Agenda and draft minutes

Extraordinary, Audit Committee - Monday, 22nd February, 2021 7.00 pm

Venue: Virtually

Contact: Madeleine Shopland  Democratic & Electoral Services Specialist

Media

Items
No. Item

43.

Apologies

To receive any apologies for absence

Minutes:

An apology for absence was submitted from Councillor Dianne King.

44.

Declaration of Interest

To receive any declarations of interest

Minutes:

Councillor Imogen Shepherd-DuBey declared a Personal Interest regarding Item 48 Statement of Accounts 2019-20 on the grounds that she had money in the Berkshire Pension Fund.

 

Councillor Daniel Sargeant declared a Personal Interest in Items 47 Wokingham Borough Council Audit Results Report Year ended 31 March 2020 and Item 48 Statement of Accounts 2019-20 on the grounds that he was a Non Executive Director of Wokingham Housing Limited and Berry Brook Homes.

 

45.

Public Question Time

To answer any public questions

 

A period of 30 minutes will be allowed for members of the public to ask questions submitted under notice.

 

The Council welcomes questions from members of the public about the work of this committee.

 

Subject to meeting certain timescales, questions can relate to general issues concerned with the work of the Committee or an item which is on the Agenda for this meeting.  For full details of the procedure for submitting questions please contact the Democratic Services Section on the numbers given below or go to www.wokingham.gov.uk/publicquestions

Minutes:

There were no Public questions.

 

46.

Member Question Time

To answer any member questions

Minutes:

In accordance with the agreed procedure, the Chairman invited Members to submit questions.

 

46..1

Gary Cowan asked the Chairman of the Audit Committee the following question. Due to his inability to attend the following written answer was provided:

Minutes:

Question

Agenda Page 227 (Corporate Risk Register) states that on July 18th, 2019, a Motion was passed at Council declaring a climate emergency.  The Council gave itself six months to establish the Borough’s carbon footprint and develop an action plan setting how the Council would achieve its targets by 2030.  The report goes on to add Further Actions to Mitigate Risk mentions Cross Council officer group established and ongoing work of working group with further report back to Council in 2021 on progress against target.

 

At its meeting on 21st January 2021 the Council considered a Motion (450), submitted by Andy Croy, and seconded by Carl Doran. ‘Council believes the Executive should commission a Citizens’ Assembly on the Climate Emergency.  A Citizens’ Assembly on the Wokingham Borough response to the Climate Emergency is required to address the hard choices which need to be made if the Borough is to achieve carbon neutrality by 2030.  The Motion was defeated as every Conservative present with the exception of the Mayor and his Deputy voted against the motion.

 

My question therefore is what assurance has the Audit Committee sought with regards to the effectiveness of the mitigating actions around the Climate Emergency risk on the Corporate Risk Register?

 

Answer

With regards to risk management, the Audit Committee’s remit is to provide independent assurance of the adequacy of the Risk Management Strategy and the associated control environment.  This includes, but is not limited to, receiving quarterly reports reviewing the implementation of the Council’s Risk Management Policy and Strategy to determine whether strategic risks are being actively managed.

 

To discharge this responsibility, I ensure that the Committee receives comprehensive reports from officers on the Corporate Risk Register and that Committee members are able to assure themselves that the Council is actively managing its most significant risks.  The Committee does this in a number of ways including through questions to the Chief Executive, Deputy Chief Executive, and Directors who regularly attend our meetings. 

 

It is pleasing to note the comments of our External Auditors later on this evening’s agenda that risk management arrangements have been strengthened over the past period albeit I acknowledge the helpful suggestions for further improvement including the comment that the Committee should avoid taking “active deep dives” into individual risks which I fear your question may be encouraging us to do.  Indeed, the External Auditors go to say that it may be better covered by the work of Overview & Scrutiny which, I know, has already examined the topic of climate emergency in some depth during 2020 and reported its recommendations to Executive in October 2020. 

 

Climate emergency is a priority for the Council which is why it is reassuring and correct to see it identified as one the key strategic risks on the Corporate Risk Register.  Following the climate emergency declaration made in July 2019, Wokingham Borough Council adopted a Climate Emergency Action Plan (CEAP).  Within this plan, the Council committed to communicate and engage with residents, businesses, schools, and  ...  view the full minutes text for item 46..1

47.

Wokingham Borough Council Audit Results Report Year ended 31 March 2020 pdf icon PDF 5 MB

To consider the Wokingham Borough Council Audit Results Report Year ended 31 March 2020.

Minutes:

Members received the Wokingham Borough Council Audit Results report year ended 31 March 2020.

 

During the discussion of this item the following points were made:

 

·       Helen Thompson, Ernst & Young, commented that the audit was largely completed in the less complex areas.  However, work remained outstanding on 4 areas; valuations, pension fund disclosures, Group accounts (consolidation) and going concern.

