RESOLVED:     That Councillor E M Dodd was elected Chairperson of the Audit Committee.

Councillor Dodd then took the Chair.

RESOLVED:     That the Committee agreed to appoint Councillor G Davies as Vice-Chairperson of the Audit Committee.

To receive apologies for absence (to include reasons, where appropriate) from Members/Officers.

Apologies were received from Councillor D K Edwards who was on holiday.

None.

To receive for approval the minutes of a meeting of the Audit Committee held on 18 June 2014.

RESOLVED:         That the minutes of a meeting of the Audit Committee held on the 18^th June 2014 were approved as a true and accurate record. 

The Corporate Director - Resources presented a report to submit the Appointed Auditor’s Annual Letter in respect of the audit performance work and associated fees for 2014/15, attached at Appendix A to the report, and also an update on the current status of the planned work, attached at Appendix B.  The Appointed Auditor - WAO informed the Committee that his office was responsible for the Performance Audit Programme at Bridgend, which is undertaken jointly with KPMG, which was a Standard Regulatory Programme.

            In response to a question, the WAO Auditor informed the Committee that there had been a reduction in the fee since last year as a result of the Audit General undergoing a restructure.  It was found that of the three Bands, Bridgend was currently in the minimum performance Band owing to the nature of the risk facing the Council going out to consultation for fees for next year.  He advised that the Audit General was mindful of the financial situation all local authorities were facing.

RESOLVED:         That the Committee gave due consideration to the attached documents to the report to ensure that all aspects of their core functions were being adequately reported.

The Section 151 Officer submitted a report to present the final Statement of Accounts for 2013-14 attached at appendix A to the report, which were due to be signed off by the external auditors, KPMG and associated Letter of Representation of the Council.

            The Audit Manager - KPMG took Members through the Audit of Financial Statements report, which sets out the issues that the external auditors are required to report on, and summarises the outcomes of work and areas which require attention by the Authority, together with proposals.

            He explained that the audit had gone smoothly, with good support from Officers in the Finance Department who produced a good, accurate set of accounts.  He explained that it was not KPMG’s role to sign off the Financial Statement, but to recommend to the WAO, and they had recommended an unqualified positive outcome.  He advised that a couple of issues were highlighted in view of adjustments, and also two recommendations.  He informed the Committee that the report had not included financial statements for County Borough Supplies and Coychurch Crematorium which were audited separately.

            The Committee congratulated the finance team on their unqualified reports and the Deputy Section 151 Officer formally thanked KPMG for their professionalism and hard work in completing the Statement of Accounts on behalf of the Authority.

            One Member asked for an explanation as to why in 2013 there was a deficit in unusable reserves as opposed to a surplus of over £91m in this financial year.

            The Finance Manager explained that his Department was responsible for producing a Statement of Accounts on behalf of the Authority to comply with both Statutory and Accounting Regulations and Requirements, in order to present a true and fair view for both income and expenditure, and also balances and reserves, to include an income and expenditure statement in accordance with standards, showing either a surplus or deficit.  A range of expenditure items were included in that reserve, which were mainly to do with the pension fund, which had gained £90m on the pension liability and as of the 31^st March 2013 there was a balance of £7,320m in earmarked reserves.

            He explained that it was important to recognise the impact that transactions had on the Authority’s general fund and Council Tax, which are reflected to in order to comply with accounting practice.  However, as they do not impact on the Council Tax position, there is a requirement to show the difference between what is accounted for and separately what the Authority should be charging, such as pensions which have to comply with International Standards as the amount of pension paid in by employees of the Authority in any financial year through contributions has to be reflected.  As far as Council Tax and the general fund are concerned, the Authority is required to reflect the costs of employer’s contributions to the pension fund actuarial, received over a three year period so that future liabilities can be worked out to ascertain what the employers’ annual  ...  view the full minutes text for item 7.

            The Chief Accountant presented a report to update the Committee on the outturn position for Treasury Management activities, Treasury Management and prudential Indicators for 2013-14 and to highlight compliance with the Council’s policies and practices prior to them being reported to Cabinet and Council.

She advised that the Council had complied with its legislative and regulatory requirements with full Council approval for the financial year 2013/14 as part of the Medium Term Financial Strategy (MTFS).  Council also approved the Half Year report in November 2013, and Quarterly Monitoring reports had also been approved by Cabinet.  She informed Members that the Authority no longer undertakes long or short term borrowings and no debt rescheduling was undertaken as there were no significant savings to be made.  There were, however, favourable cash flows during the year, which meant that on the balance sheet dated 31^st March 2014 investments totalled £10.5m with an average interest rate of 0.59%.  The bank base rate currently stood at 0.5%, which was an improvement on 0.51% at the beginning of the year.

