Agenda and minutes

To approve the minutes of the meeting held on 15 June 2016 as an accurate record and note any outstanding actions.

RESOLVED

That the minutes of the meeting held on 15 June 2016 were agreed as a correct record and were signed by the Chair.

Apologies for absence were received from Councillor Nicholas Botterill.

Apologies for lateness were received from Councillor PJ Murphy and Donald Johnson.

If a Councillor has a disclosable pecuniary interest in a particular item, whether or not it is entered in the Authority’s register of interests, or any other significant interest which they consider should be declared in the public interest, they should declare the existence and, unless it is a sensitive interest as defined in the Member Code of Conduct, the nature of the interest at the commencement of the consideration of that item or as soon as it becomes apparent.

At meetings where members of the public are allowed to be in attendance and speak, any Councillor with a disclosable pecuniary interest or other significant interest may also make representations, give evidence or answer questions about the matter. The Councillor must then withdraw immediately from the meeting before the matter is discussed and any vote taken.

Where Members of the public are not allowed to be in attendance and speak, then the

Councillor with a disclosable pecuniary interest should withdraw from the meeting whilst the matter is under consideration. Councillors who have declared other significant interests should also withdraw from the meeting if they consider their continued participation in the matter would not be reasonable in the circumstances and may give rise to a perception of a conflict of interest.

Councillors are not obliged to withdraw from the meeting where a dispensation to that effect has been obtained from the Audit, Pensions and Standards Committee.

There were no declarations of interest.

Hitesh Jolapara, Strategic Finance Director, introduced the report that recommended the Committee to note the auditor’s findings and recommendations, approve the management representation letter, approve the Statement of Accounts for 2015/16 including the Pension Fund, to note the Annual Governance Statement, and approve the Pension Fund Annual Report 2015/16. He noted the following key points from the Narrative Statement of the Statement of Accounts:

·         A General Fund revenue account under-spend of £4.5m

·         A General Fund balance of £19.0m.

·         A Housing Revenue Account (HRA) surplus of £5.3m for the year, increasing its working balance to £18.5m.

·         Earmarked reserves at 31 March 2016 of £112.9m.

Andrew Sayers, KPMG, noted that they were anticipating issuing an unqualified audit opinion on the Council’s financial statements and that the Annual Governance Statement complied with the guidance issued by CIPFA/SOLACE in June 2007.

Three audit adjustments were identified above the threshold of £600,000 which required reporting. The impact of these adjustments was to decrease the gross balance of Debtors and Creditors on the balance sheet by £2.2 million (less than 0.2% of net assets) and did not impact the balance on the general fund and HRA account as at 31 March 2016.

The following key audit risks were identified in the 2015/16 external audit plan issued in June 2016:

·         Management override of controls

·         Valuation of Property, Plant and Equipment

·         Managed Services implementation (affecting Cash, Debtors, Creditors, Journals and Payroll)

Andrew Sayers noted that the auditors had discussed these issues with officers throughout the year and they were satisfied that adequate controls had been put in place. Further work was required for the Pensions Fund on valuations, benefits and contributions but there was comfort on the overall figures. There had been some issues with membership data following the recent transfer of contracts from Capita to Surrey County Council but the auditors now had all of the information they needed and anticipated being able to hit the 30 September deadline. It was noted that if any non-significant changes were required, such as changes to disclosure notes, the Strategic Finance Director would authorise these and inform the Chair.

The Chair invited questions from the Committee.

Councillor Guy Vincent, with reference to page 142 of the agenda, noted that the auditor had concerns about significant numbers of queries and the accuracy of data related to pensions. He asked if that was primarily a managed services issue. Andrew Sayers responded that the ‘logic check’ the auditors carried out on contributions and benefits was heavily dependent on membership data. When the check was completed it highlighted some concerns around the timing of people coming in and out of the scheme. When looking into the issue in greater detail they didn’t find any errors in payments made and they believed it was purely a data issue, of which an element was due to managed services, but was also due to the move from Capita to Surrey County Council. Once Surrey County Council were more comfortable with the data (carried out  ...  view the full minutes text for item 4.

George Bruce presented the Council’s Outturn Treasury Report for 2015/16 and noted that it would be formally signed off by Full Council in October. The Chair invited questions from the Committee.

Councillor Michael Adam, with reference to page 244 of the agenda, said it was not clear how the maturity of debt matched declining investment. George Bruce referenced section 5.29 of the report that showed the breakdown of the £60m reduction in investment balances -  debt maturities was only one element of that. The major element was higher cash balances at year end.

