Agenda and minutes

Venue: Bromley Civic Centre

Contact: Steve Wood  020 8313 4316

Items
No. Item

37.

APOLOGIES FOR ABSENCE AND NOTIFICATION OF SUBSTITUTE MEMBERS

Minutes:

No apologies for absence were received.

38.

DECLARATIONS OF INTEREST

Minutes:

There were no declarations of interest.

39.

CONFIRMATION OF THE MINUTES OF THE MEETING HELD ON 26th FEBRUARY 2020--EXCLUDING MINUTES CONTAINING EXEMPT INFORMATION pdf icon PDF 322 KB

Minutes:

The public minutes of the meeting held on 26th February 2020 were agreed as a correct record.  

40.

QUESTIONS TO THE CHAIRMAN OF THE AUDIT SUB COMMITTEE

In accordance with the Council’s Constitution, questions that are not specific to reports on the agenda must have been received in writing 10 working days before the date of the meeting. 

 

Questions specifically concerning reports on the agenda should be received within two working days of the publication date of the agenda.  Please ensure that questions specifically regarding reports on the agenda are received by the Democratic Services Team by 5pm on Thursday 9th July. 

 

Minutes:

No questions were received.

41.

QUESTIONS ON THE INTERNAL AUDIT REPORTS PUBLISHED ON THE COUNCIL WEBSITE

The link to the audit reports published on the website is:

 

https://cds.bromley.gov.uk/ieListDocuments.aspx?CId=559&MId=7008&Ver=4

 

The published reports are:

 

·  Pension Administration 2019 to 2020

·  Review of St Olave’s Grammar School

·  Review of the Care Act (Information, Advice and Guidance)

·  Review of Nursing Care Audit for 2018 to 2019

·  Review of the More Homes Bromley LLP Scheme

·  Review of Registrars

·  Treasury Management 2019 to 2020

·  Review of Contracts Coming to an End

·  Review of Looked After Children   

Minutes:

No questions were received regarding the Internal Audit reports that had been published on the Council Website.

42.

EXTERNAL AUDIT PLAN FOR 2019--2020 pdf icon PDF 293 KB

Additional documents:

Minutes:

Representatives from Ernst and Young (E&Y) attended to provide an update regarding the External Audit Plan for 2019-2020. These were Janet Dawson, Hannah Lill and Adrian Balmer.

 

Ms Dawson outlined the key areas of risk as assessed by E&Y. 

 

These were:

 

·  Misstatements due to fraud or error

·  Incorrect capitalisation of revenue expenditure

·  Asset valuations

·  Pensions valuations and disclosures.

 

The first two risks noted were common risks associated with local government generally. Asset valuations would need particular attention to detail, due to the historic problems with these valuations, and due to the effects of the pandemic. The IOCS (Institute of Chartered Surveyors) had issued a statement which said that they would expect their advisors to note an aspect of material uncertainty in their valuations because of the Covid pandemic,

 

The Committee noted that Pensions Valuations and Disclosures had also been classed as a significant risk. This was not to be taken as indicating that the external auditors saw anything wrong with the Pension Fund or its valuations, but rather that this was an area that was generally complex to value; it was also an area that would have been affected by the Covid 19 pandemic and the volatility of the financial markets.

 

Ms Dawson drew attention to another key area of risk which was identified as ‘Going Concern Compliance with ISA 570’. This was a new area of focus and essentially meant that it would increase the workload of auditors in the UK when they assessed whether or not councils were financially viable. Ms Dawson had therefore considered it necessary to draw the Committee’s attention to this fact.

 

The effects of the Covid 19 pandemic were listed as a separate risk factor. 

 

Ms Dawson drew attention to the section of the papers dealing with ‘Value for Money’ where it was noted that E&Y had to consider if LBB had put in place proper arrangements to secure economy, effectiveness and efficiency in the use of its resources.

 

Ms Dawson highlighted page 40 of the pack which explained the ‘Materiality’ reporting levels that would be adopted by E&Y. It was noted that ‘Planning Materiality’ for 2019/2020 had been set at £5.49m. This had been calculated as 1% of the Council’s gross expenditure for the previous year which was £549m. (‘Planning Materiality’ was the amount over which the external auditor felt that a mis-statement could influence the decisions of a user of the financial statements).

