Public Document Pack · 8/31/2017 · MBC), A Jones (Doncaster MBC), G Lindars-Hammond (Sheffield...

Sheffield City Region Combined AuthorityRegistered Address: 18 Regent Street, Barnsley, S70 2HG

21st August 2017

To: Members of the Sheffield City Region Combined Authority Audit CommitteeAppropriate Officers

NOTICE OF MEETING

You are hereby summoned to attend a meeting of the Sheffield City Region Combined Authority Audit Committee, to be held at at 11.00 am on Thursday 31 August 2017 for the purpose of transacting the business set out in the agenda.

Diana TerrisClerk to the Combined Authority

WEBCASTING NOTICE

This meeting is being filmed for live or subsequent broadcast via the Combined Authority’s website. At the start of the meeting the Chair will confirm if all or part of the meeting is being filmed.

You should be aware that the Combined Authority is a Data Controller under the Data Protection Act. Data collected during this webcast will be retained in accordance with the Combined Authority’s published policy.

Therefore by entering the meeting room, you are consenting to being filmed and to the possible use of those images and sound recordings for webcasting and/or training purposes.

This matter is being dealt with by:Craig Tyler [email protected] 01226 772824

Gill Richards [email protected] 01226 772806

Public Document Pack

Member Distribution

Councillors: K Reid (Bolsover DC) (Chair)D Challinor (Bassetlaw DC), A Cowles (Rotherham MBC), C Furness (Derbyshire Dales), N Gibson (Sheffield CC), W Johnson (Barnsley MBC), A Jones (Doncaster MBC), G Lindars-Hammond (Sheffield CC), S Mohammed (Sheffield CC), G Morley (North East Derbyshire DC), M Rayner (Chesterfield BC), A White (Doncaster MBC) and K Wyatt (Rotherham MBC)

Contact Details

For further information or assistance please contact

Craig TylerSCR Combined Authority18 Regent StreetBarnsleySouth YorkshireS70 2HG

Tel: 01226 [email protected]

Gill RichardsSCR Combined Authority18 Regent StreetBarnsleySouth YorkshireS70 2HG

Tel: 01226 [email protected]

mailto:[email protected]


AUDIT COMMITTEE

11.00 AM, THURSDAY 31 AUGUST 2017

18 Regent StreetBarnsleyS70 2HG

AGENDA

Item Page

1 Welcome and Apologies

2 Declarations of Interest by Members

3 Urgent Items / Announcements

4 Items to be considered in the absence of public and press

5 Reports from and Questions by Members

6 Questions from Members of the Public

7 Minutes of the previous meeting held on 27th July 1 - 8

8 External Auditor's Report - ISO260 9 - 46

9 Strategic Risk Management Update 47 - 52

10 Revised Meeting dates for 2017/18 53 - 58

This page is intentionally left blank

SCR Combined AuthorityAudit Committee

27/07/17

SHEFFIELD CITY REGION COMBINED AUTHORITY

AUDIT COMMITTEE

MINUTES OF THE MEETING HELD ON 27 JULY 2017

PRESENT:

Councillor Karl Reid, Bolsover DC (Chair)Councillor Mark Rayner, Chesterfield BC (Vice Chair)

Councillor Allan Jones, Doncaster MBCCouncillor Shaffaq Mohammed, Sheffield CCCouncillor Ken Wyatt, Rotherham MBC

Ruth Adams, SCR Exec TeamSharon Bradley, Internal AuditTim Cutler, KPMGClaire James, SCR Executive TeamMartin McCarthy, South Yorkshire Joint AuthoritiesGill Richards, South Yorkshire Joint AuthoritiesDave Smith, SCR Exec TeamMike Thomas, SCC / SCR Exec TeamEugene Walker, S73 Officer

Apologies for absence were received from Councillors D Challinor, N Gibson, G Lindars-Hammond and A White

1 APPOINTMENT OF CHAIR AND VICE CHAIR

M McCarthy opened the meeting and invited nominations for the position of Chair and Vice-Chair of the Committee.

RESOLVED –

i) That Cllr K Reid be appointed Chair of the Committee.

ii) That Cllr M Rayner be appointed Vice-Chair of the Committee.

2 WELCOME AND APOLOGIES

The Chair welcomed everyone to the meeting. Apologies were noted as above.

3 ITEMS TO BE CONSIDERED IN THE ABSENCE OF THE PUBLIC AND PRESS

None.

Page 1

Item 7


27/07/17

4 DECLARATIONS OF INTEREST BY MEMBERS

None.

5 URGENT ITEMS / ANNOUNCEMENTS

None.

6 REPORTS FROM AND QUESTIONS BY MEMBERS

None.

7 QUESTIONS FROM MEMBERS OF THE PUBLIC

None.

8 MINUTES OF THE PREVIOUS MEETING HELD ON 27TH APRIL

RESOLVED – That the minutes of the meeting held on 27 April 2017 be agreed as an accurate record.

9 INTERNAL AUDIT - ANNUAL REPORT 2016/17

A report was considered which highlighted the Internal Audit Team’s completed assignments throughout 2016/17, recommendations made and also the Head of Internal Audit’s assurance opinion based on the work undertaken throughout the year.

Members noted that the final position at 31 March 2017 was that Internal Audit had delivered 98 days, with a total of 17 days incorporated into the 2017/18 annual plan to enable the completion of 2 pieces of work in quarter one. Both carried forward reviews had since been completed and were included in the annual report.

The Committee were informed that based on the work undertaken and reported on by Internal Audit during the year, together with management’s response to issues raised, the Head of Internal Audit had provided an overall Adequate (positive) assurance opinion.

Members noted that in addition to the ‘reportable’ pieces of work undertaken, Internal Audit had provided advice and assurances in a further three areas, these were Risk Management, Governance Framework Development and Support and the Annual Governance Process.

RESOLVED – That the report be noted.

10 INTERNAL AUDIT - PROGRESS REPORT (QUARTER 1)

A report was submitted that informed the Committee of the Internal Audit work completed and in progress from 1 April 2017 to 14 July 2017.

Page 2


27/07/17

Members were informed that a total of 38 days of planned work had been delivered in accordance with the agreed schedule of work. There were no significant control or compliance issues to report to the Committee.

Members noted that the audit of procurement arrangements had resulted in a limited assurance opinion. Recommendations had been made to the recently-appointed Procurement Manager which were already being implemented and that would be followed up in due course.


11 EXTERNAL AUDIT UPDATE

T Cutler reported that KPMG had received the draft accounts by the deadline and no problems were envisaged in meeting the reporting deadlines.

An additional paper was tabled which was a formality of auditing standards where, whenever there was a significant issue that emerged during the work, the matter had to be brought to the Audit Committee’s attention.

A new risk had been identified in relation to the treatment of assets and liabilities following the liquidation of SYITA Properties Limited and the transfer of assets and liabilities to the PTE. The current year actuary valuation had provided the net assets and liabilities with the transfer and a pension deficit of £2.6m against the Executive.

E Walker reported that there was a question of who the deficit related to as the Property Company had never had employees.

There was a clear view of where the deficit needed to be accounted for but there would need to be evidence to back up how it would be treated in the accounts.

Due to the fact that the Combined Authority did not have any employees and that the Property Company was being closed, the right place for the deficit to be accounted for was the PTE; there was more work to be done to identify exactly where the deficit would be accounted for.

There would be no impact on the bottom line of the Combined Authority accounts; the PTE had been paying for it for the last few years but it was not entirely clear how and where. The only issue was where it would be accounted for on the balance sheet.

