Agenda and minutes

Councillor Wall and Harman had given their apologies.  Councillor Chard attended as a substitute for Councillor Wall.

No interests were declared.

20 June 2012

The minutes of the last meeting had been circulated with the agenda.

The Director of Resources reported back on the issue raised at the last meeting regarding the £100k journal threshold.  He explained that journals are primarily used to correct errors in posting of income or expenditure.  He assured members that this did not pose an opportunity for false payments to be made.  He advised members that the ability to undertake journals was controlled by a robust process which allowed only certain staff to do journals with a further process for countersigning journals over £100k.  Discussions across the four GO partners identified £100k as an appropriate level based on an assessment of the balance of risk and level of process.  The threshold had always been £100k at Cheltenham Borough Council though other partners may have had other levels previously. 

Upon a vote it was unanimously

RESOLVED that the minutes of the meeting held on the 20 June 2012 be agreed and signed as an accurate record.

These must be received no later than 12 noon on the fourth working day before the date of the meeting

No public questions had been received.

Presentation by the Finance Team

The Director of Resources introduced the item by explaining to members that contrary to previous years the annual statement of accounts had not been printed for all members but instead made available on the website and in the members room, given the increasing size of the documentation.  Officers would make a PowerPoint presentation of particular highlights of the documentation.

Group Accountant, Martyn Scull, tabled amendments to pages 14, 21 and 92 of the statement of accounts.  The amendments to pages 21 and 92 were presentational only, there had been no changes to the figures simply how they had been presented following a suggestion by KPMG.  The amendment to page 14 had been a change to the capital expenditure which had previously not included the loan to the Airport.  This had since been added.  (Annex 1). 

Group Accountants, Sarah Didcote and Martyn Scull introduced the PowerPoint presentation (Annex 2) and talked through each slide. 

Officers provided the following responses to questions from members of the committee;

• There was a £30k limit for Disabled Facilities Grants and if Social Services were unable to provide top-up funding any shortfall could be met with a loan from the Council.  Limits differed for private properties and social housing and these loans were usually repaid on death or sale of the property.  Such loans were currently being treated as capital expenditure and when repaid as capital receipts.  Officers would look at whether these loans needed to be disclosed elsewhere in the accounts.
• The cost of any borrowing was passed on to those to whom we loaned monies, the Council was not making a loss and was prohibited by law to make a profit. 
• In terms of the subsidy buy-out the Government would continue to get 75% of any RTB monies, though there were a number of deductions that could be made (admin costs, etc).  There was a new piece of legislation that would relax the restrictions on any monies from the sale of surplus assets but the Council would need to prove any such monies were to be used for regeneration. 
• The decision to borrow £27.4m for the HRA self financing settlement was made by Council and was based on the business case which had been presented and showed that over a 30 year period it would be of significant benefit.
• The valuation of the Airport was based on the runway and buildings and the reduction in value was as a result of the declining property values since 2008.
• The Code had never previously required for heritage assets to be included, probably due to the difficulty around valuations.  There would be no cash loss if any pieces were claimed back though this would impact the Net assets.  The majority of pieces were donated a long, long time ago and some had been impossible to value.
• There were so many heritage assets that it would not be possible to value them all given the cost associated with such an undertaking.  With these assets there was the potential  ...  view the full minutes text for item 5.

Report of KPMG

The KPMG Auditor introduced the report as circulated.  In order to provide some context to the report he first explained that at the same time as what was always a busy period of accounting the council had launched the new GO financial system.  KPMG had known for some time that this would pose additional risks and in recognition of this the council had brought in additional resources.  Officers had done a good job inspite of the situation and whilst the accounts couldn’t be descried as excellent as they had the year before, they had been produced in advance of the deadline and subject to the receipt of a signed management representation letter, KPMG would be issuing an unqualified audit opinion on the accounts

The KPMG Auditors gave the following responses to questions from members of the committee;

