Joint Report of PCC s Chief Finance Officer and Chief Constable s Director of Resources. Joint Audit Committee s Draft Annual Report for 2013/14

Transcription

1 To: The Members of the Joint Audit Committee Meeting: 18 th September 2014 Joint Report of PCC s Chief Finance Officer and Chief Constable s Director of Resources Joint Audit Committee s Draft Annual Report for 2013/14 1. Purpose of the Report The purpose of this report is for Members to consider and approve their annual report to the PCC and Chief Constable relating to 2013/ Recommendation Members are asked to consider and approve the attached draft annual report in Appendix A, including the action plan contained within the report. 3. Background 3.1 The Audit Committee should be held to account on a regular basis by the both the PCC and the Chief Constable. The Chartered Institute of Public Finance and Accountancy (CIPFA) highlight the following aspects that should be specifically considered when holding an Audit Committee to account:- whether the Committee has fulfilled its agreed terms of reference; whether the Committee has adopted recommended practice; whether the development needs of Committee members have been assessed and whether Committee members are accessing briefing and training opportunities; whether the Committee has assessed its own effectiveness or been the subject of a review; and the conclusions and actions from that review; and what impact the Committee has on the improvement of governance, risk and control. 3.2 In addition, CIPFA s guidance to Police Audit Committees published in requires an Audit Committee to undertake a review each year of its effectiveness against its terms of reference and its objectives. It also requires that the results of this review be reported to the PCC and 1 Audit Committees: Practical Guidance for Local Authorities and Police, 2013 Edition, CIPFA

2 Chief Constable. The findings of the review should also be included within the organisations Annual Governance Statements. 4. Annual Review of the Effectiveness of the Audit Committee 4.1 On 10 th July 2014 Committee Members met with the PCC s Chief Finance Officer, the Force s Director of Resources, the Force s Head of Organisational Support and Head of the Shared Internal Audit Service to review its effectiveness. At this meeting Members and Officers evaluated the Committee s effectiveness in accordance with CIPFA s;- criteria for holding an Audit Committee to account; self-assessment of good practice checklist, contained in Appendix D of the 2013 guidance; and checklist on evaluating the effectiveness of the Audit Committee, contained in Appendix E of the 2013 guidance. 4.2 Following the meeting the Chairperson, in consultation with the other Members and the officers, has drafted an annual report for consideration by the Committee, Appendix A, prior to formally issuing the report to the PCC and Chief Constable. 4.3 The report addresses each of the criteria for holding the Audit Committee to account and contains the completed checklists detailed above in paragraph 4.1. The report concludes that:- The Committee has received assurances on the operation of the Commissioner s and Chief Constable s systems of governance, risk management arrangements, control environment and financial reporting arrangements. Its work has not identified any significant control risks and the Committee concludes that the arrangements reviewed are adequate. The Committee undertook a review of its effectiveness against its terms of reference and its objectives. The Committee determined that it was effective but identified areas where improvements could be made. These included reviewing arrangements for countering fraud and corruption and value for money risks. The findings of the review have been reported to the Commissioner and Chief Constable and an action plan was agreed to address the areas identified. 4.4 It is noted that the Audit Committee has been invited to the PCC and Chief Constables High Level Governance meeting on the 16 th September 2014 to discuss their draft annual report. The final report will be submitted to the PCC and Chief Constable and published on their websites.

3 4.5 The report also includes an action plan to address the issues identified during the review and ensure that the Committee becomes more effective in 2014/15. Members are asked to approve the action plan. Progress reports on the action plan will be submitted to the Committee, as well as the PCC and Chief Constable during the course of 2014/ Financial and Staffing Implications There are no financial and staffing issues associated with this report. 6. Equality & Diversity Impact Assessment The review of the Audit Committee s effectiveness arrangements has positive impact on relationships and workings of the PCC, Force, its employees, contactors and the local community. 7. Environmental Impact Assessment There are no environmental issues associated with this report. 8. Risk Assessment The risk in not producing a formal report on the effectiveness of the Audit Committee for 2013/14 is a failure to comply with national guidance issued by CIPFA. The review of the effectiveness of the Committee and submission of an annual report enables the PCC and Chief Constable to hold the Committee to account. 9. Conclusion The Audit Committee plays an important role in overseeing the governance arrangements adopted by the PCC and Chief Constable. In line with national guidance it is appropriate for the Committee to review annually its effectiveness against its terms of reference and objectives and report its findings to the PCC and Chief Constable. In undertaking the review with officers from the OPCCM and the Force it enables the PCC and Chief Constable to hold the Audit Committee to account. John Riley PCC Chief Finance Officer Geoff Broadhead Director of Resources Contacts:- Mark Turley, Head of Shared Internal Audit Service, Background Papers: Audit Committees: Practical Guidance for Local Authorities and Police, 2013 Edition, CIPFA.