She continued by informing the Committee that the Council was in the process of retendering for its banking services following the Co-operative Bank’s withdrawal from the Local Government  market, and the new banking contract would be in place from the 1^st January 2015.

            Finally, she advised the Committee that the Treasury Management function for 2013-14 had been reviewed by both Internal and External Audit; and Internal Audit had issued an audit opinion of ‘substantial assurance’ with no control weaknesses identified, or recommendations made.

One Member asked whether it was unusual not to have short term borrowing.

The Chief Accountant explained that it was not unusual given the way the Authority manages its finances, and given the fact that on the balance sheet it is a cash rich Authority, it therefore in effect, borrows from its own internal reserves.  She reported that the Authority had under-borrowed by approximately £40m due to the reserves being built up; however, she stressed that it would likely reach the stage where the Authority would eventually be required to borrow as the reserves dwindled, which was a familiar position with local authorities throughout Wales.

A Member drew attention to the table shown at Appendix A, on page 170 of the report, and requested an explanation to the net debt which had increased by £0.48m, against the investment which had decreased by £5.2m.

The Finance Manager explained that the gross debt position as at the 31^st March 2014 was £118m, which had only marginally changed from last year.  He added that variable rate investments would have reflected the cash the Authority had at the time, which meant a reduction in the cash invested.  The Chief Accountant explained that the reason for the increase in long term liabilities was the result of work on the HALO contract which was part way through the financial year 2013/14, and completion of the capital works on the Bridgend Recreation Centre.

RESOLVED:         That the  ...  view the full minutes text for item 8.

The Chief Internal Auditor welcomed the Corporate Director – Resources to the meeting, on her phased return to work.

The Chief Internal Auditor presented a report, the purpose of which was to summarise for Members the actions and information requests made by the Audit Committee.  A summary of actions and information provided was contained in the table shown at paragraph 4.1 of the report and she confirmed that there were no outstanding requests.

            The Deputy Section 151 Officer explained that she had been employed in her role since July this year, following a quick response to the Audit Committee’s concern over the statutory obligations of the Section 151 Officer being fulfilled, in the absence of the Corporate Director – Resources, whose role also covered that of the Section 151 Officer.  She commented that she had agreed with the Committee’s decision to send a letter to the Chief Executive expressing its concerns, as it was a proper governance issue.  She informed Members that there had been discussions with the Legal Department regarding the Section 151 Officer title role, which was appointed by Council, and the Corporate Director - Resources still held the title, albeit that she could not currently fully undertake those functions.  She advised that even though she was appointed Deputy Section 151 Officer, she was still legally able to undertake the functions of the Section 151 Officer and was committed to continue carrying out those responsibilities until such time as the Section 151 Officer fully resumed her duties.

RESOLVED:         That the Committee noted the report.

The Chief Internal Auditor introduced a report, the purpose of which was to summarise for Members the findings of the audits completed by the Internal Audit Shared Service.  Appendix B summarised those finalised audits carried forward from 2013/14.

            The Chief Internal Auditor reported that a recent procurement audit was carried out by Newport City Council on behalf of the Authority and other member Authorities, in accordance with the Welsh Purchasing Consortium arrangement for the provision of agency staff.  A reasonable audit opinion was given and a recommendation made in relation to ensuring that appropriate checks are carried out on agency staff.

            An audit was carried out on the Carbon Reduction Committee (CRC) Energy Management Return, which was given a substantial audit opinion.  It was recommended that Management should ensure that there is adequate segregation of duties for staff in the Energy Management Section.

The Building Maintenance Service was issued with a reasonable audit opinion; however the process for out-of-hours calls was over-complicated due to the unnecessary involvement of the Highways Section which resulted in duplication and differing recorded details.

An audit on taxi licensing was given a substantial audit opinion, and it was noted that a number of strengths and areas of good practice were identified within the Licensing Department.  She reported that there was good and open communication between Officers of the team and queries raised during the audit testing were seen to be actioned immediately.

In relation to the audit carried out on Park Income, the Chief Internal Auditor explained that the main issue was that a review should be carried out on all leases to ensure they were still relevant; also leases should be introduced where none currently existed.

