minutes

The Minutes of the Meeting held on 15th December 2010 (Minute Nos. 556 - 567) were taken as read, approved and signed by the Chairman as a correct record.

declarations of interest

No interests were declared.

part a minutes for confirmation by council

role of the audit committee

Informal Presentation on the Role of the Audit Committee

Andy Mack (District Auditor, Audit Commission) gave a presentation on "making an impact - the effective Audit Committee". He then asked various questions:

Q What is the role of the Audit Committee?

Members made the following comments: corporate governance; holding the Cabinet to account and to recognise the probity and governance of the Authority.

Q What makes a good Audit Committee?

Members made the following comments: SBC's Audit Committee were not bound by the Cabinet, so it was not a 'rubber stamping' exercise; successful in influencing Officers to make change where necessary; being non-party political and Members ensuring they were prepared before meetings so sensible questions could be asked.

benefit fraud annual report 2010/11 - activity and outcomes

The Benefits Fraud Manager introduced the report, which provided a summary of activities and outcomes undertaken during 2010/11 by Swale's Benefits Investigation Team in conjunction with their partners from The Department for Work and Pensions (DWP) under the banner of "One Customer One Team" (OCOT).

The Benefits Fraud Manager reported that the Benefits Investigation Team continued to work well with the DWP on all areas. She drew attention to item 2.3 of the report which detailed significant increases in overpayments. She advised that despite reductions in resources they were still achieving good prosecution results.

The Committee discussed the proposed overhaul of the Benefits system in relation to a "Single Fraud Investigation Service" and how it would impact on the Authority. The Benefits Fraud Manager explained that the Local Authority would continue to administer certain benefits but may lose their powers to prosecute.

internal audit annual report 2010/11

The Head of Internal Audit Partnership introduced the report which provided details of the work of the Internal Audit Team over the financial year 2010/2011 and the opinion of the Head of Internal Audit in relation to the Council's control environment, in the context of the Annual Governance Statement. The Head of Internal Audit Partnership reported that significant progress had been made since the previous annual report.

In response to questions around the Sports Development Audit report, the Head of Economy and Communities stated that various actions had been taken, including the formation of an Action Plan which had addressed the concerns highlighted in the report. The Corporate Services Director endorsed the proactive approach taken, which highlighted the effectiveness of the partnership's audit approach.

In response to questions around the Development Control Enforcement audit report, the Head of Planning explained that a report on the formation of an Enforcement Service Strategy and Charter would be considered by Cabinet on 8th June 2011. He outlined that it had taken longer to produce the report than originally intended to ensure Cabinet Member views were being addressed and due to reporting times through to the Cabinet. He explained that a key issue that was being addressed was the need to develop the Headway IT system. The Head of Planning explained that they were in the process of implementing an enforcement 'add-on' system which would record how long it took the section to deal with complaints. It was hoped over time that this logging system would be accessible to Members and the general public. However this could take three to four years to implement. He stated that more transparency was required around longstanding enforcement cases and the consideration of taking prosecution action where appropriate.

A Member raised concern with regard to timescales in responding to the two audit reports. He considered that timely and rapid responses where significant problems had been identified was required.

The Head of Internal Audit Partnership outlined the procedure that had been followed and stated that a comprehensive Action Plan was required within four weeks, and that normally three to six months was a reasonable period to schedule the follow-up audit. This allowed Officers to implement the changes required to improve the service. In some cases, where strategies and policies needed to be written and approved or where ICT systems needed to be introduced, a longer period might be more appropriate.

In response to queries around the Local Engagement Forum Grant Administration audit report, the Head of Economy and Communities stated that, due to lack of resources, it was important for Members to state when allocating funding that it was public money and to provide the necessary information so that their applications could be processed.

Councillor Mike Henderson proposed the following addendum to recommendation (1): "and that the Committee also notes that there are clear opportunities for further improvements within some sections of the Authority". This was seconded by Councillor Harrison. On being put to the vote the addendum was agreed.

Councillor Hampshire proposed a further recommendation: "That a monitoring system report be introduced for future meetings". This was seconded by Councillor Mike Haywood. On being put to the vote the proposal was agreed.