4 Appendix A TO THE POLICE AND CRIME COMMISSIONER FOR MERSEYSIDE AND THE CHIEF CONSTABLE OF MERSEYSIDE Introduction JOINT AUDIT COMMITTEE ANNUAL REPORT The Chartered Institute for Public Finance and Accountancy (CIPFA) recommend that Audit Committees report regularly on their work and, at least annually, report an assessment of their performance. This is the first report of the Joint Audit Committee. The Joint Audit Committee was established in April Its role is to provide independent assurance on the adequacy of the risk management framework and the associated control environment, independent scrutiny of the organisations financial and non-financial performance to the extent that it affects the exposure to risk and weakens the control environment, and to oversee the financial reporting process. This annual report sets out how the Committee has fulfilled its responsibilities. The Committee members were appointed following a recruitment process and are Tom P Kelly (Chairman), David Bradbury, Tom C Kelly and Chad Thompson. Members have attended all meetings during the year. The Committee should be held to account on a regular basis by the both the Police and Crime Commissioner and the Chief Constable. CIPFA highlights aspects to be considered and these form the basis of the remainder of the report. whether the Committee has fulfilled its agreed terms of reference; whether the Committee has adopted recommended practice; whether the development needs of Committee members have been assessed and whether Committee members are accessing briefing and training opportunities; whether the Committee has assessed its own effectiveness or been the subject of a review; and the conclusions and actions from that review; and what impact the Committee has on the improvement of governance, risk and control.

5 Has the committee fulfilled its terms of reference? Terms of reference were approved at the Committee s first meeting in April 2013 and reaffirmed in February Details can be found on the PCC website and are summarised in the table below:- Audit activity Regulatory framework Accounts Head of Internal Audit s annual report and opinion, internal audit activity, specific internal audit reports on request, implementation of audit recommendations, external auditor s annual letter, report to those charged with governance and other relevant reports, scope and depth of external audit work and its value for money, liaise with Audit Commission on appointment of external auditor. Overview of contract procedure rules, financial regulations and codes of conduct and behaviour, specific issues referred by the PCC Chief Executive, Chief Financial Officers and Chief Constable, monitor the development and operation of risk management and corporate governance, oversee the production of the PCC and Chief Constable s Annual Governance Statements and recommend their adoption, consider arrangements for corporate governance and agreeing necessary actions to ensure compliance with best practice, compliance with published standards and controls. Review the annual statement of accounts, specifically, to consider accounting policies and any concerns arising from the statements or audit that should be brought to the attention of the PCC and Chief Constable, external auditor s report to those charged with governance on issues arising from the audit of the accounts. The Committee 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 with regular reviews of internal and external audit plans and reports. Particular aspects of the regulatory framework have been reviewed including risk management and the Corporate Governance Framework. The Annual Governance Statements will be considered at the September 2014 meeting. The September Committee meeting will also consider the annual accounts and the external auditor s report on them. The Committee will be reviewing its terms of reference at its meeting in September This will take account of CIPFA s latest position statement and will consider how the PCC and Chief Constable deliver value for money, anti-corruption and anti-fraud measures, treasury management and ethical.

6 Has the Committee adopted recommended practice? As part of its annual review, the Committee has reviewed its performance against good practices identified by CIPFA. Although there are some areas where improvements can be made (see appendix 1), 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 assessed themselves against CIPFA s knowledge and skills framework. The results of this will form the basis of training to be provided during Members have received training in a number of areas during This was based on current issues and areas they identified themselves. Issues covered included the annual governance statement, risk management, annual accounts and the corporate governance framework. In addition, individual members have attended training provided by CIPFA and Grant Thornton. Have the Committee assessed its own effectiveness or been the subject of a review? The Committee has assessed its own effectiveness based on CIPFA guidance. Details are provided in appendix 2. This identified a number of areas where effectiveness can be developed; these are reflected in the action plan. Key areas to develop include:- receiving a map of assurances as part of its Annual Governance Statement review; receiving presentations and updates on major projects such as the Estates Strategy and financial saving plans; considering allocating champion roles to members, allowing more emphasis on particular areas. Champions could then attend appropriate meetings such as Performance Meetings; receiving training on value for money and considering how other committees obtain assurance on VFM; and receiving training on fraud and corruption and reviewing arrangements to counter these risks.

7 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. This has included regular reports on internal audit, external audit and risk management. It has also discussed other issues including preparation of the annual accounts, corporate governance framework and the Commissioner s community engagement strategy. Legislation restricts the role of police Audit Committees. The Chief Constable and Police and Crime Commissioner are those charged with governance and this means the Committee s role is largely advisory. Despite these limitations, the Committee has made an impact during the year and two areas provide good examples of this: The Committee was concerned about the level of internal audit resources during the early part of the year. There was a risk that it would not address some of the key risk areas within the audit plan. The Committee highlighted its concerns and monitored progress for the remainder of the year. This contributed to additional staffing resources being utilised, including temporary staff. Internal audit caught up with its outstanding workload and completed its 2013/14 audit plan effectively. While risk management is well established with the force, it was being developed with the Police and Crime Commissioner s office. The committee has monitored this development and a risk management strategy and risk register have now been adopted by the Commissioner. Committee s Conclusions on Governance The PCC and Chief Constable have a Joint Audit Committee. Its role is to provide independent assurance of the adequacy of the risk management framework and the associated control environment, independent scrutiny of the organisations financial and non-financial performance to the extent that it affects the organisations exposure to risk and weakens the control environment, and to oversee the financial reporting process. The Committee has received assurances on the operation of the Commissioner s and Chief Constable s systems of governance, risk management arrangements, control environment and financial reporting arrangements. Its work has not identified any significant control risks and the Committee concludes that the arrangements reviewed are adequate.

