Agenda and draft minutes

Audit Committee - Wednesday, 4th December, 2024 7.30 pm

Venue: New Council Chamber - Town Hall, Reigate

Contact: Democratic Services (01737 276182)  Email: Democratic@reigate-banstead.gov.uk

Media

Items
No. Item

31.

Minutes

To confirm as a correct record the Minutes of the previous meeting.

Supporting documents:

Minutes:

The minutes from the meeting held on 11 September 2024 were APPROVED.

32.

Apologies for Absence and Substitutions

To receive any apologies for absence and notification of substitutes in accordance with the Constitution.

Additional documents:

Minutes:

An apology for absence had been received from Councillor Nash, Councillor Harrison attended as his substitute. Councillor Buttironi was not present.

33.

Declaration of Interest

To receive any declarations of interest.

Additional documents:

Minutes:

Councillor Harrison declared two interests; firstly was in receipt of a pension from Deloitte and secondly he was the Chair of the Surrey Pension Fund Committee.

34.

Report of the External Auditor on the 2020-21 Statement of Accounts

RECOMMENDED that the Audit Committee:

(i)            Notes the report from the external auditor (ISA 260) regarding the 2020-21 statement of accounts (Annex 1).

(ii)          Notes the Annual Auditor’s report for 2020-21 (Annex 2)

(iii)         Agrees the Management Representation Letter and that it be signed by the Chair of the Audit Committee and Chief Finance Officer (Annex 3)

(iv)         Approves the statement of accounts for year ended 31 March 2021 (Annex 4)

Supporting documents:

Minutes:

The external auditor presented the key messages from the Financial Statements Audit Report for 2020/21, as outlined on page 21 of the agenda pack. It was noted that the audit work for 2021 had been completed later than usual, primarily due to delays in updating the Council's Fixed Asset Register following recommendations from the 2019/20 audit and the impact of the COVID-19 pandemic. The delay had resulted in the audit being undertaken in 2023 rather than the typical 2021 timeframe.

The auditor confirmed that no significant uncorrected audit adjustments or disclosure deficiencies had been identified. An unmodified audit opinion was issued, with no concerns raised regarding the Council's arrangements for securing economy, efficiency, and effectiveness in its use of resources. The impact of COVID-19 on both the financial statements and the operational arrangements during the period was also considered.

The report included findings from the audit concerning the Council’s control environment, with recommendations made for improvement. Management responses to these recommendations were included in the report.

A member asked for clarification on whether the delays in the audit process were primarily due to the Fixed Asset Register and COVID-19, and whether this would impact future audits.

In response the external auditor confirmed that the delays were mainly caused by the time taken to update the Fixed Asset Register and by the reduced capacity in the finance team due to COVID-19. The auditor assured the Committee that efforts had been made to mitigate these delays.

In response to a member question the external auditor confirmed that while no significant weaknesses were found in the control environment, recommendations had been made for improving certain areas, which  management had agreed to address.

Auditor's Annual Report 2021

The auditor presented the Auditor’s Annual Report for 2021, summarising the financial sustainability, governance arrangements, and the economy, efficiency, and effectiveness of the Council’s operations. The auditor confirmed that no significant weaknesses were identified in the Council’s arrangements across these areas. There were no issues raised in the report, meaning the review had satisfied external audit requirements.

A member sought further clarification on the areas of governance and whether any risks had been identified in these aspects. The external auditor clarified that the governance arrangements were largely in line with expectations.

Letter to Deloitte’s – Management Representations

The Chief Finance Officer introduced the management representation letter to Deloitte, which formed part of the external audit process. The letter confirmed that the statement of accounts was compliant with the relevant codes of practice. This letter was then to be signed by the Chief Finance Officer.

Review of the Annual Financial Report

The Committee reviewed the narrative report, the Statement of Accounts, and the Annual Governance Statement for 2021. Several questions were raised, including clarification regarding the reconciliation of the quarter 4 budget outturn report with the consolidated income and expenditure statement contained in the Statement of Accounts. The Chief Finance Officer agreed to provide a reconciliation.