KPMG would:

- Review correspondence with the Pension Fund Actuary to understand the treatment of the assets and liabilities in the current year and previous years;

- Assess whether the assets and liabilities were correct to be transferred to the Passenger Transport Executive; and

Page 3


27/07/17

- Ensure the correct accounting treatment was made and disclosure complied with the Code, indication whether any prior adjustment was necessary.

T Cutler reported that he was confident the issue could be resolved within the reporting deadline.

RESOLVED - That the report be noted.

12 SCR STATEMENT OF ACCOUNTS 2016/17

Mike Thomas, Senior Finance Manager for the SCR Combined Authority, gave a presentation on the accounts.

Members were reminded that in most local authorities the Audit Committee considered and approved the Statement of Accounts. However, legislation required that ‘those charged with governance’ approve the accounts i.e. the Combined Authority.

The Audit Committee was charged with considering the accounts, performing scrutiny and exerting challenge to support the Combined Authority’s approval.

As previously mentioned, the draft accounts had met the deadline and had been published on the website for public inspection.

The accounts had to be approved by the 30 September 2017 and would be submitted to the Combined Authority meeting on 11 September prior to which the Audit Committee would conduct a final review of the accounts on 31 August.

Members were reminded that the Combined Authority Financial Group consisted of the parent, the Sheffield City Region Combined Authority and two subsidiaries; South Yorkshire Passenger Transport Executive, who operationalise the SY Transport Plan and SYITA Properties Ltd who manage the CA’s asset portfolio. Outside of the CA Group but linked to it was the South Yorkshire Passenger Transport Pension Fund whose financial results were not consolidated into the Group position but presented as an addendum to the accounts.

Members noted that the CA’s financial results were first presented as a single entity, but then shown as separate activity between SY transport activity and City Region wide activity. This was due to the fact that transport activity was funded by a statutory levy on the four SY districts and this levy, under law, could only be used to fund SY activity.

Members noted the context for the key financial issues of the Group which were detailed within the presentation, including the Local Growth Fund spend and the underspend on revenue activity due to the planned draw down of reserves.

The Statement of Accounts had been prepared in accordance with the International Financial Standards Code of Practice on Local Authority Accounting in the UK and

Page 4


27/07/17

the statutory Accounts and Audit Regulations to ensure that local authorities produce their accounts in a standard way to facilitate comparison.

M Thomas informed the Committee that local authority accounting was very different to private sector accounting, with most of the differences relating to capital accounting, pensions accounting and provisions for the repayment of debt, details of which were contained within the presentation.

Members also considered the revenue outturn position and adjusting between accounting and budgeting and the structure of the accounts, including the movement in reserves, comprehensive income and expenditure statement, consolidated balance sheet and cash flow statement.

The Chair thanked M Thomas for an interesting and informative presentation.

13 SCR ANNUAL GOVERNANCE STATEMENT 2016/17

The Committee considered the Annual Governance Statement which would be published alongside the accounts.

Members noted that there was still work to be completed on the Governance Improvement Plan; the Annual Governance Statement was in far more detail than in previous years and clarified what had been worked on to improve governance during the year.

The Committee were informed that during 2016/17 the CA had commissioned an independent review of decision making which had identified key changes which were included in the Annual Governance Statement.

The 2015/16 external audit conclusion had identified some areas for development. These were also included in the AGS with an update on their resolution.

Members noted that the review of the CA’s governance, risk and internal control arrangements in 2016/17 had identified a number of opportunities to strengthen governance. These were:

Financial Governance Management of Assets Information Governance Mayoral Combined Authority

With the exception of Mayoral Combined Authority which was still to be completed, the AGS detailed what action had been taken during the year to strengthen governance.


Page 5


27/07/17

14 RISK MANAGEMENT UPDATE

A report was submitted to ensure the Committee had relevant information to fulfil their role in monitoring the progress of the developing SCR risk management process.

Members were reminded that in January the Committee had endorsed a revised approach to strategic management along with the Risk Management Policy and Strategy.

A number of next steps were outlined in the report presented in January and the report now considered provided information to enable the Audit Committee to monitor the progress of developing and embedding risk management arrangements.

In addition, a new format for reporting the strategic risk management action plan was developed.

Members were informed that SCR’s risk management approach was focused on the effectiveness of, and compliance with, the contents of its governance and control framework. The effectiveness of the framework was vital to the successful delivery of the Strategic Economic Plan.

The initial re-scoping of the strategic risk analysis across the LEP and CA led to the identification of 13 strategic risk categories which were detailed in the report.

Work continued within the SCR Executive Team to embed Risk Management Processes at a strategic, operational, programme and project level and the Committee noted the activities that had been undertaken to progress this.

The outputs from the risk identification and action planning were currently being reviewed and developed into action plans across the 13 identified risk areas. To enable the Audit Committee to make detailed consideration of these, three areas were included at Appendix A to the report. If the Committee was happy with the format of the Action Plans provided, the remaining ten Action Plans would be forwarded for Members’ consideration.

RESOLVED – That the Committee:

i) Note the progress made in developing SCR’s risk management processes.

ii) Note the risk management action plans provided for the areas of Financial Management, Information Assurance and Business Continuity Management.

Page 6


27/07/17

15 DATES OF FUTURE MEETINGS

The Committee’s meeting dates for 2017/18 were reported as follows:

31 August 201726 October 201725 January 201826 April 201826 July 201830 August 2018

RESOLVED – That the dates be agreed.

CHAIR

Page 7

External audit report 2016/17

Sheffield City Region Combined

Authority

—

August 2017

DRAFT

Page 9

Item 8

Document Classification: KPMG Confidential

2© 2017 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with

KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

Summary for Audit Committee

Financial statements This document summarises the key findings in relation to our 2016-17

external audit at Sheffield City Region Combined Authority (‘the Authority’).

This report focusses on our on-site work which was completed in August

2017 on the Authority and Group’s significant risk areas, as well as other

areas of your financial statements. Our findings are summarised within

section one of this report.

Subject to all outstanding queries being resolved to our satisfaction

we anticipate issuing a unqualified audit opinion on the Authority's

financial statements before the deadline of 30 September.

Within the group accounts it was noted that there were historical pension

assets and liabilities that had not previously been accounted for due to an IAS

19 report not being produced. The PTE have taken accountability of these and

as a result a prior year adjustment has also been made to the subsidiary (PTE)

and group accounts.

We identified a number of adjustments during the course of our audit, most

notably the write back of a loan to SCR Financial Interventions of £16m as no

cash has been transferred. This has been communicated with DCLG who have

confirmed there is no clawback required from this as there are now plans to

defray this. Our audit also led to the reclassification of debtors and

investments with South Yorkshire ITA Properties Ltd from long term to short

term as they are due to wind down in 2017/18. There were a number of other

immaterial adjustments and presentational amendments that are listed in

Appendix Three.

We are awaiting confirmation from CLG as to the treatment of grant monies

received and whether the accounting transactions for such are appropriate.

We have not yet received the final consolidated accounts, however, we expect

to have received this and all outstanding queries finalised by 11 September.

Use of resources We have completed our risk-based work to consider whether in all significant

respects the Authority has proper arrangements in place to ensure it has

taken properly informed decisions and deployed resources to achieve

planned and sustainable outcomes for taxpayers and local people. We have

concluded that the Authority has made proper arrangements to secure

economy, efficiency and effectiveness in its use of resources.

We therefore anticipate issuing an unqualified value for money

opinion.

See further details within section two.

Acknowledgements We would like to take this opportunity to thank officers and Members for their

continuing help and co-operation throughout our audit work.

