TO THE POLICE AND CRIME COMMISSIONER FOR MERSEYSIDE AND THE CHIEF CONSTABLE OF MERSEYSIDE JOINT AUDIT COMMITTEE ANNUAL REPORT

Transcription

1 TO THE POLICE AND CRIME COMMISSIONER FOR MERSEYSIDE AND THE CHIEF CONSTABLE OF MERSEYSIDE Introduction JOINT AUDIT COMMITTEE ANNUAL REPORT CIPFA recommends that Audit Committees report on their work and assess their performance. This is the fourth report of the Joint Audit Committee. The Committee was established in April 2013 to have oversight of, and provide independent review of the effectiveness of Police and Crime Commissioners (PCC) and Chief Constable s governance, risk management and control frameworks, financial reporting and annual governance processes, internal and external audit, and treasury management. This annual report sets out how the Committee fulfilled these responsibilities in 2016/17. The Committee members, appointed through a recruitment process, are Tom P Kelly (Chairman), David Bradbury, Tom C Kelly and Chad Thompson. The Committee should be held to account by both the PCC and the Chief Constable. CIPFA sets criteria for this and these form the basis of this report: has the committee fulfilled its agreed terms of reference? has the committee adopted recommended practice? have the development needs of committee members been assessed and are committee members accessing briefing and training opportunities? has the committee assessed its own effectiveness or been the subject of a review? what impact has the committee had on the improvement of governance, risk and control? The report will also consider: committee members roles as champions ; and progress in addressing last year s action plan. Has the committee fulfilled its terms of reference? Terms of reference follow CIPFA guidance and are reviewed regularly. Details can be found on the PCC website and are summarised below:

2 Governance, risk and control Internal audit External audit Financial reporting Accountability arrangements Review corporate governance arrangements against good governance framework. Review the Annual Governance Statements, considering whether they properly reflect arrangements and assurances. Identify any improvements. Consider arrangements to secure value for money and review assurances and assessments on their effectiveness. Consider the assurance framework, ensuring it adequately addresses the risks and priorities of the OPCC and the Force. Monitor risk management arrangements, review the risk profile and monitor progress in addressing risk-related issues. Consider reports on the effectiveness of internal controls and the implementation of agreed actions. Review arrangements for assessing fraud risks and potential harm from this, and monitor the effectiveness of the counter-fraud strategy. Review the internal audit charter and resources annually. Review the internal audit plan and any proposed revisions to this. Oversee the appointment and performance of the internal audit service and its independence. Consider the Head of Internal Audit s annual report and opinion, and a regular summary of the progress of internal audit activity against the audit plan, and the assurance it can give over governance arrangements. Consider summaries of internal audit reports and such detailed reports the committee may request. Consider a report on the effectiveness of internal audit to support the Annual Governance Statement. Comment on the scope and depth of external audit work, its independence and whether it gives satisfactory value for money. Consider the external auditor s annual management letter, the report to those charged with governance and other reports. Advise and recommend on the effectiveness of relationships between external and internal audit and other inspection agencies or relevant bodies. Review the annual statement of accounts, including whether appropriate accounting policies have been followed and whether concerns arising from the audit need to be brought to the attention of the PCC and/or the Chief Constable. Consider the external auditor s report to those charged with governance on issues arising from the audit of the financial statements. Report to the PCC and Chief Constable with advice and recommendations on any matters it considers relevant to governance, risk management and financial management. Also, its findings, conclusions and on these arrangements and functions. Review performance against terms of reference annually and report the results to the PCC and Chief Constable.

