BIRMINGHAM CITY COUNCIL AUDIT COMMITTEE TUESDAY, 19 JUNE 2018 AT 14:00 HOURS IN COMMITTEE ROOM 6, COUNCIL HOUSE, VICTORIA SQUARE, BIRMINGHAM, B1 1BB A G E N D A 1 NOTICE OF RECORDING/WEBCAST The Chairman to advise/meeting to note that this meeting will be webcast for live or subsequent broadcast via the Council's Internet site (www.civico.net/birmingham) and that members of the press/public may record and take photographs except where there are confidential or exempt items. 2 APOLOGIES To receive any apologies. 3 APPOINTMENT OF AUDIT COMMITTEE, CHAIR, DEPUTY CHAIR AND MEMBERS 1. To note the resolution of the City Council appointing the Committee, Chair and Members to serve on the Committee for the period ending with the Annual Meeting of the City Council in 2019. Labour Councillors O'Shea (Chair), Afzal, Bridle, Shah and Trickett Conservative Councillors Jenkins and Webb Liberal Democrat Councillor Tilsley 2. To elect a Deputy Chair, for the purpose of substitution for the Chair if absent, for the period ending with the Annual Meeting of the Council in 2019. Page 1 of 310 4 FUNCTIONS - AUDIT COMMITTEE 5 - 6 To note the Committee's functions as set out in the attached schedule. 5 DECLARATIONS OF INTERESTS Members are reminded that they must declare all relevant pecuniary and non pecuniary interests arising from any business to be discussed at this meeting. If a disclosable pecuniary interest is declared a Member must not speak or take part in that agenda item. Any declarations will be recorded in the minutes of the meeting. 6 MINUTES - AUDIT COMMITTEE 7 - 16 To confirm and sign the Minutes of the last meeting. 7 ANNUAL GOVERNANCE STATEMENT 2017/18 17 - 36 Report of the Corporate Director - Finance & Governance 8 INTERNAL AUDIT ANNUAL REPORT 2017/18 37 - 80 Report of the Assistant Director - Audit & Risk Management 9 STATEMENT OF ACCOUNTS 2017/18 81 - 302 Report of the Corporate Director - Finance & Governance 10 GRANT THORNTON - PROGRESS REPORT 303 - 310 Report of the External Auditor 11 DATES AND TIME OF MEETINGS - AUDIT COMMITTEE To approve a schedule of dates for the Committee's meetings during 2018/19. The Chairman proposes that the Committee meets on the following Tuesdays at 1400 hours in the Council House:- 2018 2019 30 July (Monday) 29 January 25 September 26 March 20 November Page 2 of 310 12 OTHER URGENT BUSINESS To consider any items of business by reason of special circumstances (to be specified) that in the opinion of the Chairman are matters of urgency. 13 AUTHORITY TO CHAIRMAN AND OFFICERS Chairman to move:- 'In an urgent situation between meetings, the Chairman jointly with the relevant Chief Officer has authority to act on behalf of the Committee'. Page 3 of 310 Page 4 of 310 AUDIT COMMITTEE The purpose of the Audit Committee is to support the Council’s Corporate Governance responsibilities and to provide independent assurance to the Council in relation to internal control, risk management and governance. Functions (a) To review the City Council’s Annual Accounts and Annual Governance Statement (AGS). This will include advising on significant changes throughout the year to financial regulations and policies. (b) To monitor progress in addressing control or governance issues identified in the AGS. (c) To review and provide the executive with assurance on the embedding and maintenance of an effective system of corporate governance including the risk management framework and the associated control environment. (d) Responsibilities as set out in the terms of reference in relation to external audit including reviewing the planned programme of work, noting fees and terms of engagement of the external auditor, considering and advising the executive on responses to audit management letters, reports and investigations and reviewing whether agreed external audit or inspection recommendations have been implemented as timetabled. (e) To review and make recommendations to the executive regarding the effectiveness of internal audit to include ensuring the internal audit function is adequately resourced, to review its strategy, receive, challenge and approve its annual plan and monitor its delivery and to review significant audit findings and monitor progress by managers in implementing agreed recommendations. (f) To consider and make recommendations to the executive on the Council’s arrangements for deterring, preventing, detecting and investigating fraud. (g) To consider reports from the Ombudsman and monitor management response in relation to these. (h) To consider, approve or make recommendations in respect of any other matters at the request of the Council. Page 5 of 310 Page 6 of 310 BIRMINGHAM CITY COUNCIL AUDIT COMMITTEE 27 MARCH 2018 MINUTES OF A MEETING OF THE AUDIT COMMITTEE HELD ON TUESDAY, 27 MARCH 