There were no apologies for absence.

There were no Substitute Members.

There were no Visiting Members.

RESOLVED:  That Councillor Horne be elected as Chairman of the Committee for the Municipal Year 2010/11.

RESOLVED:  That Councillor Warner be elected as Vice-Chairman of the Committee for the Municipal Year 2010/11.

The Chairman, on behalf of all Members present, disclosed a personal interest in the report of the Head of Internal Audit Partnership concerning the Internal Audit Annual Report 2009/10 in so far as it related to the review of Members’ allowances and expenses, by virtue of being recipients of such payments.

There were no disclosures of lobbying.

RESOLVED:  That the items on the agenda be taken in public as proposed.

RESOLVED:  That the Minutes of the meeting held on 29 March 2010 be approved as a correct record and signed.

RESOLVED:  That the following Members be appointed as Spokespersons for their respective Political Groups for the Municipal Year 2010/11:-

Councillor Horne - Conservative Group

Councillor Warner - Liberal Democrat Group

The Committee considered the report of the Chief Executive setting out the draft Annual Governance Statement 2009/10 to be signed by the Chief Executive and the Leader of the Council and included in the Statement of Accounts.  It was noted that the combined Statements would be submitted to the Committee for approval on 21 June 2010.

The Head of Internal Audit Partnership advised the Committee that there was an inconsistency between paragraph 5.2 (a) of the Annual Governance Statement and the Internal Audit Annual Report 2009/10.  In paragraph 5.2 (a) of the Annual Governance Statement, it stated that two areas of audit work with a level of assurance lower than substantial were outstanding at March 2010 (IT Disaster Recovery and the Business Transformation Programme).  However, two other areas required further work in 2010/11 (Members’ and Mayor’s Allowances and Expenses and Contract Procedure Rules – Compliance).  The review of Members’ and Mayor’s Allowances and Expenses had been about regularity and making sure processes were in place, and was not a strategic issue, but the review of compliance with the Contract Procedure Rules was more of a corporate issue and, to be consistent, it should be referred to in the Annual Governance Statement.

The Committee asked a number of questions of the Officers and the representatives of the Audit Commission relating to, inter alia, the effectiveness of the system of internal audit; the availability of minutes of meetings of the Officer Working Group set up to review and monitor corporate governance issues; the management of systemic risk; the new performance management system which would be implemented for the first quarterly reporting cycle of 2010/11 and would bring improved data analysis and links to the monitoring of the Local Strategic Partnership (LSP), the Strategic Risk Register and the Sustainable Community Strategy; the effectiveness of partnerships, including the LSP, and the controls in place to ensure that targets were achieved; the consistency of reporting arrangements across the Mid-Kent Improvement Partnership; and the role of the Overview and Scrutiny Committees.

Arising from the discussion on the Annual Governance Statement, the representatives of the Audit Commission confirmed that they were satisfied with the quality and standard of the internal audit work undertaken during the year. 

Having considered the replies to its questions, the Committee:-

RESOLVED:  That the Annual Governance Statement for 2009/10, as amended by the Head of Internal Audit Partnership, be endorsed for inclusion in the Statement of Accounts.

The Committee considered the report of the Chief Executive asking that it review and approve an amended Local Code of Corporate Governance based on a CIPFA/SOLACE publication entitled “Delivering Good Governance in Local Government”.  It was noted that the amended Code included the core principles and the supporting principles of Corporate Governance and detailed the current practice of the Authority in delivering good governance.

The Committee asked a number of questions of the Officers relating to, inter alia, the action being taken or planned to be taken in order to engage with local people and other stakeholders, including partnerships, through the scrutiny function; and the flexibility to amend the document in response to any changes in corporate governance arrangements introduced locally and/or nationally.

Having considered the replies to its questions, the Committee:-

RESOLVED:  That the amended Local Code of Corporate Governance be approved.

The Committee considered the report of the Chief Executive concerning the Audit Commission’s Annual Audit and Inspection Fee Letter for 2010/11.  It was noted that since the Letter had been received, the new Government had abolished Comprehensive Area Assessment (CAA), and this would have an impact on the proposed fee. 

Mr Mack, the District Auditor, confirmed that the increase in the financial statements element of the audit fee reflected the additional work arising from IFRS.  In recognition of the financial pressures that public bodies were facing in the current economic climate, the Audit Commission had decided that it should rebate the “one-off” element of the cost of transition to IFRS that would arise in 2010/11, the year of transition.  For Maidstone Borough Council, this rebate would amount to £7,357.  He could not say what impact the abolition of CAA would have on the proposed fee at this stage, but the planned inspection fee would reduce or be deleted.  Work on Use of Resources would continue, but the scoring element had been taken out.  The Audit Commission would be consulting the Department for Communities and Local Government and local authorities about what might replace the scoring system and CAA (if anything), but whatever arrangements were introduced would be lighter touch and lower cost, focusing on value for money, efficiency, data quality and financial management.

