Agenda and minutes

There were no apologies for absence made.

Members are asked to declare any interests they may have in the business to be discussed.

There were no declarations of interest made.

The Minutes of the previous meeting of the Audit and Risk Committee held on 15 June 2016 are attached and Members will be asked to confirm them as a correct record.

RESOLVED:

that the minutes of the meeting of the Audit & Risk Committee held on 16 June 2016 be confirmed as a correct record.

The External Auditor submits a report with an overview of progress in delivering their responsibilities as external auditors.  The report also highlights the main technical issues which are currently having an impact in local government.  The Committee is asked to note the report.  

The External Auditor (KPMG) submitted a report for noting which provided Members of the Audit & Risk Committee with an overview of progress in delivering their responsibilities as external auditors. The report also highlighted the main technical issues which were currently having an impact in local government.

Adrian Benselin, Audit Manager at KPMG, presented the report. Members were asked to note KPMG had received the draft financial statements on 30^th June. An audit visit to consider financial statements was scheduled for 8^th August, and to date there were no matters that needed to be brought to the attention of Members.

Members were informed that external auditors had met with the Strategic Director, Education and Children’s Services on 27 June to discuss recent follow-up actions in response to the OFSTED inspection of Children’s Services. Further evidence to support progress being made was requested, which would be considered when the external auditors reached their conclusion on value for money (VFM).

Adrian highlighted the technical developments in the report and brought to the Committee’s attention areas they may wish to make further enquiries about.

The Committee raised concern over the EU Referendum and its effect on government grants to local authorities, and the fear that poverty would increase for the public. They were also concerned that a reduction in business rates would have an adverse impact on local authority budgets. The Director of Finance stated it was too early to speculate on the impact of Britain’s exit from the EU. She explained that European funding had in the past been granted with a vast range of criteria to meet, had been paid retrospectively and had been difficult to administer. She added it was anticipated that the government would produce a similar funding scheme for regeneration.

Members noted the publication of the Public Sector Audit Appointments Ltd (PSAA) work programme and scale of fees for the audits of the 2016/17 accounts of principle audited bodies. KPMG were asked to provide the Audit & Risk Committee Members with information on the responses of the City Council and other local authorities, in reference to the Government’s wish for pension assets to be pooled to reduce the number of pension schemes. Members were advised that staff pensions were at no lesser or greater risk, as the role of the pension manager was to protect the assets, but fund managers needed to be risk aware.

Members noted new HMRC rules effective from 6 April 2016, whereby a new exemption had been introduced for councillors’ travel expenses, which up to certain limits would be free of tax and National Insurance Contributions (NIC). Members asked the Director of Finance to confirm if the new rules would affect Councillors’ travel expenses.

RESOLVED:

That:

1.       the report be noted;

2.       the external auditors provide the Audit & Risk Committee Members with information on the responses of the City Council and other local authorities, in reference to the Government’s wish for pension assets to be pooled to reduce the number of pensions; and,  ...  view the full minutes text for item 20.

The City Barrister and Head of Standards submits a report advising the Committee on the performance of the Council in authorising Regulatory Investigatory Powers Act 2000 (RIPA) applications from 1^stJanuary 2016 to 30 June 2016.

The Committee is recommended to note its contents and to make any recommendations or comments it sees fit either to the Executive or to the City Barrister and Head of Standards.

The City Barrister and Head of Standards submitted a report for noting on the performance of the Council in authorising Regulation of Investigatory Powers Act (RIPA) applications, from 1^st January 2016 to 30^th June 2016.

Tony Edeson, Head of Internal Audit & Risk Management presented the report, and asked the Committee to note:

·         The Council had applied for no Directed Surveillance Authorisations and no Communications Data Authorisations for the period covered by the report.

·         The Council was considering 2 Directed Surveillance Authorisations, which would be included in the next report to Committee.

RESOLVED:

1.       That the report be noted.

The Director of Finance submits a report requested by the Committee at its meeting in February on the Housing Benefit Subsidy arrangements for the authority.  The report explains the Subsidy Audit process and its findings and includes the Benefits Team Improvement Action Plan to improve the accuracy and to subsequently reduce the clawback of monies against the clawback fund.  

The Committee is requested to note and comment on the findings highlighted in the report and on the improvement and communication plans as appropriate.  

The Director of Finance submitted a report for noting as requested by the Committee at its meeting on 10 February 2016 on the Housing Benefit Subsidy arrangements for the authority.  The report explained the Subsidy Audit process and its findings and included the Benefits Team Improvement Action Plan to improve the accuracy and to subsequently reduce the clawback of monies against the general fund.

James Hudson Quality and Performance Manager,  Revenues & Customer Support, presented the report.

The Committee noted that:

·         Every year all local authorities submitted a Housing Benefit Subsidy claim to the Department for Work & Pensions (DWP).

·         The difference between the subsidy claimed and the amount received back was met by the authority’s general fund.

·         Two main reasons the authority did not receive the full subsidy were:

o   Overpayments, 90% of which were the fault of the claimant, for example, claimants’ delay in notifying the authority of a change in circumstances;

o   Qualification of the subsidy claim, which was not confined to Leicester but was improving.

·         There were a number of ways the authority could try to mitigate the shortfall in subsidy, though there were barriers due to the complexity of the scheme and changes to regulations. There had also been a 10-13% reduction in the Housing Benefit Administration Grant for the scheme year on year. Ways to mitigate loss included:

o   Reduce the number of overpayments created by authority error;

o   Keep the audit qualification loss to a minimum;

o   Ensure all entitlement to a subsidy was claimed;

o   Maximise the recovery of outstanding overpayments.

·         Performance management actions were in place to address the issue of human error in Housing Benefit assessments, including regular quality checks on officer’s work. A full refresher training programme was also in place.

·         An awareness campaign was planned to encourage people and make it easier for them to contact the authority about a change in circumstances. An online form to report changes was introduced in April 2016.

·         The authority had successfully bid for funds from the DWP through the Fraud & Error Reduction Incentive Scheme (FERIS) for pay for two staff to proactively target claims with known undeclared changes in circumstances.

·         The Subsidy Audit required significant resources with eight staff members working 9-11 months a year on errors. If the awareness campaign continued to have an impact, it would reduce overpayments.

·         Staff morale had been under challenging circumstances since 2012 when the roll out of Universal Credit was announced.

·         The Real Time Initiative (RTI) was a DWP programme that data-matching of Housing Benefit claims and HMRC data could identify overpayments due to income changes.

Members raised questions and received the following responses:

·                  A proportion of claims were checked for accuracy to reduce errors. Due to capacity it was not possible to check all claims.

·                  Housing Benefit overpayment was one of the hardest to recover as it was usually paid to the least well-off households. A deduction from ongoing benefit was carefully calculated to prevent hardship to the claimant, and tended to be low  ...  view the full minutes text for item 22.

The Director of Finance submits a report on the Statutory (Pre-Audit) Statement of Accounts 2015/16.  The Committee will be invited to approve the issue of the final Statement of Accounts at its meeting currently scheduled for 27 September 2016.  Meanwhile the Committee are recommended to note the Pre-Audit Statement of Accounts for the year ended 31 March 2016 as submitted for audit.

The Director of Finance submitted the Draft Statement of Accounts for the financial year ended 31^st March 2016, prior to formal approval of the final Statement of Accounts at the Audit & Risk Committee on 27^th September 2016, in accordance with the Accounts and Audit (England) Regulation 2015. The report was presented by the Director of Finance. The draft accounts were appended to the report and were submitted for information only.

Members of the Committee were advised of dates and times when the Principal Accountant would be available to meet with Members to discuss the accounts, and were asked to pass on questions to officers ahead of the Audit & Risk Committee meeting in September prior to the accounts being signed off.

Members did raise concern with an item in the draft accounts, on the pension deficit. The Director of Finance said there had been a number of changes in the pension scheme, and it was a national issue that that public sector pensions were no longer affordable.

RESOLVED:

That:

1.    the draft accounts for the year ended 31^st March 2016, as submitted for audit, be noted;

2.    Members of the Committee to contact the Principal Accountant to arrange one-to-one discussions regarding the accounts if required.

AGENDA

MEMBERS OF THE PUBLIC TO NOTE

Under the law, the Committee is entitled to consider certain items in private where in the circumstances the public interest in maintaining the matter exempt from publication outweighs the public interest in disclosing the information.  Members of the public will be asked to leave the meeting when such items are discussed.

The Committee is recommended to consider the following report in private on the grounds that it will contain ‘exempt’ information as defined by the Local Government (Access to Information) Act 1985, as amended, and consequently makes the following resolution:-

“that the press and public be excluded during consideration of the following report in accordance with the provisions of Section 100A(4) of the Local Government Act 1972, as amended, because it involves the likely disclosure of 'exempt' information, as defined in the Paragraph detailed below of Part 1 of Schedule 12A of the Act, and taking all the circumstances into account, it is considered that the public interest in maintaining the information as exempt outweighs the public interest in disclosing the information.”

Paragraph 3

Information relating to the financial or business affairs of any particular person (including the authority holding that information)

This report concerns the strength of internal controls in the City Council’s financial and management processes and includes references to material weaknesses and areas thereby vulnerable to fraud or other irregularity. It is considered that the public interest in maintaining the exemption outweighs the public interest in disclosing the information.

INTERNAL AUDIT UPDATE REPORT, 2015-16 - APPENDIX F

RESOLVED:

that the press and public be excluded during consideration of the following report, in accordance with the provisions of Section 100A(4) of the Local Government Act 1972, as amended, because it involved the likely disclosure of 'exempt' information, as defined in the Paragraph detailed below of Part 1 of Schedule 12A of the Act, and taking all the circumstances into account, it was considered that the public interest in maintaining the information as exempt outweighed the public interest in disclosing the information.

Paragraph 3

Information relating to the financial or business affairs of any particular person (including the authority holding that information)

INTERNAL AUDIT UPDATE REPORT – 2015-16

The report concerned the strength of internal controls in the City Council’s financial and management processes and included references to material weaknesses and areas thereby vulnerable to fraud or other irregularity.

The Director of Finance to submit the Internal Audit Update Report 2015-16.

The Director of Finance submitted a report for noting to the Audit & Risk Committee, which provided a summary of Internal Audit work completed in the financial year 2015-16, significant issues identified by audit work, and progress made by business areas in implementing agreed recommendations.

The Head of Internal Audit & Risk Management presented the report, drawing attention to the key issues identified, and asked the Committee to note:

·         The different assurance levels explained in the report.

·         In all cases service management had responded constructively to the audits and recommendations made. Controls had been put in place, and progress made to reduce risks identified.

·         The authority was fortunate that it had an IT auditor who could interrogate the Council’s IT systems. In relation to a specific IT Audit, it was confirmed that knowledge and information of the issues found had been shared with the software provider and other authorities who used the same software.

·         The Council was spending more on security to prevent the spread of malware, and regular updates of security software were made.

RESOLVED:

1.    That the report be noted.

The meeting closed at 7.24pm.