25 07 2005

There were no apologies for absence.

 

 

There were no declarations of interest.

 

 

 

RESOLVED: That the minutes of the meeting of the Audit and Risk Sub Committee held on 14 June 2005 be approved and signed as a true and correct record by the Chairman.

 

 

 

 

The Sub Committee reviewed the first three-month performance of Internal Audit for the financial year 2005/06.

 

Members were advised that, as part of the inspection by External Audit, one of the indicators reviewed and measured was the percentage of actual coverage of the Annual Internal Audit Plan. The minimum standard was 90%, which equated to the production of 48 completed reports i.e. 90% of 53.

 

In the first quarter the target, taken from the original 2005/06 Annual Audit Plan, was set at eleven. The Section had produced eleven reports and work was in progress on one other (Holbrook). All outstanding work 2004/05 (other than the review of Holbrook) had been completed.

 

Internal Audit resources had been reduced by one full time equivalent post with effect from the end of June 2005. Options to fill the post were being evaluated and were the subject of a report to be presented later at the meeting.

 

The Internal Audit Section was congratulated on its performance.

 

The Sub-Committee was asked to note the performance and current resource issues of the Internal Audit Section at the three-month stage of the current financial year.

 

 

RESOLVED:  That the Sub-Committee take note of the performance and the current resource issues of the Internal Audit Section at the three-month stage of financial year 2005/06.

 

 

 

The Sub Committee considered a report by the Head of Internal Audit and Risk Assurance.

 

It was reported that the Internal Audit Section, over the last two years, had lost key staff to other local Councils and to the private sector. As the section was small, losses of this magnitude over such a short timescale, were extremely damaging to its performance.  Many Councils were exploring the possibilities of fully or partially outsourcing part of their audit function (i.e. to the private sector). Fareham Borough Council was currently part outsourcing  (from July 2005) and East Hampshire District Council had fully outsourced its audit function. Other neighbouring Councils were sharing audit resources in a partnership arrangement, such as that of Winchester City Council & Havant Borough Council, which had been in place for several years. A number of Councils nationally had developed consortia (i.e. East Riding of Yorkshire) and this method was growing in popularity with efficiency gains being the main driver. This was a similar arrangement to that of Winchester City Council and Havant Borough Council.

 

Members were advised that officers were exploring each of the options and would report back in detail to the Sub-Committee in September 2005. Meetings had been arranged with a number of Audit Manager’s in Hampshire, recruitment agency representatives and local suppliers of audit services to discuss the possibilities of collaborative working.

 

Members were advised that a new internal efficiency review was being offered to determine whether the vacant post should be outsourced. It would be several months before any conclusions would be reached and there was a possibility that temporary or permanent appointments would be made to complete the work programme. This could be arranged either by buying in agency support or by a temporary two-year contract, which would expire at the same time as neighbouring authorities’ outsourced contracts.

 

It was anticipated that the Internal Audit Section would be able to fulfil the original annual audit plan (using contingency) until the end of the second quarter (end of September 2005). Should the post not be filled or other arrangements not be in place by then there would be a significant impact on the annual audit plan and a complete review of the plan would need to be carried out early September 2005.

 

Some concerns were raised by a Member regarding the possibility of loss of control by the Council over the audit function should resources be outsourced. Members were advised that the Council had new procurement processes, which set genuine challenges including the possibility of outsourcing. Consideration of the joint-provision or outsourcing of some internal audit work could be seen as an example and could provide the option to help manage other areas as well as lead to economies of scale. Additionally, should the function be outsourced, any partner or contractor could be held to account if they failed to deliver.

 

RESOLVED:  That the Sub-Committee agree and support the actions being taken by the Borough Treasurer and the Head of Internal Audit & Risk Assurance to evaluate the best method of filling the current vacancy in the Internal Audit Section.

 

 

Consideration was given to a report by the Council’s External Auditors (Mazars), a copy of which is affixed in the Minute Book as Appendix A.

 

Members were advised that the responsibility of external audit was to review and, where appropriate, report on the financial aspects of the Council’s corporate governance arrangements relating to:

 

·        Systems of financial control;

 

·        Standards of financial conduct and the prevention and detection of fraud and corruption;

 

·        Legality of financial transactions; and

 

·        The Council’s financial standing

 

The hard work carried out by Council officers was acknowledged.

 

A number of issues had arisen:

 

·        There had been a slippage on the 2004/05 audit programme with work on payroll, debtors and National Non-Domestic Rates systems not completed by the year end. As the results of these reviews had not been available at the time of Mazars’ interim audit visit, it might be necessary for them to undertake additional work to gain assurance over the adequacy of systems controls for the purposes of their audit of the statement of accounts;

 

·        Internal Audit currently produced approximately sixty reports per year and consideration should be given to rationalising the reporting arrangements; and

 

·        Arrangements for securing IT audit support had not been finalised.

 

Members were advised that the cash reconciliation situation at present was satisfactory.

 

In response to a Member’s question, it was confirmed that the new Head of Legal Services was now in post.

 

RESOLVED:  That the Sub-Committee support the report of External Audit and agree to monitor all recommendations listed in the report over the financial year 2005/06.

 

 

 

 

 

A copy of the External Audit Plan for 2005/06 had been circulated to Members at the meeting of the Sub-Committee held on 14 June 2005 in order to provide the opportunity for any queries to be raised.

 

Members had no queries regarding the plan and agreed that it be noted.

 

RESOLVED: That the Sub-Committee note the External Audit Plan for the financial year 2005/06.

 

 

 

RESOLVED:  That the dates of forthcoming meetings of the Sub Committee be noted as follows:

 

 

 

·        Monday 19 September at 6.00 pm

·        Monday 24 October 2005 at 6.00 pm

·        Monday 30 January 2006 at 6.00 pm

·        Monday 24 April 2006 at 6.00 pm