• The audit was undertaken on the old system as the new system (Agresso) had not gone live until 1 April 2012.  The issue, as expected, was that officers were not able to dedicate as much time as they previously had as a result of the additional pressure of implementing a new system. 
• In relation to item 2 / appendix 1 (the timeliness of bank reconciliations) the issue had been that the systems were not interfacing.  Officers were working hard to rectify the issue, meet the deadline of the 31 October and then undertake weekly reconciliations.
• Instances where the responsible officer had been listed as ‘GO Corporate team member’ had been made, as given the restructure it had not been possible to name an individual at the time.  Individuals had since been identified. 
• It was doubtful that the quality of accounts this year would negatively impact the audit fee from Grant Thornton as this had already been set.  This fee would likely reduce in the coming years by approximately 40% as the Audit Commission reduced their operating costs.  KPMG had incurred overruns and this would be discussed with the Director of Resources.
• KPMG had concluded that the two Elector Challenges did not impact on the statement of accounts and these would be resolved with a letter to the challenger.
• Any outstanding issues from this year and any still outstanding from the previous year would be highlighted to Grant Thornton to monitor through to conclusion. 
• The appendices did focus on property but this was because KPMG had less issues with day to day transactions and more with the technical area of fixed assets.

Rachael Tonkin, KPMG Auditor, had been asked to produce a report on the handover process between KPMG and the new external auditors Grant Thornton.  Rather than produce a separate report she has chosen to include the information in this report (page 12).  The table summarised the approach and timetable of the audit handover.

The Chairman acknowledged that this would be the last meeting that KPMG would attend and took the opportunity to formally register thanks for the support they had provided over the years.  He felt they had served  ...  view the full minutes text for item 6.

Report of the Head of Audit Cotswolds

The Head of Audit Cotswolds introduced the report as circulated with the agenda.  This was a standard item designed to inform members of the Audit Committee about highlights of the work completed by internal audit and comment on the assurances provided by this work. 

He talked members through some of the key points contained within the report.  The GO ICT Host (Centre of Excellence) review had been deferred until the end of the year to allow for continued implementation.  Audit Cotswolds would be relying on their colleagues within Forest of Dean Internal Audit to ensure that the GO audit plan was delivered with minimal duplication and liaison was ongoing as to the best way of approaching this.  The same approach had been taken with UBICO and a separate plan produced.  Internal audit had also been involved in the new risk management system, in a consultancy capacity and would be undertaking a review later in the year.  Appendix 1 summarised the work completed to date and the future AGS process going forward.

The Head of Audit Cotswolds gave the following responses to member questions;

• It was envisaged that GO Shared Services and Ubico would complete a certificate of assurance but this would very much be trial and error initially.  The KPMG Auditor commented that the GO Partners would need to agree a consistent approach rather than four separate approaches.
• The Gifts & Hospitality and Equalities items to be added to the Significant Issues Action Plan were the result of an internal reviews that had identified issues rather than as a result of changes to legislation.
• The operation audit days identified for GO and Ubico in item 3.7 did not include residual days for retained services and was based on historic knowledge.  This would no doubt be evolutionary but these days and the associated fees had been agreed as part of Service Level Agreements and additional days would impact the budget.

Upon a vote it was unanimously

RESOLVED that the report be noted.

The work programme had been circulated with the agenda. 

No additions were made by members.

In response to a query raised by a member of the Committee the Chairman assured members that it was systemic for the Overview & Scrutiny Committee to refer issues to the Audit Committee and vice versa.  The process had not changed as a result of the move from three to one O&S Committee.  

The Director of Resources provided an update on the GO restructure.  A number of people had taken voluntary redundancy so there had been no compulsory redundancies and all posts had been filled.  When considering the proposed structure, the Senior Leadership Team at CBC had raised concerns about the resilience of the Payroll function and as a result more resource had been put into the administration of the Payroll function.  Whilst somewhat premature he was confident that savings would be realised and a high quality, resilient service delivered.

9 January 2013

The next meeting was scheduled for the 09 January 2013.