We ask the Audit Committee to note this report.

Page 10




Contents2 Summary for Audit Committee

4 Section one: financial statements

19 Section two: value for money

Appendices

25 One: Key issues and recommendations

27 Two: Follow-up of prior year recommendations

31 Three: Audit differences

34 Four: Materiality and reporting of audit differences

35 Five: Declaration of independence and objectivity

36 Six: Audit fees

The key contacts in relation to

our audit are:

Timothy Cutler

Partner

KPMG LLP (UK)

0161 246 4774

[email protected]

Alison Ormston

Senior Manager

KPMG LLP (UK)

0113 231 3942

[email protected]

Matt Ackroyd

Manager

KPMG LLP (UK)

0113 254 2996

[email protected]

Olivia Camm

Assistant Manager

KPMG LLP (UK)

0113 231 3017

[email protected]

This report is addressed to Sheffield City Region Combined Authority (the Authority) and has been

prepared for the sole use of the Authority. We take no responsibility to any member of staff acting in

their individual capacities, or to third parties. Public Sector Audit Appointments issued a document

entitled Statement of Responsibilities of Auditors and Audited Bodies summarising where the

responsibilities of auditors begin and end and what is expected from audited bodies. We draw your

attention to this document which is available on Public Sector Audit Appointment’s website

(www.psaa.co.uk).

External auditors do not act as a substitute for the audited body’s own responsibility for putting in place

proper arrangements to ensure that public business is conducted in accordance with the law and proper

standards, and that public money is safeguarded and properly accounted for, and used economically,

efficiently and effectively.

We are committed to providing you with a high quality service. If you have any concerns or are

dissatisfied with any part of KPMG’s work, in the first instance you should contact

Timothy Cutler, the engagement lead to the Authority, who will try to resolve your complaint. If you are

dissatisfied with your response please contact the national lead partner for all of KPMG’s work under

our contract with Public Sector Audit Appointments Limited, Andrew Sayers (on 0207 694 8981, or by

email to [email protected]). After this, if you are still dissatisfied with how your complaint has

been handled you can access PSAA’s complaints procedure by emailing [email protected],

by telephoning 020 7072 7445 or by writing to Public Sector Audit Appointments Limited, 3rd Floor,

Local Government House, Smith Square, London, SW1P 3H.

Page 11

Financial Statements

Section one

Page 12

We anticipate issuing an

unqualified audit opinion on the

Authority’s 2016/17 financial

statements by 30 September

2017. We will also report that

your Annual Governance

Statement complies with the

guidance issued by

CIPFA/SOLACE (‘Delivering

Good Governance in Local

Government’) published in April

2016.

For the year ending 31 March

2017, the single entity Authority

has reported a deficit of £608k

and the Group a surplus of

£2,886k.

Page 13




Group Structure

The Sheffield City Region Combined Authority financial group consists of the Combined Authority itself, and

those bodies that are controlled by the Combined Authority. Thus this section reports on the audit of the

Sheffield City Region group accounts and any issues from the subsidiary audits that have impacted these.

Section one: financial statements

The above diagram is n extract from the financial statements and demonstrates this structure.

Page 14




Significant audit risksSection one: financial statements

Significant audit risks Work performed

1. Accounting Treatment of

Transferred Pensions (PTE and

Group accounts)

Why is this a risk?

Following the termination of SYITA properties the Passenger Transport Executive has

been notified that they will become responsible for any deficit arising in relation to

the historical pre 1993 assets and liabilities remaining. The current year actuary

valuation has provided the net assets and liabilities with this transfer and a deficit

arising against the Executive of £2.6m. In addition there is a need to fully understand

the impact regarding any future contributions and any impacts on revenue funding.

There is a risk that this pension scheme is not accounted for correctly within the

relevant entity's financial statements and the Sheffield City Region Group accounts.

Our work to address this risk

The PTE have claimed responsibility for the assets and liabilities which has been

approved by their Executive Board and we have requested a signed management

representation letter to confirm this.

To validate this treatment initially we had to review and understand the historical

treatment of this issue, dating back from 1983 to ascertain that the PTE is

responsible for underwriting the deficit of the fund. This included reviews of the initial

contracts for the fund.

We have reviewed correspondence with the Pension Fund and Actuary to

understand the treatment of the assets and liabilities in the current year and previous

years. The actuary confirmed that at each triennial actuarial valuation exercise, any

funding deficit (or surplus) assessed for SYITA was effectively recharged into the

position of the PTE, so the PTE received the risks and rewards of the scheme. Hence

the fundamental accounting principle of substance over form meant this should have

been recognised within the PTE’s accounts and a prior year period adjustment was

made.

Throughout we have consulted with KPMG pension specialists who have reviewed

the assumptions in place for the current year and the restated values.

We have verified the accounting treatment of this prior year period adjustment and

the current in year treatment of the assets and liabilities and ensured that the

disclosures complied with the CIPFA code.

Our External Audit Plan 2016/17 sets out our assessment of the

Authority’s significant audit risks. During the year we provided an Update

on Significant Risks to the July 2017 Audit Committee. We have

completed our testing in these areas and set out our evaluation following

our work:

Page 15





Significant audit risks Work performed

2. New core financial system

(Combined Authority)

Why is this a risk?

The general ledger used by the Combined Authority has changed in year. There

has been a phased implementation of the new Integra system with the existing

OEO system still being used for a number of feeder systems e.g. Accounts

Payable and Receivable Ledgers.

There is a risk that account balances are incorrectly transferred from the old ledger

to the new ledger incorrectly leading to a misstatement. There is also a risk that

account balances are inaccurately coded due to an unfamiliarity with the new

coding structure.


We reconciled the closing balance on the old ledger to the opening balance on the

new ledger to ensure no transactions were lost or duplicated in the transfer. Testing

of activity in the year verified that the correct codes have been used both for the

transfer and subsequent activity, as well as any corrections made to this mapping

were appropriate.

This work involved KPMG IT specialists who reviewed the controls around the new

system to ensure users were appropriately recognised. This also included the review

of the 'link' between the old OEO and other feeder systems to the new ledger to

ensure data is transferred as required.

Pension Fund Specific Risks

3. Continuing issues with the

implementation of the

Pensions Administration

System (South Yorkshire

Passenger Transport Pension

Fund)

Why is this a risk?

The implementation of the pensions administration system by South Yorkshire

Pensions Authority in 2014/15 caused problems for the Authority and, on

implementation, it did not operate as designed. Workaround systems were put in

place, for example on pensioners payroll to ensure members receive their

entitlements.

As part of the 2015/16 audit, KPMG IT specialists undertook testing in respect of the

migration of data from the old Heywoods Pension system to the new Civica Pension

system. Their work identified a number of issues and we raised three

recommendations. The exceptions noted contributed to a lack of assurance over

completeness and accuracy for the migration from the old to new Pension systems.

Discussions with officers during 2016/17 indicate that significant progress has been

made in addressing the problems arising from the implementation although there

remain some outstanding issues such as backlogs in processing.


As part of our audit of the Pension Fund, we have:

• undertaken a walkthrough of the system to identify the controls in place in

relation to member details, benefits payable and contributions;

• tested the operating effectiveness of relevant system controls;

• used KPMG IT specialists to review the progress the Authority has made during

the year in addressing our recommendations; and

• tested benefits payable and contributions receivable substantively at the year end.

Subject to the outstanding matters highlighted in Appendix Two, the

recommendations raised in 2015/16 have been sufficiently addressed to allow

reliance to be placed on the information contained in the system. Our work on the

controls in place provided assurance that these are operating effectively.

