Minutes for Audit and Risk Committee meeting, Nov 3 2009, 2.00PM official page

The Committee had before it the minute of its previous meeting of 8^th September 2009.

The Committee resolved:-

(i)         to note the update from the Vice-Convener in connection with Article 8 (Internal Audit Reports Issued) to the effect that the Internal Audit Manager had liaised with officers regarding the Crèche Services Audit (C-CL/SA/0805), whereupon it had been established that the financial shortfall was considerably less than had initially been identified; and

(ii)        to approve the minute.

The Committee had before it a statement of business prepared by the Head of Democratic Services.

The Committee resolved:-

(i)                 to delete item 1 (Property Sales/Land Disposal);

(ii)               to delete item 3 (Audit – SL-EES/SA/0701 Business Development Section Activities); and

(iii)             to otherwise to note the statement.

The Committee had before it a report by Henderson Loggie, External Auditor, which detailed progress in relation to the External Audit operational plan for 2008/09.

The Committee resolved:-

to note the report.

(a)       ISA 260 - Report to Those Charged with Governance on the Audit of Aberdeen City Council - Report by Henderson Loggie

(b)       Audited Annual Accounts – Report by City Chamberlain

(c)        Financial Statements – Please note that this document has been issued separately

The Committee had before it (1) a report by Henderson Loggie, External Auditor, to those charged with governance on the audit of Aberdeen City Council (ISA 260); (2) a report by the City Chamberlain which advised members on the outcome of the audit for the 2008/09 annual accounts; and (3) a copy of the, audited annual accounts for Aberdeen City Council for the period 1^st April 2008 to 31^st March 2009.

Karlyn Watt from Henderson Loggie spoke to the ISA 260 report. The report stated that systems and procedures had been reviewed by the Council which had resulted in an improvement in the robustness of the financial statements. 

The report highlighted two issues for the Council to consider, those being:- (1) a difference between the number of Council Houses held within the Fixed Asset Register and the number within the Housing Revenue Account (HRA) had been identified (item 2.2.2), whereby a full reconciliation would be required to ensure movements on and off charge were correctly accounted for to ensure the HRA income was fairly stated; and (2) although there had been improvements in the quality of information presented as part of the audit, there were still some areas where further improvements could be made (item 2.2.3).

The Committee heard from the City Chamberlain who advised that an unqualified audit certificate had been obtained for the Council's annual accounts for 2008/09.

The report by the City Chamberlain recommended:-

that the Committee note the positive outcome of the audit of the 2008/09 annual accounts.

The Committee resolved:-

(i)                 to note the report by Henderson Loggie, External Auditor, to those charged with governance on the audit of Aberdeen City Council;

(ii)               to approve the recommendation contained within the report by the City Chamberlain;

(iii)             to request that future reports by the External Auditor include a glossary of terms to assist members with any acronyms used throughout the report

(iv)              to note that the issue identified in paragraph 2.2.2 of the ISA 260 report regarding the number of Council houses held within the Fixed Asset Register and the number within the Housing Revenue Account would be included in the Annual Audit Plan for consideration at a later date; and

(v)                to note that these items would be referred to Council for formal approval at its meeting on 16^th December 2009, along with the Report to Members and Controller of Audit which was to be considered at the next meeting of the Committee.

With reference to Article 6 of the minute of its meeting of
8^th September 2009, the Committee had before it a report by the City Chamberlain which provided an update on the progress to date in relation to the bank reconciliation process and the implementation of the automatic bank reconciliation module.

The report advised that since the last update to this Committee on 8^th September 2009, there continued to be positive progress in relation to the bank reconciliations with continuing timely and robust clearance of items from the reconciliation to ensure that it was up-to-date with timescales agreed for the process.  The August reconciliations had been signed off and work for the completion of the September reconciliations, due to be completed by the end of October 2009, were on schedule.

The report explained that further evidence of the positive progress could be found in the External Auditor’s report to those charged with governance on the audit of Aberdeen City Council 2008/09 wherein it stated that a full reconciliation had been carried out on the bank account at 31^st March 2009, and that all reconciling items, including the backlog to 2006/07 had been matched and cleared.

The report detailed key activities since the last report in relation to the automated bank reconciliation module and highlighted the next steps required to achieve the target date of 31^st March 2010, for full implementation.

The report recommended:-

that the Committee –

(a)       note the positive position that had been reflected in the final accounts of the Council for financial year 2008/09 in relation to the bank reconciliations; and

(b)       note the current positive progress and plan for the implementation of the automated bank reconciliation system.

The Committee resolved:-

(i)                 to note the update from the City Chamberlain that the September reconciliations had been completed and signed off, and that the October reconciliations were on schedule;

(ii)               to congratulate staff on their work to date in relation to the project; and

(iii)             to otherwise approve the recommendations contained in the report.

DECLARATION OF INTEREST

Councillor John West declared an interest in the subject matter of the following article due to his appointment as a member of the Board of Directors for Sport Aberdeen, and left the meeting for the duration of the Committee’s deliberations.

The Committee had before it a remit from the Education, Culture and Sport Committee (article 12 of the minute of the meeting of 8^th October 2009 refers) which requested the Audit and Risk Committee to re-investigate the audit of the Leaping Leopards crèche service on the basis that figures relating to the use of crèche services at sports facilities had not been included in the financial information submitted as part of the audit.

