Agenda and draft minutes

The Committee is asked to note the membership and terms of reference as appointed by Council, and the election of Mr Stephen Watson as Chair of the Committee as appointed by Council on 7 July 2021

8 members (4:3:1)  

Quorum – 3 (must be at be at least 2 opposition members) 

Independent Chair: S. Watson 

Vice Chair: D. Towns 

Also: 

2 Independent Members (non-voting) –  P. Topping and one vacancy

Statement of purpose 

(1)      Our audit committee is a key component of Northumberland County Council’s corporate governance. It provides an independent and high-level focus on the audit, assurance and reporting arrangements that underpin good governance and financial standards. 

(2)      The purpose of our audit committee is to provide independent assurance to those charged with governance of the adequacy of the risk management framework and the internal control environment. It provides independent review of Northumberland County Council’s governance, risk management and control frameworks and oversees the financial reporting and annual governance processes. It oversees internal audit and external audit, helping to ensure efficient and effective assurance arrangements are in place. 

Terms of Reference: 

Governance, risk and control  

(1)      To review the Council’s corporate governance arrangements against the good governance framework, including the ethical framework, and consider annual governance reports and assurances. 

(2)      To review and approve the Annual Governance Statement and consider whether it properly reflects the risk environment and supporting assurances, taking into account internal audit’s opinion on the overall adequacy and effectiveness of the Council’s framework of governance, risk management and control. 

(3)      To consider the Council’s arrangements to secure value for money and review assurances and assessments on the effectiveness of these arrangements. 

(4)      To consider the Council’s framework of assurance and ensure that it adequately addresses the risks and priorities of the Council. 

(5)      To monitor the effective development and operation of risk management in the Council. 

(6)       To monitor progress in addressing risk-related issues reported to the Committee. 

(7)      To consider reports on the effectiveness of internal controls and monitor the implementation of agreed actions. 

(8)      To review the assessment of fraud risks and potential harm to the Council from fraud and corruption. 

(9)       To monitor the counter-fraud strategy, actions and resources. 

(10) To review the governance and assurance arrangements for significant partnerships and arrangements. 

Internal audit  

(1)      To approve the internal audit charter. 

(2)      To review proposals made in relation to the appointment of external providers of internal audit services and to make recommendations. 

(3)      To approve the risk-based internal audit plan, including internal audit’s resource requirements, the approach to using other sources of assurance and any work required to place reliance upon those other sources. 

(4)      To approve significant interim changes to the risk-based internal audit plan and resource requirements. 

(5)      To make appropriate enquiries of both management and the head of internal audit to determine if  ...  view the full agenda text for item 102.

The Committee noted the membership and terms of reference as appointed by Council, and the election of Mr Stephen Watson as Chair of the Committee as appointed by Council on 7 July 2021: 

8 members (4:3:1)?? 

Quorum – 3 (must be at be at least 2 opposition members)? 

? 

Independent Chair:?S. Watson? 

? 

Vice Chair:?D. Towns? 

? 

? 

Also:? 

2 Independent Members (non-voting) –??P.?Topping?and one vacancy 

? 

Statement of purpose? 

(1)????? Our audit committee is a key component of Northumberland County Council’s corporate governance. It provides an independent and high-level focus on the audit,?assurance and reporting arrangements that underpin good governance and financial standards.? 

(2)????? The purpose of our audit committee is to provide independent assurance to those charged with governance of the adequacy of the risk management framework and the internal control environment. It provides independent review of Northumberland County Council’s governance, risk management and control frameworks and oversees the financial reporting and annual governance processes. It oversees internal audit and external audit, helping to ensure efficient and effective assurance arrangements are in place.? 

? 

Terms of Reference:? 

Governance, risk and control?? 

? 

(1)??????To review the Council’s corporate governance arrangements against the good governance framework, including the ethical framework,?and consider annual governance reports and assurances.? 

(2)??????To review?and approve?the Annual Governance Statement and consider whether it properly reflects the risk environment and supporting assurances,?taking into account?internal audit’s opinion on the overall adequacy and effectiveness of the Council’s framework of governance, risk management and control.? 

(3)??????To consider the Council’s arrangements to secure value for money and review assurances and assessments on the effectiveness of these arrangements.? 

(4)??????To consider the Council’s framework of assurance and ensure that it adequately addresses the risks and priorities of the?Council.? 

(5)??????To monitor the effective development and operation of risk management in the Council.? 

(6)???????To monitor progress in addressing risk-related issues reported to the Committee.? 

(7)??????To consider reports on the effectiveness of internal controls and monitor the implementation of agreed actions.? 

(8)??????To review the assessment of fraud risks and potential harm to the Council from fraud and corruption.? 

