Agenda and minutes

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Contact: Steve Wood  020 8313 4316

Items
No. Item

26.

APOLOGIES FOR ABSENCE AND NOTIFICATION OF SUBSTITUTE MEMBERS

Minutes:

No apologies had been received.

27.

DECLARATIONS OF INTEREST

Minutes:

There were no declarations of interest.  

28.

CONFIRMATION OF THE MINUTES OF THE MEETING HELD ON 14th NOVEMBER-- EXCLUDING THOSE CONTAINING EXEMPT INFORMATION pdf icon PDF 149 KB

Minutes:

A Member referenced the section of the minutes that mentioned Direct Payments, and the possibility of the provision of a payment card that could be used to purchase services. The Member asked for an update concerning this. The Head of Internal Audit promised to look into the matter and provide an update in due course.

 

RESOLVED that

 

1) The Head of Internal Audit provide an update concerning whether or not payment cards had been introduced for service users in receipt of Direct Payments.

 

2) The minutes be agreed and signed as a correct record.

 

Post Meeting Note:

 

The update relating to Resolution 1 was disseminated to the Member that asked the question on 20th March 2019:

 

‘Internal Audit have met with the Project Manager – Direct Payments Lead (PM-DPL) to establish the work done to date to improve the current direct payments process and secondly to evidence progress to implement a pre-payment card for direct payments.

 

The Direct Payment Board, Chaired by the Director of ASC, agreed the business plan for prepayment and the Gateway Report to proceed to procure has now been signed off by the appropriate authorising officers. It is proposed that a three year pre-paid card contract with an option to extend for a further year, will be awarded to start in May 2019’

 

29.

QUESTIONS TO THE AUDIT SUB COMMITTEE FROM COUNCILLORS OR MEMBERS OF THE PUBLIC

In accordance with the Council’s Constitution, questions to this Committee must be received in writing 4 working days before the date of the meeting.  Therefore please ensure questions are received by the Democratic Services Team by 5pm on 20th February 2019.

 

Minutes:

No questions had been received.

30.

MATTERS ARISING REPORT---PART 1 pdf icon PDF 65 KB

Minutes:

CSD 19032

 

The matter relating to Zurich developing a cyber insurance policy was noted. The Head of Audit advised the Committee that a new Insurance Manager would be appointed soon and would commence duties in March. The view of the new Insurance Manager on cyber insurance cover was that existing policies were not well developed. The new Insurance Manager would advise Internal Audit further in due course, subsequent to his appointment. 

 

The Director of Regeneration (Mr Colin Brand) provided an update concerning progress made with the development of the Civic Centre Accommodation Strategy. Members were informed that the work to implement the strategy had gone out to tender. All of the tenders were due back during the second week of March. The contract would be awarded by the end of March and work would then commence in April.

 

A Member requested that more detail be added to the ‘estimated completion’ column in the Matters Arising report.

 

A Member expressed dissatisfaction that the matter relating to the objections to the accounts had still not been closed and asked when this was likely to happen. Janet Dawson (Partner-Ernst and Young) came to the table to provide a response. She explained that this was a matter that was historically still being managed by KPMG. She hoped that KPMG would now move swiftly to complete this work and bring the matter to a conclusion. 

 

RESOLVED that the Matters Arising report is noted.

 

 

 

31.

QUESTIONS ON THE AUDIT REPORTS PUBLISHED ON THE WEB

The current cycle of Internal Audit reports has been published ahead of the Audit Sub Committee meeting on 26th February.

 

The web link to the information briefing that shows the reports is:   https://cds.bromley.gov.uk/ieListDocuments.aspx?CId=559&MId=6657&Ver=4

 

The following Internal Audit reports have been published:

 

·  Business Rates—2018-2019

 

·  Review of Health and Safety Audit—2018-2019

 

·  Review of Information Governance and GDPR Audit for 2018-2019

 

·  Review of Pension Fund Audit--2018-2019

 

·  Review of St. Olave’s School Audit—2018-2019

 

·  Review of Street Cleansing Contract Management—2018-2019

 

·  Review of Debtor’s Income Audit—2018-2019

 

·  Internal Audit of the Housing Register—2017-2018

 

·  Review of Parking Income Audit—2018-2019

 

·  Internal Audit of Pension Payments for 2018-2019

 

·  Review of the Management of Strategic Property for 2017-2018.

