Agenda and minutes

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

40.2           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.  

41.1           Apologies for absence were received from Councillor A J Evans.  There were no substitutions for the meeting. 

42.1           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.

42.2           There were no declarations made on this occasion.

To approve the Minutes of the meeting held on 14 December 2016.

 43.1          The Minutes of the meeting held on 14 December 2016, copies of which had been circulated, were approved as a correct record and signed by the Chair.

To consider the Audit Committee Work Programme.  

44.1           Attention was drawn to the Audit Committee Work Programme, circulated at Pages No. 12-18, which Members were asked to consider.

44.2           A Member raised concern that the July Agenda was very heavy and she questioned whether any items could be moved to September.  The Head of Corporate Services explained that some items, such as the Annual Governance Statement 2016/17, must go to the next meeting; however, there may be some scope to push back the Annual Report on Health and Safety Activities and the Bulky Waste Follow-Up Audit and he undertook to consult with the Head of Finance and Asset Management following the meeting.

44.3           It was

RESOLVED          That the Audit Committee Work Programme be NOTED.

To consider Grant Thornton’s certification year end letter March 2016. 

45.1           Attention was drawn to Grant Thornton’s Certification Letter March 2016, circulated at Pages No. 19-21, which set out the findings of the claim which had been certified during the year.  Members were asked to consider the information provided.

45.2           The Audit Manager from Grant Thornton reminded Members that the findings of the Certification Letter had been flagged at the last meeting of the Committee.   Appendix A to the report provided details of the claims and returns certified for 2015/16; this confirmed that the housing benefits subsidy claim had been certified and had resulted in an overall adjustment of approximately £7,000 which, for expenditure of £18.7M, was a fairly good result.  Clarification was provided that the figure of £7,000 was an extrapolation; the pure amendment to the claim was £1,169.  The fee for the 2015/16 certification work was outlined at Page No. 21, Appendix B to the report, and was the same as had been outlined in previous plans.

45.3           It was

RESOLVED          That the Grant Thornton Certification Letter March 2016 be NOTED.

To consider the external auditor’s Audit Plan 2016/17.

46.1           Attention was drawn to Grant Thornton’s Audit Plan 2016/17, circulated at Pages No. 22-42, which set out the Audit Plan for the year ended 31 March 2017.  Members were asked to consider the information provided.

46.2           The Engagement Lead from Grant Thornton explained that the Audit Plan outlined the planned scope and timing of the audit which allowed Grant Thornton to discharge its responsibilities under the Code of Audit Practice, issued by the National Audit Office, in terms of giving an opinion on the Council’s financial statements and specific responsibilities around the value for money conclusion.  Pages No. 25-26 of the report gave a high level overview of the key areas which had been considered in understanding the challenges faced by the Council and identifying key risks.  The ongoing financial challenges, particularly in terms of the delivery of the Medium Term Financial Plan, had been well documented and there had been a lot of conversations around continuing business rates appeals and the impact of the Autumn Statement.  In terms of financial reporting, the most significant change to the Chartered Institute of Public Finance and Accountancy (CIPFA) Code of Practice 2016/17 was a presentational reporting requirement which aimed to try to tell the story better in terms of how organisations reported financial outturns to stakeholders and relevant readers of the accounts.  It was also necessary to restate the accounts for the previous year.  Members were reminded that the Accounts and Audit Regulations 2015 required Councils to bring forward the approval and audit of the financial statements to 31 July by the 2017/18 financial year and a dry-run was being carried out this year to ensure that both the Council and Grant Thornton were prepared for the earlier timeframes.

46.3           Members were advised that the concept of materiality was applied when performing the audit so Grant Thornton did not look at every single transaction.  Materiality was risk-based and required a professional judgement to be made in the context of Grant Thornton’s knowledge of the Council.  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 £707,000, or 2% of the gross revenue expenditure.  Any adjustments over and above £35,000 were referred to as ‘trivial’ matters but still needed to be stated in the accounts.  The Engagement Lead explained that this would be kept under review and she would report back to the Audit Committee meeting in July if necessary.  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. 26 of the report.  Page No. 27 of the report set out the significant risks that had been identified for the audit.  There were two presumed significant risks that were applicable to all audits under the accounting standards: that the revenue cycle included fraudulent transactions and management over-ride of controls.  Two other significant risks had  ...  view the full minutes text for item 46.

