BOROUGH OF POOLE

AUDIT COMMITTEE

2ND APRIL 2009

The Meeting commenced at 7.00pm and concluded at 8.57pm

Present:

CouncillorMrs Haines (Vice-Chairman, in the Chair)

CouncillorsAllen, Brooke (substituting for Councillor Martin), Burden (substituting for Councillor Gregory) and Chandler

Also in attendance:

Liz Wilkinson – Head of Financial Services

Ruth Hodges – Management Auditor (Financial Services)

Simon Garlick – Audit Commission

Chris Peachey – Audit Commission

Michelle Coplestone – Democratic Support Officer, Legal and Democratic Services

Members of the public present: 1

AC34.09APOLOGIES FOR ABSENCE

Apologies for absence were received from Councillors Gregory and Martin.

AC35.09DECLARATIONS OF INTEREST

Councillor Brooke declared a personal interest as a Member of the Children’s Services Capital Programme Board.

AC36.09MINUTES

RESOLVED that the Minutes of the Meeting held on 18th December 2008, having been previously circulated, be confirmed as a correct record and signed by the Chairman.

Councillors Brooke and Burden abstained from the vote.

AC37.09INTERNAL AUDIT OUT-TURN MONITORING REPORT

The Committee received the Report of the Head of Financial Services, presented by Ruth Hodges, Management Auditor (Financial Services).

The Report summarised the performance of the Internal Audit Section and any significant issues arising from the audit work undertaken during the third quarter of 2008/2009. It also provided details of the progress made on the implementation of recommendations (as of March 2009).

Key points were summarised as follows:-

Internal Audit Performance Indicators for October – December 2008

  • The percentage of the Audit Plan completed (26.8%) was above target for quarter 3, and for the year to date (75.1%).
  • The percentage of recommendations implemented was below target and had been reviewed as part of the recommendations followed up/not implemented.
  • The overall auditee satisfaction score was 3.8, which had exceeded the target of 3 for 2008/09.

Time Analysis

  • Time analysis of actual time spent versus the total time planned in the Internal Audit Plan showed that total time planned was on course.
  • Some variances had been identified within some individual ‘Activity’ areas of the Plan, however, these variances represented a small percentage of overall planned time.

Investigations and Anti-Fraud work

  • The time spent on investigations was less than planned, however, this was an unpredictable area of work.
  • The amount of Anti-Fraud work was greater than planned due to the amount of resource required to participate in the National Fraud Initiative.

Corporate Management and Liaison

  • Less time was spent on Corporate Management and Liaison due to Section 151 Officer duties and Financial Services Management and the absence of the Chief Auditor.

Internal Audit Work completed

  • There were no significant matters to report to the Audit Committee on work completed during the second quarter.
  • No ‘qualified’ audit reports (where the system inadequately safeguards the Council against identified risks) had been issued.
  • No high impact recommendations (to address actual/potential critical implications for achievement of the Council’s objectives) had been made.
  • The Head of Financial Services was reviewing the current functions and structure of the Internal Audit Section following recent staff changes to ensure that it was ‘fit for purpose’.

Agreed recommendations followed up/not implemented

  • 17% of recommendations had not been implemented and the Head of Financial Services and the Chief Auditor would be reviewing the ‘Internal Audit Recommendations Escalation/Reporting Procedure’.
  • The tables shown in Sections 3.1 and 6.2 of the Report showed that the percentage of recommendations implemented was below the target of 100%. It was noted that Service Unit Heads were responsible for ensuring that recommendations were implemented and Service Unit risks adequately managed.
  • There had been a downward trend in the number of recommendations not implemented over the past year.
  • The tables shown in Section 6.6 and 6.7 of the Report provided details of any outstanding recommendations not previously reported to the Committee and outstanding recommendations that had been previously reported to the Committee, where the revised target date had been exceeded.