In response to a member question regarding the subsidiary companies the Chief  ...  view the full minutes text for item 34.

35.

Report of the External Auditor Backstop Planning Report

That the Audit Committee note the External Auditor Backstop Planning Report.

Supporting documents:

Minutes:

The External Auditor introduced the planning report for the 2021-22 and 2022-23 audits, as presented in the document on page 251 of the agenda pack. The report outlined the key points of the planning document, noting that local authorities were required to publish their financial statements in sufficient time for appropriate consultation periods. This would allow the necessary work to be carried out to issue the required disclaimed opinions ahead of the deadline of 13th December.

The planning document highlighted the limited time available for undertaking the usual audit work for these two years. As a result in external audit delays nationally Central Government implemented a backstop date of 13 December 2024 which covered audits to the 2022/23 financial year. The report specified the areas where work had been carried out, although it acknowledged that full risk assessment and audit testing had not been completed due to time constraints due to the backstop arrangements. Further details on the required opinion were also provided, with a follow-up in the subsequent ISA 260 report and the auditor's annual reports.

A member raised several questions regarding the financial statements, particularly on page 259 of the pack (page 9 of the report). He inquired about the analytical procedures used in reviewing the financial statements, asking whether these involved understanding material movements across the statements and notes. He also questioned the process of agreeing primary statements and supporting working papers, asking whether this extended to the notes and other disclosures in the financial statements. Lastly, he sought clarification on the disclosure checklist, enquiring if it covered the notes and all other account requirements.

The response explained that the analytical procedures involved reviewing the financial statements in light of the authority's context, including minutes and management discussions, to identify anything unusual. It was confirmed that both the primary statements and the notes were agreed to the working papers, including the checklist to ensure all requirements were met.

It was further queried if the audit process involved reviewing governance minutes during the year, which was confirmed as part of the process to update the understanding of the authority's developments.

Clarification was requested on the scope of a disclaimed audit opinion, noting that detailed testing was not completed in the same way as in a full audit. A more detailed explanation was requested of what was not covered in this audit compared to a typical audit.

It was explained that the key elements not covered included a full risk assessment of significant risks impacting the financial statements and detailed testing at the transaction level for balances. While an overall review and analytical procedures were performed, including understanding movements from the prior year, the usual in-depth audit testing, including sample testing of balances and notes, had not been conducted.

RESOLVED that the Audit Committee notes the External Auditor’s Backstop Planning Report.

36.

Report of the External Auditor on the 2021-22 and the 2022-23 Statement of Accounts

RECOMMENDED that the Audit Committee:

(i)            Notes the report from the external auditor (ISA 260) regarding the 2021-22 and the 2022-23 statement of accounts (Annex 1).

(ii)          Notes the Annual Auditor’s report for 2021-22 and 2022-23 (Annex 2)

(iii)         Agrees the Management Representation Letters for 2021-22 and 2022-23 and that they be signed by the Chair of the Audit Committee and Chief Finance Officer (Annex 3)

(iv)         Approves the statement of accounts for year ended 31 March 2022 (Annex 4)

(v)          Approves the statement of accounts for year ended 31 March 2023 (Annex 5)

Supporting documents:

Minutes:

The Committee discussed the report on the 2021-2022 and 2022-2023 financial statements. The Deloitte team outlined the key points from their report, confirming that they had followed the procedures set out in the planning report. They highlighted that material adjustments were identified during their review of the draft financial statements. These adjustments were addressed by management, with the corrected misstatements being listed in the report. The auditors recommended that management performed certain minimum procedures to ensure reliable financial reporting, and those were detailed in the report.

The auditors stressed the importance of a strong control environment for the preparation and review of financial statements to ensure timely and accurate financial reporting going forward. They also explained that their audit of internal controls could not be fully performed, and the evaluation of these controls would need to be addressed in the future. The auditors also completed their work on value for money, as outlined in the Auditor's Annual Report. The Committee was informed that external audit responsibilities would transition to Grant Thornton for the 2023-2024 financial year.

