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Agenda and minutes

Items
Note No. Item

1.

Apologies for Absence.

Minutes:

The Chairman advised that representatives from the External Auditor, Grant Thornton UK, were delayed and would join the proceedings as soon as possible. Mr Matthew Dean subsequently joined the meeting.

 

The Strategic Directors for Internal and External Services were welcomed to the meeting by the Chairman, also the Managers for Financial Services and Counter Fraud. A special welcome was given to the new members of the Council’s Internal Audit team whom the Chairman encouraged to contribute to the debate. The absence (due to illness) of the Anti-Fraud and Risk Assessment Manager (AFRAM) was noted and Members wished him a speedy recovery.

 

In the initial absence of the External Auditors, the Board agreed the Chairman’s proposal that Item 13 on the Agenda – Annual Governance Statement – be taken as the first substantive Item.

 

Apologies from Councillor D Swinerd were subsequently tendered to Member Services.

2.

Declarations of Interest.

To receive declarations of interest from Members including the terms(s) of the Grant of Dispensation (if any).

Minutes:

There were no declarations of interest.

MD

3.

Confirmation of the Minutes of the meeting held on 23 March 2016 pdf icon PDF 99 KB

Minutes:

                        RESOLVED:

 

That the Minutes of the Audit Board meeting held on 23 March 2016 be confirmed as accurate.

4.

Urgent Items

The Chairman will announce his decision as to whether there are any urgent items and their position on the agenda.

Minutes:

The Chairman confirmed that there were no urgent items of business for the Board to consider.

5.

References from Other Committees (IF ANY)

There are no references from other Committees at present.

Minutes:

There were no references from other Committees.

6.

Annual Governance Statement 2015-16

Minutes:

The report reminded the Audit Board of the Council’s responsibility to ensure that its business is conducted in accordance with the law and proper standards and that public money is safeguarded and properly accounted for. In discharging this responsibility the Council had to ensure that it had good governance arrangements in place and that it operated a sound system of internal control and that it reviewed those arrangements annually.

 

Board Members were advised that the Monitoring Officer, Section 151 Officer, Head of Legal Services and the Financial Services Manager had reviewed the Council’s arrangements against the CIPFA Guidance Delivering Good Governance in Local Government and agreed that the Annual Governance Statement 2015-16 (attached as Appendix A to the report) be referred to the Board for approval and subsequent inclusion in the Council’s Annual Statement of Accounts for the year ended 31 March 2016. The Senior Management Team had endorsed that decision. Appendices attached to the report for consideration by the Board included:

 

·         Appendix A: Annual Governance Statement 2015-16 recording the outcome of the review;

·         Appendix B: Review of the Council’s Governance Arrangements 2015-16 detailing the review process;

·         Appendix C: Governance Action Plan 2015/16 – Progress Review;

·         Appendix D: Governance Action Plan 2016/17

 

The Financial Services Manager commended the report and appendices to the Board for approval.

 

In direct response to a question from the Chairman of the Board, the Strategic Director (External Services) in her role as Monitoring Officer confirmed for the Board that she was happy with the progress made and the outcomes recorded in the Council’s Annual Governance Statement for 2015-16 as attached at Appendix A to the report.

 

In the absence of any further questions from Members it was RESOLVED that:

 

1.    Board Members noted the review of the Council’s Corporate Governance arrangements for 2015-16 as summarised in the report;

 

2.    Members approved for inclusion in the Council’s Annual Statement of Accounts for the year ended 31 March 2016 the Annual Governance Statement 2015-16 document (Appendix A to the report);

 

3.    Members approved the Corporate Governance Action Plan 2016-17 document as attached at Appendix D to the report.

 

 

7.

Report & Letter from the External Auditor pdf icon PDF 45 KB

To consider the correspondence received from the Council’s External Auditor, Grant Thornton UK, LLP.