Advice, consultation and other work

  • Following requests from Service Units, Internal Audit had continued to provide advice on a wide range of risk, control and compliance issues including how to ensure compliance with Financial Regulations and Contract Standing Orders, new system controls and on the revision of Council Policies.
  • Internal Audit had been preparing the 2009/10 Audit Plan, which would be reported separately to this Committee, including carrying out risk assessments.
  • Contributions towards the Financial Services business planning process had been made.
  • The Local Code of Governance was produced and approved by the Audit Committee in December 2008.
  • Work was being carried out on the new Use of Resources assessment.
  • Compilation of the Council’s National Indicator 179 had been carried out and had been included in Council Tax leaflets.
  • Internal Audit was developing and scoping projects for a medium term efficiency review programme to accompany the future Mid-Term Financial Plan, based on the Value for Money assessment of service operations and known areas for improvement.

Projects and Investigations

  • In addition to work carried out on investigations and projects previously reported, the following new areas had also been reviewed during the quarter.

Projects

  • Employees First.

Investigations

  • School Contract Review.
  • Blue Badge Use in the Civic Centre Multi-Storey Car Park.
  • Learning Disabilities Processes and Procedures.
  • Fraudulent Cheques.
  • Homelessness Procedures.
  • Civic Regalia Security Review.

Conclusion

  • The Key Internal Audit Annual Performance Indicator was on target to be met this year with 75.1% completed by the third quarter.
  • The Internal Audit Plan had been regularly updated to take account of the changing risk profile of the Authority.
  • Risks and Controls had been assessed in several Service Units throughout the quarter to help ensure that management could meet their Unit/Corporate objectives.

The Chairman thanked the Management Auditor for her presentation. The following points were then raised:-

  • A Member of the Audit Committee referred to Section 6.7 of the Report and asked whether the absence of the Chief Auditor had impacted on the number of recommendations not implemented? The Management Auditor explained that the absence of the Chief Auditor would not have an impact, as it was individual Service Units that had not implemented various recommendations. It was noted that Property Services was without a Service Unit Head, which could have impacted on the number of recommendations not implemented, however, the post was to be advertised after Easter.
  • The Head of Financial Services advised that once a new Chief Auditor had been appointed, a formal escalation procedure would be devised in order to escalate actions and follow them up. It was anticipated that this would encourage officers to take ownership of their actions and become more accountable.
  • A Member of the Committee commented that Educational Capital Programme Projects were insufficiently resourced and that it was vital that this be addressed. The Head of Financial Services explained that the Management Team was conscious of the need to put in place stronger Capital Performance monitoring arrangements.
  • A Member raised concern that over 16 items were identified by Internal Audit a number of years ago regarding Education Capital Programme projects and some of these had now recurred. The Head of Financial Services advised that she was unable to comment on past schemes and budgetary provisions, however, it was important that arrangements were precise so that improvements could be made. The Head of Financial Services added that it was important to be clear about financial risks and management arrangements and that capital monitoring needed to be as tight as revenue monitoring.
  • A Member of the Committee referred to Section 8 of the Report and asked why ‘Blue Badge Use in the Civic Centre Multi-Storey Car Park’ had been investigated and what the outcome was? The Head of Financial Services advised that the use of ‘Blue Badges’ had been investigated as the Borough of Poole was conscious of the local and national perspective of fraudulent ‘Blue Badge’ use and concerns had been raised regarding the use of ‘Blue Badge’ spaces at the Civic Centre Car Park. It was noted that only one person was found to be fraudulently using a ‘Blue Badge’. ‘Blue Badge’ usage was not investigated across the whole of Poole, as the Council was unable to take any action and the Police did not treat the fraudulent use of ‘Blue Badges’ as a priority. The Head of Financial Services advised that ‘Blue Badge’ use may feature in a future Audit Plan, however, it was necessary for a new Chief Auditor to be appointed in order to discuss with the Police how best to address the issue.
  • The Committee asked for further information regarding the ‘Learning Disabilities Processes and Procedures’ investigation. The Head of Financial Services explained that she would circulate a response to all Members of the Audit Committee after the Meeting.
  • A Member of the Committee referred to the ‘Civic Regalia Security Review’ investigation and advised that he was not impressed with the re-evaluation. The Head of Financial Services explained that evaluations of Civic Regalia were very complex as it was difficult to value for insurance purposes.
  • Reference was made to Section 5.1 of the Report and it was questioned whether the Head of Financial Services (when reviewing the current functionality and structure of the Internal Audit Section following recent staff changes to ensure it was ‘fit for purpose’) should be discussed with the whole of the Audit Committee as opposed to just the Chairman. The Head of Financial Services advised that, as the Section 151 Officer, it was her responsibility to ensure that the current functions and structure of the Internal Audit Section was reviewed. The remit of the Audit Committee was to ensure that Internal Audit was ‘fit for purpose’, however, the structure of Internal Audit did not fall under the remit of the Audit Committee. It was appropriate for the Head of Financial Services to carry out a review of the Internal Audit Section and bring forth a report to the next meeting on the restructure to the Audit Committee for consultation purposes. The Head of Financial Services could then be held to account with regard to the restructure of Internal Audit.

