AUDIT & Date of MeTime: 10aVenue: G2

29th Octob To: All Mem You are hementioned

A W MuterChief Exec

1. Apo 2. Dec 3. Dec 4. Min 5. Tre 6. Inv 7. Inte

8. Sta

9. Ext 10. Com 11. Res

ACCOUN

eeting: Wedam 21, Kelham

ber 2013

mbers of th

ereby requed above for

r utive

ologies for A

clarations o

claration of

nutes of the

easury Mon

estment Co

ernal Audit

tutory requ

ernal Audit

mbined Ass

sponses to q

TS COMM

dnesday 6th

Hall

he Audit & A

ested to attthe purpos

Absence

of Interest b

f any intenti

e meeting h

itoring – 20

ounterparty

Progress Re

uirements re

tors’ Annua

urance Rep

questions a

MITTEE

November

Accounts Co

tend the abse of transac

by Members

ions to reco

held on 25th

013/2014 M

y Selection C

eport

elating to In

l Audit Lette

port

sked at pre

r, 2013

ommittee

bove Meeticting the bu

AGENDA

s and Office

ord the mee

September

Mid-Year Rep

Criteria

nternal Aud

er 2012/13

evious meet

Email: Web

ing to be husiness on t

ers and as to

eting

r 2013

port

dit

ting

helen.baynebsite: www.

eld at the tthe Agenda

o the Party

e@newark-s.newark-she

Te

time/place as under.

Whip

sherwooddc.erwooddc.g

KelhaN

NottinghaNG2

el: 01636 65

and on the

Page N

1 - 4

5 - 16

17 - 20

21 - 50

51 - 144

145 - 154

155 - 176

177 - 178

gov.uk gov.uk

am Hallewarkmshire23 5QX55882

e date

os.

4

4

12. Work Programme 179 - 182 13. Date of next meeting- Wednesday 19th February 2014, 10am Distribution Councillors: T. Bickley S. Crawford Mrs R. Crowe (C) P. Handley Mrs S.M. Michael D. Staples Officers: D. Dickinson N. Lovely B. Hill A. Hunt (Audit Lincs) Lucy Pledge (Audit Lincs) John Scott (Audit Lincs) John Cornett (KPMG) Mike Norman (KPMG) Helen Bayne (x2)

1

NEWARK AND SHERWOOD DISTRICT COUNCIL Minutes of the meeting of the AUDIT & ACCOUNTS COMMITTEE held in F20, Kelham Hall on Wednesday, 25th September 2013 at 10.00am. PRESENT: Councillor Mrs R. Crowe (Chairman)

Councillors: T.S. Bickley, P. Handley and D. Staples. Officers David Dickinson - Director- Resources in Attendance: Nicola Lovely - Business Manager- Financial Services Nicola Pickavance- Assistant Business Manager- Financial Services John Scott - Audit Lincolnshire Also in attendance John Cornett – KPMG (LLP) UK Mike Norman – KPMG (LLP) UK Councillor J.E. Hamilton 13. APOLOGIES FOR ABSENCE

An apology for absence was submitted by Councillor Mrs M. Michael.

14. DECLARATIONS OF INTERESTS BY MEMBERS AND OFFICERS AND AS TO THE PARTY WHIP No declarations of interest were made.

15. MINUTES OF THE MEETING HELD ON 26TH JUNE 2013 The Director- Resources commented, in regard to item 4- Treasury Management Outturn report 2012/2013 that having previously had a practice to restrict the Council’s investments to UK based banks, he had been in recent conversation with a representative from Handelsbanken, which was a Swedish bank with a local presence in Nottinghamshire. He reported that the bank was keen on working with the Council and associated economic development within the District. It was proposed that a detailed report be submitted to the next meeting of the Audit and Accounts Committee regarding the matter.

AGREED that the Minutes of the meeting held on 26th June 2013 be approved as a correct record and signed by the Chairman.

16. EXTERNAL AUDIT ANNUAL GOVERNANCE REPORT John Cornett, from KPMG, was in attendance to present the External Audit Annual Governance report, highlighting that the Annual Governance statement was very positive, with no specific concerns to highlight to the Council. It was reported that the appropriate Value for Money arrangements were in place to support Councillors making their own assessment of the value for money of the Council. The Auditors confirmed that all auditing work had been undertaken within the agreed audit fee. Thanks were expressed to all staff involved in undertaking the audit and the Auditors praised their prompt and professional response.

1

2

Members considered the Governance report, and agreed that it was a very good audit report for the Council. Members of the Committee agreed that their formal congratulations be passed to staff involved in the audit process and to the external auditors for delivery of a smooth and objective audit.

AGREED (unanimously) that a) the External Auditors Annual Governance report for 2012/2013 be

noted; and b) the letter of representation be signed by the Director- Resources, be

approved.

17. STATEMENT OF ACCOUNTS AND ANNUAL GOVERNANCE STATEMENT The Assistant Business Manager- Financial Services presented the final Statement of Accounts for approval. The Committee had considered a draft version at its meeting in June, and amendments had been included to the final version, as a result of consideration by the Committee and recommendations arising from the audit. It was a legal requirement that the Statement of Accounts be approved by an appropriate committee by 30th September. Members considered the covering report and accounts, and queried the use of reserves for internal borrowing. The Director- Resources explained the process and reasoning behind using internal cash balances to make ‘loans’ within the Council. He explained that when the Council was required to make expenditure, internal cash balances were considered as were the interest rates for external borrowing and investment options. It was common practice to utilize internal cash reserves for external spending, rather than using external loans as this was cheaper for the Council. However, external loans could be taken to externalise the borrowing, should the cash be required by the Council. The total internal reserve levels were monitored, however, there was not an itemised list of internal borrowing available. The Committee agreed to receive a report at the next meeting regarding this process. Members considered the budget figures in detail, specifically noting the variances detailed from the original budget, and requested that in future more details be included on where variances had occurred, and reasons for these. Members also considered a proposed Combined Assurance Model, for their comments and approval. The Director- Resources explained that the Assurance Model would be published on the Council’s website following comments from Policy Committee Members, and would also be included on the agenda for the Committee’s next meeting.

2

3

AGREED (3 for and 1 abstention) that a) the Annual Governance Statement for the financial year ended 31st

March 2013 be approved; and b) the Statement of Accounts for the financial year ended 31st March 2013

be approved.

18. COUNTER FRAUD ACTIVITY STATEMENT The Business Manager- Financial Services presented a report detailing counter fraud activities taken relating to benefits since 1st April 2013. The report detailed prosecutions undertaken by the Council against fraudulent benefit claims which had resulted in benefit overpayments by the Council, which were recoverable. Detected frauds were publicised in the local press and internally at the Council to act as a deterrent. Members also heard about the National Fraud Initiative (NFI), a data matching exercise which was in progress. This was undertaken every other year by the Audit Commission, and involved data collection from numerous agencies, and review of this data to detect fraudulent activity. During the last NFI exercise in 2010/2011 the Council had identified £30,000 benefit overpayments and £68,000 council tax discount overpayments, of which £88,000 was in recovery. The Director- Resources, also explained that the Council was taking part in a countywide single person discount review, which would help detect and prevent fraud, but would also help maintain an accurate council tax database which would in turn assist accuracy in the implementation of the Individual Electoral Registration. Members considered the information and agreed that whilst work to undercover and deter fraud was beneficial, a balance was needed between resources used for this balanced against the amounts recovered. However, Members conceded that it was more difficult to assess the savings made as a result of fraud prevention, and the public interest of pursuing high profile cases of fraud.

AGREED that the report be noted.

19. RESPONSES TO QUESTIONS RAISED AT THE PREVIOUS MEETING The Committee considered a report detailing answers to questions that had been raised by Members at their previous meeting. With regard to the percentage of leavers forms returned, Members heard that there was a low-turn over for these. However, the Committee felt very strongly that the forms should be monitored to help identify any possible issues that staff leaving the organisation may wish to raise.

AGREED that the report be noted.

20. WORK PROGRAMME The Committee considered the work programme detailing items for consideration at

3

4

their future meetings. The Committee agreed to include reports on the Reserves Policy and the Combined Assurance report.

AGREED that the Work Programme be approved.

21. DATE OF NEXT MEETING The next meeting would be held on Wednesday 6th November 2013, at 10am.

The meeting closed at 11:25am Chairman

4

AUDIT AND ACCOUNTS COMMITTEE AGENDA ITEM NO.5

6TH NOVEMBER 2013

TREASURY MANAGEMENT 2013-14 MID YEAR REPORT

REPORT PRESENTED BY: BILL HILL – SENIOR ACCOUNTANT (TECHNICAL)

1. Introduction

1.1 The Chartered Institute for Public Finance and Accountancy recommends in its Code of Practice on Treasury Management that Members receive at least two reports on Treasury Management activities in a year. The report covering the first half of the year is due to be considered at the next Council meeting and the purpose of this report is both to report activities to this Committee and to give members the opportunity to comment on the draft report, which is reproduced below.

2. Interest Rates

2.1 The recent improvement in economic indicators has fuelled speculation that interest rates will start to rise in the near-term. However the Bank of England has given guidance that it will not even consider raising the base rate from the current 0.5% rate until unemployment has fallen to 7%, though this does carry certain caveats. The Council’s Treasury Advisors have reviewed their interest rate projections but still do not see any increase in the base rate before 2016, though they have increased borrowing rates slightly. Current forecasts are shown below:

Bank Rate Money Rates PWLB Borrowing Rates 3 month 1 year 5 year 20 year 50 year

Dec 2013 0.50 0.45 0.90 2.25 4.05 4.25 Mar 2014 0.50 0.45 0.95 2.30 4.10 4.30 Jun 0.50 0.50 0.95 2.35 4.15 4.35 Sep 0.50 0.55 0.95 2.40 4.20 4.40 Dec 0.50 0.55 1.00 2.45 4.25 4.45 Mar 2015 0.50 0.55 1.05 2.50 4.30 4.50 Jun 0.50 0.55 1.10 2.55 4.35 4.55 Sep 0.50 0.60 1.15 2.65 4.45 4.60 Dec 0.50 0.65 1.20 2.75 4.55 4.65 Mar 2016 0.50 0.70 1.25 2.90 4.65 4.75 Jun 0.50 0.80 1.30 3.10 4.85 4.85 Sep 0.50 0.90 1.40 3.30 4.95 4.95

5

3. Position as at 30th September 2013

3.1 Short Term Position

Temporary borrowing stands at £3.6m. This reflects withdrawals and deposits made by Newark & Sherwood Homes and Southwell Leisure Centre Trustees, whose cashflow is managed by the Council under a service level agreement.

Temporary investments stand at 10.7m split between fixed term deposits and instant access accounts.

3.2 Long Term Position

Long term borrowing stands at £94.2m as forecast. A PWLB HRA loan of £3m which matured on 17th June was repaid and not refinanced in line with the HRA business plan.

3.3 A detailed breakdown of the current position is shown below.

RECOMMENDATION

That the Treasury Management position as outlined in the draft Council report be considered

For further information please contact Bill Hill, Senior Accountant on Ext 5587

D Dickinson

Director – Resources

6

Treasury Management Report as at 30th September 2013

A. Short Term Position A1 Temporary Loans

Lender Interest

paid gross of fee

Type Date

Borrowed To be

Repaid Period end

Balance

Newark & Sherwood Homes 0.36% Call n/a n/a 3,012,000

Southwell LC Trust 0.36% 7 day notice n/a n/a 140,791

Gilstrap/Knights Trusts n/a n/a 465,466 Total Temporary Loans 3,618,257

A2 Temporary Investments

Borrower Interest

Rate Type

Date Invested

To be Repaid

Period end Balance

NatWest SIBA Account 0.50% Call n/a n/a 3,238,000 Santander 0.50% Call n/a n/a 3,010,000 RBS Global Treasury Money Market Fund 0.33% Call n/a n/a 10,000 Deutsche Bank Sterling Money Market Fund 0.32% Call n/a n/a 5,000 Glitnir ISK balance in escrow 3.40% Fixed 16-Mar-12 tba 424,221 Lloyds TSB 0.80% Fixed 09-May-13 11-Nov-13 2,000,000 Lloyds TSB 0.70% Fixed 03-Sep-13 03-Dec-13 2,000,000 Total Temporary Investments 10,687,221

Bank Balance 30th September 2013 22,147

A3 Short Term Position - Net Invested/(Borrowed) 7,091,111 Average variable rate earned to date 0.57%Average fixed rate earned to date 0.75%Note - This excludes the Glitnir deposit

B. Long Term Position

Long Term Loans Average Interest

Rate Type

Date Borrowed

To be Repaid

Public Works Loans Board (41 loans) 4.46% Maturity Various Various 77,078,000 Public Works Loans Board (21 loans) 9.03% Annuity Various Various 604,438 Barclays Bank (4 loans) 4.09% LOBO Various Various 13,000,000 BAe Systems Pension Funds (2 loans) 3.75% LOBO 01-Dec-11 01-Dec-16 3,500,000 Total Long Term Loans 94,182,438 Please note the interest rate for long term loans is an average of the total loans for each category

C. Net Indebtedness 87,091,328

7

COUNCIL MEETING – 17TH DECEMBER 2013 AGENDA ITEM NO.

MID YEAR TREASURY REPORT 2013/14 (DRAFT)

1.0 Purpose of Report

1.1 This report provides an update on the Council’s treasury activity and prudential indicators for the first half of 2013/14. As indicated in the report none of the Prudential Indicators have been breached and a prudent approach has been taken in relation to the investment activity, with priority being given to security and liquidity over yield.

1.0 Background Information

1.1. The Council’s Treasury Management Strategy has been underpinned by the adoption of the Chartered Institute of Public Finance and Accountancy’s (CIPFA) Code of Practice on Treasury Management 2011, which includes the requirement for determining a treasury strategy on the likely financing and investment activity for the forthcoming financial year.

1.2. The Code also recommends that members are informed of Treasury Management activities at least twice a year. This report therefore ensures that this Authority is embracing best practice in accordance with CIPFA’s recommendations.

1.3. Treasury Management is defined as: “The management of the local authority’s investments and cash flows, its banking, money market and capital market transactions; the effective control of the risks associated with those activities; and the pursuit of optimum performance consistent with those risks”.

2.0 Economic Background

2.1. Growth: The UK economy showed some improvement with consumer spending boosting growth. GDP for the first quarter of 2013 was revised up to +0.4% and for the second quarter was +0.7%. Recent data suggests a stronger rate in quarter three. Revisions by the Office of National Statistics to GDP back-data showed the UK avoided a double-dip recession in 2012, but the down-turn in 2008/9 was deeper than previously estimated. Growth is now still over 3% below its peak back in 2007.

2.2. Some positive signs for household spending emerged. The deterioration in real earnings growth (i.e. earnings less inflation) slowed, which implied a slower erosion of purchasing power. Consumer confidence improved. Household savings rates remained high, which is unsurprising given the uncertain economic output, but appear to be on a downward track, suggesting that spending was being driven by borrowing or lower savings. This raises questions about the sustainability of the recovery at these rates of growth.

2.3. Inflation: Annual CPI for August (published September) was 2.7%. Inflation fell in line with expectations and is expected to remain close to this level throughout the autumn. Further out, inflation should fall back towards the 2% target as external

8

price pressures fade and a revival in productivity growth curbs domestic cost pressures.

2.4. Monetary Policy: There was no change to UK monetary policy with official interest rates and asset purchases maintained at 0.5% and £375bn respectively. The main development for UK monetary policy was the start of Mark Carney’s tenure as Governor and the implementation of forward guidance. Within the August Inflation Report the Bank stated its forward guidance, the main element of which is to defer monetary tightening at least until the ILO Unemployment rate falls to a threshold of 7% (among a raft of caveats). The Bank projected that the probability of this happening would remain below 50% until 2016. The Governor has had to defend the Bank’s guidance in the face of rising financial market expectations of an earlier rate rise on the back of encouraging economic data.

2.5. Global: Whilst the global economy generally appeared to have improved over the period, significant economic risks remain, particularly in China and the Eurozone. The Chinese banking system is facing tighter liquidity conditions as officials seek to slow down rampant credit growth and despite the time gained by the ECB to allow individual members, and the Eurozone as a whole, to reform their economies, the Eurozone crisis has not gone away. September’s German election produced few surprises but political uncertainties, particularly in Italy, could derail any progress towards a more balanced and stable regional economy. The US recovery appeared to be in train, but a lack of agreement on the federal budget by the end of September caused a partial government shutdown at the start of October, which could have an effect on GDP.

3.0 Debt Management

3.1. Activity during the first six months for the financial year can be summarised as follows:

Balance on 01/04/2013

£m

Debt Repaid £m

New Borrowing

£m

Balance on 30/09/2013

£m Short Term Borrowing 2.64 4.30 5.18 3.52 Long Term Borrowing 97.19 3.01 0.00 94.18 Total Borrowing 99.83 7.31 5.18 97.70

3.2. PWLB Borrowing: The PWLB remains an attractive source of borrowing for the Council as it offers flexibility and control. As market concerns mounted over the timing of the removal of quantitative easing in the US gilt yields rose in April and May, which led to a corresponding rise in PWLB rates, with the most pronounced increase in 10 year loans where rates at the end of September were 0.83% higher than those at the beginning of April. However affordability and the ‘cost of carry’ remained important influences on the Authority’s borrowing strategy and any borrowing undertaken ahead of need would have to be invested in the money

9

markets at rates of interest significantly lower than the cost of borrowing. An example of the movement in interest rates since 1st April is shown at Appendix B.

3.3. Depending on the phasing of actual expenditure on major capital projects that the Council is considering it is not anticipated at this stage that there will be a need for additional external borrowing in the current financial year.

3.4. Internal borrowing: For the Council the use of internal resources in lieu of borrowing has continued to be the most cost effective means of funding of capital expenditure that has not been funded from grants and other resources. This has lowered overall treasury risk by reducing both external debt and temporary investments. However this position will not be sustainable over the medium term as the Council needs to use reserves for the purpose they were set aside for, and external borrowing will have to be undertaken.

3.5. Debt rescheduling: The increase in PWLB repayment rates during the quarter lowered the premium that would apply on the premature repayment of loans, but the premia were still relatively expensive for loans in the Authority’s portfolio and therefore unattractive for debt rescheduling activity. No rescheduling activity was undertaken as a consequence.

3.6. A year after their commencement the £36.08m of loans borrowed in March 2012 for the HRA self-financing settlement became eligible for rescheduling. These loans were taken out at one-off preferential rates made available specifically for the settlement. The increases in gilt yields and PWLB redemption rates have resulted in these loans presenting early repayment opportunities at close to par. i.e. with a very small premium of discount. However debt rescheduling would have involved the Authority refinancing at a much higher rate. For example 10-, 20- and 30-year self-financing maturity borrowing rates were around 2.4%, 3.3% and 3.5% respectively. The equivalent new borrowing certainty rates at 30th September for these maturities were 3.46%, 4.16% and 4.29% respectively.

3.7. The Authority will continue to first assess early repayment or rescheduling against the requirements of the HRA business plan and any future borrowing requirements.

4.0 Investment Activity

4.1. The Guidance on Local Government Investments in England gives priority to security and liquidity and the Council’s aim is to achieve a return commensurate with these principles. The policy is set out in the Treasury Strategy Report which was approved by Council on 7th March 2013.

10

4.2. The Council’s short term investments at the end of September can be summarised as follows:

Type of Investment Balance on 01/04/2013

£m

New Investments

£m

Investments Repaid

£m

Balance on 30/09/2013

£m

Average Interest

Rate Fixed Term Deposits

1,424 7,000 4,000 4,424 0.75%

Money Market Funds

15 14,445 14,445 15 0.33%

Bank Call Accounts 2,308 48,254 44,314 6,248 0.55% Total 3,747 69,699 62,759 10,687

4.3. Budgeted income: The estimated investment income for the General Fund at the start of the financial year was £79k; this has since been revised to £51k to reflect a general reduction in interest rates paid by approved counterparties following the introduction of the Government’s Funding for Lending programme.

5.0 Counterparty Update

5.1. In April Fitch downgraded the UK’s long-term sovereign rating by one notch from AAA to AA+, the second of the rating agencies to do so after Moody’s had carried out a similar downgrade in February.

5.2. The proposed sale of 632 Lloyds’ branches to the Co-op Bank – referred to as Project Verde – fell through in April. These branches were subsequently transferred to TSB Bank, a new bank which will be sold through a listing on the stock market in 2014. In the Chancellor’s Mansion House speech on 19th June he signalled his intention to sell the government’s stake in the Lloyds Banking Group reasonably soon and a 6% stake was indeed sold to institutional investors on 17th September at a price of 75p. In a positive move, Fitch upgraded Lloyds’ viability rating to bbb+.

5.3. The situation was more complicated with RBS since its problems were greater and reflected in its share price. It appeared that a ‘good bank’ and ‘bad bank’ split was favoured by the Chancellor but Moody’s placed RBS’s long term rating of A3 on review for downgrade on 5th July amid concerns about the impact of any potential breakup of the bank on creditors. Although the probability of losses remains low there is a possibility of capital impairment, especially as the government has clearly indicated that it will not put up any further funding. As a precautionary measure the Authority has reduced its maximum duration on RBS investments to overnight.

6.0 Prudential Indicators

6.1. A summary of the Prudential Indicators set by the Council is given at Appendix A.

11

7.0 RECOMMENDATIONS that:-

(a) the treasury activity be noted; and

(b) the Prudential Indicators detailed in Appendix A to the report be noted.

Background Papers

Nil.

For further information please contact Bill Hill, Senior Accountant on extension 5587.

D. Dickinson

Director – Resources

12

APPENDIX A

Capital Financing Requirement (CFR) The CFR is the total of all capital expenditure which has not yet been paid for from either Revenue of Capital resources; it is essentially a measure of the Council’s need to borrow. It is compared with actual external borrowing to give the borrowing requirement.

£m 31/03/2013

Actual 31/03/2014

Revised 31/03/2015

Revised 31/03/2016

Revised CFR – Non Housing 17.0 17.2 17.7 20.6CFR – Housing 104.1 101.1 98.1 95.0Total CFR 121.1 118.3 115.8 115.6Existing Borrowing Profile 99.4 96.6 93.7 90.7Gross Borrowing Requirement 21.7 21.7 22.1 24.9

Authorised Limit and Operational Boundary for External Debt

• The Local Government Act 2003 requires the Council to set an Affordable Borrowing Limit, irrespective of their indebted status. This statutory limit, once set, should not be breached.

• The Council’s Authorised Borrowing Limit was set at £128.0m for 2013/14. • The Operational Boundary is based on the same estimates as the Authorised Limit but

reflects the most likely, prudent but not worst case scenario, without the additional headroom included within the Authorised Limit.

• The Operational Boundary for 2013/14 was set at £107.4m. • Long term borrowing at its peak during the period under review was £97.2m.

Upper Limits for Fixed and Variable Interest Rate Exposure

• These indicators allow the Council to manage the extent to which it is exposed to changes in external interest rates.

£m Approved 2013/14

£m

Actual to 30/09/2013

£m Fixed Upper Limit for Exposure on Debt 112.3 97.2 Upper Limit for Exposure on Investments

-15.0 -5.4

Net Fixed Exposure 97.3 91.8 Variable Upper Limit for Exposure on Debt 28.5 4.0 Upper Limit for Exposure on Investments

-18.0 -12.0

Net Variable Rate Exposure 10.5 -8.0

13

Maturity Structure of Fixed Rate Borrowing

• This indicator is to limit large concentrations of fixed rate debt needing to be replaced at times of uncertainty over interest rates.

Upper Limit

%

Lower Limit

%

Actual at 30/09/13

£

Actual at 30/09/13

% Compliance

Under 12 months

15 0 £14.0m 14.7% Yes

12-24 months 15 0 £1.0m 1.0% Yes 2-5 years 30 0 £9.5m 10.0% Yes 5-10 years 100 0 £17.0m 17.9% Yes Over 10 years 100 0 £53.7m 56.4% Yes

Gross Debt and the Capital Financing Requirement

• This is a key indicator of prudence. In order to ensure that over the medium term net borrowing will only be used for capital purposes, the Authority should ensure that debt should not, except in the short term, exceed the CFR in the preceding year plus the estimates of any additions for the current and next two financial years.

• The Council’s total external debt (including temporary borrowing) is currently £97.7m, which is considerably lower than the CFR shown above so there is no difficulty in meeting the requirement of this indicator now or in future years. This view takes into account current commitments, existing plans and the proposals in the approved budget.

Estimates of Capital Expenditure

• This indicator is set to ensure that the level of proposed capital expenditure remains within sustainable limits and in particular to highlight the impact on Council Tax and in the case of the HRA, housing rent levels.

Capital Expenditure 2013/14

Approved£m

2013/14 Revised

£m

2014/15 Estimate

£m

2015/16 Estimate

£m Non-HRA 5,685 3,893 5,805 10,150HRA 7,629 7,399 8,893 6,814Total Expenditure 13,314 11,292 14,698 16,964

Financing Government Grants 3,543 842 2,854 2,3613rd Party Contributions 7 2,261 3,130 52Capital Receipts 1,090 908 575 4,687Revenue Contributions 5 56 738 10Major Repairs Allowance 6,842 6,858 6,346 6,454Total Financing 11,487 10,925 13,643 13,563Unsupported Borrowing 1,827 367 1,055 3,401Total Financing and Funding 13,314 11,292 14,698 16,964

14

• The table above shows that the capital expenditure plans of the Authority cannot be funded entirely from sources other than borrowing. However subject to the maintenance of a prudent level of liquidity to meet short term commitments, internal reserves and balances will continue to be used as a source of short term internal borrowing before external borrowing is undertaken.

Principal sums invested for more than 364 days

• This indicator allows the Council to manage the risk inherent in investments longer than 364 days.

• The limit for 2013/14 was set at £2m. • The Council’s policy response since the onset of the credit crunch in 2007 has been to keep

fixed investment maturities to less than one year and to use only high quality UK domiciled counterparties. There have been no longer term investments during the year.

15

APP

END

IX B

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50

5.00

03-Apr

10-Apr

17-Apr

24-Apr

01-May

08-May

15-May

22-May

29-May

05-Jun

12-Jun

19-Jun

26-Jun

03-Jul

10-Jul

17-Jul

24-Jul

31-Jul

07-Aug

14-Aug

21-Aug

28-Aug

04-Sep

11-Sep

18-Sep

25-Sep

02-Oct

09-Oct

16-Oct

23-Oct

%

New

Bor

row

ing

Rate

s on

Fix

ed M

atur

ity

Loan

s

10 Y

ear

25 Y

ear

16

AUDIT & ACCOUNTS COMMITTEE AGENDA ITEM NO.6 6TH NOVEMBER 2013 INVESTMENT COUNTERPARTY SELECTION CRITERIA

1. Purpose of Report

1.1. The purpose of this report is to review current counterparty criteria to ensure that the Council is getting the best return on its investment balances commensurate with the overriding principles of Security and Liquidity.

2. Introduction

2.1. The Council approved the annual Treasury Management Strategy Statement on 7th March 2013. The sections relating to investment counterparties are reproduced below.

7.4 The types of investment that will be used by the Authority are all specified investments as follows: • Call and notice deposits with banks and building societies, • Term deposits with banks and building societies, • AAA-Rated Money Market Funds, • Debt Management Office deposit facility, • Investments with Registered Providers, • Certificates of Deposit with banks and building societies, • Other Local and Public Authorities.

7.6 The minimum credit rating for non-UK sovereigns is AA+ (or equivalent) and the minimum long term rating for counterparties is A- (or equivalent). The other credit characteristics, in addition to credit ratings, that the Authority measures are listed in the Prudential Indicator on Credit Risk.

2.2. The approach to credit risk is further outlined in the Prudential Indicators reproduced below:

The Authority considers security, liquidity and yield, in that order, when making investment decisions. Credit ratings remain an important element in assessing credit risk but they are not the sole feature in the Authority’s assessment of counterparty credit risk.

The Authority also considers alternative assessments of credit strength and information on corporate developments of and market sentiment towards counterparties. The following key tools are used to assess credit risk:

• Published credit ratings of the institution (minimum A- or equivalent) and

its sovereign (minimum AA+ or equivalent for non-UK sovereigns); • Sovereign support mechanisms; • Credit default swaps (where quoted); • Share prices (where available);

17

• Economic fundamentals, such as a country’s net debt as a percentage of GDP;

• Corporate developments, news, articles, market sentiment and momentum;

• Subjective overlay.