To approve the accounting policies to be used during the 2016/17 closedown. 

47.1           The report of the Head of Finance and Asset Management, circulated at Pages No. 43-62, set out the main changes in accounting policies under the Code of Practice on Local Authority Accounting in the United Kingdom 2016/17 supported by International Financial Reporting Standards.  Members were asked to approve the accounting policies to be used during the 2016/17 closedown.

47.2           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 2016/17.  In order to do this, the Council had to review all of its accounting policies to ensure that it complied with the Code.  The proposed accounting policies were largely unchanged from those used in the 2015/16 accounts, with the exception of a few minor amendments.  The main change was the way in which the accounts were reported.  Due to the revised format of the income and expenditure statement, and the introduction of the new expenditure and funding analysis, the Council no longer had to show the costs of overheads and support services within the service segments as they were not included within the quarterly management reports.  Property, Plant and Equipment (PPE) had been tidied up to ensure that their value at year end reflected their current value and the Council Tax and Non-Domestic Rates policy had been amended to explain the relationship between the Council and other preceptors and how this was accounted for.  The full list of accounting policies was attached at Appendix A to the report. 

47.3           It was

RESOLVED          That the accounting policies to be used during the 2016/17 closedown be APPROVED.

To approve the critical accounting judgements that will be used in completing the 2016/17 annual accounts and to note the key sources of estimation uncertainty. 

48.1           The report of the Head of Finance and Asset Management, circulated at Pages No. 63-71, set out the critical accounting judgements and key sources of estimation uncertainty that would be used in preparing the 2016/17 accounts.  Members were asked to approve the judgements and to note the key sources of estimation uncertainty.

48.2           The Finance Manager explained that the Council had to apply its accounting policies in order to produce the annual Statement of Accounts.  In applying those policies, certain judgements had to be made about complex transactions, or those involving uncertainty about future events.  There were quite a few compared to the previous year and the full list was attached at Appendix A to the report.  It was particularly noted that the Council had entered into several leases during the year which had been considered in detail to establish whether they should be classed as operating or finance leases.  The accounting code stated that the cost of redundancies needed to be recognised, and communicated to relevant staff when there was an expectation that future redundancies would be taking place.  A report in relation to an internal restructure had been taken to Council in February 2017 and a provision had been made for this potential cost within the accounts.  In terms of investments, e.g. the purchase of Challenge House and the land at Cascades, a judgement needed to be made as to their property class.

48.3           The Finance Manager advised that, in preparing the Statement of Accounts, there were areas where estimates were made.  This included the useful lives and valuations of properties, which were estimated by qualified valuers; the amount of arrears that would not be collected, which was estimated based on past experience of collection of different types of debt; and the liability for future pension payments, which was estimated by qualified actuaries.  These areas were set out in detail at Appendix B to the report, however, it was noted that the exact figures would not be known until the accounts had been completed.

48.4           In response to a Member query regarding accounting for assets and the way they were held, the Finance Manager explained that capital appreciation would be shown in the accounts.  If assets had gone up in value this would be shown as an unrestricted gain.  The Head of Finance and Asset Management advised that the Council was currently in the process of appointing an Investment Manager to work with Officers in respect of investing in new commercial properties and reporting on the existing portfolio.  It was intended that a quarterly report on performance would be shared with an internal board but it would also be possible to produce an annual report for Council which could include capital appreciation and rental yields.  A Member expressed the view that it would be difficult to value the land which had become vacant following the demolition of Cascades until the Council had decided what to use it for.  He pointed out that the use of greatest value  ...  view the full minutes text for item 48.

To consider the responses to the self-assessment checklist, which is required to meet the new closure date for statement of accounts, and to note the progress made to date.

49.1           The report of the Head of Finance and Asset Management, circulated at Pages No. 72-78, attached the Council’s completed self-assessment checklist which was required to meet the new closure date for the Statement of Accounts.  Members were asked to consider the responses to the self-assessment checklist and note the progress that had been made to date.