RESOLVED that

(i)the report be noted; and

(ii)Members of the Committee receive further information regarding the ‘Learning Disabilities Processes and Procedures’ Investigation.

AC38.09INTERNAL AUDIT PLAN 2009/10

The Committee received the Report of the Head of Financial Services, presented by the Management Auditor.

The Management Auditor explained that the Chartered Institute of Public Finance and Accountability (CIPFA) Code of Practice for Internal Audit in Local Government in the United Kingdom, required Internal Audit to:-

  • Regularly review its Terms of Reference;
  • Ensure the Audit Strategy was kept up-to-date with the Council’s changing priorities; and
  • Produce a risk based Audit Plan.

The following key points were noted:-

  • All Local Authority Internal Audit Sections were expected to comply with the Code of Practice. Compliance with the Code was then reviewed by the Audit Commission as part of its assessment of Internal Audit.
  • Internal Audit Terms of Reference described the purpose, authority, responsibilities and scope of the Authority’s Internal Audit Section. The Terms of Reference had been reviewed (See Appendix A of the Report) and minor changes had been made to ensure compliance with the CIPFA Code of Practice.
  • The Internal Audit Strategy explained how the Internal Audit Service would be delivered and developed in accordance with the Terms of Reference. The Audit Strategy had been reviewed (see Appendix B of the Report) and some changes had been made to ensure compliance with the CIPFA Code of Practice.
  • The draft Audit Plan for 2009/10 (see Appendix C of the Report) had been split into four activities:-
  • Core Audit and Assurance Work;
  • Efficiency and Value for Money Work;
  • Special Projects; and
  • Other Audit Activity.
  • The Audit Plan was updated on a regular basis, in keeping with the changing risk profile of the Borough of Poole.
  • The Section 151 Officer (Head of Financial Services) had approved the Audit Plan and the Audit Commission and Service Unit Heads had been consulted on the detail of the Audit Plan.
  • Internal Audit and External Audit (Audit Commission) planning was co-ordinated to take account of respective work streams and to utilise scarce resources. Audit Commission Plans would not be available for this Financial Year until June 2009.
  • Future monitoring of the Audit Plan completion would be brought to the Audit Committee on a bi-annual basis.

The Management Auditor referred to Appendix D of the Report ‘Internal Audit Risk Assessment Criteria’ and explained that it showed the categories and criteria for scoring particular functions. It was highlighted that high scores were looked at on a more frequent basis. Reference was then made to the ‘Detailed Audit Plan’ (Appendix E), which reflected a dynamic and fluid process.

The Head of Financial Services asked Members of the Committee to identify audits from the ‘Detailed Audit Plan’ on which they wished to receive a full and detailed report.

