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Agenda and minutes

Venue: Committee Rooms A and B, Civic Offices, Elstree Way, Borehamwood. View directions

Contact: Allan Siao Ming Witherick  020 8207 7550

Items
No. Item

402.

Membership

To note the appointment of Councillor S Hodgson-Jones to the Audit Committee following the resignation of Councillor Ash.

To receive details of any changes in membership of the Committee notified since the agenda was printed.

 

Minutes:

The Chairman reported that Councillor Farida Turner had replaced Councillor Cynthia Barker as a member of this Committee for the meeting.

403.

Communications and Apologies

(a)            Communications (if any) relating to business on the agenda.

 

(b)            Apologies for absence.

Minutes:

An apology for absence was submitted on behalf of Councillor Cynthia Barker.

 

Due to a member of the External Audit team needing to leave early, Item 7 Certification of claims and returns annual report 2016/17 and Item 8 External Audit Plan 2017/18 were taken earlier in the meeting.

404.

Certification of claims and returns annual report 2016/17 - Ernst & Young, External Auditors pdf icon PDF 916 KB

This report summarises the overall assessment by Ernst and Young of the Council’s management arrangements for the certification process.

Minutes:

The Council’s external auditors were required to certify certain claims and returns submitted by Hertsmere Borough Council.  Ernst & Young submitted a report on the outcome from their certification work for 2016/17.

 

This was a requirement due to the council receiving funds from the Department of Work and Pensions (DWP) towards housing benefits paid.  The representative from Ernst & Young presented the report noting that a qualification on the claim was not unusual due to the nature of the work as there was no threshold for materiality.

 

They confirmed that recommendations on training for staff from the previous year appeared to have had a positive impact and the extrapolated error was £197 on a claim of £40m.

 

This had resulted in a lower fee for 2016/17 as less work had been required.  The fee level for the next year was indicative and based on 2015/16, hence it showed an increase, however they hoped that it would be reduced provided no substantive issues were found for the 2017/18 certification.

 

In response to a Member’s question, they stated that it was too early to assess the potential impact of Universal Credit and no details had been provided by DWP as to how it would be assessed.

 

RESOLVED that the information contained in the certification report from Ernst & Young be noted.

405.

Internal Audit Plan Progress Report - Shared Internal Audit Service (SIAS) pdf icon PDF 432 KB

This report provides information on progress made delivering the Council Internal Audit Action Plan 2017/18.

Minutes:

The Shared Internal Audit Service (SIAS) submitted a report to the Committee detailing progress made by SIAS on: delivery of the Council’s 2017/18 Internal Audit Plan as at 8 January 2018; findings for the period 8 September 2017 to 8 January 2018; proposed amendments to the 2017/18 Audit Plan; status of audit recommendations and an update on performance management information as at 8 January 2017.

 

An update was provided on the KPI’s in the report. The Committee was informed that the Planned Day’s percentage had increased from 67% to 68%. Two further draft reports had been issued since the date the Committee papers had been published, i.e. Risk Management and Fees and Charges Benchmarking. The Planned Projects percentage thus increased from 52% to 58%.

 

The Committee was reminded of the service restructure and sickness absence as communicated at a previous Committee meeting. In spite of this, the overall performance was strong as Hertsmere had benefitted from significant resource being invested locally.  The authority was at the point where very nearly enough work had been completed to support the annual assurance opinion with two months of the financial year still to be completed. Resource would however need to be diverted to other authorities in the partnership to ensure consistency of outcomes for all SIAS partners.

 

The SIAS Audit Manager drew the attention of the Committee to the two high priority recommendations that remain partially implemented from the Business Continuity and Corporate Governance (Members serving on Outside Bodies) respectively.  These related to service continuity plans and business impact assessments, and provision of standing guidance and training / briefing to Members and Officers.

 

In reply to a question about training, Officers confirmed that they were looking at potential training packages provided by the Local Government Association (LGA) in partnership with the Institute of Directors (IoD). A one day course for Members was under development.  Officers had already been undertaking the IoD’s “Certificate in Company Direction” course with associated exams at a discounted rate, through another local authority.

