Venue: Virtually through Zoom
Contact: Kay Norris 01670 622611
ATTENDANCE AND APOLOGIES FOR ABSENCE
The Chair welcomed Councillor S Dickinson as a new member of the committee.
Apologies were received from Councillor M Purvis.
Minutes of the meeting of the Audit Committee held on 25 November 2020, as circulated, to be confirmed as a true record and signed by the Chair.
RESOLVED that the minutes of the Audit Committee meeting held on 25 November 2020, as circulated, be confirmed as a true record and signed by the Chair.
At that point Councillor Swinburn referred to item 59 (b) Update on the audit progress of the Pension Fund Accounts 2019-20, and asked for clarification regarding ‘unqualified opinion’. In response Mr Waddell said an unqualified opinion was good and in the context of the Pension Fund it meant the financial statements had been audited and no material statements uncorrected by management had been identified. This allowed an unqualified opinion to be issued on the basis of reasonable assurance. Mazars had broadly completed the work on the Pension Fund and once they were able to complete the work on the County Council’s core statement, they would be in a position to issue the Audit Report and the Pension Fund separately.
DISCLOSURE OF MEMBERS' INTERESTS
Unless already entered in the Council’s Register of Members’ interests, members are required to disclose any personal interest (which includes any disclosable pecuniary interest) they may have in any of the items included on the agenda for the meeting in accordance with the Code of Conduct adopted by the Council on 4 July 2012, and are reminded that if they have any personal interests of a prejudicial nature (as defined under paragraph 17 of the Code Conduct) they must not participate in any discussion or vote on the matter and must leave the room. NB Any member needing clarification must contact Legal Services, on 01670 623324. Please refer to the guidance on disclosures at the rear of this agenda letter.
Councillor Castle declared an interest in item 5(a) Treasury Management Statement for the Financial Year 2021-22 as he was on the Board of Alnwick Playhouse and Alnwick Youth Hostel to which the Council had loaned money.
To consider the above report from Mazars.
Mr C Waddell, Mazars, introduced the above report and said good progress had been made on the Pension Fund. An Audit Completion Report on the Pension Fund had been presented at the last meeting and a verbal update provided on outstanding issues. The Pension Fund Audit was almost complete and the required letters to auditors of the National Park Authority and Active Northumberland had been issued. Responses to outstanding queries had been received and following completion of the County Council audit, the Pension Fund audit would be signed off with an unqualified opinion which, as explained earlier, was a good result.
Due to the pandemic extra work around level 3 on quoted investments was required but, given the nature of the investments held by the Pension Fund, a separate paragraph was not needed for that. It was, however, proposed to include an extra paragraph to explain that on 1 April 2020 Northumberland Pension Fund had merged with Tyne and Wear Pension Fund.
In terms of the County Council, Mazars had been making good progress and the following information was provided:
RESOLVED that the information be noted
The Local Government Act 2003 requires the Council to set out its Treasury Strategy for borrowing and to prepare an Annual Investment Strategy, which sets out the policies for managing investments and for giving priority to the security and liquidity of those investments. The Council nominates Audit Committee to be responsible for ensuring effective scrutiny of the Treasury Management Strategy and Policy. This report sets out the Treasury Management Strategy, Treasury Management Policy Statement, the Annual Investment Strategy for the Financial Year 2021-22, Prudential Indicators 2021-22 to 2023-24 and the Minimum Revenue Provision Policy 2021-22.
Mr C Hand, Executive Director of Finance and Section 151 Officer, introduced the above report which set out the Treasury Management Strategy, Treasury Management Policy Statement, the Annual Investment Strategy for the Financial Year 2021-22, Prudential Indicators 2021-22 to 2023-24 and the Minimum Revenue Provision Policy 2021-22. These would be put before full Council for approval in February.
Mr A Stewart, Finance Manager, highlighted the key issues as follows:
The Chair read through the recommendations as set out on page 1 of the report and on a show of hands these were unanimously agreed.
1. Audit Committee recommend that County Council approve the Treasury Management Strategy Statement which includes the Treasury Management Policy Statement, the Annual Investment Strategy and Borrowing Strategy for the Financial Year 2021-22.
Northumberland County Council is required to assess whether it should be considered as a ‘going concern’ organisation, and whether the Council’s annual accounts should be prepared on that basis. This report considers the Council’s status as a going concern and recommends that Members approve this.
