Agenda and draft minutes

An apology for absence was received from Councillor J. Reid.

Minutes of the meeting of the Audit Committee held on 30 November 2022, as circulated, to be confirmed as a true record and signed by the Chair.

RESOLVED that the minutes of the meeting of the Audit Committee held on 30 November 2023, as circulated, be confirmed as a true record and signed by the Chair.

Unless already entered in the Council’s Register of Members’ interests, members are required where a matter arises at a meeting;

a. Which directly relates to Disclosable Pecuniary Interest (‘DPI’) as set out in Appendix B, Table 1 of the Code of Conduct, to disclose the interest, not participate in any discussion or vote and not to remain in room. Where members have a DPI or if the matter concerns an executive function and is being considered by a Cabinet Member with a DPI they must notify the Monitoring Officer and arrange for somebody else to deal with the matter.

b. Which directly relates to the financial interest or well being of a Other Registrable Interest as set out in Appendix B, Table 2 of the Code of Conduct to disclose the interest and only speak on the matter if members of the public are also allowed to speak at the meeting but otherwise must not take part in any discussion or vote on the matter and must not remain the room.

c. Which directly relates to their financial interest or well-being (and is not DPI) or the financial well being of a relative or close associate, to declare the interest and members may only speak on the matter if members of the public are also allowed to speak. Otherwise, the member must not take part in discussion or vote on the matter and must leave the room.

d. Which affects the financial well-being of the member, a relative or close associate or a body included under the Other Registrable Interests column in Table 2, to disclose the interest and apply the test set out at paragraph 9 of Appendix B before deciding whether they may remain in the meeting.

e. Where Members have or a Cabinet Member has an Other Registerable Interest or Non Registerable Interest in a matter being considered in exercise of their executive function, they must notify the Monitoring Officer and arrange for somebody else to deal with it.

NB Any member needing clarification must contact monitoringofficer@northumberland.gov.uk. Members are referred to the Code of Conduct which contains the matters above in full. Please refer to the guidance on disclosures at the rear of this agenda letter.

Councillors L. Grimshaw and P. Jackson advised that they would declare interests in item 17 (Executive Management response to the 2021 KPMG report) on the agenda as former board members of Advance Northumberland.

The Audit Committee operates under an agreed programme of core business, in accordance with its Terms of Reference as set out in the Council’s Constitution. The Committee is asked to review and note its monitoring report/action log for the 2022/23 council year.

The Committee was asked to review and note its monitoring report/action log for the 2022/23 council year (a copy of which had been filed with the signed minutes).

Regarding Action 1 and 2 these had now been completed and could be removed from the log.  Actions 3, 6 and 8 were on the agenda for today’s meeting.

Action 4 was still to be discussed between the Chair and Vice Chair to ensure there was no duplication of workload between Audit and the relevant Overview and Scrutiny Committee. 

In relation to Action 7, Members were advised that this report had been delayed.  It was hoped that the report would be ready for consideration at their March meeting. 

RESOLVED that the monitoring report/action log and comments made be noted.

Response to the Challenge Board Interim Report 1 for the Member Oversight Group

To consider and respond to the first interim report of the Challenge Board, provided to the Member Oversight Group on the 23.12.22.  This report was considered at County Council on 18 January 2023.

Response to the Challenge Board Interim Report 1 for the Member Oversight Group

The Leader introduced the first interim report of the Challenge Board, provided to the Member Oversight Group on the 23.12.22 and considered at County Council on 18 January 2023.  (A copy of the report has been filed with the signed minutes).

The Leader advised that back in 2021, he took the decision to commission an independent review of governance in the Council. The final report of the Independent Review of Governance (known as the ‘Caller Report’) was presented to Full Council in June 2022.  In line with the Caller Report recommendations across-party, Member Oversight Group, was established to oversee the development and delivery of an Improvement Plan in response to Caller.  Again, following the Caller recommendations, the Leader of the Council asked the Local Government Association (LGA) to establish an external Challenge Board of experienced local government Elected Members and Officers to advise the Council on its improvement journey.  

The Challenge Board was established and met formally for the first time in October 2022.  Following its first three meetings, the Challenge Board drafted its first, interim report and presented its findings to the Members Oversight Group on the 23.12.22.

It was reported that overall, the Board’s interim report presented a positive picture of progress.  Alongside this, the Board had provided feedback and advice on six key areas of work as set out within the report.

The Chair thanked the Leader for attending the meeting and presenting the report.  He commented on the pace and positive direction of travel being achieved so far. 

Councillor Jackson spoke about being denied access to information in the past and knew of other former Cabinet Members who had also experienced similar struggles.  He stated that the Council had an access to information policy but that it had not aways been adhered to in previous years.  He commented that all 67 members had the right to information.  He welcomed the feedback and advice received including the need for the Council to arrive at an agreed protocol on appropriate access to information to give clarity on what members could and could not have (and why).  He stated that the changes being made by the Council would help achieve a change in culture, rebuild trust and enable the authority to move forward.

Councillor Oliver agreed with comments made and felt this was a positive report with the Council already taking great strides to improve.  He did raise a question about the pace needed to bring about change quickly, particularly regarding producing budgets and the Corporate Plan.  In response the Leader commented that in the past there had been a lot of consultation, but comments made had not always been listened to.  He wanted to be precise in who to communicate with and listen to feedback received.  Recently there had been an all member policy conference, meetings with town and parish councils, Local Area Councils and discussions with business leaders.  He felt this was the best  ...  view the full minutes text for item 59.

Changes to the Code of Practice for Local Authority Accounting in the UK for 2022-23

The purpose of this report is to provide the Audit Committee with a summary of the key accounting changes in the latest edition of the Code of Practice for Local Authority Accounting in the UK (the Code) which will apply to the 2022-23 Statement of Accounts.

Changes to the Code of Practice for Local Authority Accounting in the UK for 2022-23

J. Willis, Interim Executive Director of Finance and Section 151 Officer presented the report which provided the Audit Committee with a summary of the key accounting changes in the latest edition of the Code of Practice for Local Authority Accounting in the UK (the Code) which would apply to the 2022-23 Statement of Accounts.  (A copy of the report has been filed with the signed minutes).

RESOLVED that the changes detailed in the report and in Appendix A which will be taken into account in the preparation of the 2022-23 statement of accounts be noted.

Treasury Management Strategy Statement for the Financial Year 2023-24

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 the 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 2023-24, Prudential Indicators 2023-24 to 2026-27 and the Minimum Revenue Provision Policy 2023-24.

Treasury Management Strategy Statement for the Financial Year 2023-24

The Local Government Act 2003 required the Council to set out its Treasury Strategy for borrowing and to prepare an Annual Investment Strategy, which set out the policies for managing investments and for giving priority to the security and liquidity of those investments.  The Council nominated the Audit Committee to be responsible for ensuring effective scrutiny of the Treasury Management Strategy and Policy.

J. Willis, Interim Executive Director of Finance and Section 151 Officer presented the report which set out the Treasury Management Strategy, Treasury Management Policy Statement, the Annual Investment Strategy for the Financial Year 2023-24, Prudential Indicators 2023-24 to 2026-27 and the Minimum Revenue Provision Policy 2023-24.  (A copy of the report has been filed with the signed minutes).

It was noted that CIPFA had published revised Treasury Management and Prudential Codes on 20 December 2021 which included revisions to the reporting framework from the 2023-24 financial year.

It was reported that the Treasury Management Strategy Statement detailed the proposed activities of the Treasury Management function for the financial year 2023-24 and was based upon the treasury management officers’ views on interest rates, supplemented with leading market forecasts provided by the Council’s treasury management advisors, Link Asset Services.  Any strategy changes would be reported to Audit Committee.

The Chair commented on training which was highlighted within the Caller report and asked if training received was adequate.  J. Willis confirmed that the CIPFA Code required the responsible officer to ensure that Members with responsibility for treasury management received adequate training in treasury management and this was held on a regular basis.  Details of a CIPFA webinar for Audit Committee Members in February had recently been circulated and all were encouraged to attend.  There was always room for more training and if there was demand more training could been provided.

Councillor Dale stressed the need to carefully examine the proposal to maintain an under-borrowing position to minimise short term net revenue costs because of the risk involved.  She commented that there was a need to ensure there was sufficient money put aside to cover ongoing maintenance costs in areas such as highways, local transport plan and capital projects.  In response, J. Willis spoke about the complexity of forecasting and budgeting for long term commitments and the need to continue to improve recording.  She suggested a further discussion take place with Councillor Dale about this issue.

RESOLVED that Audit Committee:

(a)  consider the report and recommend that County Council approves the Treasury Management Strategy Statement, including new reporting requirements, the Treasury Management Policy Statement, the Annual Investment Strategy, and the Borrowing Strategy for the Financial Year 2023-24.

(b)  recommend that County Council approves the Prudential Indicators (Appendix 4) for four years 2023-24 to 2026-27 to ensure that the Council’s capital investment plans are affordable, prudent and sustainable.

(c)  recommend that County Council approves the Minimum Revenue Provision Policy (Appendix 5) 2023-24.

Northumberland County Council - Statement of Accounts 2022-23

The purpose of this report is to provide the Audit Committee with:

a.  an overview of the timetable for publishing the 2022-23 Statement of Accounts; and,

b.  an update on the Accounting Policies to be applied in the preparation of the 2022-23 Statement of Accounts.

Northumberland County Council - Statement of Accounts 2022-23

(A copy of the report has been filed with the signed minutes).

The purpose of the report was to provide the Audit Committee with:

a. an overview of the timetable for publishing the 2022-23 Statement of Accounts; and,

b. an update on the Accounting Policies to be applied in the preparation of the 2022-23 Statement of Accounts.

RESOLVED that Audit Committee:?

a.  note the key dates in the final accounts process for 2022-23.?

b.  approve the Accounting Policies to be used for the preparation of the 2022-23?Statement of Accounts.?

c.  authorise the Interim Executive Director of Finance to review the accounting policies as necessary and report any changes to the Audit Committee.

Annual Governance Review and Draft Annual Governance Statement 2021/22

The purpose of this report is to enable the Audit Committee to review the draft Annual Governance Statement for 2021-22 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.

Annual Governance Review and Draft Annual Governance Statement 2021/22

The Leader introduced the report which sought to enable the Audit Committee to review the draft Annual Governance Statement for 2021-22 and consider whether it properly reflected 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.  (A copy of the report has been filed with the signed minutes).

Councillor Jackson welcomed the report but queried how the Council would ensure its Governance Statement was followed and what were the consequences if the three lines of defence were breached.  In response J. Willis confirmed that the draft Governance Statement was published with the accounts and audited externally to ensure it was accurate and comprehensive.  The findings from the Caller report spoke about significant weaknesses but this Governance Statement supported assurances that issues were being addressed.  

J. Dafter, External Auditor confirmed that each Governance Statement was externally audited.

Councillor Oliver commented on the three lines of defence and the need to be informed quickly if there were any overrides and for those to be dealt with in a timely fashion. 

The Chair felt reassured that the three lines of defence were working.  Issues were getting picked up and Audit Committee informed, even though this sometimes was not instantly.

Councillor Dale commented on the effective risk management and controls in place and felt that as an Audit Committee they did get assurances, but it was their responsibility to scrutinise and ask questions where necessary.  However, she agreed that they did need to see the details if the system had been overridden.

P. Topping reported that as an Audit Committee they needed to be satisfied that the Governance Statement was a true reflection and accurately highlighted the challenges faced by the Council.  He felt that the role of the Audit Committee was clearly identified within the statement.  In the past there had been frustration about reports not being made available in a faster manner although there was now a different approach, which was welcomed.

RESOLVED that Audit Committee:

(a)  Approve the draft Annual Governance Statement (shown in Appendix A); and

(b)  Agree to the draft Annual Governance Statement being published on the Council’s website alongside the draft statement of accounts and reviewed by the Council’s external auditors as part of the 21-22 Audit. 

Review of Exit Packages

The purpose of this report is to provide an update to Audit Committee on findings and recommendations from a review of exit packages paid to former employees, as requested by the Section 151 Officer following the issuing of a report under s114 and s114A of the Local Government Finance Act 1988 on 23 May 2022. 

Review of Exit Packages

The purpose of the report was to provide an update to Audit Committee on findings and recommendations from a review of exit packages paid to former employees, as requested by the Section 151 Officer following the issuing of a report under s114 and s114A of the Local Government Finance Act 1988 on 23 May 2022.  (A copy of the report has been filed with the signed minutes).

K. McDonald, Head of Internal Audit and Risk Management introduced the report and highlighted the main issues.  He advised all that Internal Audit had undertaken a review in accordance with the Section 151 Officer’s report and between June and November 2022 provided detailed findings to the Section 151 Officer for consideration as to whether any further unlawful payments have been made.  Internal Audit had been requested to prepare a report to Audit Committee, detailing a summary of findings from work that had been undertaken.  This report had therefore been prepared to update Audit Committee on findings related to weaknesses in systems and procedures and associated recommendations made.

It was reported that in addition to this work, Internal Audit’s plan of work for 2022/23 was agreed by Audit Committee on 23 March 2022.  The 2022/23 Strategic Audit Plan included a proposed review of recruitment and retention – processes governing changes to terms and conditions and how employees leave the organisation.  This planned internal audit was currently underway and the findings would be reported to Audit Committee in the normal manner, once completed. 

It was stressed that this report was solely written to examine the processes and systems in place relating to the S151 report and did not go into detail about individual cases.  However, the review did identify that a number of exit payments made to former postholders did not comply with the requirements of the Localism Act 2011.  There was therefore the potential that these payments could be unlawful.  Internal Audit was aware that the County Council was seeking appropriate advice in order to determine whether payments made were unlawful and this aspect would be considered further by the Section 151 Officer and Monitoring Officer.  It was reported that where any additional action was identified by the Section 151 Officer and / or Monitoring Officer, subsequent reports to update Audit Committee would be prepared as required.  

The Chair thanked the Head of Internal Audit and Risk Management for the detailed report which could not have been easy to draft especially with such a tight remit.  The Chair questioned whether this was a systemic issue within the Council.  In response it was stated that Internal Audit’s review of recruitment and retention would hopefully answer that question once finalised. 

Councillor Dale reported that she believed there were other exit packages that needed investigated but had not fallen within the scope of this report.  She felt that there needed to be a holistic approach taken to investigate further.  She spoke about the changes to the Constitution, the Staff and Appointments Committee, Pay  ...  view the full minutes text for item 64.

Preparation of the Strategic Audit Plan 2023/24

The purpose of this report is to outline the approach to preparing the 2023/24 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.

Preparation of the Strategic Audit Plan 2023/24

The purpose of the report was to outline the approach to preparing the 2023/24 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.  (A copy of the report has been filed with the signed minutes).

RESOLVED that Audit Committee:

(a) consider and endorse the approach to preparation of the 2023/24 Strategic Audit Plan, and

(b)  are also invited to highlight any areas for consideration by the Head of Internal Audit and Risk Management, for inclusion in the 2023/24 Strategic Audit Plan.

Public Sector Internal Audit Standards

The purpose of this report is to inform Audit Committee of the requirements of the Public Sector Internal Audit Standards (April 2017) and the related Local Government Application Note; and the conformance by Northumberland County Council’s Internal Audit service to the requirements of these standards.

Public Sector Internal Audit Standards

K. McDonald, Head of Internal Audit and Risk Management introduced the report which aimed to inform Audit Committee of the requirements of the Public Sector Internal Audit Standards (April 2017) and the related Local Government Application Note; and the conformance by Northumberland County Council’s Internal Audit service to the requirements of these standards.  (A copy of the report has been filed with the signed minutes).

Councillor Dale expressed her gratitude to the work of Internal Audit, particularly since they had recently ended the shared service with North Tyneside Council and were still adjusting to the new arrangement.

RESOLVED that Audit Committee:

a.  Note the legal requirements to be fulfilled by all providers delivering Internal Audit activity within relevant authorities in England and Wales (the Public Sector Internal Audit Standards and related Local Government Application Note);

b.  Note that a self-assessment of adherence to the Public Sector Internal Audit Standards and the related Local Government Application Note has been performed and a summary is attached as Appendix A.  This demonstrates that Northumberland County Council’s Internal Audit service has demonstrated a high level of conformance to the requirements of the standards;

c.  Note that in the small number of areas where further development has been identified to secure full conformance to the standards, appropriate actions are planned to ensure this is the case, and that updates will be provided to future meetings of Audit Committee on progress in relation to these actions;

d.  Agree the Quality Assurance and Improvement Programme which is attached as Appendix B, which is a requirement of the Public Sector Internal Audit Standards;

e.  Note that it is a requirement that the Internal Audit service will be externally assessed at least once in every five years, and agree that Northumberland County Council’s external assessment will be performed before the end of March 2023 by CIPFA (Chartered Institute of Public Finance and Accountancy);

f.  Agree that the outcomes from the external assessment will be reported to a future meeting of Audit Committee once the external assessment has been completed.

Audit Progress Report

This report provides the Committee with:

• an update in respect of 2019/20 value for money (VFM) work;

• an update in respect of 2020/21 remaining audit work;

• an update in respect of 2021/22 audit work; and

• a summary of recent relevant national reports and publications for your information (Section 2).

Audit Progress Report

This report provided the Committee with:

• an update in respect of 2019/20 value for money (VFM) work;

• an update in respect of 2020/21 remaining audit work;

• an update in respect of 2021/22 audit work; and

• a summary of recent relevant national reports and publications for your information (Section 2).

J. Dafter drew members’ attention to the main points in the report including the temporary relief now available to local authorities regarding infrastructure assets (a copy of which has been filed with the signed minutes).

In response to a question raised from Councillor Oliver regarding the Council’s Value for Money arrangements work, it was reported that it was hoped this would be completed soon.  

RESOLVED that the External Audit Progress report be noted.

The next meeting is scheduled for Wednesday, 29 March 2023 at 10.15 am.

RESOLVED that the next meeting is scheduled for Wednesday, 29 March 2023 at 10.15 a.m.

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 items 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

17 & 18                                                Paragraph 3 of Part 1 of Schedule 12A

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 items 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 Item

17 & 18                   Paragraph 3 of Part 1 of Schedule 12A

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.

Executive Management response to the 2021 KPMG report

To receive a summary prepared for Northumberland County Council Audit Committee on the Executive Management response to the 2021 KPMG report.

Executive Management response to the 2021 KPMG report

Councillors L. Grimshaw and P. Jackson declared interests in this matter and stated they would take no part in the discussion.  Also, Councillor Dale advised that she would need to leave the meeting at this point to attend a prior commitment.  It was noted that this would make the meeting inquorate.  However, the Monitoring Officer advised that as the report was for information and no decision was to be taken, Members could proceed.

Members received a summary prepared for Northumberland County Council’s Audit Committee.  (A copy of the report has been filed with the signed minutes, coloured pink and marked “Not for Publication”).

K. Gardner, Interim Chair of Advance Northumberland Audit Committee and R. Earl, Advance Northumberland Chief Operating Officer were in attendance to discuss the Executive Management response to the 2021 KPMG report. 

Members congratulated Advance Northumberland for the significant progress made and the continuing good relationship between the two Audit Committees.

RESOLVED that the report be noted.

K. Gardner and R. Earl withdrew from the meeting at this point.

Group Audit Committee:   Advance Northumberland Internal Audit Plan 2022/23 Update and Preparation of the 2023/24 Internal Audit Plan

The purpose of this report is to provide an update to Group Audit Committee on progress with the 2022-2023 Internal Audit Plan covering Advance Northumberland Group of Companies. The Report also outlines the approach to preparing the 2023/24 Internal Audit Plan.

Group Audit Committee: Advance Northumberland Internal Audit Plan 2022/23 Update and Preparation of the 2023/24 Internal Audit Plan

The purpose of the report was to provide an update to Group Audit Committee on progress with the 2022-2023 Internal Audit Plan covering Advance Northumberland Group of Companies.  The report also outlined the approach to preparing the 2023/24 Internal Audit Plan.  (A copy of the report has been filed with the signed minutes, coloured pink and marked “Not for Publication”).

K. McDonald, Head of Internal Audit and Risk Management detailed the main points of the report for members.

RESOLVED that Group Audit Committee notes and considers the update on the Advance Internal Audit Plan for 2022-2023 summarised in Appendix 1, together with the approach to be undertaken in preparation of the 2023/24 Internal Audit Plan, as part of Group Audit Committee’s role in maintaining governance oversight of all entities within the County Council’s accounting group boundary.