Agenda and draft minutes

Audit Board - Wednesday 19 October 2022 7.00 pm

Venue: Board Room - Civic Centre. View directions

Items
Note No. Item

13.

Apologies for Absence.

Minutes:

Apologies for absence were received on behalf of Councillors Barham, Harman & Stealey.

 

The Chairman gave a particular welcome to new Members and Mr Paul Cuttle from the Council’s external auditors Grant Thornton UK. He also noted the attendance of the Chief Officer and Director of Corporate Services, the Head of Finance, and the Internal Audit Manager.

 

14.

Declarations of Interest.

To receive declarations of interest from Members including the terms(s) of the Grant of Dispensation (if any) by the Audit Board or Chief Officer & Director of Corporate Services.

Minutes:

There were no declarations of interest.

 

15.

Member Training - Internal Audit Function

To receive a presentation from the Internal Audit Manager.

Minutes:

Members received a PowerPoint presentation from the Internal Audit Manager which covered the three principal areas of the Internal Audit (IA) function which she summarised in the following terms:

 

‘Internal auditing is an independent, objective assurance and consulting activity designated to add value and improve an organisation’s operations. It helps an organisation accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control and governance processes.

 

Members were advised that the IA function comprised three distinct elements: 

 

Systemic and Disciplined Approach

 

The International Professional Practices Framework (IPPF) set out the parameters and best practice for IA work under the overarching principles of independence, confidentiality and set out in the IA Charter and included:

 

·       Mandatory Guidance;

·       Core Principles regarding Definition, Standards and Core Ethics;

·       Implementation Guidance;

·       Supplemental Guidance; and

·       Recommended Guidance

 

Nature of IA Work

 

The comprehensive details were set out in the IA Charter and combined into the Annual Report for presentation to the General Assembly of the Council (GAC). The principal stages were to:

 

·       Compile a plan to provide independent assurance based on the [Council’s] Strategic Risk Register (SRR), horizon scanning (including emerging risks), plus input from the External Auditors;

·       Engage with Council services to provide consultation;

·       Provide Risk Management guidance in discussion with management for individual sections, to determine both strategic and operational risk ‘ownership’;

·       Undertake internal investigations; and

·       Receive whistleblowing complaints

 

Doing an audit

 

·       Audit objectives taken from annual audit plan;

·       Research and information gathering – planning the audit with individual service managers;

·       Consideration of subject area’s current objectives, risks and controls with those managers;

·       Design tests to evaluate current design and operational controls are adequate and effective once IA fully understand the existing process and operational arrangements;

·       Communicate with client management in a 2-way process, to establish cause and effect and agreed corrective actions to be undertaken by management to an agreed timescale;

·       Report findings; and

·       Follow-up on agreed management actions

 

In concluding her presentation the IAM compared the IA function to that undertaken to repair a dishwasher. When the machine broke down/didn’t work, the owner washed the dishes by hand until the machine was repaired. Then checked any washed dishes in their cupboard to ensure they were clean i.e. to check at what stage the dishwasher had started to fail to clean the dishes properly, and re-wash any dishes found not to be completely clean.

 

The Chairman thanked the IAM for her presentation and asked the Clerk to circulate the material electronically to Members.

 

MD

16.

Confirmation of the Minutes of the meeting held on 20 July 2022 pdf icon PDF 201 KB

Minutes:

RESOLVED:

 

1.    That the Minutes of the Board meeting held on 20 July 2022 be confirmed as an accurate record of those proceedings.

 

17.

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 for the Board to consider.

 

18.

References from Other Committees (IF ANY)

There are no references from other Committees for the Board to consider.

Minutes:

None.

 

19.