8 The Committee undertook a review of its effectiveness against its terms of reference and its objectives. The Committee determined that it was effective but identified areas where improvements could be made. These included reviewing arrangements for countering fraud and corruption and value for money risks. The findings of the review have been reported to the Commissioner and Chief Constable and an action plan was 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 good governance in developments such as the estates strategy, the continuing requirements to make cost savings and the introduction of the College of Policing s Code of Ethics.

9 Appendix 1 CIPFA 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

10 Good practice questions Yes Partly No 11 Has the committee maintained its nonadvisory role by not taking on any decisionmaking powers that are not in line with its core purpose? 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?

11 Issues arising from this self-assessment are: Committee s Terms of Reference will be reviewed at the next meeting. This will be based on CIPFA s latest position statement. Committee fulfills all of the functions to some extent but some areas need to be developed: - value for money not clear how this will be addressed but will try to identify good practice from other Audit Committees - counter-fraud and corruption need to review counter-fraud strategy and consider (e.g.) training session from Professional standards All committee members should complete the Knowledge and Skills Framework (appendix C of CIPFA Guidance) and use this as a basis for further training. There are some areas where the Committee can develop its role in adding value to the chief constable and police and crime commissioner. Committee members will meet with Chief Constable and Commissioner to feedback on the Committee s annual report. This will also provide an opportunity to obtain views on how Chief Constable and Commissioner see Committee s role and the current issues the Committee needs to be aware of. Committee will meet external auditor privately before the next committee meeting.

12 Evaluating the Effectiveness of the Audit Committee The Committee assessed each area and agreed a score from 1 to 5. Appendix 2 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. 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. Agreed Areas to Develop Score 3 Will receive a map of assurances as part of the review of the Annual Governance Statement. 4 Committee will raise any major concerns with senior managers when required. (No cases requiring this to date) 4 2 Will be better able to assess this after receiving the map of assurances as part of the review of the Annual Governance Statement. 4 3 Committee to receive training on major projects such as the Estates Strategy, financial saving plans. Committee will consider allocating champion roles to members, allowing more emphasis on particular areas. Champions to attend appropriate meetings such as Performance Meetings.

13 Areas to Add Value Supporting the development of robust arrangements for ensuring value for money. Helping the authority to implement the values of good governance, including effective arrangements for countering fraud and corruption risks. Agreed Areas to Develop Score 2 Consider how other committees obtain assurance and identify best approach to develop arrangements. Committee to receive training on VFM and how this is evaluated. 2 Review arrangements for countering fraud and corruption risks and comparing these with best practice. Committee to receive training on fraud and corruption and how risks are addressed within Force and Commissioner s Office. Promoting effective public reporting to the authority s stakeholders and local community and measures to improve transparency and accountability. n/a Not considered a significant issue for Police Audit Committees.

14 Action Plan Appendix 3 Ref Action Responsibility Target Date Progress 1 Committee s Terms of Reference will be reviewed at the next meeting. This will be based on CIPFA s latest position statement. 18 Sept 2014 Report to be submitted to Committee meeting on the 18 th September Committee to receive training on VFM and how this is evaluated. 3 Review arrangements for value for money risks and comparing these with best practice. 4 Committee to receive training on fraud and corruption and how risks are addressed within Force and Commissioner s Office. 5 Review arrangements for countering fraud and corruption risks and comparing these with best practice. 6 All committee members should complete the Knowledge and Skills Framework (appendix C of CIPFA Guidance) and use this as a basis for further training. Chair of the Audit Committee tbd tbd tbd tbd 6 th Nov 2014

15 Ref Action Responsibility Target Date Progress 7 Committee members will meet with Chief Constable and Commissioner to report on the Committee s annual report. This will also provide an opportunity to obtain views on how Chief Constable and Commissioner see Committee s role and the current issues the Committee needs to be aware of. 8 Committee will meet external auditor privately before the next committee meeting. 16 Sept 2014 Arranged for Committee to attend PCC and Chief Constable s High Level Governance meeting on the 16 th September 2014 at OPPCM at Allerton Road Police Station. 18 Sept 2014 Meeting arranged for the 18 th September 2014 at the Grant Thornton Offices in the Royal Liver Buildings. 9 Will receive a map of assurances as part of the review of the Annual Governance Statement. 10 Committee will raise any major concerns with senior managers when required. 11 Committee to receive presentations and updates on major projects such as the Estates Strategy, financial saving plans. 12 Committee will consider allocating champion roles to members, allowing more emphasis on particular areas. Champions to attend appropriate meetings such as Performance Meetings. Chair of the Audit Committee Chair of the Audit Committee 18 Sept 2014 Report to be submitted to Committee meeting on the 18 th September Na tbd 6 th Nov 2014