Agenda and minutes

37.1           The evacuation procedure, as noted on the Agenda, was taken as read.

37.2           The Chair welcomed David Johnson, Grant Thornton’s Audit Manager for Tewkesbury Borough Council, and Julie Masci, the Engagement Lead from Grant Thornton, to the meeting. 

38.1           Apologies for absence were received from Councillors A J Evans, Mrs P A Godwin, Mrs S E Hillier-Richardson and Mrs H C McLain (Vice-Chair).  Councillors Mrs R M Hatton and H A E Turbyfield would be acting as substitutes for the meeting. 

39.1           The Committee’s attention was drawn to the Tewkesbury Borough Council Code of Conduct which was adopted by the Council on 26 June 2012 and took effect from 1 July 2012.

39.2           There were no declarations made on this occasion.

To approve the Minutes of the meeting held on 16 December 2015.

40.1           The Minutes of the meeting held on 16 December 2015, copies of which had been circulated, were approved as a correct record and signed by the Chair. 

To consider Grant Thornton’s Certification Letter 2014/15. 

41.1           Attention was drawn to Grant Thornton’s Certification Letter 2014/15, circulated at Pages No. 9-11, which set out the findings of the claim which had been certified during the year.  Members were asked to consider the information provided.

41.2           The Audit Manager from Grant Thornton reminded Members that it had been intended to bring this letter to the last meeting of the Audit Committee but timing issues with the previous Engagement Lead had meant that this had not been possible.  Page No. 10 of the report set out details of the claims and returns certified for 2014/15 and confirmed that the housing benefits subsidy claim had been certified.  He indicated that the Minutes of the previous meeting had stated that an amendment of £50,000 had been made and he clarified that this was the subsidy amount whereas £47,221, as stated in Appendix A to the report, was the actual figure in that particular cell.  The fee for the 2014/15 certification work was outlined at Page No. 11, Appendix B to the report, and was the same as had been outlined in previous plans.

41.3           A Member noted that this was the second year in succession that a claim had been certified and he questioned whether it was the same claim.  Clarification was provided that both certification claims related to the housing benefit subsidy but were for different years; 2013/14 and 2014/15 respectively.  A Member felt that this amendment was very minor considering that the total value of the claim was £18.9M and the Engagement Lead advised that it was not uncommon to have qualifications within housing benefit claims.

41.4           It was

RESOLVED          That the Grant Thornton Certification Report 2014/15 be NOTED.

 42.1          Attention was drawn to Grant Thornton’s progress report, circulated at Pages No. 12-26, which set out the progress that had been made in relation to the Audit Plan, together with any emerging national issues and developments that might be relevant to the Borough Council.  Members were asked to consider the report.

42.2           Members were advised that the interim accounts audit had been undertaken in February 2016 and an Audit Plan had now been produced which would be considered under the next Agenda item.  The final accounts audit 2015/16 was still planned for completion in August 2016 and Grant Thornton was required to provide an opinion by 30 September 2016.  It was noted that, in the coming years the deadline for submission would be brought forward and the Engagement Lead advised that, for 2017/18, the accounts would need to be audited by the end of July.  A Member noted that the draft financial statement and Annual Governance Statement were expected by 30 June 2016, however, the Audit Committee was due to meet on 22 June 2016.  He was informed that, previously, the accounts had to be brought to the Committee by the end of June to approve the draft but the rules had been changed a few years earlier; the accounts were now published by the end of June but they were not taken to the Committee until September when they were approved and signed.  In response to a query as to how that might change going forward, Members were advised that the deadline for the Finance Team would be the end of May which meant that in 2018 there would only be a one month period to complete the accounts as opposed to three.

42.3           The Audit Manager for Grant Thornton went on to advise that the National Audit Office was now responsible for issuing value for money guidance and the criteria had changed so that external auditors were now required to assess the risks applicable to the Council rather than a suite of risks.  Work was ongoing with various partners in relation to financial stability and resources within the Council and a lot of work had been conducted with the Finance Team in this regard.