Complaints Monitoring and Procedure Review 2021-2022 pdf icon PDF 217 KB

Additional documents:

Minutes:

The standard annual report from the Head of Legal Services, in her role as the Council’s Corporate Complaints Officer, provided Members with information on the Council’s Corporate Complaints Procedure, including the number and nature of complaints received in respect of the services provided by the Council during the period 1 April 2021 to 31 March 2022, as set out in Appendix A to the report. Appendix B comprised the Analysis of Corporate Ombudsmen Complaints, with Appendix C providing an Equalities Analyses for 2021/2022.

 

The Head of Legal Services presented her report and Appendices to the Board as read, with two additional verbal comments:

 

(i)              The role of Designated Person previously undertaken by the Chairman of the Audit Board, had been abolished on 1 October 2022. The role had been to act as a conduit between complainants and the Council, prior to complainants choosing to refer their complaints to the Housing Ombudsman, but had been a cumbersome process in need of streamlining;

(ii)             The Council’s role in helping residents with disabilities with the complaints process, in particular those suffering from dyslexia, had increased significantly in the period under review.

 

The Chairman thanked the Head of Legal Services for her report, and in answer to a specific question, confirmed that his role and duties as Designated Person for the Council had on average, only involved 2 or 3 complaints per annum.

 

He advised Members that the Council was blessed with a good cohort of Officers who held their hands up if and when mistakes were made and apologised for any failings that had been made.

 

          RESOLVED:

 

1.     That Members receive and note the report and Appendices;

 

2.     That the Chairman of the Audit Board be thanked for undertaking his role over several years of the Council’s Designated Person.

 

20.

Annual Report 2021/2022 of the Monitoring Officer on the Review of Ethical Governance Arrangements and Ancillary Matters pdf icon PDF 92 KB

Additional documents:

Minutes:

The report from the Head of Legal Services in her role as the Council’s Monitoring Officer, asked Board Members to consider and endorse the Monitoring Officer’s Annual Report 2021/22 on the Review of Ethical Governance Arrangements and Ancillary Matters (Appendix A to the report), and note the Government’s response to the review by the Committee on Standards in Public Life (CSPL), of local government ethical standards (Appendix B to the report).

 

The Monitoring Officer presented her report and Appendices as read, with the following additional verbal commentary:

 

(i)              A section 56B Local Government Act 2000 report from the Chairman of the Audit Board on the discharge by the Board, of its general and specific functions, would be presented to the General Assembly of the Council in December 2022, and thereafter annually;

(ii)             The Procurement Bill currently processing through Parliament, aimed to substantially overhaul and reform the UK’s public procurement regime. Secondary legislation would be required to bring some elements of the Bill into effect. The Government had indicated that it intended to develop the required secondary legislation (along with supporting guidance), in parallel with the Bill’s passage through Parliament. Once in force, the new legislation would impose a significant extra work load on procurement teams and lawyers;

(iii)           The Data Protection and Digital Information Bill had ‘stalled’, which in the short-term at least, obviated the need to re-visit the Council’s current policies and guidance regarding data protection legislation;

(iv)           A pressing concern facing those in public office, including those standing for election, was the increasing levels of intimidation, harassment and abuse, particularly through social media. The LGA has called for Government to prioritise a change in legislation, to put it beyond doubt, that councillors can proactively withhold their home address from public DPI registers. This approach would be consistent with the rules that apply to local government and parish council etc. elections, removing the requirement that each candidate’s home address be published during the election process and be included on the ballot paper and for each candidate’s qualifying address to be published during that process;

(v)             The Localism Act 2011 did not give a local authority any power to impose sanctions for breach of its code, such as disqualification from office or withdrawal of monetary allowances payable under the Local Authorities (Members’ Allowances) (England) Regulations 2003, Sanctions likely to be imposed are a formal letter to the Member, formal censure by motion and removal of the Member from a committee(s). The CSPL had recommended to Government that local authorities should be given the power to suspend councillors, without allowances, for up to six months, but the recommendation had been rejected.

