Agenda and minutes

Audit and Governance Committee
Monday, 26th November, 2018 7.00 pm

Venue: Council Chamber, Civic Offices, High Street, Epping

Contact: Democratic Services Manager  Tel: 01992 564243 Email:  democraticservices@eppingforestdc.gov.uk

Items
No. Item

24.

Webcasting Introduction

This meeting is to be webcast. The Chairman will read the following announcement:

 

I would like to remind everyone present that this meeting will be broadcast live to the internet (or filmed) and will be capable of repeated viewing (or another use by third parties).

 

If you are seated in the lower public seating area then it is likely that the recording cameras will capture your image and this will result in the possibility that your image will become part of the broadcast.

 

This may infringe your human and data protection rights and if you wish to avoid this then you should move to the upper public gallery.

 

Could I please also remind Members to activate their microphones before speaking”.

 

Minutes:

The Chairman made a short address to remind everyone present that the meeting would be broadcast live to the internet and would be capable of repeated viewing, which could infringe their human and data protection rights.

25.

Declarations of Interest

To declare interests in any item on the agenda for the meeting of the Committee.

Minutes:

Councillor J. M. Whitehouse declared a personal interest in item 9 (Internal Audit Monitoring Report) of the agenda for the meeting, by virtue of being a member of Epping Town Council and a resident of St. John’s Road, Epping. Councillor Whitehouse had determined that his interest was not prejudicial and indicated that he would remain in the meeting for the consideration of the report and voting thereon.

26.

Minutes pdf icon PDF 95 KB

To confirm the minutes of the meeting of the Committee held on 24 September 2018.

Minutes:

RESOLVED:

 

That the minutes of the meeting of the Committee held on 24 September 2018 be taken as read and signed by the Chairman as a correct record.

27.

Matters Arising

To consider any matters arising from the minutes of the previous meeting of the Committee.

 

Minutes:

The Chief Finance Officer confirmed that an explanation of the variation between the initial budget proposal and the actual outcome relating to fixed rates of return on investments (Minute 22 (2)), had been issued to the Chairman of the Committee and to the Finance and Performance Management Cabinet Committee, following consideration of the Treasury Management and Prudential Indicators outturn report at the previous meeting.

28.

Audit & Governance Committee - Work Programme 2018/19 pdf icon PDF 72 KB

To consider the attached work programme for the Committee for 2018/19.

Minutes:

The Committee reviewed progress against the achievement of its work programme for 2018/19.

 

The Chief Internal Auditor reported that a revised version of the Council’s Anti-Fraud and Corruption Strategy would be considered later in the meeting as part of the regular Internal Audit progress report.

 

Members were advised that a combined review of the terms of reference of the Committee and its ongoing effectiveness, was also included in the agenda for the meeting.  The Chief Internal Auditor reported that reference to the Annual Audit Letter within the work programme related to the audit letter for 2017/18, which had been considered by the Committee at its meeting in September 2018.

29.

External Auditors

In attendance would be Craig Wisdom and Oli Richardson from Deloitte LLP, who had been appointed to carry out the audit of the Council accounts for the 2018/19 financial year.

Minutes:

The Committee was reminded that Deloitte LLP had been appointed as the Council’s external auditors for the audit of its accounts for the 2018/19 financial year. The Chairman welcomed Craig Wisdom (Risk Advisory Partner) of Deloitte to the meeting.

 

 

30.

Audit & Governance Committee - Review of Terms of Reference & Effectiveness pdf icon PDF 127 KB

To consider the attached report.

Additional documents:

Minutes:

The Committee considered a review of its terms of reference and effectiveness, in order to ensure that it satisfied the core functions of an audit committee as prescribed by the Chartered Institute of Public Finance and Accountancy (CIPFA) and remained effective as a key component of the Council’s assurance and governance framework. The Chief Internal Auditor reported that no changes to the terms of reference of the Committee were proposed as a result of the review and that an action plan had been developed to address minor weaknesses identified as part of the review process.  

 

Members were advised that the Committee normally reviewed its terms of reference and effectiveness on an annual basis, but that the review for 2017 had been deferred to await the issue of new guidance on the operation of local authority audit committees by CIPFA. The Committee noted that such guidance, which had been published in Spring 2018, updated the core functions of audit committees in relation to governance, risk management, internal control and audit, and included new legislation affecting audit committees in combined authorities, alongside revisions to regulations, standards and statutory guidance.

 

The Chief Internal Auditor reported that the Committee had last reviewed its terms of reference in November 2016 and had proposed that no changes be made, as it had been considered that they remained fit for purpose at that time. Members noted that the Chief Internal Auditor had recently carried out a comparison of the current terms of reference of the Committee with the latest model terms of reference recommended by and had undertaken appropriate benchmarking with the terms of reference of the audit committees operated by Broxbourne Borough Council and Harlow District Council. The Committee was advised that no changes to the current terms of reference were proposed as a result of the latest review, as they were considered to continue to remain fit for purpose.

The Chief Internal Auditor indicated that effective audit committees were characterised by a membership that was balanced, objective, independent of mind, knowledgeable and properly trained to fulfil its role, whilst also achieving a mix of apolitical expertise. Members were advised that CIPFA endorsed the appointment of independent members to audit committees, although there appeared to be little consistency in the size of audit committees across the local government sector. Members noted that the Council had five councillor members on its committee, which was fewer than both Broxbourne Borough Council and Harlow District Council, although neither authority currently appointed independent members to their committees.