Additional documents:

Minutes:

The report from the Financial Services Manager (FSM) asked Board Members to consider and note one report and one letter received from the Council’s External Auditors, Grant Thornton UK (Appendices A and B to the report):

 

·         Appendix A: Audit Board Update – Progress at 29 June 2016

 

·         Appendix B: Planned Audit Fee letter for 2016/17

 

Matthew Dean, Audit Manager, Grant Thornton advised Board Members that the External Auditors had received the Council’s 2015/16 Draft Financial Statements on 10 June and that it was hoped to complete the audit process by 1 July, as part of the transition to the earlier closedown of the audit cycle that would be required from 2018 [Appendix A (Agenda p.16)]. The final outcome of the audit would be reported to the Board in September 2016 as part of the Audit Findings Report.

 

In response to a specific question from the Chairman, the Audit Manager advised that the 1 July target was ‘stretching’ but achievable. Even with a slight overrun [to mid-July] the audit cycle for 2015-16 would still be completed well in advance of what would be required in 2018.

 

Board Members were advised that the External Auditors had identified a ‘significant’ risk in their planning, as defined in the National Audit Office’s (NAO’s) Code of Audit Practice, which it was required to communicate to the Council as client. He referred Members to the ‘Value for Money–Risk Assessment’ in Appendix A [agenda p. 18] which detailed a ‘significant’ risk with regard to the Council’s financial position. Whilst the Council was on course to meet its financial outturn for 2015-16, it was relying on funding sources to do so, funding which would not be readily available in future years.

 

The External Audit Manager advised that he did not anticipate any major concerns in the short term, but that the Council would need to closely monitor the likely level of resources available to the Council. Current projections indicated that a considerable level of savings would be needed over the next four years as part of its Medium Term Financial Plan.

 

In response to a specific question from the Board Chairman, the Financial Services Manager assured the Board that the Council had robust plans in place for the medium term. The current plans would be examined later in 2016 for the first time by a specially convened Star Chamber of senior Council Officers and Managers, in an exercise designed to identify both further savings and options to generate new income for the Council.

 

The Chairman thanked the External Audit Manager for his report and the Council’s Financial Services Manager for providing further background and explanations to the agenda papers.

 

 

 

 

                        RESOLVED:

 

1.    That Members noted the External Auditor’s Audit Board Progress and Update Report for the Council attached at Appendix A to the covering report;

 

2.    That Members noted the proposed Audit Fee for 2016/17 attached as  Appendix B to the covering report.

8.

Anti-Fraud Team Annual Report 2015/16 pdf icon PDF 77 KB

This report is to update the Audit Board on work undertaken by the Anti-Fraud Team during the year ended 31 March 2016 and confirms the creation of a new Counter Fraud & Compliance Team following the transfer of Housing Benefit fraud work to the Single Fraud Investigations Service (S-FIS) within the Department for Work & Pensions on 1 February 2016.

Minutes:

The report updated the Board on the work undertaken by the Anti-Fraud Team during the year ended 31 March 2016 and confirmed the creation of a new Counter Fraud & Compliance Team (CF&CT) following the transfer of Housing Benefit fraud work to the Single Fraud Investigation Service (S-FIS) within the Department for Work & Pensions (DWP) on 1 February 2016.

 

Appendix A to the report summarised the team’s performance regarding:

 

·         the detection and investigation of Benefit fraud from 1 April 2015 to 31 December 2015;

 

·         the detection and investigation of Council Tax fraud and Tenancy fraud from 1 April 2015 to 31 March 2016;

 

·         Detailed the composition of the new Counter Fraud & Compliance Team that had been created on 1 February 2016 following the transfer of Benefit fraud work to the DWP’s Single Fraud Investigation Service (S-FIS).

 

Board Members were advised by the Counter Fraud Manager (formerly the Anti-Fraud Manager) that 2015-16 had been a year of transition for his team, but that given the shortened timeframe to investigate benefit fraud, allied to the additional workload imposed by the transfer of Dartford [and Sevenoaks] benefit fraud case work to the DWP; it had been a very successful final year of operation for the joint Anti-Fraud Team.

 

During January 2016 all benefit fraud investigations had been successfully migrated over to the DWP and from 1 February 2016 Dartford Borough Council had ceased to be responsible for, or have the powers to, investigate Benefit fraud allegations. On 1 February 2016 the smaller Counter Fraud & Compliance Team had been created jointly between Dartford and Sevenoaks Councils. The remit of the new team was to protect the revenue streams of both Councils and to investigate any areas of fraud not covered by the DWP’s Single Fraud Investigation Service (S-FIS). The new CF&C team had been relocated to Sevenoaks District Council Offices within the shared Revenues & Benefits Department.

