Bassetlaw · AUDIT AND RISK SCRUTINY COMMITTEE . 12TH FEBRUARY 2013 . INDEX OF AGENDA ITEMS . 1. APOLOGIES FOR ABSENCE . 2. DECLARATIONS OF INTEREST BY MEMBERS AND OFFICERS(pages

AUDIT AND RISK SCRUTINY COMMITTEE

AGENDA Meeting to be held in The Ceres Suite, Town Hall, Worksop, on Tuesday, 12th February 2013 at 7.00 p.m. (Please note time and venue)

(Please turn off mobile telephones during meetings. In case of emergency, Members/officers can be contacted on the Council's

mobile telephone: 07702 670209)

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AUDIT AND RISK SCRUTINY COMMITTEE Membership 2012/13 Councillors R. B. Carrington-Wilde, A. Chambers, C. Entwistle, M. T. Gray,

C. Palmer, D. Pidwell, J. Sanger, Mrs. C. Troop and C. Wanless Substitute Members: Any Member except those appointed to the Cabinet Quorum: 3 Members Lead Officer for this Meeting Mr. M Hill - Ext. 3174 Administrator for this Meeting Miss C Crossland - Ext. 3254

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12TH FEBRUARY 2013

INDEX OF AGENDA ITEMS

1. APOLOGIES FOR ABSENCE

2. DECLARATIONS OF INTEREST BY MEMBERS AND OFFICERS (pages 5-6) (Members and Officers' attention is drawn to the attached notes and form)

(a) Members (b) Officers

3. MINUTES OF THE MEETINGS HELD ON 22ND NOVEMBER 2012 AND 7TH JANUARY 2013* (pages 7-13) 4. REPORTING MINUTES*

(a) Performance Sub-Committee – 23rd August 2012 (pages 15-18) 5. MINUTES FOR ACTION AND IMPLEMENTATION * (pages 19-20) 6. OUTSTANDING MINUTES LIST * (page 21)

SECTION A – ITEMS FOR DISCUSSION IN PUBLIC Key Decisions 7. REPORT(S) OF THE HEAD OF FINANCE AND PROPERTY *

(See separate Draft Budget Book 2013/14 for use at ARSC 12.2.13 and Cabinet 14.2.13) (A) General Fund Budget 2013/14 to 2014/15 (Key Decision No. 336) (pages 23-24) (B) General Fund Capital Programme 2013/14 to 2017/18 (Key Decision No. 337)

(pages 26-26) (C) Treasury Management Policy and Strategy 2013/14 to 2015/16 (Key Decision No.

338) (pages 27-28) (D) Capital Investment Strategy 2013/14 to 2017/18 (Key Decision No. 339)

(pages 29-30) (E) Property Asset Management Plan 2013/14 to 2017/18 (Key Decision No. 340)

(pages 31-32) Other Decisions 8. REPORT(S) OF THE HEAD OF FINANCE AND PROPERTY *

(See separate Draft Budget Book 2013/14) (F) Robustness of Estimates and Adequacy of Reserves – 2012/13 (pages 33-34) (a) Internal Audit Progress Report 2012/13 (pages 35-50) (b) Certification of Claims and Returns Report 2011/12 (pages 51-59) (c) External Audit Plan 2012/13 (pages 61-82)

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The press and public are likely to be excluded from the meeting during the consideration of the following items in accordance with Section 100A(4) of the Local Government Act 1972. SECTION B - ITEMS FOR DISCUSSION IN PRIVATE Key Decisions None Other Decisions None 9. ANY OTHER BUSINESS WHICH THE CHAIRMAN CONSIDERS TO BE URGENT * Report attached NOTES: 1. The papers enclosed with this Agenda are available in large print if required. 2. Copies can be requested by contacting us on 01909-533254 or by e-mail:

[email protected]

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Agenda Item No. 2

DECLARATION OF INTEREST

COMMITTEE ………………………………………………………………………………

DATE ……………………………………………………………………..

NAME OF MEMBER : ……………………………………………………………………………… Type of Interest 1. Disclosable Pecuniary 2. Non Pecuniary Agenda Item

No. REASON * Type of Interest

(1 or 2)

Signed

Dated

Note:

* When declaring an interest you must also state the nature of your interest. Completion of this form is to aid the accurate recording of your interest in the Minutes. The signed form should be provided to the Minuting Clerk at the end of the meeting. A nil return is not required. It is still your responsibility to disclose any interests which you may have at the commencement of the meeting and at the commencement of the appropriate Agenda item.

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DECLARATION OF INTERESTS

HOW TO USE THIS FORM

There are now only two types of Declaration of Interest: Disclosable Pecuniary Interests ) Details can be found in the Councillors ) Code of Conduct which is contained in ) the Council’s Constitution (a summary is Non Pecuniary Interests ) printed below) Upon receipt of the attached form you will need to enter the name and date of the Committee and your own name. By looking at the Agenda you will no doubt know immediately which Agenda Items will require you to make a Declaration of Interest. Fill in the Agenda Item number in the first column of the form. Enter the subject matter and any explanations you may wish to add in the second column. In the third column you will need to enter either if you are declaring a disclosable pecuniary interest, or a non pecuniary interest. The form must then be signed and dated. Please remember that if during the actual meeting you realise that you need to declare an interest on an additional Agenda Item number please simply amend the form during the meeting. The form must be handed into the Committee Administrator at the end of the meeting. NB. The following is a summary prepared to assist Members in deciding at the actual meetings their position on INTERESTS it is not a substitute for studying the full explanation regarding INTERESTS, which is contained in the Council’s Constitution and the Code of Conduct for Councillors, which is legally binding. Members and Officers are welcome to seek, PREFERABLY WELL IN ADVANCE of a meeting advice from the Council’s Monitoring Officer on INTERESTS.

Disclosable Pecuniary Interests Action to be Taken May relate to employment, office, trade, profession or vocation carried on for profit or gain May relate to sponsorship May relate to contracts May relate to interests in land May relate to licences to occupy land May relate to corporate tenancies May relate to securities

Must disclose to the meeting - existence of the interest - the nature of the interest - withdraw from the room - not seek improperly to influence a decision on the matter

Non Pecuniary Interests Action to be Taken May relate to any body of which you are a member or in a position of general control or management and to which you are appointed or nominated by the Council May relate to any person from whom you have received a gift or hospitality with an estimated value of at least £25 A Member may also have a non pecuniary interest where a decision in relation to that business might reasonably be regarded as affecting wellbeing or the wellbeing of other council tax payers, or ratepayers or inhabitants in the electoral division or ward, as the case may be, affected by the decision. . (Note – there are special provisions relating to “Sensitive Interests” which may exclude the above provisions in certain circumstances.)

Must disclose to the meeting - existence of the interest - the nature of the interest - not seek improperly to influence a decision on the matter.

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Agenda Item No. 3

D R A F T AUDIT AND RISK SCRUTINY COMMITTEE

Minutes of the Meeting held on Thursday, 22nd November 2012 at Retford Town Hall Present: Councillor R B Carrington-Wilde (Chair)

Councillors A Chambers, C Entwistle, J Ogle, D Pidwell, J Rickells, J Sanger and Mrs C Troop

Officers: D Armiger, C Crossland, M Hill and P Jones Others present: R Barnett and C Roxburgh – Audit (RSM Tenon) R Dunlop (Sector) Also present: Councillor J Evans (Cabinet Member for Finance and Property) (The Chairman welcomed all to the meeting and read out the Fire Alarm/Evacuation Procedure.) 35. APOLOGIES FOR ABSENCE Apologies for absence were received from Councillors M T Gray, C Palmer and C Wanless. 36. DECLARATIONS OF INTEREST BY MEMBERS AND OFFICERS (a) Members There were no declarations of interest by Members. (b) Officers There were no declarations of interest by officers. 37. MINUTES OF THE MEETING HELD ON 20TH SEPTEMBER 2012 RESOLVED that the Minutes of the meeting held on 20th September 2012 be approved. 38. REPORTING MINUTES (a) Performance Sub-Committee – 24th May 2012 RESOLVED that the minutes of the meeting of the Performance Sub-Committee held on 24th May 2012 be received. 39. MINUTES FOR ACTION AND IMPLEMENTATION RESOLVED that the Minutes for Action be received. 40. OUTSTANDING MINUTES LIST Members were advised in relation to Outstanding Minute Number 34(a), Retford Enterprise Centre, that notes from the meeting on 19th November 2012 which reviewed the Retford Enterprise Centre audit report have been circulated to the Committee.

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In relation to Outstanding Minute Number 32(a), in relation to the possibility of the Council collecting scrap metal, the Principal Operational Services Manager advised that as there are so many other companies collecting scrap metal it would not be cost effective. The Council do however collect scrap metal internally. The Council also offers a bulky item collection for a fee of £5.40 per item. Members were advised regarding Outstanding Minute Number 33(a), in relation to recycling initiatives, that: Officers regularly attend schools to promote recycling; an advert has gone out with the leaflet about the Christmas lights switch on; a letter drop on four rounds will be taking place providing residents with a recycling wheel to show what can and cannot be recycled; and Officers will be writing to Parish Councils to ask them to promote recycling in their newsletters. The Chairman thanked P Jones for attending the meeting and providing Members with updates. RESOLVED that the Outstanding Minutes List be received. 41. CHANGE OF AGENDA ORDER The Chairman advised a change in Agenda order so that Item No. 8(a) would be considered next. Other Decisions 42. REPORT(S) OF THE DIRECTOR OF RESOURCES (a) Internal Audit Progress Reports 2012/13 Members were presented with a summary of the outcome of work completed, five reports relating to the 2012/13 audit plan have been finalised. 25 recommendations have been raised in total, of which no recommendations have been classified high risk, 10 recommendations classified as medium risk and 15 recommendations have been classified as low risk. Members were updated on individual audit findings. Members were advised that of these recommendations made one recommendation in relation to the Mail Room was not accepted by management. Members were advised that a second review has been undertaken to follow up progress made by the Council to implement previous internal audit recommendations. An adequate progress assurance level has been given as 10 out of the 29 recommendations had not been implemented by the set due date. Elected Members expressed concerns in relation to the progress made to implement recommendations. The Chairman advised that outstanding recommendations will be reviewed at the next pre-agenda meeting and an update will be given at the next meeting of the Committee. In relation to recommendations made regarding Partnerships and Voluntary Sector Grant Aid, Councillor J Evans advised that all the recommendations have now been implemented. An application process was established and the decision panel has met to discuss applications received. A scoring system was applied and grants have been allocated accordingly. An Elected Member raised a question regarding the Amber-Red assurance level given in the A1 Housing Operational Plan Performance for waste management. R Barnett advised that this is not a current recommendation and that the reports have been presented to the A1 Housing and Finance and Organisational Health Champion Group meetings. He advised that he would follow this up and find out further information. The Chairman thanked R Barnett and C Roxburgh for their report.

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RESOLVED that:

1. The Internal Audit Progress Report 2012/13 be received and actions taken or to be taken be noted.

2. Outstanding recommendations be reviewed at the next pre-agenda meeting and an update be given at the next meeting of the Committee.

3. R Barnett find out further information regarding the Amber-Red assurance level given in the A1 Housing Operational Plan Performance for waste management.

(The Chairman advised of a break to allow for training regarding treasury management) (The Committee reconvened) Key Decisions

43. REPORT(S) OF THE DIRECTOR OF RESOURCES (a) Budget Monitoring and Capital Programme Update Report to 30th September 2012 (Key Decision Number 328) Members were provided with information on: the spending position for the period 1st April to 30th September 2012 for the General Fund, Housing Revenue and Capital Programme; any significant variances from the approved budgets; the proposed resourcing of the Capital Programme and the level of Council capital resources available, including capital receipts; updates on regeneration projects and sites that are not monitored through the Council’s Capital Programme; updates on Treasury Management Budget issues; the regular quarterly update on performance against the approved Treasury Management Prudential Indicators for the period ending 30th September 2012; and the Mid-Year Treasury Management Strategy Review report. RESOLVED that the Budget Monitoring and Capital Programme Update Report to 30th September 2012 be noted. Other Decisions 44. REPORT(S) OF THE DIRECTOR OF COMMUNITY SERVICES (a) Update on the Changes to Warden Services The Head of Community Prosperity informed the Committee that he was having trouble accessing the briefing note; he apologised to Members and advised that the information regarding the changes to warden services would be circulated tomorrow and that he would be happy to answer any questions at the next meeting. RESOLVED that the information regarding the changes to warden services be circulated to Members and that an Officer attends the next meeting to any questions. SECTION B – ITEMS FOR DISCUSSION IN PRIVATE Key Decisions None. Other Decisions None.

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45. ANY OTHER BUSINESS WHICH THE CHAIRMAN CONSIDERS TO BE URGENT As there was no other urgent business to consider, the Chairman closed the meeting.

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D R A F T AUDIT AND RISK SCRUTINY COMMITTEE

Minutes of the Extraordinary Meeting held on Monday, 7th January 2013 at Retford Town Hall Present: Councillor R B Carrington-Wilde (Chair)

Councillors A Chambers, G A N Oxby, C Palmer, D Pidwell, J Rickells, J Sanger and T Taylor

Officers: C Crossland and M Hill Others present: R Barnett and C Roxburgh – Audit (RSM Tenon) Also present: Councillor J Evans (Cabinet Member for Finance and Property) (The Chairman welcomed all to the meeting and read out the Fire Alarm/Evacuation Procedure.) 46. APOLOGIES FOR ABSENCE Apologies for absence were received from Councillors M T Gray, C Troop and C Wanless. 47. DECLARATIONS OF INTEREST BY MEMBERS AND OFFICERS (a) Members There were no declarations of interest by Members. (b) Officers There were no declarations of interest by officers. 48. CHANGE OF AGENDA ORDER The Chairman advised a change in Agenda order so that Item No. 4(a) would be considered next. Other Decisions 49. REPORT(S) OF THE DIRECTOR OF RESOURCES (a) Internal Audit Progress Reports 2012/13 Members were presented with a summary of the outcome of work completed, eight reports relating to the 2012/13 audit plan have been finalised. 37 recommendations have been raised in total, of which 1 recommendation has been classified high risk, 9 recommendations classified as medium risk and 27 recommendations have been classified as low risk. Members were updated on individual audit findings. Members were advised that all recommendations have been accepted by management. Members were advised that there has been one change to the audit plan since the last progress report. This is with regards to Human Resources Policy Review, which was not considered timely due to on-going changes in that area. It has been replaced by a review of the Council’s allotments, which was included in the rolling programme of reviews planned for 2013/14, and the HR Policy review will be undertaken at a more suitable time.

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Elected Members expressed concerns in relation to the high risk audit recommendation that risk assessments should be completed for the Pest Control Service. Members were concerned that the implementation date was 31st March and asked that they be undertaken immediately and not delayed. The Chair advised that he would contact the Principal Environmental Health Manager and raise the issue with the Council’s Health and Safety Committee. An Elected Member raised questions in relation to Pest Control and the two medium risks recommendations. In response to the question raised in relation to outstanding invoices the Chair advised that a scheme is being piloted at the Retford Enterprise Centre which will hopefully be rolled out across the Council. In response to the question in relation to verifying a customer’s claim of a concession, Members were advised that the concession rate has been deleted and that all customers now pay the same fee. The Chairman thanked R Barnett and C Roxburgh for their report. RESOLVED that:


2. The Chair contact the Principal Environmental Health Manager in relation to Pest Control risk assessments and an update be circulated to Members.

(The Chairman advised of a short break to allow for training regarding Housing Finance) (The Committee reconvened) Key Decisions

50. REPORT(S) OF THE DIRECTOR OF RESOURCES (a) Housing Capital Programme 2013/14 – 2017/18 (Key Decision Number 332) Members were presented with the Housing Capital Programme 2013/14 to 2017/18, which will be reported to Cabinet on 8th January 2013. The report outlined: decent homes; fuel poverty; crime and community safety; disability; funding; capital receipts and the changes to the right to buy scheme; and affordability. RESOLVED that the Housing Capital Programme 2013/14 to 2017/18 be noted. (b) Housing Revenue Account Budget 2013/14 and Future Years to 2015/16 (Key Decision Number 333) Members were presented with the Housing Revenue Account Budget 2013/14 and Future Years to 2015/16, which will be reported to Cabinet on 8th January 2013. The report outlined: the 2013/14 HRA revenue budget; rents; repairs and maintenance; pension provisions; depreciation; value for money and the A1 Housing management fee; provision for bad debts; treasury management; supporting people; and reserves. Elected Members asked questions/ raised issues regarding: changes to the welfare reform; potential increase in the level of outstanding debts for council house rents; budget education for residents; and working with the Citizens Advice Bureau. RESOLVED that the Housing Revenue Account Budget 2013/14 and Future Years to 2015/16 report be noted. Other Decisions

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51. REPORT(S) OF THE DIRECTOR OF RESOURCES (a) Corporate Risk Management Quarter 2 2012/13

Members were presented with Corporate Risk Management Quarter 2 2012/13 report, which updated Members on the current level of assurance that can be provided against each corporate risk. The report outlined actions taken by officers on the Council’s Corporate Risk Register. Elected Members asked questions/ raised issues regarding: welfare reforms and the negative community impact; supply chain failure; sponsorship and advertising; contaminated sites and pest control risk assessments. The Chair congratulated the Management Team on their work on the Council’s Corporate Risk Register. RESOLVED that progress of actions identified within the Corporate Risk Register be noted. SECTION B – ITEMS FOR DISCUSSION IN PRIVATE Key Decisions None. Other Decisions None. 52. ANY OTHER BUSINESS WHICH THE CHAIRMAN CONSIDERS TO BE URGENT As there was no other urgent business to consider, the Chairman closed the meeting.

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Agenda Item No. 4(a)

PERFORMANCE SUB-COMMITTEE

Minutes of the Meeting held on Thursday, 23rd August 2012 at Worksop Town Hall Present: Councillor D G Pidwell (Chair)

Councillors I J Campbell, G Jones, R Leigh, A Simpson.

Officers: D Armiger, T Bircumshaw, G Blenkinsop, S Brown, A Burton, S Carter, J Hamilton, L Hull, N Taylor and R Theakstone.

Also present: Councillor J M Sanger (The Chair welcomed all to the meeting and read out the Fire Alarm/Evacuation Procedure.) 10. APOLOGIES FOR ABSENCE There were no apologies for absence. 11. DECLARATIONS OF INTEREST BY MEMBERS AND OFFICERS (a) Members There were no declarations of interest by Members. (b) Officers There were no declarations of interest by officers. 12. CHANGE OF AGENDA ORDER By agreement with the Chair, it was RESOLVED that Agenda Item Nos. 6(e) and 6(f) be brought forward on the Agenda. 13. MINUTES OF THE MEETING HELD ON 24TH MAY 2012 Councillor I J Campbell stated that he had not received the information requested at the last meeting, although this had been circulated to all Members of the Sub-Committee. This had been received by other Members and another Member thanked officers for the information. RESOLVED that:

1. The minutes of the meeting held on 24th May 2012 be approved. 2. The information requested be re-sent to Councillor I J Campbell.

14. MINUTES FOR ACTION RESOLVED that the Minutes for Action be received. 15. OUTSTANDING MINUTES LIST RESOLVED that:

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1. The Outstanding Minutes List be received. 2. A more detailed response on the consultation regarding the relocation of the bi-annual fair

in Retford be made within the next two weeks to Councillor I J Campbell. Key Decisions None. Other Decisions 16. REPORT(S) OF THE DIRECTOR OF CORPORATE SERVICES (a) Quarter 1 Complaints 2012/13 Members were presented with a summary of complaints dealt with by the Council during April to June 2012, which was appended to the report. It was noted that the number of complaints is decreasing year on year; however, it was felt that a comparison with other authorities would be useful. RESOLVED that:

1. The Quarter 1 2012/13 Complaints report be received. 2. Future reports to include comparison figures from authorities within the Nottinghamshire

Group. (b) Local Government Ombudsman Annual Report 2011/12 Members were presented with the annual summary of complaints dealt with by the Local Government Ombudsman for 2011/12, which was appended to the report. In his report, the Ombudsman states “I am pleased to say that I have no concerns about your authority’s response times and there are no issues arising from the complaints that I want to bring to your attention.” RESOLVED that:

1. The Local Government’s Annual Report for Complaints 2011/12 be received and the progress/points of interest be noted.

2. Congratulations be conveyed to officers in respect of the Ombudsman’s comments. (c) Performance Indicators – Summary of Definitions Following a request from the Sub-Committee, Members were presented with a list of definitions for the 33 new indicators for 2012/13 as well as Performance Indicators which have been monitored previously as National or Best Value Indicators. RESOLVED that:

1. The definitions for the 2012/13 Performance Indicators be received and used by Members as a reference guide in all future Sub-Committee meetings.

2. A booklet containing these definitions be produced for easy reference. (d) Performance Indicator – Target Setting Members were asked to consider the targets for the Authority’s 2012/13 Performance Indicators, a breakdown of which was appended to the report. Members raised queries on: NI32, EE41, EE17, DD74 and DD75, to which officers responded.

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RESOLVED that:

1. The targets for the 2012/13 Performance Indicators be approved. 2. The adoption of the specified new Performance Indicators set out with the pre-fix DD,

within the appendix to the report, be approved.

(e) Organisation Scorecard Members were presented with the Organisation Scorecard, which was appended to the report. The format of the scorecard is “balanced” and is a strategic planning and management tool which can be used to align the activities of an organisation to its vision and ambitions. The scorecard focuses on: customer; people; process; and finance; and the strategy map, which provides a snapshot of the performance and overall health of the organisation, is currently at “red”. Members raised queries on: A14 and NI157a, to which officers responded. RESOLVED that:

1. The development of the Organisation Scorecard and the supporting strategy map be noted.

2. The Organisation Scorecard be kept under review to ensure that it is providing Members and officers with the necessary information.

(f) Service Scorecards – 2012/13 Quarter 1 Members were provided with a comprehensive update on the performance of each of the Services for the period 1st April to 30th June 2012. The Service Scorecards were appended to the report. Members asked questions/raised issues on: C.SID-CEP.15 – Encourage public participation in Council meetings – how and where advertised, who involved; EE40 and EE41 – Partnership Plus areas – their impact on crime statistics; C.SID-CEP.14 – Maintain and uphold the principles of public life – the outstanding complaints process; C.SID-F&PS.03 – To develop a Value For Money culture within the Council – procurement and efficiencies; EE 17 – Working days lost due to sickness absence – inclusion of agency staff and press coverage of the Health and Wellbeing Gold Award; C.SID-R&CS.03 – Develop Council’s telephony efficiency – the introduction of voice recognition for switchboard; C.SID-R&CS.06 – Welfare reform – the introduction of the ‘bedroom tax’ and increasing homelessness; C.SID-SS.11 – Printing and copying – the introduction of a print management system; and C.SID-SS.10 – Street naming and numbering – the timescale for the introduction of charges. RESOLVED that:

1. Contact be made with the Youth Council via Councillor R Leigh to increase involvement in Council meetings.

2. A report on sickness absence and workplace achievements be submitted to the current Select Panel looking into ‘Pride in the District’.

3. A further training session on the Housing and Council Tax Benefit Scheme be arranged for Members.

4. The Service Scorecards be received and the performance for the period 1st April to 30th June 2012 be noted.

SECTION B – ITEMS FOR DISCUSSION IN PRIVATE Key Decisions None.

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Other Decisions None. 17. ANY OTHER BUSINESS WHICH THE CHAIRMAN CONSIDERS TO BE URGENT As there was no other urgent business to consider, the Chair closed the meeting, after thanking officers for their input and attendance.

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Agenda Item No. 5

MINUTES FOR ACTION AND IMPLEMENTATION SHEET

AUDIT AND RISK SCRUTINY COMMITTEE 22/11/12

FROM: Senior Democratic Services Officer TO: HFP = Head of Finance and Property DSO = Democratic Services Officer HCP = Head of Community Prosperity EA = External Auditor The following decisions are brought to your attention for action by the appropriate officers within your Service:

42. REPORT(S) OF THE DIRECTOR OF RESOURCES (a) Internal Audit Progress Reports 2012/13 RESOLVED that:


2. Outstanding recommendations be reviewed at the next pre-agenda meeting and an update be given at the next meeting of the Committee.

HFP 3. R Barnett find out further information regarding the Amber-Red assurance level given in the A1

Housing Operational Plan Performance for waste management. EA

44. REPORT(S) OF THE DIRECTOR OF COMMUNITY SERVICES (a) Update on the Changes to Warden Services RESOLVED that the information regarding the changes to warden services be circulated to Members and that an Officer attends the next meeting to any questions.

HCP/DSO

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MINUTES FOR ACTION AND IMPLEMENTATION SHEET

EXTRAORDINARY AUDIT AND RISK SCRUTINY COMMITTEE 07/01/13

FROM: Senior Democratic Services Officer TO: DSO = Democratic Services Officer The following decisions are brought to your attention for action by the appropriate officers within your Service:

49. REPORT(S) OF THE DIRECTOR OF RESOURCES (a) Internal Audit Progress Reports 2012/13 RESOLVED that:


2. The Chair contact the Principal Environmental Health Manager in relation to Pest Control risk assessments and an update be circulated to Members.

DSO/Chair

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Agenda Item No. 6


12th February 2012

OUTSTANDING MINUTES LIST Members please note that the updated positions are shown in bold type following each item. (DCommS = Director of Community Services, HFP = Head of Finance and Property) Min. No.

Date

Subject

Decision

Officer Responsible

53(a)

7.02.12

General Fund Budget 2012/13

The outcome of the Retford Market consultation exercise be reported back to the Committee.

DCommS

Update to be given at a future meeting

42(a)

22.11.12

Internal Audit Progress Reports 2012/13

Outstanding recommendations be reviewed at the next pre-agenda meeting and an update be given at the next meeting of the Committee.

HFP

Update to be given at the meeting

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Agenda Item No. 7(A) BASSETLAW DISTRICT COUNCIL

AUDIT & RISK SCRUTINY COMMITTEE 12TH FEBRUARY 2013

REPORT OF DIRECTOR OF RESOURCES

GENERAL FUND BUDGET 2013/14 TO 2015/16 Cabinet Member: Finance & Property Contact: Neil Taylor Ext: 3221 1. Public Interest Test The author of this report, Neil Taylor, has determined that the report is not

confidential. 2. Purpose of the Report To provide the Audit & Risk Scrutiny Committee with the attached report on the

General Fund Budget 2013/14 to 2015/16, which will be reported to Cabinet on 14th February 2013.

3. Background and Discussion As per the attached report. 4. Implications

a) For service users

As per the attached report. b) Strategic & Policy

As per the attached report. c) Financial - Ref: 13/909

As per the attached report. d) Legal – Ref: 34/02/13

As per the attached report. e) Human Resources

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As per the attached report. f) Community Safety, Equalities, Environmental

As per the attached report. g) This is a key decision, number 336.

5. Options, Risks and Reasons for Recommendations As per the attached report. 6. Recommendations 6.1 That Members note the General Fund Budget 2013/14 to 2015/16 report. Background Papers

Location

Director of Resources

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Agenda Item No. 7(B) BASSETLAW DISTRICT COUNCIL



GENERAL FUND CAPITAL PROGRAMME 2013/14 TO 2017/18 Cabinet Member: Finance & Property Contact: Neil Taylor Ext: 3221 1. Public Interest Test The author of this report, Neil Taylor, has determined that the report is not

confidential. 2. Purpose of the Report To provide the Audit & Risk Scrutiny Committee with the attached report on the

General Fund Capital Programme 2013/14 to 2017/18, which will be reported to Cabinet on 14th February 2013.







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5. Options, Risks and Reasons for Recommendations As per the attached report. 6. Recommendations 6.1 That Members note the General Fund Capital Programme 2013/14 to 2017/18 report. Background Papers

Location


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Agenda Item No. 9(C) BASSETLAW DISTRICT COUNCIL



TREASURY MANAGEMENT POLICY & STRATEGY 2013/14 TO 2015/16 Cabinet Member: Finance & Property Contact: Mike Hill Ext: 3174 1. Public Interest Test The author of this report, Mike Hill, has determined that the report is not confidential. 2. Purpose of the Report To provide the Audit & Risk Scrutiny Committee with the attached report on the

Treasury Management Policy & Strategy 2013/14 to 2015/16, which will be reported to Cabinet on 14th February 2013.

Members are reminded that the Council has formally delegated the role of scrutiny of Treasury Management Policy and Strategy to this Committee in accordance with the requirements of the CIPFA Treasury Management Code of Practice.






As per the attached report.

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e) Human Resources



5. Options, Risks and Reasons for Recommendations As per the attached report. 6. Recommendations 6.1 That Members note the Treasury Management Policy & Strategy 2013/14 to 2015/16

report. Background Papers

Location


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Agenda Item No. 7(D) BASSETLAW DISTRICT COUNCIL



CAPITAL INVESTMENT STRATEGY 2013/14 TO 2017/18 Cabinet Member: Finance & Property Contact: Mike Hill Ext: 3174 1. Public Interest Test The author of this report, Mike Hill, has determined that the report is not confidential. 2. Purpose of the Report To provide the Audit & Risk Scrutiny Committee with the attached report on the

Capital Investment Strategy 2013/14 to 2017/18, which will be reported to Cabinet on 14th February 2013.








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f) Community Safety, Equalities, Environmental


5. Options, Risks and Reasons for Recommendations As per the attached report. 6. Recommendations 6.1 That Members note the Capital Investment Strategy 2013/14 to 2017/18 report. Background Papers

Location


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Agenda Item No. 7(E) BASSETLAW DISTRICT COUNCIL



PROPERTY ASSET MANAGEMENT PLAN 2013/14 TO 2017/18 Cabinet Member: Finance & Property Contact: Mike Hill Ext: 3174 1. Public Interest Test The author of this report, Mike Hill, has determined that the report is not confidential. 2. Purpose of the Report To provide the Audit & Risk Scrutiny Committee with the attached report on the

Property Asset Management Plan 2013/14 to 2017/18, which will be reported to Cabinet on 14th February 2013.








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As per the attached report. g) This is key decision number 340.

5. Options, Risks and Reasons for Recommendations As per the attached report. 6. Recommendations 6.1 That Members note the Property Asset Management Plan 2013/14 to 2017/18 report. Background Papers

Location


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Agenda Item No. 8(F) BASSETLAW DISTRICT COUNCIL



ROBUSTNESS OF ESTIMATES AND ADEQUACY OF RESERVES – 2013/14 Cabinet Member: Finance & Property Contact: Mike Hill Ext: 3174 1. Public Interest Test The author of this report, Mike Hill, has determined that the report is not confidential. 2. Purpose of the Report To provide the Audit & Risk Scrutiny Committee with the attached report on the

Robustness of Estimates and Adequacy of Reserves - 2013/14, which will be reported to Cabinet on 14th February 2013.








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As per the attached report. g) This is not a key decision, but it is an integral part of the budget reports that

are. 5. Options, Risks and Reasons for Recommendations As per the attached report. 6. Recommendations 6.1 That Members note the Robustness of Estimates and Adequacy of Reserves –

2013/14 report. Background Papers

Location


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Agenda Item No. 8(a) BASSETLAW DISTRICT COUNCIL

AUDIT & RISK SCRUTINY COMMITTEE

12th FEBRUARY 2013

REPORT OF THE DIRECTOR OF RESOURCES

INTERNAL AUDIT PROGRESS REPORTS 2012/13 Cabinet Member: Finance & Property Contact: R. Barnett Ext: 01159 489400 1. Public Interest Test 1.1 The author of this report, Rob Barnett, has determined that the report is not

confidential. 2. Purpose of the Report 2.1 To provide Members with information regarding the following internal audits:

1) Council Housing – Right to Buy Covalent AT - 18 2) Tourist Information Centres Covalent AT - 29 3) Allotments Covalent AT - 32

3. Background and Discussion 3.1 Internal Audit is an assurance function that primarily provides an independent and

objective opinion to the organisation on the control environment comprising risk management, control and governance by evaluating its effectiveness in achieving the organisation’s objectives. It objectively examines, evaluates and reports on the adequacy of internal control as a contribution to the proper, economic, efficient and effective use of resources.

3.2 A progress report has been provided so that Members are aware of the work

undertaken by Internal Audit and can satisfy themselves that adequate reviews have been undertaken and that appropriate responses have been provided by Managers.

3.3 Recommendations made have been prioritised to identify their respective risk,

High, Medium or Low. Risk is a function of consequence and probability of occurrence.

3.4 For the three internal audits outlined above, nine recommendations have been

raised in total, of which no recommendations have been classified as High Risk, and one recommendation has been classified as Medium Risk. There are also eight Low Risk recommendations that are not detailed within this report.

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3.5 Just for clarity, the recommendations containing high risks are the ones that officers must give priority to addressing, as these represent a weakness in controls.

3.6 As a further internal control measure, the Chair of this Committee, the Leader of

the Council and the Head of Finance & Property will meet with the relevant Portfolio Holder and the Manager(s) of the service concerned for all reports that have received a ‘red’ (or in some circumstances a ‘red/amber’) audit assurance level. Just for clarity a ‘red’ assurance level is defined as “the Authority cannot take assurance that the controls upon which the organisation relies to manage this risk are suitably designed, consistently applied or effective. Action needs to be taken to ensure the risk is managed.”

3.7 Within this report there are no ‘red’ audits.

4. Implications

a) For Service Users As contained within the individual reports. b) Strategic & Policy As contained within the individual reports. c) Financial Ref: 13/933 As contained within the individual reports. d) Legal Ref: 38/02/13 As contained within the individual reports. e) Human Resources As contained within the individual reports. f) Community Safety, Equalities, Environmental As contained within the individual reports. g) Whether this is a key decision, and if so the reference number This is not a key decision.

5. Options, Risks and Reasons for Recommendations 5.1 The recommendations are contained within each individual report. Officers and

management have the option to not agree with the recommendation; however this must be because of a valid operational and practical reason. The risks can be varied and therefore it is important that weaknesses are addressed as soon as practically possible.

6. Recommendations 6.1 Members receive the Report and note actions taken or to be taken.

Background Papers Location Audit Files RSM Tenon Office, Nottingham

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BASSETLAW DISTRICT COUNCIL Internal Audit Progress Report (2012/13) Audit & Risk Scrutiny Committee Meeting – 12th February 2013

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CONTENTS SECTION Page 1 Introduction 1 2 Final reports issued 1 3 Work in Progress or Planned 1 4 Findings From Internal Audit Work 1 5 Liaison with Management 2 6 Changes to our Plan 2 Appendix A Operational Plan Performance 2012/13 3 Appendix B Reports Finalised – Summary of Key Findings 9 Appendix C Operational Plan Performance – A1 Housing 13 The matters raised in this report are only those which came to our attention during our internal audit work and are not necessarily a comprehensive statement of all the weaknesses that exist, or of all the improvements that may be required. Whilst every care has been taken to ensure that the information provided in this report is as accurate as possible, based on the information provided and documentation reviewed, no complete guarantee or warranty can be given with regard to the advice and information contained herein. Our work does not provide absolute assurance that material errors, loss or fraud do not exist. This report is prepared solely for the use of Council and senior management of Bassetlaw District Council. Details may be made available to specified external agencies, including external auditors, but otherwise the report should not be quoted or referred to in whole or in part without prior consent. No responsibility to any third party is accepted as the report has not been prepared, and is not intended for any other purpose.

© 2010 RSM Tenon Limited RSM Tenon Limited is a member of RSM Tenon Group RSM Tenon Limited is an independent member firm of RSM International an affiliation of independent accounting and consulting firms. RSM International is the name given to a network of independent accounting and consulting firms each of which practices in its own right. RSM International does not exist in any jurisdiction as a separate legal entity. RSM Tenon Limited (No 4066924) is registered in England and Wales. Registered Office 66 Chiltern Street, London W1U 4GB. England

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1. INTRODUCTION

1.1 The periodic internal audit plan for 2012/13 was approved by the Audit & Risk Scrutiny Committee on the 26th April 2012. This report summarises the outcome of work completed to date against that plan, and Appendix A provides cumulative data in support of internal audit performance.

2. FINAL REPORTS ISSUED

2.1 We have finalised three reports relating to the 2012/13 audit plan; these are in the areas of:

Director of Corporate Services: Council Housing – Right to Buy;

Director of Community Services: Tourist Information Centres; and Allotments.

3. WORK IN PROGRESS OR PLANNED

3.1 Work in Progress at the time of this progress report consists of four audits as shown in Appendix A. These are:

Markets; Procurement; Risk Management; and IT Review (Third Party Data Security).

3.2 The followings audit will be undertaken in the period from the compilation of this progress report and this committee:

Car Parks, CCTV, Parks and Open Spaces, Safeguarding Children & CRB Checks and Follow Up (4).

4. FINDINGS FROM INTERNAL AUDIT WORK

4.1 We have raised nine recommendations across the three reviews that are being presented to this committee; There are no recommendations classified as ‘High’ Risk; one recommendation have been classified as ‘Medium’ Risk and the remaining eight recommendations have been classified as ‘Low’ Risk. Details of the key findings are shown in Appendix B.

4.2 Appendix C is provided for information only, as these reports are for A1 Housing Bassetlaw Ltd and are reported to the A1 Housing Finance & Organisational Health Champions Group.

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5. LIAISON WITH MANAGEMENT

5.1 Meetings are held with the Head of Finance and Property on a regular basis, as well as other senior management to discuss the progress of the internal audit work.

6. CHANGES TO OUR PLAN

6.1 There have been no changes to the audit plan since the last Committee in January 2013.

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APPENDIX A: OPERATIONAL PLAN PERFORMANCE 2012/13 – CURRENT REPORTS Detailed below is a summary of the work undertaken in 2012/13 to date, showing the levels of assurance given and the number of recommendations arising. Reports being considered at this Committee are shown in bold and italics. Definitions with regard to the levels of assurance and the classification of recommendations are provided overleaf.

Auditable Area Start Date

Debrief date

Draft report issued

Responses received

Final report issued

Audit & Risk Scrutiny

Committee

Audit approach

Audit Days

Assurance level given

Number of Recommendations Made

High Medium Low In Total

Agreed

Current Reports

Council Housing – Right To Buy 08/10/12 13/10/12 22/10/12 22/01/13 22/01/13

February 2013 Risk Based (6) GREEN 0 0 2 2 2

Subtotal (Director of Corporate Services) 0 0 2 2 2

Allotments 10/12/12 04/01/13 08/01/13 22/01/13 22/01/13 February

2013 Risk Based (5) GREEN 0 0 4 4 4

Tourist Information Centres 03/12/12 12/12/12 13/12/12 09/01/13 09/01/13

February 2013 Risk Based (6) GREEN 0 1 2 3 3

Subtotal (Director of Community Services) 0 1 6 7 7

Subtotal (All Directorate) 0 1 8 9 9

Management - - - - - - - (2) - - - - - -

Subtotal 19 - 0 1 8 9 9

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Debrief date

Draft report issued

Responses received

Final report issued


Committee

Audit approach

Audit Days




Agreed

Work in progress or yet to start (including reports still in draft)

Procurement – Contract Management

10/12/12 04/12/12 14/12/12 (7)

Risk Management 17/12/12 07/01/12 08/01/13 (7)

Markets 05/11/12 09/11/12 20/11/12 (7)

IT Review (Third Party Data Security) 03/12/12 06/12/12 08/01/13 (12)

Car Parks 14/01/13 18/01/13 23/01/13 (10)

CCTV 14/01/13 18/01/13 (6)

Parks & Open Spaces 21/01/13 (8)

Safeguarding Children & CRB Checks

21/01/13 (6)

Members Expenses 04/02/13 (6)

Contaminated Land 04/02/13 (5)

Follow Up (4) 04/02/13 (5)

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Debrief date

Draft report issued

Responses received

Final report issued


Committee

Audit approach

Audit Days




Agreed

Localism Act 17/02/13 (10)

Taxation - PAYE 17/02/13 (5)

Contingency - - - - - - - (15) - - - - - -

Management - - - - - - - (3)

Subtotal 112

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Previous Reports already presented to Committee

Redeployment, Recruitment & Retention

20/08/12 18/10/12 29/10/12 23/11/12 26/11/12 January 2012 Risk Based 6 GREEN 0 1 3 4 4

Payroll 08/10/12 12/10/12 22/10/12 03/12/12 03/12/12 January 2012 Risk Based 8 GREEN 0 0 1 1 1

NNDR 15/10/12 19/10/12 22/10/12 06/11/12 9/11/12 January 2012 Risk Based 8 GREEN 0 1 2 3 3

Housing Benefits 22/10/12 05/11/12 06/11/12 28/11/12 29/11/12 January 2012 Risk Based 20 GREEN 0 1 3 4 4

Creditors (incl. E-Procurement) 30/10/12 07/11/12 21/11/12 11/11/12 11/12/12 January 2012 Risk Based 8 AMBER-GREEN 0 1 5 6 6

Corporate Governance 29/10/12 06/11/12 07/11/12 19/11/12 20/11/12 January 2012 Risk Based 7 GREEN 0 0 3 3 3

Pest Control 08/10/12 29/10/12 29/10/12 14/11/12 19/11/12 January 2012 Risk Based 5 RED-AMBER 1 2 4 7 7

Follow-up (3) 05/11/12 N/A 15/11/12 10/12/12 11/12/12 January 2012 Risk Based 5 ADEQUATE 0 3 6 9 9

Council Tax 15/10/12 19/10/12 22/10/12 22/10/12 22/10/12 November 2012 Risk Based 8 GREEN 0 0 1 1 1

Treasury Management 01/10/12 05/10/12 15/10/12 30/10/12 30/10/12 November

2012 Risk Based 8 GREEN 0 0 2 2 2

Mail Room 21/08/12 24/08/12 30/08/12 16/10/12 17/10/12 November 2012 Risk Based 6 AMBER-GREEN 0 3 3 6 5

Emergency Planning & Business Continuity 28/08/12 31/08/12 17/09/12 01/10/12 01/10/12 November

2012 Risk Based 6 AMBER-GREEN 0 1 2 3 3

Follow Up (2) 13/08/12 N/A 12/09/12 29/10/12 29/10/12 November 2012 Risk Based 5 ADEQUATE 0 6 7 13 13

Customer Services & One Stop Shop Areas 02/07/12 05/07/12 17/07/12 07/07/12 07/08/12 September


General Estates 09/07/12 12/07/12 23/07/12 21/08/12 23/08/12 September 2012 Risk Based 6 AMBER-GREEN 0 3 1 4 4

Insurances 13/08/12 16/08/12 20/08/12 20/08/12 20/08/12 September 2012 Risk Based 8 GREEN 0 0 0 0 0

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Facilities Management 23/07/12 27/07/12 08/08/12 21/08/12 23/08/12 September


Complaints Management 11/07/12 24/07/12 24/07/12 24/07/12 24/07/12 September


Equality & Diversity 23/07/12 27/07/12 30/07/12 24/08/12 24/08/12 September 2012 Risk Based 7 GREEN 0 0 5 5 5

Health & Safety 02/07/12 06/07/12 16/07/12 19/07/12 19/07/12 September 2012

Risk Based 6 GREEN 0 1 2 3 3

Recycling 09/07/12 13/07/12 26/07/12 13/08/12 20/08/12 September 2012 Risk Based 6 GREEN 0 2 2 4 4

Street Cleansing & Public Conveniences 16/07/12 20/07/12 30/07/12 14/08/12 20/08/12 September


Building Control 16/07/12 20/07/12 30/07/12 15/08/12 23/08/12 September 2012 Risk Based 6 AMBER-GREEN 1 1 3 5 5

Homelessness 30/07/12 03/08/12 08/08/12 16/08/12 23/08/12 September 2012 Risk Based 6 GREEN 0 1 2 3 3

Follow Up (1) 26/06/12 N/A 06/07/12 02/08/12 02/08/12 September 2012 Risk Based 5 ADEQUATE 1 4 5 10 10

Retford Enterprise Centre 28/05/12 11/06/12 18/06/12 02/07/12 04/07/12 July 2012 Risk Based 6 AMBER-RED 2 2 2 6 6

Management - - - - - - - 7 - - - - - -

Subtotal 191 - 5 39 73 117 116

TOTAL 322

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Recommendation Categorisation

Our findings and recommendations are categorised as follows:

High (H): action is imperative to ensure that the objectives for the area under review are met.

Medium (M): requires action to avoid exposure to significant risks in achieving the objectives for the area under review.

Low (L): action advised to enhance control or improve operational efficiency.

ASSURANCE OPINIONS

Our opinion will be graphically represented as a speedometer (see below). We have provided guidelines for each segment of the speedometer to provide the Audit & Risk

Committee (or equivalent) with some context behind each of the ratings.

Taking account of the issues identified, the Authority can take substantial assurance that the controls upon which the organisation relies to manage this risk are suitably designed, consistently applied and effective.

Taking account of the issues identified, the Authority can take reasonable assurance that the controls upon which the organisation relies to manage this risk are suitably designed, consistently applied and effective. However we have identified issues that, if not addressed, increase the likelihood of the risk materialising.

Taking account of the issues identified, whilst the Authority can take some assurance that the controls upon which the organisation relies to manage this risk are suitably designed, consistently applied and effective, action needs to be taken to ensure this risk is managed.

Taking account of the issues identified, the Authority cannot take assurance that the controls upon which the organisation relies to manage this risk are suitably designed, consistently applied or effective. Action needs to be taken to ensure this risk is managed.

The Amber assurance level is split into two so that we are able to give you a clear indication of whether we consider the assurance to be “above or below the line”. We hope this will help draw attention

to those reports where we are highlighting that although not a negative opinion, the Authority does need to take action to ensure the risk is managed. Similarly the above the line amber opinion reflects

that although a positive opinion, there is still room for improvement. During the year our progress reports to Audit and Performance Scrutiny Committee will reflect the opinions given and build up a

picture of our findings so that there will be no surprises in our year end annual opinion.

Advisory Review – A review designed to provide advice to the organisation and does not result in a formal assurance opinion. Follow Up – A review of actions taken to implement previous internal audit recommendations. Testing will be performed, as appropriate, to confirm the success of implementation of agreed actions to manage the risks identified.

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APPENDIX B: REPORTS FINALISED – SUMMARY OF KEY FINDINGS

Summary of Audit Findings Assurance Level

No. of Recs. Made

and (Accepted)

No. of Recs. Categorised As

High Risk

Implementation Date

Responsible Officer (s)

Council Housing – Right to Buy

An audit of Council Housing – Right to Buy was undertaken as part of the approved internal audit plan and resulted in two ‘Low’ Risk recommendations being raised, which were accepted by management.

2 (2) 0 Implemented Property Manager

Allotments An audit of Allotments was undertaken as part of the approved internal audit plan and resulted in four ‘Low’ Risk recommendations being raised, all of which were accepted by management.

4 (4) 0 April 2013 Parks Development

Officer

Tourist Information Centres An audit of Tourist Information Centres was undertaken as part of the approved internal audit plan and resulted in one ‘Medium’ Risk and two ‘Low’ Risk recommendations being raised, all of which were accepted by management. The Medium Risk recommendation raised was:

Any evaluation of the on-going effectiveness of the Tourist Information Centres will need to include careful consideration as to whether the current locations are best suited to the centre's purpose. This is particularly true with regards to the Worksop centre, which since the building of the new library, has become more remote from the centre of town activity.

3 (3) 0 April 2014 Head of Community Prosperity

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APPENDIX C: A1 HOUSING OPERATIONAL PLAN PERFORMANCE 2012/13 – CURRENT REPORTS Detailed below is a summary of the work undertaken in 2012/13 to date, showing the levels of assurance given and the number of recommendations arising. These reports have been presented at A1 Housing Finance & Organisational Health Champions Group meetings.


Debrief date

Draft report issued

Responses received

Final report issued

Finance & Organisational

Health Champions Group

Audit approach

Audit Days




Agreed

Current Reports

Community Centre 12/11/12 16/11/12 03/11/12 08/01/13 09/01/13 January 2013 Risk Based 6 GREEN 0 0 4 4 4

Follow Up (2) 08/10/12 26/10/12 31/10/12 14/11/12 15/11/12 January 2013 Risk Based 4 GOOD 0 1 3 4 4

Service Level Agreements 08/10/12 22/10/12 24/10/12 07/11/12 08/11/12

November 2012

Risk Based 5 RED - AMBER 2 1 1 4 4

Performance Management 22/10/12 25/10/12 31/10/12 08/11/12 08/11/12

November 2012


Debtors & Debt Recovery 08/10/12 19/10/12 20/10/12 30/10/12 31/10/12

November 2012

Risk Based 6 AMBER - GREEN 0 4 1 5 5

Contract Management 20/08/12 24/08/12 30/08/12 24/09/12 24/09/12

November 2012


Rent Accounting 03/09/12 07/09/12 18/09/12 N/A 18/09/12 November 2012 Risk Based 7 GREEN 0 0 0 0 0

General Ledger & Budgetary Control 17/09/12 18/09/12 18/09/12 19/09/12 19/09/12 November


Information Security 19/07/12 23/07/12 28/08/12 20/09/12 20/09/12 November 2012 Advisory 5 N/A 0 2 0 2 2

Assurance Stocktake 18/06/12 29/06/12 06/07/12 16/07/12 16/07/12

September 2012

Advisory 7 N/A 0 3 5 8 8

Insurance 18/06/12 22/06/12 02/07/12 09/08/12 09/08/12 September 2012 Risk Based 5 GREEN – AMBER 0 3 1 4 4

Branching Out 18/06/12 02/07/12 04/07/12 16/07/12 18/07/12 September 2012 Risk Based 6 GREEN – AMBER 0 1 6 7 7

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Debrief date

Draft report issued

Responses received

Final report issued


Health Champions Group

Audit approach

Audit Days




Agreed

Follow Up (1) 18/06/12 N/A 06/07/12 26/07/12 27/0712 September 2012 Risk Based 4 ADEQUATE 0 1 5 6 6

Housing Allocations 23/07/12 27/07/12 31/07/12 17/08/12 20/08/12 September 2012 Risk Based 6 GREEN 0 1 1 2 2

Out of Hours/ Emergency Service 30/04/12 11/05/12 16//05/12 28/05/12 28/05/12 July 2012 Risk Based 6 GREEN – AMBER 0 3 1 4 4

Code of Conduct and Declaration of Interest

23/05/12 25/05/12 29/05/12 30/05/12 30/05/12 July 2012 Risk based 4 GREEN 0 1 4 5 5

Waste Management 10/04/12 13/04/12 13/04/12 26/04/12 26/04/12 May 2012 Risk Based 6 AMBER – RED 1 3 1 5 5

Gas Installation – Decent Homes 10/04/12 13/04/12 24/04/12 01/05/12 01/05/12 May 2012 Risk Based 5 GREEN 0 2 2 4 4

Contingency - - - - - - - 7 - - - - - -

Management - - - - - - - 9 - - - - - -

Sub total

111 3 28 36 67 67

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Auditable Area Start

Date

Debrief date

Draft report issued

Responses received

Final report issued


Health Champions

Group

Audit approach

Audit Days




Agreed

Work in progress or yet to start (including reports still in draft)

Follow Up (3) 04/03/12 N/A (4)

Contingency (3)

Management - - - - - - - (1) - - - - - -

Sub total Grand total

(8) 125

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Agenda Item No. 8(b) BASSETLAW DISTRICT COUNCIL



KPMG - CERTIFICATION OF GRANTS AND RETURNS 2011/12 Cabinet Member: Finance & Property Contact: Mike Hill Ext: 3174 1. Public Interest Test 1.1 The author of this report, Mike Hill, has determined that the report is not confidential. 2. Purpose of the Report 2.1 To present to the Audit & Risk Scrutiny Committee, KPMG’s annual report on the

work undertaken by the former Audit Commission in relation to the certification of claims and returns for 2011/12.

3. Background and Discussion 3.1 The external auditors are required under section 28 of the Audit Commission Act

1998 to certify some claims and returns for grants or subsidies paid by the government departments and public bodies to the Council as follows:

• Below £0.125m – no requirement • Between £0.125m and £0.5m – limited testing • Over £0.5m – limited or full testing dependant on the control environment.

3.2 A total of four claims were audited during 2011/12, and one of these (Housing and

Council Tax Benefits Subsidy), was found to contain minor errors. The report is attached as a separate document at Appendix 1.

4. Implications


External verification is important to Bassetlaw as it provides an independent assessment of progress and the standard of service provided for the council tax levied.

b) Strategic & Policy

KPMG and the former Audit Commission’s work programme supports the Council’s corporate governance arrangements.

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c) Financial - Ref: 13/151 Any amendments made in respect of grant claims will have an impact on the

financial standing of the authority. It is therefore imperative that accurate claims are submitted in accordance with pre-determined timescales.

d) Legal – Ref: 37/02/13 As contained within the report. e) Human Resources None arising from this report. f) Community Safety, Equalities, Environmental None arising from this report. g) Whether this is a key decision, and if so the reference number.

No. 5. Options, Risks and Reasons for Recommendations 5.1 To receive and accept the Annual Report on the Certification of Grants and Returns

for 2011/12. 6. Recommendations 6.1 That the Audit & Risk Scrutiny Committee receive and accept the Annual Report on

the Certification of Grants and Returns for 2011/12. Background Papers

Location

KPMG annual grants and returns report 2011/12

Head of Finance & Property office

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Certification of grants and returns 2011/12

Bassetlaw District Council

January 2013

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1 © 2012 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (‘KPMG International’), a Swiss entity. All rights reserved.

Contents

The contacts at KPMG in connection with this report are:

Sue Sunderland Director

Tel: 0115 945 4490 [email protected],uk

Lee Towers Manager

Tel: 0115 935 3428 [email protected]

Jon Machej Assistant Manager

[email protected]

Page

■ Headlines 2

■ Summary of certification work outcomes 3-4

■ Fees 5

■ Prior year recommendations 6

This report is addressed to the Authority and has been prepared for the sole use of the Authority. We take no responsibility to any member of staff acting in their individual capacities, or to third parties. The Audit Commission has issued a document entitled Statement of Responsibilities of Auditors and Audited Bodies. This summarises where the responsibilities of auditors begin and end and what is expected from the audited body. We draw your attention to this document.

External auditors do not act as a substitute for the audited body’s own responsibility for putting in place proper arrangements to ensure that public business is conducted in accordance with the law and proper standards, and that public money is safeguarded and properly accounted for, and used economically, efficiently and effectively.

If you have any concerns or are dissatisfied with any part of KPMG’s work, in the first instance you should contact Sue Sunderland who is the engagement leader to the Authority (telephone 0115 945 4490, e-mail [email protected] who will try to resolve your complaint. If you are dissatisfied with your response please contact Trevor Rees (telephone 0161 236 4000, e-mail [email protected]) who is the national contact partner for all of KPMG’s work with the Audit Commission. After this, if you are still dissatisfied with how your complaint has been handled you can access the Audit Commission’s complaints procedure. Put your complaint in writing to the Complaints Unit, Westward House, Lime Kiln Close, Stoke Gifford, Bristol, BS34 8SR or by e mail to: [email protected]. Their telephone number is 0844 798 3131, textphone (minicom) 020 7630 0421.

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mailto:[email protected],uk�

mailto:[email protected],uk�

mailto:[email protected]�



Certification of grants and returns 2011/12 Headlines

Introduction and background

This report summarises the results of work on the certification of the Council’s 2011/12 grant claims and returns . The grants work was done by the Audit Commission as appointed auditor for 2011/12, and KPMG is therefore only reporting the outcome.

■ For 2011/12 the Audit Commission certified four returns with a total value of £76.9m.

-

Certification results We issued unqualified certificates for three grants and returns but a qualification was necessary in one case.

■ The housing and council tax benefits claim was qualified due to an error identified during audit testing. The financial impact of the error has been reported in the qualification letter; and

■ This is similar to last year when the same claim was qualified. Given the complexities of the housing and council tax benefit claim, it is not unusual for a qualification letter to be required.

Pages 3 – 4

Audit adjustments One adjustment was necessary to the Council’s grants and returns as a result of our certification work this year.

■ The housing and council tax benefits claim was amended by £937. This is an improvement on last year when three claims were subject to minor amendment.

Pages 3 – 4

The Council’s arrangements

The Council has good arrangements for preparing its grants and returns and supporting our certification work . Pages 3- 4

Fees Our overall fee for the certification of grants and returns (£20,226) was higher than the original estimate of £18,200.

■ The main reason for this was that the housing finance base data return audit in 2010/11 provided partial assurance for the HRA subsidy review but certification of this claim was not required in 2011/12 hence the claim took marginally longer to complete.

■ Overall the fees were lower than those charged in the previous year (£20,988) although there were fewer claims to certify this year.

Page 5

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Comments overleaf

Qualified certificate

Significant adjustment

Minor adjustment

Unqualified certificate

Housing and council tax benefits

NNDR

Pooling of housing capital receipts

Housing subsidy

1 0 1 3

Certification of grants and returns 2011/12 Summary of certification work outcomes

Overall, the Council has good arrangements for preparing its grants and returns and supporting our certification work. The four returns certified had a combined value of £76.9m.

Detailed below is a summary of the key outcomes from our certification work on the Council’s 2011/12 grants and returns, showing where either audit amendments were made as a result of our work or where we had to qualify our audit certificate.

A qualification means that issues were identified concerning the Council’s compliance with a scheme’s requirements that could not be resolved through adjustment. In these circumstances, it is likely that the relevant grant paying body will require further information from the Council to satisfy itself that the full amounts of grant claimed are appropriate. It is worth noting that given the complexities of the housing and council tax benefit claim it is not unusual for a qualification letter to be required.

Overall, the Audit Commission certified 4 grants and returns:

■ 3 were unqualified with no amendment; and

■ 1 required a minor amendment and qualification to the audit certificate.

Detailed comments are provided overleaf.

1

56


Certification of grants and returns 2011/12 Summary of certification work outcomes

This table summarises the key issues behind each of the adjustments or qualifications that were identified on the previous page.

Ref Summary observations Amendment

Housing and council tax benefits claim A number of minor amendments arose as a result of the claim compilation methodology resulting in an overall reduction of £937 to the claim.

Testing of the initial sample of cases identified one case where benefit was underpaid due to miscalculation of the claimant’s weekly income by using an incorrect Pension Credit Assessed Income figure. As the cause of this error, if replicated could have resulted in overpayments as well as the underpayment identified additional testing was required. The additional testing did not identify any further errors but we were required to report the error and the value of the underpayment was reported in a qualification letter.

-£937

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Breakdown of certification fees 2011/12

Certification of grants and returns 2011/12 Fees

The initial estimated fee for certifying 2011/12 grants and returns was £18,200. The actual fee charged was higher than the estimate but lower than the actual fee charged in 2010/11. The main reason for the fee exceeding the original estimate was:

■ The housing finance base data return audit in 2010/11 provided partial assurance for the HRA subsidy review but certification of this claim was not required in 2011/12 hence the claim took marginally longer to audit.

The overall fee for the certification of grants and returns was higher than the estimate but lower than the actual fee charged in 2010/11.

Breakdown of fee by grant/return

2011/12 (£) 2010/11 (£) Housing and council tax benefit 12,299 12,233 NNDR 3,865 3,171 Pooling of housing capital receipts 839 316 HRA subsidy 2,521 1,396 Disabled facilities 0 918 Housing finance base data return

0 2,954

Reporting (* in 10/11 this fee was apportioned over the various claims)

702 *0

Total fee 20,226 20,988

H & CT benefit, £12,299

NNDR, £3,865

Pooling of HCR, £839

HRA subsidy, £2,521

Reporting, £702

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© 2011 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.

The KPMG name, logo and ‘cutting through complexity’ are registered trademarks or trademarks of KPMG International Cooperative (KPMG International).

59

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Agenda Item No. 8(c) BASSETLAW DISTRICT COUNCIL



KPMG EXTERNAL AUDIT PLAN 2012/13 Cabinet Member: Finance & Property Contact: Mike Hill Ext: 3174 1. Public Interest Test 1.1 The author of this report, Mike Hill, has determined that the report is not confidential. 2. Purpose of the Report 2.1 To present KPMG’s Audit Plan 2012/13, which sets out the work for Bassetlaw’s

audit in respect of the Accounting Statements and Whole of Government Accounts, plus the Value for Money Conclusion for 2012/13.

3. Background and Discussion 3.1 The statutory responsibilities and powers of appointed auditors are set out in the

Audit Commission Act 1998, and the Local Government Act 1999. In discharging these specific statutory responsibilities and powers, auditors are required to carry out their work in accordance with the Audit Commission’s Code of Audit Practice for local government bodies. As a statutory body, the Council is externally audited and an Annual Governance Report will be submitted to the Council at the conclusion of the final accounts process by the KPMG Engagement Lead.

3.2 The Audit Plan is in accordance with the national Audit Commission framework, and

a programme, including regular meetings between officers and the Audit Team has been put in place to ensure an effective closedown process this year. Bassetlaw has been awarded unqualified audit opinions in successive years, and needs to ensure that this continues.

3.3 Changes to the accounts in respect of reporting formats (for example the introduction

of the International Financial Reporting Standards in previous years), plus any internal service or financial system changes, means that the accounting and auditing requirements do not remain constant between years. This is reflected in the Council’s approach to the final accounts process, and the response by KPMG.

3.4 Significant and specific risks identified by the District Auditor for 2012/13 are:

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• The delivery of the Star Chamber savings programme for 2012/13 in year; • The delivery of further savings of £0.8m for 2013/14; • The delivery of further savings for 2014/15.

3.5 The Audit Plan is set out in the Appendix to this report. 4. Implications


External verification is important to Bassetlaw as it provides an independent assessment of progress and the standard of service provided for the council tax levied.

b) Strategic & Policy

The KPMG work programme supports the Council’s corporate governance arrangements.

c) Financial - Ref: 13/273 Bassetlaw’s fee includes work on the Accounting Statements, reporting on the

Whole of Government Accounts return, and the Value for Money conclusion. The fee has reduced from £125,666 in 2011/12 to £75,400 in 2012/13. This is an annual reduction of 40%.

d) Legal – Ref: 36/02/13 As contained within the report. e) Human Resources None arising from this report. f) Community Safety, Equalities, Environmental None arising from this report. g) Whether this is a key decision, and if so the reference number.

This is not a key decision. 5. Options, Risks and Reasons for Recommendations 5.1 This report is provided to Members for information and consideration. 6. Recommendations 6.1 That the Audit & Risk Scrutiny Committee receive and accept the KPMG External

Audit Plan for 2012/13 and recommends the report to full Council on 4th March 2013. Background Papers

Location

Audit Plan 2012/13

Head of Finance & Property office

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External Audit Plan 2012/13

Bassetlaw District Council

January 2013

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1 © 2012 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. This document is confidential and its circulation and use are restricted. KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative, a Swiss entity.

Contents

The contacts at KPMG in connection with this report are:

Sue Sunderland Engagement Lead KPMG LLP (UK)


Lee Towers Manager KPMG LLP (UK)


Jon Machej Assistant Manager KPMG LLP (UK)


This report is addressed to the Authority and has been prepared for the sole use of the Authority. We take no responsibility to any member of staff acting in their individual capacities, or to third parties. The Audit Commission has issued a document entitled Statement of Responsibilities of Auditors and Audited Bodies. This

summarises where the responsibilities of auditors begin and end and what is expected from the audited body. We draw your attention to this document which is available on the Audit Commission’s website at www.auditcommission.gov.uk.

External auditors do not act as a substitute for the audited body’s own responsibility for putting in place proper arrangements to ensure that public business is conducted in accordance with the law and proper standards, and that public money is safeguarded and properly accounted for, and used economically, efficiently and effectively.

If you have any concerns or are dissatisfied with any part of KPMG’s work, in the first instance you should contact Sue Sunderland, the appointed engagement lead to the Authority, who will try to resolve your complaint. If you are dissatisfied with your response please contact Trevor Rees on 0161 246 4000, or by email to

[email protected], who is the national contact partner for all of KPMG’s work with the Audit Commission. After this, if you are still dissatisfied with how your complaint has been handled you can access the Audit Commission’s complaints procedure. Put your complaint in writing to the Complaints Unit Manager, Audit

Commission, Westward House, Lime Kiln Close, Stoke Gifford, Bristol, BS34 8SR or by email to [email protected]. Their telephone number is 0844 798 3131, textphone (minicom) 020 7630 0421.

Page

Report sections

■ Introduction 2

■ Headlines 3

■ Our audit approach 4

■ VFM audit approach 10

■ Audit team, deliverables, timeline and fees 12

Appendices

1. Independence and objectivity requirements

2. Quality assurance and technical capacity

16

17

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Section one Introduction

This document describes how we will deliver our audit work for Bassetlaw District Council.

Scope of this report

We are pleased to be appointed as your external auditors for 2012/13. This document supplements our Audit Fee Letter 2012/13 sent to you in August 2012. It describes how we will deliver our financial statements audit work for Bassetlaw District Council (‘the Authority’). It sets out our approach to value for money (VFM) work for 2012/13.

We are required to satisfy ourselves that your accounts comply with statutory requirements and that proper practices have been observed in compiling them. We use a risk based audit approach.

The audit planning process and risk assessment is an on-going process and the assessment and fees in this plan will be kept under review and updated if necessary.

Statutory responsibilities

Our statutory responsibilities and powers are set out in the Audit Commission Act 1998, the Local Government Act 1999 and the Audit Commission’s Code of Audit Practice.

The Code of Audit Practice summarises our responsibilities into two objectives, requiring us to review and report on your:

■ financial statements (including the Annual Governance Statement): providing an opinion on your accounts; and

■ use of resources: concluding on the arrangements in place for securing economy, efficiency and effectiveness in your use of resources (the value for money conclusion).

The Audit Commission’s Statement of Responsibilities of Auditors and Audited Bodies sets out the respective responsibilities of the auditor and the Authority.

Structure of this report

This report is structured as follows:

■ Section 2 includes our headline messages, focusing on the key risks identified this year for the financial statements audit.

■ Section 3 describes the approach we take for the audit of the financial statements.

■ Section 4 explains our approach to VFM work.

■ Section 5 provides information on the audit team, our proposed deliverables, the timescales and fees for our work.

Acknowledgements

We would like to take this opportunity to thank officers and Members for their continuing help and co-operation throughout our audit work.

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Section two Headlines

We have identified no financial statement risks and one key risk that we will focus on as part of our value for money conclusion work.

This is described in more detail on page 11.

The remainder of this document provides information on our:

■ approach to the audit of the financial statements;

■ approach to VFM work; and

■ audit team, proposed deliverables, timescales and fees for our work.

Area Risk Audit work

Savings plans The Authority currently estimates that it will need to deliver £800,000 in savings during 2013/14 to address further reductions to local authority funding and continued cost pressures.

The Authority has established and is managing its savings plans to secure longer term financial and operational sustainability however difficult decisions will need to be taken.

As part of our VFM conclusion work we will critically assess the controls the Authority has in place to ensure a sound financial standing and review how the Authority is planning and managing its savings plans.

We have not identified any significant risks to the audit of the 2012/13 financial statements and only one risk in relation to our value for money conclusion work. This is summarised below.

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Section three Our audit approach

We have summarised the four key stages of our financial statements audit process for you below:

We undertake our work on your financial statements in four key stages during 2013:

■ Planning (January to February).

■ Control Evaluation (April).

■ Substantive Procedures (July to August).

■ Completion (September).

Jan Feb Mar Apr May Jun Jul Aug Sep

2

3

4

1 Planning

Control evaluation

Substantive procedures

Completion

■ Update our business understanding and risk assessment.

■ Assess the organisational control environment.

■ Determine our audit strategy and plan the audit approach.

■ Issue our Accounts Audit Protocol.

■ Evaluate and test selected controls over key financial systems.

■ Review the internal audit function.

■ Review the accounts production process.

■ Review progress on critical accounting matters.

■ Plan and perform substantive audit procedures.

■ Conclude on critical accounting matters.

■ Identify audit adjustments.

■ Review the Annual Governance Statement.

■ Declare our independence and objectivity.

■ Obtain management representations.

■ Report matters of governance interest.

■ Form our audit opinion.

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Section three Our audit approach - planning

During January and February 2013, we complete our planning work.

We assess the key risks affecting the Authority’s financial statements and discuss these with officers.

We assess if there are any weaknesses in respect of central processes, including the Authority’s IT systems, that would impact on our audit.

We determine our audit strategy and approach, and agree a protocol for the accounts audit, specifying what evidence we expect from the Authority to support the financial statements.

Our planning work takes place in January and February 2013. This involves the following aspects:

Business understanding and risk assessment

We update our understanding of the Authority’s operations and identify any areas that will require particular attention during our audit of the Authority’s financial statements.

We identify the key risks affecting the Authority’s financial statements. These are based on our knowledge of the Authority, our sector experience and our ongoing dialogue with Authority staff. The risks identified to date are set out in this document. Our audit strategy and plan will, however, remain flexible as the risks and issues change throughout the year. It is the Authority’s responsibility to adequately address these issues. We encourage the Authority to raise any technical issues with us as early as possible so that we can agree the accounting treatment in advance of the audit visit.

We meet with the finance team on a bi-monthly basis to consider issues and how they are addressed during the financial year end closedown and accounts preparation.

Organisational control environment

Controls operated at an organisational level often have an impact on controls at an operational level and if there were weaknesses this would impact on our audit. In particular risk management, internal control and ethics and conduct have implications for our financial statements audit. The scope of the work of your internal auditors also informs our risk assessment.

The Authority relies on information technology (IT) to support both financial reporting and internal control processes. In order to satisfy ourselves that we can rely on the use of IT, we test controls over access to systems and data, system changes, system development and computer operations.

Audit strategy and approach

The Engagement Lead sets the overall direction of the audit and decides the nature and extent of audit activities.

We design audit procedures in response to the risk that the financial statements are materially misstated. The materiality level is a matter of judgement and is set by the Engagement Lead.

Group audit

To support our audit work on the Authority’s group accounts, we seek to place reliance on the work of Baker Tilley who are the auditors to the Council’s ALMO, A1 Housing. We will liaise with them in order to confirm that their programme of work is adequate for our purposes and they satisfy professional requirements.

Accounts audit protocol

At the end of our planning work we will issue our Accounts Audit Protocol. This important document sets out our audit approach and timetable. It also summarises the working papers and other evidence we require the Authority to provide during our interim and final accounts visits.

Plan

ning

■ Update our business understanding and risk assessment.

■ Assess the organisational control environment.

■ Determine our audit strategy and plan the audit approach.

■ Issue our Accounts Audit Protocol.

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Section three Our audit approach – control evaluation

During April 2013 we will complete our interim audit work.

We assess if controls over key financial systems were effective during 2012/13. We work with your Internal Audit team to avoid duplication.

We work with your finance team to enhance the efficiency of the accounts audit.

If there are significant reporting issues arising from our work, we will present our Interim Report to the Audit and Risk Committee.

Our interim visit on site will be completed during February to April. During this time we will complete work in the following areas:

Controls over key financial systems We update our understanding of the Authority’s key financial processes where our risk assessment has identified that these are relevant to our final accounts audit and where we have determined that this is the most efficient audit approach to take. We confirm our understanding by completing walkthroughs for these systems. We then test selected controls that address key risks within these systems. The strength of the control framework informs the substantive testing we complete during our final accounts visit.

Where our audit approach is to undertake controls work on financial systems, we seek to rely on any relevant work Internal Audit have completed to minimise unnecessary duplication of work. Our audit fee is set on the assumption that we can place reliance on their work. We are developing a joint working protocol and will meet with the Internal Audit to discuss the principles and timetables.

Review of internal audit

Where we intend to rely on internal audit’s work in respect of the key financial systems identified as part of our risk assessment, auditing standards require us to review aspects of their work. This includes re-performing a sample of tests completed by internal audit. We will provide detailed feedback to Internal Audit at the end of our interim visit.

Critical accounting matters

We will discuss the work completed to address the specific risks we identified at the planning stage. Wherever possible, we seek to review relevant workings and evidence and agree the accounting treatment as part of our interim work.

Following our interim visit, if there are significant reporting issues arising, we will issue our Interim Report which will set out the findings of our planning and interim work. This will be discussed at the next available Audit and Risk Committee meeting.

Con

trol

Ev

alua

tion

■ Evaluate and test controls over key financial systems identified as part of our risk assessment.

■ Review the work undertaken by the internal audit function on controls relevant to our risk assessment.

■ Review the accounts production process.

■ Review progress on critical accounting matters.

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Section three Our audit approach – substantive procedures

During July and August 2013 we will be on site for our substantive work.

We complete detailed testing of accounts and disclosures and conclude on critical accounting matters, such as specific risk areas. We then agree any audit adjustments required to the financial statements.

We also review the Annual Governance Statement for consistency with our understanding.

We will present our ISA 260 Report to those charged with governance in September 2013.

Our final accounts visit on site has been provisionally scheduled for the period July and August . During this time, we will complete the following work:

Substantive audit procedures

We complete detailed testing on significant balances and disclosures. The extent of our work is determined by the Engagement Lead based on various factors such as our overall assessment of the Authority’s control environment, the effectiveness of controls over individual systems and the management of specific risk factors.

Critical accounting matters

We conclude our testing of the key risk areas as identified at the planning stage and any additional issues that may have emerged since. We will discuss our early findings of the Authority’s approach to address the key risk areas with the Head of Finance in August 2013, prior to reporting to those charged with governance, in your case Council in September 2013.

Audit adjustments

During our on site work, we will meet with the Head of Finance and the Principal Accountant on a weekly basis to discuss the progress of the audit, any differences found and any other issues emerging.

At the end of our on site work, we will hold a closure meeting, where we will provide a schedule of audit differences and agree a timetable for the completion stage and the accounts sign off.

To comply with auditing standards, we are required to report uncorrected audit differences to Council. We also report any material misstatements which have been corrected and which we believe should be communicated to you to help you meet your governance responsibilities.

Annual Governance Statement

We are also required to satisfy ourselves that your Annual Governance Statement complies with the applicable framework and is consistent with our understanding of your operations. Our review of the work of internal audit and consideration of your risk management and governance arrangements are key to this.

We report the findings of our final accounts work in our ISA 260 Report, which we will issue to Council in September 2013.

Subs

tant

ive

Proc

edur

es ■ Plan and perform substantive audit procedures.

■ Conclude on critical accounting matters.

■ Identify and assess any audit adjustments.

■ Review the Annual Governance Statement.

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Section three Our audit approach - other

In addition to the financial statements, we also audit the Authority’s Whole of Government Accounts pack.

We may need to undertake additional work if we receive objections to the accounts from local electors.

We will communicate with you throughout the year, both formally and informally.

Whole of government accounts (WGA)

We are required to review and issue an opinion on your WGA consolidation to confirm that this is consistent with your financial statements. The audit approach has been agreed with HM Treasury and the National Audit Office.

Elector challenge

The Audit Commission Act 1998 gives electors certain rights. These are:

■ the right to inspect the accounts;

■ the right to ask the auditor questions about the accounts; and

■ the right to object to the accounts.

As a result of these rights, in particular the right to object to the accounts, we may need to undertake additional work to form our decision on the elector's objection. The additional work could range from a small piece of work where we interview an officer and review evidence to form our decision, to a more detailed piece of work, where we have to interview a range of officers, review significant amounts of evidence and seek legal representations on the issues raised.

The costs incurred in responding to questions or objections raised by electors is not part of the fee. This work will be charged in accordance with the Audit Commission's fee scales.

Reporting and communication

Reporting is a key part of the audit process, not only in communicating the audit findings for the year, but also in ensuring the audit team are accountable to you in addressing the issues identified as part of the audit strategy. Throughout the year we will communicate with you through meetings with the finance team and the Audit and Risk Committee or full Council for those matters that can only be delivered to those charged with governance. Our deliverables are included on page 13.

Use of off-shore audit resources

During our audit work we may make use of our KPMG Global Services (KGS Audit) team in India to undertake certain basic audit tasks and functions. Use of this ‘off-shore’ team is one of many initiatives we employ to deliver a cost-effective audit service for our clients. Although based in India, the KGS Audit team works closely with our local audit teams to undertake certain audit procedures remotely. We have provided our UK teams with guidance on the types of audit procedures and other tasks that it is suitable and permissible to use KGS Audit for - we do not use KGS Audit for any audit procedures that involve access to personal, confidential or sensitive information. Audit tasks are then allocated by our UK-based engagement teams to dedicated teams in India, allowing local staff to control what work KGS Audit undertakes and what information is accessed. They operate to our same quality standards and all work undertaken by KGS Audit is reviewed by the UK team.

The KGS Audit team operates in a paperless environment and we apply robust processes to control how data is accessed and used:

■ all work is conducted electronically;

■ all data files are maintained on servers in the UK with restricted access and only viewed on screen in India. These servers are governed by established KPMG IT controls;

■ policy and technology restrictions are in place to protect data, for example locked down USB ports, no external emailing, no printing;

■ KGS Audit staff are based in an office with restricted access and security; and

■ the team members adhere to global KPMG ethics and independence standards, along with requirements governing the non-disclosure of client information.

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Section three Our audit approach - other

Our independence and objectivity responsibilities under the Code are summarised in Appendix 2. We confirm our audit team’s independence and objectivity is not impaired.

Independence and objectivity confirmation

Professional standards require auditors to communicate to those charged with governance, at least annually, all relationships that may bear on the firm’s independence and the objectivity of the audit engagement partner and audit staff. The standards also place requirements on auditors in relation to integrity, objectivity and independence.

The standards define ‘those charged with governance’ as ‘those persons entrusted with the supervision, control and direction of an entity’. In your case this is full Council.

KPMG LLP is committed to being and being seen to be independent. APB Ethical Standard 1 Integrity, Objectivity and Independence requires us to communicate to you in writing all significant facts and matters, including those related to the provision of non-audit services and the safeguards put in place, in our professional judgement, may reasonably be thought to bear on KPMG LLP’s independence and the objectivity of the Engagement Lead and the audit team.

Confirmation statement

We confirm that as of January 2013 in our professional judgement, KPMG LLP is independent within the meaning of regulatory and professional requirements and the objectivity of the Engagement Lead and audit team is not impaired.

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Section four VFM audit approach

Background to approach to VFM work In meeting their statutory responsibilities relating to economy, efficiency and effectiveness, the Commission’s Code of Audit Practice requires auditors to:

plan their work based on consideration of the significant risks of giving a wrong conclusion (audit risk); and

carry out only as much work as is appropriate to enable them to give a safe VFM conclusion.

To provide stability for auditors and audited bodies, the Audit Commission has kept the VFM audit methodology unchanged from last year. There are only relatively minor amendments to reflect the key issues facing the local government sector.

The approach is structured under two themes, as summarised below.

Our approach to VFM work follows guidance provided by the Audit Commission.

Our work will draw heavily on other audit work which is relevant to our VFM responsibilities and the results of last year’s VFM audit.

Specified criteria for VFM conclusion

Focus of the criteria Sub-sections

The organisation has proper arrangements in place for securing financial resilience.

The organisation has robust systems and processes to:

manage effectively financial risks and opportunities; and

secure a stable financial position that enables it to continue to operate for the foreseeable future.

Financial governance

Financial planning

Financial control

The organisation has proper arrangements for challenging how it secures economy, efficiency and effectiveness.

The organisation is prioritising its resources within tighter budgets, for example by:

achieving cost reductions; and

improving efficiency and productivity.

Prioritising resources

Improving efficiency and productivity

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Section four VFM audit approach – key audit risks

We will follow a risk based approach to target audit effort on the areas of greatest audit risk.

We have identified one risk which we will consider as part of our risk assessment.

We will provide an update on how the Authority is managing this risk in our ISA 260 Report.

Risk Our audit work

As at November 2012, the Authority was forecasting that it will deliver its 2012/13 budget in overall terms. This includes a savings programme totalling £1.2 million. The Authority reports that £1.2 million (100 per cent) of these savings have been delivered to date. These forecasts are currently being updated. The Authority currently estimates that another £0.8 million in savings will need to be achieved during 2013/14 (with further savings for 2014/15) to address the further reductions to local authority funding. Against a backdrop of continued demand pressures it will become more and more difficult to deliver these savings in a way that secures longer term financial and operational sustainability. If there are any related liabilities at year end, these will need to be accounted for in the 2012/13 financial statements as appropriate

We will critically assess the controls the Authority has in place to ensure a sound financial standing, specifically that its Medium Term Financial Plan has duly taken into consideration the potential funding reductions and that it is sufficiently robust to ensure that the Authority can continue to provide services effectively. We will also review how the Authority is planning and managing its savings plans.

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Section five Audit team

Your audit team has been drawn from our specialist public sector assurance department. One of our audit team was part of the Bassetlaw District Council audit last year prior to transfer from the Audit Commission. Contact details are shown on page 1.

The audit team will be assisted by other KPMG specialists as necessary.

“My role is to lead our team and ensure the delivery of a high quality external audit opinion. I will be the main point of contact for the Audit and Rick Committee and Executive Directors.”

“I am responsible for the management, review and delivery of the whole audit and providing quality assurance for any technical accounting areas. I will work closely with Sue Sunderland to ensure we add value. I will liaise with the Head of Finance and Internal Audit”

Sue Sunderland

Engagement Lead and Director

Lee Towers

Manager

“I will be responsible for the on-site delivery of our work. I will liaise with the Principal Accountant and Internal Audit. I will also supervise the work of our audit assistants.”

Jon Machej

Assistant Manager

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Section five Audit deliverables

At the end of each stage of our audit we issue certain deliverables, including reports and opinions.

Our key deliverables will be delivered to a high standard and on time.

We will discuss and agreed each report with the Authority’s officers prior to publication.

Deliverable Purpose Committee dates

Planning

External Audit Plan ■ Outline audit approach.

■ Identify areas of audit focus and planned procedures.

February 2013

Control evaluation

Interim Report (if necessary)

■ Details and resolution of control and process issues.

■ Identify improvements required prior to the issue of the draft financial statements and the year-end audit.

May 2013

Substantive procedures

Report to Those Charged with Governance (ISA 260 Report)

■ Details the resolution of key audit issues.

■ Communication of adjusted and unadjusted audit differences.

■ Performance improvement recommendations identified during our audit.

■ Commentary on the Authority’s value for money arrangements.

Full Council September 2013

Completion

Auditor’s report ■ Providing an opinion on your accounts (including the Annual Governance Statement).

■ Concluding on the arrangements in place for securing economy, efficiency and effectiveness in your use of resources (the VFM conclusion).

Full Council September 2013

Annual Audit Letter ■ Summarises the outcomes and the key issues arising from our audit work for the year. November 2013

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Section five Audit timeline

We will be in continuous dialogue with you throughout the audit.

Key formal interactions with the Audit and Risk Committee are:

■ February – External Audit Plan;

■ June (provisional) – Interim Report (if necessary);

■ September – ISA 260 Report;

■ November (provisional) – Annual Audit Letter.

We work with the finance team and internal audit throughout the year.

Our main work on site will be our:

■ Interim audit visits during April.

■ Final accounts audit during July and August.

Regular meetings between the Engagement Lead and the Chief Executive and the Head of Finance

Aud

it w

orkf

low

C

omm

unic

atio

n

Jan Feb Mar Apr May Jun Jul Aug Sep Dec Oct Nov

Presentation of the External Audit Plan

Presentation of the Interim

Report (if necessary).

Presentation of the ISA260

Report

Presentation of the Annual Audit Letter

Continuous liaison with the finance team and internal audit.

Interim audit visit

Final accounts visit

Control evaluation Audit planning Substantive

procedures Completion

Key: Audit and Risk Committee or full Council meetings.

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Section five Audit fee

The main fee for 2012/13 audit of the Authority is £75,400. The fee has not changed from that set out in our Audit Fee Letter 2012/13 issued in August 2012.

Our audit fee remains indicative and based on you meeting our expectations of your support.

Meeting these expectations will help the delivery of our audit within the proposed audit fee.

Audit fee

Our Audit Fee Letter 2012/13 sent to you in August 2012 first set out our fees for the 2011/12 audit. We have not considered it necessary to make any changes to the agreed fees at this stage.

Our audit fee includes our work on the VFM conclusion and our audit of the Council’s financial statements. The fee for 2012/13 is £75,400. This is a reduction of 40 percent compared to the 2011/12 fee.

Audit fee assumptions

The fee is based on a number of assumptions, including that you will provide us with complete and materially accurate financial statements, with good quality supporting working papers, within agreed timeframes. It is imperative that you achieve this. If this is not the case and we have to complete more work than was envisaged, we will need to charge additional fees for this work. In setting the fee, we have assumed:

■ the level of risk in relation to the audit of the financial statements is not significantly different from that identified for 2011/12;

■ you will inform us of any significant developments impacting on our audit;

■ you will identify and implement any changes required under the CIPFA Code of Practice on Local Authority Accounting in the UK 2012/13 within your 2012/13 financial statements;

■ you will comply with the expectations set out in our Accounts Audit Protocol, including:

– the financial statements are made available for audit in line with the agreed timescales;

– good quality working papers and records will be provided at the start of the final accounts audit;

– requested information will be provided within the agreed timescales;

– prompt responses will be provided to queries and draft reports;

■ internal audit meets appropriate professional standards;

■ internal audit adheres to our joint working protocol and completes appropriate work on all systems that provide material figures for the financial statements and we can place reliance on them for our audit; and

■ additional work will not be required to address questions or objections raised by local government electors.

Meeting these expectations will help ensure the delivery of our audit within the agreed audit fee.

The Audit Commission requires us to inform you of specific actions you could take to keep the audit fee low. Future audit fees can be kept to a minimum if the Authority achieves an efficient and well-controlled financial closedown and accounts production process which complies with good practice and appropriately addresses new accounting developments and risk areas .

Changes to the audit plan

Changes to this plan and the audit fee may be necessary if:

■ new significant audit risks emerge;

■ additional work is required of us by the Audit Commission or other regulators; and

■ additional work is required as a result of changes in legislation, professional standards or financial reporting requirements.

If changes to this plan and the audit fee are required, we will discuss and agree these initially with the Head of Finance.

Element of the audit 2012/13 (planned)

2011/12 (actual)

Gross audit fee £75,400 £125,666

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Appendices Appendix 1: Independence and objectivity requirements

This appendix summarises auditors’ responsibilities regarding independence and objectivity.

Independence and objectivity Auditors are required by the Code to: ■ carry out their work with independence and objectivity; ■ exercise their professional judgement and act independently of both

the Commission and the audited body; ■ maintain an objective attitude at all times and not act in any way

that might give rise to, or be perceived to give rise to, a conflict of interest; and

■ resist any improper attempt to influence their judgement in the conduct of the audit.

In addition, the Code specifies that auditors should not carry out work for an audited body that does not relate directly to the discharge of the auditors’ functions under the Code. If the Authority invites us to carry out risk-based work in a particular area, which cannot otherwise be justified to support our audit conclusions, it will be clearly differentiated as work carried out under section 35 of the Audit Commission Act 1998. The Code also states that the Commission issues guidance under its powers to appoint auditors and to determine their terms of appointment. The Standing Guidance for Auditors includes several references to arrangements designed to support and reinforce the requirements relating to independence, which auditors must comply with. These are as follows: ■ Any staff involved on Commission work who wish to engage in

political activity should obtain prior approval from the Partner. ■ Audit staff are expected not to accept appointments as lay school

inspectors. ■ Firms are expected not to risk damaging working relationships by

bidding for work within an audited body’s area in direct competition with the body’s own staff without having discussed and agreed a local protocol with the body concerned.

■ Auditors are expected to comply with the Commission’s statements on firms not providing personal financial or tax advice to certain senior individuals at their audited bodies, auditors’ conflicts of interest in relation to PFI procurement at audited bodies, and disposal of consultancy practices and auditors’ independence.

■ Auditors appointed by the Commission should not accept engagements which involve commenting on the performance of other Commission auditors on Commission work without first consulting the Commission.

■ Auditors are expected to comply with the Commission’s policy for the Engagement Lead to be changed on each audit at least once every five years (subject to agreed transitional arrangements). Audit suppliers are required to obtain the Commission’s written approval prior to changing any Engagement Lead in respect of each audited body.

■ Audit suppliers are required to obtain the Commission’s written approval prior to changing any Engagement Lead in respect of each audited body.

■ The Commission must be notified of any change of second in command within one month of making the change. Where a new Engagement Lead or second in command has not previously undertaken audits under the Audit Commission Act 1998 or has not previously worked for the audit supplier, the audit supplier is required to provide brief details of the individual’s relevant qualifications, skills and experience.

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At KPMG we consider audit quality is not just about reaching the right opinion, but how we reach that opinion. KPMG views the outcome of a quality audit as the delivery of an appropriate and independent opinion in compliance with the auditing standards. It is about the processes, thought and integrity behind the audit report. This means, above all, being independent, compliant with our legal and professional requirements, and offering insight and impartial advice to you, our client.

KPMG’s Audit Quality Framework consists of seven key drivers combined with the commitment of each individual in KPMG. We use our seven drivers of audit quality to articulate what audit quality means to KPMG.

We believe it is important to be transparent about the processes that sit behind a KPMG audit report, so you can have absolute confidence in us and in the quality of our audit. Tone at the top: We make it clear that audit quality is part of our culture and values and therefore non-negotiable. Tone at the top is the umbrella that covers all the drives of quality through a focused and consistent voice. Sue Sunderland as the Engagement Lead sets the tone on the audit and leads by example with a clearly articulated audit strategy and commits a significant proportion of her time throughout the audit directing and supporting the team. Association with right clients: We undertake rigorous client and engagement acceptance and continuance procedures which are vital to the ability of KPMG to provide high-quality professional services to our clients. Clear standards and robust audit tools: We expect our audit professionals to adhere to the clear standards we set and we provide a range of tools to support them in meeting these expectations. The global rollout of KPMG’s eAudIT application has significantly enhanced existing audit functionality. eAudIT enables KPMG to deliver a highly

technically enabled audit. All of our staff have a searchable data base, Accounting Research Online, that includes all published accounting standards, the KPMG Audit Manual Guidance as well as other relevant sector specific publications, such as the Audit Commission’s Code of Audit Practice. Recruitment , development and assignment of appropriately qualified personnel: One of the key drivers of audit quality is assigning professionals appropriate to the Authority’s risks. We take great care to assign the right people to the right clients based on a number of factors including their skill set, capacity and relevant experience.

We have a well developed technical infrastructure across the firm that puts us in a strong position to deal with any emerging issues. This includes:

- A national public sector technical director who has responsibility for co-ordinating our response to emerging accounting issues, influencing accounting bodies (such as CIPFA) as well as acting as a sounding board for our auditors.

- A national technical network of public sector audit professionals is established that meets on a monthly basis and is chaired by our national technical director.

- All of our staff have a searchable data base, Accounting Research Online, that includes all published accounting standards, the KPMG Audit Manual Guidance as well as other relevant sector specific publications, such as the Audit Commission’s Code of Audit Practice.

- A dedicated Department of Professional Practice comprised of over 100 staff that provide support to our audit teams and deliver our web-based bi-monthly technical training.

Appendices Appendix 2: KPMG Audit Quality Framework

We continually focus on delivering a high quality audit.

This means building robust quality control procedures into the core audit process rather than bolting them on at the end, and embedding the right attitude and approaches into management and staff.

KPMG’s Audit Quality Framework consists of seven key drivers combined with the commitment of each individual in KPMG.

The diagram summarises our approach and each level is expanded upon.

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Commitment to technical excellence and quality service delivery: Our professionals bring you up- the- minute and accurate technical solutions and together with our specialists are capable of solving complex audit issues and delivering valued insights. Our audit team draws upon specialist resources including Forensic, Corporate Finance, Transaction Services, Advisory, Taxation, Actuarial and IT. We promote technical excellence and quality service delivery through training and accreditation, developing business understanding and sector knowledge, investment in technical support, development of specialist networks and effective consultation processes. Performance of effective and efficient audits: We understand that how an audit is conducted is as important as the final result. Our drivers of audit quality maximise the performance of the engagement team during the conduct of every audit. We expect our people to demonstrate certain key behaviors in the performance of effective and efficient audits. The key behaviors that our auditors apply throughout the audit process to deliver effective and efficient audits are outlined below: ■ timely Engagement Lead and manager involvement; ■ critical assessment of audit evidence; ■ exercise of professional judgment and professional scepticism; ■ ongoing mentoring and on the job coaching, supervision and

review; ■ appropriately supported and documented conclusions; ■ if relevant, appropriate involvement of the Engagement Quality

Control reviewer (EQC review); ■ clear reporting of significant findings; ■ insightful, open and honest two-way communication with those

charged with governance; and ■ client confidentiality, information security and data privacy.

Commitment to continuous improvement: We employ a broad range of mechanisms to monitor our performance, respond to feedback and understand our opportunities for improvement.

Our quality review results

We are able to evidence the quality of our audits through the results of National Audit Office and Audit Commission reviews. The results of the Audit Commission’s annual quality review process is made publicly available each year (http://www.audit-commission.gov.uk/audit-regime/Pages/qualityreviewprocess_copy.aspx) . The latest report dated October 2012 showed that we performed highly against all the Commission’s criteria.

Appendices Appendix 2: KPMG Audit Quality Framework

We continually focus on delivering a high quality audit.

This means building robust quality control procedures into the core audit process rather than bolting them on at the end, and embedding the right attitude and approaches into management and staff.

Quality must build on the foundations of well trained staff and a robust methodology.

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http://www.audit-commission.gov.uk/audit-regime/Pages/qualityreviewprocess_copy.aspx�

http://www.audit-commission.gov.uk/audit-regime/Pages/qualityreviewprocess_copy.aspx�

© 2012 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.

The KPMG name, logo and ‘cutting through complexity’ are registered trademarks or trademarks of KPMG International Cooperative (KPMG International).

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