 

RESOLVED that the information contained in the Shared Internal Audit Service progress report (A/18/02) be noted and the amendments to the Audit Plan be approved.

406.

Declarations of Interest

Members are required to declare any disclosable pecuniary interests they or their spouse/partner have in any matter which is to be considered at this meeting.  Members must also declare any other pecuniary or non-pecuniary interests they have in any matter to be considered at this meeting. The responsibility for declaring an interest rests solely with the member concerned.

 

Members must clearly state to the meeting the existence and nature of any disclosable pecuniary interest, other pecuniary interest or non-pecuniary interest and the agenda item(s) to which it/they apply.

 

Disclosable Pecuniary Interests are prescribed by the Relevant Authorities (Disclosable Pecuniary Interests) Regulations 2012 as follows;

 

Employment, office, trade, profession or vocation

 

Any employment, office, trade, profession or vocation carried on for profit or gain.

 

Sponsorship

 

Any payment or provision of any other financial benefit (other than from the relevant authority) made or provided within the relevant period in respect of any expenses incurred by a member 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.

 

Contracts

 

Any contract which is made between the relevant person (and a body in which the relevant person has a beneficial interest) and the relevant 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.

 

Land

 

Any beneficial interest in land which is within the area of the relevant authority.

 

Licences

 

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

 

Corporate tenancies

 

Any tenancy where (to the member’s knowledge) - (a) the landlord is the relevant authority; and (b) the tenant is a body in which the relevant person has a beneficial interest.

 

Securities

 

Any beneficial interest in securities of a body where - (a) that body (to the member’s knowledge) has a place of business or land in the area of the relevant 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 the 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 cases of disclosable pecuniary interest, Members must withdraw from the meeting room while the matter is being considered.

 

Minutes:

No Members had an interest to declare in relation to the items of business on the agenda for the meeting.

407.

Minutes pdf icon PDF 83 KB

To confirm and sign the minutes of the meeting of the Committee held on 26th September 2017.

 

In accordance with the Constitution, no discussion shall take place upon the minutes, except upon their accuracy.

 

 

Minutes:

RESOLVED that the minutes of the meeting held on 26 September 2017 be confirmed as a correct record.

408.

Anti-Fraud Service Action Plan 2018/19 (Draft) - Shared Anti-Fraud Service (SAFS) pdf icon PDF 145 KB

This report provides the Committee with details of the proposed Hertsmere Borough Council Internal Audit Plan for 2018/19.

It includes:

Appendix A - LGA Councillors Workbook- Fraud and Bribery Prevention

Appendix B - HBC Anti-Fraud Action Plan 2018/2019

Additional documents:

Minutes:

The Shared Anti-Fraud Service (SAFS) submitted the proposed Hertsmere Borough Council Anti-Fraud Plan 2018/19.  This plan set out the programme of work for the year ahead and formed part of the Council’s assurance framework.

 

The Councillors Workbook on Bribery and Fraud Prevention produced by the LGA was highlighted as a useful resource for Members and it was agreed that the workbook would be circulated to all Members.  Officers reported that training for Members is also planned.

 

RESOLVED that:

 

1.            The Hertsmere Borough Council Anti-Fraud Service Action Plan 2018/19 be approved.

2.            The LGA Councillors Workbook on Fraud and Bribery Prevention 2017 be noted.

409.

External Audit Plan 2017/18 - Ernst & Young, External Auditors pdf icon PDF 6 MB

This Audit Plan sets out how Ernst & Young intend to carry out their responsibilities as external auditor. It provides the Committee with a basis to review the proposed audit approach and scope for the 2017/18 audit. It will also help ensure that this audit is aligned with the Committee’s service expectations.

Minutes:

The Audit Plan set out how the external auditors intended to carry out their responsibilities; provided the Committee with a basis to review the proposed audit approach and scope for the 2017/18 audit; and also help to ensure that the audit was aligned with the Committee’s service expectations.