42.4           Members were informed that a number of articles had been produced on issues which the external auditors wished to bring to the Committee’s attention.  The first one was relatively new and related to Grant Thornton’s ongoing review of local government governance.  There was also a report on “CFO insights”, an online analysis tool that gave access to insight on the financial performance, socio-economic context and service outcomes of every local authority in England, Scotland and Wales.  Page No. 22 related to public right of inspection of the accounts which had changed for 2015/16.  Previously there had been a requirement to advertise in the newspaper for a certain number of days but the accounts must now be published on the Council’s website for inspection.  The 30 working day period for the exercise of  ...  view the full minutes text for item 42.

To consider Grant Thornton’s Audit Plan 2015/16. 

43.1           Attention was drawn to Grant Thornton’s Audit Plan 2015/16, circulated at Pages No.  27-49, which set out the Audit Plan for the year ended 31 March 2016.  Members were asked to consider the information provided.

43.2           The Engagement Lead from Grant Thornton explained that the report summarised the initial planning work and the risk assessment work in preparing for the audit and the results of initial work around the value for money conclusion.  Page No. 5 of the report gave a high level overview of the key areas which had been considered in understanding the Council and its ongoing challenges.  Financial pressures associated with a continuing reduction in government funding would be picked up as part of the value for money conclusion in terms of the impact on the Council and the alternative plans being put in place for the medium to long term.  There had been some interesting developments around devolution over the past few weeks and a close eye would be kept on this going forward.   Business rates had already been discussed under the previous Agenda item in terms of the ongoing problems with Virgin and the impact on Tewkesbury Borough Council’s financial position.  The earlier deadlines for the closure of accounts was another challenge which was faced over the next few years and a number of local authorities were already preparing and signing-off accounts to shorter deadlines.  She indicated that a national report was being produced around faster close down in order to share good practice in a more formal way and she undertook to ensure that Officers had access to that once it was available.  As part of the audit planning, consideration was also given to key developments in the sector as well as national audit requirements. 

43.3           There had been a major accounting change around International Financial Reporting Standard (IFRS) 13 which defined how fair value was measured and recorded within the accounts.  The main area where local authorities would be affected was around investment properties and surplus assets.  There was a new requirement for local authorities to produce a Narrative Statement which reported on financial performance and use of resources in the year and the Council was also required to submit a Whole of Government accounts pack upon which Grant Thornton would provide an audit opinion. 

43.4           Members were informed that the concept of materiality was applied when performing the audit.  This was determined as a proportion of the gross revenue expenditure of the Council and, for the purposes of planning the audit, this had been deemed to be £698,000, or 2% of the gross revenue expenditure.  Any adjustments over and above 5% of the materiality level were referred to as ‘trivial’ matters but still needed to be stated in the accounts.  There were certain items where separate materiality levels were appropriate, for instance, if they were sensitive or in the public interest, and these were set out at Page No. 34 of the report.  Pages No. 35-36 set out the significant risks  ...  view the full minutes text for item 43.

To approve the accounting policies to be used during the 2015/16 closedown. 

44.1           The report of the Finance and Asset Management Group Manager, circulated at Pages No. 50-70, set out the main changes in accounting policies under the Code of Practice on Local Authority Accounting in the United Kingdom 2015/16 supported by International Financial Reporting Standards.  Members were asked to approve the accounting policies to be used during the 2015/16 closedown.

44.2           Members were advised that the Council was required to produce an annual statement of accounts prepared in accordance with the Code of Practice on Local Authority Accounting in the United Kingdom 2015/16.  In order to do this, the Council had to review all of its accounting policies to ensure that it complied with the Code.  One of the main changes was the introduction of the accounting standard IFRS13 Fair Value Measurement; it was noted that fair value had always been mentioned within the accounting standards but this had standardised the definition.  Fair value was now defined as the price that would be received to sell an asset or paid to transfer a liability in orderly transaction between market participants at the measurement date.  There were three levels of input to measure the sale of an asset: Level 1 inputs which were quoted prices in active markets for identical assets e.g. bonds, shares; Level 2 inputs which were inputs other than quoted prices included within Level 1 that were observable for the asset e.g. interest rates; and Level 3 inputs which required more estimation e.g. cash flow forecasts. 