49.2           Members were informed that the revised Audit and Accounts regulations required authorities to produce a draft Statement of Accounts by 31 May with effect from the 2017/18 financial year.  To ensure the Council was prepared, a ‘dry-run’ was being followed for the closure of accounts for 2016/17; this would be an opportunity to test for readiness for the following year and to refine processes and practices to comply with the deadlines.  As part of its preparations, Officers had used Grant Thornton’s best practice checklist which was attached at Appendix A to the report.  It was clear that good progress had been made by the Finance Team in most areas.  There were six negatives and, in most cases, plans were already in place to address these.  It was noted that some of the requirements were unnecessary for Tewkesbury Borough Council.  It was hoped that the report and checklist would give reassurance that the preparations would lead to the successful conclusion of this year’s accounts, within the timetable promised, and, as such, demonstrated that the Council would be ready for the following year.

49.3           It was

RESOLVED          That the responses to the self-assessment checklist and the progress made to date to meet the new closure date for the statement of accounts be NOTED.

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 2016 – February 2017.

50.1           The report of the Head of Corporate Services, circulated at Pages No. 79-119, was the third monitoring report of the financial year and summarised the work undertaken by the Internal Audit team during the period December 2016 to February 2017.  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.

50.2           The Head of Corporate Services advised that full details of the work undertaken in the period were attached at Appendix 1 to the report.  It was generally a very positive report with one ‘limited’ opinion in relation to the cascading of insurance conditions to relevant staff.  A list of audits within the 2016/17 Audit Plan and their progress to date could be found at Appendix 2 to the report.  Approximately 93% of the 2016/17 Internal Audit Plan had been completed and days had been allocated within the 2017/18 Plan for any which needed to be carried forward.  There had been a small degree of slippage due to sickness absence and the Finance Team had provided an additional resource to assist with non-financial audits.  One member of the team had recently gone on maternity leave and a secondment arrangement was in place to cover this.  Members were advised that notification had been received that Tewkesbury Town Council wished to terminate its contract for the provision of Tewkesbury Borough Council’s internal audit function.  A total of 20 days had been allocated for this provision within the 2016/17 plan which would now be available for additional Borough Council work within the 2017/18 Internal Audit Plan.

50.3           With regard to the audit of the Council’s insurance arrangements, there was a good level of control in terms of the information provided to the Council’s insurers to ensure that the cover was appropriate; however, the controls and environment in relation to insurance policies being disseminated to appropriate Officers had been found to be limited.  Whilst the risk of not disseminating insurance conditions to Officers could potentially affect the Council’s ability to defend a claim, this risk was considered to be minimal based on the limited number of claims received that had resulted in a claim being settled in favour of the claimant.  The Finance Team had been working on this and the relevant information would all be available on the intranet by the end of the month.  A Member questioned whether it was possible to take out insurance to protect against lost planning appeals.  The Borough Solicitor advised that it was highly unlikely that it would be possible to obtain insurance for planning decisions made by the Council when the risks were known.  The determination of planning applications was a legal process and there were certain requirements which needed to be observed.  Whilst she recognised that the costs of losing appeals could be significant, this was taken into account in the Council’s financial planning.  It was potentially different if there was a case for negligence but this would only  ...  view the full minutes text for item 50.

To consider the progress made in respect of the recommendations arising from the tree inspections audit. 

51.1           The report of the Asset Manager, circulated at Pages No, 120-122, provided an update in relation to the recommendations arising from the tree-inspections audit.  Members were asked to consider the progress that had been made.

51.2           The Head of Finance and Asset Management reminded Members that responsibility for the management of trees on Tewkesbury Borough Council-owned land had transferred to the Asset Management Team in September 2015.  A new system for plotting trees had been introduced in November 2015 which had involved new software and GPS hardware and that had been very successful once initial teething problems had been addressed.  In February 2016, it was established that Ubico had been inspecting trees that were not within the ownership of the Borough Council and the process for future inspections had subsequently been reviewed.  The Asset Management Team had reviewed all trees on Council-owned land and risk categorised them and, in November 2016, the Executive Committee had approved an updated Tree Policy which incorporated the new risk categories and inspection regime.  Additional training had also been provided to Ubico on the software and risk categorisation system.  As of February 2017, Ubico had completed 70% of tree inspections on Tewkesbury Borough Council-owned land and only one had been wrongly inspected during 2016/17 that was not within the ownership of the Borough Council.  The Head of Finance and Asset Management acknowledged that the tree inspection regime had been very poor 18 months ago but he was pleased to be able to provide assurance that there was now a solid and robust system in place and trees were being maintained responsibly.

