Minutes for Audit Committee meeting, Dec 11 2008, 7.30PM official page

To confirm as a correct record the Minutes of the meeting held on 25 September 2008. 

RESOLVED that the minutes of the meeting held on 25 September 2008 be confirmed as a correct record. 

Report of the Interim Assistant Directors - Audit 

The quarterly update reported on matters arising from the last Committee meeting, progress against the Internal Audit 2008/09 Audit Plan, and on reports issued during the quarter (procurement, data security and on financial governance in a primary school).

Four items were reported as fundamental issues (colour coded red) with implications for the Committee’s assurance role: risk management; arrangements to counter fraud and corruption; project management; and business continuity management.  Separate full reports were provided for the Committee on the first two items - at Appendices F and G in the agenda. To embed project management disciplines into RBK’s culture and processes, CDT has determined that the One Council Programme and 10 projects will serve as exemplar projects.  Given the importance of the Programme for the Council’s medium term financial management, the Audit Committee welcomed the suggestion to receive a briefing on how the One Council Programme is being managed.  It was recommended and agreed later in the meeting that Business Continuity arrangements (with the particular focus on risk management) would be the subject of the Committee’s scrutiny at the next meeting on 19 March.   

Among the significant issues for the Committee to consider (colour coded amber) were how lessons are learned from investigations and construction contract management – on which there would be further to report to the Committee’s next meeting.

With reference to a recent incident at LB Haringey, Members suggested that, while RB Kingston’s Children’s Services had been evaluated as Outstanding by the Inspectorate and had robust procedures, risk management in Safeguarding / Child Protection might be a worthwhile subject for internal audit, for example in relation to the effectiveness of record keeping and reporting processes.

RESOLVED that the report be noted and the actions taken by Internal Audit to ensure recommendations are implemented, be endorsed.

Reason for decision

To assist the Committee in meeting its responsibilities to consider a summary of the most significant issues arising from internal audit work; and to obtain assurance that appropriate action is being taken on those issues. 

Report by the District Auditor, with cover report by the Strategic Director of Finance 

The Audit Commission has introduced an audit of data quality for all local authorities, to ensure that data on which Best Value Performance Indicators (BVPIs) are calculated, is sound.  The District Auditor has reviewed this Council’s arrangements and her report (attached at Annex 1 to the report) effectively scores the Council’s overall arrangements for securing data quality as ‘good’.  The review comprised: an audit of the overall management arrangements; an analytical review of data for 12 BVPIs;  and a detailed spot check of four of these BVPIs relating to housing benefits, composting and pedestrian crossings.  The District Auditor’s report contains seven recommendations, and an Action Plan by the Strategic Director of Finance to ensure that these recommendations are followed up, is attached at Annex 2 to the report. 

RESOLVED that

1.         the comments and recommendations of the District Auditor as set out in Annex 1 to the report be noted ;

2.         the action plan as set out in Annex 2 to the report be approved; and

3.         a progress report on the Action Plan be submitted to the June meeting of the Committee.

Reason for decision

To consider the District Auditor’s report on the Council’s Data Quality Arrangements and approve the actions arising from that report.

Report by the Strategic Director of Finance 

The budget monitoring position for month 6 (30 September 2008) as reported to the Executive on 9 December shows a potential net underspend of £0.157 million.  The main areas for concern are the budgets for Community Care, Planning and Transportation, and Waste Management (with potential net overspend of £0.4million, £0.3million and £0.4million respectively).  There were no significant movements to report to date arising from the review of significant expenditure and income budgets for month 7.

RESOLVED that the report be noted. 

Report by the Strategic Director of Finance  

A major audit of the Council’s risk management arrangements was completed in October 2007, resulting in action being taken to address limited audit assurance.  A progress review audit completed in October 2008 found that significant progress had been made, but that further work still needed to be done to improve the risk management framework, particularly on the following areas:

·               development of linking to all relevant corporate procedures (e.g. procurement and partnership management) and with clear escalation procedures for high risks.

·               improvement of the approach to risk identification and management, including a toolkit to provide practical guidance for all stages of risk management.

·               development of the risk reporting and monitoring software (the JCAD system) particularly to ensure that there is a clear focus on the highest risks.

Ongoing action on all of these areas was reported, including the appointment of a corporate risk manager in September 2008 to ensure that outstanding risk management issues are addressed by March 2009. 

RESOLVED that the report be noted.

The work programme for the Committee’s next meeting on 19 March 2008 was noted.

An additional information report was tabled at the meeting – a Progress Report by the Audit Commission.  This included one issue arising out of the audit of the accounts for 2007/08: while the Audit Commission is satisfied that the key controls covering the payroll system are working, and that the accounts correctly recorded the amounts expended on employee costs, from their year on year comparison of employee costs they feel that there is uncertainty regarding the  variances between the expected value of payroll costs derived from the number of staff and expected pay rates, and the actual numbers of staff and expected pay rates, and the actual staff costs recorded in the accounts.  The uncertainty of £2.8 million was below the materiality level for the financial statements, and consequently the Audit Commission issued an unqualified opinion and a certificate closing the audit for 2007/08 on 2 October.

RESOLVED that the information report be noted. 

 The following items of business may be considered in private if the Committee agrees to pass the following resolution: To RESOLVE that, under Section 100A(4) of the Local Government Act 1972, the public be excluded from the meeting on the grounds that it is likely that exempt information, as defined in paragraph 3 of Part I of Schedule 12A to the Act (relating to the authority’s financial or business affairs) would be disclosed:

Exempt Annex to Appendix F – Corporate Risk Register profile

Exempt Annex to Appendix G – Implementation of Audit Review of Counter Fraud and Corruption Arrangements – Work Programme.

