Agenda and minutes

To approve the record of the meeting held on 4 September 2013.

The record of the meeting held on 4 September 2013 was agreed and signed by the Chairman as a correct record. 

25 September 2013

There were none. 

27 September 2013

Apologies for absence were received from Councillors Jarrett and Osborne.

The Chairman will announce any late items which do not appear on the main agenda but which he has agreed should be considered by reason of special circumstances to be specified in the report.

There were none. 

A member need only disclose at any meeting the existence of a disclosable pecuniary interest (DPI) in a matter to be considered at that meeting if that DPI has not been entered on the disclosable pecuniary interests register maintained by the Monitoring Officer.

A member disclosing a DPI at a meeting must thereafter notify the Monitoring Officer in writing of that interest within 28 days from the date of disclosure at the meeting.

A member may not participate in a discussion of or vote on any matter in which he or she has a DPI (both those already registered and those disclosed at the meeting) and must withdraw from the room during such discussion/vote.

Members may choose to voluntarily disclose a DPI at a meeting even if it is registered on the council’s register of disclosable pecuniary interests but there is no legal requirement to do so.

In line with the training provided to members by the Monitoring Officer members will also need to consider bias and pre-determination in certain circumstances and whether they have a conflict of interest or should otherwise leave the room for Code reasons.

There were none. 

This report updates to Committee on the progress of the Council’s risk management activities. 

Discussion:

The Quality Assurance and Client Manager updated the Audit Committee on progress with the Council’s risk management activities.

Members were advised that the 2012/2013 Risk Management Audit had confirmed that the Council’s risk management arrangements were compliant with the Risk Management Strategy (attached at Appendix A to the report). It had however identified three ‘medium priority’ recommendations that remained outstanding from the previous audit. The Quality Assurance and Client Manager updated the Committee as to the implementation of these recommendations; insofar that:

• the Strategic Risk Management Group now included a representative from the Children and Adults Directorate,
• managers had been reminded that risks identified in service/divisional plans should be reported as part of the service manager and assistant director quarterly reporting process, and
• the incorporation of risk within service manager Covalent training.

Decision:

The Audit Committee noted progress on the Council’s risk management activities.

This report advises Members about the nature of concerns raised under the Council’s Whistleblowing Policy between September 2012 and September 2013. 

Discussion:

The Monitoring Officer introduced a report that advised Members of three concerns raised under the Whistleblowing Policy between September 2012 and September 2013. The outcome of these instances was set out in the report.

It was noted that the requirement to report annually to the Audit Committee on the number and nature of concerns raised was set out within the Anti-Fraud and Corruption Policy and the Whistleblowing Policy, both of which were set out within the Council’s Constitution.

Members considered the whistleblowing reporting process and whether the number of instances being raised under the policy was appropriate, given the size of the organisation. The Monitoring Officer assured Members that the Council’s procedures appeared to be working appropriately and that employees may be raising issues through other mechanisms, such as directly with their line manager.

In response to questions as to how the policy applied to new forms of service delivery, such as the joint venture company established between Medway Council and the public-sector owned company Norse, the Monitoring Officer advised that non-council staff were able to raise issues under the Whistleblowing Policy and had done so previously. He would however ensure this was embedded in the new arrangements.

Following discussion as to whether it was necessary to provide a dedicated whistleblowing telephone line, the Monitoring Officer undertook to discuss with the Assistant Director, Organisational Services the feasibility of incorporating a whistleblowing number into the Care First service when it is retendered.

Decision:

The Audit Committee noted the report.

This report informs Members of matters relating to corporate fraud, including outcomes of investigations, fraud referrals received by Audit Services, and twice yearly updates on the Fraud Resilience Strategy.   

Discussion:

The Audit Services Manager introduced this report that informed Members of matters relating to corporate fraud, including outcomes of investigations, fraud referrals received by Audit Services, and twice yearly updates on the Fraud Resilience Strategy. 

In relation to the external investigations, reported in Annex A to the report, the Audit Services Manager advised that the Department for Work and Pensions had led a number of prosecutions, which were prosecuted by the Crown Prosecution Service. The outcome from three of these cases, where the prosecution had been unsuccessful, was highlighted. Members also sought clarification and considered the nature of tagging orders, which had been awarded in a number of ‘living together’ cases.

In response to Members’ questions officers advised that criminal investigations relating to Blue Badge fraud were undertaken and prosecuted by Medway Council. It was also noted that a number of operational and technical issues needed to be resolved ahead of the launch of the dedicated fraud hotline and that the Council’s Council Tax payments technology was compliant with the Payment Card Industry (PCI) Data Security Standard.

Following the discussion of this item the Audit Services Manager undertook to clarify which financial institutions the Council used to create saving accounts for foster children, as referenced within Annex C to the report, and also to explore whether calls from the dedicated fraud hotline could display the hotlines number, given concerns that some people did not answer withheld numbers.

Decision:

The Audit Committee noted progress in investigating benefit fraud in accordance with the approved Anti Fraud and Corruption Policy.

This report advises Members of the outcomes of Internal Audit activity completed since the last meeting of the Audit Committee. 

Discussion:

The Audit Services Manager introduced this report on the outcome of completed audit activity.

Members were advised that the control environments considered as part of the Medway Innovation Centre, National Fraud Initiative, and Debtors Income audits had all been found to be ‘sufficient’. Four school probity reviews, four income/grant site reviews and a further governance audit on the Council’s Carbon Reduction Commitment were also reported. The Committee was advised that a number of audits had progressed satisfactorily since the publication of this report and would be reported at the next meeting.

