Agenda and minutes

None

The Minutes of the meeting held on the 28 September 2020 were accepted as a true record.

The Chair reiterated for the Members of the Audit Committee that the present Committee was an Audit Committee, not a risk Committee and that the Committee was there to review processes undertaken by Newport City Council.

The Head of People and Business Change presented the report to the Audit Committee stating that the report for Quarter 1 highlighted the key areas that were being worked on such as the Covid 19 pandemic and Brexit preparations, which both featured heavily.

The report highlighted some changes to the previous risk report with 6 new risks which were not all new, some of these risks escalated to become part of the Risk Register.

Key points: 

·       There were 57 total risks recorded.

·       Out of the 57 risks recorded, 19 of these were considered to have a significant impact on the achievement of the Council’s objectives.

·       Out of the 19 risks, 1 was a completely new risk and 5 escalated risks were from the service areas risk registers which was pressure on Adult Community Services, pressure on the delivery of Children’s Services, cyber security, pressure on Homelessness and Housing all primarily driven by Covid 19.

·       A new risk emerged which was Ash Die Back Disease.

·       Covid 19 was previously at a risk of 20 and was escalated to a risk of 25.

·       Balancing the Councils medium term budget also increased as well as In year Financial Management as a result of the Covid 19 pandemic.

·       City Centre security and safety also saw a reduction in risk as non-essential retail was closed which minimized the risk.

·       There was a change in Newport Council’s Property Estate due to remote working and a reduction in the Climate Change risk due to Council staff working remotely which had reduced the environmental impact due to changes in air quality.

The Chair questioned as to whether Capital spend was included in the Financial Management Risk, which had increased from 3 to 9. The Assistant Head of Finance confirmed that the In Year Financial Management looked at the revenue budget, and Capital in the future would have an impact on the medium term financial plan. The Chair questioned as to where Capital was picked up as over the last 5 to 6 years there had been a 20-25% underspend on Capital every year and stated that Covid should not be a reason for Capital spend not to be undertaken.

The Assistant Head of Finance confirmed that Capital spend was constantly monitored alongside MTFP as a risk, MTFP has Capital finance on it and was identified as part of the MTPF on the Corporate Risk Register as a specific risk but not the overall slippage.

The Head of Finance stated that this slippage was individual to individual projects as if a school had to be built by a certain date then this was an individual risk.

            Questions: 

·       Councillor Thomas stated that it was unclear as to the insight on the risks and how officers were mitigating risks. In relation to the Ash Die  ...  view the full minutes text for item 3.

The Chief Internal Auditor presented the report to the Committee and explained that this was a report that was a regular item on the agenda intended to provide the appropriate level of assurance. In September 2020, Committee Members approved the revised audit plan for the remaining 6 months of the financial year starting in October.

The Chief Internal Auditor stated that he wanted to make Members aware of the work that the Internal Audit team had been involved with in the first 6 months of the year due to the impact of Covid 19, as it was not possible to complete much of the audit work on the original audit plan for 2020/21, due to many service areas having more pressing priorities. The team was involved with extensive counter fraud work in relation to the business grants issued by Welsh Government along with supporting business grants administration and Track Trace & Prevent (TTP).  Some audit opinion related work was undertaken where possible and this was shown in the Appendix.

The Chief Internal Auditor referred the Committee to Appendix A which contained information on the proportion of the original audit plan that had been achieved.

Key Points:

·       Based on the original plan 24% of planned audits had been completed.

·       There was a quarter-by-quarter comparison and a year on year comparison. Progress as at Quarter 2 had been affected significantly by Covid 19 in 2020/2021.

·       Appendix B identified the individual Audit jobs undertaken and the corresponding opinions issued as a result of the audit work: the table showed 1 Good Opinion, 3 Reasonable, 1 Unsatisfactory and no Unsound opinions during the first 6 months of the year.

·       The non-opinion work, which included providing financial advice to all service areas of the organisation, completion of the Annual Governance Statement and extensive counter fraud work as a result of Covid 19 business grants.

Questions:

·       Councillor Whitcutt referred to paragraphs 9 and 10 on page 48 of the report, which referred to the pandemic and the audit team being unable to complete all planned work and had to change the way they operated. They referred to paragraph 14, which dealt with the knock on effect and paragraph 27 where it stated Heads of Service and service managers were responsible for addressing any weaknesses identified and demonstrated this by incorporating their agreed actions into the audit reports. Councillor Whitcutt questioned as to whether there was an effect on the Committee’s monitoring function and does it affect the ability of service managers to review operational issues with reference to Audit.