 The following report was considered as confidential Government information by virtue of s100A(3) of the Local Government Act 1972 because the Audit Commission has requested that local authorities’ assessments are kept confidential until the Audit Commission publishes the national results on 26 February 2009:

·                    Appendix B – Audit Commission Use of Resources Assessment.

RESOLVED that under Section 100A(4) of the Local Government Act 1972, the public be excluded from the meeting for the consideration of the following reports on the grounds that it is likely that exempt information, as defined in paragraph 3 of Part I of Schedule 12A to the Act (relating to the authority’s financial or business affairs) would be disclosed:

·                    Appendix F – Corporate Risk Register

·                    Appendix G – Implementation of Audit Review of Counter Fraud and Corruption Arrangements – Work Programme.

The Chair had authorised that the following report could be considered as urgent business: 

Report of the District Auditor with cover report by the Strategic Director of Finance

As the Use of Resources scores will be subject to national moderation which will not be published until Monday 8 December, this report will be despatched to Members as a late item. 

The District Auditor has now completed her review and assessment of how well the Council manages and uses its resources, and her report is attached as Annex 1 to the report.

The assessment has been carried out under the CPA (Comprehensive Performance Assessment) framework and includes an overall score for the local authority’s use of resources, five supporting theme scores, and 14 recommendations for future action.  A cover report sets out the Strategic Director of Finance’s comments in respect of the District Auditor’s recommendations.  An action plan at Annex 2 indicates how the Council will address those recommendations. 

The Audit Commission has requested that local authorities’ assessments are kept confidential until the Audit Commission publishes the national results on 26 February 2009.  The report is therefore not for publication.

RESOLVED that

1.         the comments and recommendations of the District Auditor as set out in Annex 1 to the report be noted ;

2.         the action plan as set out in Annex 2 to the report be approved, for a progress report to be submitted to the             Committee meeting in June 2009.

Reason for decision

To consider the District Auditor’s report on the Council’s Use of Resources and approve the actions arising from that report.

Note   This item was considered as an urgent item on the grounds that the District Auditor’s Use of Resources Assessment for the Royal Borough of Kingston upon Thames was not released by the Audit Commission for printing until 10 December because all such Assessments have been subject nationally to an Audit Commission quality control process which seeks to ensure consistency between auditors nationwide.  The Chair considered that it would be an unacceptable delay to wait until the March meeting to receive this information and therefore authorised that the report could be circulated late. 

Report of the Interim Assistant Directors – Audit  (with exempt Annex) 

An Internal Audit review of the Council’s arrangements for risk management highlighted that most of the risks on the corporate risk register have been there for three years with little movement, and with a lack of clarity in the definition of the risks and no real drive to manage them down.  The Assistant Directors – Audit were requested by the Chief Executive to advise on how to improve risk management at the corporate level and have introduced a new format corporate risk register based on more broadly defined risk scenarios identified from discussions with members of the Corporate Development Team (CDT), other senior managers and from knowledge and understanding of the authority's arrangements and activities. 

A risk profiling session with CDT ranked each risk according to the likelihood of its occurring and the level of impact if it did occur, and from this a risk profile identifies particular risks for immediate CDT action and monitoring.  The results are set out in an Annex to the report.  The 26 scenarios represent risks, rather than reality, as the purpose of risk management is to prevent the risk becoming reality (or, if it does occur, to minimise its impact).

The Committee selected one of the risk areas on which to receive, at its next meeting, a detailed report from the lead officer for that area (the ‘risk owner’), in order for the Committee to review the effectiveness of its risk management.

RESOLVED that:

1.         the revised corporate risk profile, the risk register underpinning it, and the process by which the profile was             developed, be noted.

2.         a report be submitted to the 19 March 2009 meeting on Business Continuity Management.

Reason for the decision

To assist the Committee in meeting its responsibilities with respect to risk management.

Report of the Interim Assistant Directors – Audit  (with exempt Annex) 

An Internal Audit review of the Council’s arrangements to counter fraud and corruption was reported to the Council’s Corporate Development Team (CDT) and to the Audit Committee in March 2008.  An audit opinion of ‘limited assurance’ was given.  The report highlighted a number of fundamental and significant weaknesses in the Council’s arrangements and made recommendations to help the Council to develop an up-to-date, sustained, systematic and strategic organisational response to the challenge of combating fraud and corruption. 

The Assistant Directors – Audit have drawn up a work programme, which has been approved by CDT and designed to ensure that, by the (financial) year end, the Council has in place:

·                          a completely revised policy, strategy and framework.

·                          revised (practical) guidance for managers to help them to identify, rank and manage fraud and corruption risks (to use for 2009/10 team plans and risk registers).

·                          a counter fraud unit established (if appropriate) to align general and benefits fraud investigation but also to take operational responsibility for arrangements to counter fraud and corruption (e.g. policy, culture, deterrence, prevention, detection).

·                          revised (practical) fraud awareness and other guides for members, managers, and staff to help guide behaviour in combating fraud and corruption.

The new Counter Fraud and Corruption Strategy is scheduled to be submitted to the March meeting of the Committee.  The Committee hoped that the new Strategy will be brought to the attention of all Members of the Council - it was suggested that this be discussed with the Leader of the Council (as Risk Champion) to ensure that the Strategy is widely publicised.

In relation to the Regulation of Investigatory Powers Act 2000, Members hoped that the new Strategy would define which investigatory powers would be used by the Council in relation to fraud and corruption and the circumstances in which they would be authorised.

RESOLVED that:

1.      the work programme (attached as an Annex to the report) to implement the recommendations of the Internal Audit review, be noted.

2.      a revised draft counter fraud and corruption strategy be brought to the Committee for approval in March 2009, together with a report on progress against other aspects of the work programme.

Reason for decision

To assist the Committee in meeting its responsibilities with respect to anti fraud and corruption.