 

In March 2016 the Chartered Institute of Finance and Accountancy (CIPFA) had published the Local Government Counter Fraud and Corruption Strategy 2016-19 document as a follow-up to the Fighting Fraud and Corruption Locally strategy published in 2011. The new strategy document had 5 (five) key guiding principles for local authorities to follow:

 

·         To continue to effectively fight fraud & corruption following the transfer of Benefit fraud work to the central government and the DWP – Dartford’s creation of its new joint Counter Fraud & Compliance  Team was positive evidence of the Council meeting this need;

 

·         Counter Fraud resources to be targeted at areas of highest risk – Dartford collects £55M in Council Tax and £92M in Business Rates annually – tax payers can claim various discounts, allowances and reliefs under both schemes; the new Counter Fraud & Compliance team would help police both schemes to ensure that only tax payers who were due a discount received one;

 

·         A robust compliance strategy was equally important [to a counter fraud strategy] i.e. every £1 lost to error was equally important as a £1 lost to fraud; the new Counter Fraud & Compliance team  ...  view the full minutes text for item 8.

9.

Update on Progress on the PWC Action Plan pdf icon PDF 81 KB

This report provides the Board with an update on progress made against the PWC action plan

Minutes:

This report provided the Board with an update on progress made against the Price Waterhouse Coopers (PWC) action plan, drawn up following PWC’s external review of the Council’s Internal Audit service. The Update document was attached as Appendix A to the report.

 

The Strategic Director (Internal Services) highlighted the following key points for Board Members:

 

·         Progress to date against the Action Plan [first presented to the Audit Board in June 2015] had shown positive progress with a number of actions either implemented or in the process of being implemented as detailed in Appendix A [final column];

·         Some actions would take time to bed in before they made a real difference to the quality of the service provided by Internal Audit;

·         The Internal Audit team was now up to full strength, following the appointment of a new Principal Auditor and Auditor, both of whom had settled in well to their new posts and received positive feed-back from service managers;

·         The PWC report had identified a need to strengthen the relationship between Internal Audit and service managers and a workshop had been held in October 2015, hosted by the Audit, Risk and Anti-Fraud Manager (ARAFM), to help both sides understand how they could better support one another to ensure the Internal Audit service provided real value to the Council as an organization;

·         The ARAFM would hold further regular workshops with senior service managers going forward, to discuss audit related matters and to ensure that managers understood the need for strong internal controls and governance arrangements;

·         The SD(IS) in her role as the Council’s Section 151 Officer, reminded all service managers on a regular basis of the importance of the internal audit role and the need [for managers] to fully co-operate with auditors;

·         The pre-audit scoping meeting process had been strengthened, aimed at ensuring that audits provided the level of assurance required by service managers and that audit recommendations were focussed, realistic and added value to the Council;

·         The Internal Audit (IA) team had participated in a development workshop in December 2015, aimed at re-energising the team and helping it to re-focus on new ways to facilitate the delivery of the Council’s IA service in terms of added value and compliance with Public Sector Internal Audit Standards, to meet Senior Management’s expectations. The team had responded positively and an action plan arising from the workshop was being developed.

 

In response to a specific question from the Vice-Chairman the SD(IS) confirmed that a follow-up review was proposed by PWC of the Council’s Internal Audit service.

 

                                    RESOLVED:

 

1.    That Board Members noted the progress made against the PWC Action Plan as set out in the Update document attached as Appendix A to the report.

 

 

 

10.

Annual Review of the Effectiveness of the System of Internal Audit 2015-16 pdf icon PDF 52 KB

This report provides Members with a summary of the findings from the review of effectiveness of the system of Internal Audit for 2015-16.

 

Additional documents:

Minutes:

The report provided Members with a summary of the findings from the review of the effectiveness of the Council’s system of Internal Audit for the 2015-16 financial period ended 31 March 2016.

