Agenda and minutes

Councillors K. Thomas, L. Lacey and J. Guy

None

It was requested by the Audit Manager that on Page 5 of the minutes from 6 June 2019, for paragraph 6 and paragraph 8 to be deleted.

The Chair commented on page 6 of the minutes under the heading of Internal Audit Unsatisfactory Audit Opinions in relation to the decision by the Committee to call in the Chief Education Officer on the Internal Audit of School Trips and Visits resulting in a second Unsatisfactory opinion, and also the decision by the committee to call in the Headteacher and Chair of Governors of Caerleon School regarding the Internal Audit Unsatisfactory opinion. It was agreed to delay this until October’s Audit Committee as a result of advice provided by the Chief Internal Auditor, that September was a very busy time for schools with the beginning of a new term therefore it was agreed for those individuals to be called in to Octobers Audit Committee.

The Chair also commented on page 9 of the minutes under the heading Annual Governance Statement Draft 2018/19, that the Letter response from the Chief Executive following Unsatisfactory Audit Opinions within City Services needed to be referenced in the Annual Governance Statement and this needed to be actioned as soon as possible.

It was questioned as to whether the CIPFA Norse report was due to be discussed during this meeting and was the report available for Committee members to view. It was confirmed that a draft report had been seen by the Chief Executive and the Leader of the Council and that the report would be made available for October’s committee.

Agreed:

To confirm the Minutes of the 6 June 2019

The Committee was requested to view the Audit Enquiries Letter 2018/19. It was explained by the WAO Audit Manager that the team was required to consider the risks of material misstatement due to fraud and that they also needed to understand how the Audit Committee exercises oversight of management processes.

There was a standard check list to be completed and responses were compiled from Management and from the Audit Committee. 

It was confirmed that no areas were affected.

The Chair commented on page 4 question 2, that it was the same response as question 5 but was the question put to a different audience? The Chair asked whether the team were aware of any incidents (page 19 of the report) and whether they were happy with the response. 

The WAO Audit Manager stated that they were happy to confirm verbally and that a response could be added which the Chair requested as that was an oversight.

The Chair commented that a cover note was needed to state what was expected of the Audit committee.

The Committee was shown a presentation by the Senior Finance Business Partner.

Main points:

On the 6^th of June 2019 the draft accounts were presented to the Audit Committee and the accounts went on display for the public from the 26^th of June to the 23^rd July 2019.

The intention was to issue an unqualified audit report on the financial statements.

There were two uncorrected misstatements:

1.         Actuaries have had a look at the impact on the pension fund and there was an understatement of pension liability by £2.562m arising from the McCloud Judgement. 

2.         Accounting treatment of loan modifications under IFRS 9

There was an increase in ear marked reserves and both of these issues were technical in nature and non-cash.

1.         For 2018/19 the final date on which the accounts had to be signed and dated was brought forward from the 30^th June to 15^th June with an audited statement completed by the 15^th September. This will be the same for 2019/20.

2.         From 2020/2021 the draft statement of accounts would need to be completed by the 31^st May to be signed by 31^st July. This year the Statement of Accounts were signed by the Head of Finance on the 7^th June so within the deadline however improvements needed to be made.

The Letter of Representation was to be signed by the Chair and Head of Finance to authorise this and the Audit Committee was to authorise the Chair and the Head of Finance to sign the Statement of Accounts.

The published accounts would be on the website on the 15^th September 2019.

Questions:

·                A Member asked a question regarding pension provisions and whether the pension liability was rising and whether it affected Newport Transport Limited and the Education Achievement Service (EAS).

It was explained that the EAS wouldn’t be part of this and that it would have its own deficit as this was not part of Newport Council’s. In relation to EAS, the percentages that Newport City Council receives we do not put EAS as part of our joint account, it was the same in nature and would not affect the accounts. EAS were their own body in terms of pension evaluation.

In relation to contingent liabilities it was explained that the Council acted as a guarantor and the liability had not arisen. The Chair commented that this was not quite correct, and the event had been determined by the Supreme Court and if it was a provision then it could be argued and if you knew what the value was providing, then a contingent could be made.

There was a difference of interpretation in the materiality perspective. The Chair also commented on the accounts and the recorded £2.4 million underspend.

The Assistant Head of Finance commented that this would be reversed out through the pension reserve with  ...  view the full minutes text for item 5.

The Committee were requested to view the Audit of Financial Statements Report   2018/19 which was an opinion on whether the financial statements gave a true and fair view of the financial position of Newport City Council and Newport City Council Group.

Main points:

·                It was the intention to issue an unqualified clean audit report on the financial statements once a Letter of Representation was provided.

·                The Committee was asked to view page 184; Appendix 3 in relation to the Summary of Corrections made to the draft financial statements and it was noted that although there were a lot of areas to cover none of the corrections impacted on the general fund balance.

·                On page 173 the McCloud judgement was nonmaterial and didn’t affect them but needed to be brought to attention.

·                There was also one other issue on page 174, during a review of related party transactions this year it was found that Council staff did not receive declarations of interest from the majority of Council Members as part of the work over related party disclosures of cases and there was nothing disclosed on party accounts.

The Chair asked whether Members should be contacted. The Assistant Head of Finance confirmed thatFinance would be liaising with the Democratic Services Team. The Chair enquired as to whether there was anything the Audit Committee could do, and it was noted that this was an opportunity to nudge the process along.