The Convener referred to the update provided by the Vice-Convener at the start of the meeting in connection with this issue (Article 1 refers) and concluded that no further action was required.

The Committee resolved:-

to agree that no further action was required.

EXEMPT INFORMATION

The Committee resolved in terms of Section 50(A)(4) of the Local Government (Scotland) Act 1973 to exclude the press and public from the meeting during consideration of the following items of business so as to avoid disclosure of exempt information of the class described in paragraphs 1 and 8 of Schedule 7(A) of the Act.

The Committee had before it (1) a report by the Internal Audit Manager which appended recently completed audit reports on the services detailed below; and (2) management statements from the appropriate Directors in response to each of the completed reports.

SERVICE

TITLE

DATE ISSUED

Enterprise, Planning and Infrastructure –

Resources Development and Delivery

Walker Road Primary School Refurbishment

September 2009

All Services

Registers of Gifts and Hospitality

August 2009

Education, Culture and Sport

Home School Liaison

August 2009

Enterprise, Planning and Infrastructure

School Catering

August 2009

The Committee resolved:-

(i)         that in relation to Audit RM-RDD/CT/0802 (Walker Road Primary School Refurbishment Contract), to instruct the Director for Education, Culture and Sport to report to the Education, Culture and Sport Committee explaining the reasons for the delay in completing the contract, which incurred additional costs as a result;

(ii)        that in relation to Audit N-SE/SA/0802 (Schools Catering), to note that the City Chamberlain would respond to Councillor Donnelly outwith the meeting regarding his query on who paid for free school meals and how this affected the figures included in the report; and

(iii)       to otherwise approve the issue of the Internal Audit reports and endorse the recommendations for improvements contained therein.

The Committee had before it a report by the Internal Audit Manager which (1) detailed a number of recommendations previously approved in audit reports issued, the implementation of which was overdue; and (2) advised on progress with the implementation of recommendations arising from selected audits.

The Committee received updates from various officers in relation to the Audit recommendations affecting their Services and considered revised implementation dates where appropriate.

The Committee resolved:-

(i)         that in relation to Audit AW/IA/0811 (Registers of Gifts and Hospitality), item 2.5, to note that the item had been completed;

(ii)        that in relation to Audit C-SS/SA/0802 (Kittybrewster Creditors), item 4.3.1, to note that the item had been completed;

(iii)       that in relation to Audit AW/IA/0812 (Year-end Stock-taking), item 3.6.2, to note that the item had been completed;

(iv)       that in relation to Audit S-SE/SA/0701 (Roads Maintenance – Flooding), to note that item 4.1.1 had been completed and that a report would be submitted to the Enterprise, Planning and Infrastructure Committee in January 2010;

(v)        that in relation to Audit C-SS/SA/0801 (Kittybrewster Creditors), items 4.1.2 (ii), (iii) and (iv) and 4.1.3, to note:-

(a)       the update provided by the City Chamberlain relating to the ongoing work with the supplier; and

(b)       that a revised date for completion would be agreed between the City Chamberlain and the Internal Audit Manager;

(vi)       that in relation to Audit CI-SDD/SA/0803 (Transformation Programme), to note that all outstanding recommendations had been completed;

(vii)      that in relation to Audit RM-RDD/CT/0802 (Hanover Street Refurbishment Contract), items 4.2.4.2(i) and 4.2.6(i), to approve the revised implementation date of 2^nd February 2010; and

(viii)     that in relation to the physical verification of recommendations, to note that all items had been satisfactorily implemented.

At this juncture, the Convener requested that all officers who were not directly involved with the following item of business leave the meeting, whereupon Mr James Guyan, Internal Audit Manager left the meeting by virtue of the fact that the business in question discussed his future employment and that of his staff.

With reference to Article 7 of the minute of its meeting of 8^th September 2009, the Committee had before it a report by the Director for Corporate Governance, which presented the outcome of an options appraisal for the Best Value means of delivering the Internal Audit function.

The report advised that the options appraisal had been carried out as a group exercise which included staff within the Internal Audit team, the Head of Performance Management and Quality Assurance and an Investigations Manager.

The report outlined the five options that had been appraised as follows:-

(1)       Status quo – attempting to fill vacant posts;

(2)       In-house with redesign of structure;

(3)       Full outsourcing;

(4)       Co-sourcing; and

(5)       Shared service.

The report explained that the six key criteria that had been used to appraise each option, when weightings were applied, the following results had been achieved (the lower the score, the better the match to key criteria):-

Preferred

Full Outsourcing

1.48

2^nd

Co-sourcing

1.83

3^rd

Shared Service

2.45

4^th

In-house with redesign of structure

2.97

5^th

Status Quo

3.64

The report recommended:-

that the Committee –

(a)       note the detail of the options appraisal and the recommendation to seek to outsource the functions of Internal Audit; and

(b)       agree to instruct officers to progress arrangements to outsource the functions of Internal Audit.

The Committee resolved:-

(i)         to instruct officers to report back at the next stage of progressing arrangements to outsource the functions of Internal Audit, with full detail on the financial, legal, human resource and procurement implications as well as a SWOT analysis; and

(ii)        to otherwise approve the recommendations contained in the report.

- BARNEY CROCKETT, Convener.