 

In the absence of any questions the Board RESOLVED that:

 

1.     The Monitoring Officer’s Annual Report 2021/22 on the Review of Ethical Governance Arrangements and ancillary matters, as set out in Appendix A be endorsed;

2.     The Government’s response to the review by the Committee on Standards in Public Life of local government ethical standards [Appendix B to the report],  ...  view the full minutes text for item 20.

21.

Statement of Accounts 2021-22 pdf icon PDF 75 KB

Additional documents:

Minutes:

In a change to the agenda order, prior to receiving an update report from the external auditor Grant Thornton UK, the Board considered the Head of Finance’s report and recommendations for the Council’s Statement of Accounts for the period of 1 April 2021 to 31 March 2022. 

 

Members were asked to consider and approve the report for publication, and to agree that the Head of Finance be authorised to approve any subsequent amendments to the 2021/22 Statement of Accounts resulting from outstanding audit work still to be undertaken by Grant Thornton, in consultation with the Audit Board Chairman.

The Head of Finance reminded the Board that the Council’s Statement of Accounts was prepared in accordance with ‘proper accounting practice’ - i.e. with regard to all the accounting rules issued by the Financial Reporting Council and the CIPFA Code of Practice on Local Authority Accounting, and that those accounting rules differed from the statutory regulations that the Council is required to follow regarding setting council tax and in relation to capital finance. 

There had been no significant changes in the requirements for the 2021/22 Accounts compared to those for 2020/21. However, the continued knock-on effect and extra complexity of additional COVID-19 transactions, and resultant difficulties for external audit firms, had again required audit deadlines to be extended, with the audited accounts presented to Members later than planned.

The Council had submitted draft accounts for external audit by the the15th July deadline, and despite some elements of remaining work, Grant Thornton expect to issue an ‘Unqualified’ opinion by November/December. When completed, the Opinion would replace the blank pages in the submitted 2021/22 Statement of Accounts [Appendix A to the report].

The Head of Finance then gave the following verbal summary of the main accounting statements as shown on pages 189-193 of the published agenda, with accompanying disclosure notes as required by the code. Overall, the 2021/22 accounts showed a positive picture for the Council, with additional non business rate resources being added to reserves as reported to Cabinet in July 2022 [Min. No. 39 refers], including the following details:

·       The Comprehensive Income and Expenditure Statement (CIES) [pages 189-193 refer] recorded an accounting surplus of £14.107m as reflected in the EFA [p.194];

·       In addition to that gain the Income and Expenditure Statement also showed unrealised gains shown as part of other comprehensive income and expenditure such as changes on the revaluation of assets, changes to the value of financial assets, and pension remeasurements. taking the Council to a total surplus of £53.6m;

·       The Expenditure and Funding Analysis and the notes to it [pages 194-196 refer], explained in more detail the relationship between the CIES and the Movement on Reserves, including the reasons for different adjustments and how the reserve position is then related to the CIES position. In effect it showed that the surplus was reduced from £14.1m to a deficit of £11.5m.

·       The Movement in Reserves Statement (MIRS) [p.190] recorded changes in usable and unusable reserves, beginning with the Accounting outcome  ...  view the full minutes text for item 21.

22.

Report from the External Auditor pdf icon PDF 72 KB

To note the report and Appendices from the External Auditors, Grant Thornton UK LLP.

Additional documents:

Minutes:

The covering report from the Head of Finance advised the Board that the External Auditor (Grant Thornton UK) had substantially completed the audit of the Council’s 2021/22 Accounts as set out in the ‘Audit Findings’ report at Appendix A for Members to note.

 

Members were also asked to approve the Letter of Representation [Appendix B to the covering report], and note the letter of explanation from Grant Thornton postponing completion of its work on arrangements to secure value for money (VFM) as set out in Appendix C. Appendix D to the report contained a draft ‘Unqualified’ Opinion, to be slotted into the 2021/22 Statement of Accounts on final completion of the External Auditor’s outstanding work.