 

The Strategic Director (Internal Services) informed Board Members that an annual review of the effectiveness of Internal Audit had to be carried out in compliance with the Account and Audit Regulations and the Public Sector Internal Audit Standards (PSIAS). The details of the review were attached at Appendix A to the report and the conclusion of the review was that the Council’s arrangements for Internal Audit were substantially compliant with PSIA Standards.

 

Members were advised of one key issue arising from the self-assessment exercise in respect of the designated Chief Audit Executive (CAE) position. The Standards defined the CAE as ‘a person in a senior position responsible for effectively managing the internal audit activity in accordance with the internal audit charter’. The Standards also emphasised the importance of internal audit being both independent and objective and the PWC review highlighted the need for the Council to formally identify who the Chief Audit Executive (CAE) should be.

 

Given the need to formulate an Action Plan in response to the PWC review and implement the Plans proposals as soon as possible; the Managing Director had agreed in April/May 2015 the proposal that the SD(IS) as Section 151 Officer, assume the role of CAE on a temporary basis to allow the Audit, Risk and Anti-Fraud Manager (ARAFM) to progress the Action Plan quickly in response to the PWC review of the Council’s IA service. The temporary arrangement was discussed with PWC at the time who confirmed their agreement that the proposal was sensible and would allow the ARAFM to concentrate on implementing the service improvements proposed in the Action Plan. The ARAFM was advised of the Senior Management decision which was also reported to the Board in June 2015 [Min. No. 17].

 

The ARAFM subsequently raised his concerns over the temporary arrangement with Senior Management on a number of occasions, voicing the principal concern that the SD(IS) in her role as Section 151 Officer and part of the Senior Management structure could not be considered  to be independent, and that the temporary arrangement did not strictly comply with Public Sector Internal Audit Standards (PSIAS). Advice was sought from Grant Thornton UK, as the Council’s External Auditors, who advised that the Chief Audit Executive (CAE) role should sit with the ARAFM rather than the Section 151 Officer to ensure independence and objectivity. This advice has been relayed to the ARAFM and a meeting to discuss the role and the practicalities of the transfer of CAE responsibilities will be arranged with him when he returns to duty.

 

Board Members were assured by the SD(IS) that the potential risk to independence during her 12 month tenure as CAE, had been mitigated by the fact that the ARAFM had had direct access to her, the Manging Director and the Audit Board Chairman  ...  view the full minutes text for item 10.

11.

Review of Internal Audit Recommendations - Progress Report pdf icon PDF 49 KB

This report is to update Members on progress of the implementation of recommendations agrees with Management during this year, and to report on outstanding recommendations any outstanding recommendations due for implemented by 30 April 2016.

 

 

 

Additional documents:

Minutes:

This report updated the Board on the progress that had been made in the implementation of recommendations agreed with Management during the year in addition to reporting on outstanding recommendations that had been due to be implemented by 30 April 2016.

 

Members were referred to Appendix A to the report [agenda p.91] which provided a summary of the audits undertaken and a break-down of the number of recommendations implemented or delayed. Appendix B [agenda p. 92-101] set out the reasons for delayed implementation of audit recommendations together with reasons, the current position plus a revised implementation date.

 

The Chairman expressed his concern over the continued delay over the completion of the Museum Audit [Appendix B - agenda p.92]. He asked that where progress in an audit was dependent on co-operation and performance of 3rd parties (as was the case in the museum cataloguing project); this fact should be noted in the ‘Latest Position’ dialogue column, to fully inform the public and preserve the Council’s reputation. Officers noted this request.

 

In response to a specific questions regarding the Audit on Data Protection & Freedom of Information (FoI) [Appendix B agenda p.101; the SD(IS) advised that the Annual Staff Appraisal process monitored whether staff had received training in Data Protection and to respond to FoI requests. She undertook to confirm for Members whether Data Protection and FoI training formed part of the Council’s induction training for new staff and confirmed that FoI requests received by the Council were recorded and monitored centrally [by Legal Services].

 

The SD(IS) also confirmed the following points for Board Members regarding the audit of the Council’s Banking Contract [Appendix B agenda p.97]:

 

·         The Council’s legal team had completed all the actions required of them and that matters now lay with Lloyd’s Bank legal team who were contacted on a regular basis;

·         The Council’s Account with Lloyd’s Bank was being conducted by ‘implied contract’ and the ‘Risk’ to the Council was assessed as ‘Low to Medium’;

·         Business continuity was being maintained under the current arrangements which contained the standard ‘exit’ clauses should they be required. This was not thought to be the case.