One of the points raised was about the corrected misstatements listed on pages 20 and 21 of the report. A member of the Committee asked whether these misstatements were a cause for concern. The Deloitte team clarified that these differences were identified between the working papers and the draft accounts and had been corrected. The Chief Finance Officer also confirmed that the misstatements had been corrected.

A member raised a question regarding the number of misstatements identified in the 2022-2023 accounts compared to the 2020-2021 accounts, particularly concerning whether some of the accounts had been prepared by someone else. The Chief Finance Officer acknowledged that there had been staff changes and a change in the CIPFA code, which could have contributed to the misstatements, but reassured the Committee that steps would be taken to ensure that such mistakes were minimised in the future.

The Committee then considered the Auditor's Annual Report for 2021-2022 and 2022-2023. The report, starting on page 305 of the pack, provided key messages about the audits for both years. The Deloitte team explained that they anticipated issuing audit reports with a disclaimer of opinion on the financial statements, in accordance with national provisions. However, they noted that no significant weaknesses were identified in the three key areas of financial sustainability, governance, and improving economy, efficiency, and effectiveness. These areas were covered in more detail in the report, and no significant weaknesses were flagged, leading to a clean position from a value-for-money perspective for both years.

The Chair remarked that, given the disclaimer on the audit, it was difficult for the Committee to provide detailed scrutiny of the financial statements. He also noted the annual letter to Deloitte, which appeared similar to the previous year despite the disclaimed audit. The Chief Finance Officer explained that this was standard practice under the CIPFA code, and no further changes would be made.

The Committee proceeded to discuss the annual accounts for the two  ...  view the full minutes text for item 36.

37.

Implementation of the Global Internal Audit Standards

That the Audit Committee note the pending implementation of the Global Internal Audit Standards and the overview provided in the report and at Annex 1 and 2.

Supporting documents:

Minutes:

Neil Pitman, Head of Southern Internal Audit Partnership (SIAP), explained that the report provided an overview of the new Global Internal Audit Standards, to which public sector audit functions will have to comply from 1 April 2025.

 

SIAP had carried out a gap analysis had against the Global Standards. The aim of this report was to keep the Committee fully appraised of the changes and it was noted that SIAP would be fully compliant with the Global Standards.

 

RESOVLED that the Audit Committee notes the pending implementation of the Global Internal Audit Standards and the overview provided in the report and at Annexes 1 and 2.

38.

Internal Audit progress report (October 2024)

That the Audit Committee notes the Internal Audit Progress Report (October 2024) at Annex 1.

 

Supporting documents:

Minutes:

Natalie Jerams, Chief Internal Auditor of Southern Internal Audit Partnership (SIAP) explained that this report provided an update on the delivery of the 2024/25 internal audit plan and update on live reports.

 

Page 642 of the agenda pack showed the percentage of work in progress. 11% of the audits had been completed. Page 643 of the report showed the status of management actions, and this showed that 3 were overdue. It was noted that all management actions were followed through to completion. It was stated that the payroll action shown in annex 2 had now been completed.

 

In response to a member question, it was explained that the capital programme audit looked at governance and any slippage. Officers were putting forward an action plan regarding Marketfield Way and this would be brought back to the Overview and Scrutiny Committee.

 

In response to a question from the Independent Member, it was explained that the Policy Officer monitored management actions once they had been completed. Those audits that had a either no assurance or limited assurance would be re reviewed. It was asked how often were management actions prematurely closed. The Chief Internal Auditor was unaware of any but agreed to check back.

 

It was noted that there were a number of audits to complete, and a progress report would be brought back to the additional Committee being held in February 2025.

 

RESOLVED that the Audit Committee notes the Internal Audit Progress Report (October 2024) at Annex 1.

39.

Internal Audit 2024/25 (Quarter 4)

That the Audit Committee approves the Internal Audit Plan 2024-25 (Q4).

Supporting documents:

Minutes:

Natalie Jerams, Chief Internal Auditor of Southern Internal Audit Partnership (SIAP) stated that the report referred to the quarter 4 plan for 2024/25.

 

Following a request from the Committee, pages 664 and 665 of the report mapped out the audits against the Council’s strategic risks.