·       Ernst & Young had already identified with Officers, changes that would need to be made to the Statement of Accounts.  These had not been included in the results report or amended at this stage as there was likely to be further changes, particularly around the work of valuations on property, plant and equipment.  All changes would be consolidated into one for ease.

·       With regards to valuations, it was an area of focus for reviewers of audit quality, and work in this area had increased significantly over time.  Ernst & Young had asked its valuation specialists to review 11 assets.  There remained open queries on 4 of these assets, which may or may not have a wider impact on the asset portfolio.  For the assets (operational land and buildings) revalued as at 31 March, a number of queries had been identified leading to a review of the source evidence that was being used for the assumptions that were then used in a valuation.  The internal valuer had updated the source evidence.   In addition, with regards to assets that had been revalued in prior years, evidence had been sought on processes used.

·       Helen Thompson commented that she welcomed the Council’s approach of updating the valuation approach in the future, such as employing an external valuer to provide support to the internal valuation team, and also to review the cycle for valuations.

·       With regards to the assurances from the pensions funds auditor, the report had been received from Deloitte in January.  However, this had been issued prior to the completion of the audit and several review queries remained outstanding.

·       With regards to Group Accounting, the work of the component auditors had been reviewed and no issues had been identified.  However, the accounting policies particularly around property, plant and equipment differed between the Council and its subsidiaries.  Work was being undertaken to realign the policies and to restate the figures.

·       With regards to Going Concern, it had been an area of focus this year because of the pandemic and significant changes to income and expenditure streams.  Updated Management Disclosures would be included in the final Statement of Accounts.

·       Ernst & Young were producing a plan which would be agreed with the Finance team and the Valuations team.

·       Councillor Burgess asked what the impact would be on income expenditure and the balance sheet.  Helen Thompson stated that based on amendments that had been collated to date, there were adjustments that would have an impact but that they would largely net off against each other.  There would be no impact on the bottom line.  In terms of whether the asset value would go up or down it was difficult to say  ...  view the full minutes text for item 47.

48.

Statement of Accounts 2019-20 pdf icon PDF 2 MB

To consider the Statement of Accounts 2019-20.

Minutes:

The Committee received the Statement of Accounts 2019-20.

 

During the discussion of this item, the following points were made:

 

·       The Assistant Director Finance indicated that the Statement of Accounts was not yet ready for sign off.  There were 4 areas outstanding that were still under discussion with Ernst & Young; treatment of valuations, pensions, Group Accounts, statement of going concern.

·       The Assistant Director Finance indicated that he had no real concerns as to the Council’s current position.  Both the Council’s Finance team and Ernst & Young had been working hard on the audit.  The pandemic had had an impact on the speed of the process.

·       The Assistant Director Finance indicated that the Committee could either bring the finalised Statement of Accounts to an additional extraordinary Committee meeting in March or delegate the sign off to the Deputy Chief Executive and the Chairman of the Audit Committee, subject to there being no adverse audit opinion.  The final audit report and the final Statement of Accounts would be shared with Members.  Members agreed that they wished for an additional meeting to be arranged.

·       Councillor Burgess questioned what the deadline was for the availability of the final audited accounts.   Helen Thompson indicated that there was no statutory deadline for the publication of the audited accounts.  Regulations required that for the year that the Council was in, it should by 30 November either publish the final Statement of Accounts, with the audit report and the auditor’s opinion, on its website, or a statement as to why this had not been achieved.  There was no penalty for this deadline having not been met.

·       Councillor Gee noted that lending to the subsidiaries had been increased and questioned whether this would be recoverable.  The Assistant Director Finance clarified that loans had been made to allow the companies to continue developments around the housing area. 

·       Councillor Gee commented that the fair value of borrowings was £90million higher than the borrowings.  The Assistant Director Finance stated that when a loan was taken out it was taken out at the prevailing best rates of the time. 

·       Councillor Gee referred to a loss on some property, plant and equipment.  The Chief Account clarified that this was a result of the academisation of a school.

 

RESOLVED:  That

 

1)    The draft Statement of Accounts 2019-20, be noted.

 

2)    The final report be considered at an extraordinary meeting of the Audit Committee on 22 March 2021 7pm.

 

49.

Corporate Risk Management pdf icon PDF 369 KB

To receive a report on Corporate Risk Management.

Additional documents:

Minutes:

The Assistant Director Governance presented the Corporate Risk Management report.

 

During the discussion of this item, the following points were made:

 

·       Risk 1 Budgeting and Financial Management had been re-assessed from “very high” to “high” following the proposed balanced budget being presented to Council on 18 February.

·       Risk 10 “End of the EU Transition” had been updated.  The Government had recently released a press release that gave further assurances around negotiations between the EU and the UK and it looked significantly less likely that the EU would consider the UK as a ‘third country.’