51.3           A Member raised a query in relation to the maintenance of trees next to waterways and whether those would have been linked.  The Head of Finance and Asset Management indicated that he would need to make some enquiries and come back to Members outside of the meeting.  It was

RESOLVED          That the progress made in respect of the recommendations arising from the tree inspections audit be NOTED.

To approve the Internal Audit Plan 2017/18. 

52.1           The report of the Head of Corporate Services, circulated at Pages No. 123-127, attached, at Appendix 1, the Internal Audit Plan 2017/18.  Members were asked to approve the Plan.

52.2           Members were advised that the Internal Audit Plan 2017/18 was divided into key areas: governance related activity; corporate improvement; fundamental financial systems; service areas; and other areas.  The Head of Corporate Services drew attention to a typographical error at Appendix 1 which should state that 80 days had been allocated for Corporate Improvement rather than none.  The areas that would be covered under corporate governance included absence management, health and safety and data protection.  There would be some new work under the fundamental financial systems audits in respect of the new e-ordering system and off-payroll regulations.  In terms of specific service areas, days had been allocated to client monitoring for both the leisure centre and Ubico; Disabled Facilities Grants, where there had been significant change; the vehicle contract; the Public Service Centre refurbishment; and property leases.

52.3           It was

RESOLVED          That the Internal Audit Plan 2017/18 be APPROVED.

To approve the Internal Audit Charter. 

53.1           The report of the Head of Corporate Services, circulated at Pages No. 128-139, set out the Internal Audit Charter which Members were asked to approve.

53.2           Members were advised that it was a requirement of the Public Sector Internal Audit Standards (PSIAS) for the authority and responsibility of the internal audit activity to be formally defined in an Internal Audit Charter which must be periodically reviewed and presented to the Corporate Management Team and the Audit Committee for approval.  The Charter had last been approved by the Committee on 23 March 2016 and a number of amendments had been made since that time, the majority of which were minor textural changes.  The only real significant change was at Page No. 135, Paragraph 4.2.2, in order to clearly highlight the operational responsibilities of the Head of Corporate Services.  The Head of Corporate Services indicated that audit was only one part of his remit, however, he made a commitment under his professional standards that he would present reports in an objective and transparent manner and would not have any influence in changing the opinions given by the Internal Audit Team.  He pointed out that he was responsible for the complaints framework and business continuity which had both been given limited audit opinions.

53.3           It was

RESOLVED          That the Internal Audit Charter be APPROVED.

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

54.1           The report of the Borough Solicitor, circulated at Pages No. 140-146, 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.

54.2           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 further columns indicating the progress as at 30 November 2016 and 1 March 2017.  The Borough Solicitor indicated that she had hoped to be able to advise that all of the issues identified had been completed, unfortunately, this was not the case.  She explained that the approval of a Workforce Development Strategy was programmed for consideration by the Executive Committee at its meeting in June so this would be completed on time.  In terms of the Audit Committee effectiveness, an initial ‘Meet the Audit Team’ session had been held in February and this would be followed-up with training on the role of the Audit Committee and a review of the effectiveness of the Audit Committee using the CIPFA framework.  This had been given a revised implementation date of September.  Both risk management and business continuity were corporate matters and dependent upon staffing; there had been quite a significant resource shortage over the past few months but it was important that there was corporate ownership and these outstanding matters would be addressed now that the new team was in place.  Any outstanding risks would be rolled forward into the Annual Governance Statement 2016/17 which would be brought to the Audit Committee in July.  In terms of the review of the Council’s Constitution she explained that the Democratic Services Team was very small and the majority of time had been taken up with unexpected matters such as the Ward Boundary Review which had not been included in the work programme for that service.  She provided assurance that, whilst it did require updating, the current Constitution continued to be used as a working document.  Assuming that there was no snap election in 2018, there would be an opportunity to carry out the review at that time.

54.3           A Member queried whether there was a date for the Audit Committee training and was advised that Grant Thornton would be running the session on the role of the Audit Committee and Members would be advised of the arrangements in due course.  It was subsequently

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