Mr C Hand, Executive Director of Finance and Section 151 Officer, introduced the above report which considered the Council’s status as a going concern and recommended that Members approve this. The report related to the annual accounts for 2019-20 which were currently being reviewed by External Audit. The accounts were being prepared in line with the CIPFA code and were required to be prepared on a going concern basis on the assumption that the Council would continue to operate for the foreseeable future. The report outlined the rationale for that assumption.
Mr Hand said the Council provided a number of essential services for its residents, it had revenue and tax raising powers in order to fund those services, had a balanced budget, an MTFP which recognised and addressed any cost pressures and had a strong financial track record of identifying and delivering efficiencies and savings. The Council had prudent levels of reserves (attached as Appendix A) which should enable it to withstand any unexpected events. Whilst Covid 19 had impacted significantly on the Council both financially and operationally, it had continued to deliver all services throughout the pandemic and had received significant financial support from Central Government which would continue in the next financial year.
On the basis of those summary headlines, Mr Hand said it was recommended that the Council be considered as a going concern.
In response to a request from the Chair for further clarification, Mr Hand explained it was part of the process for the accounts to be prepared on a going concern basis in terms of how the balance sheets were prepared and assets valued. If a company or organisation was to wind up, the accounts would be prepared on a different basis. The Council was viewed as a going concern and the accounts had been prepared as such and would be reviewed by External Audit as part of their conclusion.
In response to questions from members the following information was provided:
Councillor Oliver ... view the full minutes text for item 79.
The?purpose?of?this report?is to outline the approach to preparing the 2021/22 Strategic Audit Plan for consideration and endorsement by the Audit Committee. The report also ensures the Audit Committee, as a key stakeholder of Internal Audit’s work, is engaged at an early stage in the planning process.
Mr K McDonald (Chief Internal Auditor) introduced the above report, the?purpose?of which was to outline the approach to preparing the 2021/22 Strategic Audit Plan for consideration and endorsement by the Audit Committee. The report also ensured the Audit Committee, as a key stakeholder of Internal Audit’s work, was engaged at an early stage in the planning process.
Mr McDonald said the report updated the committee on Internal Audit’s work plan for 2021/22, work was underway, and the plan would be presented to the committee in March for approval. The plan was risk based and normal processes were being followed to identify risks, along with any emerging risks or governance issues, and the usual engagement process.
Audit Committee members could make suggestions for items to be included within the plan at any time and comments were welcome now or after the meeting.
Discussion ensued about the process of putting suggestions forward and the Chair advised members to email Mr McDonald with a copy to herself. If there was sufficient interest, a session could be arranged virtually for discussion. The Acting Chief Internal Auditor said, although it was his Plan, as part of that he must take into consideration the comments of stakeholders, Audit Committee included. The Plan had to be risk based and he had to provide that assurance. If for any reason some suggestions made were not included it would be up to the committee to query why and that could be discussed at the meeting in March. Mr McDonald was, however, happy to receive any suggestions.
The Chair agreed with comments about the benefits of a virtual meeting to discuss wider issues and risks highlighted red in the risk register. She suggested a virtual meeting be set up in advance of the Audit Committee meeting in March.
On a show of hands members unanimously agreed the recommendations set out in the report and it was:
RESOLVED that Audit Committee endorse the approach to preparation of the 2021/22 Strategic Audit Plan and highlight any areas for consideration by the Chief Internal Auditor for inclusion in the 2021/22 Strategic Audit Plan.
DATE AND TIME OF NEXT MEETING
The next meeting is scheduled for Wednesday, 24 March 2021 at 10:15 am.
The next meeting was scheduled for Wednesday, 24 March 2021 at 10:15 am.
EXCLUSION OF PRESS AND PUBLIC
The Committee is invited to consider passing the following resolution:
(a) That under Section 100A (4) of the Local Government Act 1972, the press and public be excluded from the meeting during consideration of the following item on the Agenda as it involves the likely disclosure of exempt information as defined in Part I of Schedule 12A of the 1972 Act, and
(b) That the public interest in maintaining the exemption outweighs the public interest in disclosure for the following reasons:-
Agenda Items Paragraph 3 of Part I of Schedule 12A
10, 11, 12,
13, 14a, 14b Information relating to the financial or business affairs of any particular person (including the authority holding the information)
a) That under Section 100A of the Local Government Act 1972, the press and public be excluded from the meeting during consideration of the following items on the agenda as they involved the likely discussion of exempt information as defined in Part 1 of the Schedule 12(A) of the 1972 Act, and
b) That the public interest in maintaining the exemption outweighed the public interest in disclosure for the following reasons:-
Agenda Items Paragraph 3 of Part 1 of Schedule 12A
10, 11, 12,
13, 14a, 14b Information relating to the financial or business affairs of any particular person (including the authority holding the information).