 

 

RESOLVED that:

 

1.    Audit Board Members noted the reasons for delayed implementation of audit recommendations as provided by Management and set out in Appendix B to the report;

 

2.    Members endorsed the revised dates for implementation provided by Management as noted in Appendix B;

 

3.    Where the implementation of audit recommendations resided with Third Parties, outside the direct remit of the Council and its Officers; that this fact be recorded in all audit papers and correspondence to preserve the Council’s reputation [Min. No. 55 Resolution 3 of 23 March 2016].

 

 

12.

Audit Reports Issued Since Last Meeting of the Board pdf icon PDF 55 KB

To inform Members of outcomes of the audits completed since the previous report to the Board in March 2016 and to provide Members with the opportunity to request clarification or further information, if considered necessary.

Additional documents:

Minutes:

The report informed Board Members of the outcomes of audits that had been completed since the previous report to the Board on 23 March 2016 and gave Members the opportunity to request further information if deemed necessary.

 

Members were referred to Appendix A of the report [agenda p. 107] which set out in table format the details of the four (4) audits finalised since the last report to the Board in March 2016. All the audits had received a ‘Good’ opinion for ‘Framework’; three audits had also received a ‘Good’ opinion for ‘Compliance’ with the fourth audit being classed as ‘Satisfactory’.

 

In response to a specific question, the Principal Auditor confirmed for the Shadow Chairman that the audit of the Council’s pilot anti-litter scheme was still officially at the ‘Draft’ stage, awaiting sign-off by the ARAFM currently on sick leave. However the findings had been agreed by Officers and were positive.

 

The Shadow Leader expressed his concern that a ‘Draft’ audit report was being used by Cabinet in support of their decision to extend the Litter Scheme in the Borough without any elected Members outside of Cabinet having sight of the audit report and recommendations.

 

The Cabinet Member for Strategic Council Finances advised the Shadow Leader that Cabinet had taken its decision with the advice of Officers and Auditors, on the basis that the report was finalised and merely awaited sign-off.

 

Officers present confirmed the Cabinet Members explanation and also advised that the proper forum for contesting Cabinet decisions was either the relevant Cabinet Advisory Committee considering the item or as a Draw-Down by the Scrutiny Committee.

 

 

                                    RESOLVED:

 

1.    That Audit Board Members noted the contents of the report.

13.

Selective Invoice Checks pdf icon PDF 60 KB

During the Board meeting held on 13 January 2016 Members selected 5 (five) creditor payments for checking to ascertain the probity and accuracy of the transactions. Due to staff illness that exercise was not completed in time for the March 2016 meeting of the Board. The attached report summarises the findings of that delayed exercise and provides the Board with the opportunity to select five (5) further payments for checking, if required.

Minutes:

At the meeting of the Board in January 2016 Members had selected five creditor payments for checking. The results of that exercise were originally due to be reported to the Board in March 2016 but due to capacity issues had been deferred to the June Board.

 

Members were advised that results of the Internal Audit review confirmed that all the spend decisions made were appropriate and in compliance with Council procedures.

 

Member selected five (5) further creditor payments for examination by Internal Audit with the outcomes to be reported to the Board in September 2016.

 

                                    RESOLVED:

 

1.    That Board Members noted the contents of the report and select five (5) further payments for checking by Internal Audit.

 

14.

Internal Audit Annual Report 2015-16 pdf icon PDF 55 KB

This report provides Members of the Board with a summary of the work of the Internal Audit Service during 2015-16. The report outlines the performance of the Section during the year and, based on the work completed, informs the Board of the Chief Audit Executive’s overall opinion on the adequacy and effectiveness of the internal control environment, which is timed to support the Annual Governance Statement [presented elsewhere in this agenda].