Page 16





PTE and Pension Fund Specific Risk

4. Significant

changes in

the pension

liability due

to LGPS

Triennial

Valuation

(PTE and

South

Yorkshire

Passenger

Transport

Pension

Fund)

Why is this a risk?

During the year, the Local Government Pension Scheme for South Yorkshire PTE and the Pension

Fund has undergone a triennial valuation with an effective date of 31 March 2016 in line with the Local

Government Pension Scheme (Administration) Regulations 2013. The Authority’s share of the

pension’s assets and liabilities is determined in detail, and a large volume of data is provided to the

actuary in order to carry out this triennial valuation.

The pension liability numbers to be included in the financial statements for 2016/17 will be based on

the output of the triennial valuation rolled forward to 31 March 2017. For 2017/18 and 2018/19 the

actuary will then roll forward the valuation for accounting purposes based on more limited data.

There is a risk that the data provided to the actuary for the valuation exercise is inaccurate and that

these inaccuracies affect the actuarial figures in the accounts. Most of the data is provided to the

actuary by South Yorkshire Pension Authority, who administer the Pension Fund.


We have reviewed the process used to submit payroll data to the Pension Fund and have found no

issues to note. We have also tested the year-end submission process and other year-end controls, this

has been done through consultation with the pension fund audit team.

During the assessment of controls we noted that management could not evidence their review of the

actuary assumptions and a recommendation has been raised around this at Appendix One.

We have substantively agreed the total figures submitted to the actuary to the ledger with no issues to

note. We have engaged with your Pension Fund Auditors to gain assurance over the pension figures.

We reviewed the report received by the actuary and benchmarked the assumptions to determine

whether these were appropriate, this work was performed by a KPMG pension specialist. We also

assessed the capabilities and independence of the actuary.

We then reviewed that the journals posted agreed to the actuary report and that the accounts

accurately reflected this report.

PTE Specific Risk

5.Valuation of

Property,

Plant and

Equipment

(PTE)

Why is this a risk?

At 31 March 2016 the PTE was reporting Property, Plant and Equipment with a value of £109.737m,

representing the large majority of assets held on the Balance Sheet. It is the Authority’s policy to

revalue assets at a minimum every 5 years on a rolling basis, ensuring that the value of assets held on

the balance sheet is not materially different to the current value at year end.

There is an element of judgement exercised by the authority in determining whether assets require a

valuation in year and also with regards to the assumptions made by the valuer in determining a value

for the assets.

The ongoing tram/train project will progress during the year and the project will near completion. There

is a risk that this is categorised incorrectly on the financial statements and the year end valuation

provided is not a fair reflection of the project.

Given the materiality in value and the judgement involved in determining the carrying amount we have

determined a significant risk with regards to this account.


We have tested the accuracy and completeness of the PTE’s asset register through review of the

PTE’s asset verification exercise and the inspection of any significant new addition records.

We have reviewed the capitalisation of major expenditure in the year and obtained an understanding of

the classification of the tram/train project.

No valuation had initially been performed in year and the impairment review undertaken was

inadequate to support this justification. Due to this the audit team requested management to revalue a

selection of material assets, making up 75% of the land and building assets held. This valuation was

done by Sanderson Wetherall and resulted in a total increase in fixed assets of £4.8m. We reviewed

the qualifications, approach of the valuer and the appropriateness of the valuation basis adopted, with

which no issues were identified. We have raised a recommendation to improve the impairment review

process going forward in Appendix One.

Page 17





Fraud risk of revenue recognition

Professional standards require us to make a rebuttable

presumption that the fraud risk from revenue

recognition is a significant risk.

In our External Audit Plan 2016/17 we reported that we

do not consider this to be a significant risk for Local

Authorities as there is unlikely to be an incentive to

fraudulently recognise revenue.

This is still the case. Since we have rebutted this

presumed risk, there has been no impact on our audit

work.

Management override of controls

Professional standards require us to communicate the

fraud risk from management override of controls as

significant because management is typically in a

unique position to perpetrate fraud because of its

ability to manipulate accounting records and prepare

fraudulent financial statements by overriding controls

that otherwise appear to be operating effectively.

Our audit methodology incorporates the risk of

management override as a default significant risk. We

have not identified any specific additional risks of

management override relating to this audit.

In line with our methodology, we carried out

appropriate controls testing and substantive

procedures, including over journal entries, accounting

estimates and significant transactions that are outside

the normal course of business, or are otherwise

unusual.

There are no matters arising from this work that we

need to bring to your attention.

Considerations required by professional standards

do not consider this to be a significant risk for Loca

Authorities as there is unlikely to be an incentive

fraudulently recognise revenue.

This is still the case. Since we have rebutted this

presumed risk, there has been no impact on our a

work.

Page 18




Other areas of audit focusSection One: Financial Statements

We identified four areas of audit focus across the Group. These are not

considered as significant risks as they are less likely to give rise to a

material error. Nonetheless these are areas of importance where we

would carry out substantive audit procedures to ensure that there is no

risk of material misstatement.

Other areas of audit focus Our work to address the areas

1. Disclosures associated with

retrospective restatement of

CIES, EFA and MiRS

(Combined Authority and PTE)

Background

CIPFA has introduced changes to the 2016/17 Local Government Accounting Code

(Code):

— Allowing local authorities to report on the same basis as they are organised by

removing the requirement for the Service Reporting Code of Practice (SeRCOP)

to be applied to the Comprehensive Income and Expenditure Statement (CIES);

and

— Introducing an Expenditure and Funding Analysis (EFA) which provides a direct

reconciliation between the way local authorities are funded and prepare their

budget and the CIES. This analysis is supported by a streamlined Movement in

Reserves Statement (MiRS) and replaces the previous segmental reporting note.

As a result the Authority and Group was required to make a retrospective

restatement of its CIES (cost of services) and the MiRS. New disclosure

requirements and restatement of accounts require compliance with relevant

guidance and correct application of applicable accounting standards.

What we have done

We have assessed how the Group has actioned the revised disclosure requirements

for the CIES, MiRS and the new EFA statement as required by the Code. We

reconciled the new analysis to internal reporting to the governance structures of the

organisation. We found no issues to note.

For the restatement, we have obtained an understanding of the methodology used to

prepare the revised statements. We have also agreed figures disclosed to the’

Authorities general ledger and found no issues to note.

2. Concessionary Travel (PTE) Background

During 2015/16 expenditure on concessionary travel was circa £34m amounting to

31% of the PTE’s Gross Transport Expenditure.

There has been an increase in the rate charged to concessions for travel across

South Yorkshire, therefore, this has led to an increased amount to be reimbursed by

the PTE for each concession. This increase in price to be reimbursed per concession

is offset in the total movements as the general trend for use of public transport

decreases. Overall this has resulted in a decrease of £2.2m (6.5%) to a total spend of

£31.5m.

What we have done

We have obtained an understanding of each contract and the controls in place at the

PTE to monitor the amounts charged. We have assessed payments made in the year

and agreed to supporting documentation.

Our testing identified that although there were no issues identified from review of

the passenger information provided by the transport companies the PTE had not

commissioned any audits of this during the financial year.

Page 19




Other areas of audit focusSection One: Financial Statements

Other areas of audit focus Our work to address the areas

1. Compliance with the Code’s

requirements (South

Yorkshire Passenger Transport

Pension Fund)

Background

The format of the Fund Account and the Net Asset Statement have been updated for

consistency with the new Financial Reports of Pension Schemes –A Statement of

Recommended Practice 2015

What we have done

We have assessed the Pension Fund statements against the new format.

