Audit and Governance Committee Minutes

Audit and Governance Committee Minutes

Thursday 20 September 2012
10:00 a.m.
Oberhausen Room,Town Hall, Middlesbrough

Attendance Details

Junier (Chair), P Khan (Vice-Chair), Harvey, Hawthorne, C Hobson, Taylor.
B Baldam, P Clarke, H Fowler, S Harker, I Hope and M Padfield.
Apologies for absence:
There were no apologies for absence submitted
Item Number Item/Resolution

The minutes of the meeting of the Audit and Governance Committee held on 19 June 2012 were taken as read and approved as a correct record.


The Chair informed Members that Councillor Hudson had resigned from the Committee.  The Chair asked that thanks be recorded for Councillor Hudson's contributions to the Committee.


The Deputy Director of Resources presented a report to update Members of the Audit and Governance Committee on the production of the Middlesbrough Council Statement of Accounts 2011/12. The draft Statement of Accounts 2011/2012 was based on the previous year's accounts, which had been prepared using the IFRS (International Financial Reporting Standards) Code of Practice for the first time. However, using the previous year's accounts as a model had resulted in a draft document that was full of highly technical, detailed explanations and many tables.


The final accounts had therefore undergone a major review to change the presentation and content in order to reduce the amount of technical information, ensure figures were comparable throughout, and make the accounts easier to read and understand.


The accounts had been divided into two sections with the more significant information at the front and less significant information at the back. The first section included the Explanatory Foreword and Review of the Year, the Basis of Accounting and Significant Accounting Policies, Judgements and Estimates, the main Statements of Account and the principal notes to the Main Statements. The second section of the Accounts included the remaining accounting policies and supplementary notes. It was intended that the accounts would be a stepping stone to producing a simplified, summarised set of accounting statements for 2012/2013.


The final Statement of Accounts remained a technical publication containing accounting statements prepared in accordance with the Code of Practice on Local Authority Accounting in Great Britain and the Statutory Accounts and Audit Regulations (The Code). The Statement of Accounts had been prepared in compliance with the International Financial Reporting Standards (IFRS). Extracts from the revised Statement of Accounts 2011/2012 were attached to the submitted report.


As previously requested by the Audit and Governance Committee, two years’ figures were included in the Statements in order that a comparison could be drawn. All the notes to the Accounts were listed on page 24 for ease of reference.


The External Auditor commented on the change in presentation and highlighted that some of the narrative had been removed. One area where the Council had decided not to give full disclosure was Heritage Assets. This area was particularly onerous and therefore the Council had taken the decision to reduce the notes, whilst still giving a satisfactory explanation. Whilst this was a disclosure deficiency, the External Auditor stated that it was not substantial. The External Auditor added that objective of ensuring the Accounts were easier to understand and much more readable had been achieved.


Councillor Taylor declared a Non Prejudicial Interest at this point in the meeting on the grounds that he was a member of the Levick Trust.


The final Statement of Accounts was in the process of being audited and the External Auditor would present a draft report summarising the principal matters that had arisen from the audit to date for the year-end 31 March 2012, as the next agenda item.


RECOMMENDED as follows that Members note the revised format of the final 2011/2012 Statement of Accounts.


The External Auditor presented a progress report on the principal matters that had arisen to date from the audit for the year ended 31 March 2012. The audit testing was not yet complete and the results of work carried out to date in relation to significant risks were summarised in the Executive Summary.


The following significant risks had been identified and the External Auditor provided a detailed explanation and update as to the current position for each of the following items:


Revenue recognition: recognising grant income.
Recoverability of investments.
Valuation of fixed assets.
Accounting for Heritage Assets.
Disclosure of related parties.
Presentation of summary financial statements.
Risk of Accounts Payable control deficiencies.
Management override of internal control.
Financial standing.


An updated Appendix 1: Audit adjustments and uncorrected misstatements was tabled for Members’ information.


As part of the audit the External Auditor was required to form a conclusion on the Council’s arrangements for securing economy, efficiency and effectiveness in the use of resources, known as 'value for money. The key audit risks that had been identified were:


Financial sustainability.
Asset management and the development of the property hubs.

