Agenda and minutes

Audit Committee
Thursday, 16th March, 2017 7.00 pm

Venue: Civic Offices, St Nicholas way, Sutton, SM1 1EA

Contact: Committee Services Team  Tel: 020 8770 4990 | Email:

No. Item


Apologies for absence


There were no apologies for absence. Councillor Hicks welcomed all those present.



Declaration of interests


No declarations of interest were made.



Minutes of the last meeting

To approve as a correct record the Minutes of the meeting held on 8 December 2016.


RESOLVED: that the Minutes of the meeting held on 8 December 2016 be agreed as a correct record. 


Order of Items


The Chair Announced that the items would be discussed in the following order, Item 5 followed by item 10, then item 9, then remaining items as per the agenda.



Audit Task and Finish Update- Role and Effectiveness of the Audit Committee pdf icon PDF 78 KB


A report was presented to Audit Committee on the 22 September 2016 setting out a proposed approach to consider and clarify the role of the Audit Committee, including, but not limited to, making a clear distinction from the role of the Scrutiny Committee.   Audit committee agreed that a task and committee group would be established and facilitated by the Head of the South West London Audit Partnership (SWLAP).This report highlights the findings.


Additional documents:


The report was presented by Alix Wilson, Head of the South West London Audit Partnership (SWLAP), who had facilitated the Task and Finish Group.


Members asked how the functioning of the Committee might change.  The Head of SWLAP advised that more focus could be placed on the effective and timely implementation of internal audit recommendations. Members could invite senior officers to attend Audit Committee meetings to provide additional explanation and assurance where recommendations were not implemented in line with agreed timescales. The Committee could also seek assurance about measures being taken to mitigate specific risks.


Officers clarified that reference in Appendix D to compliance with professional standards related to, for example, CIPFA treasury management standards and similar guidance from professional bodies. It was confirmed that a questionnaire had been sent to all Members regarding the functions of the Audit Committee but that no responses were received.


Councillor Broadbent asked where CIPFA recommend that Audit may function better as a standalone committee.  The Head of SWLAP advised that this is in the guidance and position statement. However, she confirmed that it was common for the audit function to be discharged by a committee with a wider remit. It was confirmed in the event of a change in the committee structure at the London Borough of Sutton the audit committee functions would be assigned to a committee, possibly combined with other functions.


The Head of SWLAP advised Members that a shared training needs document had been prepared which set out the knowledge and skills requirements for audit committee members. This would assist committee members in identifying any knowledge and skills gaps. The document would be made available to audit members for completion, to inform the content of future Member development sessions. Councillor Davey suggested this should be taken forward irrespective of which committee would have responsibility for the audit function in the future. The Chair, Councillor Hicks, suggested this approach may be useful to share with other committees such as scrutiny and pensions. Finally, Councillor Hicks requested that feedback on the decision-making process of the new committee be presented to Audit Committee once discussions are concluded.


A motion was moved by Councillor Broadbent and seconded by Councillor Burke to amend the wording of the first recommendation of the report to “Endorse the findings of the report, including the recommendations as contained in Appendix A and the terms of reference in Appendix D” and Members agreed.



  1. The findings of the report be endorsed, including the recommendations as contained in Appendix A and the terms of reference in Appendix D.


2.    It be recommended to Strategy and Resources Committee to have regard to the findings when considering any future proposed changes to the functions of the Audit Committee or any successor Committee.



Regulation of Investigatory Powers Act 2000 – Audit Committee Update pdf icon PDF 122 KB

The Council, in its regulatory capacity, periodically undertakes investigations into allegations of benefit fraud and unlawful trading practices. Such investigations require the Council to obtain personal information about an alleged perpetrator through covert surveillance techniques under the Regulation of Investigatory Powers Act 2000 “RIPA”


This report updates the Audit Committee on the use of Directed Surveillance under “RIPA 2000” and makes recommendations for Council Wide awareness of the Social Networking Policy.


Additional documents:


Peter Rollins, Litigation and Planning, South London Legal Partnership (SLLP), presented the report, highlighting in particular the impact of social networking within investigations and the policy set out in Appendix B.


It was explained that the next step consisted of ensuring council wide adherence to the social networking policy. It was intended that a web page be set up where use of RIPA is explained fully and also outlining when it is appropriate to use this.  It was stated that the Council will next be inspected on 17 May 2017, before which training would be in place for the relevant departments. In a first phase this would include Social workers and the Adult and Children's safeguarding teams.


Members were concerned that the policy for social media needed to be more specific to which it was responded that it will be, once finalised.  Councillors also requested that the policy should be more explicit on the consequences for the individual and the Council if the policy is breached.