Home to School Transport was one area highlighted for potential savings in the MTFS.  It was given a substantial audit opinion, with a number of recommendations.  She explained that following a review of bus contracts for 2014/15 and the indicated potential savings, instances where operators are tendering for more routes than they had the capacity to fulfil should be identified.  The main recommendation was to ensure that operators who worked across local authorities were not at risk of trying to cover schools in both areas at the same time.  She advised that there needed to be closer liaison with neighbouring authorities to ascertain what contractors they were using.

She reported that a reasonable audit opinion had been given to the audit carried out on the SEWTA Grant Verification and despite varying information being received from SEWTA, no recommendations were required.

The Learner Transport Project was given a reasonable audit opinion.  She advised that this was an on-going review and would be revised after consultation due to go out this month, was completed.

The Chief Auditor informed Members that the Corporate Director -Resources had requested Internal Audit to review the Porthcawl Harbour Project.  The project forms part of a wider plan to regenerate Porthcawl as part of the Swansea Bay Water Sports Centre of Excellence Programme.  It was given  ...  view the full minutes text for item 10.

The Chief Internal Auditor presented a report, the purpose of which was to inform the Committee of the actual Internal Audit performance against the five months of the audit plan year April 2014 to August 2014.  The Plan had provided for a total of 1,130 productive days to cover the period April 2014 to March 2015, and a summary of commenced and ongoing audits during the period April to August 2014 were detailed under Appendix A.

She referred Members to Section 3 of the Head of Audit’s ongoing opinion report attached at Appendix B and advised that a risk based approach to the planning had taken into consideration resources available at the time.  She reported that so far this year, one Officer had returned to work after long term sickness absence; although on returning that Officer had requested a move to part time work which was expiated.  Another member of staff had left to take up another post in London, and she had just been informed that one of the Group Auditors was due to go into hospital in October, and would be on sick leave for a minimum of eight weeks.  She advised that this would impact on service delivery whereby the internal work plan would need to be revisited and a risk assessment carried out, with the revised audit plan being brought to the Committee in November to take account of the impact of staffing issues.  She informed the Committee that it would effectively equate to a loss of 1.5 full time equivalent staff on a productive day.

The Chief Internal Auditor advised that since last November Internal Audit had completed 115 assessments in total, and she was pleased to report that 6% of the assessments scored ‘5’ as Auditors had identified areas of improvement in terms of efficiency and effectiveness, resulting in substantial savings.  The figures showed that the 551 actual productivity days achieved amounted to 101% overall which meant they had exceeded their expectations.

She informed the Committee that the overall response rate to the Client Satisfaction Surveys totalled 74%, which was higher than the response rate from the Vale of Glamorgan Council, and significantly higher than the 54% average for Wales.  

            RESOLVED:          That the Committee gave due consideration to the Internal Audit Outturn Report covering the period April 2014 to August 2014 to ensure that all aspects of their core functions are being adequately reported.

The Chief Internal Auditor presented a report on the recommendations made since the 1^st April 2014, in accordance with the Audit Committee’s Forward Work Programme.

            She informed Members that this year’s recommendations had been incorporated into the Outturn as they were interlinked, and therefore would enable the Committee to give consideration to whether the recommendations being made were fundamental or significant.  The recommendations are graded in order of importance, as illustrated under Section 4 of the report.

            The Chief Internal Auditor reported that the intention was to streamline the process and procedures for efficiency and lean auditing.  She informed Members that they constantly received comments about “merits attention” and explained that the reason was to convey that although there was control, there was margin for a more desirable or enhanced way to make a process even more efficient.  The current system is time consuming, as the Auditors are required to manage the responses in order to keep the management system up to date.  By implementing the new system, although the Auditors would continue to make the “merits attention” proposals, there would no longer be a need to report them, and by not demanding a response would assist the process.

            A Member asked why Table 1 of the report did not include a description for “Value for Money”.

            The Chief Internal Auditor explained that the 16 recommendations were divided into different categories and the information extracted from the management system between April and August 2014 had no categories which necessitated recommendations for “Value for Money”.  She added that it did not rule the possibility that there would be recommendations to that effect in the future.

RESOLVED:       That the Committee gave due consideration to the report on completed audits to ensure that all aspects of their core functions are being adequately reported.

The Chief Internal Auditor presented a report to update Members on the 2014 - 2015 Forward Work Programme (FWP) for the Audit Committee, attached at Appendix A to the report.

RESOLVED:         That the Committee gave due consideration to the updated 2014-2015 Forward Work Programme to ensure that all aspects of their core functions were being adequately reported.