Agenda and minutes

To appoint a Vice-Chairman for the 2017/18 municipal year (The Vice Chairman must not be a member of Cabinet or Overview and Scrutiny).

The Chairman requested nominations for the position of Vice-Chairman of the Audit Committee for the municipal year 2017/8.

It was proposed by Councillor Whittaker and seconded by Councillor Scott:

“That Councillor Hartley be appointed Vice-Chairman of the Audit Committee for the municipal year 2017/18”

There being no further nominations, the Chairman declared the proposal to be carried.

Resolved:

That Councillor Hartley be appointed Vice-Chairman of the Audit Committee for the municipal year 2017/18.

Minutes of meeting held on 18^th January 2017 (previously circulated). 

That the minutes of the meeting held on 18^th January 2017 were signed by the Chairman as a correct record.

There were no items of urgent business.

To receive declarations by Members of interests in respect of items on this Agenda. 

Members are reminded that, in accordance with the Localism Act 2011, they are required to declare any disclosable pecuniary interests which have not already been declared in the Council’s Register of Interests. (It is a criminal offence not to declare a disclosable pecuniary interest either in the Register or at the meeting). 

Whilst not a legal requirement, in accordance with Council Procedure Rule 9 and in the interests of clarity and transparency, Members should declare any disclosable pecuniary interests which they have already declared in the Register, at this point in the meeting. 

In accordance with Part B Section 2 of the Code Of Conduct, Members are required to declare the existence and nature of any other interests as defined in paragraphs 8(1) or 9(2) of the Code of Conduct. 

There were no declarations of interest.

Report of KPMG LLP.

The Committee received the External Audit Plan 2016/17 prepared by KPMG, which outlined how KPMG would deliver its financial statements audit work for the Authority and set out their approach for value for money (VFM) work for 2016/17. The Plan supplemented the Audit Fee Letter 2016/17.

Tim Cutler, Partner KPMG LLP (UK) advised the Committee that KPMG had assessed the key risks affecting the Authority’s financial statements and the central processes that would impact on the audit. Professional standards required two standard risks, in relation to management override of controls and fraudulent revenue recognition, to be considered as part of each authority’s audit.

It was reported that the risk assessment was ongoing and KPMG would report on VFM significant risks during their audit.

Members were advised that KPMG’s work would be completed in four phases from March to September 2017.

Resolved:

That the External Audit Plan 2016/17 be accepted.

Report of KPMG LLP.

The Internal Audit and Assurance Manager left the room and did not participate in item 7.

Report of the Chief Officer (Resources).

 The Chief Officer (Resources) presented a report on Internal Audit Management – Collaboration with Wyre Borough Council which sought endorsement to the arrangements regarding the Internal Audit and Assurance Manager (IAAM) role as a 12 month pilot.

It was reported that the Accounts and Audit Regulations 2015 required local government to have a “Head of Audit” role holding a professional qualification and being suitably qualified.

Members were advised that the departure of the former IAAM had unavoidably resulted in the loss of many years of knowledge and experience. Discussions had therefore taken place as to various options available and from these discussions a collaboration arrangement had been agreed, with Wyre Borough Council, as a pilot for 12 months, subject to the endorsement of the Committee.

It was reported that endorsing the proposals would ensure the Internal Audit Service continued to deliver an effective audit service which complied with the relevant professional standards. The proposals were designed to support the delivery of the Audit Plan. The interim IAAM would work with the Chief Officer (Resources) to embed a structure which would provide stability, increase resilience and retained its well-developed respect and standing throughout the organisation.

Members asked a number of questions relating to the collaboration with Wyre Borough Council regarding Information Governance, external auditors, the cost of the arrangements, and reports to the Audit Committee. Members also asked questions regarding succession planning and professional qualifications of existing audit staff, compliance with Regulations, the role of an apprentice and how the collaboration would be reviewed and reported back to the Committee. 

It was proposed by Councillor Whittaker and seconded by Councillor Thomas:

“That the recommendations, as set out in the proposal, be approved.”

Upon being put to the vote Members voted unanimously in favour of the proposition, whereupon the Chairman declared the proposal to be carried.

Resolved;

(1)    That the Committee endorses the 12 month pilot collaboration arrangements with Wyre Borough Council, to cover the IAAM role and to develop the Internal Audit function and team as set out in the report.

That future proposals (beyond the pilot) be considered by the Committee in due course, and in the meantime the Committee be informed of any significant charges or developments as the pilot progresses.