There are no matters to bring to your attention.

2. Valuation of unquoted

investments (South Yorkshire

Passenger Transport Pension

Fund)

Background

There is a higher risk of material misstatement in the valuation of level two and level

three investments.

What we have done

We have tested a sample of unquoted investments, focussing the sample on those

in the higher risk category. Our testing has considered the classification of the

investments, the valuation approach and the adequacy of the evidence to support the

valuation.

There are no matters to bring to your attention.

Page 20




JudgementsSection One: Financial Statements

Subjective areas 2016/17 2015/16 Commentary

Pensions

(PTE)

We reviewed the pensions assumptions made by your actuary to ensure

they were in line with our expectations. We substantiated the figures to

your actuary’s report and confirm that the accounting treatment of these

within the account was correct. We have no indications that a balanced

judgement has not been made.

Assets

(PTE)

As detailed on page 6, we requested a valuation to be done on assets

due to the lack of impairment reviews performed.

Following the revaluations being received we have reviewed the

assumptions and judgements of these and are satisfied that the Group

has made a balanced judgement and that there is a low risk of material

misstatement in light of those assumptions.

Provisions We have reviewed the assumptions and judgements which underpin the

£1,846k of provisions accounted for in the Group accounts and we are

satisfied that there is no risk of material misstatement in light of the

assumptions used and that the provisions disclosure is complete.

The PTE is continuing to provide for a provision for overpaying a rail grant

(£204k) in prior years and hearing loss claims (£50k). As such, we have

assessed that, although the Group makes balanced judgement in relation

to provisions, the decisions are closer to the cautious approach than the

optimistic approach.

We queried whether the damage from the fire at the Rotherham

Interchange should be provided for. However management concluded

they were unable to make a reliable estimate and have therefore added a

narrative note within the revised financial statements. This treatment is in

line with the CIPFA code. See Appendix Three for more details.

We have considered the level of prudence within key judgements in your

2016/17 financial statements and accounting estimates. We have set out

our view below across the following range of judgements.

Level of prudence

Cautious OptimisticBalanced

Acceptable range

Audit difference Audit difference

Page 21




Proposed opinion and audit differencesSection one: financial statements

Subject to all outstanding queries being resolved to our satisfaction, we

anticipate issuing an unqualified audit opinion on the Authority’s 2016/17

financial statements following approval of the Statement of Accounts by

the Audit Committee and then the Combined Authority on 11 September

2017.

Audit differences

In accordance with ISA 260 we are required to report

uncorrected audit differences to you. We also report any

material misstatements which have been corrected and

which we believe should be communicated to you to help

you meet your governance responsibilities.

The final materiality (see Appendix Four for more

information on materiality) level for this year’s audit was

set at £2 million. Audit differences below £100 thousand

are not considered significant.

Our audit identified a total of four significant audit

differences, which we set out in Appendix Three. It is our

understanding that these will be adjusted in the final

version of the financial statements.

The tables on the right illustrate the total impact of audit

differences on the Group’s movements on the General

Fund and HRA for the year and balance sheet as at 31

March 2017.

Our work identified the following adjustments:

— One adjustment required was the write back of a

loan to SCR Financial Interventions of £16m as no

cash had been transferred. This has been

communicated with DCLG who have confirmed

there is no clawback required from this as there

are now plans to defray this.

— Our audit also led to the reclassification of

debtors and investments with South Yorkshire

ITA from long term to short term as they are due

to wind down in 2017/18.

— Within the group accounts it was noted that there

were historical pension assets and liabilities that

had not previously been accounted for due to an

IAS 19 report not being produced. The PTE have

taken accountability of these and as a result a

prior year adjustment has also been made to the

subsidiary (PTE) and group accounts.

— Our audit of the PTE identified a significant audit

difference of £4.7m to the valuation of Land and

Buildings owned by the Passenger Transport

Executive. This adjustment is to be reflected

within the accounts.

In addition, we identified a small number of

presentational adjustments required to ensure that

the accounts are compliant with the Code of

Practice on Local Authority Accounting in the

United Kingdom 2015/16 (‘the Code’). We

understand that the Authority will be addressing

these where significant.

Annual governance statement

We have reviewed the Authority’s 2016/17 Annual

Governance Statement and confirmed that:

— It complies with Delivering Good Governance in Local

Government: A Framework published by

CIPFA/SOLACE;

and

— It is not misleading or inconsistent with other

information we are aware of from our audit of the

financial statements.

Narrative report

We have reviewed the Authority’s 2016/17 narrative

report and have confirmed that it is consistent with the

financial statements and our understanding of the

Authority.

Page 22




The Pension FundSection one: financial statements

We anticipate issuing an unqualified audit opinion on the Fund’s 2016/17


Pension fund audit

Our audit of the Fund also did not identify any material

misstatements.

There was no audit differences identified.

In the prior year we identified three recommendations

around the Pensions Administration System and have

concluded that these have been partially implemented

during the year, see Appendix Two for more details. There

have been no new recommendations raised from the

current year audit work.

Annual report

We have reviewed the South Yorkshire Passenger

Transport Pension Fund Annual Report]and confirmed that:

— The financial and non-financial information it contains is

not inconsistent with the financial information

contained in the audited financial statements.

We anticipate issuing an unqualified opinion on the South

Yorkshire Passenger Transport Pension Fund at the same

time as our opinion on the Statement of Accounts.

Page 23

1616


Accounts production andaudit process


Accounting practices and financial reporting

The Authority has recognised the additional pressures

which the earlier closedown in 2017/18 will bring. We

have been engaging with the Authority in the period

leading up to the year end in order to proactively address

issues as they emerge.

We consider the Authority’s accounting practices

appropriate.

Completeness of draft accounts

We received a complete set of draft accounts on 12 June

2017, which was prior to the statutory deadline.

Quality of supporting working papers

We issued our Accounts Audit Protocol 2016/17

(“Prepared by Client” request) which outlines our

documentation request. This helps the Authority to provide

audit evidence in line with our expectations. We followed

this up with a meeting with Management to discuss

specific requirements of the document request list.

We worked with management to ensure that working

paper requirements are understood and aligned to our

expectations. We are pleased to report that this has

resulted in good-quality working papers with clear audit

trails.

Our audit standards (ISA 260)

require us to communicate our

views on the significant qualitative

aspects of the Authority’s

accounting practices and financial

reporting.

We also assessed the

Authority’s process for preparing

the accounts and its support for an

efficient audit. The efficient

production of the financial

statements and good-quality

working papers are critical to

meeting the tighter deadlines.

© 2017 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with



Page 24





Response to audit queries

Officers resolved many of the audit queries in a reasonable

time and to a good quality. There were some delays noted

to the journals testing due to the changes within the IT

system.

Pension Fund audit

The audit of the Fund was completed alongside the main

audit. There are no specific matters to bring to your

attention relating to this.

Additional findings in relation to the Authority’s

control environment for key financial systems

In our External Audit Interim Report 2016/17 tabled in April

2017, we reported that there were a number of year end

controls that we will be testing during our year end audit.

We have since completed the testing of these controls

and have found no significant issues to note.

Prior year recommendations

As part of our audit we have specifically followed up the

Authority's progress in addressing the recommendations

in last years ISA 260 report.

There are still a number of recommendations in progress.

Appendix Two provides further details.

Controls over key financial systems

We have tested controls as part of our focus on significant

audit risks and other parts of your key financial systems on

which we rely as part of our audit. The strength of the

control framework informs the substantive testing we

complete during our final accounts visit.

No issues were identified with these controls.