Members advised that they would like to receive detailed reports on the following:-

  • Children's Services Capital Programme.
  • Full Sail Ahead.
  • Adult Education Merger – amalgamation of the Bournemouth and Poole Adult Learning Centres.

It was noted, with regard to the Adult Education Merger, that both the Borough of Poole and Bournemouth Borough Council had showed budgetary deficits. The Learning Skills Council (LSC) was also being disbanded so there was an urgent need to look at how funding would impact on the merging services. It was also noted that the LSC had recently announced a cut in sixth form funding, which could mean a significant reduction in the delivery of the 14-19 programme or staff redundancies.

The Head of Financial Services explained that the amalgamation of the Bournemouth and Poole Adult Learning Centres and the LSC were not matters which the Audit Committee could monitor, as the remit of the Committee did not cover policy making or scrutiny.

RESOLVED that

(i)the Committee approve the updated Internal Audit Terms of Reference, the updated Internal Audit Strategy and the updated Internal Audit Plan 2009-2010; and

(ii) the following audits from the Detailed Audit Plan be reported in detail to the Committee:-

  • Children’s Services Capital Programme,
  • Full Sail Ahead,
  • Amalgamation of the Bournemouth and Poole Adult Learning Centres: and
  • Asset Management Update

AC39.09USE OF RESOURCES 2008/09

The Head of Financial Services presented a covering report detailing the Audit Commission’s ‘Use of Resources’ Report for the Financial Year 2007/08.

The 2007/08 Audit Commission Use of Resources Assessment would be the last assessment to be performed under the Comprehensive Performance Assessment (CPA). From 2008/09 the Audit Commission would assess the Borough of Poole’s ‘Use of Resources’ under the new Comprehensive Area Assessment (CAA), which was expected to be a much harder test.

Chris Peachey, Audit Commission, referred to the ‘Use of Resources 2007/08 Audit’ and advised of the following key points:-

  • The 2007/08 Use of Resources Assessment was the fourth assessment carried out at the Borough of Poole and would be the last one carried out under the CPA framework.
  • The overall Use of Resources Assessment was made up of five themes:
  • Financial Reporting;
  • Financial Management;
  • Financial Standing;
  • Internal Control; and
  • Value for Money.
  • For 2007/08 individual theme scores for Financial Management and Internal Control improved from a score of 2 to 3, which reflected the in year progress and improvements made by the Borough of Poole to better manage its asset base and to further embed and develop its Risk Management processes.
  • The Borough achieved and maintained an overall score of 3 for the majority of the CPA period.
  • In January 2009, Financial Services commenced work on the 2008/09 Use of Resources Assessments. The new Key Lines of Enquiry now focussed on 3 themes (as opposed to the 5 themes considered under the CPA Framework). The 3 new themes were:-
  • Managing Finances;
  • Managing Resources; and
  • Governing the Business.

The results from each theme would enable the Audit Commission to form an opinion on the overall Value for Money achieved.

  • Under the CPA Framework, the Audit Commission would have a greater focus on achievements, outputs and outcomes and the impact of arrangements on local people.
  • The new CAA Framework would present a much harder test and Audit Commission expectations would be significantly harder to meet. The Borough of Poole had achieved strong scores for Use of Resources under the CPA Framework, however, scores of 3 would become increasingly difficult for Councils to achieve. Scores of 4 would be reserved for excellence and genuine ‘leading edge’ performance.

A Member referred to Table 2 in the 2007/08 Use of Resources Audit, in relation to Financial Management, and questioned how the Council had scored level 3 when there was evidence to show that Capital Budgets required tighter controls? Chris Peachey, Audit Commission explained that the Audit Commission was aware of some issues with regard to the management of individual Capital Programmes, however, it was the adequacy of arrangements that had been assessed. It was also noted that the score related to the 2007/08 Audit, when the Capital Programme was significantly smaller.