 

The Chairman asked Ms Dawson if LBB should expect a ‘qualification’ on the accounts, and the response to this was that this was not expected.

 

The Chairman asked if Ms Dawson could shed light on any proposed increase to LBB’s fees as a result of the extra work involved in the audit and the closer monitoring of external auditors by the Financial Reporting Council (FRC). Ms Dawson replied that she had been in general discussion with LBB’s Director of Finance concerning this matter and talks would continue going forward.

 

The Chairman referred to the Pensions  ...  view the full minutes text for item 42.

43.

ANNUAL GOVERNANCE STATEMENT 2019/2020 pdf icon PDF 296 KB

Additional documents:

Minutes:

The Head of Audit and Assurance explained the regulations and statutory framework around the Annual Governance Statement (AGS). He also outlined the various sources of assurance that were relied upon when drafting the Statement. He explained that several key governance issues had been identified going forward as a result of the annual review. These were:

 

·  Finance

·  Valuation of Fixed Assets

·  Impact of the Covid 19 pandemic on Service

 

It was noted that the financial position had improved somewhat before lockdown, due to an improved financial settlement that had been received from central government, notwithstanding the Council’s £16.9m budget deficit. It was also the case that a Transformation Plan was in place. However, the Council’s financial position would have been adversely affected by the economic fallout from Covid 19, and the full effect of this would be difficult to evaluate at the moment. The Council had experienced loss of income streams along with increased expenditure. Some monies had been provided by central government, but there were still some areas where the financial burden was falling upon the Council.

 

It was noted that revised revaluation work relating to fixed assets had been completed and revised accounts had been submitted to the external auditors. It was anticipated that any outstanding work required to be completed by E&Y with regard to fixed assets would now have been completed, and E&Y would be reporting on this to the GP&L Committee on 30th July.

 

Mr Balmer confirmed their presentation to GP&L and that the revised valuation work had been accepted. It was hoped to sign off this aspect of the accounts shortly after the GP&L meeting.

 

A Member asked if it was possible to assess the effect of the pandemic on the Transformation Programme. The Head of Audit and Assurance responded that he was not in a position to answer this question at this early stage, but the situation was being monitored by the Transformation Board.

 

RESOLVED that the Annual Governance Statement is agreed and adopted.

 

 

 

 

 

44.

ANNUAL INTERNAL AUDIT REPORT pdf icon PDF 392 KB

Additional documents:

Minutes:

The Head of Audit and Assurance stated that in 69% of cases, the assurance ratings assigned by Internal Audit after completion of audits were positive. Issues identified and recommendations made were generally complied with and LBB had a reasonable system of internal control, with these controls being applied consistently.

 

The Chairman asked if he could remind the Committee which audits had been delayed or cancelled as a result of the pandemic—these were discussed. The Head of Audit and Assurance explained that the full analysis was included in Appendix A. 

 

In some cases, work had commenced but needed to continue, in other cases work had been delayed and assigned to the following year’s Audit Plan. The Audits that had been cancelled were:

 

·  Creditors

·  The use of Consultants

·  Information Governance

·  Procurement Control Framework

·  Mental Health Service Agreements

 

The Head of Audit and Assurance said that in the next quarter, there would be much work undertaken on the government funding streams that were coming in. This was in relation to, (amongst other things), Business Support Grants, Track and Trace and Discretionary Grants. 

 

The Vice Chairman referred to section 3.59 of the report which mentioned four Priority 1 recommendations that had been carried forward from one year to another. He said that it appeared that these had been carried forward in 2018/2019 and also in 2019/2020, then transferred again. He asked what these were and why they had not been actioned.

 

The Head of Audit and Assurance responded that two of the recommendations related to the Leaving Care Audit, where there was now a new Head of Service in place. Another was related to Strategic Property. The final one was related to the Health and Safety Audit that took place at the end of 2019/2020. It was clarified that the Health and Safety recommendation had still been open as at the end of March, but it was now closed. Action was being taken with respect to the recommendation for Leaving Care, but the new Head of Service had to deal with a backlog of cases.