 

Paul Cuttle (Grant Thornton UK) highlighted the following key headlines in his report for Members:

 

·         As advised in his VFM Extension Letter to the Board Chairman [Appendix C to the covering report], completion of VFM work had been extended, to enable the External Auditor to concentrate on the delivery of the opinion on the Council’s 2021/22 Financial Statements;

·         It was hoped to complete the VFM work by February 2023 provided that the Financial Statements were signed-off in November 2022, with the VFM Extension Letter submitted on a statutory basis to explain the delay;

·         The Council had published its Draft 2021/22 Accounts for audit in line with the statutory deadline of 31 July. It is expected Dartford will be in the first five local authorities in Kent to have their accounts signed off;

·         Dartford’s accounts were of a good standard with only minor amendments required as set out by the EA in Appendix A on a statutory basis.

 

In response to a specific question from the Cabinet Portfolio Holder for Finance [attending in an Observer capacity], it was confirmed that post-COVID staff were now only allowed to carry-over the standard 5 days annual leave, to help lessen the impact on staffing levels and to better achieve work targets.

 

The Head of Finance advised that since the publication of the agenda, the procurement exercise to appoint external auditors to audit local authority accounts in England from 2023-24 had been concluded. Grant Thornton had again been awarded the contract for Kent local authorities including Dartford. The number of firms re-applying for the work had been limited, and an increase of 150% to the current external auditor fees was expected under the new contract arrangements with Grant Thornton. The review of the sector by Sir Tony Redmond (the Redmond Review) had recommended that fees should be increased. This need for the increase was a result of low biding by firms and the increased workload placed on auditors by the regulators. In light of this significant increases in fees, it was hoped that the Local Government Association (LGA) would petition Government for an increase in local authority funding.

 

In closing the debate and thanking the EA for his report and Appendices, the Chairman asked that in relation to Appendix B – Letter of Representation, that the minutes record the fact  ...  view the full minutes text for item 22.

23.

Strategic Risk Register pdf icon PDF 95 KB

Additional documents:

Minutes:

The report from the Chief Officer and Director of Corporate Services attached an updated Strategic Risk Register [Appendix C to the report] for approval by the Board. Appendix A to the report comprised an Impact Matrix and Appendix B provided the Definitions of Assurance ratings.

 

The report reminded Members that the Strategic Risk Register (SRR) focussed on those risks that might impact the Council’s ability to function effectively, and deliver key services to residents. Appendix C represented a reviewed and revised Register to the SRR document approved by the Audit Board in April 2022.

 

The Chief Officer highlighted the following points for Members in her report:

 

·       The Council now had a new Climate Change Team in place and environmental implications were now considered as part of all decision making processes, to enable the Council to better meet its requirements under the Government’s climate change agenda. Policy measures included the development of a Climate Change Policy & Action Plan and investigating funding opportunities to e.g. decarbonise the Council Estate. The risk in respect of climate change had therefore been reduced [Risk SR13 Climate Change – report para 3.4 refers];

·       Risk SR08 Contract/Supply Failure had increased due to current inflationary pressures on contractors and suppliers, and the Council was working closely with its major suppliers to identify what support it could provide [report para 3.4 refers];

·       Risk SR11 Housing demand & Homelessness had also increased due to the cost of living crisis;

·       Risk SR 15 Health & Safety had reduced following the roll out of the new Health & Safety policy and regular health & safety checks;

·       Two new risks had been added to the Register. Risk SR16 - Cost of Living Crises was designed to assess the potential increase in service demand and/or delivery in service costs in the current crisis and moving forward during the Winter for residents facing fuel and food poverty. This could lead to an inability to pay council tax and possible increases in incidents of homelessness, contributing to both an increase in contractor costs and a negative impact on staff wellbeing. However, the risk was considered to be within the Council’s ‘risk appetite’ and controls were already in place to support residents and those contractors most at risk. Risk SR17- Elections 2023 had been added to meet a number of changes in the Election Act 2022, particularly in respect of a new requirement for voter ID, which held risk implications for Returning Officers in conducting successful elections in May 2023. More would be known after secondary legislation was published, but target controls had been identified to reduce the potential risk below the ‘High’ level. 