The only indicators with prescriptive values remain to be credit ratings. Other indicators of creditworthiness are considered in relative rather than absolute terms.

2.3. In response to the problems which the banking industry worldwide has experienced in recent years the Director – Resources has imposed further temporary restrictions by making only short term investments with UK domiciled institutions.

3. Developments

3.1. In recent years the Council has pursued a policy of using available resources to pay down external debt, thus reducing its exposure to the market, and so its external investments are much lower than was historically the case. In 2008/09 average temporary investments were £32.9m whereas the average in the current financial year to date is £9.4m.

3.2. Due to the timing of the Council’s receipts and payments daily balances in the current year have varied between £2.6m and £16.2m and for this reason there is a need for a range of good quality investment counterparties to be available to maximise the opportunity for diversification.

3.3. Until recently one of the main investment vehicles was the call deposit account with the Council’s own bankers, NatWest, which was allocated a £10m upper limit. However the bank has now had its ratings reduced, in response to which the Director – Resources has reduced the maximum exposure with the bank to £5m, with instant access. The Council also has a call deposit account with Santander UK which also has a maximum exposure of £5m.

3.4. Money Market Funds are currently used for ‘overflow’ funds which cannot be fixed for longer periods and operate in a similar way to call accounts, but the return currently being achieved on the fund which is administered by RBS is only 0.32% as opposed to the 0.5% being achieved on the NatWest and Santander UK deposit accounts. In addition new European proposals will shortly alter the status of MMFs making them even less attractive.

3.5. The banking crisis has highlighted many weaknesses in the regulation of the industry and the strength of specific balance sheets. Different governments have adopted different approaches to putting their house in order according to the severity of the problems and the state of their wider economies. Canada and Sweden for example have been in a relatively strong position throughout the crisis whereas the problems in the southern European countries have been well documented.

3.6. For information the table below shows the twenty strongest banks in the world and it will be noted that it contains no UK domiciled banks. However not all of these have approved direct dealing arrangements in place to take sterling retail deposits in the UK.

18

WORLD'S STRONGEST BANKS UK Trade?

1) Qatar National Bank Qatar No

2) Overseas-Chinese Banking Corporation Singapore No

3) Canadian Imperial Bank of Commerce Canada Yes

4) Royal Bank of Canada Canada No

5) DBS Group Holdings Singapore No

6) United Overseas Bank Singapore No

7) Bank of Nova Scotia Canada No

8) Toronto-Dominion Bank Canada No

9) Citigroup US No

10) Hang Seng Bank Hong Kong No

11) Svenska Handelsbanken Sweden Yes

12) China Construction Bank China No

13) Malayan Banking Malaysia No

14) Credit Suisse Group Switzerland No

15) JPMorgan Chase US No

16) Skandinaviska Enskilda Banken Sweden No

17) National Bank of Canada Canada No

18) Industrial & Commercial Bank of China China No

18) Turkiye Garanti Bankasi Turkey No

20) Bank of Communications China No

Source: Bloomberg

3.7. Whilst appreciating the desire for caution, the Council’s treasury advisors, Arlingclose, see no particular problem with depositing short term sterling funds with high quality foreign domiciled counterparties and the table below shows the ratings of UK banks at 30th September 2013 alongside those of key foreign counterparties who have an established presence in the UK. The table also shows the maximum recommended period for fixed term investments, which is based not just on the assessments of the Ratings Agencies but all the other factors indicated in Paragraph 2.2 above.

Counterparty Domiciled Fitch Moody's S & P Maximum duration

Australia & NZ Banking Group Australia AA- Aa2 AA- 12 months HSBC UK AA- Aa3 AA- 12 months Nordea Bank Sweden AA- Aa3 AA- 12 months Svenska Handelsbanken Sweden AA- Aa3 AA- 12 months Barclays Bank UK A A2 A 12 months Nationwide BS UK A A2 A 12 months Lloyds Banking Group UK A A2 A 6 months Santander UK UK A A2 A 6 months Credit Agricole France A A2 A 100 days RBS/NatWest UK A A3 A Overnight

3.8. The Council has recently been approached by Svenska Handelsbanken (who appear in both of the above tables) who have opened an office in Mansfield and are in the process of opening another in West Bridgford with a view to supporting local businesses as well as

19

taking deposits, particularly from large corporates and local authorities. The bank is offering an instant access corporate deposit account paying an attractive rate of interest, currently 0.6%. The bank satisfies all the counterparty criteria approved in the Treasury Management Strategy Statement and the Director – Resources sees an advantage for the Council in relaxing the blanket temporary embargo on foreign domiciled banks to allow for a wider spread of investments.

3.9. Officers receive regular updates from Arlingclose about the strength or otherwise of approved investment counterparties and are alert to investment opportunities with top quality foreign banks. However interest rates generally are suppressed among the most secure counterparties and there would need to be a clear advantage for the Council before any deposit would be considered and no general amendment to the criteria approved in the Treasury Management Strategy Statement is envisaged for the foreseeable future.

4. Recommendations

a) That the investment counterparty criteria approved in the Treasury Management Strategy Statement be affirmed;

b) That the decision of the Director – Resources to relax the blanket embargo on selected high quality foreign counterparties within delegated authority be noted.

For further information please contact Bill Hill, Senior Accountant on Ext. 5587

D Dickinson Director – Resources

20

1

AUDIT AND ACCOUNTS COMMITTEE AGENDA ITEM NO. 7 WEDNESDAY 6 NOVEMBER 2013 INTERNAL AUDIT PROGRESS REPORT REPORT PRESENTED BY: HEAD OF AUDIT AND RISK MANAGEMENT – AUDIT LINCOLNSHIRE 1.0 Purpose of Report To receive and comment upon the latest Internal Audit Progress Report which covers the

period up to September 2013. 2.0 Introduction

The purpose of the internal audit progress report (Appendix A) is to provide a summary of Internal Audit work undertaken during 2013/14 against the agreed audit plan.

3.0 RECOMMENDATION That the Audit and Accounts Committee consider and comment upon the latest internal

audit progress report. Background Papers Nil. For further information please contact Lucy Pledge on 01522 553692. David Dickinson Director of Resources

21

22

Internal Audit - Progress Report 2013 / 14

Date: September 2013

23

Audit Lincolnshire – Internal Audit Report

Page 1 of 24

Contents Introduction 2 Key Messages 2 Internal Audit work completed from June to September 3 Other Significant Work 5 Audits in Progress 5

Performance Information 7 Other matters of interest

8

Appendices Appendix 1 – Assurance Definitions 9Appendix 2 - Audits where assurance is assessed as ‘No’ or ‘Limited’ 10Appendix 3 – Outstanding recommendations as at 30 September 2013 16Appendix 4 - Internal Audit Plan & Schedule 2013/14 and outstanding 2012/13 audits

17

Contact Details: Lucy Pledge CMIIA Head of Audit & Risk Management

County Offices, Newland, Lincoln, LN1 1YG �: 01522 553692 � lucy.pledge@lincolnshire.gov.uk

24

Audit Lincolnshire – Internal Audit Report

Page 2 of 24

Introduction 1 The purpose of this report is to:

Advise of progress being made with the Audit Plan

Provide details of the audit work during the period

Provide details of the current position with agreed management actions in respect of previously issued reports

Raise any other matters that may be relevant to the Audit and Accounts Committee role

Key Messages 2 Progress is being made to complete the outstanding work remaining from the

2012/13 audit plan and this is very nearly completed. The 2013/14 plan is currently slightly behind target although this is not unexpected; the majority of work is programmed during the latter half of 2013/14. There are a number of audits in progress and many nearing or at draft report stage. Arrangements are in place to ensure delivery of the plan by 31st March 2014.

3 Our follow-up process has strengthened and we are pleased to report very few

recommendations which are not implemented on time. 4 The combined assurance report has been presented to CMT and is due to be

presented to the November Committee. The model provides an overview of assurance across all Council activities leveraging assurance from other assurance providers. It will help identify where assurances are present, their source and where there are potential gaps or unknown areas.

5 There were completion issues with an audit contractor which has caused delays on

completing some 2012/13 audits. These have subsequently been refunded to the Council.

25

Audit Lincolnshire – Internal Audit Report

Page 3 of 24

Internal Audit work completed from June to September 2013 6 The following audit work has been completed and a final report issued:

Full Assurance Substantial Assurance

Limited Assurance No Assurance

None CIL/S106

Payroll

Performance Management

Asset Management

Counter Fraud

Information Governance

None

Note The Audit Committee should note that the assurance expressed is at the time of issue

of the report but before the full implementation of the agreed management action plan. Definitions levels are shown in Appendix 1.

7 We have three limited assurance audits to report on in this quarter; the

management summaries are at Appendix 2. 8 Progress with the implementation of agreed management action on

recommendations for audits is followed up and reported in Appendix 3. 9 In the audits given Substantial Assurance, we confirmed that the Council has sound

processes in place:- CIL/S106

Section 106 (S106) agreements are a way of delivering or addressing matters that are necessary to make a development acceptable in planning terms. The common uses are to secure affordable housing, and to specify the type and timing of this housing; and to secure financial contributions to provide infrastructure or affordable housing. From April 2014 local planning authorities will not be able to use section 106 agreements to fund infrastructure that is needed because of new development. The Community Infrastructure Levy came into force in April 2010. It allows local authorities in England and Wales to raise funds from developers undertaking new building projects in their area. The money can be used to fund a wide range of infrastructure that is needed as a result of development. This includes new or safer road schemes, flood defences, schools, hospitals and other health and social care facilities, park improvements, green spaces and leisure centres. Newark and Sherwood District Council have implemented a CIL charging scheme. The systems for managing CIL/S106 were found to be well managed and generally operating efficiently:

26

Audit Lincolnshire – Internal Audit Report

Page 4 of 24

Regular meetings are undertaken to monitor S106 and CIL progress.

Section 106 monitoring is assisted by a dedicated Access database.

The authority’s internet site contained a wealth of information relating to the CIL charge.

Relevant forms for progressing the CIL charge were in place.

Income is promptly banked and recorded. Payroll

For the areas examined the key controls were found to be operating satisfactorily in respect of :-

Employees are set up and removed promptly and accurately on receipt of valid and authorised documentation;

Proposed payments of salaries and allowances are suitably reconciled and authorised;

Statutory and other deductions including pensions are dealt with in line with legislative requirements; we also tested a sample of tax, NI and pension deductions which were found to be accurate.

The Council’s accounts accurately reflect the payroll costs.

Performance Management

We found that the performance management arrangements allow the Council to adequately measure the performance of its operational activities. The Council have made good progress over the last 12 months to implement new performance management arrangements. Despite the initial mixed enthusiasm for using Covalent, the performance unit have now ensured that all business units have performance indicators on Covalent. We reviewed both the framework and the actual arrangements in place and found several areas of good practice as follows:

The Draft Performance Management Framework sets out the arrangements to provide effective performance management at the Council. The final version was agreed by CMT in September.

Roles and responsibilities have been clearly defined.

Business Managers are supported by the Performance business unit to manage the performance of their individual units and to display performance data on Covalent.

There is an adequate program of monitoring performance indicator completion and reporting to CMT by the Performance business unit.

Usage of Covalent is continually being developed.

27

Audit Lincolnshire – Internal Audit Report

Page 5 of 24

Other Significant Work 10 Combined Assurance Model

The Combined Assurance report has been presented to the Corporate Management Team and is being presented to the November Audit and Accounts Committee.

11 Gilstrap Accounts The accounts were audited and there were no items giving rise to a qualified opinion. 12 Additional work We have used some of the contingency to carry out a couple of pieces of additional

work instead of KPMG carrying them out. This has included the initial testing for the Housing Benefit subsidy and checking of the NNDR return. The HB Subsidy testing is based on Department of Work and Pension requirements and helps KPMG determine any additional testing requirements. The NNDR claim has been signed off by KPMG. Both grant claims will be included within the External Auditors report in the new year.

Audits in Progress 13 The following 2012/13 audits are currently in progress:

Audits at Draft Report Stage

Environmental Changes*

Localism Act

IT applications

Transparency Agenda

Audits in Progress

Corporate Governance

Allowances, Expenses

Newark and Sherwood Homes

* Further consideration of the draft report is required by the new Business Manager Asset Management before this report can be finalised.

Audit Lincolnshire have had some issues regarding the performance of a contractor

employed to complete a number of 2012/13 audits for Newark and Sherwood District Council. The amount charged for these audits has now been reimbursed to the Council and the audits will not now be completed.

28

Audit Lincolnshire – Internal Audit Report

Page 6 of 24

14 The following 2013/14 audits are currently in progress:

Audits at Draft Report Stage

Street Cleansing

Bank Reconciliation

Medium Term Financial Planning

Recovery/Bailiffs

NNDR

Strategic Risk Register

Audits in Progress

New Council Tax Support Scheme

Growth Investment Fund

Economic Development

New Build/Affordable Homes

Commissioning/Savings

Emerging Risks

29

Audit Lincolnshire – Internal Audit Report

Page 7 of 24

Performance Information

15 Our current performance against targets is shown below:-

Performance Indicator

Target

2012/13 Actual @ 30/09/13

2013/14 Actual @ 30/09/13

Percentage of plan completed.

2012/13 100% (revised plan) 2013/14 54% time 27% jobs

99%*

26% Time 5% Jobs

Percentage of key financial systems completed.

2012/13 100% 2013/14 20%

100% 0%^

Percentage of recommendations agreed.

100% 97% N/A

Percentage of recommendations implemented.

100% or escalated

100% (Some have been implemented early)

N/A

Timescales Draft report issued within 10 working days of completing audit.

Final report issued within 5 working days of closure meeting / receipt of management responses.

93%

72%

N/A

N/A

Client Feedback on Audit (average)

Good to excellent 100% N/A

*Audits totalling 38.5 days had to be moved to 13/14 so this figure shows the audit percentage completion based on the revised total. Audits reimbursed have also been removed from the plan days. ^ This is at draft report stage so very nearly achieved target.

16 Performance is below target for a number of reasons this quarter. Completion of the 2012/13 plan has remained the priority and this is now nearing completion so work on the 2013/14 plan can be progressed. The percentage split of work for the first six months has been 20% 2012/13 and 80% 2013/14.

17 All planned quarter 1 audits have been started and some are now at draft report stage and the majority of quarter 2 audits have also been started. Some audits within the plan have been moved at the request of the client for a number of reasons and this has also contributed towards the below target performance.

30

Audit Lincolnshire – Internal Audit Report

Page 8 of 24

Other matters of Interest 18 CIPFA is currently consulting on a change to Audit Committee guidance; further

details will be provided at the next meeting.

31

Audit Lincolnshire – Internal Audit Report

Page 9 of 24

Appendix 1 - Assurance Definitions1 Full Assurance

Our critical review or assessment on the activity gives us a high level of confidence on service delivery arrangements, management of risks, and the operation of controls and / or performance. The risk of the activity not achieving its objectives or outcomes is low. As a guide there are a few low risk / priority actions arising from the review.

Substantial Assurance

Our critical review or assessment on the activity gives us a reasonable level of confidence on service delivery arrangements, management of risks, and operation of controls and / or performance. There are some improvements needed in the application of controls to manage risks. However, the controls are in place and operating sufficiently so that the risk to the activity not achieving its objectives is medium to low. As a guide there are low to medium risk / priority actions arising from the review.

Limited Assurance

Our critical review or assessment on the activity identified some concerns on service delivery arrangements, management of risks, and operation of controls and / or performance. The controls to manage the risks are not always being operated or are inadequate. Therefore, the risk of the activity not achieving its objectives is medium to high. As a guide there are medium and a few high risk / priority actions arising from the review. Our work did not identify system failures that could result in any of the following: - damage to the Council’s reputation - material financial loss - adverse impact on members of the public - failure to comply with legal requirements

No Assurance

Our critical review or assessment on the activity identified significant concerns on service delivery arrangements, management of risks, and operation of controls and / or performance. Our work identified system failures that could result in any of the following: - damage to the Council’s reputation - material financial loss - adverse impact on members of the public - failure to comply with legal requirements The controls to manage the risks are not being operated or are not present. Therefore the risk of the activity not achieving its objectives is high. As a guide there are a large number of medium and high risks / priority actions arising from the review.

1 The assurance opinion is based on information and evidence which came to our attention during the audit. Our work cannot provide absolute assurance that material errors, loss or fraud do not exist.

32

Audit Lincolnshire – Internal Audit Report

Page 10 of 24

Appendix 2 – Audits where assurance is assessed as ‘No’ or ‘Limited’ (Executive Summaries only) Asset Management Executive Summary

Assurance Opinion – Limited Assurance Our audit found that the management processes in place were not sufficient to ensure that the property portfolio is effectively managed. We have made a number of suggestions where improvements could be made around the corporate management of assets owned by the authority:-

• The Council does not have an overall strategy for managing it’s assets. The production of an asset management plan as referred to in the Council’s constitution would provide such a strategy.

• A programme of asset reviews is not currently being compiled to assist in the effective management

of the property portfolio. We found that the reviews of assets and land holdings commenced in October 2011 but stalled in April 2012. The current focus is to resolve three specific property matters that have been brought to the attention of the Policy, Overview and Scrutiny Committee. We feel that a program of asset reviews should be compiled and adhered to, to ensure that the authority promptly identifies assets that may be surplus to requirements.

• We have suggested that a separate steering group is set up to support Asset Management reviews. This should assist in improving the effective use of resources.

We found that the property register used by the Asset Management Business Unit is not being actively maintained and there is no listing of disposals. We have therefore suggested that the register is kept up to date, reconciled with the records held in Accountancy and a listing of disposals maintained. We have been unable to confirm that the Asset Management and Disposal Policy has been approved. We have suggested that management ensure that it has been approved. The processing elements of asset management, such as the disposal undertaken within 2011/12, were found to be operating satisfactorily. We examined a number of recent property disposals and found that all of the disposals examined were supported by evidence of appropriate authorisation.

33

Audit Lincolnshire – Internal Audit Report

Page 11 of 24

Direction of Travel

Improving

We are aware that the service has been subject to staff resource issues as the previous Business Manager was shared between three neighbouring authorities. This arrangement has now come to an end and an appointment has now been made to provide a full-time replacement for Newark and Sherwood District Council only. This additional resource may help address the findings within this report. .

Management Response There has been little structured property asset management following the period 2008 to 2010. As the new Business Manager, I recognise the opportunity to start afresh following my appointment and look forward to implementing the plan agreed with the Director of Resources.

Management Actions

No

All to be completed by:

High Priority 3 October 2013 Medium Priority 3 December 2013

34

Audit Lincolnshire – Internal Audit Progress Report

Page 12 of 26

Counter Fraud Executive Summary

Assurance Opinion – Limited Assurance We found that the arrangements in place for countering fraud at Newark and Sherwood District Council generally adhere to the main principles of Fighting Fraud Locally, the Local Government Fraud Strategy. The recently revised Anti Fraud policies and procedures developed by the council are robust. In particular, the Strategy is comprehensive with clear links to other related documents and policies including the ‘Guidance for Dealing with Irregularities’ and the Whistleblowing Policy. The council has a robust approach in tackling its main fraud risk areas such as Housing and Council Tax benefit although some work is required to pro-actively assess fraud risks in corporate areas such as employee and procurement fraud. There is scope to further improve engagement at all levels. One of the main themes of Fighting Fraud Locally is that councils must acknowledge their fraud risks in order to achieve an anti-fraud culture. To assess whether Newark and Sherwood District Council are taking all reasonable steps to counter fraud and corruption and protect the business it needs to ensure it fully understand its fraud risk exposure. This will require support from the top and is crucial in maintaining a strong response in this key governance area. Direction of travel Improving

The Council is actively taking steps to strengthen its arrangements to counter fraud and corruption in line with recommended practice

Newark and Sherwood District Council have already made some progress towards achieving the levels of good practice recommended in the Fighting Fraud Locally Strategy. The Council already acknowledges its main fraud risks and take appropriate steps to address them. Pro active exercises have been undertaken to identify fraud within Housing and Council Tax Benefit systems and there is evidence that successful cases are reported within the local press. This work is not replicated in areas of potential corporate fraud.

35

Audit Lincolnshire – Internal Audit Progress Report

Page 13 of 26

The Benefits Fraud Team clearly has strong relationships with the relevant agencies such as the DWP to allow it to prevent and pursue potential cases of benefit fraud. Data matching is also carried out on a regular basis - the council does not rely solely on the biannual National Fraud Initiative to address possible issues. The Council has recently revised its Constitution so that many of the policies, such as the Codes of Conduct and Whistleblowing Policy, that link to the Anti Fraud and Corruption Strategy are now up to date. The Anti Fraud Strategy that covers benefits is comprehensive in its coverage although requires updating to ensure it reflects current structures and practices and is accessible. More work is required to ensure that stakeholders at all levels are fully engaged in the Council’s response to countering fraud. Fighting Fraud Locally relies heavily on a strong counter fraud culture. An important factor is that members and management are fully involved in the process to ensure the key messages and expectations filter down to employees and the wider general public. It is clear that the Audit and Accounts Committee review the Anti Fraud Strategy on a regular basis but overall fraud activity and statistics are not currently reported and this may be a method of ensuring members ‘buy in’ to the process. Similarly, some policies and articles relating to fraud are held on the council’s Intranet and external website but improved communication of counter fraud activity would help promote fraud awareness among employees and local residents. The Council’s arrangements for dealing with matches produced through the National Fraud Initiative are robust and have resulted in recoveries being made.

Management Response The Business Manager (Financial Services) provided a management response. The Council has undergone some major changes in the last couple of years and corporate counter-fraud activities have been given less priority during this time. This report gives a fair view of the current position and we acknowledge that more focus needs to be given to this area. We will use the recommendations to determine our future approach to counter fraud.

Management Actions

No

All to be completed by:

High Priority

1

Medium Priority 6

36

Audit Lincolnshire – Internal Audit Progress Report

Page 14 of 26

Information Governance

Executive Summary

Assurance Opinion - Limited Assurance The Council handles and holds vast amounts of information and has a responsibility to its stakeholders for managing that information, ensuring it is processed legally, securely, efficiently and effectively. We have found that the management of records and information at the Council needs to be strengthened to provide greater assurance to stakeholders and protect the Council against reputational and legislative risk of poorly applied information and record management. We believe that the following recommendations will help support staff and members to discharge their information management responsibilities and help to demonstrate to all stakeholders the priority given to managing their information:

• Develop an overarching information management policy supported by a records management policy and procedure

• Undertake a data audit to provide a sound basis for data cleansing, disposal and where necessary indexing

• Review delivery and coverage of training for staff and Members to ensure they are fully aware and understand their responsibilities for managing information and records

• Require managers to remind staff of the need to ensure information is kept in recognised network locations

We have recently completed a separate audit of information security giving an opinion of substantial assurance. As part of this review we confirmed that there are appropriate systems in place for the disposal of ICT equipment. To help the Council ensure that it meets its legal obligations and maintain openness and transparency we have recommended:

• As a high priority the data protection handbook is completed and circulated. The content should be included as part of training development

• Review the use of private email accounts following Information Commissioners’ advice and IT security policies.

• Management and content of information sharing agreements with third parties are reviewed.

To assist in delivering improvements in managing information at the Council we have recommended:

• Producing an implementation plan of work taking into account priorities, timescales and resources available.

• Review and update of the business case for acquiring an electronic data and records

37

Audit Lincolnshire – Internal Audit Progress Report

Page 15 of 26

Direction of Travel

As this was our first review of Information Governance we are unable to assess the Direction of Travel at this time.

Management Response This audit was carried out prior to 2013. In January 2013, following a restructure the Business Manger Customer Services and External Communication became responsible for Information Governance. The roles of the Information Governance Officer and Assistant Information Governance Officer have since become more clearly defined; the Information Governance Officer now has the specific task of implementing a corporate Information Management Framework throughout NSDC. A report was taken to CMT during April 2013 to advise them of the relevant policies and to obtain their agreement in implementing these. An action plan has been created; however due to long term sickness of the Information Governance Officer the roll out has been temporarily suspended pending his return to work. It is appreciated that “the job shouldn’t stop” but this is a very specialist role and currently no one else can deliver it. The situation will be re- assessed at the end of August 2013.

management system. Documenting the decision making process for taking this procurement forward.

Management Actions No All to be completed by:

High Priority 2 March 2014 Medium Priority 6 April 2014

38

Audit Lincolnshire – Internal Audit Progress Report

Page 16 of 26

Appendix 3 - Outstanding recommendations as at 30 Sept 2013 For 2012/13 audits we have made and agreed 204 recommendations to date; 154 have been implemented, 9 are outstanding, 29 have not yet reached their implementation date and 12 have revised implementation dates. There are a number of recommendations which have not been implemented and these are shown in the table below. We will continue to track these alongside any new recommendations.

The Audit and Accounts Committee may wish to seek further information on the progress of unsatisfactory audits; management can be asked to provide a paper on how they will be addressing the outstanding recommendations.

We are satisfied that there are adequate reasons for the provision of revised implementation dates and action is being taken towards their implementation.

Reports Issued for 2012/13

Audit Area

Date Assurance No.of

Agreed Recs

ImplementedRevised

Implementation Date Agreed

Outstanding* Not Due H M

Customers Information Governance

Sept 2013

Limited 8 0 0 0 0 8

Growth Building Control Jan’13 Substantial 4 2 2 0 0 0Land charges May’13 Limited 6 4 2 0 0 0Strategic Housing Risks

Jun’13 Substantial 3 1 2 0 0 0

Growth Point Jun’13 Substantial 4 1 0 0 3 0CIL/S106 Aug13 Substantial 5 4 0 0 0 1ICT PCIDSS Nov’12 No 4 3 1 0 0 0IT Security Feb’13 Substantial 11 8 0 0 0 3

Resources

Council Tax Dec’12 Substantial 2 1 0 0 1 0Counter Fraud May’13 Limited 7 2 4 0 1 0

Performance Management

Jul’13

Limited 4 3 (Early) 0 0 0 1

Asset Management Jul’13 Limited 6 0 0 0 0 6

Safety Risk Management Jun’13 Substantial 4 2 0 0 0 2

Equality and Diversity Jan’13 Limited 9 5 0 0 0 4

Health and Safety Apr’13 Limited 6 4 1 0 0 1

Licensing Mar’13 Limited 6 3 0 0 0 3

Strategic and Emerging Risks

Change Programme Dec’12 Substantial 6 2 0 1 3 0

*Those which had an implementation date of 30/09/13 or earlier and have not revised them.

39

Aud

it Li

ncol

nshi

re –

Inte

rnal

Aud

it R

epor

t

P

age

17 o

f 26

App

endi

x 4

– In

tern

al A

udit

Pla

n &

Sch

edul

e 20

13/1

4 A

rea

D

ays

Indi

cati

ve S

cope

Pl

anne

d St

art D

ate

Act

ual

Star

t Dat

e

Fina

l Rep

ort

Issu

ed

Stat

us /

Ass

uran

ce

Leve

l Giv

en

Crit

ical

Ser

vice

Act

ivit

ies

Dir

ecto

r Sa

fety

22

Busi

ness

Con

tinui

ty

To

rev

iew

the

Coun

cil’s

ar

rang

emen

ts fo

r Bu

sine

ss

Cont

inui

ty to

ens

ure

it ca

n re

spon

d ef

fect

ivel

y.

Qua

rter

2

Mov

ed to

qua

rter

4 a

t th

e re

ques

t of t

he

clie

nt.

Hea

lth a

nd S

afet

y

Hav

ing

com

plet

ed a

n ov

ervi

ew

of h

ealth

and

saf

ety

arra

ngem

ents

in 2

012/

13 w

e w

ill fo

cus

in m

ore

dept

h on

so

me

spec

ific

area

s su

ch a

s co

ntra

ctor

ris

ks, l

egio

nella

, fal

ls

from

hei

ght,

asb

esto

s an

d ri

sk

asse

ssm

ent.

Qua

rter

3

Dir

ecto

r G

row

th

39

Ec

onom

ic D

evel

opm

ent

W

e w

ill r

evie

w th

e Co

unci

l’s

arra

ngem

ents

for

man

agin

g Ec

onom

ic D

evel

opm

ent,

taki

ng

acco

unt o

f rel

ated

pol

icie

s,

stra

tegi

es a

nd li

nkag

es to

the

loca

l dev

elop

men

t fra

mew

ork.

Qua

rter

2

Ong

oing

– te

stin

g be

ing

carr

ied

out.