3 Treasury Management Ensure the effective scrutiny of the treasury management strategy and policies. The Committee believes it has met these requirements, both in terms of relevant agenda items and the effectiveness of its review. In summary, audit activity is reviewed at every meeting including internal and external audit plans and reports. Particular aspects of governance have been reviewed including risk management, the updated Corporate Governance Framework and the assurance frameworks. Treasury management strategy and performance have also been reviewed. The Annual Governance Statements will be considered at the September 2017 meeting. This meeting will also consider the annual accounts and the external auditor s report on them. Has the committee adopted recommended practice? As part of its annual review, the Committee reviewed its performance against good practices identified by CIPFA. There are some minor areas where improvements can be made (Appendix 1) but the review shows the Committee is following good practice in the way it operates. Have the development needs of committee members been assessed and are they accessing briefing and training opportunities? As part of the year end assessment, Committee members have assessed themselves against CIPFA s knowledge and skills framework (appendix 3). This will form the basis of training in Members have received training and briefings in a number of areas during 2016/17, based on current issues and areas they identified themselves. Issues covered included Community First, victim services, professional standards, whistleblowing arrangements, the budget and the annual accounts. Has the committee assessed its own effectiveness or been the subject of a review? The Committee has assessed its own effectiveness based on CIPFA guidance and Grant Thornton recommendations (appendices 2 and 4). This identified some areas where effectiveness can be developed; these are reflected in the action plan and include: holding regular private meetings with external audit and the Head of Internal Audit.

4 monitoring the implementation of Community First, as it becomes more embedded. receiving updates and briefings on any major collaborations as they develop. receiving annual updates of the results of HMIC inspections and future inspections. What impact has the committee had on the improvement of governance, risk and control? The Committee has considered a wide range of areas during the year but legislation restricts the role of police audit committees. The Chief Constable and PCC are those charged with governance and this means the Committee s role is largely advisory. The other restriction on the Committee is the limited time available. With only four meetings per year it is difficult to be aware of all developments Despite these limitations, the Committee has made an impact during the year and five areas provide good examples of this: The Committee s champion roles have provided more focus on key risk areas. This is discussed further in the section below. The Committee identified areas where briefings and training were required to fulfil its role effectively. It has received presentations on a range of areas including Community First, victim services, professional standards, whistleblowing arrangements and the budget. This provides additional assurance on the arrangements in place. The Committee has raised the issue of collaborations with other forces and organisations, and how these are governed. It has received a summary of significant collaborations and their monitoring. This has provided clarity on the numbers of arrangements in place and their governance. The Committee also gained assurance from internal audit for the lead force having a role in assessing arrangements. The Committee has a key role in reviewing the annual accounts and annual governance statements. With its overview of governance and role in reviewing these documents, the Committee is well-placed to provide assurance to the PCC and Chief Constable before they formally approve these documents. The Committee monitors internal audit resources and progress against the audit plan. It regularly challenges progress, resources and discusses findings from reports.

5 Committee Members Champion Roles The Committee s champion roles have now been established. With restrictions on the role of police audit committees and the limited time available, the champion roles aim to improve the Committee s effectiveness. Each member has a role in becoming more involved in key risk areas: performance, scrutiny and the budget; sustaining excellence; the estates strategy; and victim services. Members attend meetings and review documentation, aimed at providing assurance on these risk areas. They report back informally to each Committee meeting and this provides an additional source of assurance on the arrangements in place in each area. It also improves members knowledge and understanding of current developments. The roles are already providing assurance that arrangements on major risks and developments are effective. As risks change, members roles may also change to new risk areas. This will therefore always provide the Committee with assurance about the key risk areas and continue to improve its effectiveness. Progress on Last Year s Action Plan Last year, the Committee identified a number of recommendations to improve its effectiveness. These have largely been addressed with a number of briefings on areas such as victim services, whistleblowing arrangements and collaborations with other forces and organisations. Other areas have also developed with a review of the updated Corporate Governance Framework, an annual meeting with Professional Standards and a phased approach to succession planning for the Committee. Committee s Conclusions on Governance The PCC and Chief Constable have established a Joint Audit Committee. Its role is to provide an independent review of the effectiveness of governance, risk management and control frameworks, financial reporting and annual governance processes, internal and external audit, and treasury management This annual report sets out how the Committee fulfilled these responsibilities in 2016/17.

6 The Committee has received assurances on the operation of the Commissioner s and Chief Constable s systems of governance, risk management, financial reporting and annual governance statement arrangements. Its work has not identified any significant control risks and the Committee concludes that the arrangements reviewed are adequate. The Committee has reviewed its effectiveness against its terms of reference and objectives. Members believe the Committee has been effective but have identified areas where improvements could be made. These include holding regular, private meetings with internal and external audit, monitoring the implementation of Community First as it becomes more embedded and receiving briefings on major collaborations as they develop. An action plan has been agreed to address the areas identified. In implementing this action plan, the Committee will become more effective during It recognises the significant challenges facing the Commissioner and Chief Constable and aims to support them in developing governance arrangements as they address key challenges, while also meeting the continuing requirement to make cost savings.

7 Appendix 1 Self-Assessment of Good Practice Good practice questions Yes Partly No Audit committee purpose and governance 1 Does the authority have a dedicated audit committee? 2 Does the audit committee report directly to full council? (Applicable to local government only.) 3 Do the terms of reference clearly set out the purpose of the committee in accordance with CIPFA s Position Statement? 4 Is the role and purpose of the audit committee understood and accepted across the authority? 5 Does the audit committee provide support to the authority in meeting the requirements of good governance? 6 Are the arrangements to hold the committee to account for its performance operating satisfactorily? Functions of the committee 7 Do the committee s terms of reference explicitly address all the core areas identified in CIPFA s Position Statement? good governance assurance framework internal audit external audit financial reporting risk management value for money or best value counter-fraud and corruption. 8 Is an annual evaluation undertaken to assess whether the committee is fulfilling its terms of reference and that adequate consideration has been given to all core areas? 9 Has the audit committee considered the wider areas identified in CIPFA s Position Statement and whether it would be appropriate for the committee to undertake them? 10 Where coverage of core areas has been found to be limited, are plans in place to address this? Not applicable to Police audit committees

8 Good practice questions Yes Partly No 11 Has the committee maintained its advisory role by not taking on any decision-making powers? Membership and support 12 Has an effective audit committee structure and composition of the committee been selected? This should include: separation from the executive an appropriate mix of knowledge and skills among the membership a size of committee that is not unwieldy where independent members are used, that they have been appointed using an appropriate process. 13 Does the chair of the committee have appropriate knowledge and skills? 14 Are arrangements in place to support the committee with briefings and training? 15 Has the membership of the committee been assessed against the core knowledge and skills framework and found to be satisfactory? 16 Does the committee have good working relations with key people and organisations, including external audit, internal audit and the chief financial officer? 17 Is adequate secretariat and administrative support to the committee provided? Effectiveness of the committee 18 Has the committee obtained feedback on its performance from those interacting with the committee or relying on its work? 19 Has the committee evaluated whether and how it is adding value to the organisation? 20 Does the committee have an action plan to improve any areas of weakness? Issues arising from this self-assessment are: A process for succession planning for the Committee is being introduced that will also aim to widen its diversity. The Committee should hold regular, separate meeting with internal and external audit.

9 Evaluating the Effectiveness of the Audit Committee Appendix 2 The Committee assessed each area and agreed a score from 1 to 5. 1 means no evidence can be found that the audit committee has supported improvements in this area. 5 means clear evidence is available from a number of sources that the committee is actively supporting improvements across all aspects of this area. Areas to Add Value Promoting the principles of good governance and their application to decision making. Contributing to the development of an effective control environment. Supporting the establishment of arrangements for the governance of risk and for effective arrangements to manage risks. Advising on the adequacy of the assurance framework and considering whether assurance is deployed efficiently and effectively. Agreed Score Areas to Develop Supporting the quality of the internal audit activity, particularly by underpinning its organisational independence. Aiding the achievement of the authority s goals and objectives through helping to ensure appropriate governance, risk, control and assurance arrangements. Supporting the development of robust arrangements for ensuring value for money. 3 Will hold regular meetings with the Head of Internal Audit. 4 3 Will monitor the implementation and embedding of Community First.

