An apology for absence was received from Councillor John Leach.

Minutes of the Meeting held on 28 April 2011.

The Minutes of the Meeting held on 28 April 2011 were agreed as a correct record subject to the following amendment for Minute 376/11:

To delete: Lindsey Mallors explained her role in looking at value for money arrangements and that whilst the Sutton Town Centre Redevelopment may be deemed a failure it was necessary to look at it in context with projects across the whole council. She was also able to request that information be made public and ask the council to respond following a request from a member of the public. She would be happy to see the report recommendations put in place and, as part of her role, would be seeking assurances that they were in place and working.

To insert: Lindsey Mallors explained her role as the Council’s appointed auditor. She has a number of specific responsibilities to consider in relation to the Council’s activities. First, she has to give an annual opinion on the Council’s arrangements to secure value for money. In reaching her opinion she would need to take account of not only the findings from this report but the management arrangements across the whole Council.

Secondly, one of the statutory duties of the appointed auditor is to consider whether there may be issues of such significance that a report should be published in the public interest. Lindsey Mallors reserved the right to form a more considered view on this course of action but noted that currently the issue was already in the public domain through the Council’s publishing of the paper and the media coverage.

Whilst there were clearly failures in this case, initial discussions with the CEO and Strategic Director, Resources, had indicated that all the recommendations made by Internal Audit were accepted and swift action was being taken to address the individual issues. She would be writing formally to the CEO to seek assurance on progress and would continue to discuss the issue at her regular meetings with the CEO and Strategic Director, Resources.

Lindsey Mallors also noted that an additional responsibility is to consider information and requests made to her by local electors. Should she receive such correspondence, then she would need to consider whether any audit action was required at that time. Any such action would be discussed with the Council in advance.

Report of the Strategic Director Resources.

The Committee considered the Annual Review of the Audit Committee for 2010/11 presented by the Chief Internal Auditor.  It was explained that the purpose of the annual Review was to demonstrate to stakeholders the work undertaken by the Audit Committee of the previous year was promoting good governance and fulfilling its remit.  The Annual Review was also forward looking in that it contained the 2011/12 workplan as agreed by the committee.

Whilst the Annual Review was not a statutory requirement it was considered to be a useful piece of work in that it reassured that the Committee were discharging its functions.

            Resolved: (i) That the content of the Annual Review was approved.

(ii) That the Annual Review be circulated to stakeholders.

Report of the Chief Internal Auditor.

The Committee considered the Annual Review of Corporate Governance, the Annual Governance Statement as well as the proposed representations from the Audit Committee to the external auditors.

It was reported that the annual review of corporate governance was a CIPFA recommendation and that the Council complied 56 or the 58 relevant standards.  The two cases in which standards were not fully met were deemed to be non serious.  One of them was the requirement to publish an Annual Report and second was that the Council did not produce an annual report on the activities of its scrutiny function.   It was thought that governance communicated effectively with relevant stakeholders regarding performance, priorities and finance and that the Scrutiny Overview Committee had regular updates from each of the scrutiny committees at every meeting rather than consolidated annually.

The Committee considered the report of the Chief Internal Auditor that explained the Annual Governance Statement (AGS) 2010/11, which was an important expression to the Council’s stakeholders, external auditors and assessors, as well as the general public, of what the Council had done to put in place good business practice, high standards of conduct and sound

Governance arrangements.  As such, it was required to be signed off by the Leader and Chief Executive.  A small number of governance issues had been identified which had heightened the risk profile because of some issues affecting projects.  It was confirmed that corporate and group risk registers were maintained and that the process of continually reviewing these was being improved.

Resolved: (i) To note the Annual Review of Corporate Governance 2010/11.

(ii) To endorse the Annual Governance Statement 2010/11 prior to it being certified by the Leader and Chief Executive and included within the Council’s Statement of Accounts for 2010/11.

(iii) To endorse the representations to the external auditor concerning how the Audit Committee exercises oversight of management processes.

(iv) To request that a copy of the Risk Register is circulated to Audit Committee members before the next meeting.

Report of the Chief Internal Auditor.

Members considered a report which summarised the work of the Internal Audit team during 2010/11 and included the Chief Internal Auditor’s annual opion on the internal control environment.

The Chief Internal Auditor reported that he had found some weaknesses which had been dealt with and that the issues found with the Sutton Town Centre project were not endemic and that this opinion should be included in the Annual Governance Statement.

Members discussed schools becoming academies and what this would mean for internal audit work.  It was reported that brochures had been sent to schools on services that they may wish to buy from the Council and audit work was one of them. 

Resolved: (i) To applaud the Audit Team for the many extra days audit work but still coming up with an underspend.

(ii) To endorse the Chief Internal Auditor’s Opinion on the Council’s control environment.

a) Progress Report

b) Annual Pension Fund Audit Fee Letter 2011/12

The Committee considered the progress report presented by Lindsey Mallors along with the pension fund fee letter for 2011.12.

The total indicative fee for the pension fund was £35K for 2011/12.

            Resolved: (i) To thank Lindsey Mallors for the progress report.

(ii) To note the Annual Pension Fund Audit Fee Letter 2011/12

Report of the Executive Head of Finance.

The Committee considered the report of the Executive Head of Finance which summarised the Council’s Treasury Management operations during 2010/11. 

The Treasury Management Strategy for 2010/11 had been approved by full Council on 10 March 2010. It had not been necessary to undertake any new long term borrowing in 2010/11 as balances had not reduced as quickly as expected. Surplus funds were invested when available achieving an average interest rate of 1.03% compared to a benchmark of 0.43% (7 day London Interbank BID rate). 