The Chief Internal Auditor stated that this would have an impact on the Audit Committee as Internal Audit could only complete a certain number of audits in a year, given the resources, which had been reported in the plan. The Chief Internal Auditor stated that it was his role to also provide assurance to the Committee in terms of control environment, risk management and governance across the whole organisation. A revised plan was created on that basis to  ...  view the full minutes text for item 4.

The Assistant Head of Finance presented the report to the Audit Committee and explained that the report informed the Committee of Treasury activities undertaken during the period for the first half of the year to the 30 September 2020. The report confirmed that the Council was following its strategy of maintaining investments to a minimum value rather than taking out new long-term borrowing. The Council was also minimising its cash holding as interest rates were very low during this period so investments were being kept to a minimum.

The Assistant Head of Finance requested Committee Members to view Table 2 on page 68, which contained a good summary of the borrowing and investment position of the authority. It showed that borrowing since the end of the financial year 31 March 2020 had reduced by £17.1 million and investments had increased by £15.7 million meaning that there was quite a big decrease in net borrowing from £153.8 million to £121.1 million in the first half of the year.

It was explained that at the end of the financial year there was some extra borrowing to assist with business grants going out to businesses prior to Welsh Government providing financial assistance. Welsh Government subsequently reimbursed this and the borrowing was repaid.

In terms of the investments levels increase this was due to the revenue support grant provided by Welsh Government, which was front-loaded in the first couple of months to help local authorities with their cash flow.

The main priority for investments was security so investments were on a very short term to minimise risk so the income returns were very low due to the current situation.

The Assistant Head of Finance also mentioned cash flow as Welsh Government was able to assist in the increase of costs as they assisted with hardship claims and reimbursement on any additional business grants so there was no big increase in borrowing. Welsh Government had largely supported authorities so there was no big increase in borrowing.

Cash would now decrease and investments would drop so borrowing may need to occur in line with the Treasury management strategy. 

The Chair questioned that in January 2021; would the strategy document be presented to the Audit Committee for comments and asked whether it would provide a guidance as to what the level of borrowing should be rather than what it is. This was confirmed by the Assistant Head of Finance.

The Head of Finance confirmed that this was not the first time the Committee had commented on the Councils level of borrowing which was reaching a high level and the current capital programme would increase which involved borrowing over the next 2 to 3 years. In conjunction with this, internal borrowing had reached capacity and this was not for new expenditure so there was a pressure there. In addition, it was explained that Councils funding was low and there was uncertainty over future funding as the UK was currently in a lot of debt at present.

The Head  ...  view the full minutes text for item 5.

The Chief Internal Auditor explained that Cabinet Members could put through reports urgently and the purpose of this report was to provide assurances to members that these decisions had been fully justified and were therefore appropriate.

There are two reports relating to School Admissions and NNDR have been identified as being urgent through the democratic process in quarter 1 of 2020/21.  The NNDR report was in relation to Welsh Government’s decision on business rates due to Covid -19.

The Chief Internal Auditor stated that they viewed the reports were reviewed to make sure that there was an appropriate justification given to the decision making for the urgency and was documented within the report. Often urgent decisions were taken this way as if there was no time for consultation with other members of the Council and therefore there would need to be an appropriate justification for doing so.

The Chief Internal Auditor requested members to view the table on page 77 and in particular, the Chief Internal Auditor comments on the right hand side. The first report on the table was in relation to School Admissions in relation to the change of catchment. It was an urgent decision but there was no justification for the need of urgency stated in the report. Normally there were timelines would be provided but this was not the case with this report. However, the report had gone out to stakeholders and all members as it related to a school admissions issue. Although there was no justification provided, the Chief Internal Auditor explained that they he deemed the decision as satisfactory as members saw the original report and had an opportunity to commented on it. Therefore they felt no call-in was needed.

The Chair agreed that this was satisfactory and there were no comments from any members of the committee.

In relation to the NNDR report, the Chief Internal Auditor stated that there was appropriate justification for this clearly stated in the report, guidance from Welsh Government came through on the 18^th March 2020 and the scheme had to be implemented as close to 1st April 2020 as possible. Papers were also attached for members to look at in detail. The Chief Internal Auditor also deemed the report as justified and no call-in was required.

Agreed:

The Audit Committee were satisfied with the content of the report.

The Chair stated that the Audit Committee had requested for a call in for Gwent Music and there had been an email response provided rather than an attendance at Committee as parties in question could not attend until January 2021.