(9)???????To monitor the counter-fraud strategy, actions and resources.? 

(10) To review the governance and assurance arrangements for significant partnerships and arrangements.? 

? 

Internal audit?? 

? 

(1)??????To approve the internal audit charter.? 

(2)??????To review proposals made in relation to the appointment of external providers of internal audit services and to make recommendations.? 

(3)??????To approve the risk-based internal audit plan, including internal audit’s resource requirements, the approach to using other sources of assurance and any work required to place reliance upon those other sources.? 

(4)??????To approve significant interim changes to the risk-based internal audit plan and resource requirements.? 

(5)??????To make appropriate enquiries of both management and the head of internal audit to determine if there are any inappropriate  ...  view the full minutes text for item 102.

Apologies were received from Councillors Towns and Scott. 

Minutes of the meeting of the Audit Committee held on 24 March 2021, as circulated, to be confirmed as a true record and signed by the Chair.

Councillor Oliver queried whether the Annual Governance Statement would be sent to all new members of the Committee.  The S151 Officer advised that it was contained within the final accounts which were included in the agenda papers. 

RESOLVED that the minutes of the meeting of the Audit Committee held on 24 March 2021, as circulated, be confirmed as a true record and signed by the Chair.

(1)        Interim Audit Completion Report 2019-20

(2)        FinalAudit Completion Report 2019-20

(3)        Northumberland Pension Fund - Follow Up Letter

(4)        Audit Completion Report 2019-20 - Pension Fund

(1)      Interim Audit Completion Report 2019-20 and 

(2)      Final Audit Completion Report 2019-20 

Karen Murray from Mazars drew members’ attention to the key points of the report, including significant risks, internal control issues and adjustments made. Member points included:-

The Chair commented that property plant and equipment valuation was a complex issue to get sorted. If best estimate figures were being worked on, he asked if these would be adjusted at some point. Ms Murray advised that the value did need to reflect that there was a concern that values could be affected by the pandemic. This was a standard position to be in and would correct itself this year. The Chair asked whether, if the figures were very wrong, would the Authority have to wait a year to find that out. Ms Murray confirmed that Mazars were satisfied that the figures which were in the accounts now were materially correct.

Councillor Dickinson asked about the assumptions made regarding the down value of the airport. Other authorities appeared not to have taken the same view as Northumberland and he asked how confident officers were with what was in the report. Ms Murray advised that she was happy with what was in the report but would take the question back regarding what others had done and the level of consistency. 

The Chair asked whether the same control issues were coming up year after year. Ms Murray replied that Mazars had followed up on the recommendations which had been made by their predecessors, but it was difficult for her to say if the same issues were recurring because this was their first year. 

Councillor Dickinson asked about council tax and how floor space was calculated for this. Ms Murray advised that there was no correlation between floor space and valuations for Council tax, which were assessed by the Valuation Office. This valuation put properties into a council tax band and the appropriate council tax was then levied for that band by the Council. It had no influence on the valuation of the property itself. 

Councillor Jackson commented that the accounts were from 18 months ago and therefore very late and asked why this was. Ms Murray replied that normally the Council should have its accounts ready by the end of May with audit competed by the end of July. MHCLG had recognised the problems associated with the pandemic and had given authorities some leeway in the timetable. The 2019-20 accounts did not have to be complete until the end of August, with audit to be completed by the end of November. But because of the change in auditors at Northumberland this had not been possible. Issues had come up which paused the work in the Autumn of 2020 and the audit had resumed at the start of 2021. 

Councillor Jackson commented that it was unusual to pause an audit and suggested that Cameron Waddell should provide an explanation about this to members. Councillor Dickinson advised that an explanation on this had been  ...  view the full minutes text for item 105.

(1)       2020/21 Opinion on the Adequacy and Effectiveness of the Framework of Governance, Risk Management and Control

The purpose of this report is to provide the annual opinion from the Chief Internal Auditor on the overall adequacy and effectiveness of the organisation’s framework of governance, risk management and control, taking into account the expectations of the Council’s Leadership Team, Audit Committee and other key stakeholders.

(2)       Key Outcomes from Internal Audit Reports (Issued November 2020 – July 2021)

The purpose of this report is to advise Audit Committee of key outcomes from Internal Audit reports issued between November 2020 and July 2021.

(1)      2020/21 Opinion on the Adequacy and Effectiveness of the Framework of Governance, Risk Management and Control 

The purpose of this report was to provide the annual opinion from the Chief Internal Auditor on the overall adequacy and effectiveness of the organisation’s framework of governance, risk management and control, taking into account the expectations of the Council’s Leadership Team, Audit Committee and other key stakeholders.

Mr McDonald highlighted the main points of the report for members.