In response to questions by Members, Mr Mack explained that, in general terms, given the current economic climate, the risk associated with the change in policy, was that the basic principles of good corporate governance might be allowed to slip.  However, no specific risks had been identified for Maidstone which was recognised as a strongly performing Council.  The proposed fee would be updated to reflect the change in arrangements.

RESOLVED:  That the position with regard to the annual audit and inspection fee for 2010/11 be noted.

Following the decision of the Council to increase the membership of the Audit Committee to include a non-voting Independent Member, the Committee considered a report by the Director of Resources and Partnerships setting out a proposed process for the appointment of a suitably qualified person to fill the position.  The report included a suggested role description and person specification which had been developed from an Audit Commission and CIPFA best practice guidance note.  It was noted that the Standards Committee had endorsed an appointment process that replicated the process used to appoint its Independent Members, but this did not mean that the Audit Committee was obliged to recommend this approach.

RESOLVED:

1.  That subject to:-

Clarification as to whether it is a statutory requirement for the Independent Member of the Audit Committee not to have been a Councillor or Officer of the Council in the preceding five years prior to appointment;

It being desirable (as opposed to essential) for the Independent Member to be a CCAB qualified accountant; and

It being made clear that the role will require a commitment to attend at least six evening meetings a year

the suggested role description and person specification for the position of Independent Member of the Audit Committee, as set out in Appendix A to the report of the Director of Resources and Partnerships, be approved.

2.  To RECOMMEND to the COUNCIL:

  That the following process be adopted for the appointment of a non-voting Independent Member of the Audit Committee:-

·  Advertise in appropriate local media and forward details to all partner agencies for expressions of interest in the role.

·  Supply the role description and person specification to all respondents, with a request to return a Curriculum Vitae (CV) if they remain interested.

·  Review CVs and select candidates who meet the person specification.

·  Select the appropriate candidate at a formal interview.

  The advertisement and the interaction with interested candidates, supplying the role description and person specification and receiving CVs will be completed by Officers.

  The review of CVs will be strictly in accordance with best match to the person specification and will be carried out by the Chairman and a selected Member of the Audit Committee and the Director of Regeneration and Communities.

  The interview and selection of the appropriate candidate will be by the Audit Committee or representative Members of the Committee.

The Committee considered the report of the Head of Internal Audit Partnership setting out details of the work of the Internal Audit Section over the financial year 2009/10 and the opinion of the Head of Internal Audit Partnership on the overall adequacy and effectiveness of the Council’s control environment, in the context of the Annual Governance Statement.

It was noted that:

·  The statutory Code of Practice for Internal Audit in Local Government in the United Kingdom required the Head of Internal Audit to provide a written report to those charged with governance, timed to support the Annual Governance Statement.

·  The Accounts and Audit (Amendment) Regulations 2006 also required that “the relevant body shall at least once in each year, conduct a review of the effectiveness of its system of internal audit”.  In previous years a separate report had been prepared containing the ‘review of effectiveness’.  However, in the context of last year’s Triennial Review of Internal Audit by the Audit Commission, which confirmed the effectiveness of Internal Audit at that time, and the transition to the new four-way Internal Audit Partnership, it was considered that a separate report was not appropriate.

·  It was the opinion of the Head of Internal Audit Partnership that substantial reliance could be placed on the Council’s control environment in terms of the overall adequacy and effectiveness of the controls and processes that were in place to achieve the objectives of the Council.  There were no qualifications to that opinion.

·  The opinion on the control environment was principally formed through the results of Internal Audit work during the financial year but other factors had also been considered such as the results of external audit work during the year (including the Use of Resources assessment) and any concerns expressed by the External Auditor; the effectiveness of the Council’s risk management arrangements; significant control breakdowns during the financial year, whether they were found by Internal Audit or not; the results of any other form of external inspection or assessment; and the effectiveness of senior management in resolving control weaknesses.

·  Thirty two audit projects were completed between April 2009 and March 2010.  The work of the Internal Audit Section had established that for the majority of the areas examined, substantial controls were in place. Where weaknesses had been identified they were reported to the appropriate Head of Service who then had the responsibility for taking the necessary action in order to rectify those weaknesses.

The Committee asked a number of questions of the Officers relating to, inter alia, the risks associated with changes to the Council’s management structure especially in terms of minor areas of activity and given the current economic climate; the implications of the implementation of the Mid-Kent Improvement Partnership; the surveys carried out to assess satisfaction with the audit service; and the management response to various audit findings.

RESOLVED:  That having considered the replies to its questions, the Committee:-

1.  Notes the Head of Internal Audit Partnership’s opinion that substantial reliance can be placed  ...  view the full minutes text for item 15.

6.30 p.m. to 8.05 p.m.