Following requests for clarification about non-members of the committee staying for part 2 items, the Chair said there had been a precedent at Audit Committee to date for the Business Chair, Vice Business Chair and Portfolio Holder for Corporate Services to remain and she had no issue with that but was concerned about fairness to other members.
Mr N Masson, Senior Legal Services Manager said currently there was no protocol in place for part 2 items but officers were looking to provide some written clarification. He advised members about the ‘need to know’ principle depending on their position. He would advise any non-committee member who wished to attend part 2 items to put their request with reasons in writing to himself or another Monitoring Officer. Items discussed in closed session were often sensitive and tight control of access had to be maintained.
Mr Masson referred to members having a duty of confidentiality as outlined in the Members’ Code of Conduct and emphasised the importance of that, not just for this committee, but for all committees moving into part 2. Breach of confidential issues could result in serious legal implications for members and for the Council and actions of misfeasance in public duty could be a Police matter.
On a point of clarification, Mr Masson said at present a protocol was suggested and no level of detail had been agreed. The Business Chair added that he was happy to have this discussion outside of the meeting and said it could be raised for committees in general at a future Constitutional Working Group. He added that he was attending today’s meeting in his role as Business Chair for the purpose of ensuring the smooth running of the Council which was the same for Councillor Stewart in his role as Vice Business Chair.
Discussion ensued and a member commented that the procedure was understood but it would be helpful to have it in writing to avoid misinterpretation and for the rules to be applied fairly.
MINUTES 25 NOVEMBER 2020
The confidential part of the Minutes of the meeting of the Audit Committee held on 25 November 2020, as circulated, to be confirmed as a true record and signed by the Chair.
RESOLVED that the confidential minutes of the Audit Committee meeting held on 20 November 2020, as circulated, be confirmed as a true record and signed by the Chair.
With reference to item 67, Report of the Service Director – Corporate Assurance, Ms Mitchell confirmed that the points raised by the Vice Chair in the second bullet point had been picked up by the Corporate Risk Manager. The corporate risk updates were done twice yearly and would be detailed in a future report to Audit Committee.
MINUTES 16 DECEMBER 2020
The confidential part of the Minutes of the meeting of the Audit Committee held on 16 December 2020, as circulated, to be confirmed as a true record and signed by the Chair.
RESOLVED that the confidential minutes of the Audit Committee meeting held on 16 December 2020, as circulated, be confirmed as a true record and signed by the Chair subject to an amendment regarding item 70, Disclosure of Members’ Interests.
Overview of Treasury Management Investment Procedures (Appendix E)
The report provides an overview of the Council’s rationale and procedures for placing treasury management investments. The report identifies the risks associated with investments and the steps taken to mitigate the risks, as far as possible. The report follows discussion about the inherent risks associated with treasury investments and the risk mitigations measures undertaken, at Audit Committee on 25 November 2020.
Mr C Hand, introduced the above report which provided an overview of the Council’s rationale and procedures for placing treasury management investments. The report identified the risks associated with investments and the steps taken to mitigate the risks, as far as possible. The report followed discussion about the inherent risks associated with treasury investments and the risk mitigations measures undertaken, at Audit Committee on 25 November 2020.
RESOLVED that the contents of the report be noted.
Group Audit Committee: Initial Report and Proposal for Self-Assessment of Framework of Governance, Risk Management and Control by Entities within the Advance Northumberland Group (Appendix F)
This is the initial report in relation to the Audit Committee undertaking its role as Group Audit Committee (GAC) for the Council’s group of companies, in accordance with the Terms of Reference approved at the County Council meeting on 4 November 2020. As reported at the County Council meeting, the active companies within the Council’s group currently relate to those within the Advance Northumberland Group of Companies (the Advance Group).
The report presents summary information in relation to work completed by Internal Audit, and publicly available external audit information, in relation to all non-dormant entities within the Advance Group.
The report also proposes an approach to invite all non-dormant entities within the Advance Group to provide information so that the GAC can develop its understanding of the framework of governance, risk management and control within the group boundaries. This will help identify areas of emerging risk which the GAC may then wish to commission Internal or External audit to examine further.
