Agenda and draft minutes

Audit and Governance Committee
Monday, 25th March, 2019 5.30 pm

Venue: Nidd Room - Civic Centre. View directions

Contact: Samantha Stonebanks, Democratic Services Officer  Tel: 01423 500600 Email:  democraticservices@harrogate.gov.uk

Items
No. Item

1.

Apologies for Absence and Notification of Substitute:

Minutes:

An apology for absence had been received from Councillor Alex Raubitschek.

 

(5.35 pm)

 

2.

Declarations of Interest:

Member to advise of any declarations of interest.

Minutes:

There were no declarations of interest made at the meeting.

 

(5.35 pm)

 

3.

Minutes: pdf icon PDF 218 KB

of the meeting of Committee held on 9 January 2019.

Minutes:

The Minutes of the meeting of the Committee held on 9 January 2019 were approved as a correct record and signed by the Chair.

 

(Two Members voted for the motion and there was one abstention)

 

(5.36 pm)

 

4.

Exempt Information:

To determine whether to exclude the press and public during the consideration of any exempt information items.

Minutes:

There was no exempt information.

 

(5.36 pm)

 

5.

Public Arrangement - Questions:

To consider any questions under Standing Order 27.

Minutes:

The following question was read out by Mr Peter Lilley in accordance with Standing Order 27:

 

I want to follow up on the Public Question I put to your Committee more than six months ago (September 17, 2018) which still hasn’t been properly answered.


The question relates to the Council’s funding of the Local Lotto; a project the Council appears to be extremely reluctant to provide full information about.

 

Last summer two senior officers, the Director of Corporate Affairs Rachel Bowles and the Interim Communication Manager Andy Carter both claimed that the setting up of the lottery had involved “no start-up costs.” We now know that this statement was incorrect, false information as the Council has since acknowledged it made an initial payment of £3,000 to the lottery organiser, Gatherwell Limited; plus £147 on a local authority gambling licence, and £100 on a promotional banner.

 

There were also clearly staffing costs involved during the setting-up process. As there are in maintaining the lottery. So why is this information being kept secret?

 

As I stated last September, the Local Lotto may well be supporting good causes but we’re still talking about the spending of public money and, as such, I believe the Council needs to be completely transparent and accountable; first, in relation to the amount of money spent so far; and secondly, by providing details as to the ongoing cost of the Council’s financial support for a project which gives every impression of having been a less than roaring success.

 

All of the expenditure relating to the local lotto should be put in the public domain.

 

The Chair of the Committee, Councillor Victoria Oldham, responded as follows:

 

There is no secret and I am sorry if you feel there may have been.

 

The start-up costs are and always have been in the publicly available 18th October 2017 Cabinet report.

 

In so far as staff time then I understand that it has been put to you previously that no staff time dedicated to the Local Lotto is additional to the annual cost of employing the officers and covering the relevant overheads. Therefore officers engaged in working on the Local Lotto would be paid in any event, even if the lotto had not been initiated or pursued as a project. The Council has not taken on additional staff or increased staff hours as a result of the local lotto. I also understand that it was explained to you that the Council does not record officers’ time in relation to specific projects except in the Legal Services section and that there was no information that is held and can be disclosed relating to staff costs except in the legal services.

 

There is no secret.

(5.37 pm – 5. 42 pm)

 

Matters to be dealt with under Delegated Powers

6.

External Audit Progress Report: pdf icon PDF 131 KB

The Senior Manager (Mazars) to submit a written report.

Additional documents:

Minutes:

Diane Harold, Senior Manager at Mazars LLP provided a written report on the progress of the external audit for Harrogate Borough Council. Ms Harold reported that there were no significant issues and the audit was on track to be completed within the agreed timescale. A financial reporting workshop had been held in January 2019 which had been attended by the Financial Services Manager. The workshop provided assistance for officers involved in the production of the financial statements and final accounts. The Senior Manager (Mazars) also highlighted various national publications that were outlined on pages five to nine of the progress report. Particular attention was drawn to the CIPFA Fraud and Corruption Tracker 2017-18, CIPFA, October 2018 and the Scrutinising Public Accounts: A Guide to Government Finances, CIPFA, November 2018.

 

In response to questions from the Committee on the risks associated with benefit fraud, Ms Harold explained that the responsibility of the external auditors was to detect errors and conduct high level risk assessments. It was the responsibility of HBC Officers to conduct in-depth audits relating to benefit fraud. The issue was covered in the Annual Governance Statement. The Scrutiny, Governance and Risk Manager confirmed that work was being done on the anti-fraud and corruption policy.

 

It was agreed that the Scrutiny, Governance and Risk Manager would enquire about the purchase of the CIPFA Fraud and Corruption Tracker 2017-18, CIPFA, October 2018 and the Scrutinising Public Accounts: A Guide to Government Finances, CIPFA, November 2018. The Senior Manager (Mazars) advised that if only one of the publications could be purchased, the Scrutinizing Public Accounts option would be more useful.

 

RESOLVED (UNANIMOUSLY):

 

That the report be noted.

(5.42 pm – 5.51 pm)

 

(D)

 

7.