Page 25




CompletionSection one: financial statements

We confirm that we have complied with requirements on objectivity and

independence in relation to this year’s audit of the Authority’s 2016/17


Before we can issue our opinion we require a signed management

representation letter.

Once we have finalised our opinions and conclusions we will prepare our

Annual Audit Letter and close our audit.

Declaration of independence and objectivity

As part of the finalisation process we are required to

provide you with representations concerning our

independence.

In relation to the audit of the financial statements of

Sheffield City Region Combined Authority and Group for

the year ending 31 March 2017, we confirm that there

were no relationships between KPMG LLP and Sheffield

City Region Combined Authority, its directors and senior

management and its affiliates that we consider may

reasonably be thought to bear on the objectivity and

independence of the audit engagement lead and audit

staff. We also confirm that we have complied with Ethical

Standards and the Public Sector Audit Appointments Ltd

requirements in relation to independence and objectivity.

We have provided a detailed declaration in Appendix Five

in accordance with ISA 260.

Management representations

You are required to provide us with representations on

specific matters such as your financial standing and

whether the transactions within the accounts are legal and

unaffected by fraud. We have provided a template to the

Section 151 Officer for presentation to the Audit

Committee. We require a signed copy of your

management representations before we issue our audit

opinion.

We have requested the following specific representations

from the PTE Executive Board:

— That In line with IAS 36, the Authority can confirm they

have considered whether any of the groups assets

should be impaired at the reporting date. That the

authority can confirm that there are no circumstances

of which the Authority is aware which indicate that a

material change in the value of the Group’s land and

building assets has taken place during 2016/17, save

for those indicated by the valuations provided by the

expert valuers, Sanderson Wetherall and Sheffield City

Council Valuation team as at 31 March 2017;

— That the Authority can confirm that they have provided

us with all relevant information following the

Rotherham Interchange Fire regarding the estimation

of the damages and the receipt of insurance payments;

and

— In respect of the prior period restatement of pension

assets and liabilities made to correct a material

misstatement identified, the Executive confirms that

the PTE is accountable for these assets and liabilities

now and in the prior period and therefore the

restatement is appropriate.

We have also asked the Combined Authority to confirm

that they have shared relevant information with us on the

pension fund and that they are of the view that the PTE is

accountable.

Other matters

ISA 260 requires us to communicate to you by exception

‘audit matters of governance interest that arise from the

audit of the financial statements’ which include:

— Significant difficulties encountered during the audit;

— Significant matters arising from the audit that were

discussed, or subject to correspondence with

management;

— Other matters, if arising from the audit that, in the

auditor's professional judgment, are significant to the

oversight of the financial reporting process; and

— Matters specifically required by other auditing

standards to be communicated to those charged with

governance (e.g. significant deficiencies in internal

control; issues relating to fraud, compliance with laws

and regulations, subsequent events, non disclosure,

related party, public interest reporting,

questions/objections, opening balances etc.).

There are no others matters which we wish to draw to

your attention in addition to those highlighted in this report

or our previous reports relating to the audit of the

Authority’s 2016/17 financial statements.

Page 26

Value for moneySection two

Page 27

Our 2016/17 VFM conclusion

considers whether the

Authority had proper

arrangements to ensure it took

properly informed decisions

and deployed resources to

achieve planned and

sustainable outcomes for

taxpayers and local people.

We have concluded that the

Authority has made proper

arrangements to ensure it took

properly-informed decisions

and deployed resources to

achieve planned and

sustainable outcomes for

taxpayers and local people.

Page 28




VFM conclusionSection two: value for money

The Local Audit and Accountability

Act 2014 requires auditors of local

government bodies to be satisfied

that the authority ‘has made proper

arrangements for securing

economy, efficiency and

effectiveness in its use of

resources’.

This is supported by the Code of Audit Practice, published

by the NAO in April 2015, which requires auditors to ‘take

into account their knowledge of the relevant local sector

as a whole, and the audited body specifically, to identify

any risks that, in the auditor’s judgement, have the

potential to cause the auditor to reach an inappropriate

conclusion on the audited body’s arrangements.’

Our VFM conclusion considers whether the Authority had

proper arrangements to ensure it took properly informed

decisions and deployed resources to achieve planned and

sustainable outcomes for taxpayers and local people.

We follow a risk based approach to target audit effort on

the areas of greatest audit risk.

VFM audit risk

assessment

Financial statements

and other audit work

Identification of

significant VFM

risks (if any)

Assessment of work by

other review agencies

Specific local risk-based

work

Continually re-

assess potential

VFM risks

Conclude on

arrangements to

secure VFM

VFM

conclusion

Overall VFM criteria: In all

significant respects, the

audited body had proper

arrangements to ensure it

took properly informed

decisions and deployed

resources to achieve planned

and sustainable outcomes for

taxpayers and local peopleWorking

with

partners

and third

parties

Sustainable

resource

deployment

Informed

decision-

making

VFM

co

nclu

sio

n b

ased

on

1 2 3

Page 29




Section two: value for money

In consideration of the above, we have concluded that in

2016/17, the Authority has made proper arrangements to

ensure it took properly-informed decisions and deployed

resources to achieve planned and sustainable outcomes

for taxpayers and local people.

Further details on the work done and our assessment are

provided on the following pages.

The table below summarises our

assessment of the individual VFM

risk identified against the three

sub-criteria. This directly feeds into

the overall VFM criteria and our

value for money opinion.

VFM assessment summary

VFM risk

Informed decision-

making

Sustainable resource

deployment

Working with partners

and third parties

1. Corporate Governance Arrangements

Page 30




Significant VFM risksSection two: value for money

Significant VFM risks Work performed

1. Corporate Governance

Arrangements

Why is this a risk?

Our VFM opinion for the 2015/16 period was qualified due to two key deficiencies

at the authority, namely:

-A Corporate Code of Governance had not been established and

-A robust risk management process had not been operational and embedded at

the Authority throughout the period e.g. the authority's first risk register had only

been presented to Audit Committee in July 2016.

We understand from discussion with officers that some progress has been made

towards embedding these key processes in year, including the provision of a

report from an external consultant with several recommendations around

governance structures.

There is a risk that further improvements have not been made as required and that

these have not been in place for the full financial year.

Summary of our work

We have noted significant progress of the governance arrangements during the year,

this includes the development of a Code of Corporate Governance. The code was not

approved by the Audit Committee until 27th April 2017, however, we have been able

to evidence that the framework was suitably embedded in the Authority’s

governance structures during the year.

We have reviewed the risk management process in year, this allowed us to review

the risk management policy and strategy. Again these documents were not approved

until the end of the year (March 2017), however, we have been able to confirm that

the processes to which it relates were operating during the year with the inclusion of

a developed risk register which is reported on quarterly.

In consideration of the above, we have concluded that in 2016/17, the Authority has

made proper arrangements to ensure it took properly-informed decisions and

deployed resources to achieve planned and sustainable outcomes for local people.

We have identified one significant VFM risk, as communicated to you in

our 2016/17 External Audit Plan. In all cases we are satisfied that external

or internal scrutiny provides sufficient assurance that the Authority’s

current arrangements in relation to these risk areas are adequate.

Page 31

Appendices

Page 32




Key issues and recommendationsAppendix One

2016/17 recommendations summary

Priority

Number raised from our

year-end audit

High 1

Medium 2

Low 0

Total 3

Our audit work on the Group

financial statements has identified

a number of issues. We have listed

these issues in this appendix

together with our

recommendations which we have

agreed with Management. We have

also included Management’s

responses to these

recommendations.