Ms A Mitchell, Director of Corporate Assurance, introduced the above report which was the initial report in relation to the Audit Committee undertaking its role as Group Audit Committee (GAC) for the Council’s group of companies, in accordance with the Terms of Reference approved at the County Council meeting on 4 November 2020. As reported at the County Council meeting, the active companies within the Council’s group currently related to those within the Advance Northumberland Group of Companies (the Advance Group).
The report presented summary information in relation to work completed by Internal Audit, and publicly available external audit information, in relation to all non-dormant entities within the Advance Group.
The report also proposed an approach to invite all non-dormant entities within the Advance Group to provide information so that the GAC could develop its understanding of the framework of governance, risk management and control within the group boundaries. This would help identify areas of emerging risk which the GAC may then wish to commission Internal or External audit to examine further.
Following a detailed discussion the Chair read out the recommendations as set out in the report.
Upon being put to the vote the recommendations were unanimously agreed and it was:
1. The summary of internal and external audit information provided in relation to the Advance Group attached at Appendix 1 and 2 be noted.
2. The proposal for all non-dormant entities within the Advance Group to complete a self-assessment of governance, risk management and control, using the model letter at Appendix 3, by 26 February 2021 be agreed.
3. This information be utilised as a foundation of its understanding of the group entity and as a basis for determining areas of governance and risk which the Group Audit Committee may wish to explore further as part of its role.
Commercial Enterprises (Appendix G)
To provide an update from the Chief Executive on relevant governance matters relating to the County Council’s commercial enterprises.
Mrs D Lally, Chief Executive, presented the above report which provided an update on the Council’s key commercial enterprises including the plans to ensure that the Council met all required governance requirements.
Following a detailed discussion, the Chair read out the recommendations set out in the report.
Councillor Dickinson moved acceptance of the recommendations as set out in the report which was seconded by Councillor Swinburn.
An individual vote was taken on each recommendation:
Recommendations 1, 2, 3, 6 and 7 were unanimously agreed.
Recommendations 4 and 5 were agreed with 1 abstention.
Advance (Appendix H)
To provide an update on the current position from the Shareholder’s Representative on the County Council’s assessment of performance of Advance Northumberland, the County Council’s wholly owned subsidiary.
RESOLVED that the report be noted and the committee endorse the following recommendations:
1) That the Shareholder has identified a number of continuing weaknesses in governance arrangements regarding Advance Northumberland which must be improved, to ensure that the aims and interests of the County Council as Shareholder are met and that all entities are operating legally and appropriately.
2) That there are some areas of immediate and significant concern which must be
a) The poor financial performance of Advance Northumberland currently and
prognosis for the future, and the resulting impact on the County Council as
b) The nature of the Board constitution and the extent to which this allows the
Council’s interests to be suitably represented and safeguarded.
c) The adequacy of planning and performance management arrangements within the Group, including concerns regarding Advance Northumberland’s proposed Business Plan and the Operating Agreement.
d) The adequacy over the wider governance framework in place within the Group.
e) The roles undertaken by officers and members within the arrangements established, which do not enforce sufficient separation of duties and in some cases do not safeguard against a potential conflict of interest in the roles being discharged.
3) The Shareholder representative has sought the view of an interim consultant who was appointed by the Council due to the concerns of a number of the Council’s management team and some members about the lack of progress by Advance in relation to a number of outstanding concerns. These concerns were expressed in writing to the Advance Chairman and Board over a twelve month period commencing in 2019. Due to very limited progress The Shareholder representative and other members of the Council’s management team the following actions are to be instigated.
4) The Committee is asked to note that as a result, the Shareholder will (following Cabinet and Council approval) move immediately to introduce the following actions:
Governance and Legal Matters
a) The Shareholder representative has advised the Leader of the Council that the
role of Chairman of Advance Northumberland, should be made separate from the
role of Cabinet Member for Economy and Regeneration. This is necessary to
introduce a sufficient separation of duties, which will be in the interests of the holders of each role and the County Council as shareholder. Consideration is being given by the Shareholder Representative about the arrangements for the appointment of the new Chairman of Advance.
b) The County Council will work further with Advance Northumberland regarding its draft short term Business Plan, to determine whether the Business Plan can be made fit for purpose and whether this can provide sufficient assurance to the Shareholder that the County Council’s interests can be safeguarded;
c) The Operating Agreement will be fundamentally reviewed to determine whether
this can be made fit for purpose to protect the County Council, with suitable
external expertise sourced to undertake this review. This will allow clarity on what
the Shareholder requires as the purpose of Advance Northumberland, and seek
to change some current processes (e.g. ... view the full minutes text for item 88.