 

A Member enquired when staff from the Internal Audit Team would return from their Covid related duties to working back on internal audit work. The Head of Audit and Assurance answered that internal audit staff had returned to their normal roles on 1st July. They had been working with the Shielding Team. They had received compliments from the head of that team who was sorry that they had to resume normal duties. This was a good example of transferable skills within the Internal Audit Team. It was noted that services were recovering at various speeds, and that at the moment many services would not be ready for an internal audit. However, there was plenty of work that needed to be done by Internal Audit with respect to new funding streams.

 

A Member highlighted the importance of process maps and asked if Internal Audit looked out for process maps during the course of undertaking audits. The Head of Audit  ...  view the full minutes text for item 44.

45.

INTERNAL AUDIT PROGRESS REPORT pdf icon PDF 532 KB

Additional documents:

Minutes:

The Head of Audit and Assurance briefed the Committee on how Covid 19 had impacted on the Audit Plan, together with the risk profile of the Council in a short space of time. Internal Audit had to look at the services currently being implemented as well as new services and processes being delivered as a result of the pandemic. Some controls had been relaxed because of working from home, for example. The Council had to ensure that suppliers were supported through the pandemic and so processes and rules had been changed. However, fraud risks were existent for all councils. The Audit Plan had to be flexible and agile to deal with multiple demands.

 

The Audit of the Care Act (Information, Advice and Guidance) had been completed and the level of assurance was ‘Reasonable’. 

 

The audit of contracts coming to an end had been completed and the level of assurance was ‘Substantial.’

 

Members heard that the audit of Looked after Children had resulted in a Priority 1 recommendation (for children moving into the 18 plus age group).

It was found that a number of cases did not have a valid contract in place with the provider, so the Contract Procedure Rules and the Financial Regulations were not being followed. The service was working through a backlog of existing placements. The level of audit assurance was ‘Limited’.

 

The Committee heard that the audit of ‘More Homes Bromley’ had been a complex piece of work. It was an innovative scheme and 360 properties had been delivered in a short timeframe against a target of 400--this had been a steep learning curve and many lessons had been learned. Recommendations had been made to improve the control environment. Short and long term operational risks needed to be identified as well as priorities. KPI data was required. The Head of Audit and Assurance felt that the business plan, business accounts, and financial model all required updating. The Council’s Insurance Board needed to satisfy themselves that all properties were covered by relevant insurance. The final accounts had not been formally approved before being filed at Companies House.

 

Although it was the case that there had been many recommendations, the project had been very successful in that it was delivering much needed housing stock for  the Council and was also of significant benefit to the public in terms of providing housing.  The Chairman was pleased to note that there were no Priority 1 recommendations.

 

A discussion took place regarding the Council’s Board Members for the More Homes Bromley Scheme, and how could the Committee be satisfied that the correct insurances were in place if the Board members were not insurance experts. The Head of Audit and Assurance informed Members that this was indeed an issue that should not be overlooked and it would be reviewed at the next Board meeting. The Board was encouraged to take expert independent advice if required.

 

A discussion took place as to how the audit opinion of reasonable assurance had been given  ...  view the full minutes text for item 45.

46.

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.

47.

INTERNAL AUDIT FRAUD, INVESTIGATION AND EXEMPT ITEMS REPORT

Minutes:

The Head of Audit and Assurance introduced the Internal Audit Fraud report which provided an overview of the counter fraud work undertaken by Internal Audit in 2019/20.  It detailed the impact of COVID-19 on audit activity and the assurance work that had been carried out with respect to the Business Support Grant and the Discretionary Grant.

 

The full minutes for this section of the meeting are noted in the ‘restricted minutes’.

48.

EXEMPT MINUTES OF THE MEETING HELD ON 26th FEBRUARY 2020

Minutes:

The exempt minutes of the meeting that took place on 26th February 2020 were noted an agreed as a correct record.

 

Original Text: