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COMMITTEE MEMBERSHIP:

Councillor Timothy Murtagh (Chair), Councillor Shital Manro (Member), Councillor Kamaljit Nagpal (Member), Councillor Mik Sabiers (Member), Councillor Anthony Young (Member)

Mr Tommy Hyun (Independent Member)

 

 

VIRTUAL MEETING - LINK TO VIEW

This meeting will be a virtual meeting and therefore will not take place in a physical location following regulations made under Section 78 of the Coronavirus Act 2020. This meeting can be viewed by following this link:

LINK HERE

 

 

1 Apologies for Absence and Substitutions

To note any apologies for absence and substitutions.

 

1

Apologies were received from Councillor Sabiers, with Councillor Mason as his substitute, and from Councillor Nagpal.

 

2 Urgent Matters

To consider any urgent matters arising since the dispatch of the agenda that the Chair has agreed should be considered at the meeting.

 

2

There were none.

 

3 Declarations of Interest

To note any declarations of interest made by members.

 

3

There were none.

 

4 Matters to be Considered in Private

To determine whether items contain information that is exempt from disclosure by virtue of Part 1 of Schedule 12A of the Local Government Act 1972.


4

Agenda Item 13 contained information that was exempt from disclosure by virtue of Paragraphs 3 and 5 of Part 1 of Schedule 12A of the Local Government Act 1972.  The Committee went into private session to discuss the exempt information provided.

 

5 Minutes

To approve as a correct record the minutes of the meeting held on 25 November 2020.

 

5

RESOLVED:

 

That the minutes of the meeting held on 25 November 2020 be agreed and signed by the Chair, as a true and correct record.

6

Bridget Uku, Group Manager, Treasury and Investments, introduced this report which updated the Committee on the Council’s borrowing and investment activities for the quarter ending 31 December 2020.

 

Over the reporting period, all treasury management activities had been carried out within the confines of the approved limits. The report also provided information on the prevailing economic conditions over the reporting period.

 

RESOLVED:

 

That the Audit Committee:

 

  1. Noted the Treasury Management activities and performance against targets for the period to 31 December 2020.
  2. Noted the Council’s investment balance of £201.739m as at 31 December 2020 of which £20.000m was invested in other Local Authorities (Appendix 1 to the report).
  3. Noted the Council’s Treasury Management Strategy 2021-22 which had been approved by Cabinet and was approved by Full Council on 2 March 2021 (set out in Appendix 2 to the report).

7

Louisa Fearnley, Finance Manager, Financial Control, introduced this report which incorporated the Annual Audit Letter for the Council, prepared by the Council’s external auditors, Deloitte LLP, at the conclusion of their audit of the 2019/20 accounts. Their letter was appended at Appendix 1 to the report.

 

The Annual Audit Letter summarised the key findings from the audit of the 2019/20 Statement of Accounts and highlighted the fact that the Council had received an unqualified opinion for its Statement of Accounts.

 

Jonathan Gooding, partner at Deloitte, informed the committee that this report was a summary of the audit report produced last year and that the information it contained had been discussed and shared previously.

 

In response to questions from the committee, Mr Gooding confirmed that:

 

  • Audit quality was a number one priority for Deloitte
  • There was an appropriate audit methodology and audit plan employed towards the work done
  • Deloitte staff had an attitude of professional scepticism and readily challenged judgements and estimates
  • He had noted the concerns raised by the committee regarding Deloitte’s ability to spot issues
  • There had been a significant improvement in the Council’s preparedness for, and responsiveness to, auditing
  • Ealing local authority was on a positive improvement trajectory from previous years, and this was on track to continue.

 

RESOLVED:

 

That the Audit Committee:

 

  1. noted the external auditors’ Annual Audit Letter in respect of the 2019/20 audit of the Statement of Accounts (Appendix 1 to the report).

8

Simon Peet, Assistant Director Technical Finance, introduced this report, in which Deloitte set out in detail how they would deliver the audit of the financial statements for the Council and the Pension Fund.

          

The Code of Audit Practice was laid down by the National Audit Office and sets out Deloitte’s audit responsibilities which are based on two key objectives, requiring them to review and report on the Council’s:

 

• Financial Statements (including the Annual Governance Statement); providing an opinion on the Council’s accounts and the Pension Fund accounts; and

• Value for Money; issue a narrative commentary in the Auditors Annual Report on the arrangements in place for securing economy, efficiency and effectiveness in the Council’s use of resources.

 

On completion of their audit work Deloitte would present their report to those charged with governance (ISA260) and to Audit Committee at the meeting in September 2021. It was anticipated that report would include:

  • valuation of land and buildings
  • expenditure and revenue categorisation
  • presumed risk of management override of controls and
  • risk around recognition of COVID related income

 

The audit planning materiality for 2020-21 was estimated at £23m. Materiality for the Pension Fund accounts was estimated at £11.9m. Both these figures will be confirmed at year end.

 

With respect to the audit of the Pension Fund, significant risks anticipated by Deloitte included: management over-ride of controls and audit of investments and contributions.

 

 Jonathan Gooding provided clarification on some points raised by the committee:

  • while Deloitte were aware that property risks may not materialise, from an accounting perspective, they were required to focus on certain areas as small changes of assumptions could result in significant changes in materiality.
  • With respect to risks related to social care spend and COVID 19 spend, they did look at budget setting and value for money and as part of their work they would test the recognition of significant risk over COVID 19 controls.
  • The planning for the audit was still on track as the planning had started at the same time as the last audit report had been submitted.
  • The proposed increase in audit costs was an estimate and Deloitte were still in discussions with officers. The increase was intended to reflect that the fees had not changed in a few years and also increased risks around property and pensions.
  • While the risks were not unique to this particular local authority, there had been some changes regarding the expectations of auditors. More work was now required regarding estimates and judgements and around controls.

 

           RESOLVED:

That the Audit Committee:

 

i)         noted Deloitte’s External Audit Plan for the 2020/21 closedown process.

 

9

Simon Peet, Assistant Director Technical Finance, introduced this report, stating that value for money was an audit requirement and that the local authority must demonstrate compliance with good financial management.

 

The Chartered Institute of Public Finance and Accountancy (CIPFA) published The Financial Management Code (FM Code) in October 2019 and it is designed to support good practice in financial management and to assist local authorities in demonstrating their financial sustainability.

 

The FM Code outlined six principles of good financial management. These six principles were the benchmarks against which all financial management should be judged. CIPFA’s view was that all financial management practices should comply with these six principles.

 

To enable authorities to test their conformity with the six principles of good financial management, the FM Code translated these six principles into 17 financial management standards. These 17 financial management standards would have different practical applications according to the different circumstances of each authority and their use should therefore reflect this. The principle of proportionality was embedded within the FM Code and reflected a non-prescriptive approach.

 

Clarification was provided by officers and Deloitte on points raised by the committee as follows:

 

  • The Financial Management Code was not a legislative requirement, rather it set out professional responsibility for the CIPFA Code and was a measurement for assessing compliance.
  • The aim was to submit a report to the July 2021 meeting of the Audit Committee.
  • This self-assessment would form part of Deloitte’s Value for Money analysis.
  • It was intended to be a forward-looking document, to next year’s audit.

          

RESOLVED:

 

That the Audit Committee:

 

           i) Noted the requirements of the CIPFA Financial Management Code

           ii) Noted the new Value for Money audit reporting requirements from 2020/21

           ii) Noted the work plan towards full compliance with the code in 2021/22

 

10

Louisa Fearnley, Finance Manager, Financial Control, presented this report, stating that its purpose was to inform the Committee of the appointment of KPMG, as the Council’s Reporting Accountant for the areas given in the report, commencing with the returns for 2020/21. This was a change from last year’s auditors for those areas, which had been Deloitte.

 

Officers clarified the following in response to questions from the committee:

 

  • Factors considered prior to the appointment of KPMG included benchmarking amongst other auditors
  • KPMG was familiar with the local authority and had provided good value for money on grant audits previously
  • The main area of focus was housing benefit claims. There was no direct overlap between the work of KPMG and Deloitte as they performed a separate assessment at a different point in time.

 

RESOLVED:

 

That the Audit Committee:

noted the planned appointment of KPMG as the Council’s Reporting Accountant for a period of three years for the following:

• Housing Benefit Subsidy audit;

• Teachers’ Pension Return certification; and

• Housing Capital Receipts Pooling Return certification.

 

11

Mike Pinder, Assistant Director of Audit & Investigations, presented this report. He informed that the internal audit planning process included a review against the 5 year plan of our shared service partner, Hounslow, and was intended to identify any gaps in analysis and in the systems of internal control comprising of risk management, internal control and governance.

 

The One Year Plan, which would be audited next year, followed by a Five Year strategic plan, which would show previous audits and areas for consideration in the future.

          

Mike Pinder clarified the following in response to questions from the committee:

          

  • The Internal Audit Charter was re-evaluated annually. If there was a big change, it would be brought before the Audit Committee annually. The last time it had been brought before the committee was two years ago. Mike said there was a possibility he would bring the Charter before the committee again in July 2021.

     

  • Contract Management was an area considered and the team reviewed at least one contract a year e.g. the Viridor contract.

     

  • Matters such as cyber security, resilience and a review of digital capability, had been brought forward. Internal Audit encompassed items that came from the broader network but that were also specific to the local authority.

     

  • With respect to the impact of COVID, the internal audit team were participating in discussions to advise on risk, controls and fraud management.

          

RESOLVED:

 

That the Audit Committee:

reviewed and approved the draft internal audit plan for the period 1 April 2020 to 31 March 2021.

 

12

Mike Pinder, Assistant Director of Audit & Investigations, presented this report, which provided a progress update on the 2020/21 internal audit plan and status of projects as at 31 December 2020.

 

Mike Pinder summarised the position against the 2020/21 internal audit plan as follows: 11 reports had been finalised of which 2 had achieved a level of substantial assurance; 5 had achieved a level of reasonable assurance and 4 had achieved a level of limited assurance. Mike advised that for the four reports that had received a limited assurance level, the recommendations will be followed up and reported on. Mike commended the team as the majority of reports had either been finalised or were at a draft stage.

 

Mr Pinder reported that with respect to Counter Fraud and Investigations Performance & Developments, the performance targets had been slightly delayed due to court delays.

 

Paragraph 7 to the report gave details of the Proactive Audit and Investigation work being carried out, mainly to do with COVID-19 grants. The aim was to ensure that controls were optimised. So far, the council had paid out £104m worth of COVID-19 grants to in excess of 14,000 businesses within Ealing.

 

Enhanced vetting work had also been carried out between 1 April 2020 and 31 December 2020 with the outcome that 18 cases either failed or were prevented, representing 4% of all cases reviewed.

 

In response to questions from the committee, Mike Pinder clarified the following:

 

  • With respect to the four reports that had received a limited assurance opinion, this had been due to good targeting, openness of chief officers and directors and a positive view concerning and addressing these matters.
  • There were no cross-cutting themes although this would be reviewed in more detail as the Head of Audit Opinion is formulated at year end.
  • The local authority was working to adjust the age debt system and the finance team were taking this seriously
  • The 1,400 COVID grant applications which had been stopped before payment had prevented £10.6m going to those who were not eligible.
  • Some resources had been diverted from other proactive work in order to focus on the grants as a primary fraud risk.

          

RESOLVED:  

That the Audit Committee:

 

noted the performance of the Internal Audit & Investigation team and key issues arising during the period 1 April 2020 – 31 December 2020.

 

13

Mike Pinder, Assistant Director of Audit & Investigation presented this report, which updated audit committee on the strategic risks facing the council.

 

The Q3 Strategic Risk Register (SRR) contained 18 risks compared to 19 risks in Q2, as the risk of a No Deal Brexit had been removed from the register. There was still a need to monitor some Brexit risks in terms of their impact on COVID services.

 

Mike pointed out that the direction of travel had increased for one risk:

• ISR007 – Losses due to error, fraud, theft (Page 8 of Confidential Appendix A to the report), the threat of impact had increased due to the experience of another London borough;

 

Whereas the direction of travel has decreased for two risks.

• COV003 – Support to Care Homes (Page 17 of Confidential Appendix A to the report), which related to the impacts of COVID 19 in care homes. Mitigations and second wave management had reduced the direction of travel of risk.

• COV004 – COVID, Balance Budget (Page 18 of Confidential Appendix A to the report), the direction of travel of risk had reduced due to spend measures working and additional funding being provided.

 

During consideration of this item, it was

 

RESOLVED

by the Audit Committee that:

the press and the public be excluded from the meeting due to the possible disclosure of exempt information under Paragraphs 3 and 5 of Part 1 of Schedule 12A of the Local Government Act 1972.

 

The committee discussed risk ISR007 and Mike Pinder clarified that this had increased as a result of external factors which gave a greater perceived risk; this was an area officers continued to monitor.

 

Mr Hyun indicated that in their report Deloitte had identified two hot topics to receive an increased focus namely, the potential impacts of Brexit, which officers had addressed above, and climate-related risks. The committee pointed out that climate-related risk was not on the risk register.

 

Mr Pinder said that he would check what coverage there was for climate risk. It may need to be brought back to a future meeting of this committee and/or discussed with senior management as to how the local authority will address it.

 

RESOLVED:

 

That the Audit Committee:

considered the Strategic Risk Register (Confidential Appendix A to the report) and provided comments to officers for their consideration. As well as noted the key changes since Q2 as summarised in paragraphs 4.3 – 4.5 of the report.

 

14 Date of Next Meeting

The next meeting will be held on Thursday 27 May 2021.

 


14

The next meeting was scheduled to be held on 27 May 2021.

The meeting ended at 8:01pm.

 

MATTERS TO BE CONSIDERED IN PRIVATE

Exclusion of the Public and Press:

On agreement of the Committee, under Section 100(A) of the Local Government Act 1972, the public would be excluded from the meeting for the following items of business on the grounds that they involve the likely disclosure of exempt information under the relevant paragraphs of Part 1 of Schedule 12A of the Act for the reasons stated on the agenda. 

 

13 CONFIDENTIAL - Appendix A - Strategic Risk register Q3
  • Information relating to the financial or business affairs of any particular person (including the authority holding that information);
  • Information in respect of which a claim to legal professional privilege could be maintained in legal proceedings;

Attendance

NameReason for Sending Apology
Councillor Kamaljit Kaur Nagpal 
Councillor Mik Sabiers 
NameReason for Absence
No absentee information has been recorded for the meeting.

Declarations of Interests

Member NameItem Ref.DetailsNature of DeclarationAction
No declarations of interest have been entered for this meeting.

Visitors

Visitor Information is not yet available for this meeting