2018/19 Audit Strategy Memorandum: pdf icon PDF 133 KB

The Senior Manager (Mazars) to submit a written report.

Additional documents:

Minutes:

Mark Kirkham, Partner at Mazars LLP, presented the Audit Strategy Memorandum for the year ended 31 March 2019. The Memorandum set out the proposed audit approach and detailed areas of risk and mitigating procedures to ensure the correct audit opinion was issued. The concept of materiality was applied to the audit and it was assessed that the size of misstatement which would be material for this Council was £1.923 million.

 

Mr Kirkham explained that the two main duties of the external auditors were to form and express an opinion on the financial statements and to form a value for money conclusion. The format of the audit was very similar to previous years.

 

Diane Harold, Senior Manager at Mazars LLP, explained that there were no new significant risks to consider. The recurring significant risks related to management override of controls; revenue recognition; property, plant and equipment; defined benefit pensions and NNDR provision (latter being an enhanced risk). The Senior Manager at Mazars explained that the revenue recognition significant risk was present in relation to year-end income accruals. The risk was higher for accruals as these involved estimates. The external audit will sample check that income was recorded in the correct financial year, had been recorded accurately and had not been manipulated.

 

In response to questions the Senior Manager explained that bad debt now had to be calculated in a certain way and that information on expected losses had to be taken into account in assessing the risk of the debt not being recoverable. This was unlikely to have a material impact based on their initial assessment. As with all testing, the external auditors used a materiality threshold. The materiality threshold was 2% of the benchmark based on the 2017/18 audited financial statements and was based on a gross budget of over £90 million.

 

Members queried the trivial threshold for errors of £58,000. The Senior Manager explained that whilst a triviality level is set, the audit will investigate any errors that appear particularly unusual; errors would not simply be ignored because they were under the triviality level. Members of the Committee requested information on errors below the auditor’s trivial reporting threshold be provided to them by officers. The Head of Finance confirmed that all material errors were corrected.

 

The Senior Manager updated the Committee on the Property, Plant and Equipment risk. It would be unusual for a Council not to have this item listed as a significant risk due to the material balance it represented.

 

In response to a question on the defined benefit pension’s risk, the external auditors explained that the calculation of pension figures could be subject to significant volatility and included estimates based upon a complex interaction of actuarial assumptions. The Head of Finance confirmed that the pensions issue was dealt with on an assumptive basis as the accounts needed to be finalised before the information was usually available. As HBC was part of the wider North Yorkshire Local Government Pension Scheme, any issues relating HBC could also be  ...  view the full minutes text for item 7.

8.

Internal Audit Services Monitoring Report March: pdf icon PDF 167 KB

The Auditor to submit a written report.

Minutes:

The Auditor submitted a written report which provided a summary of internal audit activity for the period 1st April to early March 2019. Paragraph 5.3 of the report was a breakdown of the current position along with any key points.

 

The Auditor explained that 45% of the planned audits were in progress. Since the report had been written further progress had been made and the internal audit team were on track to complete the schedule for the year end. Two of the audits were on hold due to external factors. The Performance Related Pay audit was on hold as the union had raised objections with Human Resources. The Planning and the GDPR audit was on hold as the Planning Advisory Service were due to publish guidance on the matter.

 

In response to questions the Auditor confirmed that summaries of all audits, along with recommendations and action tracking, would be provided in the update reports starting in June 2019.

 

RESOLVED (UNANIMOUSLY):

 

That the report be noted.

(6.22 pm – 6.30 pm)

 

(D)

 

9.

Internal Audit Report on Social Media: pdf icon PDF 135 KB

The Auditor to submit a written report.

Additional documents:

Minutes:

The Internal Auditor submitted a written report which sought to inform the Committee of the findings of the internal audit report on social media. The audit had been given a partial level of assurance due to missing controls. The main findings related to the risks of social media not being recorded on the risk register; the absence of an updated social media policy; the lack of key performance indicators; the amending of social media account passwords and the lack of checks before posting.

 

In response to a question the Auditor confirmed that the social media policy had since been updated and would be considered during the review of the audit.

 

It was agreed that the number of social media accounts run by the Council would be circulated to the Committee. It was also agreed that the Social Media Policy be added to the agenda for the June meeting.

 

RESOLVED (UNANIMOUSLY):

 

That the report be noted.

(6.30 pm – 6.39 pm)

 

(D)

 

10.

Strategic Risk Register 2018/19:

The Scrutiny, Governance and Risk Manager to provide a verbal update.

Minutes:

The Scrutiny, Governance and Risk Manager gave a verbal presentation on the Strategic Risk Register. The only change since the last Audit and Governance Committee meeting was that the UCI Road Race risk had come down. The score for the fraud and error risk was still high but the work around fraud would be covered in the Annual Governance Statement and a new anti-fraud and corruption strategy had been drafted and was awaiting approval. The score for the risk would therefore be reviewed for the next meeting.

 

It was agreed that information regarding the time required for the setting up and taking down of equipment on the Stray for the UCI Road Race would be included on the strategic risk register.

 

(6.39 pm – 6.47 pm)

 

(D)