Additional documents:

Minutes:

This report provided Board Members with a summary of the work of the Internal Audit Service during the 2015-16 financial cycle to 31 March 2016. It outlined the achievements of the Team during the year and, based on the work completed, informed the Board of the Chief Audit Executive’s overall opinion on the adequacy and effectiveness of the internal control environment, which was timed to support the Annual Governance Statement, as considered elsewhere in these Minutes [Min. No. 6].

 

In her role as Chief Audit Executive (CAE) in the period under review the SD(IS) referred Board Members to her Opinion regarding the Council’s internal control environment as set out in Appendix A to the report [Agenda p. 203]. She had concluded that, in her opinion, the Council’s control environment had contributed effectively to the proper, economic, efficient and effective use of resources in achieving the Council’s objectives; based on the work undertaken by the Internal Audit (IA) team in the year under review and the contribution of the external audit service provided by Grant Thornton UK.

 

Members were advised that the original audit plan for 2015/16 had comprised of 27 audit reviews 6 of which had subsequently been deferred and carried over to the 2016/17 cycle, as previously reported to the Board [March 2016]. In addition, at the request of Senior Management, 1 allegation of suspected fraud had been investigated. Further details of the work carried out by the IA team was given in Section 4 of the report [agenda p. 204/5] and a summary of the audits undertaken was set out in Appendix 2[agenda p.210].

 

The report also detailed for Members the results of customer satisfaction surveys following the completion of individual audits; the training undertaken by the IA team during the period under review and the planned developments for the IA team. The summary of the performance of the IA team as set out in Appendix 5 (agenda p. 213/214) recorded that the Team had achieved all its targets for the year.

 

The SD(IS) in her role as Chief Audit Executive (for the period under review) asked the Board to support her Opinion that during the financial period 2015/16 the Council had had effective internal controls, risk management and governance arrangements in place for delivering its objectives.

 

The Chairman confirmed that the ‘Cancel or Defer’ column in Appendix 2 [agenda p. 210] should be for 2016/17 not 2015/16.

 

In the absence of any other comments or questions from Members it was

 

                                    RESOLVED that:

 

1.    Board Members noted the report;

2.      Members supported the conclusion of the Chief Audit Executive, that the Council had effective controls, risk management and governance arrangements in place for delivering its objectives and the management of business risks during the period 1 April 2015 to 31 March 2016.

15.

Future Appointment of External Auditors pdf icon PDF 58 KB

This report provides an update on the arrangements for appointing external auditors following the abolition of the Audit Commission and the end of the transitional arrangements at the conclusion of the 2017/18 audits.

Minutes:

This report provided Board Members with an update on the arrangements for appointing external auditors following the abolition of the Audit Commission and the end of the current transitional arrangements at the conclusion of the 2017/18 audit process.

 

The report, as presented to the March 2016 meeting of the Board, outlined three (3) options open to the Council by which an external auditor could be appointed for the 2018/19 audit period and beyond.

 

Members were advised that the Local Government Association (LGA) supported Option 3 to opt-in to a sector led body that could negotiate contracts and make appointments on behalf of councils, thereby maximising the economic approach and removing the need and cost of setting up an independent Auditor Panel. The Council had lodged an expression of interest with the LGA by the 30 April 2016 deadline to participate in this option. However this had not committed the Council in any way. The LGA were due to return to authorities later in the year with detailed proposals. The LGA proposals would be reported to a future meeting of the Board, in due course, with a recommendation for the General Assembly of the Council to approve the preferred procurement option.

 

The Shadow Leader in his position as Shadow Chairman of the Board queried the basis of the LGA thinking. He asked whether it was based on efficiency or robustness [of the model].

 

The SD(IS) confirmed that the primary consideration of the Council and the LGA was for efficiency. It made sense for Kent authorities to have a single external auditor in terms of continuity and common levels of service. She advised that the Council’s current external auditor, Grant Thornton UK, also provided the same service for a number of Kent authorities.

 

 

                                    RESOLVED:

 

1.    That Board Members noted the developments with regard to the sector led body procurement option as detailed within the body of the report.

 

In closing the proceedings, the Board Chairman advised Members that he would be attending the Sevenoaks Audit Committee meeting the following evening 30 June, as a guest, following Cllr. Grint’s observation of Dartford’s Audit Board meeting held on 13 January 2016.