Report of the Internal Audit and Assurance Manager.

The Internal Audit and Assurance Manager (IAAM) presented the Annual Review of Internal Audit’s Compliance with Professional Standards report to advise Members of the outcome from a self-assessment review against the Public Sector Internal Audit Standards (PSIAS) as a contribution to the annual review of Internal Audit effectiveness, and sought endorsement for an updated Quality Assurance and Improvement Programme.

It was reported that the Accounts and Audit Regulations 2015 include a requirement for local authorities Internal Audit functions to take into account PSIAS and any associated guidance.

The PSIAS require a ‘Quality Assurance and Improvement Programme’ (QAIP) to be maintained which included periodical internal and external assessment of compliance with the Standards. Furthermore, standard 1322 of the PSIAS required the Council to consider disclosing any significant deviations in its Annual Governance Statement.

Members were advised that an annual self-assessment had been undertaken in accordance with the QAIP. There were no areas where non-compliance had been identified and partial compliance was now demonstrated in 16 instances (previously 17).  The IAAM reported that she would be focusing on working towards full compliance in 2017/18, however would be welcoming the independent peer review later in the year which would validate the self-assessment.

Lancaster’s peer review is to be carried out in October / November 2017 by Wyre Borough Council and Allerdale Borough Council, however Members were advised that this would be reviewed in light of the collaborative agreement with Wyre Borough Council and the now shared IAAM

The IAAM answered a number of questions from Members relating to performance indicators and risk registers, external peer reviews and targets on areas of partial compliance.

It was proposed by Councillor Burns and seconded by Councillor Wilkinson:

“That the recommendations, as set out in the report, be approved.”

Upon being put to the vote, 6 Members voted in favour of the proposition, with one abstention, whereupon the Chairman declared the proposal to be carried.

Resolved:

(1)    That the IAAM conclusions from the self-assessment exercises be accepted as evidence that Internal Audit was operating effectively and the Committee could therefore place reliance on Internal Audit’s reports and work when considering the overall effectiveness of the Council’s governance arrangements. The areas of partial compliance and agreed action was presented at Appendix A to the report.

(2)    That the QAIP for 2017/18, presented at Appendix B to the report be noted and endorsed.

Report if the Internal Audit and Assurance Manager.

The Internal Audit and Assurance Manager (IAAM) presented the Internal Audit Annual Report and Assurance Statement 2016/17 to inform the Committee of the extent and outcome of Internal Audit work during the 2016/17 financial year and to present an annual Statement of Assurance regarding the Council’s framework of governance, risk management and control.

A summary of the annual position against the 2016/17 Annual Plan was provided for Members consideration.

It was reported that the work of internal audit sought to provide assurance to the Council as to the appropriateness and effectiveness of its internal control and corporate governance arrangements. During the 2016/17 financial year, Internal Audit’s work had provided reasonable assurance.

The IAAM answered a number of questions regarding safeguarding of adults, stores, and the teams risk based approach to audit work.

It was proposed by Councillor Whittaker and seconded by Councillor Scott:

“That the recommendations, as set out in the report, be approved.”

Upon being put to the vote, Members voted unanimously in favour of the proposition, whereupon the Chairman declared the proposal to be clearly carried.

Resolved:

(1)        That the report be noted.

(2)       That the IAAM Assurance Statement and Annual Internal Audit Opinion (paragraphs 2.11 to 2.22 of the report) be accepted and considered by the Committee in relation to the annual governance review and Annual Governance Statement , which is to be considered at the September 2017 meeting.

Report of the Internal Audit and Assurance Manager.

The Internal Audit and Assurance Manager (IAAM) presented the Internal Audit Strategy and Risk Based Plan and sought the Committee’s approval for the proposed Internal Audit Strategy and Annual Risk Based Plan for 2017/8.

It was reported that the Internal Audit Strategy was a high-level statement of how the Internal Audit Service would be delivered and developed in accordance with its approved terms of reference (the Audit Charter) and how it linked to the Councils’ organisations objectives and priorities.

Members asked questions in relation to allocation of resources based on risk, and a number of questions regarding health and safety auditing.

It was proposed by Councillor Hartley and seconded by Councillor  Thomas:

“That the recommendation, as set out in the report, be approved.”

Upon being put to the vote, Members voted unanimously in favour of the proposition, whereupon the Chairman declared the proposal to be clearly carried.

Resolved:

That the Internal Audit Strategy and Risk Based Plan for 2017/18 be approved.