Julie Turner, Executive Head of Business Services (Interim), confirmed the policy would be finalised and implemented in time for the inspection and would also be presented to the committee in June. The Chair queried if South West London Fraud Partnership team has a policy and it was confirmed that it has and it was endorsed as ‘good practice’ when that team had their inspection. It was requested that this is shared and reviewed to consider adding into the London Borough of Sutton policy.


Kevin Holland Deputy Head, Fraud & Risk and Head of South West London Fraud Partnership advised that following the inspection in his team a point was highlighted that the policy should not just be specifically for surveillance investigators but also needs to be rolled out across the Council.


Councillor Hicks suggested this should be highlighted in the internal staff newsletter, as part of the council's duty to spread awareness on the acceptable use of social media. In response to Councillor Burke’s question, it was confirmed that when a surveillance is taking place it is part of fraud team remit to work alongside police, enforcement teams and other agencies. It was also requested that guidance notes and training to be provided to staff be shared among Members.


A motion was moved by Councillor Davey and seconded by Councillor Hicks to add a third resolution requesting delegated authority to the Strategic Director of Resources to finalise the wording of the social media policy, to which Members agreed.



1.  The current position in relation to use of Directed Surveillance under RIPA be noted, since the last update to the Audit Committee.

2.   It be agreed to promote the Council wide awareness of the RIPA Social Network Policy.

3.   Authority be delegated to the Strategic Director of Resources, in consultation with the Chair of the Audit Committee, to finalise the RIPA Social Network Policy.



Fraud Referrals and Investigations Update pdf icon PDF 156 KB

This report summarises the results of the Council’s Counter-Fraud and investigations work undertaken since 1 April 2016, including, an update on investigations undertaken by the South West London Fraud Partnership.


Additional documents:


Kevin Holland, Deputy Head, Fraud & Risk and Head of South West London Fraud Partnership (SWLFP), presented the report, highlighting an increase in referrals but that this did not necessarily mean that there was an increase in actual fraud. In table 3 notice to quit had now been served in respect of both properties which would be recovered.


Alix Wilson, Head of the South West London Audit Partnership, also advised that a new online training system will be rolled out to staff. Margaret Culleton, Head of Internal Audit, advised that the team were also refreshing the whistle blowing policy which would be presented at the next committee.


It was highlighted that the SWLFP may need to refer data in relation to council tax benefit fraud on a case by case basis to the Department for Work and Pensions (DWP) as currently DWP can only deal with cases when they are specifically referred to them.



1.    The report was commented upon and the contents noted.



Treasury Management Quarterly report pdf icon PDF 121 KB

This report is the treasury management review for the quarter ended 31 December 2016. It summarises the Council’s Treasury Management operations during the first nine months of 2016/17. It is presented for the purpose of monitoring and review and meets best practice as suggested by the Treasury Management Code of Practice.

Additional documents:


Lyndsey Gamble, Head of Financial Strategy and Planning, presented the report, focussing on the Council’s Treasury Management operations during the first nine months of 2016/17 until the end of December 2016.


An update was provided on further external borrowing being undertaken to finance the recent purchase of an investment property. A first tranche of borrowing was taken in December and is referred to in the report. On 8 March 2017 a second tranche of borrowing was undertaken. This borrowing was in the form of two Public Works Loan Board maturity loans, the first for £8m over 44 years and the second for £9m over 50 years. These were both at an interest rate of 2.46%. It was confirmed that the Council has now undertaken all the borrowing required to support this purchase and at a rate below that within the business case which supported the acquisition.


Investment balances continue to drop due to the reasons highlighted in the report under paragraph 4.7.  The Council is predominantly using a 95 day notice account with Santander and other funds are with Money Market Funds. The current strategy is to continue to review core cash levels and maximise income received.


With regards to the Municipal Bond Agency (MBA), the Head of Financial Strategy and Planning informed the Committee that the MBA are preparing to issue their first bond. One large and several smaller authorities are participating in the issue. Total value is £100m.  The bond will only go ahead if the cost of borrowing is lower than the PWLB. Following a request from the MBA, the London Borough of Sutton has provided its future borrowing requirements for 2017/18 and 2018/19.


The Head of Financial Strategy and Planning also provided an update on changes to MiFID (The Markets in Financial Instruments Directive) since this was introduced in November 2007. She explained that MiFID II will potentially have a greater impact on the Council. The default position under MiFID II is that the Council is rated as a retail client. If confirmed, this would significantly restrict the investments which can be made for treasury management and pension fund purposes.


