Rother District Council
AUDIT COMMITTEE
29 September 2010
Minutes of the Audit Committee meeting held at the Town Hall, Bexhill-on-Sea, on Wednesday 29 September 2010 at 6.30pm.
Committee Members present: Councillors M.D. Ensor (Chairman), R.K. Bird and P.G. Lendon.
Advisory Officers present: Director of Resources, Head of Finance, Head of Corporate Services, Head of Amenities (in-part) and 2x Democratic Services Officer.
Also present: Stuart Frith (PKF).
AC10/14. MINUTES
The Chairman was authorised to sign the minutes of the meeting held on 30 June 2010 as a correct record of the proceedings.
AC10/15. APOLOGIES
Apologies for absence had been received from Councillors K.P. Dixon and D.W.E. Russell.
PART II - DECISIONS TAKEN UNDER DELEGATED POWERS
AC10/16. WORK PROGRAMME
(5.1)
Members gave consideration to the report of the Director of Resources on the Committee’s Work Programme.
RESOLVED: That the Work Programme at Appendix A, as amended, be approved.
AC10/17. PROPOSED ABOLITION OF THE AUDIT COMMISSION
(5.2)
Consideration was given to the report of the Director of Resources on the proposed abolition of the Audit Commission. Following the announcement made by the Coalition Government on 13 August 2010 that the Audit Commission was to be abolished, Members were advised that it was likely that it would not be disbanded until 2012/13 as a change in legislation would be required to enable its abolition.
A number of options had been provided by the Commission’s Chairman which included sale, a management buy out and the setting up of a mutual organisation.
The current external auditors, PKF, were appointed by the Audit Commission for the 2007/08 statement of accounts audit and as PKF’s contract was with the Audit Commission, it was likely that this contract would end after the audit of the 2011/12 statement of accounts. Members noted that the Council would need to progress procurement of Auditing Services once details of the changes had been announced.
RESOLVED: That the report be noted.
AC10/18. RISK MANAGEMENT
(5.3)
Members gave consideration to the Risk Register for each service area. Members considered that the best way to proceed with assessing the registers would be to look at two departments in detail at each meeting. Members decided to look at the IT Service, particularly disaster recovery as this had an impact on every other Service and Amenities, as this was the largest Service. Members requested that the Heads of these Services be invited to the next meeting so that they could provide the committee with any further information that may be required during their deliberations.
RESOLVED: That the Amenities and IT risk registers be assessed at the next Audit Committee meeting with the relevant Heads of Service.
AC10/19. INTERNAL AUDIT REPORT TO 30 JUNE 2010
(5.4)
Consideration was given to the report of the Director of Resources on the Internal Audit Report to 30 June 2010 which set out the Internal Audit activity during this quarter.
Six standard audit reports had been issued during the quarter. In addition to this was the final report on the special investigation which was reported to Members at the last meeting. These reports ensured compliance with the Council’s Financial Procedure Rules, achievement of management objectives, as well as looking for possible duplication of effort and achievement of better value for money. Of the 6 reports issued, 4 were rated “substantial”, 1 “limited” and 1 “minimal”. The reason for the “limited” report was due to poor budgetary control on the Sidley Goods Yard (Elva Business Park) project and the “minimal” report was as a result of the failure to comply with the financial and contract procedure rules on a works contract for Little Common Drainage Works. The Head of Amenities provided Members with details of how the procurement of the Little Common drainage works contract did not follow the contract procedure rules. An investigation highlighted that there were slight variations in staffs’ understanding of the Contract Procedure Rules and as a result some plain English guides were being produced and the procedures had been reiterated/clarified to staff.
The Head of Corporate Services took Members through the details of the Sidley Goods Yard Audit which received an assurance rating of ‘limited’. This was because a waiver in Financial Procedure Rules was not requested to obtain less than the necessary 3 competitive quotes. Members heard that the Quantity Surveyor, who had been contracted to complete the work, had already won the tender for the pre-contract work but not for continuation work. Members were concerned that the Quantity Surveyor had been contracted on an hourly rate and not a fixed rate. Members were reassured that the hourly rate was competitive and the project had been within budget. However, Members requested that this particular case be referred back to the Scrutiny Committees to ensure that any future contracting methods provided value for money and that this was taken into consideration when other contracts were being considered by Scrutiny Committees. Members discussed whether they should be made aware of any contracts that were in the process of being tendered for and completed so that they could highlight areas of concern at an earlier stage in the process. The Head of Finance suggested that the Committee be made aware of the Revenue Budget and Capital Programme monitoring report that Cabinet received.
Members received a verbal update on the outcome of the sentencing of the former member of staff who committed fraud that was reported at the last Committee meeting. Members were reassured that further controls were in place to prevent this reoccurring.