 

The external auditor, in presenting the report, highlighted that the first two risks, “Risk of fraud in revenue and expenditure recognition” and “Misstatements due to fraud or error”, are standard requirements of International Auditing Standards.

The “Valuation of Property” had been identified as a significant risk in the previous year and the external auditors were awaiting the completion of the Council’s revaluation for 2017/18 prior to reassessing the level of risk.

The “Valuation of pensions liability” is shown as an inherent risk primarily due to the size of the valuation and is overseen by specialists.

 

They also drew attention to the levels of materiality used with the Planning materiality set at £1.47m, 2% of the prior year’s gross expenditure.  The Performance materiality of £1.1m represented the level at which audit work would be undertaken with audit differences below £73.7k being deemed trivial.

 

Members queried that the £1,47m level was not representative of the direct undertakings of the council as it was based on a budget which included Housing Benefit at £40m.  A £0.5m level of materiality was suggested as potentially being more appropriate.  The External Auditor responded that this was based on a standard calculation and that all errors above the Audit difference level of £73.7k would be communicated to the Committee.

 

The External Auditor stated there was no significant risk identified from the Value for Money assessment but that they were awaiting the agreement of the Mid-Term Financial Plan.  The report set out that for 2017/18 the Value for Money assessment is based on the overall evaluation criterion:

“In all significant respects, the audited body had proper arrangements to ensure it took properly informed decisions and deployed resources to achieve planned and sustainable outcomes for taxpayers and local people”

 

The External Auditor finished by noting that the scale fee was set slightly higher than the level agreed by the Public Sector Audit Appointments Ltd (PSAA) as their work included the group accounts.

 

Members queried how the Elstree Film Studio Accounts Ltd were audited and Officers responded that a specialist film industry auditor was used due to the added value that they were able to provide.

 

Members probed as to whether this would be the case with other subsidiaries and it was confirmed that this was the intention as it helped to highlight areas for investigation and better practise which was industry specific.

 

RESOLVED that the External Auditors’ proposed Audit Plan for the Year ending 31 March 2018 be noted.

410.

New Accounting Standards and Review of Accounting Policies pdf icon PDF 131 KB

To receive a report setting out the new accounting standards and review of accounting policies as a result of the Chartered Institute of Public Finance and Accountancy (CIPFA) Service Reporting Code of Practice for Local Authorities 2018/19.

Additional documents:

Minutes:

Members received a report updating them that there were no material changes since the Chartered Institute of Public Finance and Accountancy (CIPFA) Code of Practice for 2016/17.  It was recommended that the Council’s current accounting policies were retained except where they were affected by the changes in the Code of Practice 2017/18 and referred to throughout the report.

 

Members queried whether the changes would have an impact on the Council group companies.  Officers responded that the group accounts follow the same policies and so would be consistent.

 

RESOLVED that the report be noted and that:

 

1.    The Audit Committee note the key accounting changes and implications of the revised 2017/18 edition of the CIPFA Code of practice (as set out in report paragraph 5.1 of the report Table 5).

 

2.    The Audit Committee agree to amend the existing Accounting Policy Statement included in Appendix 1 to reflect the need to recognise a “held for sale asset” on the Council’s balance sheet in relation to disposal of surplus Land at Byron Avenue (as set out in report Section 6.).

 

3.    That the Audit Committee agrees that in all other respects the existing accounting policies remain unchanged for the purposes of the 2017/18 Statement of Accounts.

 

(Action:  Head of Finance & Business Services)

411.

Treasury Management Strategy 2018/19 and Mid-Year Review 2017/18 pdf icon PDF 172 KB

This report provides the Committee with the Mid-Year Review of the Treasury Management Strategy for 2017/18 and the Treasury Management Strategy 2018/19.

Additional documents:

Minutes:

The report provided Members with details of the proposed Treasury Management Strategy for 2018/19; the prudential indicators for the years 2018/19 to 2020/21; and a review of the treasury management function for the first six months of 2017/18.