Councillor Dickinson sought clarification of the position regarding the audit of Advance and whether they still needed to have their own audit following the recent change in audit arrangements. Mr McDonald advised that there was some overlap in the arrangements. Although he had not undertaken an audit he was aware of the changes and improvements being made. The Chair advised that he had had discussions with Mr McDonald and Ms Mitchell regarding how the Audit Committee would take on this function as the overseeing Committee. 

Councillor Cessford asked for further detail of what improvements had been agreed following the leaks of confidential information mentioned at paragraph 3.4.3 of the report. He asked what specific incidences Northumbria Police were investigating, about the level of importance referred to in the last line of the paragraph and about the scope of the investigation. In respect of improvements, Mr McDonald gave the example of confidential reports being shared individually to members and paper copies not issued in the post. Regarding the police investigation, he could only look at systems and procedures within the County Council and had no jurisdiction over any suspected criminality, which had to be referred to the police. He could not comment on what action the police might be taking. Regarding the level of importance, what he had done in the opinion was to acknowledge what had happened in recent months regarding leaks because the confidentiality of information was important. 

Councillor Cessford queried whether any follow up was undertaken with the police to establish what they were doing following a referral. He also asked about the scope of the investigation and asked who had been interviewed about the leak of confidential information, had this been all members and officers involved or just members at that meeting? Mr McDonald advised that whilst he had been involved to some extent in some of the instances at issue, including being questioned, it was not his role to carry out the investigations generally. His role involved ensuring that the Council’s policies and guidelines were adhered to. It was too soon to say whether the Police investigation had concluded, and it would be a question of checking with them for updates.   

Due to a technical problem, the meeting adjourned at 11.27 am and reconvened at 11.35 am.

Councillor Cessford asked about the client views and quality assessment and improvement programme and asked what cohort there had been for the client feedback and whether any comments received had been acted upon. Mr McDonald advised that feedback was always looked at and  ...  view the full minutes text for item 106.

(1)        Final Statement of Accounts 2019-20

The purpose of this report is to seek the Committee’s approval of the final statement of accounts for the financial year ended 31 March 2020.

(2)        Statement of Accounts - Group Boundary Review  

The purpose of this report is to provide members of the Audit Committee with details of the boundary review which has been undertaken to determine those organisations which should have their financial statements consolidated with the Council’s Statement of Accounts for the financial year ended 31 March 2021.  Particular consideration is given to the position of Active Northumberland.

(3)        Pension Fund Annual Report and Accounts 2019-20

The purpose of this report is to provide the Audit Committee with an update related to the Council’s 2019-20 Pension Fund Annual Report and to assist Members in carrying out their role in reviewing the Financial Statements.

(4)        Annual Report of the Firefighters’ Pension Scheme

Local Pension Board 2020-2021

To receive the above report.

(1)      Final Statement of Accounts 2019-20

The report sought the Committee’s approval of the final statement of accounts for the financial year ended 31 March 2020.

The S151 Officer presented the report. These were the final statement of accounts which incorporated all of the audit adjustments which Ms Murray had referred to. She reminded members that the external auditor’s opinion came in two parts. The audit completion report made it clear that they were happy with the amended accounts. Regarding the VFM opinion, none of the issues which were still under consideration had any bearing on the financial statements, and on that basis, her advice to the Committee was that there was no reason why the financial statements could not be signed off today. Failure to do that would have quite significant knock-on effects, not least it would further delay the finalisation of the draft accounts for 2020-21. Also, because the pension fund accounts formed part of the overall Council accounts, failure to approve would have implications for every Council involved in the regional pension fund. She understood the points which had been raised about VFM matters and that some of these were related to ongoing issues, but she was hopeful having discussed it with Cameron, that these would be concluded in time for the September meeting. She therefore respectfully asked members to sign off the accounts as there would be far reaching implications otherwise, and there was no reason not to do so. 

The Chair summed up the advice to members was that the risk of not approving the accounts was much higher than approving, not just to the Council but other Councils in the area.  

Councillor Oliver commented that he had concerns about the outstanding VFM issues but sought confirmation that by approving the accounts he would not be saying that there were no outstanding VFM issues. The S151 Officer confirmed that approving the accounts today had no bearing on the outstanding VFM issues which Cameron was considering. Councillor Oliver sought clarification that none of that work would affect the financial position in the accounts and the VFM work would continue. He queried whether this work could result in a qualified opinion. The S151 Officer advised that approving the accounts today would not in any way impinge on the VFM work and the opinion the external auditor would issue in due course. Conversely, none of the VFM issues which were under consideration would affect the financial statements. There was no interaction between the two opinions. 

