Audit Committee

Read the Minutes

Minutes of the meeting held on 29 June 2006

Present:
Councillor Priest - In the Chair

Councillors Andrews, Isherwood, Lyons, Pagel, Ramsbottom, Sandiford and Trotman

Also Present:
Councillor S. Murphy - Executive Member for Finance and Human Resources

AS/06/7 Minutes

Decision

To approve the minutes of the meeting held on 1 June 2006 as a correct record.

AS/06/8 Annual Accounts and Statement of Internal Control 2005/2006

The Committee considered a report of the City Treasurer presenting the Council's Annual Accounts for 2005/2006 for scrutiny and referral to the Audit Commission.

The City Treasurer presented the accounts and responded to questions on matters of detail.

Members requested information from the City Treasurer in relation to the criteria for the carrying forward of departmental budget overspendings and the extent to which these automatically became the first call against budgets for the ensuing year. The City Treasurer responded by reminding members that decisions about the rollover of budget deficits were taken by the Executive and that a number of factors were taken into to consideration, for instance rollover of deficits was often against forecasts of income generation that would offset them during the course of the next financial year, some such as education had to be considered within ring-fenced budget arrangements. The Executive Member indicated that different approaches were adopted in relation to those areas of the Council budget, such as Children's Services where it was known in advance that there would be budget pressures and where there were already close monitoring arrangements in relation to those budgets.

Members also questioned the Council's borrowing limit, attention being drawn to the fact that the Council's actual borrowing in the year under review was significantly less than that permitted. The City Treasurer indicated that whilst this figure represented the authorised limit of borrowing as determined by Government the Council had a strategy to reduce the overall level of debt and to use strong cash flows and low interest rates to buy out existing debt and also to utilise capital receipts more extensively than previously as an alternative to borrowing. Overall the position was accepted to be a good one for the Council.

Questions were also posed regarding the increase in the valuation of investment properties and in particular residential properties which had evidenced an overall 10% increase despite stock transfers. Members were particularly concerned to establish that the re-valuation had been sufficiently robust in view of the criticisms levelled by the District Auditor in the previous year regarding stock valuations. The City Treasurer assured members that the re-valuations had been undertaken by the District Valuer against a clear evidence base.

Members also challenged the officers in relation to the increased deficit on the local pension scheme, and, in particular, on the likely implications of legislative changes to pension arrangements. The City Treasurer informed the Committee that the Council was effectively making a £7M annual repayment against the deficit by the reduced take up of its full allocation for health related early retirement.

Members also highlighted the potential claw back of £17M on ERDF funded schemes for which no specific contingency had been made in the accounts. The City Treasurer indicated that no provision would be made until the Council's overall liability had become clearer. Whilst the Council had accepted that EU procurement rules had not been followed in the case of one scheme and that grant repayment would be made, there were a number of others where the Council was acting under the direction of the Government Office for the North West and where the Council would strongly argue joint culpability.

A member referred to the reference in the Statement of Internal Control to the Council's overall preparedness for the implementation of new legislation or regulations affecting a number of Council services, and to the availability for the purposes of scrutiny of clear audit trails of service planning prior to the introduction of legislative changes and regulations. The City Treasurer outlined the arrangements made at service level for the planned introduction of such changes, indicating that in some cases the Council's liability was clearly defined than in others, especially those cases which were demand led.

Decision (Delegated)

 1. To approve the Statement of Internal Control for 2005/2006.

2. To note the officers' responses to the specific issues raised and to approve the Annual Accounts for 2005/2006 and to authorise the officers to submit these to the Audit Commission by 30 June 2006.

3. To exercise urgency powers in relation to the foregoing decisions on the grounds that the legal and financial position of the Council would be prejudiced if these decisions were not implemented before 30 June 2006.

Councillor Sandiford declared a personal interest as a member of Greater Manchester PTA

Councillor Trotman declared a personal interest as a member of the Management Board of Northwards Housing

AS/06/9 Risk Management

A report of the City Treasurer was submitted on the outcome of a recent review of the Risk Management Policy and Strategy and outlining the proposed approach to the further development of planning methodologies to better incorporate risk management processes, and to update the recently updated Corporate Risk Register.

The Chair referred to the services of Manchester Education Partnership shown in the Risk Register as having a high risk factor, and he expressed surprise that this had not been flagged up to the Finance and General Purposes OSC which had considered the review process the previous week. Officers responded by explaining that the risk quotient was set against degrees of control in place, the high risk tag for this item reflecting the position in May 2006 and the Director of Children's Services view at that time that the necessary controls were not then in place to be confident about the outcomes, however, risk was dynamic and a lower risk weighting may by now be more appropriate for this element.

Members also recognised the importance of the retrospective aspects of risk management in terms of identifying those things that became risks but were not identified in advance

Decision (Delegated)

1. To approve the Risk Management Policy and Strategy.

2. To note the intention to bring to the Committee a further report on the planning methodologies incorporating risk management procedures.

3. To note the content of the Corporate Risk Register and to request that this is circulated to the chairs of overview and scrutiny chairs so that individual matters can be considered for inclusion in their work programme

AS/06/10 Annual Review of the System of Internal Control

Consideration was given to a report of the City Treasurer on the outcome of a review of the system of internal control in accordance with the Accounts and Audit Regulations.

Members referred to the delays in securing timely responses from service departments to the findings of audit reviews which they considered was unacceptable in terms of the importance that management action was initiated as quickly as possible in response to significant findings from such reviews. The Committee accepted that this was an issue that it would wish to return to later in the year when officers were requested to provide up to date information of those service reviews where departmental responses were outstanding. Members indicated that chief officers could be summoned to appear before the Audit Committee to explain why they had not been able to respond to individual reviews in a timely fashion.

Decision

To note the outcomes of the review of the system of internal audit.

AS/0611 Internal Audit Plan 2006/2007

A report of the City Treasurer was submitted on the Internal Audit Plan for the period July 2006 to June 2007.

Decision (Delegated)

To approve the Internal Audit Plan 2006/2007.