The Authority should closely

monitor progress in addressing the

risks, including the implementation

of our recommendations. We will

formally follow up these

recommendations next year.

This section includes

recommendations for the

subsidiaries of the Combined

Authority.

Each issue and recommendation have been given a priority

rating, which is explained below.

Issues that are fundamental and material to

your system of internal control. We believe

that these issues might mean that you do not

meet a system objective or reduce (mitigate)

a risk.

Issues that have an important effect on

internal controls but do not need immediate

action. You may still meet a system objective

in full or in part or reduce (mitigate) a risk

adequately but the weakness remains in the

system.

Issues that would, if corrected, improve

internal control in general but are not vital to

the overall system. These are generally issues

of good practice that we feel would benefit if

introduced.

The following is a summary of the issues and

recommendations raised in the year 2016/17.

High

priority

Medium

priority

Low

priority

Page 33




Appendix One

1. Impairment Review

During the audit of the PTE we identified that a

revaluation of assets had not occurred since 2015 at the

Passenger Transport Executive and, since then, the

indices provided by Building Cost Information Services,

based on average selling prices in the UK ,indicated that

there had been a material change to the value of these

assets. The audit team queried the impairment review to

support that no movement was required to these assets.

We were informed that there was no other impairment

review done, unless it is clear that there has been

damage to a property.

Without a comprehensive review of impairment the

PTE’s assets could be misstated in the accounts. Due to

this the audit team requested management to revalue a

selection of assets during the year.

Recommendation

The Group needs to review that the PTE has an effective

control for monitoring possible impairment of its assets.

This should include developing a revaluation policy, in

line with accounting standards, that considers not just

the assets appropriate for revaluation but also the

remaining assets for signs of impairment. This should be

done by as a desktop review of the estates and through

a review of corporate decision making, looking at any

future changes to be made to the assets.

Management Response

The CA will have oversight of the financial

reporting process for the CA group as a

whole in 2017/18. As such, it will ensure

that the recommendation is implemented

in preparing the 2017/18 accounts

Owner

S.73 responsible finance officer

Deadline

31/03/2017

2. Review of Pension Assumptions

During our audit of the PTE we were not provided with

any evidence to confirm managements review of the

assumptions taken by the actuary.

Without this early oversight of the assumptions there is

a risk that the figures provided by the actuary may not

be appropriate for the year end accounts.

Recommendation

The Group should ensure that PTE management have

performed a review of the assumptions and can

evidence that this has been done.

Management Response

The CA will have oversight of the financial

reporting process for the CA group as a

whole in 2017/18. As such, it will ensure

that the recommendation is implemented

in preparing the 2017/18 accounts

Owner

S.73 responsible finance officer

Deadline

31/03/2017

3. Continued Review of Governance

Whilst this report acknowledged the improvements that

have been made to Governance within the Authority

these mechanisms and formal codes are still being

embedded within the organisation. Furthermore, as the

Authority continues to expand there is a risk that such

policies and structures will become out of date and not

reflective of the governance needs.

Recommendation

The Authority should continue to review and amend its

governance structure to meet its needs. This should

include full consideration of all issues raised within the

Metro Dynamics report and a consideration of the

governance structures within the Group.

Management Response

The CA will continue to ensure that

improvements in Governance are

embedded and will conduct a light touch

review to confirm that this is the case and

take steps to further strengthen

arrangements where opportunities to do

so are identified.

Owner

Executive Director

Deadline

31/03/2017

High

priority

Medium

priority

Medium

priority

Page 34




Follow-up of prior year recommendationsAppendix Two

In the previous year, we raised four

recommendations which we

reported in our External Audit

Report 2015/16 (ISA 260). The

Authority has not implemented all

of the recommendations. We re-

iterate the importance of the

outstanding recommendations and

recommend that these are

implemented by the Authority.

We have used the same rating system as explained in

Appendix 1.

Each recommendation is assessed during our 2016/17

work, and we have obtained the recommendation’s status

to date. We have also obtained Management’s

assessment of each outstanding recommendation.

Below is a summary of the prior year’s recommendations.

2015/16 recommendations status summary

Priority

Number

raised

Number

implemented

/ superseded

Number

outstanding

High 4 1 3

Medium 0 0 0

Low 0 0 0

Total 4 1 3

1. Corporate Governance

Arrangements

We noted both from our own work and

the Authority’s Annual Governance

Statement that a Code of Corporate

Governance has not yet been established

at the Authority.

We also noted that whilst the Authority

has made good progress in establishing a

robust risk management process this was

still in its infancy and had not been in

place for the full 2015/16 period with the

first corporate risk register only being

presented to Audit Committee in July

2016.

There remained some issues with

regards to the data processing

performance of the pension fund

(highlighted in recommendations 2-4),

although we acknowledge that, other

than moving pensions administrator,

these issues are largely out of the control

of the Authority directly.

Recommendation

The Authority needs to establish a clear

Code of Corporate Governance as a

priority in order to demonstrate it is

operating effectively in the 2016/17

period. Establishing the Code should also

enable the risk management framework

to become more fully embedded.

Management Response

The Authority has implemented a number of changes

to its Corporate Governance arrangements during

financial year 2015/16, and will work to ensure that

these are fully embedded and reviewed throughout

2016/17.

The Authority continues to recognise that further

development of arrangements are, however,

necessary. External support has been commissioned

from specialist consultancy providers to support the

Authority in developing effective arrangements as it

moves towards a devolution agreement with central

government, and as an evolving organisation the

Authority will continue to review those arrangements.

As administering body, the Authority will coordinate

with SYPA such that the changes necessary to

address weaknesses identified in the pension fund

are implemented.

Responsible Officer

Dave Smith –Head of Paid Service

Due Date

31 March 2017

KPMG’s August 2017 assessment

As not our work on Value for Money a Corporate

Governance code and risk management framework

have been established.

High

priority

Fully implemented

Page 35




Appendix Two

2. Pension Admin System (SYPA) –Mapping Errors

Due to mapping errors from Axis to UPM not being

recognised until post go live, issues are arising on an

ad hoc basis with no clear indication or certainty of

how many exist in UPM.

Management have informed us that once UPM DART

(the data cleansing tool) is fully operational it will allow

SYPA to improve the data quality significantly going

forward.

Recommendation

Management should continue to be alert for mapping

errors and deal with them promptly and completely

(making full use of the DART tool once operational)

once identified.

Management original response

Procedures are in place for the notification

and rectification of data mapping errors as

and when they arise. Whilst the possibility

of new errors remains, it is unlikely that

they will impact large numbers of

members the further we move away from

our live implementation date.

Nevertheless, DART will be used to

ensure any erroneous data is corrected.

Owner

Gary Chapman

Original deadline

31 March 2017

KPMG’s July 2017 assessment

Positive steps have been taken to manage

this area with management. With work

instructions being created, this has now

been issued to the UPM Team as formal

notification to assist identification and

resolution of data issues.

Given the ongoing issues regarding

unknown mapping errors and the creation

of the spreadsheet to assist in the

management of this area, management

should be aware that general IT controls

need to be considered such as access to

program and data, change management,

development and computer operations

(such as backup etc.).

Management’s July 2017 response

Despite the fact that the number of data

mapping errors arising from data

conversion is declining with the passage of

time I agree that they can occur from time

to time. We now have the structure in

place to ensure they are accurately

recorded and dealt with through our DART

system and we are routinely taking all the

necessary IT control steps identified in the

further recommendation.

I’m happy for this to be tested again and

then removed at the end of the next

financial year.

It is noted that this issue will only exist at

the Combined Authority for part of the

year in 2017/18 as the fund transfers to

Greater Manchester.