Gro

wth

Inve

stm

ent F

und

To

pro

vide

ass

uran

ce th

at th

e ne

w b

usin

ess

loan

sch

eme

is

Qua

rter

2

Ong

oing

– te

stin

g be

ing

carr

ied

out.

40

Aud

it Li

ncol

nshi

re –

Inte

rnal

Aud

it R

epor

t

P

age

18 o

f 26

Are

a

D

ays

Indi

cati

ve S

cope

Pl

anne

d St

art D

ate

Act

ual

Star

t Dat

e

Fina

l Rep

ort

Issu

ed

Stat

us /

Ass

uran

ce

Leve

l Giv

en

oper

atin

g in

acc

orda

nce

with

sc

hem

e co

nditi

ons.

New

bui

ld a

ffor

dabl

e ho

mes

/e

mpt

y ho

mes

bac

k in

to u

se

W

e w

ill r

evie

w a

rran

gem

ents

fo

r af

ford

able

hou

sing

and

em

pty

hom

es li

nked

to th

e Co

unci

l’s o

bjec

tives

.

Qua

rter

2

Ong

oing

– th

e st

art w

as

dela

yed

due

to th

e av

aila

bilit

y of

the

audi

tee

but i

nitia

l di

scus

sion

s ha

ve ta

ken

plac

e an

d te

stin

g co

mm

ence

d.

Mon

itori

ng N

ewar

k an

d Sh

erw

ood

Hom

es

Re

view

mon

itori

ng

arra

ngem

ents

for

New

ark

and

Sher

woo

d H

omes

Qua

rter

4

Dir

ecto

r Cu

stom

ers

15

Co

rpor

ate

com

plai

nts

To p

rovi

de a

ssur

ance

on

the

corp

orat

e co

mpl

aint

s sy

stem

in

clud

ing

liais

on w

ith th

e O

mbu

dsm

an.

Qua

rter

3

Use

of S

ocia

l Med

ia

W

e w

ill a

sses

s th

e ap

proa

ch to

so

cial

med

ia p

olic

ies

ensu

ring

su

ffic

ient

saf

egua

rds

are

in

plac

e at

a c

orpo

rate

and

em

ploy

ee le

vel.

Qua

rter

4

Dir

ecto

r Co

mm

unit

y 22

Stre

et C

lean

sing

To p

rovi

de a

ssur

ance

on

Stre

et

Clea

nsin

g lin

ked

to o

bjec

tives

Q

uart

er 1

A

pril

2013

Dra

ft re

port

with

CM

T

41

Aud

it Li

ncol

nshi

re –

Inte

rnal

Aud

it R

epor

t

P

age

19 o

f 26

Are

a

D

ays

Indi

cati

ve S

cope

Pl

anne

d St

art D

ate

Act

ual

Star

t Dat

e

Fina

l Rep

ort

Issu

ed

Stat

us /

Ass

uran

ce

Leve

l Giv

en

and

perf

orm

ance

targ

ets

Car

Park

s an

d M

arke

ts

12

Re

view

of o

ff-s

tree

t car

par

k in

com

e, c

ar b

oot a

nd r

esid

ents

pa

rkin

g. F

ocus

to b

e ag

reed

.

Qua

rter

4

Sub

Tota

l 98

Due

Dili

genc

e

Ch

ief E

xecu

tive

32

Corp

orat

e Pl

an

To

rev

iew

the

Stra

tegi

c /

Corp

orat

e Pl

an to

pro

vide

as

sura

nce

on th

e pr

ogre

ss m

ade

agai

nst t

he d

eliv

ery

of k

ey

prio

ritie

s.

Qua

rter

2

Corp

orat

e G

over

nanc

e

To p

rovi

de a

ssur

ance

on

the

Coun

cil’s

Gov

erna

nce

arra

ngem

ents

aga

inst

rev

ised

gu

idan

ce. T

his

wor

k w

ill

com

plem

ent a

nd b

uild

on

the

assu

ranc

e w

ork

unde

rtak

en in

20

12/1

3.

Qua

rter

3

Com

mis

sion

ing

/ Sa

ving

s

To p

rovi

de a

ssur

ance

on

the

Coun

cil’s

ong

oing

arr

ange

men

ts

for i

dent

ifyin

g re

quir

ed s

avin

gs.

Qua

rter

2

Ong

oing

– in

the

initi

al

stag

es o

f aud

it.

Dir

ecto

r of

Res

ourc

es

137

Re

cove

ry /

bai

liffs

To r

evie

w c

orpo

rate

rec

over

y Q

uart

er 1

M

ay 2

013

D

raft

rep

ort w

ith C

MT

42

Aud

it Li

ncol

nshi

re –

Inte

rnal

Aud

it R

epor

t

P

age

20 o

f 26

Are

a

D

ays

Indi

cati

ve S

cope

Pl

anne

d St

art D

ate

Act

ual

Star

t Dat

e

Fina

l Rep

ort

Issu

ed

Stat

us /

Ass

uran

ce

Leve

l Giv

en

proc

edur

es.

N

ew C

ounc

il Ta

x Su

ppor

t Sch

eme

To

pro

vide

ass

uran

ce o

n th

e ne

w C

ounc

il Ta

x Su

ppor

t Sc

hem

e. W

e w

ill a

lso

revi

ew

impl

emen

tatio

n of

new

le

gisl

atio

n/re

gula

tion

e.g.

be

nefit

cap

, und

er o

ccup

atio

n in

so

cial

ren

ted

sect

or a

nd L

HA

(L

ocal

Hou

sing

Allo

wan

ce)

free

ze.

Qua

rter

2

Ong

oing

– te

stin

g be

ing

unde

rtak

en.

Bene

fits

To

pro

vide

ass

uran

ce o

n ke

y ri

sk

and

cont

rols

and

test

tr

ansa

ctio

ns. T

his

incl

udes

fo

llow

up

of s

ubsi

dy te

stin

g is

sues

and

thos

e w

ithin

our

20

12/1

3 au

dit r

epor

t.

Qua

rter

4

NN

DR

To

pro

vide

ass

uran

ce o

n ke

y ri

sk

and

cont

rols

and

test

tr

ansa

ctio

ns.

Qua

rter

2

Dra

ft r

epor

t

Deb

tors

To p

rovi

de a

ssur

ance

on

key

risk

an

d co

ntro

ls a

nd te

st

tran

sact

ions

.

Qua

rter

2

Mov

ed to

qua

rter

3 a

t th

e re

ques

t of t

he

clie

nt.

Payr

oll

To

pro

vide

ass

uran

ce o

n ke

y ri

sk

Qua

rter

3

43

Aud

it Li

ncol

nshi

re –

Inte

rnal

Aud

it R

epor

t

P

age

21 o

f 26

Are

a

D

ays

Indi

cati

ve S

cope

Pl

anne

d St

art D

ate

Act

ual

Star

t Dat

e

Fina

l Rep

ort

Issu

ed

Stat

us /

Ass

uran

ce

Leve

l Giv

en

and

cont

rols

and

test

tr

ansa

ctio

ns.

St

rate

gic

Ass

et M

anag

emen

t

Focu

s to

be

agre

ed w

ith D

OR

Qua

rter

4

M

ansf

ield

Cre

mat

oriu

m

W

e w

ill u

nder

take

our

ann

ual

revi

ew o

f acc

ount

s.

Qua

rter

1

May

M

ay

Com

plet

ed.

Gils

trap

Acc

ount

s

We

will

und

erta

ke o

ur a

nnua

l re

view

of a

ccou

nts.

Q

uart

er 2

Ju

ne

Sept

Co

mpl

eted

Catt

le M

arke

t

Man

dato

ry a

nnua

l aud

it of

re

ntal

fee.

Q

uart

er 1

Ju

ne

O

ngoi

ng.

Wor

k co

mpl

eted

aw

aitin

g cl

eari

ng o

f que

ries

with

cl

ient

hop

eful

ly to

be

clea

red

in O

ctob

er.

Man

aged

Aud

it w

ork.

This

allo

catio

n of

up

to 3

0 da

ys

will

be

used

to u

nder

take

wor

k on

fina

ncia

l/du

e di

ligen

ce

syst

ems,

liai

sing

with

the

Exte

rnal

Aud

itor

to e

nsur

e ef

fect

ive

part

ners

hip

wor

king

be

twee

n in

tern

al a

nd e

xter

nal

audi

t.

Qua

rter

4

Key

Proj

ects

Co

ntra

ct m

anag

emen

t - G

ener

al

12

To r

evie

w c

ontr

act m

onito

ring

on

the

Coun

cils

larg

er c

ontr

acts

. Q

uart

er 3

Proj

ect /

Pro

gram

me

Man

agem

ent

15

We

will

und

erta

ke a

rev

iew

of

one

or m

ore

capi

tal p

roje

cts

/ Q

uart

er 3

44

Aud

it Li

ncol

nshi

re –

Inte

rnal

Aud

it R

epor

t

P

age

22 o

f 26

Are

a

D

ays

Indi

cati

ve S

cope

Pl

anne

d St

art D

ate

Act

ual

Star

t Dat

e

Fina

l Rep

ort

Issu

ed

Stat

us /

Ass

uran

ce

Leve

l Giv

en

stra

tegi

c pr

ojec

ts w

ithin

the

Aut

hori

ty to

ens

ure

com

plia

nce

and

effe

ctiv

enes

s of

del

iver

y.

Stra

tegi

c an

d Em

ergi

ng R

isks

St

rate

gic

Risk

Reg

iste

r 10

To

pro

vide

ass

uran

ce o

n th

e st

rate

gic

risk

reg

iste

r in

term

s of

ac

tions

to m

itiga

te id

entif

ied

risk

s.

Qua

rter

2

Dra

ft r

epor

t

Emer

ging

Ris

ks

20

To a

udit

any

sign

ifica

nt

emer

ging

ris

ks a

risi

ng in

the

year

Qua

rter

2

Ong

oing

Oth

er r

elev

ant A

reas

Co

mbi

ned

Ass

uran

ce

15

Upd

atin

g as

sura

nces

on

the

Coun

cil’s

ass

uran

ce m

ap w

ith

serv

ice

man

ager

s an

d he

lpin

g to

co

-ord

inat

ing

the

annu

al s

tatu

s re

port

.

Ong

oing

ICT

Aud

it 32

o

Revi

ew o

f key

ICT

appl

icat

ions

to a

sses

s co

ntro

l arr

ange

men

ts.

o Bu

ildin

g on

the

infr

astr

uctu

re a

udit

in

2012

/13

we

will

exa

min

e on

e or

mor

e ar

eas

in m

ore

deta

il e.

g. b

ack-

up, d

isas

ter

reco

very

Qua

rter

2-

3

45

Aud

it Li

ncol

nshi

re –

Inte

rnal

Aud

it R

epor

t

P

age

23 o

f 26

Are

a

D

ays

Indi

cati

ve S

cope

Pl

anne

d St

art D

ate

Act

ual

Star

t Dat

e

Fina

l Rep

ort

Issu

ed

Stat

us /

Ass

uran

ce

Leve

l Giv

en

o To

pro

vide

ass

uran

ce o

n th

e ar

rang

emen

ts fo

r co

rpor

ate

IT p

roje

cts.

Co

rpor

ate

Coun

ter

Frau

d 12

To

rev

iew

the

Coun

cil’s

frau

d ri

sk a

sses

smen

t and

focu

s on

so

me

of th

e hi

gher

ris

k ar

eas

such

as

e.g.

pro

cure

men

t,

recr

uitm

ent,

etc

Qua

rter

4

New

ark

and

Sher

woo

d H

omes

63

In

tern

al A

udit

Plan

201

3/14

Ong

oing

– 1

aud

it at

dr

aft r

epor

t sta

ge a

nd

anot

her

at te

stin

g st

age.

N

on-A

udit

A

dvic

e &

Lia

ison

10

Ong

oing

Ann

ual R

epor

t 3

O

ngoi

ng

A

udit

Com

mitt

ee

20

O

ngoi

ng

Re

view

IA S

trat

egy

and

plan

ning

2

O

ngoi

ng

Fo

llow

-up

of p

revi

ous

audi

t re

port

s 7

O

ngoi

ng

O

ngoi

ng

Co

ntin

genc

y 17

(57

in

plan

se

e no

tes)

Sout

hwel

l LC

up to

17.

Up

to 3

5 da

ys to

be

used

for

Hou

sing

Be

nefit

Sub

sidy

wor

k. 5

day

s us

ed fo

r N

ND

R cl

aim

wor

k.

Ther

e is

an

addi

tiona

l 19

days

tr

ansf

erre

d fr

om 2

012/

13

Ong

oing

So

uthw

ell L

C sc

ope

agre

ed a

nd a

udit

to

com

men

ce s

hort

ly.

46

Aud

it Li

ncol

nshi

re –

Inte

rnal

Aud

it R

epor

t

P

age

24 o

f 26

Are

a

D

ays

Indi

cati

ve S

cope

Pl

anne

d St

art D

ate

Act

ual

Star

t Dat

e

Fina

l Rep

ort

Issu

ed

Stat

us /

Ass

uran

ce

Leve

l Giv

en

prov

idin

g 19

day

s co

ntin

genc

y ba

lanc

e.

HB

Subs

idy

35

Ju

n Ju

n N

/A

Com

plet

e N

ND

R Cl

aim

5

A

ug

Aug

N

/A

Com

plet

e

Gra

nd T

otal

54

5

47

Aud

it Li

ncol

nshi

re –

Inte

rnal

Aud

it R

epor

t

P

age

25 o

f 26

Ong

oing

wor

k fr

om t

he 2

012/

13 A

udit

Pla

n A

rea

Stat

us /

Ass

uran

ce L

evel

Giv

en

Crit

ical

Ser

vice

Act

ivit

ies

D

eput

y Ch

ief E

xecu

tive

Corp

orat

e G

over

nanc

e Th

e m

ain

part

com

plet

ed a

nd r

epor

ted

to m

anag

emen

t thi

s w

ork

is p

rogr

amm

ed a

s pa

rt o

f the

201

3/14

pla

n.

Proj

ect a

nd C

ontr

act M

anag

emen

t Re

fund

ed d

ue to

con

trac

tor

not c

ompl

etin

g Pr

ojec

t and

con

trac

t man

agem

ent

Refu

nded

due

to c

ontr

acto

r no

t com

plet

ing

Safe

ty

Co

mm

unit

y Sa

fety

CCTV

Re

view

pos

tpon

ed fo

llow

ing

cont

act t

o st

art r

evie

w.

Car

Park

s an

d m

arke

ts

Lo

rry

Park

Re

fund

ed d

ue to

con

trac

tor

not c

ompl

etin

g Re

sour

ces

Re

spon

ding

and

ada

ptin

g to

Env

iron

men

tal C

hang

es

Dra

ft R

epor

t. T

his

mat

ter

is b

eing

dis

cuss

ed a

gain

with

Dir

ecto

r of

Res

ourc

es.

Dev

elop

men

t

New

ark

& S

herw

ood

Hom

es

In p

rogr

ess.

Six

aud

its c

ompl

eted

. Com

plet

ion

of r

emai

ning

tw

o po

stpo

ned

to

2013

/14

and

are

ongo

ing.

D

ue D

ilige

nce

Re

sour

ces

Ca

ttle

Mar

ket

In p

rogr

ess.

Aw

aitin

g re

solu

tion

of a

dditi

onal

mar

kets

– w

ith N

SDC

Lega

l Uni

t.

Allo

wan

ces

and

expe

nses

+ T

rans

pare

ncy

Age

nda

+ Co

nduc

t ar

eas

/ Re

gist

er o

f Int

eres

ts/

Seco

ndar

y Em

ploy

men

t / G

ifts

and

Hos

pita

lity

Revi

ew c

omm

ence

d.

Tran

spar

ency

com

plet

ed.

Proc

urem

ent C

ontr

acts

Re

fund

ed d

ue to

con

trac

tor

not c

ompl

etin

g Co

re fi

nanc

ial s

yste

ms

wor

k (t

o be

agr

eed

wit

h D

D)

Bank

and

cas

h at

fina

l rep

ort s

tage

. Bal

ance

mov

ed to

201

3/14

to in

clud

e w

ithin

the

cont

inge

ncy

48

Aud

it Li

ncol

nshi

re –

Inte

rnal

Aud

it R

epor

t

P

age

26 o

f 26

Are

a

Stat

us /

Ass

uran

ce L

evel

Giv

en

Cred

itor

Proj

ect –

Ord

erin

g an

d in

voic

e pr

oces

sing

M

oved

to 2

013/

14 d

ue to

pro

gres

s m

ade

on th

e pr

ojec

t.

Fina

l Acc

ount

s Ba

lanc

e m

oved

to 2

013/

14 to

incl

ude

with

in th

e co

ntin

genc

y.

Stra

tegi

c &

Em

ergi

ng R

isks

Emer

ging

ris

ks a

nd le

gisl

atio

n (B

ig S

ocie

ty &

loca

lism

age

nda)

D

raft

Rep

ort

O

ther

rel

evan

t Are

as

Co

mbi

ned

Ass

uran

ce

Repo

rt to

be

pres

ente

d to

Com

mitt

ee.

ICT

Aud

it.

49

50

1

AUDIT AND ACCOUNTS COMMITTEE AGENDA ITEM NO.8 WEDNESDAY 6 NOVEMBER 2013 STAUTORY REQUIREMENTS RELATING TO INTERNAL AUDIT REPORT PRESENTED BY: NICKY LOVELY - BUSINESS MANAGER – FINANCIAL SERVICES 1.0 Purpose of Report To propose actions to allow the Committee to address statutory requirements contained in

the Accounts and Audit (England) Regulations 2011. 2.0 Background 2.1 Regulation 6(3) of the Accounts and Audit (England) Regulations 2011 requires the Council

to review the effectiveness of internal audit once a year and for the findings of the review to be considered by a Committee of the Council. The Audit & Accounts Committee is the most appropriate one in the case of this Council.

2.2 In this context ‘internal audit’ is not just restricted to the role, activity and effectiveness of

the internal audit team; it also applies to the role, activity and effectiveness of this Committee itself. Guidance makes it clear that is not the role of the external auditor to undertake this work. It is for the authority itself to complete a review.

2.3 New Public Sector Internal Audit Standards came into effect on 1 April 2013, which lay out the standards to be met by Internal Audit. The standards are split between addressing the assurance and the performance of Internal Audit. A copy of the Standards is attached at Appendix A, giving details of the requirements. The effectiveness of the Internal Audit function should be assessed against these standards.

2.4 The CIPFA publication “Audit Committees – Practical Guidance for Local Authorities is

attached at Appendix B. It includes a self-assessment checklist for Audit Committees. 3.0 Responsibility of the Audit & Accounts Committee 3.1 To address the statutory requirement, it is proposed that a review of the effectiveness of

Internal Audit against the new Standards is undertaken. This should be carried out in time to inform the Annual Governance Statement.

3.2 In order to undertake the review of effectiveness, it will be necessary to convene a joint

Member/officer working group. It is proposed that the group should consist of the Chairman and one other Member of the Audit and Accounts Committee, the Director – Resources and the Business Manager – Financial Services.

3.3 The Head of Internal Audit has carried out a self-assessment of Audit Lincs against the

Public Sector Internal Audit Standards which can be used as the basis to undertake the review.

3.4 It is also proposed that The Committee complete the CIPFA self-assessment questionnaire

to determine its own effectiveness.

51

2

4.0 RECOMMENDATIONS

That the Audit and Accounts Committee:

a) Determine the membership of a joint Member/officer working group to undertake the review of effectiveness of internal audit;

b) Task the group to undertake the review; and c) Task the group to carry out a self-assessment of the effectiveness of the

Committee. Background Papers Nil. For further information please contact Nicky Lovely, Business Manager – Financial Services on extension 5317. David Dickinson Director of Resources

52

Public Sector Internal Audit Standards

Applying the IIA International Standards to the UK Public Sector

53

Issued by the Relevant Internal Audit Standard Setters:

In collaboration with:

54

Applying the IIA International Standards to the UK Public Sector

Public Sector Internal Audit Standards

55

ISBN 978 1 84508 356 4

Permission has been obtained from the copyright holder, The Institute of Internal Auditors, 247 Maitland Ave, Altamonte Springs, Florida 32701-4201, USA. The concepts enunciated in the original IPPF have been preserved in this version.

56

Contents

Section 1 Introduction 4

Section 2 Applicability 7

Section 3 Definition of Internal Auditing 9

Section 4 Code of Ethics 10

Section 5 Standards 13

Attribute Standards 13

Purpose, authority and responsibility 13

Independence and objectivity 14

Proficiencyanddueprofessionalcare 16

Quality assurance and improvement programme 17

Performance Standards 20

Managing the internal audit activity 20

Nature of work 22

Engagement planning 24

Performing the engagement 26

Communicating results 27

Monitoring progress 30

Communicating the acceptance of risks 30

Glossary 31

Public Sector Internal Audit Standards 3

57

SECTION 1

IntroductionA professional, independent and objective internal audit service is one of the key elements of good governance, as recognised throughout the UK public sector.

ThisdocumentisthereforeaddressedtoAccountingOfficers,AccountableOfficers,boardandauditcommittee members, heads of internal audit, internal auditors, external auditors and other stakeholders suchaschieffinancialofficersandchiefexecutives.

Framework overviewThe Relevant Internal Audit Standard Setters (RIASS)1 have adopted this common set of Public Sector Internal Audit Standards (PSIAS) from 1 April 2013. The PSIAS encompass the mandatory elements of the Institute of Internal Auditors (IIA) International Professional Practices Framework (IPPF) as follows:

� DefinitionofInternalAuditing

� Code of Ethics, and

� International Standards for the Professional Practice of Internal Auditing (including interpretations and glossary).

Additional requirements and interpretations for the UK public sector have been inserted in such a way as to preserve the integrity of the text of the mandatory elements of the IPPF.

Theoverarchingprincipleborneinmindwhenallpotentialpublicsectorinterpretationsand/orspecificrequirements were considered was that only the minimum number of additions should be made to the existing IIA Standards. The criteria against which potential public sector requirements were judged for inclusion were:

� where interpretation is required in order to achieve consistent application in the UK public sector

� where the issue is not addressed or not addressed adequately by the current IIA Standards, or

� where the IIA standard would be inappropriate or impractical in the context of public sector governance(takingintoaccount,forexample,anyfundingmechanisms,specificlegislationetc).

At the same time, the following concepts were also considered of each requirement or interpretation being proposed:

� materiality

� relevance

� necessity, and

� integrity (the additional commentary does not cause inconsistency elsewhere).

1 The Relevant Internal Audit Standard Setters are: HM Treasury in respect of central government; the Scottish Government, the Department of Finance and Personnel Northern Ireland and the Welsh Government in respect of central government and the health sector in their administrations; the Department of Health in respect of the health sector in England (excluding Foundation Trusts); and the Chartered Institute of Public Finance and Accountancy in respect of local government across the UK.

4 Public Sector Internal Audit Standards

58

Wherever reference is made to the International Standards for the Professional Practice of Internal Auditing, this is replaced by the PSIAS. Chief audit executives are expected to report conformance on the PSIAS in their annual report.

Purpose of the PSIASThe objectives of the PSIAS are to:

� definethenatureofinternalauditingwithintheUKpublicsector

� set basic principles for carrying out internal audit in the UK public sector

� establish a framework for providing internal audit services, which add value to the organisation, leading to improved organisational processes and operations, and

� establish the basis for the evaluation of internal audit performance and to drive improvement planning.

Additional guidance is a matter for the RIASS.

ScopeThe PSIAS apply to all internal audit service providers, whether in-house, shared services or outsourced.

AllinternalauditassuranceandconsultingservicesfallwithinthescopeoftheDefinitionofInternalAuditing (see section 3). The provision of assurance services is the primary role for internal audit in the UK public sector. This role requires the chief audit executive to provide an annual internal audit opinion based on an objective assessment of the framework of governance, risk management and control. Consultingservicesareadvisoryinnatureandaregenerallyperformedatthespecificrequestoftheorganisation, with the aim of improving governance, risk management and control and contributing to the overall opinion.

The Code of Ethics promotes an ethical, professional culture (see section 4). It does not supersede or replace internal auditors’ own professional bodies’ Codes of Ethics or those of employing organisations. Internal auditors must also have regard to the Committee on Standards of Public Life’s Seven Principles of Public Life.

In common with the IIA IPPF on which they are based, the PSIAS comprise Attribute and Performance Standards. The Attribute Standards address the characteristics of organisations and parties performing internal audit activities. The Performance Standards describe the nature of internal audit activities and provide quality criteria against which the performance of these services can be evaluated. While the Attribute and Performance Standards apply to all aspects of the internal audit service, the Implementation Standardsapplytospecifictypesofengagementsandareclassifiedaccordingly:

� Assurance (A) and

� Consulting (C) activities.

TheStandardsemploytermsthathavebeengivenspecificmeaningsthatareincludedintheGlossary.

Public Sector Internal Audit Standards 5

59

Key governance elementsWithin the PSIAS, the terms ‘board’ and ‘senior management’ need to be interpreted in the context of the governance arrangements within each UK public sector organisation, as these arrangements vary in structure and terminology between sectors and from one organisation and the next within in the same sector.

It is also necessary for the chief audit executive to understand the role of the Accounting or Accountable Officer,ChiefFinancialOfficer,chiefexecutive,theauditcommitteeandotherkeyofficersorrelevantdecision-making groups as well as how they relate to each other. Key relationships with these individuals andgroupsaredefinedforeachinternalauditservicewithinitscharter.

6 Public Sector Internal Audit Standards

60

SECTION 2

Applicability

The Relevant Internal Audit Standard Setters for the various parts of the UK public sector are shown below, along with the types of organisations in which the PSIAS should be applied.

SECTOR / RELEVANT INTERNAL AUDIT STANDARD SETTER

Central Government

NHS

Local Government

CIPFA UKLocal authorities.

England & Wales onlyTheOfficeofthePolice& Crime Commissioner, constabularies,fireauthorities, National Park authorities, joint committees and joint boards in the UK.

Scotland onlyStrathclyde Partnership for Transport.

HM Treasury UK*Government departments and their executive agencies and non-departmental public bodies.

Department of Health

EnglandClinical Commissioning Groups. NHS Trusts.

Public Sector Internal Audit Standards 7

61

SECTOR / RELEVANT INTERNAL AUDIT STANDARD SETTER

Central Government

NHS

Local Government

Scottish Government

ScotlandThe Scottish Government, the Crown OfficeandProcuratorFiscal Service, Executive Agencies and non-ministerial departments, non-departmental public bodies, the Scottish Parliament Corporate Body and bodies sponsored / supported by the Scottish Parliament Corporate Body.

ScotlandNHS Boards, Special NHS Boards, NHS Board partnership bodies in the public sector (eg joint ventures, Community Health Partnerships etc), NHS Board subsidiaries.

Welsh Government

WalesThe Welsh Government, National Assembly for Wales and Welsh Government sponsored bodies including commissioners.

WalesHealth Boards and Trusts.

Northern Ireland Assembly: Department of Finance and Personnel (NI)

Government departments, executive agencies, non-ministerial departments, non-departmental public bodies, NI health and social care bodies and other relevant sponsored bodies.

* Unless the body falls under the jurisdiction of the devolved governments.

8 Public Sector Internal Audit Standards

62

SECTION 3

DefinitionofInternalAuditingInternal auditing is an independent, objective assurance and consulting activity designed to add value and improve an organisation’s operations. It helps an organisation accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control and governance processes.

Public Sector Internal Audit Standards 9

63

SECTION 4

Code of EthicsPublic sector requirement

Internal auditors in UK public sector organisations (as set out in the Applicability section) must conform to the Code of Ethics as set out below. If individual internal auditors have membership of another professional body then he or she must also comply with the relevant requirements of that organisation.

The purpose of The Institute’s Code of Ethics is to promote an ethical culture in the profession of internal auditing. A code of ethics is necessary and appropriate for the profession of internal auditing, founded as it is on the trust placed in its objective assurance about risk management, control and governance.

TheInstitute’sCodeofEthicsextendsbeyondthedefinitionofinternalauditingtoincludetwoessential components:

Components1 Principles that are relevant to the profession and practice of internal auditing;

2 Rules of Conduct that describe behaviour norms expected of internal auditors. These rules are an aid to interpreting the Principles into practical applications and are intended to guide the ethical conduct of internal auditors.

The Code of Ethics provides guidance to internal auditors serving others. ‘Internal auditors’ refers toInstitutemembersandthosewhoprovideinternalauditingserviceswithinthedefinitionofinternal auditing.