 

In presenting the report Officers noted that some of the predictions in the six month review would now be dated.  The council had approached its counterparties under the European Union Markets in Financial Instruments Directive (MIFID) to secure accreditation as a “Professional Client” to increase the councils access to different investment products.  This was possible because we met the criteria for the required level of investment, investment frequency and had the relevant experience available within the council.

 

Members questioned whether external investment support was still required and Officers responded that this provided an important level of knowledge and forecasting.  The same external team were still providing this despite changing hands a number of times because they were held in good regard.

 

Attention was drawn to the review of the Councils Treasury Management Practices which would be undertaken in 2018/19 and be brought back to the Audit Committee.

 

The report included a number of changes to the Treasury Management Strategy 2018/19 as a result of a consultation on the CIPFA Treasury and Prudential Codes of practice and the DCLG Prudential Framework.

 

The strategy now included buildings as agreed by the committee previously and the capital expenditure would be subject to council approval.

 

Members queried the level of external borrowing showing in the table.  Officers responded that this reflected the anticipated costs of Crown Road as no revenue or capital resources had yet been identified to fund the development.  It was also confirmed that there was no financial impact of the proposed Newberries Carpark development reflected in the period covered by the strategy.

 

Officers noted that there was a slight increase in income, c.£20k, now that the council could make use of building societies.

 

Members enquired about the level of exposure to Barclays and officers noted that this was limited to £5m on a day basis although this limit had been briefly exceeded in the previous financial year when a money market purchase had not cleared.

 

RESOLVED that:

 

1.    the content of the Treasury Management Strategy 2018/19 and Prudential Indicators 2018/19 to 2020/21, attached at Appendix 1, be recommended to the Council for approval; and

 

2.    the Treasury Management and Prudential Indicators Mid-Year Review 2017/18, attached at Appendix 2 to the report, be considered and recommended to the Council for information.

 

(Action:  Treasury Manager/Head of Finance and Business Services/Director of Resources)

412.

Risk Management Progress Update pdf icon PDF 158 KB

This report reviews and updates the Strategic Risks facing this Authority.

Additional documents:

Minutes:

The Committee received a report reviewing and updating the strategic risks facing the authority.  This included two appendices which were dispatched after the production of the agenda.

 

A Member raised concern that the level of risk and impact for IT Disaster Recovery [SO13] had increased.  Officers responded that the level of cyber risk had increased generally, increasing the likelihood of an issue and that it was unlikely to decrease however work had been undertaken to reduce the impact.

 

Members noted that Newberries Carpark [SO22] was still shown on the risk register but that Crown Road was not.  Officers explained that this reflected the current situation and the time frames in place.  After discussion it was agreed that it would be better to group the risks related to asset revenue and development in box 9 to recognise the new challenges faced by the council as developers.

 

Members highlighted the potential impact of the General Data Protection Regulations and the need for a report back to the Audit Committee for reassurance and Member oversight.  Officers noted that a lot of work was already undertaken to meet Data Protection Act requirements and that this was being developed further.  There was a good level of awareness within the organisation with Information Asset Register and management being developed.  This was compounded by related issues such as the “Right to be forgotten”.

 

RESOLVED the current strategic risks be noted and in particular the following amendments and additions as detailed in Appendices A and B:

 

1.    The increase in the assessment of the “Supply of Affordable Social Housing & Homelessness [SO01]” (increase in likelihood).

 

2.    The increase in assessment of the “Data Protection and Information Management [SO11]” (increase of impact).

 

3.    The reduction of the assessment of the “IT Disaster recovery [SO13]” risk (increase in likelihood and decrease of impact).

 

4.    The new risk “Parking Services - new partnership arrangement [SO27]”.

 

5.    That a report be brought to the next meeting on the implementation of the General Data Protection Regulations.

413.

Date of Next Meeting

The next meeting of the Committee is scheduled to take place on 31 May 2018 at 7.30pm in the Civic Offices, Elstree Way, Borehamwood.

 

Minutes:

It was noted that the next meeting of the Audit Committee was scheduled to take place on 31 May 2018 at 7.30 p.m. in the Civic Offices, Elstree Way, Borehamwood.