44.3           Although there was no change in measurement for operational Property, Plant and Equipment (PPE), the definition of the measurement base had been changed from ’fair value’ to ‘current value’ in line with the new fair value requirements.  The policy for investment properties had also been amended to reflect the new fair value requirements.  The valuation method was no longer looking at the current use of the asset and instead focused on the possible wider use of the asset which meant that the final value reflected the highest and best use of the asset.  This was more relevant in the private sector, for instance, if prime retail land was used for retirement homes then more money would be made and the higher value would need to be included in the accounts.  As the Council had undertaken borrowing for cash flow purposes, clarification had been provided as to how this would be presented in the balance sheet.  In terms of interests in companies and other entities, the previous year’s accounts had been specific about the relationship with the Swimming Bath Trust, however, the Council now had an interest in Ubico which needed to be accounted for.  This standard had been rewritten to be less specific as full details of any interest would be disclosed within the notes to the account.  It was also noted that the depreciation policies had been amended slightly to allow for the new solar panels which had been installed on the roof of the Council offices as they needed to  ...  view the full minutes text for item 44.

To consider the Internal Audit work undertaken and the assurance given on the adequacy of internal controls operating in the systems audited for the period December 2015 to February 2016.

45.1           The report of the Corporate Services Group Manager, circulated at Pages No. 71-102, was the third monitoring report of the financial year and summarised the work undertaken by the Internal Audit team during the period December 2015 to February 2016.  Members were asked to consider the audit work completed and the assurance given on the adequacy of the internal controls operating in the systems audited.

45.2           The Corporate Services Group Manager reminded Members that the Internal Audit team consisted of two full-time equivalent posts.  As previously reported to the Committee, one of the postholders had been on maternity leave which had been covered through a combination of a secondment arrangement and an external contractor.  This Officer had now returned on a part-time basis and shared a post with the other member of staff leaving one vacancy in the team.  This post had been advertised and an appointment had been made with the new member of staff starting the role on 11 April.  It was noted that no incidents of fraud had been reported during the period and no work had been commissioned for Tewkesbury Town Council.

45.3           Full details of the work undertaken in the period was attached at Appendix 1 to the report and a list of audits within the 2015/16 Audit Plan and their progress to date could be found at Appendix 2 to the report.  It was noted that all audit opinions issued had been either ‘good’ or ‘satisfactory’.  A good level of control had been found in respect of the audit of the main accounting system and the local authority had strong financial control which was a view shared by the external auditors.  An audit of ‘cash and bank’, a key financial system, had identified a good level of control over the Council’s cash payments and bank reconciliation.  Payroll was another fundamental financial system with reputational risks.  This audit had found that key parameters had been correctly input into the system and were applied correctly during the payroll process; salary adjustment notifications were entered correctly into the payroll system; reconciliation and assurance checks were undertaken during the processing of the payroll, supported by a monthly reconciliation to the main accounting system; and the payment of employees was verified on an annual basis.

45.4           With regard to the garden waste audit, which had been discussed under an earlier Agenda item, a satisfactory level of control had been found overall and a comprehensive record of nearly 15,000 residents who subscribed to the garden waste service was held through the Achieve system which allowed renewal administration.  In terms of renewals, there were prescribed stages built into the system with a number of reminders sent out.  Any non-renewals were added to the ‘do not collect’ list which was provided to Ubico on a daily basis, however, there could not be full assurance that the unpaid bins were not collected as the system was reliant on the Ubico operatives using the list and trying to empty the bins at the  ...  view the full minutes text for item 45.

To approve the Internal Audit Plan 2016/17. 

46.1           The report of the Corporate Services Group Manager, circulated at Pages No. 108-119, set out, at Appendix 1, the Internal Audit Plan 2016/17.  Members were asked to approve the Plan.

46.2           Members were advised that the Internal Audit Plan 2016/17 was divided into five main areas: corporate governance; corporate improvement; fundamental financial systems; service areas; and other areas.  Members were informed that, under corporate governance, the Internal Audit team would be looking at health and safety and lone working as well as the new complaints framework, which was due to be considered by the Executive Committee on 6 April 2016, as well as business continuity, safeguarding and information governance.  The work on the fundamental financial systems would help to inform Grant Thornton’s year end work on the accounts.  In terms of the service areas included in the plan, audits would be carried out in relation to insurances; ICT; client monitoring of the new leisure centre and Ubico; Tell Us Once; tree inspections; playground inspections; recycling; community grants; Tourist Information Centres; bulky waste and flood resilience/flood alleviation grants.  Consultancy and advice had been allocated 30 days within the plan which accounted for representation on corporate groups e.g. ‘Keep Safe, Stay Healthy’ Group, Business Continuity Group etc.  with 20 days set aside for internal audit work undertaken at Tewkesbury Town Council and a further 30 days for follow-up audits.