Applicability and EnforcementThis Code of Ethics applies to both individuals and entities that provide internal auditing services. For Institute members, breaches of the Code of Ethics will be evaluated and administered according to The Institute’s Disciplinary Procedures. The fact that a particular conduct is not mentioned in the Rules of Conduct does not prevent it from being unacceptable or discreditable and therefore, the member liable to disciplinary action.

Public sector interpretation

The ‘Institute’ here refers to the IIA. Disciplinary procedures of other professional bodies and employing organisations may apply to breaches of this Code of Ethics.

10 Public Sector Internal Audit Standards

64

1 Integrity

Principle

The integrity of internal auditors establishes trust and thus provides the basis for reliance on their judgement.

Rules of Conduct

Internal auditors:

1.1 Shall perform their work with honesty, diligence and responsibility.

1.2 Shall observe the law and make disclosures expected by the law and the profession.

1.3 Shall not knowingly be a party to any illegal activity, or engage in acts that are discreditable to the profession of internal auditing or to the organisation.

1.4 Shall respect and contribute to the legitimate and ethical objectives of the organisation.

2 Objectivity

Principle

Internal auditors exhibit the highest level of professional objectivity in gathering, evaluating and communicating information about the activity or process being examined.

Internal auditors make a balanced assessment of all the relevant circumstances and are not unduly influencedbytheirowninterestsorbyothersinformingjudgements.

Rules of Conduct

Internal auditors:

2.1 Shall not participate in any activity or relationship that may impair or be presumed to impair their unbiased assessment. This participation includes those activities or relationships that may be in conflictwiththeinterestsoftheorganisation.

2.2 Shall not accept anything that may impair or be presumed to impair their professional judgement.

2.3 Shall disclose all material facts known to them that, if not disclosed, may distort the reporting of activities under review.

3 Confidentiality

Principle

Internal auditors respect the value and ownership of information they receive and do not disclose information without appropriate authority unless there is a legal or professional obligation to do so.

Rules of Conduct

Internal auditors:

3.1 Shall be prudent in the use and protection of information acquired in the course of their duties.

3.2 Shall not use information for any personal gain or in any manner that would be contrary to the law or detrimental to the legitimate and ethical objectives of the organisation.

Public Sector Internal Audit Standards 11

65

4 Competency

Principle

Internal auditors apply the knowledge, skills and experience needed in the performance of internal auditing services.

Rules of Conduct

Internal auditors:

4.1 Shall engage only in those services for which they have the necessary knowledge, skills and experience.

4.2 Shall perform internal auditing services in accordance with the International Standards for the Professional Practice of Internal Auditing.

4.3 Shallcontinuallyimprovetheirproficiencyandeffectivenessandqualityoftheirservices.

Public sector requirement

Internal auditors who work in the public sector must also have regard to the Committee on Standards of Public Life’s Seven Principles of Public Life, information on which can be found at www.public-standards.gov.uk

12 Public Sector Internal Audit Standards

66

SECTION 5

Standards Attribute Standards

1000 Purpose, Authority and ResponsibilityThepurpose,authorityandresponsibilityoftheinternalauditactivitymustbeformallydefinedinaninternal audit charter, consistent with the Definition of Internal Auditing, the Code of Ethics and the Standards. The chief audit executive must periodically review the internal audit charter and present it to senior management and the board for approval.

Interpretation:

Theinternalauditcharterisaformaldocumentthatdefinestheinternalauditactivity’spurpose,authorityand responsibility. The internal audit charter establishes the internal audit activity’s position within the organisation, including the nature of the chief audit executive’s functional reporting relationship with the board; authorises access to records, personnel and physical properties relevant to the performance ofengagements;anddefinesthescopeofinternalauditactivities.Finalapprovaloftheinternalauditcharter resides with the board.

Public sector requirementThe internal audit charter must also:

� definetheterms‘board’and‘seniormanagement’forthepurposesofinternalauditactivity;

� cover the arrangements for appropriate resourcing;

� definetheroleofinternalauditinanyfraud-relatedwork;and

� includearrangementsforavoidingconflictsofinterestifinternalauditundertakes non-audit activities.

1000.A1Thenatureofassuranceservicesprovidedtotheorganisationmustbedefinedintheinternalauditcharter. If assurances are to be provided to parties outside the organisation, the nature of these assurancesmustalsobedefinedintheinternalauditcharter.

1000.C1Thenatureofconsultingservicesmustbedefinedintheinternalauditcharter.

1010 Recognition of the Definition of Internal Auditing, the Code of Ethics and the Standards in the Internal Audit Charter

The mandatory nature of the Definition of Internal Auditing, the Code of Ethics and the Standards must be recognised in the internal audit charter. The chief audit executive should discuss the Definition of Internal Auditing, the Code of Ethics and the Standards with senior management and the board.

Public Sector Internal Audit Standards 13

67

1100 Independence and ObjectivityThe internal audit activity must be independent and internal auditors must be objective in performing their work.

Interpretation:

Independence is the freedom from conditions that threaten the ability of the internal audit activity to carry out internal audit responsibilities in an unbiased manner. To achieve the degree of independence necessary to effectively carry out the responsibilities of the internal audit activity, the chief audit executive has direct and unrestricted access to senior management and the board. This can be achieved through a dual-reporting relationship. Threats to independence must be managed at the individual auditor, engagement, functional and organisational levels.

Objectivity is an unbiased mental attitude that allows internal auditors to perform engagements in such a manner that they believe in their work product and that no quality compromises are made. Objectivity requires that internal auditors do not subordinate their judgment on audit matters to others. Threats to objectivity must be managed at the individual auditor, engagement, functional and organisational levels.

1110 Organisational Independence

The chief audit executive must report to a level within the organisation that allows the internal audit activitytofulfilitsresponsibilities.Thechiefauditexecutivemustconfirmtotheboard,atleastannually,the organisational independence of the internal audit activity.

Interpretation:

Organisational independence is effectively achieved when the chief audit executive reports functionally to the board. Examples of functional reporting to the board involve the board:

� approving the internal audit charter;

� approving the risk based internal audit plan;

� approving the internal audit budget and resource plan;

� receiving communications from the chief audit executive on the internal audit activity’s performance relative to its plan and other matters;

� approving decisions regarding the appointment and removal of the chief audit executive;

� approving the remuneration of the chief audit executive; and

� making appropriate enquiries of management and the chief audit executive to determine whether there are inappropriate scope or resource limitations.

Public sector requirementThe chief audit executive must report functionally to the board. The chief audit executive must also establish effective communication with, and have free and unfettered access to, the chief executive (or equivalent) and the chair of the audit committee.

Public sector interpretationGovernance requirements in the UK public sector would not generally involve the board approving theCAE’sremunerationspecifically.TheunderlyingprincipleisthattheindependenceoftheCAE is safeguarded by ensuring that his or her remuneration or performance assessment is not inappropriatelyinfluencedbythosesubjecttoaudit.IntheUKpublicsectorthiscanbeachievedbyensuring that the chief executive (or equivalent) undertakes, countersigns, contributes feedback to or reviews the performance appraisal of the CAE and that feedback is also sought from the chair of the audit committee.

14 Public Sector Internal Audit Standards

68

1110.A1The internal audit activity must be free from interference in determining the scope of internal auditing, performing work and communicating results.

1111 Direct Interaction with the Board

The chief audit executive must communicate and interact directly with the board.

1120 Individual Objectivity

Internalauditorsmusthaveanimpartial,unbiasedattitudeandavoidanyconflictofinterest.

Interpretation:

Conflictofinterestisasituationinwhichaninternalauditor,whoisinapositionoftrust,hasacompetingprofessionalorpersonalinterest.Suchcompetinginterestscanmakeitdifficulttofulfilhisorherdutiesimpartially.Aconflictofinterestexistsevenifnounethicalorimproperactresults.Aconflictofinterestcancreateanappearanceofimproprietythatcanundermineconfidenceintheinternalauditor,theinternalauditactivityandtheprofession.Aconflictofinterestcouldimpairanindividual’sabilitytoperform his or her duties and responsibilities objectively.

1130 Impairment to Independence or Objectivity

If independence or objectivity is impaired in fact or appearance, the details of the impairment must be disclosed to appropriate parties. The nature of the disclosure will depend upon the impairment.

Interpretation:

Impairment to organisational independence and individual objectivity may include, but is not limited to, personalconflictofinterest,scopelimitations,restrictionsonaccesstorecords,personnelandpropertiesand resource limitations, such as funding.

The determination of appropriate parties to which the details of an impairment to independence or objectivity must be disclosed is dependent upon the expectations of the internal audit activity’s and the chief audit executive’s responsibilities to senior management and the board as described in the internal audit charter, as well as the nature of the impairment.

1130.A1Internalauditorsmustrefrainfromassessingspecificoperationsforwhichtheywerepreviouslyresponsible. Objectivity is presumed to be impaired if an internal auditor provides assurance services for an activity for which the internal auditor had responsibility within the previous year.

1130.A2Assurance engagements for functions over which the chief audit executive has responsibility must be overseen by a party outside the internal audit activity.

1130.C1Internal auditors may provide consulting services relating to operations for which they had previous responsibilities.

Public Sector Internal Audit Standards 15

69

1130.C2If internal auditors have potential impairments to independence or objectivity relating to proposed consulting services, disclosure must be made to the engagement client prior to accepting the engagement.

Public sector requirement

Approvalmustbesoughtfromtheboardforanysignificantadditionalconsultingservicesnotalreadyincluded in the audit plan, prior to accepting the engagement.

1200 Proficiency and Due Professional CareEngagementsmustbeperformedwithproficiencyanddueprofessionalcare.

1210 Proficiency

Internal auditors must possess the knowledge, skills and other competencies needed to perform their individual responsibilities. The internal audit activity collectively must possess or obtain the knowledge, skills and other competencies needed to perform its responsibilities.

Interpretation:

Knowledge,skillsandothercompetenciesisacollectivetermthatreferstotheprofessionalproficiencyrequired of internal auditors to effectively carry out their professional responsibilities. Internal auditors areencouragedtodemonstratetheirproficiencybyobtainingappropriateprofessionalcertificationsandqualifications,suchastheCertifiedInternalAuditordesignationandotherdesignationsofferedbyTheInstitute of Internal Auditors and other appropriate professional organisations.

Public sector requirement

Thechiefauditexecutivemustholdaprofessionalqualification(CMIIA,CCABorequivalent)andbesuitably experienced.

1210.A1The chief audit executive must obtain competent advice and assistance if the internal auditors lack the knowledge, skills, or other competencies needed to perform all or part of the engagement.

1210.A2Internalauditorsmusthavesufficientknowledgetoevaluatetheriskoffraudandthemannerinwhichitis managed by the organisation, but are not expected to have the expertise of a person whose primary responsibility is detecting and investigating fraud.

1210.A3Internalauditorsmusthavesufficientknowledgeofkeyinformationtechnologyrisksandcontrolsandavailable technology-based audit techniques to perform their assigned work. However, not all internal auditors are expected to have the expertise of an internal auditor whose primary responsibility is information technology auditing.

16 Public Sector Internal Audit Standards

70

1210.C1The chief audit executive must decline the consulting engagement or obtain competent advice and assistance if the internal auditors lack the knowledge, skills, or other competencies needed to perform all or part of the engagement.

1220 Due Professional Care

Internal auditors must apply the care and skill expected of a reasonably prudent and competent internal auditor. Due professional care does not imply infallibility.

1220.A1Internal auditors must exercise due professional care by considering the:

� Extent of work needed to achieve the engagement’s objectives;

� Relativecomplexity,materialityorsignificanceofmatterstowhichassuranceproceduresareapplied;

� Adequacy and effectiveness of governance, risk management and control processes;

� Probabilityofsignificanterrors,fraud,ornon-compliance;and

� Costofassuranceinrelationtopotentialbenefits.

1220.A2In exercising due professional care internal auditors must consider the use of technology-based audit and other data analysis techniques.

1220.A3Internalauditorsmustbealerttothesignificantrisksthatmightaffectobjectives,operationsorresources. However, assurance procedures alone, even when performed with due professional care, do notguaranteethatallsignificantriskswillbeidentified.

1220.C1Internal auditors must exercise due professional care during a consulting engagement by considering the:

� Needs and expectations of clients, including the nature, timing and communication of engagement results;

� Relative complexity and extent of work needed to achieve the engagement’s objectives; and

� Costoftheconsultingengagementinrelationtopotentialbenefits.

1230 Continuing Professional Development

Internal auditors must enhance their knowledge, skills and other competencies through continuing professional development.

1300 Quality Assurance and Improvement ProgrammeThe chief audit executive must develop and maintain a quality assurance and improvement programme that covers all aspects of the internal audit activity.

Interpretation:

A quality assurance and improvement programme is designed to enable an evaluation of the internal audit activity’s conformance with the Definition of Internal Auditing and the Standards and an evaluation of whether internal auditors apply the Code of Ethics.Theprogrammealsoassessestheefficiencyandeffectivenessoftheinternalauditactivityandidentifiesopportunitiesforimprovement.

Public Sector Internal Audit Standards 17

71

1310 Requirements of the Quality Assurance and Improvement Programme

The quality assurance and improvement programme must include both internal and external assessments.

1311 Internal Assessments

Internal assessments must include:

� Ongoing monitoring of the performance of the internal audit activity; and

� Periodicself-assessmentsorassessmentsbyotherpersonswithintheorganisationwithsufficient knowledge of internal audit practices.

Interpretation:

Ongoing monitoring is an integral part of the day-to-day supervision, review and measurement of the internal audit activity. Ongoing monitoring is incorporated into the routine policies and practices used to manage the internal audit activity and uses processes, tools and information considered necessary to evaluate conformance with the Definition of Internal Auditing, the Code of Ethics and the Standards.

Periodic assessments are conducted to evaluate conformance with the Definition of Internal Auditing, the Code of Ethics and the Standards.

SufficientknowledgeofinternalauditpracticesrequiresatleastanunderstandingofallelementsoftheInternational Professional Practices Framework.

1312 External Assessments

Externalassessmentsmustbeconductedatleastonceeveryfiveyearsbyaqualified,independentassessor or assessment team from outside the organisation. The chief audit executive must discuss with the board:

� The form of external assessments;

� Thequalificationsandindependenceoftheexternalassessororassessmentteam,includingany potentialconflictofinterest.

Interpretation:

External assessments can be in the form of a full external assessment, or a self-assessment with independent external validation.

Aqualifiedassessororassessmentteamdemonstratescompetenceintwoareas:theprofessionalpractice of internal auditing and the external assessment process. Competence can be demonstrated through a mixture of experience and theoretical learning. Experience gained in organisations of similar size, complexity, sector or industry and technical issues is more valuable than less relevant experience. In the case of an assessment team, not all members of the team need to have all the competencies; it is the teamasawholethatisqualified.Thechiefauditexecutiveusesprofessionaljudgmentwhenassessingwhetheranassessororassessmentteamdemonstratessufficientcompetencetobequalified.

Anindependentassessororassessmentteammeansnothavingeitherarealoranapparentconflictof interest and not being a part of, or under the control of, the organisation to which the internal audit activity belongs.

18 Public Sector Internal Audit Standards

72

Public sector requirement

The chief audit executive must agree the scope of external assessments with an appropriate sponsor, egtheAccounting/AccountableOfficerorchairoftheauditcommitteeaswellaswiththeexternalassessor or assessment team.

1320 Reporting on the Quality Assurance and Improvement Programme

The chief audit executive must communicate the results of the quality assurance and improvement programme to senior management and the board.

Interpretation:

The form, content and frequency of communicating the results of the quality assurance and improvement programme is established through discussions with senior management and the board and considers the responsibilities of the internal audit activity and chief audit executive as contained in the internal audit charter. To demonstrate conformance with the Definition of Internal Auditing, the Code of Ethics and the Standards, the results of external and periodic internal assessments are communicated upon completion of such assessments and the results of ongoing monitoring are communicated at least annually. The results include the assessor’s or assessment team’s evaluation with respect to the degree of conformance.

Public sector requirement

The results of the quality and assurance programme and progress against any improvement plans must be reported in the annual report.

1321 Use of “Conforms with the International Standards for the Professional Practice of Internal Auditing”

The chief audit executive may state that the internal audit activity conforms with the International Standards for the Professional Practice of Internal Auditing only if the results of the quality assurance and improvement programme support this statement.

Interpretation:

The internal audit activity conforms with the Standards when it achieves the outcomes described in the Definition of Internal Auditing, Code of Ethics and Standards.

The results of the quality assurance and improvement programme include the results of both internal and external assessments. All internal audit activities will have the results of internal assessments. Internal auditactivitiesinexistenceforatleastfiveyearswillalsohavetheresultsofexternalassessments.

1322 Disclosure of Non-conformance

When non-conformance with the Definition of Internal Auditing, the Code of Ethics or the Standards impacts the overall scope or operation of the internal audit activity, the chief audit executive must disclose the non-conformance and the impact to senior management and the board.

Public sector requirement

Instancesofnon-conformancemustbereportedtotheboard.Moresignificantdeviationsmustbeconsidered for inclusion in the governance statement.

Public Sector Internal Audit Standards 19

73

Performance Standards

2000 Managing the Internal Audit ActivityThe chief audit executive must effectively manage the internal audit activity to ensure it adds value to the organisation.

Interpretation:

The internal audit activity is effectively managed when:

� The results of the internal audit activity’s work achieve the purpose and responsibility included in the internal audit charter;

� The internal audit activity conforms with the Definition of Internal Auditing and the Standards; and

� The individuals who are part of the internal audit activity demonstrate conformance with the Code of Ethics and the Standards.

The internal audit activity adds value to the organisation (and its stakeholders) when it provides objectiveandrelevantassurance,andcontributestotheeffectivenessandefficiencyofgovernance,riskmanagement and control processes.

2010 Planning

The chief audit executive must establish risk-based plans to determine the priorities of the internal audit activity, consistent with the organisation’s goals.

Interpretation:

The chief audit executive is responsible for developing a risk-based plan. The chief audit executive takes into account the organisation’s risk management framework, including using risk appetite levels set by management for the different activities or parts of the organisation. If a framework does not exist, the chief audit executive uses his/her own judgment of risks after consideration of input from senior management and the board. The chief audit executive must review and adjust the plan, as necessary, in response to changes in the organisation’s business, risks, operations, programs, systems, and controls.

Public sector requirement

The risk-based plan must take into account the requirement to produce an annual internal audit opinion and the assurance framework. It must incorporate or be linked to a strategic or high-level statement of how the internal audit service will be delivered and developed in accordance with the internal audit charter and how it links to the organisational objectives and priorities.

2010.A1The internal audit activity’s plan of engagements must be based on a documented risk assessment, undertaken at least annually. The input of senior management and the board must be considered in this process.

2010.A2The chief audit executive must identify and consider the expectations of senior management, the board and other stakeholders for internal audit opinions and other conclusions.

20 Public Sector Internal Audit Standards

74

2010.C1The chief audit executive should consider accepting proposed consulting engagements based on the engagement’s potential to improve management of risks, add value and improve the organisation’s operations. Accepted engagements must be included in the plan.

2020 Communication and Approval

The chief audit executive must communicate the internal audit activity’s plans and resource requirements, includingsignificantinterimchanges,toseniormanagementandtheboardforreviewandapproval.Thechief audit executive must also communicate the impact of resource limitations.

2030 Resource Management

Thechiefauditexecutivemustensurethatinternalauditresourcesareappropriate,sufficientandeffectively deployed to achieve the approved plan.

Interpretation:

Appropriate refers to the mix of knowledge, skills and other competencies needed to perform the plan. Sufficientreferstothequantityofresourcesneededtoaccomplishtheplan.Resourcesareeffectivelydeployed when they are used in a way that optimises the achievement of the approved plan.

Public sector requirement

The risk-based plan must explain how internal audit’s resource requirements have been assessed.

Where the chief audit executive believes that the level of agreed resources will impact adversely on the provision of the annual internal audit opinion, the consequences must be brought to the attention of the board.

2040 Policies and Procedures

The chief audit executive must establish policies and procedures to guide the internal audit activity.

Interpretation:

The form and content of policies and procedures are dependent upon the size and structure of the internal audit activity and the complexity of its work.

2050 Coordination

The chief audit executive should share information and coordinate activities with other internal and external providers of assurance and consulting services to ensure proper coverage and minimise duplication of efforts.

Public sector requirement

The chief audit executive must include in the risk-based plan the approach to using other sources of assurance and any work required to place reliance upon those other sources.

Public Sector Internal Audit Standards 21

75

2060 Reporting to Senior Management and the Board

The chief audit executive must report periodically to senior management and the board on the internal audit activity’s purpose, authority, responsibility and performance relative to its plan. Reporting must also includesignificantriskexposuresandcontrolissues,includingfraudrisks,governanceissuesandothermatters needed or requested by senior management and the board.

Interpretation:

The frequency and content of reporting are determined in discussion with senior management and the board and depend on the importance of the information to be communicated and the urgency of the related actions to be taken by senior management or the board.

2070 External Service Provider and Organisational Responsibility for Internal Auditing

When an external service provider serves as the internal audit activity, the provider must make the organisation aware that the organisation has the responsibility for maintaining an effective internal audit activity.

Interpretation:

This responsibility is demonstrated through the quality assurance and improvement programme which assesses conformance with the Definition of Internal Auditing, the Code of Ethics and the Standards.

2100 Nature of WorkThe internal audit activity must evaluate and contribute to the improvement of governance, risk management and control processes using a systematic and disciplined approach.

2110 Governance

The internal audit activity must assess and make appropriate recommendations for improving the governance process in its accomplishment of the following objectives:

� Promoting appropriate ethics and values within the organisation;

� Ensuring effective organisational performance management and accountability;

� Communicating risk and control information to appropriate areas of the organisation; and

� Coordinating the activities of and communicating information among the board, external and internal auditors and management.

2110.A1The internal audit activity must evaluate the design, implementation and effectiveness of the organisation’s ethics-related objectives, programmes and activities.

2110.A2The internal audit activity must assess whether the information technology governance of the organisation supports the organisation’s strategies and objectives.

22 Public Sector Internal Audit Standards

76

2120 Risk Management

The internal audit activity must evaluate the effectiveness and contribute to the improvement of risk management processes.

Interpretation:

Determining whether risk management processes are effective is a judgment resulting from the internal auditor’s assessment that:

� Organisational objectives support and align with the organisation’s mission;

� Significantrisksareidentifiedandassessed;

� Appropriate risk responses are selected that align risks with the organisation’s risk appetite; and

� Relevant risk information is captured and communicated in a timely manner across the organisation, enabling staff, management and the board to carry out their responsibilities.

The internal audit activity may gather the information to support this assessment during multiple engagements. The results of these engagements, when viewed together, provide an understanding of the organisation’s risk management processes and their effectiveness.

Risk management processes are monitored through ongoing management activities, separate evaluations, or both.

2120.A1The internal audit activity must evaluate risk exposures relating to the organisation’s governance, operations and information systems regarding the:

� Achievement of the organisation’s strategic objectives;

� Reliabilityandintegrityoffinancialandoperationalinformation;

� Effectivenessandefficiencyofoperationsandprogrammes;

� Safeguarding of assets; and

� Compliance with laws, regulations, policies, procedures and contracts.

2120.A2The internal audit activity must evaluate the potential for the occurrence of fraud and how the organisation manages fraud risk.

2120.C1During consulting engagements, internal auditors must address risk consistent with the engagement’s objectivesandbealerttotheexistenceofothersignificantrisks.

2120.C2Internal auditors must incorporate knowledge of risks gained from consulting engagements into their evaluation of the organisation’s risk management processes.

2120.C3When assisting management in establishing or improving risk management processes, internal auditors must refrain from assuming any management responsibility by actually managing risks.

Public Sector Internal Audit Standards 23

77

2130 Control

The internal audit activity must assist the organisation in maintaining effective controls by evaluating their effectivenessandefficiencyandbypromotingcontinuousimprovement.

2130.A1The internal audit activity must evaluate the adequacy and effectiveness of controls in responding to risks within the organisation’s governance, operations and information systems regarding the:

� Achievement of the organisation’s strategic objectives;

� Reliabilityandintegrityoffinancialandoperationalinformation;

� Effectivenessandefficiencyofoperationsandprogrammes;

� Safeguarding of assets; and

� Compliance with laws, regulations, policies, procedures and contracts.

2130.C1Internal auditors must incorporate knowledge of controls gained from consulting engagements into evaluation of the organisation’s control processes.

2200 Engagement PlanningInternal auditors must develop and document a plan for each engagement, including the engagement’s objectives, scope, timing and resource allocations.

2201 Planning Considerations

In planning the engagement, internal auditors must consider:

� The objectives of the activity being reviewed and the means by which the activity controls its performance;

� Thesignificantriskstotheactivity,itsobjectives,resourcesandoperationsandthemeansbywhich the potential impact of risk is kept to an acceptable level;

� The adequacy and effectiveness of the activity’s governance, risk management and control processes compared to a relevant framework or model; and

� Theopportunitiesformakingsignificantimprovementstotheactivity’sgovernance,riskmanagement and control processes.

2201.A1When planning an engagement for parties outside the organisation, internal auditors must establish a written understanding with them about objectives, scope, respective responsibilities and other expectations, including restrictions on distribution of the results of the engagement and access to engagement records.

2201.C1Internal auditors must establish an understanding with consulting engagement clients about objectives, scope,respectiveresponsibilitiesandotherclientexpectations.Forsignificantengagements,thisunderstanding must be documented.

24 Public Sector Internal Audit Standards

78

2210 Engagement Objectives

Objectives must be established for each engagement.

2210.A1Internal auditors must conduct a preliminary assessment of the risks relevant to the activity under review.Engagementobjectivesmustreflecttheresultsofthisassessment.

2210.A2Internalauditorsmustconsidertheprobabilityofsignificanterrors,fraud,non-complianceandotherexposures when developing the engagement objectives.

2210.A3Adequate criteria are needed to evaluate governance, risk management and controls. Internal auditors must ascertain the extent to which management and/or the board has established adequate criteria to determine whether objectives and goals have been accomplished. If adequate, internal auditors must use such criteria in their evaluation. If inadequate, internal auditors must work with management and/or the board to develop appropriate evaluation criteria.

Public sector interpretation

In the public sector, criteria are likely to include value for money.

2210.C1Consulting engagement objectives must address governance, risk management and control processes to the extent agreed upon with the client.

2210.C2Consulting engagement objectives must be consistent with the organisation’s values, strategies and objectives.

2220 Engagement Scope

Theestablishedscopemustbesufficienttosatisfytheobjectivesoftheengagement.

2220.A1The scope of the engagement must include consideration of relevant systems, records, personnel and physical properties, including those under the control of third parties.

2220.A2Ifsignificantconsultingopportunitiesariseduringanassuranceengagement,aspecificwrittenunderstanding as to the objectives, scope, respective responsibilities and other expectations should be reached and the results of the consulting engagement communicated in accordance with consulting standards.

2220.C1In performing consulting engagements, internal auditors must ensure that the scope of the engagement issufficienttoaddresstheagreed-uponobjectives.Ifinternalauditorsdevelopreservationsaboutthescope during the engagement, these reservations must be discussed with the client to determine whether to continue with the engagement.

Public Sector Internal Audit Standards 25

79

2220.C2During consulting engagements, internal auditors must address controls consistent with the engagement’s objectivesandbealerttosignificantcontrolissues.

2230 Engagement Resource Allocation

Internalauditorsmustdetermineappropriateandsufficientresourcestoachieveengagementobjectivesbased on an evaluation of the nature and complexity of each engagement, time constraints and available resources.

2240 Engagement Work Programme

Internal auditors must develop and document work programmes that achieve the engagement objectives.

2240.A1Work programmes must include the procedures for identifying, analysing, evaluating and documenting information during the engagement. The work programme must be approved prior to its implementation and any adjustments approved promptly.

2240.C1Work programmes for consulting engagements may vary in form and content depending upon the nature of the engagement.

2300 Performing the EngagementInternalauditorsmustidentify,analyse,evaluateanddocumentsufficientinformationtoachievetheengagement’s objectives.

2310 Identifying Information

Internalauditorsmustidentifysufficient,reliable,relevantandusefulinformationtoachievetheengagement’s objectives.

Interpretation:

Sufficientinformationisfactual,adequateandconvincingsothataprudent,informedpersonwouldreachthe same conclusions as the auditor. Reliable information is the best attainable information through the use of appropriate engagement techniques. Relevant information supports engagement observations and recommendations and is consistent with the objectives for the engagement. Useful information helps the organisation meet its goals.