10 Areas to Add Value Helping the authority to implement the values of good governance, including effective arrangements for countering fraud and corruption risks. Promoting effective public reporting to the authority s stakeholders and local community and measures to improve transparency and accountability. Agreed Score 4 4 Areas to Develop Issues arising from this self-assessment are: The Committee will hold regular meetings with the Head of Internal Audit. The Committee will monitor the implementation of Community First, as it becomes more embedded.

11 Appendix 3 Committee Members Assessment Knowledge and Skills Framework (Based on Appendix C of CIPFA s Audit Committees - Practical Guidance For Local Authorities and Police ) Knowledge area Organisational knowledge Audit committee role and functions Governance Internal audit Financial management and accounting External audit Details of core knowledge required An overview of the governance structures of the authority and decision-making processes. Knowledge of the organisational objectives and major functions of the authority. An understanding of the audit committee s role and place within the governance structures. Familiarity with the committee s terms of reference and accountability arrangements. Knowledge of the purpose and role of the audit committee. Knowledge of the six principles of the CIPFA/SOLACE Good Governance Framework and the requirements of the Annual Governance Statement (AGS). Knowledge of the local code of governance. An awareness of the key principles of the Public Sector Internal Audit Standards and the Local Government Application Note. Knowledge of the arrangements for delivery of the internal audit service in the authority and how the role of the head of internal audit is fulfilled. Awareness of the financial statements that a local authority must produce and the principles it must follow to produce them. Understanding of good financial management principles. Knowledge of how the organisation meets the requirements of the role of the chief financial officer, as required by the CIPFA Statement on the Role of the Chief Financial Officer in Local Government. Knowledge of the role and functions of the external auditor and who currently undertakes this role. Knowledge of the key reports and assurances that external audit will provide. Knowledge about arrangements for the appointment of auditors and quality monitoring undertaken. Identified Need for Training Regular briefings on any major collaborations. The Committee receives an annual briefing on the financial statements. Would welcome any training from external audit on national issues and developments.

12 Knowledge area Risk management Counter-fraud Values of good governance Details of core knowledge required Understanding of the principles of risk management, including linkage to good governance and decision making. Knowledge of the risk management policy and strategy of the organisation. Understanding of risk governance arrangements, including the role of members and of the audit committee. An understanding of the main areas of fraud risk the organisation is exposed to. Knowledge of the principles of good fraud risk management practice (Red Book 2). Knowledge of the organisation s arrangements for tackling fraud. Knowledge of the Seven Principles of Public Life. Knowledge of the authority s key arrangements to uphold ethical standards for both members and staff. Knowledge of the whistleblowing arrangements in the authority. Identified Need for Training The training needs arising from this assessment are: Regular briefings on any major collaborations. The Committee receives an annual briefing on the financial statements. Would welcome any training from external audit on national issues and developments.

13 Appendix 4 Grant Thornton Considerations for Effective Police Audit Committees Within their assessment of the effectiveness of police audit committees (Examining the Evidence), Grant Thornton identified a number of considerations. These have been considered by members of the Audit Committee and the following areas to develop were identified: Hold private meetings with external audit and the Head of Internal Audit. The Committee will consider the latest organisational risks at its September 2017 meeting. The Committee should receive updates and briefings on any major collaborations as they develop. The Committee will be receiving annual updates of the results of HMIC inspections and future inspections.

14 Appendix 5 Action Plan Ref Action Responsibility Target Date 1 A process for succession planning for the Committee is being introduced that will also aim to widen its diversity. CFO s April The Committee should hold regular, private meetings with internal and external audit. 3 The Committee will monitor the implementation of Community First, as it becomes more embedded. 4 The Committee should receive updates and briefings on any major collaborations as they develop. Head of Internal Audit & Grant Thornton CFO s CFO s April 2018 April 2018 April The Committee would welcome any training from external audit on national issues and developments. Grant Thornton April The Committee will consider the latest organisational risks at its September 2017 meeting. CFO s Sept 2017