RECOMMENDED:
(1) That the Head of Internal Audit Partnership's opinion that substantial reliance can be placed on the Council's control environment in terms of the overall adequacy and effectiveness of the controls and processes which are in place to achieve the objectives of the Council are noted, and that the Committee also notes that there are clear opportunities for further improvements within some sections of the Authority.
(2) That it be noted that the only qualification to the opinion is that it is predominantly based on just one year of internal audit work.
(3) That it be noted that the results of the work of the Internal Audit team are the prime evidence source for 'the opinion'.
(4) That the outcomes of the work and the other matters referred to in this report provide evidence of a substantial level of internal control within the Council, which supports the findings and conclusions shown in the Annual Governance Statement for 2010/11 be agreed.
(5) That the improvements in control that occur as a result of the audit process be noted.
(6) That a monitoring system report be introduced for future meetings.

Head of Internal Audit

future of local public audit - consultation

The Head of Internal Audit Partnership introduced the report which provided details of the consultation currently being conducted by the Department of Communities and Local Government on the future of local public audit. He asked the Committee to consider the proposals and to provide a steer so Officers could prepare a draft response from the Council to the consultation.

Members considered the proposals and made the following comments:

Comments made at the start of the meeting about what makes a good Audit Committee should be included in the response;
The Audit Committee should be made up of elected Members;
Are Parish Council's aware of the proposed changes? Parish Clerks should be asked to register their views;
Good idea to combine with other Local Authorities in terms of procurement of external auditors but need to ensure they have the same principles as Swale ie. are impartial, unbiased and independent of the Cabinet;
Proposals for new Audit Committee item 3.20 - that they should be non-executive Members but there is a need to define what is meant by 'financial abilities' of Committee Members;
Some Members were happy for independent members to sit on Committee but not as Chair or Vice-Chair, others were cautious of this approach;
A Member said that it was his view that the Chairman should not be from the majority party;
Prefer Option One with only one mandatory duty for an audit committee;
Option 2 (3.24) - yes but with our terms of reference;
3.26 - Agree;
3.29 - better internal controls would mean less work for external audit;
3.30 - No to option 3;
There should be a wider range of auditors to choose from, and should not be limited to the 'big four';
Should consider putting our own option forward;
Concern that option (2) would enable Central Government to exercise greater control;
Would not like to see compulsory change of auditor after ten years;
Ensure relationship remains impartial and independent if the auditor remains the same for longer than ten years;
Each district should appoint their own auditor.

Members asked that Officers prepare a detailed response and that these comments be included.

The Chairman raised concern that the next meeting was scheduled for the day before submission of SBC's response on 30th June 2011. Members agreed that the next meeting should therefore be re-arranged for Monday 20th June at 7pm, to enable the Committee to consider the response.

internal audit: terms of reference and strategy

The Head of Internal Audit Partnership introduced the report which sought endorsement of the Audit Committee to the Internal Audit Terms of Reference and the Internal Audit Strategy.

implementation of international financial reporting standards

The Chief Accountant introduced the report which updated members on the issues addressed in the preparation towards adoption of the International Financial Reporting Standards (IFRS) for the financial year 2010-11 and presented the draft core financial statements in IFRS format.

The Interim Head of Finance stated that he would arrange a workshop to go through the key aspects of the IFRS financial accounts with Members.

audit plan 2010/11

The District Auditor, Audit Commission introduced the report which set out the audit work they proposed to undertake as external auditors for the audit of financial statements and the value for money conclusion 2010/11.

The District Auditor drew attention to the Audit and Inspection Fees 2009/10 and 2010/11 on page five of the report and that they contained a reduction for the 2010/2011 fee of £9,152. He was also pleased to announce that Swale would receive a rebate of £7,428 for the cost of the one-off first year audit of IFRS.

audit commission progress report

The District Auditor, Audit Commission introduced the report which set out progress towards completing the 2010/11 audit plan and provided a summary of the audit work planned and undertaken since the last Audit Committee.