2320 Analysis and Evaluation

Internal auditors must base conclusions and engagement results on appropriate analyses and evaluations.

2330 Documenting Information

Internal auditors must document relevant information to support the conclusions and engagement results.

2330.A1The chief audit executive must control access to engagement records. The chief audit executive must obtain the approval of senior management and/or legal counsel prior to releasing such records to external parties, as appropriate.

26 Public Sector Internal Audit Standards

80

2330.A2The chief audit executive must develop retention requirements for engagement records, regardless of the medium in which each record is stored. These retention requirements must be consistent with the organisation’s guidelines and any pertinent regulatory or other requirements.

2330.C1The chief audit executive must develop policies governing the custody and retention of consulting engagement records, as well as their release to internal and external parties. These policies must be consistent with the organisation’s guidelines and any pertinent regulatory or other requirements.

2340 Engagement Supervision

Engagements must be properly supervised to ensure objectives are achieved, quality is assured and staff is developed.

Interpretation:

Theextentofsupervisionrequiredwilldependontheproficiencyandexperienceofinternalauditorsandthe complexity of the engagement. The chief audit executive has overall responsibility for supervising the engagement, whether performed by or for the internal audit activity, but may designate appropriately experienced members of the internal audit activity to perform the review. Appropriate evidence of supervision is documented and retained.

2400 Communicating ResultsInternal auditors must communicate the results of engagements.

2410 Criteria for Communicating

Communications must include the engagement’s objectives and scope as well as applicable conclusions, recommendations and action plans.

2410.A1Final communication of engagement results must, where appropriate, contain internal auditors’ opinion and/or conclusions. When issued, an opinion or conclusion must take account of the expectations of seniormanagement,theboardandotherstakeholdersandmustbesupportedbysufficient,reliable,relevant and useful information.

Interpretation:

Opinions at the engagement level may be ratings, conclusions or other descriptions of the results. Such anengagementmaybeinrelationtocontrolsaroundaspecificprocess,riskorbusinessunit.Theformulationofsuchopinionsrequiresconsiderationoftheengagementresultsandtheirsignificance.

2410.A2Internal auditors are encouraged to acknowledge satisfactory performance in engagement communications.

2410.A3When releasing engagement results to parties outside the organisation, the communication must include limitations on distribution and use of the results.

2410.C1Communication of the progress and results of consulting engagements will vary in form and content depending upon the nature of the engagement and the needs of the client.

Public Sector Internal Audit Standards 27

81

2420 Quality of Communications

Communications must be accurate, objective, clear, concise, constructive, complete and timely.

Interpretation:

Accurate communications are free from errors and distortions and are faithful to the underlying facts. Objective communications are fair, impartial and unbiased and are the result of a fair-minded and balanced assessment of all relevant facts and circumstances. Clear communications are easily understoodandlogical,avoidingunnecessarytechnicallanguageandprovidingallsignificantandrelevantinformation.Concisecommunicationsaretothepointandavoidunnecessaryelaboration,superfluousdetail, redundancy and wordiness. Constructive communications are helpful to the engagement client and the organisation and lead to improvements where needed. Complete communications lack nothing that isessentialtothetargetaudienceandincludeallsignificantandrelevantinformationandobservationsto support recommendations and conclusions. Timely communications are opportune and expedient, dependingonthesignificanceoftheissue,allowingmanagementtotakeappropriatecorrectiveaction.

2421 Errors and Omissions

Ifafinalcommunicationcontainsasignificanterrororomission,thechiefauditexecutivemustcommunicate corrected information to all parties who received the original communication.

2430 Use of “Conducted in Conformance with the International Standards for the Professional Practice of Internal Auditing”

Internal auditors may report that their engagements are “conducted in conformance with the International Standards for the Professional Practice of Internal Auditing”, only if the results of the quality assurance and improvement programme support the statement.

2431 Engagement Disclosure of Nonconformance

When nonconformance with the Definition of Internal Auditing, the Code of Ethics or the Standards impactsaspecificengagement,communicationoftheresultsmustdisclosethe:

� Principle or rule of conduct of the Code of Ethics or Standard(s) with which full conformance was not achieved;

� Reason(s) for nonconformance; and

� Impact of nonconformance on the engagement and the communicated engagement results.

2440 Disseminating Results

The chief audit executive must communicate results to the appropriate parties.

Interpretation:

Thechiefauditexecutiveisresponsibleforreviewingandapprovingthefinalengagementcommunicationbefore issuance and deciding to whom and how it will be disseminated. When the chief audit executive delegates these duties, he or she retains overall responsibility.

2440.A1Thechiefauditexecutiveisresponsibleforcommunicatingthefinalresultstopartieswhocanensurethatthe results are given due consideration.

28 Public Sector Internal Audit Standards

82

2440.A2If not otherwise mandated by legal, statutory, or regulatory requirements, prior to releasing results to parties outside the organisation the chief audit executive must:

� Assess the potential risk to the organisation;

� Consult with senior management and/ or legal counsel as appropriate; and

� Control dissemination by restricting the use of the results.

2440.C1Thechiefauditexecutiveisresponsibleforcommunicatingthefinalresultsofconsultingengagementsto clients.

2440.C2Duringconsultingengagements,governance,riskmanagementandcontrolissuesmaybeidentified.Whenevertheseissuesaresignificanttotheorganisation,theymustbecommunicatedtoseniormanagement and the board.

2450 Overall Opinions

When an overall opinion is issued, it must take into account the expectations of senior management, theboardandotherstakeholdersandmustbesupportedbysufficient,reliable,relevantanduseful information.

Interpretation:

The communication will identify:

� The scope including the time period to which the opinion pertains;

� Scope limitations;

� Consideration of all related projects including the reliance on other assurance providers;

� The risk or control framework or other criteria used as a basis for the overall opinion; and

� The overall opinion, judgment or conclusion reached.

The reasons for an unfavourable overall opinion must be stated.

Public sector requirement

The chief audit executive must deliver an annual internal audit opinion and report that can be used by the organisation to inform its governance statement.

The annual internal audit opinion must conclude on the overall adequacy and effectiveness of the organisation’s framework of governance, risk management and control.

The annual report must incorporate:

� the opinion;

� a summary of the work that supports the opinion; and

� a statement on conformance with the Public Sector Internal Audit Standards and the results of the quality assurance and improvement programme.

Public Sector Internal Audit Standards 29

83

2500 Monitoring ProgressThe chief audit executive must establish and maintain a system to monitor the disposition of results communicated to management.

2500.A1The chief audit executive must establish a follow-up process to monitor and ensure that management actions have been effectively implemented or that senior management has accepted the risk of not taking action.

2500.C1The internal audit activity must monitor the disposition of results of consulting engagements to the extent agreed upon with the client.

2600 Communicating the Acceptance of RisksWhen the chief audit executive concludes that management has accepted a level of risk that may be unacceptable to the organisation, the chief audit executive must discuss the matter with senior management. If the chief audit executive determines that the matter has not been resolved, the chief audit executive must communicate the matter to the board.

Interpretation:

Theidentificationofriskacceptedbymanagementmaybeobservedthroughanassuranceorconsultingengagement, monitoring progress on actions taken by management as a result of prior engagements, or other means. It is not the responsibility of the chief audit executive to resolve the risk.

30 Public Sector Internal Audit Standards

84

Glossary

Add ValueThe internal audit activity adds value to the organisation (and its stakeholders) when it provides objectiveandrelevantassurance,andcontributestotheeffectivenessandefficiencyofgovernance,riskmanagement and control processes.

Adequate ControlPresent if management has planned and organised (designed) in a manner that provides reasonable assurance that the organisation’s risks have been managed effectively and that the organisation’s goals andobjectiveswillbeachievedefficientlyandeconomically.

Public sector definition: Assurance Framework

This is the primary tool used by a board to ensure that it is properly informed on the risks of not meeting its objectives or delivering appropriate outcomes and that it has adequate assurances on the design and operation of the systems in place to mitigate those risks.

Assurance ServicesAn objective examination of evidence for the purpose of providing an independent assessment on governance,riskmanagementandcontrolprocessesfortheorganisation.Examplesmayincludefinancial,performance, compliance, system security and due diligence engagements.

Public sector definition: Audit Committee

The governance group charged with independent assurance of the adequacy of the risk management framework,theinternalcontrolenvironmentandtheintegrityoffinancialreporting.

BoardThe highest level of governing body charged with the responsibility to direct and/or oversee the activities and management of the organisation. Typically, this includes an independent group of directors (eg a board of directors, a supervisory board or a board of governors or trustees). If such a group does not exist, the ‘board’ may refer to the head of the organisation. ‘Board’ may refer to an audit committee to which the governing body has delegated certain functions.

Public Sector Internal Audit Standards 31

85

CharterTheinternalauditcharterisaformaldocumentthatdefinestheinternalauditactivity’spurpose,authorityand responsibility. The internal audit charter establishes the internal audit activity’s position within the organisation; authorises access to records, personnel and physical properties relevant to the performance ofengagements;anddefinesthescopeofinternalauditactivities.

Chief Audit ExecutiveChief audit executive describes a person in a senior position responsible for effectively managing the internal audit activity in accordance with the internal audit charter and the Definition of Internal Auditing, the Code of Ethics and the Standards. The chief audit executive or others reporting to the chief audit executivewillhaveappropriateprofessionalcertificationsandqualifications.Thespecificjobtitleofthechief audit executive may vary across organisations.

Code of EthicsThe Code of Ethics of The Institute of Internal Auditors (IIA) are Principles relevant to the profession and practice of internal auditing and Rules of Conduct that describe behaviour expected of internal auditors. The Code of Ethics applies to both parties and entities that provide internal audit services.

The purpose of the Code of Ethics is to promote an ethical culture in the global profession of internal auditing.

ComplianceAdherence to policies, plans, procedures, laws, regulations, contracts, or other requirements.

Conflict of InterestAnyrelationshipthatis,orappearstobe,notinthebestinterestoftheorganisation.Aconflictofinterestwould prejudice an individual’s ability to perform his or her duties and responsibilities objectively.

Consulting ServicesAdvisory and related client service activities, the nature and scope of which are agreed with the client, are intended to add value and improve an organisation’s governance, risk management and control processes without the internal auditor assuming management responsibility. Examples include counsel, advice, facilitation and training.

ControlAny action taken by management, the board and other parties to manage risk and increase the likelihood that established objectives and goals will be achieved. Management plans, organises and directs theperformanceofsufficientactionstoprovidereasonableassurancethatobjectivesandgoalswillbe achieved.

32 Public Sector Internal Audit Standards

86

Control EnvironmentThe attitude and actions of the board and management regarding the importance of control within the organisation. The control environment provides the discipline and structure for the achievement of the primary objectives of the system of internal control. The control environment includes the following elements:

� Integrity and ethical values.

� Management’s philosophy and operating style.

� Organisational structure.

� Assignment of authority and responsibility.

� Human resource policies and practices.

� Competence of personnel.

Control ProcessesThe policies, procedures (both manual and automated), and activities that are part of a control framework, designed and operated to ensure that risks are contained within the level that an organisation is willing to accept.

EngagementAspecificinternalauditassignment,task,orreviewactivity,suchasaninternalaudit,controlself-assessment review, fraud examination, or consultancy. An engagement may include multiple tasks or activitiesdesignedtoaccomplishaspecificsetofrelatedobjectives.

Engagement ObjectivesBroadstatementsdevelopedbyinternalauditorsthatdefineintendedengagementaccomplishments.

Engagement OpinionThe rating, conclusion and/or other description of results of an individual internal audit engagement, relating to those aspects within the objectives and scope of the engagement.

Engagement Work ProgrammeA document that lists the procedures to be followed during an engagement, designed to achieve the engagement plan.

External Service ProviderApersonorfirmoutsideoftheorganisationthathasspecialknowledge,skillandexperienceinaparticular discipline.

Public Sector Internal Audit Standards 33

87

FraudAny illegal act characterised by deceit, concealment or violation of trust. These acts are not dependent upon the threat of violence or physical force. Frauds are perpetrated by parties and organisations to obtain money, property or services; to avoid payment or loss of services; or to secure personal or business advantage.

GovernanceThe combination of processes and structures implemented by the board to inform, direct, manage and monitor the activities of the organisation toward the achievement of its objectives.

Public sector definition: Governance Statement

The mechanism by which an organisation publicly reports on its governance arrangements each year.

ImpairmentImpairmenttoorganisationalindependenceandindividualobjectivitymayincludepersonalconflictofinterest, scope limitations, restrictions on access to records, personnel and properties and resource limitations (funding).

IndependenceThe freedom from conditions that threaten the ability of the internal audit activity to carry out internal audit responsibilities in an unbiased manner.

Information Technology ControlsControls that support business management and governance as well as provide general and technical controls over information technology infrastructures such as applications, information, infrastructure and people.

Information Technology GovernanceConsists of the leadership, organisational structures and processes that ensure that the enterprise’s information technology supports the organisation’s strategies and objectives.

Internal Audit ActivityA department, division, team of consultants, or other practitioner(s) that provides independent, objective assurance and consulting services designed to add value and improve an organisation’s operations. The internal audit activity helps an organisation accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of governance, risk management and control processes.

34 Public Sector Internal Audit Standards

88

International Professional Practices FrameworkThe conceptual framework that organises the authoritative guidance promulgated by The IIA. Authoritative Guidance is comprised of two categories (1) mandatory and (2) strongly recommended.

Public sector interpretation

Only the mandatory elements apply for the purposes of the Public Sector Internal Audit Standards.

Public sector interpretation: International Standards for the Professional Practice of Internal Auditing

The Public Sector Internal Audit Standards take the place of the International Standards where applicable.

MustThe Standards use the word “must” to specify an unconditional requirement.

ObjectivityAn unbiased mental attitude that allows internal auditors to perform engagements in such a manner that they believe in their work product and that no quality compromises are made. Objectivity requires that internal auditors do not subordinate their judgment on audit matters to others.

Overall OpinionThe rating, conclusion and/or other description of results provided by the chief audit executive addressing, at a broad level, governance, risk management and/or control processes of the organisation. An overall opinion is the professional judgement of the chief audit executive based on the results of a numberofindividualengagementsandotheractivitiesforaspecifictimeinterval.

RiskThe possibility of an event occurring that will have an impact on the achievement of objectives. Risk is measured in terms of impact and likelihood.

Risk AppetiteThe level of risk that an organisation is willing to accept.

Risk ManagementA process to identify, assess, manage and control potential events or situations to provide reasonable assurance regarding the achievement of the organisation’s objectives.

Public Sector Internal Audit Standards 35

89

ShouldThe Standards use the word should where conformance is expected unless, when applying professional judgment, circumstances justify deviation.

SignificanceThe relative importance of a matter within the context in which it is being considered, including quantitative and qualitative factors, such as magnitude, nature, effect, relevance and impact. Professional judgmentassistsinternalauditorswhenevaluatingthesignificanceofmatterswithinthecontextoftherelevant objectives.

StandardA professional pronouncement promulgated by the Internal Audit Standards Board that delineates the requirements for performing a broad range of internal audit activities and for evaluating internal audit performance.

Technology-based Audit TechniquesAny automated audit tool, such as generalised audit software, test data generators, computerised audit programmes, specialised audit utilities and computer-assisted audit techniques (CAATs).

36 Public Sector Internal Audit Standards

90

Public Sector Internal Audit Standards 37

91

92

�������������������������� ���������������������

���������������� �����������

93

CIPFA is the leading professional accountancy body for public services,

whether in the public or private sectors.

We provide education and training in accountancy and financial management, and

set and monitor professional standards.

Our professional qualification is high-quality, relevant and practical,

and is supported by a range of other products and services.

CIPFA is a major publisher of guidance for practitioners and others with an

interest in the public services. A comprehensive catalogue of titles is available

free.

Phone 020 7543 5602, fax 020 7543 5607 or email

publications@cipfa.org for your copy.

Why not visit our website?

www.cipfa.org.uk/shop

94

�������������������� ������������ ��� ������������

95

PAGE ii

A U D I T C O M M I T T E E S : P R A C T I C A L G U I D A N C E F O R L O C A L A U T H O R I T I E S

Published by:CIPFA, THE CHARTERED INSTITUTE OF PUBLIC FINANCE AND ACCOUNTANCY3 Robert Street, London WC2N 6RL. Tel: 020 7543 5600 Fax: 020 7543 5700www.cipfa.org.uk

© 2005, CIPFA

ISBN 1 84508 059 9

Designed and typeset by Ministry of Design, Bath (www.ministryofdesign.co.uk).

Edited by Sarah Lloyd (sarah@redlane.org.uk).

Printed by Trident Printing Group, London.

Printed on stock sourced from fully sustainable managed forests, ISO 14001.

No responsibility for loss occasioned to any person acting or refraining from action as a result of any material in this publication can be accepted by the authors or publisher.

While every care has been taken in the preparation of this publication, it may contain errors for which the publisher and authors cannot be held responsible.

Apart from any fair dealing for the purposes of research or private study, or criticism or review, as permitted under the Copyright, Designs and Patents Act, 1988, this publication may be reproduced, stored or transmitted, in any form or by any means, only with the prior permission in writing of the publishers, or in the case of reprographic reproduction in accordance with the terms of licences issued by the Copyright Licensing Agency Ltd. Enquiries concerning reproduction outside those terms should be sent to the publishers at the above mentioned address.

96

PAGE iii

FOREWORD

A U D I T C O M M I T T E E S : P R A C T I C A L G U I D A N C E F O R L O C A L A U T H O R I T I E S

FOREWORD

It is with pleasure that we introduce this guidance. It is very timely, as the issue of audit committees is relevant for all those concerned with good governance in local government. We hope that this guidance will help to inform the debate about what constitutes a robust and effective audit committee.

Audit committees are an essential element of good governance. They are mandatory in most sectors but local government is the exception.

CIPFA has consulted widely on its Position Statement on Audit Committees in Local Government and the largely positive response gives a strong indication of the level of interest that exists and the considered thinking that has taken place.

This guidance is based on that Position Statement and seeks to expand it into a practical guide that will allow authorities to develop committees to suit their needs whilst adhering to fundamental principles.

We commend this guidance to all authorities that are embarking on setting up an audit committee or are reviewing their arrangements, as a sound, practical tool for developing effective audit committees.

Caroline MawhoodChair, CIPFA’s Public Finance and Management Board

Richard KingChair, CIPFA’s Audit Panel

97

PAGE iv

FOREWORD

A U D I T C O M M I T T E E S : P R A C T I C A L G U I D A N C E F O R L O C A L A U T H O R I T I E S

98

PAGE v

ACKNOWLEDGEMENTS

A U D I T C O M M I T T E E S : P R A C T I C A L G U I D A N C E F O R L O C A L A U T H O R I T I E S

ACKNOWLEDGEMENTS

CONTRIBUTORS

Adrian Baker Canal Associates Ltd

Keith Bellew Oxfordshire County Council

Amanda Broder Wycombe District Council

Neil Carpenter Hart District Council

Alan Evans Denbighshire County Council

David Hogan London Borough of Bexley

Anna Klonowski Advance Human Resources and CIPFA Council

Gordon Mattocks Raglan Housing Association

Ian Sadler London Borough of Enfield

Peter Swaby Derbyshire County Council

Chris Sweeney Hertfordshire County Council

Christine Webster Kent County Council

CIPFA AUDIT COMMITTEE SUB-GROUP

Anthony Barrett Wales Audit Office

Jane Bloodworth DEFRA

Mike Burns Birmingham and Sandwell Internal Audit Consortium

Lee Childs PwC

Linda Duncan Axena

99

PAGE vi

ACKNOWLEDGEMENTS

A U D I T C O M M I T T E E S : P R A C T I C A L G U I D A N C E F O R L O C A L A U T H O R I T I E S

Jenny Marriott Telford & Wrekin Council

Tony Trick Brighton University

PROJECT MANAGER

Patrick Clackett Technical Manager, CIPFA

COMMISSIONED AUTHOR

Phil Embling Hazeldene Consultancy

100

PAGE vii

CONTENTS

A U D I T C O M M I T T E E S : P R A C T I C A L G U I D A N C E F O R L O C A L A U T H O R I T I E S

Contents

EXECUTIVE SUMMARY 1

Chapter 1 INTRODUCTION AND PRINCIPLES 5

THE POSITION STATEMENT 5

Chapter 2 PURPOSE 9

Chapter 3 CORE FUNCTIONS 13

INTERNAL AUDIT 14

EXTERNAL AUDIT AND INSPECTIONS 14

CONTROL STRATEGIES 15

FINANCIAL STATEMENTS 16

Chapter 4 FEATURES 19

Chapter 5 STRUCTURE AND ADMINISTRATION 21

STRUCTURE 21

INDEPENDENCE 22

MEETINGS 22

COMPOSITION 23

SKILLS AND EXPERIENCE 24

TRAINING 25

ADMINISTRATION 26

Appendix 1: Suggested Audit Committee Terms of Reference 27

Appendix 2: Self-assessment Checklist – Measuring the Effectiveness of

the Audit Committee 29

Appendix 3: Position Statement on Audit Committees in Local Government 33

Bibliography 37

101

PAGE viii

CONTENTS

A U D I T C O M M I T T E E S : P R A C T I C A L G U I D A N C E F O R L O C A L A U T H O R I T I E S

102

PAGE 1

EXECUTIVE SUMMARY

A U D I T C O M M I T T E E S : P R A C T I C A L G U I D A N C E F O R L O C A L A U T H O R I T I E S

EXECUTIVE SUMMARY

Although audit committees have been a feature of the public sector for some time, there has been a lack of clarity about how they should operate in local government. Audit committees are not just the concern of auditors; they are about the governance, financial reporting and performance of the whole authority. Yet the fact that local government is not required to establish them is unique in the public sector – less than half of all local authorities have audit committees.

Good corporate governance requires independent, effective assurance about the adequacy of financial management and reporting. These functions are best delivered by an audit committee, independent from the executive and scrutiny functions.

Effective audit committees help raise the profile of internal control, risk management and financial reporting issues within an organisation, as well as providing a forum for the discussion of issues raised by internal and external auditors. And they enhance public trust and confidence in the financial governance of an authority.

Now Comprehensive Performance Assessment sets a challenge to local authorities (in England) to ensure that their audit committees work effectively.

This guidance has been written to help those authorities that do not already have an audit committee to implement one effectively, and to help those authorities that have audit committee arrangements in place to assess whether they are as effective as they need to be to contribute to good governance.

CIPFA seeks to address the key issues in a discursive manner, without being prescriptive, as the variety of types, styles and sizes of local authorities mitigates against a single model for all.

This guidance, therefore, seeks to consider the key issues for all authorities to help them address the principles.

103

PAGE 2

EXECUTIVE SUMMARY

A U D I T C O M M I T T E E S : P R A C T I C A L G U I D A N C E F O R L O C A L A U T H O R I T I E S

CIPFA stresses that audit committees have a key role in corporate governance. They should, therefore, be clearly integrated into an authority’s governance framework.

This guidance explores the main purposes of an audit committee and concludes that these include giving independent assurance to members and the public, scrutinising financial management and reporting, and providing challenge across the council.

In addition to internal and external audit, the functions overseen by the committee should include a number of control strategies such as risk management, the authority’s governance and assurance statements, and anti-fraud and anti-corruption arrangements.

This guidance identifies a range of benefits to an authority from the operation of an effective committee. These include increasing public confidence, highlighting the independence of audit, and raising awareness of the importance of internal controls. Consultees have assisted in highlighting a range of characteristics and success factors that help to identify when a committee is effective.

CIPFA believes that the audit committee must be independent of the executive and scrutiny functions and that it must have a clear right of access to full council, other council groups and committees. The number of members and the frequency of meetings are not prescribed, but this publication gives guidance to allow authorities to determine their own approach.

This guidance stresses the importance of the audit committee’s relationship with the authority’s chief finance officer. The audit committee helps the officer to discharge his or her statutory functions. In turn, this officer is a key source of expert advice and guidance for the audit committee.

Audit committees exist in a number of councils, although not necessarily in name. What is important is the operation of the function of an effective audit committee. Status and independence are important, but being effective also means having well informed people able to confirm to the

104

PAGE 3

EXECUTIVE SUMMARY

A U D I T C O M M I T T E E S : P R A C T I C A L G U I D A N C E F O R L O C A L A U T H O R I T I E S

council that the right processes are in place to give confidence that the authority’s financial stewardship and overall governance arrangements can be relied upon.

Everyone charged with the responsibility for governance in their authority will want to familiarise themselves with the issues covered by this guidance to enable their audit committees to work effectively.

105

PAGE 4

EXECUTIVE SUMMARY

A U D I T C O M M I T T E E S : P R A C T I C A L G U I D A N C E F O R L O C A L A U T H O R I T I E S

106

PAGE 5

Chapter 1: INTRODUCTION AND PRINCIPLES

A U D I T C O M M I T T E E S : P R A C T I C A L G U I D A N C E F O R L O C A L A U T H O R I T I E S

Chapter 1INTRODUCTION AND PRINCIPLES

The role of those responsible for corporate governance and financial reporting processes continues to be open to scrutiny by regulators, legislators and the general public. Audit committees are increasingly viewed as a critical component in the overall corporate governance process.

CIPFA, recognising this growing importance, has developed a set of principles for audit committees in local government. These were partly drawn from CIPFA’s Audit Committee Principles in Local Authorities in Scotland: A Guidance Note, but also reflect the views and contributions of Audit Panel members.

These principles were encapsulated in the Position Statement on Audit Committees in Local Government (attached at Appendix 3), which has been exposed to widespread consultation. That consultation indicated broad acceptance of the principles as a sound basis for the creation and management of effective audit committees.

This guidance draws on practical experience across the public sector. It also expands on the elements of the Position Statement, both to look at the principles in more depth and to reflect the diversity of local government arrangements, which came through during the consultation process.

THE POSITION STATEMENT

The Position Statement emphasises the importance of audit committees being in place in all principal local authorities. It also recognises that audit committees are a key component of corporate governance and that they are an important source of assurance about the organisation’s

107

PAGE 6

Chapter 1: INTRODUCTION AND PRINCIPLES

A U D I T C O M M I T T E E S : P R A C T I C A L G U I D A N C E F O R L O C A L A U T H O R I T I E S

arrangements for managing risk, maintaining an effective control environment, and reporting on financial and other performance.

The way in which an audit committee is organised will vary depending upon the specific political and management arrangements in place in any local authority. This guidance therefore explores how audit committees relate to local authorities’ different arrangements for managing and governing themselves.

The Local Government Act 2000 introduced new ways of governing local authorities. All councils were required to have an executive and one or more scrutiny committees. The executive could be:

a directly elected mayor with a cabinetor

a cabinet with a leaderor

a directly elected mayor and council manager.

The role of scrutiny is to review policy and challenge whether the executive has made the right decisions to deliver policy goals.

Whichever form of executive and scrutiny model chosen, the audit committee needs to be separate, organisationally and practically, from both these functions.

Although legislation does not require audit committees, a council is required “to ensure that its financial management is adequate and effective and that it has a sound system of internal control which facilitates the effective exercise of its functions”.1 Further, section 151 of the Local Government Act 1972 requires the council to “make arrangements for the proper administration of its financial affairs”.

The chief finance officer is key to discharging these requirements. To be truly effective, the chief finance officer requires an effective audit committee to provide support and challenge, as well, of course, as adequate and effective internal audit. Both these elements are enshrined

1 Accounts and Audit Regulations 2003 (ODPM, 2003) and Accounts and Audit (Wales) Regulations 2005 (Welsh Assembly Government, 2005).

•

•

•

108

PAGE 7

Chapter 1: INTRODUCTION AND PRINCIPLES

A U D I T C O M M I T T E E S : P R A C T I C A L G U I D A N C E F O R L O C A L A U T H O R I T I E S

in CIPFA’s Code of Practice for Internal Audit in Local Government in the United Kingdom 2003.

Although CIPFA does not wish to prescribe any particular model, it believes that there are features that should be common to all. These key features form the framework for this guidance:

1 A Statement of Purpose

2 Core Functions

3 Features

4 Structure and Administration.

109

PAGE 8

Chapter 1: INTRODUCTION AND PRINCIPLES

A U D I T C O M M I T T E E S : P R A C T I C A L G U I D A N C E F O R L O C A L A U T H O R I T I E S

110

PAGE 9

Chapter 2: PURPOSE

A U D I T C O M M I T T E E S : P R A C T I C A L G U I D A N C E F O R L O C A L A U T H O R I T I E S

Chapter 2PURPOSEExtract from the Position Statement:

1. A Statement of Purpose

The local authority should formally approve a Statement of Purpose, along the following lines:

The purpose of an audit committee is to provide independent assurance of the adequacy of the risk management framework and the associated control environment, independent scrutiny of the authority’s financial and non-financial performance to the extent that it affects the authority’s exposure to risk and weakens the control environment, and to oversee the financial reporting process.

