COUNTY BOROUGH OF BLAENAU GWENT

REPORT TO: / THE MAYOR AND MEMBERS OF THE COUNCIL
SUBJECT: / AUDIT COMMITTEE – 24TH SEPTEMBER, 2013
REPORT OF: / MEMBER DEVELOPMENT CO-ORDINATOR

PRESENT: COUNCILLOR GARTH COLLIER (CHAIR)

Councillors M. Bartlett

M. Cross

N. Daniels

M. Holland

J. McIlwee

J. Morgan

D.J. Owens

Mrs. L. Winnett

Mr. Peter Williams – Lay Member

WITH: Head of Financial Services

Head of Policy & Performance

Head of Internal Audit

Chief Accountant – Corporate Services

Constitution Officer

AND: Wales Audit Office (WAO) Representatives

Mr. Philip Pugh

Ms. Emma Moorhouse

ALSO: Welsh Local Government Association (WLGA) Representative

Mr. Doug Elliot

DECISIONS UNDER DELEGATED POWERS

ITEM / SUBJECT / ACTION
1. / APOLOGIES
Apologies for absence were received from:-
Councillors D. Coughlin, J. Hopkins, Mrs. A. Lewis, Chief Education Officer, Mr. Mike Usher (WAO).
2. / DECLARATIONS OF INTEREST AND
DISPENSATIONS
There were no declarations of interest and dispensations reported.
3. / AUDIT COMMITTEE
Consideration was given to the Minutes of the Meeting held on 30th July, 2013.
RESOLVED that the Minutes be received as a true record of proceedings.
4. / ACTION SHEET
The Action Sheet arising from the Meeting held on 30th July, 2013 was submitted, whereupon:-
Post Inspection Action Plan – the Chair reminded Members that copies of this document were available upon request.
RESOLVED, subject to the foregoing, that the Action Sheet be received and the information contained therein be noted.
5. / OVERVIEW OF THE SELF EVALUATION ARRANGEMENTS OF THE COUNCIL
Consideration was given to the report of the Corporate Director – Strategy, Transformation & Culture.
At the invitation of the Chair, the Head of Policy & Performance spoke briefly to the report and highlighted the following salient points contained therein:-
Ø  A significant amount of work had been undertaken to strengthen the self evaluation function across the Council as part of the improvements being made to the Corporate Performance Management arrangements.
Ø  This work had been informed by recommendations from external auditors and findings of the national work on self evaluation that had been undertaken across authorities in conjunction with the Welsh Local Government Association.
Ø  This work had been undertaken in January/February and an analysis of the completed self evaluation templates had been undertaken to identify any gaps of information.
Councillor J. Morgan joined the meeting at this juncture.
Ø  Examples of areas of strengths and areas for improvements were listed in Paragraph 2.3 of the report.
Ø  Revisions to the self evaluation arrangements had been developed and it was the intention to continue to develop the process including work which was currently in progress including:-
-  the development of an internal peer challenge approach – a meeting with Members was scheduled to be held later that day.
-  amendments to the self evaluation template to assist the capture of information in a more robust way to inform service and corporate planning.
-  the forthcoming cycle of self evaluation was due to begin in October and would be used to inform the 2014/15 business plans.
At the invitation of the Chair, Mr. Elliot of the WLGA provided an outline of the self assessment process from a national perspective. He explained that:-
Ø  Self evaluation as a concept had been given a strong focus across all sectors in Wales not just local government.
Ø  This focus was on a step change and national work which had been commissioned by the Welsh Local Government Association had been undertaken not to identify best practice but to identify the range of approaches to the self evaluation process.
Ø  Emerging from this work across the 22 local authorities was an irrefutable set of core characteristics for self evaluation.
Ø  These core characteristics had been used to build the approach in Blaenau Gwent which was strongly advocated by members and senior management and he was encouraged by this and said that Blaenau Gwent was well ahead of the game in terms of other Council’s who had not had the benefit of this challenge and support.
RESOLVED that the report be accepted and the information contained therein be noted together with the progress made to the self evaluation arrangements of the Council.
6.
7. / It was agreed that Item Nos. 6 & 7 would be considered simultaneously.
STATEMENT OF ACCOUNTS 2012/13
ISA 260 REPORT – WALES AUDIT OFFICE
Members considered the reports of the Chief Finance Officer and Council’s External Auditors, Wales Audit Office.
At the invitation of the Chair, the Chief Accountant – Corporate Services spoke to the report of the Chief Finance Officer (Item No. 6) and highlighted the following salient points:-