 

Annex 2 of the report gave the updated horizon scanning which informed planning and discussions.

 

A member suggested that due to changes in emergency planning arrangements, this should be considered as an audit topic in the next year and consideration should be given to looking at local government reorganisation. SIAP would consider these suggestions.

 

The Chief Internal Auditor was thanked for her approach to horizon scanning against the risk register.

 

RESOLVED that the Audit Committee approved the Internal Audit Plan 2024 -25 (Q4) at Annex 1.

40.

Risk Management Quarter 2 2024/25

That the Audit Committee notes the Q2 2024/25 update on risk management provided in the report and associated Annex 1 and Part 2 exempt Annex 2 and make any observations to the Executive.

Supporting documents:

Minutes:

The Head of Policy, Projects and Performance stated that Risk management was part of the usual business of the Council and at an operational and management level takes place on a day-to-day basis.

 

The role of the Audit Committee when it came to Risk Management was to provide independent assurance over the adequacy of the risk management framework.

 

This report provided members with an update on risk management in Quarter 2 (July to September 2024). Strategic risks were presented at Annex 1 of the report; red rated operational risks were at Annex 2 (exempt).

 

In Quarter 2, no new strategic risks were identified, and no strategic risks had been identified for closure.

 

As well as reporting the strategic risk register to this Committee, updates were also provided on red rated operational risks.

 

In Quarter 2 of 2024/25 there was one red rated operational risk. One operational risk rated red last quarter has now been closed.

 

Observations from the last Committee meeting had been considered and were addressed in the covering report.

 

There had been media coverage regarding devolution however the White Paper had not yet been released. Once it had been released it would be considered if this needed to be reflected in the Strategic Risk Register.

 

A member raised concern regarding the categorisation of SR9 (Local Plan). The new Government wanted to make significant changes to the NPPF and as a result expected this risk to be heightened. It was noted that this had been raised at the previous meeting of the Committee and was addressed in paragraph 15 of the covering report. Given that changes had not yet been confirmed it was felt (in consultation with the risk owner) that currently no change was required yet. The scoring of this risk would continue to be monitored.

 

RESOLVED that the Audit Committee notes the quarter 2 2024/25 update on risk management provided in the report and associated Annex 1 and Part 2 exempt Annex 2 with observations being made to the Executive.

41.

Update of the Code of Corporate Governance

Supporting documents:

Minutes:

The Head of Legal and Governance explained that this report set out the update to the council’s Code of Corporate Governance. It was important to review this document and make improvements. Several changes had been made and this would also aid accessibility.

 

RESOLVED that the Audit Committee adopts the amended Code of Corporate Governance at Annex 1.

42.

Audit Work Programme 2024/25 and Action Tracker

To discuss and agree any changes to the schedule for Audit Committee’s Work Programme 2024/25 and note the Action Tracker.

Supporting documents:

Minutes:

It was stated that an Internal Audit update would be added to the work programme for February 2025.

 

RESOLVED that the Audit Committee’s work programme for 2024/25 and the action tracker be noted.

43.

Exempt Business

RECOMMENDED that members of the Press and public be excluded from the meeting for part of item 10 of business under Section 100A(4) of the Local Government Act 1972 on the grounds that:

 

7. Information relating to any action taken or to be taken in connection with the prevention, investigation or prosecution of crime.

Additional documents:

Minutes:

RESOLVED that members of the press and public be excluded from the meeting for part of agenda item 10 (Risk Management - Quarter 2 2024/25) under Section 100A(4) of the Local Government Act 1972 on the grounds that:

It involves the likely disclosure of exempt information as defined in paragraph 7 of Part 1 of Schedule 12A of the Act.

 

7. Information relating to any action taken or to be taken in connection with the prevention, investigation or prosecution of crime.

44.

Any Other Urgent Business

To consider any item(s) which, in the opinion of the Chair, should be considered as a matter of urgency – Local Government Act 1972, Section 100b (4)(b).

 

Note: Urgent business must be submitted in writing but may be supplemented by an oral report.

Additional documents:

Minutes:

There was none.