Councillor Cessford queried the property plant and equipment valuations mentioned previously and asked why the valuer was being replaced if there was no blame attached to the previous issues, or whether this was standard procedure. The S151 Officer advised that the contract was due to be retendered anyway but there were issues with the approach that the previous valuer had adopted and the scope of that work. These were being addressed in the specification for the new contract.

Councillor Oliver queried the £361,000  ...  view the full minutes text for item 107.

The Chair reported that he had been in discussion with officers about the best way of progressing the Group Audit Committee arrangements. At the time of the last meeting of the Committee in March, there was only one non-dormant entity, but there had been some difficulty in engaging that entity in completing the governance questionnaire which had been agreed by Audit Committee.

He had discussed the current position with the Council’s Director of Assurance and Chief Internal Auditor, and had identified that a good way forward would be to revisit the questionnaire with the Chief Operating Officer of Advance.

So, in the meanwhile, from this meeting onwards:

- The Chief Internal Auditor would provide the Group Audit Committee with a copy of the Audit Plan for each non-dormant entity, as an information item each year.

- there would be a standing ‘Group Audit Committee’ agenda item on the agenda of Audit Committee from September’s meeting onwards.

- under that item, the Chief Internal Auditor would provide a short update on any internal audits completed on each non-dormant entity (e.g. audits completed and assurance levels) and any other matters he considered might be material to the framework of governance, risk management and control arising from group entities.

- the external auditor would be invited to provide any comment or information which they wished to, under the same ‘Group Audit Committee’ item on the agenda at each meeting (there may be a need to write separately to the partner at Mazars who deals with Advance, as he understood he and Cameron practised some type of ‘ethical walls’ between them.  But then Mazars will have been informed formally that if there is anything they wish to raise, they have a mechanism for doing so).

- the Group Audit Committee (i.e. this committee, NCC Audit Committee) could ask any questions about governance regarding group entities under this item.

He raised this matter now in order to provide a record that he and senior officers had given some thought to County Council’s decision in November, and the actions taken under the previous Chair of the committee, Councillor Hill, were progressing. He hoped members would agree that this was a sensible way forward for the issue.

Councillor Oliver supported this approach and suggested that Advance be asked to attend the Committee when reports were being reviewed so they could respond on points. There had also been a report done by KPMG so if Advance were to be discussed at the September meeting, then KPMG should be invited, along with the Chair of the Advance Shareholder Group. 

In terms of the KPMG report, the Chair agreed. Regarding Advance representatives, this was acceptable when the agenda warranted it as there may not be reason for them to attend every meeting. 

Councillor Oliver asked how members could get issues onto the audit programme, and whether it would be acceptable to email committee members with his initial thoughts about that. The Chair agreed there was a need for an open  ...  view the full minutes text for item 108.

The next meeting is scheduled for Wednesday, 22 September 2021 at 10:15 am.

Wednesday, 22 September 2021 at 10:15 am.

At this point, Mr Topping left the meeting.

The Audit 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 1 of Schedule 12A

11-12                                       Information relating to the financial or business affairs of any particular person (including the authority holding the information).

                                     Disclosure could adversely affect the business reputation or confidence in the person/organisation, and could adversely affect commercial revenue.

RESOLVED 

(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 1 of Schedule 12A

11-12            Information relating to the financial or business affairs of any particular person (including the authority holding the information).

Disclosure could adversely affect the business reputation or confidence in the person/organisation, and could adversely affect commercial revenue.

Strategic Audit Plan 2020/21 – Final Monitoring Statement

The purpose of this report is to provide Audit Committee with a final monitoring statement in respect of the Strategic Audit Plan for 2020/21.

Strategic Audit Plan 2020/21 – Final Monitoring Statement

The report provided Audit Committee with a final monitoring statement in respect of the Strategic Audit Plan for 2020/21.

RESOLVED that the information set out in the Strategic Audit Plan Final Monitoring Statement, attached as Appendix 1 to the report be noted.

Risk Management Update

The purpose of this report is to provide Audit Committee with an update on progress with the development, implementation and embedding of risk management within the County Council; and to inform Audit Committee of the latest position of the corporate risks as agreed by Executive Team and considered by Cabinet portfolio holders in April 2021.

Risk Management Update

The report provided?Audit Committee?with an update on progress with the development, implementation and embedding of risk management within the County Council; and informed the Committee?of the latest position of the corporate risks as agreed by Executive Team?and considered by Cabinet portfolio holders in?April?2021.

Members raised a number of questions which were answered by officers. Members were keen to ensure that risk was being properly managed within the Authority. Ms Mitchell advised members that it was the role of the Audit Committee to oversee the management of the risk, but not to manage the risk itself. She would take the comments made back to the risk owners for further discussion.

RESOLVED that the content of the report be noted.