The Local Government Association (LGA) has warned the Financial Conduct Authority (FCA) of the potential impact on Local Government and conversations are ongoing. We are currently awaiting for further guidance and advice. It was suggested that Audit committee will need a regular update on MiFID and this will be added to the work plan


Questions from Members queried the future of EU legislation, asking whether the Finance department would be looking to adjust the risk register as EU changes take place.  The Head of Financial Strategy and Planning confirmed that officers are already speaking with advisors and thinking about adjusting risk appetite. Members further discussed the experience of staff and financial qualifications and if this is taken into account in the MiFID rating and also if it is taken into account that Advisors are used. The Head of Financial Strategy and Planning explained that these were  ...  view the full minutes text for item 47.


External Audit Plan 2016/17 progress report including grant certification pdf icon PDF 1 MB

The External Audit Plan sets out an overview of the planned scope and timing of the Audit.The Progress report update provides the Audit Committee with a report from Grant Thornton on progress in delivering their responsibilities as external Auditors to London Borough of Sutton.

Additional documents:


Iain Murray Engagement Lead from Grant Thornton presented the report.

Key reporting changes included a new requirement to “tell the story,” making the accounts more ‘meaningful’. Mr Murray confirmed that the proposal to include the value of highways assets on the balance sheet was no longer being proceeded with. He then outlined main risks surrounding financial statements and how these would be addressed in the audit.  


Following Member questioning, it was confirmed that Grant Thornton’s audit fee remains the same as the previous year.  The only grant claim in 2016/17 for which a separate fee would be charged was the housing benefits subsidy claim.


A further question on risk was raised regarding business rates income and the impact of appeals against valuations. Phil Butlin, Executive Head of Finance, advised that the Council makes a provision for appeals in the accounts and also for the purposes of business rates returns to government. The calculation of the provision involves making various judgements for example about the success rate for appeals. These judgements are reviewed by the auditors, but as long as they fall within a reasonable range they are likely to be acceptable.  Councillor Broadbent enquired as to whether Government would fund appeals costs. The Executive Head of Finance advised that currently the cost of appeals falls on the Collection Fund and therefore affects the Council’s share of business rates retained (as well as the GLA and government shares). There had been a suggestion that under full business rates retention this may change, but this had not been confirmed.


Paul Jacklin Senior Audit Manager  from Grant Thornton presented the progress report, highlighting the progress on audit planning and on completing audit testing.  It was also pointed out that the grant certification report on benefits was qualified due to the errors identified. Unlike the accounts audit, where materiality is taken into account, any error found results in a  qualification.  In this case, the error found was a misclassification of £2,900. The Plan was noted by Members of the Committee.



Pension Fund External Audit Plan 2016/17 pdf icon PDF 234 KB

The Audit Plan sets out the planned scope and timing of the audit.


Iain Murray Engagement Lead from Grant Thornton presented the plan, highlighting a significant risk relating to the valuation of investments in unquoted or unlisted financial assets. Work had not yet been completed on this but no issues had been detected so far. The Plan was noted by Members of the Committee.



Internal Audit Plan 2017/18 pdf icon PDF 122 KB

This attached report comprises the draft Annual Internal Audit Plan for 2017/18. This sets out Internal Audit’s priorities and work programme for the year ahead for approval by the Audit Committee.


Additional documents:


Margaret Culleton, Head of Internal Audit, presented the report.


Members asked if any changes had been made to the strategy from previous years.  The Head of Internal Audit responded that the main change had been Wandsworth Council joining the group of councils that participate in the SWLAP


Members asked for the information in the report to be updated to include a Borough-by-Borough organogram, which the Head of SWLAP committed to include.



1.    The internal audit plan for 2017/18 was considered and approved.



Audit Committee work plan pdf icon PDF 75 KB

The Committee’s Work Plan is attached.


The committee noted the work plan, and discussed that going forward task and finish recommendations should be reflected in the work plan. The committee asked for the following items to be added to the work plan for discussion in the meeting in June 2017:


  1. A review of the strategic risk register.
  2. A review of the Corporate Risk Management strategy.



Any urgent items brought forward at the discretion of the Chair

The Chair must approve the reason for urgency.


There was no urgent business.



Exclusion of the press and public

The following motion should be moved, seconded and approved if the committee wishes to exclude the press and public to deal with reports revealing exempt information:


“That the public be excluded from the meeting for the following items of business on the grounds that they involve the likely disclosure of exempt information as defined in paragraph 3 Schedule 12A of the Local Government Act 1972.”



There were no press or public in attendance.


Date of next meeting

The next meeting of the Audit Committee will take place on 29 June 2017 at 7pm.


The date of the next Audit Committee meeting was confirmed as 29 June 2017.