 

Minutes:

No questions had been received concerning the Internal Audit reports that had been published on the Bromley Council website.

32.

EXTERNAL AUDIT PLAN 2018-2019 pdf icon PDF 61 KB

Additional documents:

Minutes:

Ms Dawson attended the Committee to answer any questions Members had regarding the External Audit Plan for 2018-2019.

 

Members were asked to note the External Auditor’s arrangements for the Audit Plan for 2018—2019. Members were also being asked to note and agree the materiality and reporting levels that were detailed in the Plan. Members were also being asked to note the significant risks outlined in the Plan, along with the Value for Money (VFM) arrangements that had been set out. It was noted that Ernst & Young LLP were also responsible for developing a similar plan for the Pension Fund which would follow. 

 

Ms Dawson referred the Committee to page 5 of Ernst & Young’s Audit Planning Report for the year ending 31st March 2019. She highlighted and explained the four main areas of risk that had been identified:

 

·  Misstatements due to fraud or error—especially associated with the possibility of management overriding controls

 

·  Risk of fraud in revenue and expenditure recognition, through the inappropriate capitalisation of revenue expenditure

 

·  Inherent risk associated with Asset Valuations

 

·  ISA 19 valuations relating to pensions liabilities

 

(ISA refers to the ‘International Standards on Auditing’ and are auditing guidelines from the Financial Reporting Council).

 

The Committee heard that risks associated with pensions were complex and so actuaries would need to be involved in the risk assessment process.

 

Ms Dawson explained that in addition to the risks mentioned above, two areas of audit focus had been identified.

 

·  Spring Capital Loan

 

·  New Accounting Standards—IFRS 9 & IFRS 15

 

Members were briefed concerning the Materiality limits which were as follows:

 

·  Planning Materiality--£9.59m

·  Performance Materiality--£7.19m

·  Audit Differences set at--£479,500

 

Ms Dawson highlighted the figures and asked if the Committee could confirm whether or not they agreed with them. The Committee was happy to agree with the proposed Materiality limits and the Audit Differences figure. The Committee was pleased to note that there had been a reduction in the external audit fees. A discussion took place about the issue of ‘Independence’ and how important it was that the External Auditors were independent from both Members and officers.

 

Ms Dawson reported that there was still a Member who had not made an independence declaration. She asked if this could be followed up as a matter of urgency.

 

Post Meeting Note:

 

This matter was reported by the Committee Clerk to the Head of Democratic Services the following day. The Head of Democratic Services took immediate steps to clarify who the Member was, and to attempt to resolve the issue. 

 

Ms Dawson explained how Ernst & Young identified what they regarded as significant risks. A Member asked about the use of consultants. It was clarified that Ernst & Young used their own internal consultants and that Cushman and Wakefield acted as consultants for LBB. A discussion took place concerning the testing for capital and revenue expenditures.

 

The Chairman enquired why the Spring Capital Loan had been identified as an area of focus. Ms Dawson responded that the Spring Capital Loan had been highlighted previously by KPMG and it  ...  view the full minutes text for item 32.

33.

ANNUAL INTERNAL AUDIT PLAN 2019/2020 pdf icon PDF 80 KB

Additional documents:

Minutes:

FSD 19023

 

The Annual Internal Audit Plan was a risk based plan, the output from which would be used by the Council to inform the Annual Governance Statement. Members were being asked to approve the Plan. Members were also required to note and comment on the revised assurance options and definitions, along with the priority risk ratings and definitions.

 

The Plan was in draft stage and had been developed in consultation with the Corporate Leadership Team.

 

The Annual Internal Audit Plan proposed a tier of 4 new assurance levels:

 

·  Substantial Assurance (Green)

·  Reasonable Assurance (Yellow)

·  Limited Assurance (Orange)

·  No Assurance (Red)

 

Three new Risk Ratings were being proposed:

 

·  Priority 1 (Red)

·  Priority 2 (Orange)

·  Priority 3 (Green)

 

The Committee noted the work schedule for Internal Audit as outlined in the Plan, and also noted how the work would be split between Directorates. The Plan had scheduled in 902 days work over 4 Directorates. This was two days

more than the previous year. 

 

RESOLVED that:

 

1) The 2019/2020 Internal Audit Plan is approved.