In some authorities, audit committees have evolved, from ad hoc committees with few defined responsibilities to crucial committees with growing responsibilities, accountable to the full council. But this development is not reflected across local government as a whole.

There are many benefits to be gained from operating an effective audit committee. It:

raises greater awareness of the need for internal control and the implementation of audit recommendations

increases public confidence in the objectivity and fairness of financial and other reporting

reinforces the importance and independence of internal and external audit and any other similar review process (for example, providing a view on the Statement on Internal Control)

•

•

•

111

PAGE 10

Chapter 2: PURPOSE

A U D I T C O M M I T T E E S : P R A C T I C A L G U I D A N C E F O R L O C A L A U T H O R I T I E S

provides additional assurance through a process of independent and objective review. 2

“The committee is beneficial as it provides authority and backing for the audit function and emphasises to management the need to comply with the audit process.”

Head of audit, a housing association

Audit committees are not just the concern of auditors; they are relevant to the governance, financial reporting and financial performance of the whole authority.

“Audit committees are about governance and not just audit.”

Director of resources and deputy chief executive, a Welsh county council

They are central to the provision of effective corporate governance, which depends, in part, on a systematic strategy, a framework and processes for managing risk.3 Governance is also about increasing public confidence in the objectivity and fairness of financial and other reporting as well as helping to deliver improved services. This, in turn, depends upon assurance that issues raised in preparing and auditing annual accounts and other reports have been properly dealt with. It is important that local authorities have independent assurance about the mechanisms underpinning these aspects of governance, specifically:

independent assurance of the adequacy of the risk management framework and the associated control environment within the authority

independent review of the authority’s financial and non-financial performance to the extent that it affects the authority’s exposure to risk and weakens the control environment

2 Source: Improving the Effectiveness of Audit Committees: A Good Practice Guide (Housing Corporation, 2004).

3 Corporate Governance in Local Government – A Keystone for Community Governance: Framework (CIPFA/SOLACE, 2001). See dimension 4 – risk management and internal control.

•

•

•

112

PAGE 11

Chapter 2: PURPOSE

A U D I T C O M M I T T E E S : P R A C T I C A L G U I D A N C E F O R L O C A L A U T H O R I T I E S

assurance that any issues arising from the process of drawing up, auditing and certifying the authority’s annual accounts are properly dealt with and that appropriate accounting policies have been applied.

The scope of an audit committee should be sufficient to provide challenge across all committees of the council, as well as the executive.

“It is important to recognise the uniqueness of the democratic element of local government and the statutory arrangements for scrutiny. What is important is that there is a committee separate from the executive.”

Society of District Council Treasurers

An issue to be recognised and resolved is that the committee, through the exercise of its powers – particularly in relation to the annual accounts timetable – may become an obstacle to timely activity and thus delay important publications. This can be avoided through careful consideration of the timetable for the committee. The audit committee should not be involved in producing the accounts. But it should have sufficient time to appraise the process, give assurance that proper practices and policies have been followed, and commend the accounts to the authority.4

4 Although it remains the responsibility of the chief finance officer to certify that the annual statement of accounts presents fairly the financial position and transactions of the authority.

•

113

PAGE 12

Chapter 2: PURPOSE

A U D I T C O M M I T T E E S : P R A C T I C A L G U I D A N C E F O R L O C A L A U T H O R I T I E S

114

PAGE 13

Chapter 3: CORE FUNCTIONS

A U D I T C O M M I T T E E S : P R A C T I C A L G U I D A N C E F O R L O C A L A U T H O R I T I E S

Chapter 3CORE FUNCTIONSExtract from the Position Statement:

2. Core Functions

Audit committees will:

Consider the effectiveness of the authority’s risk management arrangements, the control environment and associated anti-fraud and anti-corruption arrangements.

Seek assurances that action is being taken on risk-related issues identified by auditors and inspectors.

Be satisfied that the authority’s assurance statements, including the Statement on Internal Control, properly reflect the risk environment and any actions required to improve it.

Approve (but not direct) internal audit’s strategy, plan and monitor performance.

Review summary internal audit reports and the main issues arising, and seek assurance that action has been taken where necessary.

Receive the annual report of the head of internal audit.

Consider the reports of external audit and inspection agencies.

Ensure that there are effective relationships between external and internal audit, inspection agencies and other relevant bodies, and that the value of the audit process is actively promoted.

Review the financial statements, external auditor’s opinion and reports to members, and monitor management action in response to the issues raised by external audit.

•

•

•

•

•

•

•

•

•

An audit committee should be able to improve corporate focus on the issues arising from risk management, internal control and reporting. It may be difficult for officers and members to identify what needs to be done to improve, or to act on significant issues arising from audit work or the review of the Statement on Internal Control, unless there is a forum for reviewing such issues and tracking action on what needs to be done.

115

PAGE 14

Chapter 3: CORE FUNCTIONS

A U D I T C O M M I T T E E S : P R A C T I C A L G U I D A N C E F O R L O C A L A U T H O R I T I E S

INTERNAL AUDIT

The audit committee will have a clear role in relation to the authority’s internal audit function. This should involve:

formally approving (but not directing) the overall strategy to ensure that it meets the council’s overall strategic direction

approving the annual programme of audits (paying particular attention to whether there is sufficient and appropriate coverage)

monitoring progress against the plan and assessing whether adequate skills and resources are available to provide an effective audit function.5

The audit committee’s role in relation to reviewing the work carried out will include formal consideration of summaries of work done, key findings, issues of concern and action in hand as a result of audit work. The committee will wish to judge the effectiveness of internal audit by receiving feedback on the work carried out.

A key part of the role is receiving and reviewing the annual report from the head of internal audit in order to reach an overall opinion on the internal control environment and the quality of internal audit coverage. It is important to emphasise that the head of internal audit provides independent assurance to the audit committee, and by doing so, helps support the chief finance officer’s legal responsibilities.

The head of internal audit should be able to meet privately with the committee.

EXTERNAL AUDIT AND INSPECTIONS

The audit committee’s role will include receiving and considering the work of the external auditor.

5 Including a view on whether internal audit meets the requirements of CIPFA’s Code of Practice for Internal Audit in Local Government in the United Kingdom 2003.

•

•

•

116

PAGE 15

Chapter 3: CORE FUNCTIONS

A U D I T C O M M I T T E E S : P R A C T I C A L G U I D A N C E F O R L O C A L A U T H O R I T I E S

The programme of audits will follow a nationally agreed path to some extent but, where local flavour from the auditor’s risk assessment can be added, the committee should be given the chance to comment on the inclusion of any audit work and should receive reports following the completion of such work in order to monitor action to be taken.

The audit committee should contribute to the council’s response to the Audit Commission’s annual audit and inspection letter, reports and opinion. It should also consider and express an opinion on the selection and rotation of the external auditor.

There should be an opportunity for the audit committee to meet privately and separately with the external auditor, independent of the presence of those officers with whom the auditor must retain a working relationship.

Reports from inspection agencies can be a useful source of assurance about the authority’s financial management and governance. The audit committee should have access to inspection reports as a source of assurance and to compare with any relevant internal audit and external audit reports. Inspection reports will need to be actioned either by the council’s corporate or appropriate departmental management team, but the audit committee has a role in monitoring such action to ensure that a consistent approach is adopted and that the various agencies have one recognisable point of entry to the authority.

The committee should also ensure that it is aware of the work of scrutiny and other committees so that it can take account of issues relevant to its areas of interest.

The audit committee’s role extends also to ensuring that there is effective working between all audit and inspection functions to maximise the value of the review function to the authority.

CONTROL STRATEGIES

The council will have a number of strategies in place to regulate its activities and control the actions of its employees, elected members and contractors. The audit committee should take a view on whether these

117

PAGE 16

Chapter 3: CORE FUNCTIONS

A U D I T C O M M I T T E E S : P R A C T I C A L G U I D A N C E F O R L O C A L A U T H O R I T I E S

strategies have been properly formulated, and remain effective. Regular reports to the committee on action taken and annual statements of the continued appropriateness of the strategies will be necessary if the audit committee is to perform this role.

The strategies to be overseen by the audit committee will include:

risk management

the assurance framework, including the production of the Statement on Internal Control (SIC)

local codes of corporate governance, standards and behaviour

arrangements for delivering value for money

anti-fraud arrangements

anti-corruption arrangements including the authority’s whistle-blowing guidelines.

By reviewing these strategies, the audit committee will be in a position to monitor the action recommended by auditors and inspectors and agreed and implemented by officers to improve the situation. It will also be able to monitor changes to the risk environment and guide any associated actions.

“Audit committees provide independent assurance to the authority on the adequacy of the internal control environment, risk management framework and financial reporting systems.”

Director of Audit Policy and Appointments, the Audit Commission

FINANCIAL STATEMENTS

The audit committee should review the financial statements, for example, before they are approved under regulation 10 of the Accounts and Audit Regulations 2003, and again, in conjunction with the external auditor’s SAS 610 (ISA 260) report to those charged with governance, following completion of the audit. The committee’s review of the financial statements should focus on:

the suitability of accounting policies and treatments

•

•

•

•

•

•

•

118

PAGE 17

Chapter 3: CORE FUNCTIONS

A U D I T C O M M I T T E E S : P R A C T I C A L G U I D A N C E F O R L O C A L A U T H O R I T I E S

any changes in accounting policies and treatments

major judgemental areas, eg provisions

significant adjustments and material weaknesses in internal control reported by the external auditor.

Suggested terms of reference are at Appendix 1.

•

•

•

119

PAGE 18

Chapter 3: CORE FUNCTIONS

A U D I T C O M M I T T E E S : P R A C T I C A L G U I D A N C E F O R L O C A L A U T H O R I T I E S

120

PAGE 19

Chapter 4: FEATURES

A U D I T C O M M I T T E E S : P R A C T I C A L G U I D A N C E F O R L O C A L A U T H O R I T I E S

Chapter 4FEATURESExtract from the Position Statement:

3. Features

Good audit committees will be characterised by:

A strong chair – displaying a depth of skills and interest.

Unbiased attitudes – treating auditors, the executive and management equally.

The ability to challenge the executive (leader/chief executive/mayor or whatever combination) when required.

A membership that is balanced, objective, independent of mind, and knowledgeable.

•

•

•

•

In order to be effective, an audit committee needs a chair and membership that has knowledge, experience and interest in the field. The committee will also benefit from members with financial awareness, independence of thinking and a balanced approach to significant issues. And members must recognise and understand the value of the audit function.

The audit committee needs to be recognised as an important body in the council’s structure to allow it to provide the essential challenge to the executive when needed. Best practice from the private sector and other parts of the public sector is for an audit committee to report directly to the board, ie council, therefore making it independent from the executive and scrutiny functions. This provides status, independence and clarity to the role.

The support and interest of the chief executive and leader of the council is therefore essential.

121

PAGE 20

Chapter 4: FEATURES

A U D I T C O M M I T T E E S : P R A C T I C A L G U I D A N C E F O R L O C A L A U T H O R I T I E S

“The active support of the chief executive in relating to the committee members is seen as an important factor in the success of the arrangements, as is the generally supportive stance of the members.”

Head of audit, a small district council

Other features of an effective audit committee include:

meetings are characterised by free and open discussions by all members without political influences being displayed

decisions are reached, promptly, on all matters put before the committee

financial understanding is displayed by one or more of the members when considering issues

agenda papers are circulated far enough in advance of meetings to allow adequate preparation by members

the committee displays a role in monitoring and, where necessary, chasing managers for responses to audit recommendations.

•

•

•

•

•

122

PAGE 21

Chapter 5: STRUCTURE AND ADMINISTRATION

A U D I T C O M M I T T E E S : P R A C T I C A L G U I D A N C E F O R L O C A L A U T H O R I T I E S

Chapter 5STRUCTURE AND ADMINISTRATIONExtract from the Position Statement:

4. Structure and Administration

Although no single model of audit committee is prescribed, all should:

Be independent of the executive and scrutiny functions.

Have clear reporting lines and rights of access to other committees/functions, for example scrutiny and service committees, corporate risk management boards and other strategic groups.

Meet regularly – about four times a year, and have a clear policy on those items to be considered in private and those to be considered in public.

Meet privately and separately with the external auditor and head of internal audit.

Include, as regular attendees, the chief finance officer or deputy, head of internal audit and appointed external auditor and relationship manager. Other attendees may include the monitoring officer (for standards issues), chief executive and the head of resources (where such a post exists). These officers should also be able to have access to the committee, or the chair, as required. The committee should have the right to call any other officers or agencies of the council as required.

Be properly trained to fulfil their role.

•

•

•

•

•

•

STRUCTURE

Some authorities discharge the functions of an audit committee by other means, perhaps through other committees, or as part of the scrutiny, overview or standards committees. Such arrangements may appear to work well in practice, but there is always the danger either that audit committee functions become diluted by the pressure of other business, or that the proper functions of these other bodies become less clear. Having

123

PAGE 22

Chapter 5: STRUCTURE AND ADMINISTRATION

A U D I T C O M M I T T E E S : P R A C T I C A L G U I D A N C E F O R L O C A L A U T H O R I T I E S

a group of members bearing the name ‘audit committee’ will add weight when considering audit and related issues.

In general, non-executive councillors are less clear about their roles than executive councillors. In particular, they struggle with their role in scrutiny functions. Scrutiny and audit functions are quite different and combining them could lead to confusion in the minds of members, officers and the public.

INDEPENDENCE

To be effective the audit committee needs to be independent from executive and scrutiny. The link with the scrutiny function can be beneficial but the ultimate power of the audit committee could be compromised by too much cross-membership. The audit committee needs to retain the ability to challenge the executive on issues and to report to it on major issues and contraventions. Therefore cross-membership should not be the norm, and if it is seen as necessary should be restricted to one member from each.

The audit committee chair should not be, expressly, a member of the executive. A non-executive chair is important in order to promote the objectivity of the audit committee and to enhance its standing in the eyes of the public.

Whilst a separate voice is vital, a clear right of access to other committees of the council and strategic functions is also important if such independence is to lead to any beneficial action.

MEETINGS

The frequency and timing of meetings is a matter for each authority to determine, based on its own committee timetable and needs. However, from general practice, at least four meetings per year appear to be appropriate. One meeting annually will be taken up with setting the programme, agreeing audit plans and generally preparing for the year ahead, leaving three meetings which are available for monitoring purposes and to fit in with the cycle of assurance statements and financial reporting. For example, some authorities’ audit committees may wish to meet before

124

PAGE 23

Chapter 5: STRUCTURE AND ADMINISTRATION

A U D I T C O M M I T T E E S : P R A C T I C A L G U I D A N C E F O R L O C A L A U T H O R I T I E S

approval of the accounts, to review both the financial statements and the draft SIC, and after completion of the audit to review the auditor’s report to those charged with governance.

COMPOSITION

The size of the audit committee is relevant although not crucial. Too small a number of members and political balance may be difficult to achieve; too large and meetings may become unwieldy. HM Treasury guidance6 recommends between three and five members for an audit committee. It is also important that the committee set a quorum, to enhance the credence and standing of the decisions that it makes.

Some authorities adhere to the political balance rules as contained in s15 of the Local Government and Housing Act 1989, when bringing their committee together. Any audit committee, which is a properly constituted committee of the council, will need to abide by the rules concerning political balance.

Co-option may well be beneficial. Often, the injection of an external view, for specific discussion, can be seen as bringing a new approach and flavour to committee discussions. Many authorities have made provision to co-opt a member but have not bestowed voting rights on that member. This allows flexibility in co-option and retains the decision-making function for the permanent members of the audit committee. An equivalent model is the standards committee.7

6 The Audit Committee Handbook (HM Treasury, 2003).

7 Under the Local Government Act 2000, a standards committee of a relevant authority in England or a police authority in Wales must include: – at least two members of the authority, and– at least one person who is not a member or an officer, of that or any other relevant authority. A standards committee:– may not include the elected mayor or executive leader, and– may not be chaired by a member of the executive.

125

PAGE 24

Chapter 5: STRUCTURE AND ADMINISTRATION

A U D I T C O M M I T T E E S : P R A C T I C A L G U I D A N C E F O R L O C A L A U T H O R I T I E S

“Having observed how effectively an experienced practitioner has participated as an independent member of an audit committee, I would urge all authorities to consider this issue carefully.”

A CIPFA Audit Panel member

SKILLS AND EXPERIENCE

To be effective, the members of the audit committee will require certain skills and will benefit from having gained experience in some of the key areas to be considered by the committee.

Whilst financial awareness is essential, particularly for the chair, an accounting background or qualification is less important than a broad understanding of the financial, risk and control, and corporate governance issues facing local authorities generally and the council specifically. An ability to question, probe and seek clarification about complex issues is also essential.

A survey of 24 housing associations8 carried out in 2004 identified areas that all audit committee members should be familiar with:

1. governance – understanding of the requirements of legislation and of local arrangements

2. risk management – recognising the requirements of CPA in English authorities

3. internal control assurance

4. the organisation’s core activities

5. accounting issues

6. regulation and compliance.

8 Improving the Effectiveness of Audit Committees: A Good Practice Guide (Housing Corporation, 2004).

126

PAGE 25

Chapter 5: STRUCTURE AND ADMINISTRATION

A U D I T C O M M I T T E E S : P R A C T I C A L G U I D A N C E F O R L O C A L A U T H O R I T I E S

TRAINING

Identifying sufficient members with appropriate skills and experience will be difficult, especially as many such members could already be serving on other committees and thus may not be eligible for membership.

Appropriate and timely training for members will help to overcome this problem and build upon the key attributes of independence, a risk-focused attitude, and balanced approach that preferred members will already possess.

Induction training should be provided for all new committee members and cover:

the role of the committee

the terms of reference

the time input required of members

an overview of council activities

the financial and risk environment.

Further, regular and specific audit committee training should also be provided in:

financial reporting

governance

understanding financial statements

the regularity framework

the role of internal and external audit

the importance of risk management.

This training can be provided in a variety of ways, including:

conferences

formal courses

•

•

•

•

•

•

•

•

•

•

•

•

•

127

PAGE 26

Chapter 5: STRUCTURE AND ADMINISTRATION

A U D I T C O M M I T T E E S : P R A C T I C A L G U I D A N C E F O R L O C A L A U T H O R I T I E S

internally arranged sessions

briefings from external visitors.

ADMINISTRATION

Effective administrative support for the audit committee will clearly be important, as for any committee of the council. If the committee is to take an active part in council business, it should be administered as effectively as any other should. The regular attendance of the key senior management figures mentioned in the Position Statement is important both to maintain the credibility of the committee and to ensure that members are adequately supported by appropriate professionals.

The authority’s chief finance officer will have an important relationship with the committee. This officer’s role and that of the audit committee are closely aligned and complementary. CIPFA’s A Statement on the Role of the Finance Director in Local Government states that one of the finance director’s key roles is “maintaining strong financial management underpinned by effective financial controls”. The finance director’s role is also about “supporting and advising democratically elected representatives”.

This officer should therefore be a key point of contact for audit committee members. The committee will need to receive advice from the officer on most, if not all, of the matters taken to the body.9 Thus, it is advisable that this officer or deputy be required to attend all meetings to fulfil this function which, in turn, will give the committee additional credibility.

9 This relationship should not interfere with the head of internal audit’s responsibility to report independently to the audit committee in accordance with CIPFA’s Code of Practice for Internal Audit in Local Government in the United Kingdom 2003.

•

•

128

PAGE 27

APPENDICES

A U D I T C O M M I T T E E S : P R A C T I C A L G U I D A N C E F O R L O C A L A U T H O R I T I E S

Appendix 1: Suggested Audit Committee Terms of Reference

Audit Activity

To consider the head of internal audit’s annual report and opinion, and a summary of internal audit activity (actual and proposed) and the level of assurance it can give over the council’s corporate governance arrangements.

To consider summaries of specific internal audit reports as requested.

To consider reports dealing with the management and performance of the providers of internal audit services.

To consider a report from internal audit on agreed recommendations not implemented within a reasonable timescale.

To consider the external auditor’s annual letter, relevant reports, and the report to those charged with governance.

To consider specific reports as agreed with the external auditor.

To comment on the scope and depth of external audit work and to ensure it gives value for money.

To liaise with the Audit Commission over the appointment of the council’s external auditor.

To commission work from internal and external audit.

Regulatory Framework

To maintain an overview of the council’s constitution in respect of contract procedure rules, financial regulations and codes of conduct and behaviour.

To review any issue referred to it by the chief executive or a director, or any council body.

To monitor the effective development and operation of risk management and corporate governance in the council.

129

PAGE 28

APPENDICES

A U D I T C O M M I T T E E S : P R A C T I C A L G U I D A N C E F O R L O C A L A U T H O R I T I E S

To monitor council policies on ‘Raising Concerns at Work’ and the anti-fraud and anti-corruption strategy and the council’s complaints process.

To oversee the production of the authority’s Statement on Internal Control and to recommend its adoption.

To consider the council’s arrangements for corporate governance and agreeing necessary actions to ensure compliance with best practice.

To consider the council’s compliance with its own and other published standards and controls.

Accounts

To review the annual statement of accounts. Specifically, to consider whether appropriate accounting policies have been followed and whether there are concerns arising from the financial statements or from the audit that need to be brought to the attention of the council.

To consider the external auditor’s report to those charged with governance on issues arising from the audit of the accounts.

130

PAGE 29

APPENDICES

A U D I T C O M M I T T E E S : P R A C T I C A L G U I D A N C E F O R L O C A L A U T H O R I T I E S

Appendix 2: Self-assessment Checklist – Measuring the Effectiveness of the Audit Committee

ISSUE YES NO N/A Comment

Terms of Reference

Have the committee’s terms of reference been approved by full council?

Do the terms of reference follow the CIPFA model?

Internal Audit Process

Does the committee approve the strategic audit approach and the annual programme?

Is the work of internal audit reviewed regularly?

Are summaries of quality questionnaires from managers reviewed?

Is the annual report, from the head of audit, presented to the committee?

External Audit Process

Are reports on the work of external audit and other inspection agencies presented to the committee?

Does the committee input into the external audit programme?

131

PAGE 30

APPENDICES

A U D I T C O M M I T T E E S : P R A C T I C A L G U I D A N C E F O R L O C A L A U T H O R I T I E S

ISSUE YES NO N/A Comment

Does the committee ensure that officers are acting on and monitoring action taken to implement recommendations?

Does the committee take a role in overseeing:

risk management strategies

internal control statements

anti-fraud arrangements

whistle-blowing strategies?

•

•

•

•

Membership

Has the membership of the committee been formally agreed and a quorum set?

Is the chair free of executive or scrutiny functions?

Are members sufficiently independent of the other key committees of the council?

Have all members’ skills and experiences been assessed and training given for identified gaps?

Can the committee access other committees as necessary?

Meetings

Does the committee meet regularly?

132

PAGE 31

APPENDICES

A U D I T C O M M I T T E E S : P R A C T I C A L G U I D A N C E F O R L O C A L A U T H O R I T I E S

ISSUE YES NO N/A Comment

Are separate, private meetings held with the external auditor and the internal auditor?

Are meetings free and open without political influences being displayed?

Are decisions reached promptly?

Are agenda papers circulated in advance of meetings to allow adequate preparation by members?

Does the committee have the benefit of attendance of appropriate officers at its meetings?

Training

Is induction training provided to members?

Is more advanced training available as required?

Administration

Does the authority’s s151 officer or deputy attend all meetings?

Are the key officers available to support the committee?

133

PAGE 32

APPENDICES

A U D I T C O M M I T T E E S : P R A C T I C A L G U I D A N C E F O R L O C A L A U T H O R I T I E S

134

PAGE 33

APPENDICES

A U D I T C O M M I T T E E S : P R A C T I C A L G U I D A N C E F O R L O C A L A U T H O R I T I E S

Appendix 3: Position Statement on Audit Committees in Local Government

This statement reflects the views of CIPFA’s Audit Panel on the role of audit committees in local government. It emphasises the importance of audit committees being in place in all principal local authorities.

Audit committees are a key component of corporate governance. They are a key source of assurance about the organisation’s arrangements for managing risk, maintaining an effective control environment, and reporting on financial and non-financial performance.

Guidance on implementing and running audit committees in local government lags behind other sectors. CIPFA will therefore be publishing further guidance drawn from practical examples and experience of other parts of the public sector in 2005.

The way in which an audit committee is organised will vary depending upon the specific political and management arrangements in place in any local authority. CIPFA’s further guidance will explore how audit committees relate to local authorities’ different arrangements for managing and governing themselves. It is not therefore appropriate to prescribe any particular model. But there are features that should be common to all:

1 A Statement of Purpose

2 Core Functions

3 Features

4 Structure and Administration

1 A STATEMENT OF PURPOSE

The local authority should formally approve a Statement of Purpose, along the following lines:

135

PAGE 34

APPENDICES

A U D I T C O M M I T T E E S : P R A C T I C A L G U I D A N C E F O R L O C A L A U T H O R I T I E S

The purpose of an audit committee is to provide independent assurance of the adequacy of the risk management framework and the associated control environment, independent scrutiny of the authority’s financial and non-financial performance to the extent that it affects the authority’s exposure to risk and weakens the control environment, and to oversee the financial reporting process.

2 CORE FUNCTIONS

Audit committees will:

Consider the effectiveness of the authority’s risk management arrangements, the control environment and associated anti-fraud and anti-corruption arrangements.

Seek assurances that action is being taken on risk-related issues identified by auditors and inspectors.

Be satisfied that the authority’s assurance statements, including the Statement on Internal Control,10 properly reflect the risk environment and any actions required to improve it.

Approve (but not direct) internal audit’s strategy, plan and monitor performance.

Review summary internal audit reports and the main issues arising, and seek assurance that action has been taken where necessary.

Receive the annual report of the head of internal audit.

Consider the reports of external audit and inspection agencies.

10 “The Accounts and Audit Regulations 2003 state that the relevant body is responsible for ensuring that the body (authority) has ‘a sound system of internal control’. Members and member committees should therefore establish procedures to provide sufficient assurance for them to be able to attest to this”. Source: The Statement on Internal Control in Local Government – Meeting the Requirements of the Accounts and Audit Regulations 2003 (CIPFA, 2004).

•

•

•

•

•

•

•

136

PAGE 35

APPENDICES

A U D I T C O M M I T T E E S : P R A C T I C A L G U I D A N C E F O R L O C A L A U T H O R I T I E S

Ensure that there are effective relationships between external and internal audit, inspection agencies and other relevant bodies, and that the value of the audit process is actively promoted.

Review the financial statements, external auditor’s opinion and reports to members, and monitor management action in response to the issues raised by external audit.

3 FEATURES

Good audit committees will be characterised by:

A strong chair – displaying a depth of skills and interest.11

Unbiased attitudes – treating auditors, the executive and management equally.

The ability to challenge the executive (leader/chief executive/mayor or whatever combination) when required.

A membership that is balanced,12 objective, independent of mind, and knowledgeable.

4 STRUCTURE AND ADMINISTRATION

Although no single model of audit committee is prescribed, all should:

Be independent of the executive and scrutiny functions.

Have clear reporting lines and rights of access to other committees/functions, for example scrutiny and service committees, corporate risk management boards and other strategic groups.

11 There are many personal qualities needed to be an effective chair, but key to these are promoting apolitical open discussion, managing meetings to cover all business and encouraging a candid approach from all participants. An interest in and knowledge of financial and risk management, accounting concepts and standards, and the regulatory regime are also essential. A specialism in one of these areas would be and advantage.

12 The political balance of a formal committee of an authority will reflect the political balance of the council. However, balance in terms of apolitical attitudes is as important.

•

•

•

•

•

•

•

•

137

PAGE 36

APPENDICES

A U D I T C O M M I T T E E S : P R A C T I C A L G U I D A N C E F O R L O C A L A U T H O R I T I E S

Meet regularly – about four times a year, and have a clear policy on those items to be considered in private and those to be considered in public.

Meet privately and separately with the external auditor and head of internal audit.