Ø  The purpose of the report was to present for approval the 2012/13 Statement of Accounts and for Members to consider the Authority’s financial standing as at 31st March, 2013.
Ø  The External Auditor (Wales Audit Office) had now finalised the detailed financial audit of the individual disclosure notes and Accounts that comprise the overall Statement. In addition the WAO had finalised its statutory report on the Accounts (International Standards on Auditing or ISA 260 report) which also formed part of the Audit Committee’s paperwork for this meeting.
Ø  During the course of the audit one uncorrected misstatement had been indentified in respect of Plant, Property and Equipment to the value of £143,000. Due to the immaterial level of this adjustment and as there would be no impact on the bottom line and consequently no draw from General Reserves, this misstatement had not been corrected.
Ø  The Statement of Accounts had been prepared in accordance with the Accounts and Audit (Wales) (Amendment) Regulations 2010 and the CIPFA Code of Practice on Local Authority Accounting and must conform to the Service Reporting Code of Practice.
Ø  The procedures and processes used in preparing the Statement of Accounts had been refined considerably with the embedding and consolidation of the systems introduced in previous years and future years were likely to require further changes to the reporting requirements e.g. significant changes to accounting for schools, IAS19 Employee benefits, accounting for transport infrastructure assets and revised requirements in relation to carbon reduction commitments.
Ø  The Chief Accountant concluded by expressing his appreciation to officers within the Accountancy and Financial Planning Division and colleagues from across the Council who had assisted in the preparation of the accounts.
Members were then given the opportunity to raise questions/comment in relation to the report.
Note 28: Plant, Property and Equipment – a Member expressed her concern that the £143,000 misstatement should be amended in order to provide a factual representation of the accounts. She enquired whether there would be any risks associated with not amending this statement together with the rational.
The Chief Accountant explained that £143,000 was not a significant sum when taken into context of the book value of assets disclosed within the balance sheet amounting to £296,596,000 and would not make a significant change to this figure. The £143,000 would, therefore be corrected within the 2013/14 accounts.
In response to whether this action was acceptable to the Wales Audit Office, Mr. Pugh explained that when financial statements were audited the WAO was obliged if an error was identified above a certain sum to report it to the authority. If that sum was trivial but below materiality it was the authority’s decision whether to amend the statement or not. He concluded by stating that if the Authority chose not to amend the statements it would have no impact on the proposed audit opinion.
Mr. Pugh, Wales Audit Office at this juncture, thereupon, spoke in detail to the WAO ISA260 Report (Item No. 7) and highlighted the following salient points contained therein.
Ø  It was the Appointed Auditor’s intention to issue an unmodified opinion on the financial statements.
Ø  One misstatement had been identified in the financial statements, namely Note 28 Plant, Property and Equipment was overstated by approximately £143,000.
Ø  The WAO had no concerns about the qualitative aspects of the Authority’s accounting practices and financial reporting.
Ø  The WAO had not encountered any significant difficulties during the audit and Mr. Pugh wished to place on record his appreciation to the Chief Accountant and his team and officers throughout the Council for their help and assistance during the audit process.
Ø  There was one significant matter that had been discussed and corresponded upon with management in relation to the future financial viability of the Authority and given its significance the Appointed Auditor was currently considering whether to make a Statutory recommendation to the Authority (under Section 25 of the Public Audit Wales Act 2004).
In reply to a question raised in respect of the potential Statutory recommendation, Mr. Pugh explained that he was unable to comment in relation to the potential wording in respect this recommendation at present until the Appointed Auditor had confirmed whether or not to make the Statutory recommendation.
However, he suggested that in light of the significance of the financial situation and the need for detailed robust action plans to address the size of the deficit situation as a matter of urgency any suggested recommendation may focus around this issue.