Councillor Adam noted the return of 0.6 percent and asked if any benchmarking had been done to compare our performance with that of other authorities. George Bruce responded that the London average at March was around 0.85 percent but that represented a range of risk profiles. The Council had more of a focus on security. Councillor Max Schmid and Hitesh Jolapara were however looking at options going forward to enhance the return.

RESOLVED

That the Committee noted the report.

Geoff Drake presented the report that summarised internal audit activity in respect of audit reports issued during the period 1 April to 30 June 2016 as well as reporting on the performance of the Internal Audit service. At the time of the meeting there were 64 audit recommendations outstanding.

Geoff Drake noted that Ed Garcez, Chief Information Officer, was unable to attend the meeting due to a long-standing commitment. The Chair said he would meet with him to discuss the outstanding recommendations and request a note for the rest of the committee.

Fulham Primary School

Councillor Mark Loveday noted that the internal audit report on Fulham Primary School was in the exempt agenda but information on the school’s outstanding audit recommendations were contained in the audit summary in the quarterly report which was in the open agenda. He asked that officers considered whether audit reports really needed to be kept exempt in future or whether they could be made public.

Councillor PJ Murphy, with reference to the high number of outstanding recommendations relating to schools, asked if there was a legal requirement to audit schools. Dave McNamara responded that the Council was obliged through a statutory framework to test whether proper controls were in place. In this instance the reminder sent to schools asking them to respond was sent a short time before the summer break and the report for committee was written before they came back so there was only a short time for them to provide updates. Schools do take the process seriously and are concerned if they receive nil or limited assurance. He also noted that some schools disagreed with the auditor’s opinions but find it difficult to articulate why. Councillor Murphy said would be helpful to have that information in reports going forward so at least the Committee is aware that some action is being taken. Dave McNamara suggested audit should meet with the bursars as they were keen to understand the process in more detail.

Councillor Mark Loveday, with reference to pages 253 and 254, noted that the overall picture on audit seemed to be presenting a deterioration. There were more nil-assurance returns which were defined as where ‘controls are generally weak open to significant abuse’. In addition, outstanding recommendations were remaining outstanding for longer. He asked what the cause of that was. Geoff Drake responded that a small number of schools were responsible for a significant proportion of outstanding recommendations and both of the nil returns. Dave McNamara noted that Fulham Primary School did not feel the recommendations reflected the judgement and a nil assurance opinion was not an accurate reflection of the severity of the situation. Geoff Drake countered that internal audit took a consistent line on opinions and nil assurance reports were always reviewed by the Head of Audit – he offered to meet with Children’s Services officers to resolve this issue.

The Committee agreed that the Chair should write to the Chair of Governors at the school inviting them and the  ...  view the full minutes text for item 6.

Geoff Drake presented the report that summarised all audit work undertaken during the 2015/16 financial year and provided assurances on the overall System of Internal Control, the System of Internal Financial Control, Corporate Governance and Risk Management. The work carried out by internal audit found that internal control systems were generally effective with 81.4 percent of audits undertaken receiving a positive assurance opinion.

Councillor Michael Adam asked why there were fewer recommendations this year than in previous years. Geoff Drake responded that the audit programme was roughly the same size as previous years and the number of recommendations reflected the findings of the audits undertaken.

Geoff Drake presented the updated version of the Internal Audit Charter and Strategy.

RESOLVED

That the Committee noted the contents of the report.

The next meeting will be held on 7 December 2016.

The next meeting was scheduled for 7 December 2016.

The Committee is invited to resolve, under Section 100A (4) of the Local Government Act 1972, that the public and press be excluded from the meeting during the consideration of the following items of business, on the grounds that they contain the likely disclosure of exempt information, as defined in paragraph 3 of Schedule 12A of the said Act, and that the public interest in maintaining the exemption currently outweighs the public interest in disclosing the information.

RESOLVED

That under Section 100A(4) of the Local Government Act 1972, that the public and press be excluded from the meeting during the consideration of the following items of business, on the grounds that they contain the likely disclosure of exempt information, as defined in paragraph 3 of Schedule 12A of the said Act, and that the public interest in maintaining the exemption currently outweighs the public interest in disclosing the information.

RESOLVED

That the exempt minutes of the meeting held on 15 June 2016 were agreed as a correct record and were signed by the Chair.

The Chair noted that the Committee had agreed earlier to invite the Chair of Governors and Headteacher to the next meeting to discuss the findings of the audit report.

RESOLVED

That the Chair write a letter inviting the Chair of Governors and the Headteacher of Fulham Primary School to the next meeting of the Committee to discuss the findings of the audit report.

The Committee discussed the report.