RESOLVED: That:
1) the Internal Audit Report to 30 June 2010 be noted;
2) the Head of Finance to reference the Revenue Budget and Capital Programme monitoring report received by Cabinet to the Audit Committee; and
3) the Scrutiny Committees receive Minute reference AC10/19.
AC10/20. TREASURY MANAGEMENT REPORT
(5.5)
Members gave consideration to the report of the Director of Resources on the Treasury Management Report. Following the approval of the 2010/11 Investment Strategy, it was agreed that a report would be presented to the Committee on the Council’s treasury management activities.
Investment returns – in house managed funds
Appended to the report was an investment analysis review from Sector Treasury Services, the Council’s external treasury management advisers, which explained the current economic environment and summarised the Council’s investments for in house managed funds at 31 August 2010. Members were advised that the total invested was £16.4m and the return for the year to the end of August was 1.04%.
Investment returns – Investec
The performance for Investec, the Councils Investment Fund Manager, for the year to August 2010 gave a return of around 0.8% based on a fund of around £12m. A full breakdown of the current investments was appended to the report for Members consideration.
Borrowing
The Council had not entered into any new borrowing since becoming debt free in April 2002.
Forecast
The base rate was likely to stay at 0.5% until September 2011, and it was likely that the Council would underachieve its investment income by £200,000 over the current financial year. The Interest Equalisation reserve was likely to be depleted during 2011/12 and the impact of this would need to be considered as part of the next year’s budget setting.
The use of capital resources over the next 5 years would also reduce the amount the Council would achieve in investment returns. This would be addressed in the resetting work which was currently underway so that the reliance in the revenue budget on investment returns would be reduced. Members questioned Officers on how the Council was looking to increase the return on investments. Members were reassured that invest to save was in the Councils remit and would be driven through by Officers and in the Corporate plan.
The Head of Finance advised Members that he had been cautious with longer term investments due to the current economic climate. Longer periods for investing had been considered and Sector was consulted on a regular basis to ensure that the best options were considered.
RESOLVED: That the report be noted.
AC10/21. ROTHER DISTRICT COUNCIL REPORT TO THOSE CHARGED
(5.6) WITH GOVERNANCE – REPORT FROM PKF AND STATEMENT OF ACCOUNTS
Members considered the Rother District Council Report to those Charged with Governance. Appended to the report was the Annual Governance Report from PKF, the Council’s external auditors, the Statement of Accounts for 2009/10 and a summary of the changes made to the Statement of Accounts.
The Head of Finance took Members through the changes that had been made to the Statement of Accounts. It was noted that a few items had moved within the cashflow statement; however these changes had not affected the net worth.
Stuart Frith from PKF, the Councils external Auditors, was invited to address the Committee on the PKF Annual Governance Report. Members were taken through the Executive Summary and the following salient points were noted:
· Overall the audit had gone well.
· No material errors had been identified.
· A weakness in the creditor payments system had been identified, which was being dealt with.
· The Value for Money conclusion was being qualified because the Council had not put in place adequate arrangements for managing its natural resources effectively. The Director of Resources informed the Committee that this conclusion on natural resources had been disputed by Officers as it was Officers’ view that the auditors had focused on process rather than outcomes.
Members considered and agreed the Statement of accounts and requested an update on the governance issues listed for 2009/10 at the next Audit Committee meeting.
RESOLVED: That:
1) the report of the External Auditor be received;
2) the revised Statement of Accounts for 2009/10 be approved; and
3) an update on the governance issues for 2009/10 be received at the next Audit Committee meeting.
CHAIRMAN
The meeting closed at 8.16pm ac100929.lec
Appendix A
AUDIT COMMITTEE
WORK PROGRAMME 2010-2011
29 September 2010 / · Work Programme· Internal Audit Report – Update
· Risk Management and Corporate Governance (Including Risk Register)
· External Audit ISA 260 Report
· Treasury Management Report
· Statement of Accounts (PKFs comments)
15 December 2010 / · Work Programme
· Internal Audit Report - Update
· Risk Management and Corporate Governance – IT Department and Amenities
· Annual Audit and Inspection Letter
· Treasury Management Report
· Feedback from Investment Panel for the Pension Scheme.
· Update on Governance issues for 2009/10.
· Revenue Budget and Capital programme Reference from Cabinet, if any
30 March 2011 / · Work Programme
· Internal Audit Report - Update
· Risk Management and Corporate Governance
· Internal Audit Plan – 3 year plan
· Treasury Management Report
· Feedback from Investment Panel for the Pension Scheme.
· Revenue Budget and Capital programme Reference from Cabinet, if any.
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