·       Risk 12 “Adult Social Care Provider Failure” had reduced in severity from “very high” to “high” as a consequence of the positive impact of mitigating actions.

·       Risk 13 “Climate Emergency” had been updated to reflect the Climate Emergency Task and Finish Group’s report and recommendations which had been agreed at Executive on 29 October.

·       The description of the equalities risk (no. 17) had been revised to reflect the Covid-related impact to this risk noting the Council’s proposed approach to tackling poverty and new Equality Plan (to be considered by Executive in March).

·       The Pandemic risk (no. 18) had been updated to reflect the outcomes of Overview & Scrutiny in considering the Council’s response to the first wave.

·       The Housing Numbers (no. 19) has been re-assessed from “high” to “medium” following the Government announcement in mid-December that it planned to prioritise urban and brownfield sites.

·       Two new risks had been added:

Ø  Market failure (no 20) reflecting the economic and financial impacts of Covid-19 on key providers of Council services.

Ø  2021 Elections (no. 21) reflecting the additional challenges of delivering successful elections against a backdrop of public health restrictions.

·       Councillor Burgess commented that the controls listed for the Climate Emergency risk were insufficient and that the mitigating actions did not adequately address the risk.  She felt that the Climate Emergency Action Plan contained some errors that needed to be addressed.  In addition, she suggested that the Climate Emergency Task and Finish Group established by Overview and Scrutiny should be included in the register as a control.  The Assistant Director Governance agreed that it would be added.  Members were reminded that an Internal Audit of Climate Emergency was planned for Q1.  The Assistant Director Governance suggested that the Chairman of the Audit Committee liaise with the appropriate Overview and Scrutiny Chairman to ensure that the Committee’s concerns around the Climate Emergency risk were addressed in their work.

·       Councillor Gee noted that there were a number of high risks when the Council was supposed to be a low risk Council and questioned how this would be addressed. 

·       Councillor Gee questioned how the Committee should review the Corporate Risk Register if it did not undertake a deep dive.  The Assistant Director Governance stated that the Committee needed to have assurance that the process of risk management in the Council, was sound.  He referred to the Committee’s remit in relation to risk management.  Further training around risk management could be  ...  view the full minutes text for item 49.

50.

Update on Internal Audit & Investigations including quarter 1 plan for 2021/22 pdf icon PDF 227 KB

To receive the update on Internal Audit & Investigations including quarter 1 plan for 2021/22.

Additional documents:

Minutes:

The Lead Specialist, Audit and Investigation presented the update on Internal Audit and Investigations including the 2021/22 Internal Audit Strategy and 2021/22 Audit and Investigation Work Programme Quarter 1

 

During the discussion of this item, the following points were made:

 

·       The report provided an update on the work of Internal Audit and Investigations activity up to December 2020.  There had been no audits that had received less than level 2 Audit opinion during this period.

·       For the remainder of the financial year the team was focused on completing the remaining audits contained within the 2020/21 Audit and Investigation Plan to feed into the Head of Internal Audit Opinion on the Council’s Governance, Internal Control and Risk Management Arrangements.

·       This year had been a period of uncertainty as councils had responded to the pandemic and their changing risk profiles. The extent to which the team had been able to deliver planned audit activity had been impacted because of the availability of auditees who had needed to respond to the effects of the pandemic within their services

·       Usually, an annual Audit Plan would be prepared for the forthcoming financial year.   However, it had been agreed with the Corporate Leadership Team that a one-year plan would not be practical at this time.  Flexibility and forward thinking were required in planning audit activities for the forthcoming financial year and as such, it had been agreed that for the 2021/22 financial year, audit planning would be on a quarterly basis.

·       Councillor Sargeant commented that the plan of work for Q1 was quite ambitious.  The Lead Specialist Audit and Investigations stated that the Plan had been produced according to the resources available at the time. However, a watching brief was required because of the impacts there had been on resource availability within the Internal Audit team during the current year due to redeployments from the team to service areas to assist with responses to the pandemic. The Committee would be informed of any significant changes.

·       Councillor Burgess stated that in order for the Climate Emergency audit to be successful it needed to address the level of carbon savings planned to be achieved by the Climate Emergency Action Plan.  The Lead Specialist Internal Audit and Investigation indicated that this could be considered when the audit was scoped.  The Assistant Director Governance added that consideration would be given to what external expertise might be required to assist in the audit.

 

RESOLVED:  That

 

1)    The 2020/21 Internal Audit and Investigation Progress Report be noted;

 

2)    The Internal Audit and Investigation Strategy for 2021/22 be approved;

 

3)    The Quarter 1 Plan for 2021/22 be approved;

 

4)    The Internal Audit on Climate Emergency include an accounting style carbon audit of the Climate Emergency Action Plan targets, the methodology and the underlying assumptions, in the Climate Emergency Action Plan.