46.3           It was

RESOLVED          That the Internal Audit Plan 2016/17 be APPROVED as detailed at Appendix 1.

To approve the Internal Audit Charter. 

 47.1          The repot of the Corporate Services Group Manager, circulated at Pages No. 108-119, informed the Committee of the requirement to formally define the purpose, authority and responsibility of internal audit activity in an Internal Audit Charter which must be periodically reviewed.  Members were asked to approve the Internal Audit Charter.

47.2           Members were advised that the Internal Audit Charter established the internal audit activity’s position within the organisation and final approval rested with the Audit Committee.  The Charter was first approved at the Audit Committee meeting on 20 March 2013 and there were no significant changes to the original Charter other than amendments such as updated job titles.  The revised Charter was attached at Appendix 1 to the report.  It was noted that Page No. 118, Paragraph 10.1 of the report, set out that it was a requirement of the Public Sector Internal Audit Standards that an independent review must be commissioned at least once every five years by a qualified assessor and a report would be brought to a future meeting of the Audit Committee within the current financial year.  In response to a query, the Corporate Services Group Manager confirmed that the independent review must be carried out by 2018.  It was a matter of debate as to who would be classed as a qualified assessor; it could be the head of internal audit from another authority provided that it was independent, or it could be external auditors such as Grant Thornton.  The Engagement Lead from Grant Thornton confirmed that it did carry out these reviews and, if Grant Thornton was commissioned by the Council, the work would be undertaken by a different team which was not associated with the audit team.  It was noted that some authorities pooled together and carried out a review on a joint basis.  The Corporate Services Group Manager felt that it was important that the review was proportionate to the authority’s size.

47.3           It was

RESOLVED          That the Internal Audit Charter be APPROVED.

To consider the outcomes of the data matching exercise. 

48.1           The report of the Revenues and Benefits Group Manager, circulated at Pages No. 120-123, informed Members of the outcomes of the National Fraud Initiative data matching exercise.  Members were asked to consider the report.

48.2           The Revenues and Benefits Group Manager advised that the National Fraud Initiative (NFI) matched electronic data within and between public and private sector bodies to prevent and detect fraud.  The NFI had helped to trace almost £203M in fraud, error and overpayment in England in the 2012/13 exercise, bringing the UK total since its launch in 1996 to £1.17 billion.  Public sector bodies were required to submit data to the NFI on a regular basis in order for it to be cross-checked against other government departments and other organisations’ databases.  The exercise focused mainly on checking the correct eligibility for single person discounts and ensuring that housing benefit recipients had reported changes in circumstances. 

48.3           The 2014/15 data matching exercise on Council Tax single person discount had been completed and had made 525 matches and identified 99 ineligible awards with over-claimed discount amounting to £32,512.81.  82 Council Tax matches had been made identifying where a resident had reached the age of 18 with 25 ineligible awards being found amounting to £7,542.17 of over-claimed discount.  The outcomes showed a fall in the number of incorrect awards of single person discount compared to the last review; previously the total number of ineligible discounts was 176 with a total of £59,492.45 over-claimed discount.  During 2014/15, the total value of awards for single person discount amounted to £3,822,576.74 with the total number of single person discount claims amounting to 12,083.  The amount found was relatively small in value, although it was important that the discounts were checked to ensure that those who were eligible to receive the award continued to receive it.  The average over-claim in 2014/15 amounted to £323 per case.

48.4           Going forward, the Council was working with the newly formed Counter Fraud Hub which was made up of a consortium of local authority staff, backed by the districts in Gloucestershire.  The Hub would be carrying out a major review of single person discount awards during 2016 and a review form would be sent out with the annual Council Tax bills.  Staff from the Hub and the Borough Council would be carrying out checks on the returned forms and on the latest matches received from the NFI to ensure that awards had been correctly made.  Throughout 2015, staff had carried out checks on matches provided by the NFI on housing benefit claims and, of the 589 matches, 535 had been cleared with 16 frauds and 41 claimant errors identified resulting in overpayments of £59,878.67.  The fraudulent claims had been passed to the Department of Work and Pensions and the outcome of their investigations was awaited.  It was noted that there was a caseload of 4,079 claims and housing benefit awards totalling £19M; the exercise in itself did not establish a significant amount of fraud in error  ...  view the full minutes text for item 48.