The Chief Internal Auditor reported that the current terms of reference for the Committee provided that co-opted members serve for a period of three years from appointment and could serve for a total of two such terms as of right, but might be considered for two further three-year terms, provided they were successful after open competition. The Committee noted that both current co-opted members were in their second three-year term of membership and that Mr. T. Jarvis could be considered for a further  ...  view the full minutes text for item 30.

31.

Internal Audit Monitoring Report (September-November 2018) pdf icon PDF 154 KB

To consider the attached (AGC-010-2018/19).

Additional documents:

Minutes:

The Committee considered the internal audit monitoring report for the period from September to November 2018, which updated members on work undertaken by the Internal Audit Shared Service and the Corporate Fraud Team since the previous meeting and detailed the current position in relation to overdue recommendations arising from internal audit activity.

 

The Chief Internal Auditor reported that she was currently encountering difficulties with regard to the delivery of the Audit Plan for 2018/19, as a result of resource and capacity issues within the Internal Audit Unit. The Committee was advised that specialist external support had been engaged to deliver elements of the Audit Plan, but that it was likely that the deferral of some audit activity into 2019/20 would need to be sought, for which criteria had been developed for consideration by the Committee, alongside the seeking of additional resources from the Cabinet to facilitate the delivery of the Audit Plan in full.

 

Members were advised that five audits had been completed since the last meeting of the Committee, four of which had received moderate assurance and one of which (St. John’s Road, Epping - Redevelopment) had received limited assurance. The Committee queried why the review of the governance arrangements and project management processes employed for the St. John’s Road project had raised concerns that did not appear to have arisen in relation to other similar projects supported by the Council, including the development of the Epping Forest Shopping Park. The Chief Internal Auditor advised members that the project management of the Epping Forest Shopping Park development had been outsourced to specialist external consultants, but that the St. John’s Road project had been managed by an in-house project management team and that a number of learning points had been identified from this arrangement. The Committee raised concern with regard to the findings of recent audit activity with regard to software licensing, which it considered to be unacceptable for an authority of the size of the Council and should be addressed as a matter of urgency. Members expressed disappointment that none of the recent audits had received substantial assurance, but were advised that there were no underlying themes behind the findings of each report, although the Chief Internal Auditor would keep this situation under review.

 

The Committee endorsed the need for additional resources to be directed to the activities of the Internal Audit Unit to support the achievement of the audit plan, particularly in view of the level of assurance awarded to recent areas of audit. The Chief Internal Auditor emphasised that the development of the annual Audit Plan was designed to reflect all of the Council’s high-risk priorities and that the plan retained flexibility to react to developing situations that might arise during the year.

 

The Chief Internal Auditor reminded the Committee that it received details of all overdue recommendations and high-priority recommendations arising from audit activity, as part of its regular review of the Internal Audit Recommendation Tracker. Members were advised that there were currently nine issues included  ...  view the full minutes text for item 31.

32.

Treasury Management - Mid-Year Report 2018/19 pdf icon PDF 168 KB

To consider the attached report.

Additional documents:

Minutes:

The Chief Finance Officer presented a report in relation to the Council’s treasury management activities for the first half of the 2018/19 financial year, which was a requirement of the Code of Practice on Treasury Management issued by the Chartered Institute of Public Finance and Accountancy (CIPFA) and informed the Committee about the risks associated with treasury management activity and how the Council had sought to manage such risks. The Committee considered the mid-year position of the treasury function in accordance with the revised CIPFA Treasury Management Code and Prudential Code.

 

Members were advised that during the first half of the year, the Council had continued to finance all capital expenditure from within internal resources. Members noted that the average net investment position had been approximately £19.75m and there had been no significant breaches of the prudential indicators. The Chief Finance Officer reported that the Council’s treasury management activities were regulated by statutory requirements and a professional code of practice, which included a requirement for the determination of a treasury strategy on the likely financing and investment activity for the current year.

 

The Committee questioned whether any treasury management risks were likely to arise in the event of the United Kingdom leaving the European Union on a ‘no deal’ basis. The Chief Finance Officer confirmed that Brexit-related issues, including risks to investments and the effect on income received from commercial property, were currently included in the Council’s risk ‘watch-list’ and would be assessed for likely impact as further detail concerning the departure of the United Kingdom from the European Union became clearer. Members were advised that the Council’s treasury management advisors had not currently made any recommendations for the re-alignment of the authority’s investments to address Brexit eventualities.

 

RESOLVED:

 

(1)       That the management of risks associated with the Council’s treasury management activity in the first half of the 2018/19 financial year, be noted; and

 

(2)       That no comments or suggestions on the management of risks associated with treasury management activity in the first half of the year be made to the Finance and Performance Management Cabinet Committee.

 

33.

S. Hill - Service Director (Governance & Member Services)

Minutes:

On behalf of the Committee, the Chairman expressed the appreciation of members to Simon Hill (Service Director (Governance and Member Services)), the current lead officer for the Audit and Governance Committee, who was shortly to leave the Council after many years of service to the authority.

34.

Any Other Business

Section 100B(4)(b) of the Local Government Act 1972 requires that the permission of the Chairman be obtained, after prior notice to the Chief Executive, before urgent business not specified in the agenda (including a supplementary agenda of which the statutory period of notice has been given) may be transacted.

Minutes:

No other business was raised for consideration by the Committee.