 

2) The Committee note and agree the revised assurance options and definitions, along with the new priority risk ratings and definitions.

 

34.

INTERNAL AUDIT PROGRESS REPORT pdf icon PDF 183 KB

Additional documents:

Minutes:

FSD 19024

 

The Internal Audit Progress Report was written by the Head of Internal Audit and informed Members of recent audit activity that had taken place across the Council; it also provided an update on matters that had arisen from the previous meeting. Members were asked to note and comment on the report and also to approve the updated Anti-Fraud and Corruption Policy and associated documents.

 

The Head of Audit briefed Members that a ‘Risk Register Refresh’ had taken place between December 2018 and January 2019, but none of the risk registers required any major changes. A revised suite of risk registers would be presented to the Committee at the June meeting, along with the Annual Governance Statement. The External Auditors had identified Brexit as an additional risk.

 

A GDPR ‘health check’ took place in November 2018 and was scoped in conjunction with Zurich. The outcome of the health check was largely positive. Members heard that the planned audit of Business Continuity would be deferred as the two officers previously dealing with the service had left the Council.

 

The Head of Audit was pleased with the findings of the audit that had been undertaken regarding the Housing Register, and so the assurance provided was ‘Substantial’.

 

The Chairman looked at the audit findings relating to the Management of Strategic Property, and the Director of Regeneration was present to answer  questions on the audit. The Chairman was disappointed to note that the assurance level for the ‘Management of Strategic Property’ was ‘Limited’. 

 

It was clarified that with respect to the management of Strategic Property. The main contractor was Amey, and the sub-contractor was Cushman & Wakefield. There were various issues that were identified by Internal Audit. There were instances identified when invoices were paid to the sub-contractor where the appropriate supporting documentation did not seem to support payment in full. 

 

Another issue that had been identified in the audit was that work had been undertaken by the sub-contractor which was outside the scope of the original contract. It had not been able to be determined if the TFM agreed schedule of rates had been applied to this work and so it could not be determined if the Council had obtained value for money in these cases.

 

Additionally, the Head of Audit stated that the KPIs on the contract were not working because they were deemed not workable. It was also the case that there were no instances of default penalties being applied.

 

When the contract commenced in October 2016, it had been agreed that the Strategic Property Sub-Contractor would develop a £1m Income Generation Plan. Internal Audit expressed limited confidence in the plan being developed on time and achieving the planned savings.

 

The Director of Regeneration commented that the report was fine and fair, and was accurate at a point in time. He said that in some areas (like disposing of the Old Town Hall), Cushman and Wakefield were very effective. However, there were other areas where he felt that they lacked understanding  ...  view the full minutes text for item 34.

35.

DATE OF THE NEXT MEETING

The date of the next meeting is 4th June 2019.

Minutes:

It was noted that the date of the next meeting was June 4th 2019

36.

LOCAL GOVERNMENT ACT 1972 AS AMENDED BY THE LOCAL GOVERNMENT (ACCESS TO INFORMATION) (VARIATION) ORDER 2006 AND THE FREEDOM OF INFORMATION ACT 2000

  The Chairman to move that the Press and public be excluded during consideration of the item of business listed below as it is likely in view of the nature of the business to be transacted or the nature of the proceedings that if members of the Press and public were present there would be disclosure to them of exempt information.

Minutes:

RESOLVED that the press and public be excluded during consideration of the items of business listed below as it was likely in view of the nature of the business to be transacted or the nature of the proceedings, that if members of the press and public were present, there would be disclosure to them of exempt information.

37.

INTERNAL AUDIT FRAUD, INVESTIGATION AND EXEMPT ITEMS REPORT

Minutes:

The Head of Internal Audit updated the Committee regarding the Internal Fraud and Investigation Report.

 

This was a Part 2 (exempt information item) report, and so the minutes have been drafted as Part 2 (private) minutes.   

 

Members noted the report and commented upon matters that had arisen from previous meetings.  

38.

MATTERS ARISING--PART 2

Minutes:

The Part 2 Matters Arising report was noted.

39.

EXEMPT MINUTES OF THE MEETING HELD ON 14th NOVEMBER 2018

Minutes:

The exempt minutes of the meeting that had been held on 14th November 2018 were agreed and signed as a correct record.

 

Original Text: