Agenda and minutes

None.

The Minutes of the meeting held on 1 December 2016 were submitted.

Agreed

To confirm the Minutes of the meeting held on 1 December 2016.

Members considered the latest update of the Corporate Risk Register. There were eight risks identified in the register, all medium.  Since the last update all risks remain unchanged. 

In connection with Risk 7: City Deal, Members were advised that this was heavily reliant on external factors and little action could be taken by the Council to mitigate the risk.    The same could be said for Risk 8: Brexit; that the financial implications of leaving the European Union have a negative impact on the Council’s financial position.

Discussions included the following:

·         Risk 6: Investment in Friars walk Development; the present score of the risk (December 2016) was 12 and it was asked whether this was still a valid score? -  The Head of Finance advised members that it was considered that medium was appropriate.  If there was not an active buyer it would be high.  It is not low as it is in progress.  There were still one or two hurdles to overcome with the buyer but medium looked about right at the current time. 

·         It was not Audit Committee’s role to query the score of the risk but the process around deciding on the score but it was felt that this process was a little bit disjointed and queried whether it was within the current situation? -  The Head of Finance explained that the risk was around the developer being unable to sell.  From a Council perspective he was confident that if the sale did not go ahead it was nothing to concern the Council.

·         How whistleblowing is being picked up in risk? -  It was explained that this is picked up through the process in place and would be discussed at SLT level it felt to be serious enough.  Members’ attention was directed to page 14 of the Risk Register; the Risk Table which highlighted the ongoing process and the wide ranging areas and it was explained that the process is a live one, with Risk officers taking a view on whether the risk is high enough to go on the Corporate Risk Register.  

·         Whether there was a maximum number in connection with risks and were any higher than 16? - It was clarified that the upper number was 25 and the Council tried to focus on the most important areas.   While some risks had been scored at 20 a couple of years ago, at the current time, they were all medium, amber category (16).

Agreed

To note the contents of the Corporate Risk Register.

Members considered a report on the Treasury Management Strategy 2017/18, Prudential Indicators, Investment Strategy and the Minimum Revenue Provision (MRP) policy.  Both the Prudential Code and Welsh Government required Audit Committee to review and consider the Council’s Treasury Management Strategy and Prudential Indicators before they were approved by full Council.

The overarching recommended Treasury Strategy remains unchanged from the current strategy which in summary:

·         Limits the need to actually borrow cash by using the positive cash-flow the Council has to fund capital expenditure funded from borrowing, wherever possible;

·         Borrow and invest in the short-term to manage the shorter term cash-flow requirements of the Council.

In practice the overarching strategy limits the activities of long term borrowing and investments.

The strategies within the report set the Council’s approved borrowing and investment limits, based on planned capital spending.  The report was prepared in line with the Council’s Medium Term Revenue Plan and would be presented to full Council as part of the overall budget report for approval in March 2017. 

During 2016/17 the Council repaid approximately £4 million of borrowing, mainly relating to activities related to the Friars Walk, which are being kept on short-term periods and reviewed regularly – and therefore did not represent any formal repayment but rather the management of the Council’s cash-flow and limiting the external borrowing taken out at any point in time. New temporary borrowing of approximately £20 million was anticipated to be required before the end of 2016/17 financial year.

In December 2013 the Council approved a loan of up to £89.1 million to Queensberry Real Estates (Newport) Ltd (QRE) to fund the building of the Friars Walk Development.  The Council’s own borrowing to make the onward loan was kept separate from the Council’s other borrowing requirements and incurred, as needed, up to a maximum of £89.1 million. Whilst kept separate, the actual borrowing was affected by the Council’s overall cash-flow management.  If the sale was not successful the Council would need to re-finance the scheme which required the current borrowing, maturing up to the end of July 2017 to be re-financed.

Included in the report was a paragraph on the ‘City Deal’ project.  While no formal decision had been made at this stage, any agreement to enter into the ‘City Deal’ would have a significant impact on capital expenditure and the minimum revenue provision.  Figures for this were not included in this report and a further report would need to be brought to Committee when a decision had been made on the scheme.

The Assistant Head of Finance outlined to the Members the basics of the Treasury Management Strategy.

A review of the MRP policy was currently being undertaken.   Currently this was a charge through equal instalments over the life of an asset on a straight line basis.  A review was being undertaken to move from this method, to using the annuity method.  The annuity method still had asset life as its main basis but took into account the time value of money.  Therefore  ...  view the full minutes text for item 4.

Members considered a report on the Internal Audit Section’s progress against the 2016/17 agreed audit plan for the first nine months of the year and information on audit opinions given to date and progress against key performance targets. 

The team currently operated with an establishment of 9 audit staff.  At the start of the year there were 5 audit staff with 4 vacancies in the team.  An Auditor was appointed and started in the team during Q1, a Principal Auditor was appointed in Q2 and started in Q3.

The Section had not been involved in so many special investigations but this had now changed and was involved in a special investigation with half the team involved with the audit and half with the special investigation.

The performance for Quarter 3 2016/17 was compared to the same period for the previous year:-

·         50% (43%) of the audit plan had been achieved so far which was better than last year’s performance and in line with the profiled target of 50%;

·         The promptness of issue of draft report (comparing timescale between finalising all fieldwork and issuing the draft report to management) averages at 14 days (15 days) which was above the target time of 10 days;

·         The promptness of report finalisation (comparing timescales from meeting with client to discuss issues raised in the draft report to issue of finalised report to management) averages 3 days (3 days) which was within the target time of 5 days.

·         Coverage of the plan at this stage of the year was in line with expectations; the target being 50% for Quarter 3, despite there being a reduced audit resource in the team.  The Section had started to get involved with some sensitive and time consuming special investigations.  Although performance may have dipped throughout the year, historically things had picked up the final quarter; this year would depend on sufficient audit resources being available to complete the audit plan.  All key financial systems would be reviewed by year end.

·         53 (51) days had been spent finalising 18 (15) 2015/16 audit reviews; 17 of which had been finalised.

·         A vacancy/secondment provision was taken into account in the planning stage which related to the Chief Internal Auditor’s work with Monmouthshire, a Principal Auditor post and two Auditor posts.

·         Inevitably there would be some overruns on reviews undertaken within the team which might result in not as many reviews being undertaken as were planned for the year, but there had been a significant improvement in this over previous years. 

·         There had been 90% positive feedback from service managers via the evaluation questionnaires and this would continue to be collated throughout the year and fed into the annual audit report for 2016/17.

·         21 jobs completed to at least draft report stage by 31 December 2106 warranted an audit opinion: 4 x Good; 13 x Reasonable, 3 x Unsatisfactory and 1 x Unsound.  Of the 2 community centre accounts undertaken, opinions for both were Unqualified.  Other reports have been completed which did not  ...  view the full minutes text for item 5.

The Internal Audit Unsatisfactory Audit Opinions (6 monthly report) had been deferred until the next meeting 30 March 2017.

Agreed

To note the Work Programme.

Andrew Veale of Wales Audit introduced Gareth Lucey to the Audit Committee and advised that Gareth would be replacing Terry Lewis as the new WAO Audit Manager.

The date of the next meeting was confirmed as 30 March 2017.