Members considered the summary information provided on all the completed audits, which was attached at Annex B to the report. The progress made at the Medway Innovation Centre, in addressing actions identified following an earlier investigation, was welcomed.

Responding to Members’ questions the Audit Services Manager advised that an audit of Norse was included within the 2013/2014 Audit Plan, which could consider the receipt of income by the joint venture company. Benchmarking on the National Fraud Initiative would also be possible when the Audit Commission had published a report on the 2012/13 NFI exercise in 2014.

Decision:

The Audit Committee noted the outcome of Internal Audit’s work.

This report advises Members of progress in delivering the approved 2012/13 and 2013/14 work programme, and probity and follow up work undertaken since the last Audit Committee Meeting. 

Discussion:

The Audit Services Manager introduced a report providing an overview of progress in delivering the approved 2012/2013 and 2013/2014 work programme, and probity and follow up work undertaken since the last meeting of the Audit Committee.

It was noted that Cabinet on 1 October 2013 would consider the Audit Committee’s recommendations for the disbursement of the recovered funds that had been misappropriated from Temple Mill Primary School. These recommendations included a proposal to create an Internal Audit Post to provide internal audit support for schools for one year. Subject to Cabinet’s agreement of this recommendation, the work programme would be revised and reported to Members in due course.

The Audit Services Manager clarified that the remit of the Foster Care audit, which was currently being undertaken, was to review Disclosure and Barring Service (DBS) and data protection issues.

Decision:

The Audit Committee noted the progress in completing the 2012/2013 and 2013/2014 audit programmes.

This report summarises the content of the appendix to agenda item 11, which, in the opinion of the proper officer, contains exempt information within one of the categories in Schedule 12A of the Local Government Act 1972. It is a matter for the Committee to determine whether the press and public should be excluded from the meeting during consideration of the documents.

Decision:

The press and public were excluded from the meeting during consideration of the exempt material contained within the appendix to agenda item 11 (Investigations Relating to Financial Irregularities) because consideration of this matter in public would disclose information falling within paragraphs 3 and 7 of Part 1 of Schedule 12A to the Local Government Act 1972 as specified in agenda item 12 (Exclusion of Press and Public) and, in all the circumstances of the case, the Committee considered that the public interest in maintaining the exemption outweighed the public interest in disclosing the information. 

This report and exempt annex informs Members of the outcome of recent internal investigations relating to financial irregularities. 

Discussion:

The Audit Services Manager introduced a report that set out the outcome of recent internal investigations.

Members considered the information as set out and officers responded to Members’ questions as they related to the individual cases and to the financial/audit support provided by the Council to organisations, such as academies and free schools.

Decision:

The Audit Committee noted the outcome of the irregularity investigations and the actions taken.

This report considers the issues raised in the Council’s external auditor’s Annual Governance Report, which incorporates the findings following the 2012/2013 audit of the Statement of Accounts. 

Discussion on 25 September 2013:

Robert Grant from BDO, the Council’s external auditor, provided an overview of the external auditor's report. This included the key findings from the audit of the accounts and use of resources, together with the external auditor’s opinion on the Annual Governance Statement. This item was considered in open session on 25 September 2013 (and on 27 September 2013).

A revised version of the Statement of Accounts, from that considered by the Committee in July 2013, was tabled at the meeting.

Members were advised that whilst the audit had not identified any material misstatements in the financial statements, a number of non-material misstatements had been identified and details of these were given. This included a number of errors that affected fixed asset disclosures, the treatment of Housing Revenue Account Income and Expenditure and the need to adjust the amount payable to the national non-domestic rates (NDR) pool. The Committee was updated as to progress of a number of outstanding matters and advised that having largely completed their audit work, in respect of the financial statements, it was anticipated that an ‘unqualified’ opinion would be issued. The Chief Finance Officer advised that, as a consequence of the adjustments made to the financial statements, further work was needed to correct the Cash Flow Statement. 

Robert Grant (BDO) reported that the auditor had identified areas with significant deficiencies in internal control. These related to payroll and Care Director - the Council’s adult social care information system. In relation to ‘use of resources’ a number of issues were noted by the external auditor, such as the Council’s effective arrangements for financial governance, financial planning and financial control and the Council’s arrangements for managing its budgets. It was noted that the auditor was satisfied with the Annual Governance Statement and would be issuing an ‘unqualified’ value for money conclusion.

Members were informed that a local elector had objected to the financial statements and it was noted that the external auditor had completed his work and would be notifying the elector of his conclusions.

The Committee considered the external auditor’s report noting a number of issues identified, such as the value for money conclusion and the comments relating to the corporate procurement arrangements and savings from the Category Management programme. It was also clarified that the £34million resource gap reported for 2015/16 within the auditor’s report was a cumulative figure, as opposed to a specific gap for that financial year.

The Committee acknowledged that this audit represented a significant improvement compared to previous years and congratulated officers on their work in preparing the Statement of Accounts.

Members were mindful of the need to review the revised documents tabled at the meeting and also for the external auditor to review the final adjustments made, before being able to approve the Statement of Accounts.

Decision on 25 September 2013:

The Audit Committee agreed to adjourn the meeting of 25 September 2013 to 27 September 2013 at 4 pm in the Civic Room, Gun Wharf.  ...  view the full minutes text for item 395.