing an opinion on the financial statements that had been prepared by management with the oversight of those charged with governance. The audit of the financial statements does not relieve management or those charged with governance of their responsibilities for the preparation of the financial statements.

 

The Associate Director from Grant Thornton guided members through the report in detail, and highlighted that two misstatements were identified to primary statements that management had amended in the final set of financial statements. The two adjusted misstatements, which were classification only in nature, and need to be considered in relation to the Council’s value of Property, Plant and Equipment (PPE) of £1.062 billion were:

 

Ø    Reclassification of £14.729 million Port of Workington assets was adjusted within Property, Plant and Equipment (PPE) to reclassify from infrastructure to land and buildings (£11.527m) and surplus assets £3.202m. The assets had been classified as infrastructure since 2009/10. The reclassification has no impact upon the net financial position, or to the total of the PPE balance; and

Ø    A prior period adjustment was identified to the 31st March 2016 Balance Sheet to move £15 million classified as Cash and Cash Equivalent (90 days or less notice) into Short Term Investments (more than 90 days notice) for a 100 days notice bank account which was incorrectly classified. The 31st March 2017 classification is correct.

 

Two misstatements had also been identified, which had remained unadjusted by management:-

 

§  the PPE balance for buildings and the Revaluation Reserve on one school were both overstated by £0.9 million on a school valued at £12.040m. This was due to an error in a manual calculation by the Valuer in the valuation. There were quality assurance processes in place in both Property and Finance departments. In Property a random sample of valuations are checked during the year and in Finance both the percentage and value change since the previous valuations are calculated to identify any outliers. In this case neither the actual nor the percentage increase were outside of the expected range. There were no other errors in the sample selected by the Auditor; and

§  the Capital Grants and Contributions Unapplied Account (CGUA) includes £1.638m of revenue contributions to capital projects which should be designated as an earmarked reserve. The items within this balance were not capital grants or capital external contribution, they were earmarked elements of revenue contributions.

 

The Audit Manager took members through the key messages arising from the audit of the Council's financial statements which were:-

 

     the Council had again achieved a high quality standard of financial reporting for 2016/17 in terms of compliance with the  ...  view the full minutes text for item 28.

29.

Audit Findings Report for the Cumbria Local Pensions Scheme 2016/17 pdf icon PDF 615 KB

To consider a report from Grant Thornton

 

(To Follow)

 

Minutes:

Grant Thornton presented a report which highlighted the key issues affecting the results of Cumbria Local Government Pension Scheme ('the Scheme') and the preparation of the Scheme’s financial statements for the year ended 31 March 2017.

 

It was also used to report the audit findings to management and those charged with governance in accordance with the requirements of International Standard on Auditing (UK & Ireland) 260, and the Local Audit and Accountability Act 2014 ('the Act'). Under the National Audit Office (NAO) Code of Audit Practice ('the Code'), they are required to report whether, in their opinion, the Scheme's financial statements give a true and fair view of the financial position of the Scheme.

 

The Associate Director outlined the key audit and financial reporting issues to members, and explained that although their audit was substantially complete procedures were still being finalised in the following areas:-

 

     completion of the final specialist partner review

     reviewing the final version of the financial statements;

·      obtaining and reviewing the management letter of representation; and

·      updating their post balance sheet events review, to the date of signing the opinion.

 

No adjustments had been identified that would impact upon primary statements and any adjustments identified were within memorandum disclosure notes only, all of which management had amended in the final set of financial statements.

 

Adjustments noted within memorandum disclosure notes were as follows:-

 

      note 10h fair value hierarchy had £10.413 million categorised as level 2 investments, when the correct category was level 1. The comparator for 2015/16 of £8.813 million was also amended; and

·         pension officers identified at the start of the audit two errors within the mix of note 10i for the reconciliation of fair value measurements within level 3. This included a transposition error and £3.72 million classified in the wrong heading.

 

The Audit Manager highlighted other key messages arising from the audit of the Scheme's financial statements.  These were:-

 

     the Pension Scheme officers have produced good quality financial statements for 2016/17, in terms of both compliance with the CIPFA Code of Practice and supporting working papers;

     the Pension Scheme officers responded to audit queries timely including those relating to the technical review questions;

     the cyclical specialist technical review of the financial statements raised minor issues which management amended; and

     there were no recommendations made as part of the audit report.

The Associate Director reported that Grant Thornton anticipated providing a unqualified audit opinion in respect of the financial statements and anticipated an unqualified opinion on the Annual Report.

 

The Chair thanked the Associate Director, the Audit Manager and officers of the Council who had contributed to the work of the audit findings.

 

30.

FORWARD PLAN - AUDIT AND ASSURANCE COMMITTEE pdf icon PDF 53 KB

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

 

Minutes:

The Forward Plan was noted with the following amendments:-

 

5 January 2018

 

Remove Update on Amey Action Plan, as this would be included as part of the Annual Governance Statement Action Plan Progress Update

 

Add Treasury Management Strategy

 

20 March 2018

 

Add Internal Audit External Quality Assessment

 

31.

DATE & TIME OF NEXT MEETING

The next meeting of the Committee will be held on 5 January 2018 at 10.30am at Cumbria House, Botchergate, Carlisle.

Minutes:

The next meeting of the Audit and Assurance Committee will be held on 5 January 2017 at Cumbria House, Botchergate, Carlisle at 10.30am.