 

RESOLVED:

 

1.     That Members approve the Strategic Risk Register attached as Appendix C to the report.

 

24.

Annual Audit Board Report 2021/22 pdf icon PDF 63 KB

Additional documents:

Minutes:

The covering report from the Internal Audit Manager (IAM), presented at Appendix A, the Audit Board Annual Report (2021-22) for endorsement by Members.

 

The 2021-22 annual report provided a retrospective review of the activity of the Audit Board in the period under review, and demonstrated that the Board had effectively discharged its functions in accordance with its Terms of Reference. The annual report also provided the Council with assurances that important internal controls, governance and risk management issues had been monitored and addressed as required.

 

The Chairman welcomed the new report which formally recorded the work of the Audit Board and the discharge of its functions during the 2021/22 fiscal cycle, for presentation to the General Assembly of the Council (GAC). Going forward the report would be submitted in July each year. For the particular benefit of new Members, the Chairman advised that any audit report summarised for the Board could be requested in full for further examination of any areas of concern.

 

Members welcomed the new annual report as a useful cross-reference of its work in the period under review.

 

 

RESOLVED:

 

1.  That Members endorse the Annual Audit Board Annual Report (2021/22) attached as Appendix A to the covering report;

2.  That the Audit Board Annual Report (2021/22) be referred to the General Assembly of the Council in demonstration of the effective discharge of its duties, in line with its Terms of Reference.

25.

Internal Audit Update Report October 2022 pdf icon PDF 71 KB

Additional documents:

Minutes:

The covering report from the Internal Audit Manager (IAM) attached at Appendix A, the standard Internal Audit Update Report (October 2022) for Members to note. Appendix A provided the Audit Board with an update on Internal Audit outcomes and activity since the last report to the Board in April 2022, in addition to presenting information to facilitate Members’ oversight of the Internal Audit function.

 

Members were asked to note the report and approve the reduction of the Audit Plan.

 

The IAM advised Members that it had been another tough year for her Team, including a further change of Manager [herself], in addition to carrying an Auditor vacancy and two long-term staff absences. This had prevented the Team from completing the 2021/22 Audit Plan in time for the Annual Opinion in July as detailed in the chart on page 2 of the report [chart agenda p.340 refers], and impacted on the current 2022/23 Plan which it was proposed would now be cut from 9 to 6 audits [chart report page 3 agenda p.341 refers]. The Team were now concentrating its efforts on the 7 (seven) audits left outstanding from the 2021/22 Plan by outsourcing some medium level audit work. The successful recruitment of an Apprentice to the Team had also helped, who after 4 years training would be fully qualified to Master’s degree level. The cost of the training was being supplemented through the Government’s Apprenticeship Levy, and retention of the trainee contractually guaranteed under the 4 year training period.  

 

In response to an expression of concern from the Chairman regarding the ‘Limited’ Assurance awarded to the audit of the Council’s Emergency Planning measures, the IAM advised that the Council could successfully meet future emergency situations. The ‘Limited’ assurance reflected the absence of a dedicated sub-structure and framework within the Council to meet such demands.

 

The Chief Officer acknowledged that this was the case, and confirmed that the Leadership Team were investigating ways to increase dedicated resources to augment its present emergency planning measures.

 

A Member also noted the ‘Limited’ assurance given to the audit of IT Governance, and sought details of what was proposed by the recently appointed Head of ICT and Transformation in terms of a new and comprehensive IT strategy to address perceived need and current failings. The IAM undertook to respond to Members via the Board Clerk.

 

RESOLVED:

 

1.  That Members note the Internal Audit Update Report and updates (attached as Appendix A to the report);

2.  That Members approve the reduction of the 2022/23 Audit Plan.