2018 AT 1400 HOURS IN COMMITTEE ROOM 6, COUNCIL HOUSE, BIRMINGHAM PRESENT:- Councillor Claire Spencer in the Chair; Councillors Jenkins, Robinson and Tilsley. ****************************** NOTICE OF RECORDING/WEBCAST 15 The Chairman advised and the meeting noted that this meeting would be webcast for live or subsequent broadcast via the Council's Internet site (www.birminghamnewsroom.com) and that members of the press/public could record and take photographs except where there were confidential or exempt items. _______________________________________________________________ APOLOGIES 16 Apologies were submitted on behalf of Councillor Mariam Khan due to illness and Councillors Quinnen, Rice and Shah for their inability to attend the meeting. _______________________________________________________________ The business of the meeting and all discussions in relation to individual reports was available for public inspection via the web-stream. MINUTES 17 RESOLVED:- That the public part of the Minutes of the last meeting held on 30 January 2018 be noted. _______________________________________________________________ Page426 7 of 310 Audit Committee – 27 March 2018 MATTER ARISING 18 In response to a comment from Councillor Robinson regarding the use of reserves to balance the City budget, the Chair suggested that it be considered as a potential item preferably earlier on in the new Municipal Year. _______________________________________________________________ BIRMINGHAM INDEPENDENT IMPROVEMENT PANEL 19 Councillor Ian Ward, Leader of Birmingham City Council submitted apologies for lateness and for having to leave the meeting prematurely. Councillor Ward reported that after entering into his present role almost immediately, together with the Chief Executive had met with Birmingham Independent Improvement Panel to discuss a different way of working. He confirmed that it had taken some time to determine how it would work which was why the letter to the Secretary of State for Housing, Communities and Government was sent on 8 March 2018. He added during that time period, they had been looking at how the mechanics of working in a more collaborative way would work, and also with the setting of a new base line of where the City Council was at and where it needed to be. At this juncture, Councillor Ward circulated to the committee, a plan which detailed the critical issues that needed to be tackled and progressed over the next four year period. Whilst providing a comprehensive explanation of each of the issues, it was anticipated that over the next twelve months, progress would be demonstrated by the City Council, and that it would be in a position where the panel would have greater confidence in the City Council moving forward. He made reference that in moving forward, the City Council should be open to accepting constructive advice on how further operational improvements could be made. He stated that at some time this year, he would like a corporate peer review and to invite the LGA to come and look at the City Council as it was operating as a whole, taking into consideration the work being undertaken with the Improvement Panel, the plan that was in place, and to provide further advice and guidance on progression. He added that the vision for the future, was for the City Council to be a high performing council that was delivering for the people of the City and also, highlighted the opportunities that were there to grow the City in going forward, and that it was important, that the City Council stepped up to play a leadership role in ensuring it maximised on the benefits that were available. Steve Robinson, Birmingham Independent Improvement Panel made reference to the more collaborative working approach that had been mentioned, and for elected members and officers to be seen demonstrating higher levels of transparency and self-awareness in valuation, and in reporting on the way the City Council was operating. He highlighted that the panel only now felt confident that the City Council was accepting the improvement challenge and due to the scale of the task it would take some years to achieve given the 427 Page 8 of 310 Audit Committee – 27 March 2018 underlying cultural issues. He further highlighted the serious financial budgetary position and associated issues, emphasising the enormous challenge that was there to be met. He referred to the leadership of the City Council both managerially and professionally that was in place, and believed that as a result of this, was confident that it was up for the challenge. He made reference to the various items that had been identified for discussion with Cabinet which included; using the findings from surveys, feedback and studies, peer reviews and following up and actually delivering