Agreed:

·                For the Head of Finance to draft a letter to all Members of the Council that improvements were needed in that respect and that Finance would work with Democratic Services department and for all Members to engage with this.

·                It was confirmed by the Head of Finance that the letter would set out what the problem was and what Members should do and what was required. 

The Chair commented on the £6.2million value of correction on page 184 and queried whether this was above the threshold level and why it was not picked up over the year. The Senior Finance Business Partner confirmed that this would be changed as to how it was accounted for in the ledger and that this was an oversight that would not occur again. 

It was commented that Capital had been resolved as it seemed to always have been an issue and that there was nothing wrong with the figures but the problem was that there were a lot of errors and the Chair enquired as to whether there was not enough attention to detail as it was a continuing issue. 

The Head of Finance stated that there was a problem with resources and commented that there was a lot of information to get through and with the current climate, a reasonable job was being done in the time available but things did slip in the capital area but that there was a need to be pragmatic. 

The Chair commented that maybe a lot more assurance could be given during the year and  ...  view the full minutes text for item 6.

The Committee was requested to view the progress against the Internal Audit Plan 2019/20. The report was to inform Members of the Council’s Audit Committee of the Internal Audit Section’s progress against the 2019/20 agreed audit plan for the first 3 months of the year. The Audit Manager confirmed that the team currently operated with 8 audit staff and at the start of the year there were 7 audit staff.

The main points were as follows:

·                The Internal Audit Team was externally assessed a couple of years ago in 2017/18 and was found to be generally compliant with the Public Sector Internal Audit Standards (PSIAS).

·                The Audit Sections performance was measured against planned work and in the 1^st quarter 2019/20; 18% of the audit plan was completed, as shown in Appendix A. The Audit Manager confirmed that the team were well on target in relation to performance indicators.

·                41 days had been spent finalising twenty two 2018/19 audit reviews; 12 of which have now been finalised.

·                In relation to Quality Control service managers were sent an evaluation questionnaire and generally there had been positive feedback from service managers.

·                Appendix B provided details of audit opinions issued so far for Quarter 1 and Appendix D provided a definition of audit opinions currently given.

·                Two jobs completed to at least draft report stage by 30 June 2019 merited an audit opinion where 1 was Reasonable and 1 was Unsatisfactory.  Other work completed related to the Annual Governance Statement, National Fraud Initiative (NFI),

·                In relation to Service Management Responsibility there had been some training undertaken with managers as they were responsible for addressing any weaknesses identified in the systems.

·                It was reiterated that the Appendices on page 200 summarised the performance indicators which showed that the team were ahead of profile targets.

·                On page 201 under Management Information for 2019/20 Q1, 2 audit opinions were given, with 1 Reasonable and 1 Unsatisfactory with 3 Unqualified which related to Grants. 

·                Page 202 summarised Non-Opinion work 2019/20 Q1 where Civil Parking Enforcement had a High-Risk Rating/Priority.

·                Appendix D summarised the Opinion Definitions from Good to Unsound.

Questions:

·                A Member of the Committee commented on Civil Enforcement Parking and why the risk rating was high. It was confirmed that this project was very important and had very tight timescales with the initial start date of the 1^st July 2019 and it also had a few teething problems.

·                In relation to the unsatisfactory opinion a Member questioned as to whether the Committee would be informed of the outcome. It was confirmed that the follow up would appear in next year’s audit plan and would be brought to the Audit Committee in 6 months in January’s Committee. It was commented that it was a long period of time for an unsatisfactory opinion.

Confirmation was given that the follow up by the Audit team would not be for 6 months or so to get an update, as timescales were sought as well as management actions  ...  view the full minutes text for item 7.

Members were requested to view Standing Order 24. The Audit Manager confirmed that there had been one urgent decision taken by the Cabinet Member for Regeneration and Housing.

·                The reason for urgency was that the Repayable Funding awarded by Welsh Government needed to be claimed in full by the 21 March 2019 and if it had not been claimed then it would have ceased to have been available to Newport City Council after this time. 

·                Appendix A on page 210 contained a timeline of events which stated that confirmation of the funding was not received until the 5^th March 2019. 

·                The Chief Internal Auditor had provided comments which stated that appropriate justification for the urgency of the decision was confirmed and was included within the report. 

The Chair requested for the Audit committee to confirm as to whether they were happy to accept this.

The funding was made available by Welsh Government to regenerate the town centre to give to businesses etc and Welsh Government provided funding to the service area late in March, so the report was urgent.

A Member asked as to who carried the liability of a non-repayment and it was confirmed that charges were held by Newport City Council, so it was a risk if nothing was repaid. It was also questioned as to whether there was a maximum to the loan, and it was confirmed that Welsh Government did not put a maximum on it but the Council would, in terms of looking at each application and it was a case by case basis.

A member asked that historically would the Council know how many companies would not pay back and was this an opportunity for fraud.

The Chair commented that if for example £50,000 was loaned but the return was only £20,000 then this was subject to risk. It was confirmed by the Assistant Head of Finance that the risk would be assessed and so far, the risk was quite low and so far, none had defaulted. If the Council only take out a certain amount of money and do not pay back the loans are open ended.

Admin fees on the loans were questioned by a Member and it was confirmed that some schemes do charge these fees, and some do not, and the Regeneration team would have to assess this.

Agreed: The Committee noted and endorsed the report.

17 October 2019