The Executive Member – Financial Management & Strategy expressed his appreciation to Mr. Pugh for his report and also to the Chief Accountant and officers for their assistance during this process.
RESOLVED that the report be accepted and
(i)  the reason for not amending a specific misstatement be approved;
(ii)  in accordance with the Local Government (Wales) Measure 2011, the Audit Committee exercises the statutory responsibility for reviewing the financial statements prepared by the authority and the audited Statement of Accounts 2012/2013 be approved; and
(iii)  the Statement of Accounts be signed by the Chief Finance Officer (statutory Section 151 Officer) and the Chair of the Audit Committee.
FURTHER RESOLVED that the Wales Audit Office ISA 260 report be accepted and the information contained therein be accepted.
8. / WALES AUDIT OFFICE REGULATORY PROGRAMME
Consideration was given to correspondence received from the Wales Audit Office dated 8th May, 2013.
At the invitation of the Chair, Mr. Pugh explained that the correspondence confirmed the programme of performance audit work that would be undertaken at Blaenau Gwent for 2013/14 and the associated fee for that work. This programme had been presented to Council and also to the Regulators meeting.
Mr. Pugh continued by referring to the Local Review on Page 28 of the information and highlighted that the scope of other local work would be determined by the outcome of the Corporate Assessment update and that the detail of these plans would be submitted to a future meeting of the Audit Committee for consideration.
RESOLVED, subject to the foregoing, that the WAO Regulatory Programme 2013/14 Performance Audit work and fees be received.
9. / REVISED ANTI-FRAUD, ANTI-CORRUPTION AND ANTI-BRIBERY POLICY
Members considered the report of the Chief Finance Officer.
The Head of Internal Audit spoke to the report and highlighted points contained therein. She explained that the Authority’s Anti-Fraud and Corruption Policy had existed for a number of years and it was last revised and approved by the Audit Committee in 2010. The policy was now due for revision and amendments had been made to reflect changes in structures. As its contents align with the requirements and sentiment of the Bribery Act, the policy had also been expanded to incorporate the requirements of this act and renamed Anti-Fraud, Anti-Corruption and Anti-Bribery Policy.
The Head of Internal Audit concluded by referring to a training session that had previously taken place for Members in respect of the Bribery Act and offered to provide a further session, if Members wished.
Members were then given the opportunity to raise questions/comment in relation to the report.
Training Sessions – Contract Standing Orders – in reply to a question, the Head of Internal Audit confirmed that this training would be delivered in house and in addition to Contract Standing Orders would also cover the Bribery Act.
A Member proposed that a further training session be arranged for Members in relation to this topic.
RESOLVED accordingly.
FURTHER RESOLVED, subject to the foregoing, that the report be accepted and the Anti-Fraud, Anti-Corruption and Anti-Bribery Policy be approved for inclusion in the Authority’s policy framework. / Ceri Edwards-
Brown
10. / AUDIT PLAN PROGRESS REPORT TO AUGUST 2013
Members considered the report of the Chief Finance Officer, which detailed progress against the Internal Audit Plan for the period 1st July 2013 – 31st August 2013
The Head of Internal Audit spoke to the report and highlighted the following points:-
Ø  Where internal audits had been graded as ‘marginal’ or below Internal Audit Summary Reports were normally presented to Committee, however, for the above period no Internal Audit Summary Reports were applicable.
Ø  In addition, in relation to the absence of performance statistics that were normally appended these would be reported on a quarterly basis.
Ø  In terms of staffing, the Section was currently carrying one vacant Senior Auditor post and the sickness levels for the section for period to the end of August were 7.25 days against the departmental target of 6 days. There was currently one member of the Section on long term sick leave.
Ø  The work of the team would be prioritised due to the above staffing issues and progress monitored via DMT. Members would also continue to be kept informed of the level of coverage provided through the progress reports.
Ø  In addition to staffing changes, this period had seen a peak in holiday absences which would distort the productivity figures but the impact of this should balance out as the year progressed.
The Chair advised that the issue in terms of staffing levels would be monitored very closely.
RESOLVED that the report be accepted and the progress made during the period July to August 2013 be noted.