The Chair expressed their disappointment that there was no attendance from the Head of Service as the meeting had been moved to accommodate attendance.

The Chief Internal Auditor stated that one Head of Service had stated that they could not attend the changed committee date and the other had requested their attendance be delayed until Spring 2021.

Therefore, the Audit Team had put together a template, which was a briefing note format so assurances could be provided to members so they could be reassured that issues were being addressed.

Within Gwent Music there was a response received stating that most of the staff were furloughed from March 2020 so could not respond to all issues raised in the audit report. The key issue was the stock control of musical instruments. This was not a second unsatisfactory audit opinion but members asked the question due to concerns.

A template was set up to give an overview of the situation to provide assurance that action would be taken against the agreed action plan. It identified the weaknesses identified as part of the audit report and it identified what the manager agreed to implement to make the improvement along with timescales. The Audit team would be going back to review this to make sure changes had been made and this would be reported back to the Audit Committee in due course.

The Chair requested that the Committee receive an update in January 2021 as there was still an issue around tracing musical instruments and in particular what would happen to the lost item. 

Action:

For the agenda item to be reviewed at January’s 2021 Audit Committee.

The Chief Internal Auditor presented the report to the committee stating that this was an audit on SGO/Kinship payments carried out some time ago which was unsatisfactory in its opinion. The Audit team had gone back and followed up the original audit, which resulted in a second Unsatisfactory opinion; this was the reason it was brought to Audit committee. Members then decided to call in the Head of Service and the manager to give assurances that issues would improve as a third audit visit would be required.

Information had been provided for the Committee with a background on the situation. This was a team that should have been set up but this did not happen effectively and issues identified previously were not addressed. The Chief Internal Auditor explained that the audit team could not therefore go back to that team and re-audit the situation as no progress had been made since the previous audit. An action plan was in place with timescales and management responsibilities to address the situation.

 Questions:

·       Councillor Thomas asked had there been national guidance on SGO payments and when did NCC implement it.

The Audit Manager confirmed that there was national guidance and there were issues about calculation of payments identified locally. The broader issue was how things were structured within the service to deal with payments.

·       Councillor Thomas expressed concern around the payments situation, and explained that the background circumstances in these cases were very often tragic as often grandparents have the SGO role and it was not easy. Financial support was then needed as those children often had special needs and Councillor Thomas stated that they were pleased audit would look further at this.

The Audit Manager confirmed that it was in the audit plan to go back again and that some progress had been made following the original audit. There had been a big change in the structure of the service area in terms of delivering support to families. There was new management in place and this would feed through into the subsequent audit. 

Councillor Thomas questioned the agreed management action on page 165 as the ‘By When’ action stated immediate and was this immediate from 2018 or immediate from now.

The Chief Internal Auditor confirmed that this action was immediate from date of discussion so it would be the date of the report and not 2018. Councillor Thomas stated that it would be useful to have that explained on the report for future reference, which was agreed by the Chief Internal Auditor.

Councillor Whitcutt stated that it was fair to the Head of Service that it was a difficult time at present in that service area and that the service manager was a conscientious person and would have attended if they would have been able to.

The Chair stated that taking the impact of Covid 19 into account the papers were fine to be left as they were at this point as issues were also moving in a positive direction.

Councillor Thomas  ...  view the full minutes text for item 8.

The Assistant Head of Finance stated that the statement of accounts had been brought to Audit Committee for sign off in September and they were now published on the Councils website and were signed off by Audit Wales. A review had also been completed on what could be learned from the previous process. This year was even more of a challenge as it was the first year that the team had to work remotely so ideas were put forward to improve that process. Meetings have been held with Audit Wales on improving the process, as there was technology like Microsoft Teams that could be utilised to share data etc.

It was confirmed by the Assistant Head of Finance that the audit dates would be brought forward next year and the draft deadline would be the 31^st May 2021 and the audit deadline would be the 31^st July 2021. 2021 would also become the first year that the deadlines would become statutory and the 31^st July would become the final date for the accounts to be prepared. 

The ISA 260 report was also taken on board in relation to the statements and misstatements from Audit Wales and the team would be putting in robust quality control and some assurance measures.

The IFRS 16, which was a change in the leases accounting policies, was a resource issue in that there was a change in the leasing policy across all the authorities. The implementation of that would probably take some time. The team were working alongside Audit Wales on delivering the implementation, which was due in 2021/2022 and would coincide with the teams work.

      Agreed:

      That the report be noted and approved by the Council’s Audit Committee.

The Work Programme was approved by the Council’s Audit Committee.

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