Include, as regular attendees, the chief finance officer or deputy, head of internal audit and appointed external auditor and relationship manager. Other attendees may include the monitoring officer (for standards issues), chief executive and the head of resources (where such a post exists). These officers should also be able to have access to the committee, or the chair, as required. The committee should have the right to call any other officers or agencies of the council as required.

Be properly trained to fulfil their role.13

13 Further guidance will be available on the skills, knowledge and personal attributes required of committee members but key areas for training would include financial and risk management, auditing and accounting concepts and standards, regulatory requirements for financial reporting, and corporate governance.

•

•

•

•

138

PAGE 37

Bibliography

A U D I T C O M M I T T E E S : P R A C T I C A L G U I D A N C E F O R L O C A L A U T H O R I T I E S

Bibliography

Accounts and Audit Regulations 2003 (ODPM, 2003)

Accounts and Audit (Wales) Regulations 2005 (Welsh Assembly Government, 2005)

Audit Committee Handbook (Department of Health, 2001)

The Audit Committee Handbook (HM Treasury, 2003)

Audit Committee Principles in Local Authorities in Scotland: A Guidance Note (CIPFA, 2004)

Audit Committee Self-assessment Checklist (NAO, 2003)

Audit Committees: Good Practices for Meeting Market Expectations (PricewaterhouseCoopers, 2003)

Audit Committees – The Combined Code on Corporate Governance (Financial Reporting Council, 2003)

Called to Account (Audit Commission, 1996)

Code of Practice for Internal Audit in Local Government in the United Kingdom 2003 (CIPFA, 2003)

Corporate Governance in Local Government – A Keystone for Community Governance: Framework and Guidance Note (CIPFA/SOLACE, 2001)

Effective Boards in the NHS? A Study of their Behaviour and Culture (NHS Confederation, 2005)

Improving the Effectiveness of Audit Committees: A Good Practice Guide (Housing Corporation, 2004)

The Jigsaw of Control (Sandwell and West Birmingham Hospitals NHS Trust, 2002)

Shaping the UK Audit Committee Agenda (Audit Committee Institute – Sponsored by KPMG, 2004)

139

PAGE 38

Bibliography

A U D I T C O M M I T T E E S : P R A C T I C A L G U I D A N C E F O R L O C A L A U T H O R I T I E S

The Statement on Internal Control in Local Government – Meeting the Requirements of the Accounts and Audits Regulations 2003 (CIPFA, 2004)

A Statement on the Role of the Finance Director in Local Government (CIPFA, 2003)

140

PAGE 39

A U D I T C O M M I T T E E S : P R A C T I C A L G U I D A N C E F O R L O C A L A U T H O R I T I E S

141

PAGE 40

A U D I T C O M M I T T E E S : P R A C T I C A L G U I D A N C E F O R L O C A L A U T H O R I T I E S

142

143

�������������������������

�!"�#�����#�������##������#$

��%��������&��������������$

��''����������� ���%"�������

(�"�����)�*+,-.-

��%��������� �#�/

+���!����������

������(�*��.�

��"/�-*-�012+�1.--

�3/�-*-�012+�1.-0

�'��"/�4�!"�#������5#�4 �)��% ����������������� !

��

144

AUDIT AND ACCOUNTS COMMITTEE AGENDA ITEM NO. 9 WEDNESDAY 6th NOVEMBER 2013 EXTERNAL AUDITORS’ ANNUAL AUDIT LETTER 2012/13 REPORT PRESENTED BY: JOHN CORNETT – DIRECTOR KPMG LLP (UK) 1.0 Purpose of Report 1.1 To advise Members of the receipt of the external auditor’s Annual Audit Letter for

2012/13 for Newark & Sherwood District Council. 2.0 Introduction 2.1 The Annual Audit Letter summarises the key findings from the external audit work carried

out by KPMG in 2012/13. The audit covers the 2012/13 financial statements and the Value for Money conclusion for the same year.

3.0 Conclusions 3.1 KPMG presented details of the findings from the audit of the 2012/13 financial

statements at the 25th September meeting of the Audit & Accounts Committee, and informed Members that they proposed to give an unqualified opinion on the statements. The audit opinion was issued on 27th September 2013.

3.2 At the same meeting KPMG also proposed to issue an unqualified audit opinion on the

Value for Money conclusion for 2012/13. This opinion was also issued on 27th September, 2013

4.0 RECOMMENDATION that

Members consider the external auditors Annual Audit Letter for 2012/13.

Background Papers Nil For further information please contact John Cornett, Director KPMG LLP (UK) on 0116 2566064. D. Dickinson Director of Resources

145

146

Ann

ual A

udit

Lette

r 20

12/1

3

New

ark

and

Sher

woo

d D

istr

ict C

ounc

il

Oct

ober

201

3

147

1 ©

201

3 KP

MG

LLP

, a U

K lim

ited

liabi

lity

partn

ersh

ip, i

s a

subs

idia

ry o

f KPM

G E

urop

e LL

P an

d a

mem

ber

firm

of t

he K

PMG

net

wor

k of

inde

pend

ent m

embe

r fir

ms

affil

iate

d w

ith K

PMG

Inte

rnat

iona

l Coo

pera

tive,

a

Swis

s en

tity.

All

right

s re

serv

ed. T

his

docu

men

t is

conf

iden

tial a

nd it

s ci

rcul

atio

n an

d us

e ar

e re

stric

ted.

KPM

G a

nd th

e KP

MG

logo

are

regi

ster

ed tr

adem

arks

of K

PMG

Inte

rnat

iona

l Coo

pera

tive,

a S

wis

s en

tity.

Con

tent

s

This

repo

rt is

add

ress

ed to

the

Auth

ority

and

has

bee

n pr

epar

ed fo

r the

sol

e us

e of

the

Auth

ority

. We

take

no

resp

onsi

bilit

y to

any

mem

ber o

f sta

ff ac

ting

in th

eir

indi

vidu

al c

apac

ities

, or t

o th

ird p

artie

s. T

he A

udit

Com

mis

sion

has

issu

ed a

doc

umen

t ent

itled

Sta

tem

ent o

f Res

pons

ibili

ties

of A

udito

rs a

nd A

udite

d B

odie

s. T

his

sum

mar

ises

whe

re th

e re

spon

sibi

litie

s of

aud

itors

beg

in a

nd e

nd a

nd w

hat i

s ex

pect

ed fr

om th

e au

dite

d bo

dy. W

e dr

aw y

our

atte

ntio

n to

this

doc

umen

t whi

ch is

ava

ilabl

e on

the

Audi

t Com

mis

sion

’s w

ebsi

te a

t ww

w.a

uditc

omm

issi

on.g

ov.u

k.

Exte

rnal

aud

itors

do

not a

ct a

s a

subs

titut

e fo

r the

aud

ited

body

’s o

wn

resp

onsi

bilit

y fo

r put

ting

in p

lace

pro

per a

rran

gem

ents

to e

nsur

e th

at p

ublic

bus

ines

s is

con

duct

ed

in a

ccor

danc

e w

ith th

e la

w a

nd p

rope

r sta

ndar

ds, a

nd th

at p

ublic

mon

ey is

saf

egua

rded

and

pro

perly

acc

ount

ed fo

r, an

d us

ed e

cono

mic

ally

, effi

cien

tly a

nd e

ffect

ivel

y.

If yo

u ha

ve a

ny c

once

rns

or a

re d

issa

tisfie

d w

ith a

ny p

art o

f KPM

G’s

wor

k, in

the

first

inst

ance

you

sho

uld

cont

act J

ohn

Cor

nett,

the

appo

inte

d en

gage

men

t lea

d to

the

Auth

ority

, who

will

try

to re

solv

e yo

ur c

ompl

aint

. If y

ou a

re d

issa

tisfie

d w

ith y

our

resp

onse

ple

ase

cont

act T

revo

r R

ees

on 0

161

246

4000

, or b

y em

ail t

o tr

evor

.rees

@kp

mg.

co.u

k, w

ho is

the

natio

nal c

onta

ct p

artn

er fo

r all

of K

PMG

’s w

ork

with

the

Audi

t Com

mis

sion

. Afte

r th

is, i

f you

are

stil

l dis

satis

fied

with

how

you

r co

mpl

aint

has

bee

n ha

ndle

d yo

u ca

n ac

cess

the

Audi

t Com

mis

sion

’s c

ompl

aint

s pr

oced

ure.

Put

you

r co

mpl

aint

in w

ritin

g to

the

Com

plai

nts

Uni

t Man

ager

, Aud

it C

omm

issi

on,

3rd F

loor

, Fry

Bui

ldin

g, 2

Mar

sham

Str

eet,

Lond

on, S

W1P

4D

F or

by

emai

l to

com

plai

nts@

audi

t-com

mis

sion

.gsi

.gov

.uk.

The

ir te

leph

one

num

ber i

s 03

0344

4833

0.

The

cont

acts

at K

PMG

in

con

nect

ion

with

this

re

port

are

:

John

Cor

nett

Dire

ctor

KP

MG

LLP

(UK)

Tel:

0116

256

606

4 jo

hn.c

orne

tt@kp

mg.

co.u

k

Mik

e N

orm

an

Man

ager

KP

MG

LLP

(UK)

Tel:

0115

935

355

4 m

icha

el.n

orm

an@

kpm

g.co

.uk

Pag

e

Rep

ort s

ectio

ns

■H

eadl

ines

2

Appe

ndic

es

1.Su

mm

ary

of re

ports

issu

ed

2.Au

dit f

ees

4 5

148

2 ©

201

3 KP

MG

LLP

, a U

K lim

ited

liabi

lity

partn

ersh

ip, i

s a

subs

idia

ry o

f KPM

G E

urop

e LL

P an

d a

mem

ber

firm

of t

he K

PMG

net

wor

k of

inde

pend

ent m

embe

r fir

ms

affil

iate

d w

ith K

PMG

Inte

rnat

iona

l Coo

pera

tive,

a

Swis

s en

tity.

All

right

s re

serv

ed. T

his

docu

men

t is

conf

iden

tial a

nd it

s ci

rcul

atio

n an

d us

e ar

e re

stric

ted.

KPM

G a

nd th

e KP

MG

logo

are

regi

ster

ed tr

adem

arks

of K

PMG

Inte

rnat

iona

l Coo

pera

tive,

a S

wis

s en

tity.

Sect

ion

one

Hea

dlin

es

This

repo

rt s

umm

aris

es th

e ke

y fin

ding

s fr

om o

ur

2012

/13

audi

t of N

ewar

k an

d Sh

erw

ood

Dis

tric

t Cou

ncil

(the

Auth

ority

).

Alth

ough

this

lette

r is

addr

esse

d to

the

Mem

bers

of

the

Auth

ority

, it i

s al

so

inte

nded

to c

omm

unic

ate

thes

e is

sues

to k

ey e

xter

nal

stak

ehol

ders

, inc

ludi

ng

mem

bers

of t

he p

ublic

.

Our

aud

it co

vers

the

audi

t of

the

Auth

ority

’s 2

012/

13

finan

cial

sta

tem

ents

and

the

2012

/13

VFM

con

clus

ion.

VFM

con

clus

ion

We

issu

ed a

n un

qual

ified

val

ue fo

r mon

ey (V

FM) c

oncl

usio

n fo

r 201

2/13

on

27 S

epte

mbe

r 201

3.

This

mea

ns w

e ar

e sa

tisfie

d th

at y

ou h

ave

prop

er a

rrang

emen

ts fo

r sec

urin

g fin

anci

al re

silie

nce

and

chal

leng

ing

how

yo

u se

cure

eco

nom

y, e

ffici

ency

and

effe

ctiv

enes

s.

To a

rrive

at o

ur c

oncl

usio

n w

e lo

oked

at y

our f

inan

cial

gov

erna

nce,

fina

ncia

l pla

nnin

g an

d fin

anci

al c

ontro

l pro

cess

es,

as w

ell a

s ho

w y

ou a

re p

riorit

isin

g re

sour

ces

and

impr

ovin

g ef

ficie

ncy

and

prod

uctiv

ity.

VFM

risk

are

as

Our

ini

tial

risk

asse

ssm

ent

took

int

o ac

coun

t th

e Au

thor

ity’s

key

bus

ines

s ris

ks w

hich

are

rel

evan

t to

our

VFM

co

nclu

sion

. We

spec

ifica

lly c

onsi

dere

d th

e ac

tions

bei

ng ta

ken

by th

e Au

thor

ity to

ach

ieve

the

savi

ngs

iden

tifie

d as

re

quire

d w

ithin

the

Med

ium

Ter

m F

inan

cial

Stra

tegy

, w

ith £

0.9m

to

£1.3

m r

equi

red

in t

he f

our

year

s 20

14/1

5 to

20

17/1

8. T

he A

utho

rity

was

on

targ

et t

o m

ake

the

savi

ngs

requ

ired

for

2013

/14

and

was

mak

ing

prog

ress

in

deve

lopi

ng th

e ac

tions

req

uire

d to

del

iver

the

long

er te

rm s

avin

gs r

equi

red

by th

e St

rate

gy. W

e w

ere

satis

fied

that

su

ffici

ent w

ork

in r

elat

ion

to th

is r

isk

was

bei

ng c

arrie

d ou

t by

the

Auth

ority

to m

itiga

te th

e au

dit r

isks

for

our

VFM

co

nclu

sion

. We

conc

lude

d th

at w

e di

d no

t nee

d to

car

ry o

ut a

ny s

peci

fic a

dditi

onal

wor

k ou

rsel

ves.

Audi

t opi

nion

W

e is

sued

an

unqu

alifi

ed o

pini

on o

n yo

ur fi

nanc

ial s

tate

men

ts o

n 27

Sep

tem

ber 2

013.

Th

is m

eans

that

we

belie

ve

the

finan

cial

sta

tem

ents

giv

e a

true

and

fair

view

of t

he fi

nanc

ial p

ositi

on o

f the

Aut

horit

y an

d of

its

expe

nditu

re a

nd

inco

me

for t

he y

ear.

Fina

ncia

l sta

tem

ents

au

dit

We

repo

rted

the

sign

ifica

nt m

atte

rs a

risin

g fro

m th

e fin

anci

al s

tate

men

ts a

udit

to th

e Au

dit C

omm

ittee

in o

ur R

epor

t to

thos

e C

harg

ed w

ith G

over

nanc

e. W

e di

d no

t nee

d to

rep

ort a

ny s

igni

fican

t aud

it di

ffere

nces

to th

e C

omm

ittee

, and

th

e qu

ality

of

the

acco

unts

and

sup

porti

ng w

orki

ng p

aper

s w

as g

ood.

We

did

not

high

light

any

spe

cific

are

as f

or

impr

ovem

ent.

Annu

al G

over

nanc

e St

atem

ent

We

revi

ewed

you

r An

nual

Gov

erna

nce

Stat

emen

t an

d co

nclu

ded

that

it w

as c

onsi

sten

t with

our

und

erst

andi

ng o

f yo

ur a

rrang

emen

ts.

149

3 ©

201

3 KP

MG

LLP

, a U

K lim

ited

liabi

lity

partn

ersh

ip, i

s a

subs

idia

ry o

f KPM

G E

urop

e LL

P an

d a

mem

ber

firm

of t

he K

PMG

net

wor

k of

inde

pend

ent m

embe

r fir

ms

affil

iate

d w

ith K

PMG

Inte

rnat

iona

l Coo

pera

tive,

a

Swis

s en

tity.

All

right

s re

serv

ed. T

his

docu

men

t is

conf

iden

tial a

nd it

s ci

rcul

atio

n an

d us

e ar

e re

stric

ted.

KPM

G a

nd th

e KP

MG

logo

are

regi

ster

ed tr

adem

arks

of K

PMG

Inte

rnat

iona

l Coo

pera

tive,

a S

wis

s en

tity.

Sect

ion

one

Hea

dlin

es (c

ontin

ued)

All t

he is

sues

in th

is le

tter

have

bee

n pr

evio

usly

re

port

ed. T

he d

etai

led

findi

ngs

are

cont

aine

d in

the

repo

rts

we

have

list

ed in

Ap

pend

ix 1

.

Who

le o

f Gov

ernm

ent

Acco

unts

W

e ca

rried

out

the

man

date

d au

dit

wor

k on

the

con

solid

atio

n pa

ck w

hich

the

Aut

horit

y pr

epar

ed t

o su

ppor

t th

e pr

oduc

tion

of W

hole

of G

over

nmen

t Acc

ount

s by

HM

Tre

asur

y. W

e di

d no

t nee

d to

repo

rt to

the

Nat

iona

l Aud

it O

ffice

an

y in

cons

iste

ncie

s be

twee

n th

e Au

thor

ity’s

aud

ited

acco

unts

and

the

subm

itted

pac

k.

Cer

tific

ate

We

issu

ed o

ur c

ertif

icat

e on

27

Sept

embe

r 201

3.

The

certi

ficat

e co

nfirm

s th

at w

e ha

ve c

oncl

uded

the

aud

it fo

r 20

12/1

3 in

acc

orda

nce

with

the

req

uire

men

ts o

f th

e Au

dit C

omm

issi

on A

ct 1

998

and

the

Audi

t Com

mis

sion

’s C

ode

of A

udit

Prac

tice.

Audi

t fee

O

ur fe

e fo

r 201

2/13

was

£63

,538

, exc

ludi

ng V

AT. F

urth

er d

etai

l is

cont

aine

d in

App

endi

x 2.

150

4 ©

201

3 KP

MG

LLP

, a U

K lim

ited

liabi

lity

partn

ersh

ip, i

s a

subs

idia

ry o

f KPM

G E

urop

e LL

P an

d a

mem

ber

firm

of t

he K

PMG

net

wor

k of

inde

pend

ent m

embe

r fir

ms

affil

iate

d w

ith K

PMG

Inte

rnat

iona

l Coo

pera

tive,

a

Swis

s en

tity.

All

right

s re

serv

ed. T

his

docu

men

t is

conf

iden

tial a

nd it

s ci

rcul

atio

n an

d us

e ar

e re

stric

ted.

KPM

G a

nd th

e KP

MG

logo

are

regi

ster

ed tr

adem

arks

of K

PMG

Inte

rnat

iona

l Coo

pera

tive,

a S

wis

s en

tity.

Appe

ndic

es

Appe

ndix

1: S

umm

ary

of re

port

s is

sued

This

app

endi

x su

mm

aris

es

the

repo

rts

we

issu

ed th

is

year

.

2013

Janu

ary

Fe

brua

ry

M

arch

April

May

June

July

Augu

st

Se

ptem

ber

O

ctob

er

N

ovem

ber

Audi

t Fee

Let

ter (

April

201

3)

The

Audi

t Fee

Let

ter s

et o

ut th

e pr

opos

ed a

udit

wor

k an

d dr

aft f

ee fo

r the

201

3/14

fina

ncia

l yea

r.

Audi

tor’s

Rep

ort (

Sept

embe

r 201

3)

The

Audi

tor’s

Rep

ort i

nclu

ded

our a

udit

opin

ion

on

the

finan

cial

sta

tem

ents

, our

VFM

con

clus

ion

and

our c

ertif

icat

e.

Annu

al A

udit

Lette

r (O

ctob

er 2

013)

This

Ann

ual A

udit

Lette

r pro

vide

s a

sum

mar

y of

the

resu

lts o

f our

aud

it fo

r 201

2/13

.

Exte

rnal

Aud

it Pl

an (M

arch

201

3)

The

Audi

t Fee

Let

ter i

ssue

d in

Aug

ust 2

012

set o

ut

the

prop

osed

aud

it w

ork

and

draf

t fee

for t

he

2012

/13

finan

cial

yea

r.

The

Exte

rnal

Aud

it Pl

an s

et o

ut o

ur a

ppro

ach

to th

e au

dit o

f the

Aut

horit

y’s

finan

cial

sta

tem

ents

and

to

wor

k to

sup

port

the

VFM

con

clus

ion.

Cer

tific

atio

n of

Gra

nts

and

Ret

urns

(Feb

ruar

y 20

13)

This

repo

rt on

sum

mar

ised

the

outc

ome

of o

ur

certi

ficat

ion

wor

k on

the

Auth

ority

’s 2

011/

12 g

rant

s an

d re

turn

s.

Rep

ort t

o Th

ose

Cha

rged

with

Gov

erna

nce

(Sep

tem

ber 2

013)

The

Rep

ort t

o Th

ose

Cha

rged

with

Gov

erna

nce

sum

mar

ised

the

resu

lts o

f our

aud

it w

ork

for

2012

/13

incl

udin

g ke

y is

sues

and

reco

mm

enda

tions

ra

ised

as

a re

sult

of o

ur o

bser

vatio

ns.

We

also

pro

vide

d th

e m

anda

tory

dec

lara

tions

re

quire

d un

der a

uditi

ng s

tand

ards

as

part

of th

is

repo

rt.

151

5 ©

201

3 KP

MG

LLP

, a U

K lim

ited

liabi

lity

partn

ersh

ip, i

s a

subs

idia

ry o

f KPM

G E

urop

e LL

P an

d a

mem

ber

firm

of t

he K

PMG

net

wor

k of

inde

pend

ent m

embe

r fir

ms

affil

iate

d w

ith K

PMG

Inte

rnat

iona

l Coo

pera

tive,

a

Swis

s en

tity.

All

right

s re

serv

ed. T

his

docu

men

t is

conf

iden

tial a

nd it

s ci

rcul

atio

n an

d us

e ar

e re

stric

ted.

KPM

G a

nd th

e KP

MG

logo

are

regi

ster

ed tr

adem

arks

of K

PMG

Inte

rnat

iona

l Coo

pera

tive,

a S

wis

s en

tity.

Appe

ndic

es

Appe

ndix

2: A

udit

fees

To e

nsur

e op

enne

ss b

etw

een

KPM

G a

nd y

our A

udit

Com

mitt

ee a

bout

the

exte

nt o

f our

fee

rela

tions

hip

with

you

, we

have

su

mm

aris

ed th

e ou

tturn

aga

inst

the

2012

/13

plan

ned

audi

t fee

.

Exte

rnal

aud

it

Our

fina

l fee

for t

he 2

012/

13 a

udit

of th

e Au

thor

ity w

as £

63,5

38. T

he A

udit

Com

mis

sion

’s s

cale

fee

for t

he 2

011/

12 a

udit

was

£1

05,8

96. T

he 2

012/

13 fe

e re

flect

s th

e re

duct

ions

that

the

Audi

t Com

mis

sion

has

bee

n ab

le to

mak

e to

its

scal

e fe

es

follo

win

g th

e m

arke

t tes

ting

of a

udit

serv

ices

.

The

final

fee

is th

e sa

me

as th

e pl

anne

d fe

e an

d w

e ha

ve n

ot n

eede

d to

sub

mit

any

addi

tiona

l fee

requ

ests

for t

he a

udit

of

the

finan

cial

sta

tem

ents

to th

e Au

dit C

omm

issi

on.

Cer

tific

atio

n of

gra

nts

and

retu

rns

Our

gra

nts

wor

k is

stil

l ong

oing

and

the

fee

will

be

conf

irmed

thro

ugh

our r

epor

t on

the

Cer

tific

atio

n of

Gra

nts

and

Ret

urns

20

12/1

3 w

hich

we

are

due

to is

sue

in J

anua

ry 2

014.

This

app

endi

x pr

ovid

es

info

rmat

ion

on o

ur fi

nal f

ees

for 2

012/

13.

152

© 2

013

KPM

G L

LP, a

UK

publ

ic li

mite

d lia

bilit

y pa

rtner

ship

, is

a su

bsid

iary

of

KPM

G E

urop

e LL

P an

d a

mem

ber f

irm o

f the

KPM

G n

etw

ork

of in

depe

nden

t m

embe

r firm

s af

filia

ted

with

KPM

G In

tern

atio

nal C

oope

rativ

e, a

Sw

iss

entit

y.

All r

ight

s re

serv

ed.

The

KPM

G n

ame,

logo

and

‘cut

ting

thro

ugh

com

plex

ity’ a

re re

gist

ered

tra

dem

arks

or t

rade

mar

ks o

f KPM

G In

tern

atio

nal C

oope

rativ

e (K

PMG

In

tern

atio

nal).

153

154

AUDIT AND ACCOUNTS COMMITTEE AGENDA ITEM NO. 10 WEDNESDAY 6TH NOVEMBER 2013 COMBINED ASSURANCE REPORT REPORT PRESENTED BY: DIRECTOR – RESOURCES 1.0 Purpose of Report To receive and comment upon the Combined Assurance Report which covers the period up

to the end of March 2013. 2.0 Introduction

The Combined Assurance Report has been produced by Internal Audit working with Business Managers and CMT. It demonstrates the level of assurance the Council has in its activities at a set point in time and identifies any gaps.

3.0 RECOMMENDATION That: the Audit and Accounts Committee consider and comment upon the report. Background Papers Nil. For further information please contact David Dickinson on Ex 5300 David Dickinson Director of Resources

155

156

Combined Assurance Status Report

Newark and Sherwood District Council

Date July 2013

157

Page 2 of 20

Contents Introduction

3

Key Messages

4

Critical Systems

5

Strategic Risks

16

Projects

17

Looking Ahead

18

Contact David Dickinson, Director of Resources Details:David.Dickinson@nsdc.info

158

Page 3 of 20

Introduction This is the first combined assurance report for the Council. Working with management Internal Audit has been able to show what assurances the Council currently has on the areas of the business that matter most – highlighting where there may be potential assurance ‘unknowns or gaps’. Internal Audit have gathered and analysed assurance information in a control environment that: • takes what we have been told on trust,

and • encourages accountability with those

responsible for managing the service. This report reflects the level of assurance at the end of the 2012/13 financial year. However our aim is to give Senior Management and the Audit and Accounts Committee an insight on assurances across all critical activities and key risks making recommendations where we believe assurance needs to be stronger.

Scope We gathered information on :

critical systems – those areas identified by senior management as having a significant impact on the successful delivery of priorities or whose failure could result in significant damage to reputation, financial loss or impact on people.

due diligence activities – those that support the running of the Council and ensure compliance with policies.

key risks – found on the strategic risk register or associated with major new business strategy / change.

key projects –supporting corporate priorities / activities.

Methodology We have developed a combined assurance model which shows assurances across the entire Council, not just those from Internal Audit. We leverage assurance information from your ‘business as usual’ operations. Using the ‘3 lines of assurance’ concept:

Our approach includes a critical review or assessment on the level of confidence the Councilcan have on its service delivery arrangements, management of risks, operation of controls and performance. We did this by:

Speaking to senior and operational managers who have the day to day responsibility for managing and controlling their service activities.

Working with corporate functions and using other third party inspections to provide information on performance, successful delivery and organisational learning.

Using the outcome of Internal Audit work to provide independent insight and assurance opinions.

We used a Red (low), Amber (medium) and Green (high) rating to help us assess the level of assurance confidence in place.

The overall assurance opinion is based on the assessment and judgement of senior management. Internal audit has helped co-ordinate these and provided some challenge but as accountability rests with the Senior Manager we used their overall assurance opinion

159

Key The nationaThe Councsavings whbusinesses2010/11 angovernmen We have trtax for the tmillion reve2013 – 201priorities. Our capital each £1 spand nationagovernmenchains and Overall the improvemegreen statustandard. The Councbe some tecouncillors'necessary thave soughpartners anretain stronscrutiny, reframework. Figure 1- Y

R

LowAss

Mesal economic

cil has been hilst responds. We have nd 2012/13)nt reduces u

ied to maintthird consecenue budge8 to provide

programmeent generatal civil war cnt funding in

wellbeing.

report showents that canus and there

cil moved to eething prob' commissioto ensure thht to strengtnd to clarify ng strategic view and pe

Your overa

Red

w level of urance 0%

ssagc picture haable to ma

ding to the nmade diffic. We are pl

up to 2017.

tain servicecutive year t for 2013-1e the servic

e has the pting £3.40 incentre and an business a

ws a high len be made, e are measu

a committeblems as theon we will enhat it is robuthen our relremits and leadership,erformance

ll Assuranc

Am

%

Mediuof Ass

1

ges

as continuednage its finneeds of Neult choices anning to m

es to the pubto minimise

14 and our aces and mak

otential to an value. Maa new leisuand in hous

evel of positCMT is hap

ures in plac

ee style of ge new systensure that wust and fit foationships wresponsibil

, transparene manageme

ce Status –

mber

um level surance

19%

Page 4 of 20

d to presentances and ewark and Sand deliver

make further

blic as far ae its impact ambitious cke investme

add £183.8 ajor investmre centre thing creating

tive assuranppy that mo

ce to improv

governance em beds in, we alter andor purpose.with outsidelities. At thency and accent. This all

– Critical S

Gre

High leAssur

81%

0

t challengesservices caSherwood’sred large sar savings as

as possible. on the pub

capital progrents that su

million to thments are plahat will unlog more loca

nce. Whilst ore than 80%ve areas tha

in May 201but through

d adapt the In designin

e bodies ane same timecountability l contributes

ervices

een

evel of rance %

s for the pubarefully, maks residents aavings (£3 ms our incom

We have frlic. We will ramme of £

upport our s

he district’s anned in a ck private a

al jobs, boos

there are a% of criticalat fall benea

13. There wh the work onew systemng the new d with our ee we have stogether wis to a good

Unknown

UnknowGap , 0

blic sector. king significand million betwe

me from

rozen councuse our £8354 million fotrategic

economy wnew museu

and sting supply

lways systems ha

ath this

will inevitablof our m as system we

external sought to ith effectiveassurance

n / Gap

wn / 0%

cant

een

cil 3 or

with um

y

ave

ly

160

Page 5 of 20

Critical Systems

One area where we have not co-ordinated assurances is on the Council's ICT systems. This work will be completed in 2013/14 and feed into the next annual status report.

Figure 2 shows the key areas included in the Council's assurance map – most being in Resources.

The Council has a strong assurance framework in place that works well. This has resulted in a high level of confidence in our risk and management processes. This is supported by making the best use of Internal Audit on areas where independent challenge and insight adds value and compliments internal and external reviews.

Recommended improvements in our assurance framework and resulting from Internal audits is tracked through the Audit & Accounts Committee. The remainder of the report provides assurance information on each Director service area.

Figure 2- Your Assurance Map

Figure 3- Who Provides Assurance on your Critical Activities

8%9%

9%

11%11%

29%

12%

12%Deputy Chief Executive

Community

Growth

Safety

Customers

Resources

Key Risks

Projects

100%

57%

59%

Management Assurance

Corporate and Third

Party Assurance

Internal Audit

Assurance

161

Page 6 of 20

Deputy Chief Executive

Figure 4- Deputy Chief Executive

Partnerships and Corporate Oversight The Council has a partnership toolkit which has been updated and is available on the intranet. Key partnerships have been identified asThe Newark and Sherwood Local Strategic Partnership (which reports to the Policy Committee), and Newark and Sherwood and Bassetlaw Community Safety Partnership (which reports to the Homes and Communities Committee). Whilst an overview of partnerships rests with the Deputy Chief Executive the day to day running and reporting on these two key partnerships rests with the Director of Safety. Further work is being undertaken to identify all external bodies where the Council currently provides a representative. This work will determine the level of importance for the Council in retaining a presence on this body and clarify its role on the body and the reporting mechanism for work the body is undertaking. This overview will allow the Council to decide with clarity on which bodies it is important to retain a presence. It is suggested that this is listed as amber as there remains some work to be undertaken. However the Deputy Chief Executive is comfortable that this current level of assurance is appropriate for this work and that key partnerships have suitably robust mechanisms of checks and balances. Corporate Plan The annual report was approved by Policy Committee on 6 June 2013. This details not only work that has been completed in the last year but also work planned for the coming year. Clearly defined links to the Council’s priorities are demonstrated and give direction to the workplan. Underpinning this is a set of service plans which have been completed by all managers, giving light touch details of the initiatives and issues that will be addressed, again clearly linking these to the Council’s priorities. Work is currently on going to analyse these service plans and it is expected that within the next few weeks these will be refined and approved by the Corporate Management Team. It is suggested this is listed as Amber. The Deputy Chief Executive is comfortable with this level of assurance as it is expected this can be classed as green shortly once service plans have formally been approved. A suggested next step would be to factor in customer comments and the views of stakeholders into the review process. This already forms an element of the commissioning framework so it can be expected that relevant stakeholder information on every business unit will become available over the course of the commissioning programme. Corporate Governance The Council moved to committee style of governance at its annual meeting on 14th May 2013. The committee structure was developed through a series of meetings of the Councillors Commission and sought to retain the advantages of the Cabinet style of governance rather than a nostalgic return to a traditional 1972 Act committee structure. Accordingly a strong and effective strategic

33%

67%

Red

Amber

Green

Unknown / Gap

162

Page 7 of 20

leadership was embedded into the design with a small Policy Committee which to some extent reflects the role and functions of a Cabinet. Overview and scrutiny principles were also embedded into the structure with policy development review and performance management clearly included within committee remits. The opportunity was also taken to clarify the relationship between committees and external bodies and partnerships. There will inevitably be some teething problems as the new system is implemented. However, it is suggested that this be listed as amber. The Deputy Chief Executive is satisfied that this level of assurance is appropriate as considerable time and thought was given to designing the new governance framework in a manner which was effective and fit for purpose. Commissioning Following the four pilot projects a Commissioning Framework and plan was approved by Policy Committee on 6th June 2013. This clearly takes from the learning of undertaking the four pilot projects and sets out a programme for commissioning over the next 5 years. Whilst this plan has been developed over 5 years it will be reviewed annually to take into account opportunities and issues that may arise. It has a redeveloped architecture for the programme including how the remit and scope of individual projects will be set and monitored. This document gives clear reporting and monitoring lines both within the officer and member environment. It is recommended that the Commissioning Programme is defined as Green, each individual project within the commissioning programme may be at different levels of assurance depending upon its scope and progress; these will be addressed within the programme management.

163

Page 8 of 20

Growth

Figure 5- Growth

The areas covered by Growth include Planning Development (which deals with planning application processing and front line advice), Planning Policy, Building Control, Economic Growth, Strategic Housing and these functions are supported by a specialist Growth Admin team. The services are very much in the front line with regard to serving customers, and Planning in particular is a service that people get very emotive about. We have spent a huge amount of investment in ensuring that our processes are as efficient and effective as possible so that our customers are able to obtain information and interact with us in a number of different ways. This applies to both Planning and Building Control. A regular focus on service quality and customer satisfaction is required and a high level of assurance expected.

14%

86%

Red

Amber

Green

UnknownGap

We have also made great strides in providing the spatial plan for the District in the form of the Local Development Framework. Together with the Community Infrastructure Levy, this provides a strong level of certainty for developers and investors.

This strong focus on “Place”, and the regulatory framework which underpins our approach is supported by the Economic Growth Team, which is making good progress in creating a new confidence for businesses in the District. We are one of the few District’s nationally to provide a business loan service. This has a strong governance system which underpins it.

The Council has its priorities set out under the headings of prosperity, people, place and public service. Business plans within the directorate are aligned with the corporate priorities and then fed into team objectives and individual objectives through the appraisal system. In this way, a golden thread is achieved in aligning the work of an individual employee with the delivery of the council’s goals.

Performance management and risk is embedded through the use of Covalent, which is viewed by CMT on a regular basis and is subject to regular discussion through 1 to 1s between the Director and the Business Managers. Business continuity plans are seen as an essential component to business unit operations and challenge by audit on critical activities is welcomed.

164

Page 9 of 20

Building Control – this Business Unit is under a continuing pressure to bring in income within an increasingly challenging environment. The capacity of the Unit is limited which means that its ability to win work needs to be very effective. The forthcoming Commissioning process will enable the unit to focus on key issues such as this over the forthcoming months.

Changes in terms of Housing and Welfare Reform are having key impacts on the way the Strategic Housing Business Unit delivers its service. However, these changes have been identified and the Unit’s business plan provides a sound approach to tackling these increasingly challenging issues.

Overall, the Growth Directorate has made significant changes over the last year in the way that it operates. It is now much more customer and business focussed, and the Business Units work well together. The issue of capacity needs to be closely monitored, but Business Units are agile and cohesive, and are now well placed to handle the forthcoming challenges that will arise over

165

Page 10 of 20

Figure 6- Community Community The areas covered within Communities namely: • Waste; • Cleansing; • Recycling and Transport; • Parks and Amenities; • Markets and Car Parks; • Sports and Arts Development

are working well as is reflected in the assurance summary.

The ‘front line’ nature of the services provided within the Community Directorate is such that they have a significant role to play in forming the Councils reputation as a service provider. One of the Councils key priorities is ‘Place’ and the services within the Community Directorate have a critical role to play in ensuring that the district is an attractive place to live, visit and/or work in. The quality of the local environment and in particular our public open spaces is vital in attracting visitors and businesses to the district and enhancing the health and wellbeing of our residents. A regular focus on service quality and customer satisfaction is therefore required and a high level of assurance expected.

In 2012/13, there has been significant work and improvement on performance management corporately. This has provided Business Managers with up to date performance information on agreed targets and senior management with assurance on risk management and business continuity. This is particularly relevant and welcomed by the service areas within the Directorate as the nature of these services requires a robust focus on Health and Safety and associated risk as well as service quality and customer satisfaction. The performance management framework compliments the existing procedures utilised by Business Managers to determine and mitigate risks and the data it provides is utilised in the regular meetings held with Business Managers and the Director.

Given the nature of the services within the remit of the Community Directorate it is essential that the respective Business Managers have complete ownership of all aspects of the services they manage. This is encouraged and supported by senior management as is the need for them to be innovative and entrepreneurial in their approach to service delivery. Standards of service performance and delivery and customer satisfaction are generally good and in some cases excellent but there is always room for further development and improvement and some specific areas have been identified for further improvement in risk management..

In 2013/14 there will be a growing focus on Health and Wellbeing in its broadest sense with the Communities Directorate taking a key role in this working with key partners to develop and implement projects and health interventions. There will also be a focus on developing new and enhancing existing waste and recycling services both within the district and county wide working in partnership with neighbouring authorities where appropriate.

I am comfortable with the level of assurance provided on the range of services covered by the Community directorate.

100%

Red

Amber

Green

Unknown / Gap

166

Page 11 of 20

Safety

Figure 7- Safety

The areas covered within Safety are a mix of front facing, corporate and back office services, namely: • Risk Management; • Health & Safety; • Human Resources; • Legal; • Equalities and Diversity; • Business Continuity/Emergency

Planning; • Environmental Health; • CCTV; and • Community Safety.

During 2012/13 significant resources were committed to an intensive series of Council wide staff workshops, the feedback from which has gone into informing the review and update of the workforce development plan. A cross Council officer working group was also established to review and develop changes to the appraisal process and supporting documentation to improve its fitness for purpose. The feedback from the workshops and the business plans that business managers have compiled, which tie into and reflect the Council’s four priorities, are also being used to influence the development of the new appraisal process and workforce development plan. The HR business plan incorporates theses two areas of work and sets out timelines for them to be completed over the next few months. The Director – Safety is comfortable, given the work in progress, that this area be listed as amber as it is expected this can be classed as green shortly once the work has been progressed.

An internal audit report was produced on 10 December 2012 following a review of equality and diversity within the Council. This report highlighted improvements in a number of key areas that needed to be addressed to ensure full compliance with the public sector equality duty, but also acknowledged that the Council has a clear commitment to equality and diversity which had been actively promoted within the organisation. Many of the actions highlighted in the report have already been progressed, and these are regularly reported on to the Council’s Audit and Accounts Committee. A corporate equality and diversity strategy setting out the Council’s objectives and responsibilities has been adopted which includes an action plan detailing responsible officers and timescales. The Council’s performance management system, Covalent, has enabled specific performance indicators for equality and diversity to be developed and reported on. It is appropriate that this area is classed as amber, although given the resources allocated to achieving the actions identified in the action plan, this should progress to green over the next few months.

Assurance for Emergency Planning is substantial. The Council has extremely well developed processes in place and effective, highly trained and responsive staff in this area of work. Whilst all the Council’s business units have business continuity plans in place, some work is now being undertaken to streamline processes and ensure that there is a clear corporate overview as to how the plans fit together. Once this work is complete, the Director – Safety considers that the current amber status of business continuity should be moved to green.

50%50%

Red

Amber

Green

Unknown /

167

Page 12 of 20

CCTV has been undergoing significant change over the last year, in that the Council took over CCTV monitoring for Ashfield District Council under contract and has also been developing a shared service with Broxtowe Borough Council. The shared service is currently going through a period of ‘bedding in’, hence the amber status of this work area. However, significant progress has been made over the last few months in establishing this shared service, performance standards are good and significant savings have been made through the shared service and joint procurement with Broxtowe.

Given the comments made above, and the controls in place, I am comfortable with the level of assurance provided on the range of services covered by the Safety directorate.

168

Page 13 of 20

Customers

Figure 8- Customers The Customers Directorate covers a broad mix of both frontline and back office services. The three council-run leisure centres in Newark, Ollerton and Blidworth, together with the Palace Theatre, Museums Service, Customer Services and Housing Options, serve a wide range of customers with very differing needs. Marketing and Communications and ICT are key functions which enable the delivery of the frontline services and, particularly in the case of communications, are a key pillar of the income generating activities of the leisure and culture offer. Assurance is achieved in the directorate through a mixture of process, policy and procedure, together with a strong element of people management.

The council has its priorities set out under the headings of prosperity, people, place and public service. Business plans within the directorate are aligned with the corporate priorities and then fed into team objectives and individual objectives through the appraisal system. In this way, a golden thread is achieved in aligning the work of an individual employee with the delivery of the council’s goals. Performance management and risk is embedded through the use of Covalent, which is viewed by CMT on a regular basis and is subject to regular discussion between individual directors and business managers. Business continuity plans are seen as an essential component to business unit operations and challenge by audit on critical activities is welcomed. The customer complaints procedure is another useful tool in ensuring that services are delivering in line with their objectives, with clear processes in place for complaint recording and storage on the Customer Relationship Management system and escalation to senior management where appropriate. Business managers are encouraged and supported to have an increased degree of autonomy and responsibility to lead their business operations, provided there is sufficient evidence the controls of process, policy and procedure are in place. In these circumstances, further assurance is achieved through 1 to 1 discussions between the director and business managers every two weeks. Part of these meetings are given over to coaching and mentoring managers to overcome any issues they may be facing within their business units. Managers are encouraged to try new ways of doing things and given constructive feedback when things go as intended and when they don’t. In this way, leadership is created and supported throughout the directorate. The directorate faces new challenges over the coming year, with plans to outsource the Palace Theatre well into development and to deliver a new National Civil War Centre and a leisure centre in Newark. On top of these, the full extent of the impact of welfare reform is not yet known, but could mean a significant increase in demand in Housing Options. The financial challenges the council faces are set to continue meaning that at a time when resources are set to continue reducing, capacity will need to be found to successfully deliver the major capital projects that are anticipated.

100%

Red

Amber

Green

Unknown / Gap

169

Page 14 of 20

The issue of capacity will need to be closely monitored, but I remain comfortable with the controls we have in place to do this. As a result, I’m comfortable with the level of assurance within the directorate.

170

Page 15 of 20

Figure 9- Resources Resources

Most areas within Resources are working well and this is reflected in the assurance summary. The nature of the services provided is such that there is regular focus on governance and control arrangements so a high level of assurance is expected. In 2012/13, there has been significant work and improvement on performance management. This section also provides senior management with assurance on risk management and business continuity arrangements across the Council. The transition from Council Tax Benefits to the new Council Tax Support Scheme has been well managed with key decisions being taken at the earliest opportunity and senior staff being involved at national and regional level which has enabled the Council to influence national policy and resulted in being aware of changes at the earliest possible time.

18%

82%

Red

Amber

Green

Unknown / Gap

The changes to local government finance have also been well managed and again the Council has played an important role at national and regional levels.

In 2013/14 there will be a focus on improving the Council’s approach to strategic asset management and counter fraud as well as maintaining the high levels of assurance in other areas.

The Council’s role in the management of the Government’s Welfare Reform Act is still unknown. This will result in significant changes to the benefits function in 2013/14 and future years and governance arrangements will be a key element of this.

I am comfortable with the level of assurance provided on the range of services covered by the Resources directorate.

171

Page 16 of 20

Suggested next steps…… The Council has changed from a Cabinet system to a Committee system from May 2013. A new Council Constitution has been approved and is effective from the same date. This provides a new governance framework for the Council which will be monitored and reviewed during 2013/14. Major projects will continue to be managed through project boards which will normally include at least one member of CMT. The Performance Business Unit will continue to provide assurance to management not only on performance but on Business Continuity, Risk Management and Health and Safety. Corporate Management Team will consider reports on these issues. Risk Management will be reported to the Audit and Accounts Committee and appropriate performance issues will be considered by Committees. Other assurance issues will be raised at meetings of Members, CMT and Business Managers as appropriate. For 2013/14 the Council has new external auditors, KPMG, who will provide an element of assurance. Working practices are currently in the process of being agreed between KPMG, Internal Audit and the Council. With the new audit standards we will be undertaking a review to ensure that the Council is getting the best value for money from internal and external audit. We are looking to raise awareness across the Council of counter fraud measures and comply with the National Fraud Authority’s good practice as set out in “Fighting Fraud Locally”.

172

Page 17 of 20

173

Page 18 of 20

Your Strategic Risks The Council has an active approach to risk management and has reviewed the key strategic risks facing the Council. As well as the risks identified in this section, Business Managers identify operational risks and these are managed through similar processes. Directors have individual meetings with Business Managers at which risks are discussed.

Each risk is recorded in detail and managed through the performance management system. Key strategic risks are reported through the Audit and Accounts Committee. Each risk is managed through a member of the Corporate Management Team who meets with appropriate officers on a quarterly basis. Strategic Risks are regularly reviewed by CMT. We also have a Risk Management Group comprising officers from key business units that meets quarterly and is chaired by a member of CMT. Overall, risks are clearly identified and well managed by the Council.

Partnerships

Funding and financial resilience

Growth Delivery

Partnerships

Major Projects

Workforce Development /

Transformational Change

Community Cohesion

Severe Weather Events

Corporate Governance

Data Management / Security

174

ProjThe Councdifficult finainvest in a r Each of thea project Bosuccessful evidenced and changeFocus prog Key projectMembers. All major prto a prograelected meprovided toprojects arelite principle Each projecinclude rep Internal andis planned t A key chansystem rath We are conthe ability to As well as tacross the We are satmajor projeFigure 11

jectscil has identiancial situatrange of ke

e projects shoard. This afor the Couby the levele delivered gramme.

ts are also r

rojects havemme boardmbers. Up

o the relevane run either es.

ct is assignresentative

d external athat this wil

nge for 2013her than to C

nscious of tho deliver da

the key corpCouncil.

isfied that aects.

– Assura

Red

0%

s ified that deion there is y capital pr

hown is maapproach hauncil in the pl of sustainathrough the

reported thr

e a project td, some of wdate reportnt committeon full Prin

ed a projecs from finan

audit have bl be replica

3/14 is that tCabinet or O

he need to ay to day se

porate proje

appropriate

nce on yo

A

P

espite the the scope

ojects.

naged throuas been past, as able savinge SMART

rough

team and rewhich includs are regula

ee and majonce2 or Prin

ct manager ance and per

been used inted, as app

the reportinOverview a

ensure thatervices.

ects identifie

mechanism

our key pro

Amber

44%

Page 19 of 2

to

ugh

s

eport de arly or ce

WhaIf themay You

•••••••••

and suitablerformance a

n the past tpropriate, for

ng mechanisnd Scrutiny

t all projects

ed in this se

ms and proc

ojects

G

56

0

at Managersere are any

y be helpful

ur key proje• SMART• Print • New le• Nationa• Kelham• Asset r• Palace • Commi• Growth

e corporateand others a

o verify largr future proj

sm will be thy.

s are proper

ection, there

cesses are i

reen

6%

s are doingy areas of im

to put these

ects: T focus

isure central civil war

m Hall review Theatre ssioning

h Investme

support is as appropri

ge projects jects and pr

hrough the

rly resource

e are smalle

n place to m

Unknow

0%

: mprovemente here.

re centre

nt Fund

identified. Tate to the p

or programrogrammes

new Comm

ed whilst ma

er projects d

manage the

wn / Gap

%

t then it

This will project.

mes and it s.

mittee

aintaining

delivered

e Council’s

175

Page 20 of 20

Looking Ahead Delivery of Key Projects The Council has identified an ambitious programme of key projects which are identified elsewhere in this report. Members and officers will need to retain focus on these projects. Suitable governance arrangements are already in place.

Welfare Reform We have done significant work in this area to understand the risks as the future remains unknown. We are being proactive in working with Government and regional groups to ensure that we influence and understand the future impact of welfare reform on the Council. Our processes will continue to be reviewed as the welfare reform agenda develops.

Funding The changes to local government finance have also been well managed and again the Council has played an important role at national and regional levels. We are aware of further reductions in funding over the next few years and these are reflected in the Medium Term Financial Plan. We will continue to prioritise front line services although we recognise that funding reductions also put these at risk.

Growth The development of prosperity in the District is the Council’s top priority. We have put measures in place to improve prosperity, such as the Growth Investment Fund and an apprenticeship scheme. Growth will continue to be a main focus for the Council.

176

AUDIT & ACCOUNTS COMMITTEE AGENDA ITEM NO. 11 6th NOVEMBER 2013 RESPONSES TO QUESTIONS RAISED AT THE PREVIOUS MEETING REPORT PRESENTED BY: Nicky Lovely - Business Manager Financial Services 1.0 Purpose of Report 1.1 To provide answers to questions raised at the last meeting of the Audit & Accounts

Committee. 2.0 Should the Mansfield Crematorium reserve shown in the Statement of Accounts be split

between capital and revenue? 2.1 The Statement of Accounts was prepared in compliance with the Code of Practice on Local

Authority Accounting in the United Kingdom 2012/13 and there is no requirement to split revenue and capital reserves in the note detailing the Council’s share in Mansfield Crematorium. The Code of Practice only requires reserves to be split between Usable and Unusable.

3.0 RECOMMENDATION

That the responses are noted by the Audit & Accounts Committee.

Background Papers Nil. For further information contact Nicky Lovely - Business Manager Financial Services, on extension 5317. David Dickinson Director - Resources

177

178

New

ark

and

Sher

woo

d D

istr

ict C

ounc

il A

gend

a It

em n

o. 1

2

Aud

it a

nd A

ccou

nts

Com

mit

tee

Wor

k Pl

an

Wed

nesd

ay 6

th N

ovem

ber

2013

M

eeti

ng a

t whi

ch a

ctio

n to

be

und

erta

ken

Subj

ect

and

Brie

f Des

crip

tion

W

ho w

ill p

rese

nt th

e re

port

4th

Sept

embe

r 20

13Tr

aini

ng s

essi

on o

n St

atem

ent o

f Acc

ount

sN

icol

a Pi

ckav

ance

25

th S

epte

mbe

r 20

13Ex

tern

al A

udit

Ann

ual G

over

nanc

e Re

port

John

Cor

nett

(KPM

G)

St

atem

ent o

f Acc

ount

s &

Ann

ual G

over

nanc

e St

atem

ent

N

icol

a Pi

ckav

ance

Co

unte

r-Fr

aud

Act

ivity

Rep

ort

Nic

ky L

ovel

y

Re

spon

ses

to q

uest

ions

rai

sed

at p

revi

ous

mee

ting

Nic

ky L

ovel

y

A

udit

Com

mitt

ee W

ork

Prog

ram

me

D

avid

Dic

kins

on

14th

Oct

ober

201

3Tr

aini

ng s

essi

on o

n Th

e Ro

le o

f th

e A

udit

& A

ccou

nts

Com

mitt

ee a

nd H

ow it

Can

Per

form

its

Ass

uran

ce R

ole

Lucy

Ple

dge/

John

Sco

tt (A

udit

Linc

s)

6th

Nov

embe

r 20

13

Trea

sury

Pe

rfor

man

ce

incl

udin

g de

tails

of

in

tern

al

borr

owin

g Bi

ll H

ill

Cr

edit

Ratin

gs o

f Inv

estm

ent C

ount

er P

artie

s

Bill

Hill

In

tern

al A

udit

Prog

ress

Rep

ort

Lucy

Ple

dge/

John

Sco

tt (A

udit

Linc

s)

St

atut

ory

requ

irem

ents

rela

ting

to In

tern

al A

udit

Nic

ky L

ovel

y

A

nnua

l Aud

it Le

tter

John

Cor

nett

/Mik

e N

orm

an (K

PMG

)

Co

mbi

ned

Ass

uran

ce R

epor

t

Dav

id D

icki

nson

Re

spon

ses

to q

uest

ions

rai

sed

at p

revi

ous

mee

ting

Nic

ky L

ovel

y

179

New

ark

and

Sher

woo

d D

istr

ict C

ounc

il A

gend

a It

em n

o. 1

2

Aud

it a

nd A

ccou

nts

Com

mit

tee

Wor

k Pl

an

Wed

nesd

ay 6

th N

ovem

ber

2013

Aud

it Co

mm

ittee

Wor

k Pr

ogra

mm

e

Dav

id D

icki

nson

Trea

sury

Man

agem

ent T

rain

ing

Sess

ion

Arl

ingc

lose

( N

SDC

Trea

sury

Man

agem

ent A

dvis

ors)

TB

A

Tr

aini

ng s

essi

on o

n Co

unte

r-Fr

aud

Nic

ky L

ovel

y

19th

Feb

ruar

y 20

14Tr

easu

ry P

erfo

rman

ce

Bill

Hill

D

raft

Tre

asur

y St

rate

gy

Bill

Hill

In

tern

al A

udit

Prog

ress

Rep

ort

Lucy

Ple

dge/

John

Sco

tt (A

udit

Linc

s)

D

raft

Inte

rnal

Aud

it Pl

an 2

013/

14Lu

cy P

ledg

e/Jo

hn S

cott

(Aud

it Li

ncs)

Exte

rnal

Aud

it Ce

rtifi

catio

n of

Cla

ims

& R

etur

ns

John

Cor

nett

(KPM

G)

Ri

sk M

anag

emen

t rep

ort

Lisa

Lan

cast

er

St

rate

gic

Risk

Reg

iste

rLi

sa L

anca

ster

Co

rpor

ate

Frau

d Ri

sk A

sses

smen

t and

Act

ion

Plan

N

icky

Lov

ely

Re

spon

ses

to q

uest

ions

rai

sed

at p

revi

ous

mee

ting

Nic

ky L

ovel

y

A

udit

Com

mitt

ee W

ork

Prog

ram

me

D

avid

Dic

kins

on

23th

Apr

il 20

14In

tern

al A

udit

Prog

ress

Rep

ort

Lu

cy P

ledg

e/Jo

hn S

cott

(Aud

it Li

ncs)

Fina

l Int

erna

l Aud

it Pl

an 2

013/

14Lu

cy P

ledg

e/Jo

hn S

cott

(Aud

it Li

ncs)

180

New

ark

and

Sher

woo

d D

istr

ict C

ounc

il A

gend

a It

em n

o. 1

2

Aud

it a

nd A

ccou

nts

Com

mit

tee

Wor

k Pl

an

Wed

nesd

ay 6

th N

ovem

ber

2013

Ex

tern

al A

udit

Plan

John

Cor

nett

(KPM

G)

Stat

emen

t of A

ccou

ntin

g Po

licie

s N

icol

a Pi

ckav

ance

IAS1

9 Pe

nsio

n A

ssum

ptio

ns

Nic

ola

Pick

avan

ce

Co

unte

r-Fr

aud

Act

ivity

Rep

ort

Nic

ky L

ovel

y

Re

spon

ses

to q

uest

ions

rai

sed

at p

revi

ous

mee

ting:

N

icky

Lov

ely

A

udit

Com

mitt

ee W

ork

Prog

ram

me

Dav

id D

icki

nson

TBA

Tr

aini

ng s

essi

on o

n St

atem

ent o

f Acc

ount

sN

icol

a Pi

ckav

ance

25

th Ju

ne 2

014

Trea

sury

Man

agem

ent O

uttu

rn R

epor

t

Bill

Hill

St

atem

ent

of R

espo

nsib

ilitie

s of

Aud

itors

& o

f A

udite

d Bo

dies

and

Pro

toco

l of t

he r

elat

ions

hip

betw

een

Inte

rnal

&

Exte

rnal

Aud

it

John

Cor

nett

In

tern

al A

udit

Prog

ress

Rep

ort

Lu

cy P

ledg

e/Jo

hn S

cott

Ann

ual I

nter

nal A

udit

Repo

rt

Lucy

Ple

dge/

John

Sco

tt

Re

spon

ses

to q

uest

ions

rai

sed

at p

revi

ous

mee

ting:

N

icky

Lov

ely

A

udit

Com

mitt

ee W

ork

Prog

ram

me

Dav

id D

icki

nson

181

182