The Council has outstanding investments with Heritable Bank. During the year a further £800k was received from the administrators. The administrators are still projecting a total recovery of up to 85p in the pound. The potential loss of £800k was provided for in the Council’s 2008/09 accounts.

It was reported that during 2011/12 significant new borrowing would be required as a result of the reform of Housing Revenue Account subsidy system.  The Council would have to make a payment to the Government but the negative subsidy payments made under the present system would end.   Further details will be provided in the Treasury Management report to the September meeting of the Committee.

Resolved: That the Treasury Management Annual Report 2010/11 was noted.

Report of the Chief Internal Auditor.

The Committee considered a report which summarised the recent investigation work that had been undertaken by Internal Audit.  It was highlighted that to the end of May 2011, Internal Audit had initiated zero investigations during 2011/12.  A whistleblowing disclosure had been received during this period which was referred internally to the Revenues and Benefits Investigations team and also to the UK Border Agency.

Resolved: To note the Internal Audit Anti-Fraud and Investigations update.

Report of the Executive Head of Business Services.

The Committee considered a report which set out the Benefit Investigation Teams (BI) performance in 2010/11.  

Highlights presented from the report included:-

That Housing Benefit and Council Tax Benefit claims had risen by approximately 22% since April 2008 which had had an impact on the BI Team which had not increased.  

From April 2013, Housing and Council Tax Benefit investigations would no longer be run by councils but would be merging with the Department of Works and Pensions (DWP) under the new Single Investigation Service (SIS).  This had left much uncertainty and demoralisation for staff as it was not known what would happen to them once this change had taken place.  It was reported that there was some indication that SIS would work to a local geographical area but would be based in RB Kingston which may lead to a loss of local knowledge and relationships.  DWP did not consult on the proposals.

There had been a continued improvement each year on the number of sanctions achieved by the team and had outperformed neighbouring councils.  The BI Team had won Institute of Ratings, Revenues and Valuations (IRRV) Excellence in Anti-Fraud category, which was a National and prestigious award whilst the Benefits Team had won the ‘Most Improved’ Award.

Resolved: (i) To note the contents of the Benchmarking reports and performance.

ii) To note the qualities of the team and Council in the area of fraud prevention and detection.

iii) To welcome the improved performance, key initiatives and partnership working.

iv) To congratulate the success of the 2009/10 National Fraud Initiative in relation to benefit fraud.

There will be a verbal update report on this item.

The Committee were informed that the report on revised programme and project management arrangements, arising from the recommendations in the Sutton Town Centre Redevelopment Review (STC) was intended to go to The Executive in September 2011.  The proposals would impact on the roles of both officers and members and therefore Executive members were being consulted on this before formal presentation.   More immediate changes have been made to the STC Project Board management arrangements, which include more frequent and different level meetings, chairing of the project board by the Strategic Director – Environment & Leisure and inclusion on the board of the Strategic Director - Resources. 

The Chief Internal Auditor would provide a detailed action plan in respect of the financial administration points raised.  This would include improvements already made such as the new computer system called ‘Pro Contract’ which had been implemented from April 2010 for procurements of over £10K which was working well.  It was further confirmed that none of the missing paperwork from the STC project had been found.

Resolved: (i) That the Action Plan be emailed to Audit Committee members for their comments.

(ii) That the report to The Executive includes a recommendation that they seek the views of the Audit Committee.

Report of the Strategic Director Resources.

The Committee considered a report which summarised the main issues raised by the Department for communities and Local Government consultation on the Future of Local Public Audit and draft responses to the fifty specific questions posed in the document.

It was explained that the aims of the proposals was to increase competition and reduce fees but officers were not confident that they would do that.

Members discussed the role of the National Audit Office (NAO) which was thought to consist mainly of Value For Money (VFM) work and thought that was where their focus should remain rather than the NAO taking on producing the Code of audit practice.  It was explained that the NAO also dealt with certification work.

There was a brief discussion about the potential conflict of interest between consultancy and audit work.  Each question and draft response was discussed and amendments/additions were agreed.

Lindsey Mallors was invited to give her opinion on the paper and stated that there were safeguards in place which govern what consultancy work an auditor can take on and thought that larger companies may not be interested in local authority audit work as it may impact on their consultancy work.

Resolved: (i) That the response to question 3 should read ‘We have no view’.

(ii) That ‘there should be local discretion in deciding if an annual report is required’ should be inserted into the combined response for questions 29 to 33.

Resolved: That, by virtue of Section 100(A) of the Local Government Act 1972, the press and public be excluded from the meeting during consideration of the following item of business 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.

Report of the Executive Head of Legal and Democratic Services.

The Committee considered a report from the Executive Head of Legal and Democratic Services which required Members to review the Council’s use of covert surveillance, the policy and procedure and the Inspection Report of the Office of Surveillance Commissioner. 

The Council, in its regulatory capacity, periodically undertakes investigations into allegations of benefit fraud and unlawful trading practices.  Such investigations may require the Council to obtain personal information about an alleged perpetrator through covert surveillance techniques under the Regulation of Investigatory Powers Act 2000 (“RIPA”).  The Council has an operating policy and procedure on the use of covert surveillance. The Home Office Code of Practice requires elected members to review the use of RIPA powers and agree policy at least once a year.

Resolved: (i) To accept the Inspection Report of 5 April 2011 of the Office of Surveillance Commissioner.

(ii) That the Council is appropriately using its RIPA powers to conduct covert surveillance investigations in relation to criminal activities.

(iii) To endorse the Council’s revised Policy on Covert Surveillance.

            Resolved: To note the workplan.