To consider the monitoring report on the Significant Governance Issues identified in the Annual Governance Statement and to review progress against the actions.  

49.1           The report of the Borough Solicitor, circulated at Pages No. 124-129, set out the Significant Governance Issues and the action to be taken to address them as identified in the Council’s Annual Governance Statement.  Members were asked to consider the progress made against those issues.

49.2           Members were advised that the table set out at Appendix 1 to the report comprised the Significant Governance Issues and the proposed actions and timescales for completion, with a further column indicating the progress as at 1 March 2016.  It was noted that good progress was being made in relation to embedding budget understanding and business continuity, however, the date for the completion of the Constitution update had been put back to December 2016.  The Borough Solicitor provided assurance that the Constitution did not contain any fundamental errors, and it had been updated over the year, it did require a refresh and this was something which had been identified by the Peer Review.  Unfortunately, the Democratic Services team who would be carrying out this action were now working towards the forthcoming Police and Crime Commissioner Elections in May and the EU Referendum in June, which had been announced since the adoption of the Annual Governance Statement, and the deadline had therefore been pushed back.  In terms of the Workforce Development Strategy, the Human Resources team was working in partnership with senior Human Resources Officers from Gloucestershire Care Services who were helping to deliver the strategy, however, the date of completion would need to be extended to reflect the sickness absence of the Council’s lead Officer who had been involved in a skiing accident.  A Member questioned how long this action would be delayed and the Borough Solicitor indicated that she believed that the new target date would be April 2016 but she would confirm this to Members following the meeting.

49.3           It was

RESOLVED          That progress against the Significant Governance Issues identified in the Council’s Annual Governance Statement be NOTED.

To consider the Risk Register and the risks contained within it. 

50.1           The report of the Corporate Services Group Manager, circulated at Pages No. 130-138, attached the corporate risk register which Members were asked to consider.

50.2           Members were advised that the Council’s overall risk management arrangements were overseen by the Corporate Governance Group and the corporate risk register, attached at Appendix 1, was a high level summary document which had been endorsed by the Corporate Leadership Team; changes to the register since the last update were highlighted in bold.  It was noted that the risk management framework, including the Risk Management Strategy and risk register, would be formally reviewed through the course of 2016/17.  This would be supported with training for relevant Officers and Members.  The review of the Risk Management Strategy had been briefly discussed at the Transform Working Group where there had been evidence of a shift in the risk appetite of the Council, for example, a will to explore commercial opportunities, which should be reflected in the new strategy.

50.3           With regard to Appendix 1, particular attention was drawn to business transformation which was a key part of the transform programme and a Digital Strategy was due to be presented to the Executive Committee at its meeting on 6 April 2016.  Economic growth was central to the new Council Plan and an Overview and Scrutiny Committee Working Group was currently in the process of reviewing the Economic Development and Tourism Strategy.  The Working Group needed more time to ensure that the strategy was comprehensive and the implementation date had therefore been amended to December 2016.  In terms of asset management, Members should be aware that the Executive Committee had recently approved the preparation of development proposals for the Spring Gardens and Oldbury Road site.  As mentioned under the previous Agenda item, the development of a new Workforce Development Strategy was on hold pending the return of the Lead Officer from sickness absence, however, assurance was provided that work would still be done in this area, e.g. training, without a formal strategy in place.  In relation to customer expectation, a Customer Care Strategy had been approved by the Executive Committee in March 2016 and the corporate standards included within the strategy, which set out what customers could expect when making contact with the Council, now needed to be rolled out.  In terms of the delivery of operational services, a client monitoring framework had been developed and the Overview and Scrutiny Committee was due to receive the second report since the transfer of waste services to Ubico at its next meeting.  Finally, business continuity had been identified as a Significant Governance Issue in the Annual Governance Statement and a desktop exercise had been held for Operational Managers in February which had provided the catalyst for more work during the year.

50.4           A Member felt that the register needed to be updated in relation to the new leisure centre which was entering the final phase of build work, as it would be necessary to ensure that the agreement was working  ...  view the full minutes text for item 50.