Management of information across the Council.


The External Auditor had reviewed the financial planning process and progress in updating the Medium Term Financial Plan. The findings from the previous year’s audit had been followed up to ascertain how far the Council had moved towards articulating its strategic direction and vision for what the Council would look like at the end of the Medium Term Financial Plan period. No issues had arisen that would impact on the value for money conclusion and more detailed findings and recommendations would be reported to the Audit and Governance Committee in a separate management letter.


Work in relation to asset management had focussed on the non-strategic asset review and the hub initiative. The Council continued to recognise that as financial challenges increased and specific funding streams ceased, financial and capital planning processes needed to be extremely robust to ensure risks were managed effectively and resources continued to be targeted in priority areas.


It was noted that a buildings review was underway and Members had asked previously for an update to be brought to the Audit and Governance Committee.


With regard to the management of information, the External Auditor had focused on a case study on the information flows on safeguarding within Children Families and Learning, due to continued pressures in this service area. No issues had arisen that impacted on the value for money conclusion, however a number of observations and recommendations in relation to the sources of information available to the Council and how that information was used had been noted. These findings would be reported to the next Audit and Governance Committee in the management letter.


On satisfactory completion of the outstanding matters, the External Auditor anticipated issuing an unqualified audit opinion on the truth and fairness of the financial statements, in addition to giving an audit opinion on the whole of government accounts forms.


RECOMMENDED as follows:

1.   that Members note the progress report on the external audit of the 2011/2012 Accounts.

2.   an update on the Buildings Review would be presented to the next meeting of the Audit and Governance Committee.


The Audit Manager presented a report to inform Members of the progress made to date in delivering the 2012/2013 Internal Audit Plan, any developments likely to impact on the Plan, and other agreed performance measures throughout the year. The submitted report also outlined the main findings from 2012/2013 internal audit reports that had been issued in final and provided an update on the progress made to implement recommendations made as a result of audit work undertaken in the last financial year.


Members approved the 2012/13 Audit Plan on 19 June 2012 and the total number of planned audit days was 1,325. Progress against the agreed performance measures was detailed at Appendix one to the submitted report.

The target was for the Service to deliver 100% of the agreed Audit Plan and it was currently slightly behind at 20%.  It was explained that some assessments had been moved from five days to a longer period of time. However, provided resources stayed as they were, the Audit Manager was confident that the Service was on track to achieve the Plan.


A number of audit reports for 2012/2013 had been issued. Appendix two to the submitted report provided a brief summary of the main findings of each of these audits, together with the overall assurance opinion. Members noted that the recommendations made by the Overview and Scrutiny Board in December 2010 in relation to the Winter Maintenance Plan had not been implemented and an update was requested.


To date, no audits had been removed from the approved Plan, however a number of additional assignments had been carried out using the contingency allocation of time. Details of these assignments were shown at paragraph four of the submitted report.


Internal Audit work during 2011/2012 resulted in a total of 528 recommendations being agreed with management. In addition, three Priority 3 recommendations were made which were not agreed with management. Management provided reasons for non-acceptance of these actions and the risk of non-implementation was deemed to be low.


Table 1 at Appendix 3 to the submitted report provided an analysis of all 528 recommendations according to priority ranking and department. Table 2 highlighted the number of recommendations that had been implemented. Prompt evidence of action taken had been provided in respect of all Priority 1 recommendations.


The majority of agreed recommendations had yet to be implemented, however it was noted that a number of outstanding recommendations were in respect of reports issued only recently and therefore the target date for implementation was unlikely to have been reached.


The Service was currently developing improved follow-up procedures to enable reports to be run showing how many recommendations should have been implemented by a certain date.


RECOMMENDED as follows:

1.   that the information in relation to the 2012/2013 Audit Plan be received and noted.

2.   an update in relation to the outstanding Winter Maintenance Plan recommendation be presented to the next meeting of the Audit and Governance Committee.

3.   that future progress reports include a table indicating the date by which recommendations were due to be implemented and also those recommendations that had been completed by the due date. 


The Chair reminded Members to forward details of any topics they wished to be included in the Audit and Governance Committee's Work Programme 2012/2013.



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