High

priority

Partially implemented

Page 36




Appendix Two

3. Pensions Administration System (SYPA) –

Helpdesk issues

The number of issues logged across the UPM team in

the major areas (Processes and Calculations) was high.

At 16 June 2016 these stand at 173 outstanding issues

in respect of Calculations and 251 outstanding issues

in respect of Processes.

It our understanding that a proportion of the issues

logged were due to data migration problems.

Recommendation

Management should address those outstanding issues

relating to data migration problems promptly and

completely (making full use of the DART tool once

operational).


The UPM team is currently concentrating

heavily on the annual returns and actuarial

valuation process and as a consequence a

backlog of support logs relating to UPM

calculations and processes has built up

over time.

However the vast majority of these issues

relate to current UPM usage and not data

migration issues and are prioritised

according to their urgency and impact on

similar cases. It is agreed though that any

data migration issues should be dealt

without delay.

Owner

Gary Chapman

Original deadline

31 October 2016


Positive steps have been taken to manage

this area with management. With work

instructions being created, this has now

been issued to the UPM Team as formal

notification to assist identification and

resolution of data issues.

Given the ongoing issues regarding

unknown mapping errors and the creation

of the spreadsheet to assist in the

management of this area, management

should be aware that general IT controls

need to be considered such as access to

program and data, change management,

development and computer operations

(such as backup etc.).


Despite the fact that the number of data

mapping errors arising from data

conversion is declining with the passage of

time I agree that they can occur from time

to time. We now have the structure in

place to ensure they are accurately

recorded and dealt with through our DART

system and we are routinely taking all the

necessary IT control steps identified in the

further recommendation.

I’m happy for this to be tested again and

then removed at the end of the next

financial year.




Greater Manchester

High

priority


Page 37




Appendix Two

4. Pensions Administration System (SYPA) –Access

Control

From review of the internal project plan / issues log we

noted that following issue remained open on and after

Weekly Update w/c 09/02/15, management have

confirmed that this issue has not been resolved:

Any pay element (basic pension, PI, refund, transfer,

etc.) can be amended by Payroll without a

process/instruction from Pensions Admin. Although

there is a warning given by the system prior to

confirming any amendment to a pay element.

We noted no formal review had been carried out on

the above area to provide assurance over unauthorised

changes to key and or sensitive information occurring.

Recommendation

Management should carry out a formal review of the

above area as soon as possible to ensure:

• Only authorised changes have and are made to data

and system;

• The results of the review should be documented

and actions identified should be tracked to

completion;

• Appropriate segregations of duties are

implemented to reduce the risk of unauthorised

changes; and

• Going forward a formal periodic reviews is carried

out, documented and signed off by management.


We will commence work on this after we

have completed the valuation and annual

statement projects.

Owner

Gary Chapman

Original deadline

31 October 2016


We recommend that this issue remains

open for a further year and revisited to

confirm that the processes discussed have

been implemented and are fit for purpose.


Recommendation agreed




Greater Manchester

High

priority


Page 38




Audit differencesAppendix Three

We are required by ISA 260 to report all uncorrected misstatements, other than those

that we believe are clearly trivial, to those charged with governance (which in your

case is the Audit Committee). We are also required to report all material

misstatements that have been corrected but that we believe should be

communicated to you to assist you in fulfilling your governance responsibilities.

A number of minor amendments focused on presentational improvements have also been made to the 2016/17 draft

financial statements. The Finance team is committed to continuous improvement in the quality of the financial

statements submitted for audit in future years.

Adjusted audit differences

The following table sets out the significant audit differences identified by our audit of Sheffield City Region Combined

Authority's financial statements for the year ended 31 March 2017. It is our understanding that these will be adjusted.

However, we have not yet received a revised set of financial statements to confirm this.

Table 1: Adjusted audit differences (£’000)

No. Adjustments made Basis of audit difference

1 Dr Short Term Debtors

£4,209

Dr Short Term Investments

£6,419

Cr Long Term Debtors

£4,209

Cr Long Term Investments

£6,419

There are currently plans to wind up South Yorkshire ITA

in 2017/18, therefore, it was recognised that these assets

would be recoverable within the year and, therefore,

required restating as short term.

2 Dr 2016 Pension Reserve

£3.5m

Dr Interest cost 2016

£0.1m

Cr 2016 Pension Liability

£2.6m

Cr Other Comprehensive

Income 2016 £0.9m

Following the crystallisation of the South Yorkshire ITA

pension fund, due to the retirement of the last active

member, it was noted that this had not previously been

accounted for.

Upon review of the previous treatment of the fund it was

identified that the PTE had received changes to

contribution rates based on inclusion of this fund within

the valuations. Therefore, the risks and rewards of the

fund in previous years has been retained by the PTE,

requiring a prior period adjustment to be made to

recognise the substance of this. The PTE have further

claimed responsibility of this fund.

The 2016 assets and liabilities were required to be

restated to include these.

This also resulted in an amendment to the Other

Comprehensive Income recognised in year.

3 Dr Other Operating

Expenditure £441k

Cr Transport Services

Gross Expenditure £441kThe expenditure incurred on the Rotherham Interchange

due to fire damage and the income received from the

loss adjusters had been incorrectly classified as Transport

Services on the Comprehensive Income and Expenditure

Statement in the Group accounts. As the expenditure and

income does not relate to standard Transport Service

expenditure it has now been disclosed separately on the

statement.

Dr Transport Services

Gross Income £398k

Cr Other Operating Income

£398k

4 Dr Other Long Term

Liabilities £15,653

Cr Long Term Debtors

£15,653During the year a previously dormant subsidiary was

provided with a capital loan in order to defray some

unspent grant monies. However, no money was

transferred and thus the transaction has been reversed

and instead recognised as a capital commitment. The

Authority has since contacted CLG to confirm there will

be no clawback due to this.

Page 39





Additional disclosures – South Yorkshire Passenger Transport Executive Group Account Impact

The following table sets out the additional disclosures required identified by our audit of South Yorkshire Passenger

Transport Executive’s financial statements and thus the Group financial statements for the year ended 31 March

2017.

Table 3: PTE Adjusted disclosures

No. Area of Accounts Amendments

1 Capital Commitments The audit team identified that the Embedded Rail Replacement programme, due to

occur in 2017, for which there is a contractual obligation to undertake had not been

disclosed within the accounts. As the PTE has commissioned this work, to an

estimate of £15.1m, these works need to be added as capital commitments within

the note to the accounts.

2 Contingent Liabilities Following the fire at Rotherham Interchange there is work required to make the

terminal operational and comply with the lease agreement. The PTE have a

proposal in place for the works to be done, however, they cannot yet determine

what work is due to the fire damage and what work is for capital enhancement.

Therefore, a contingent liability is required to be recognised.

3 There are a number of ongoing investigations by the Rail Accident Investigation

Branch following tram incidents with the possibility that this could lead to future

costs to the PTE. Therefore, the disclosure of a contingent liability is required.

4 Grant Income Classification The audit team identified that there was a misclassification within the grant income

note. Grant income totalling just over £900k had been included with the ‘Better

Bus Area’ line when it should have been included within the ‘Local Authority’ line.

5 Accounting Policies Note 1.3.3 ‘Post-Employment’ Benefits stated that liabilities were discounted to

their value at current price, using a discount rate, but this rate had not been detailed

as is required within the CIPFA code.

Additional disclosures – Sheffield City Region Combined Authority and Group Accounts

The following table sets out the additional disclosures required identified by our audit of the Sheffield City Region

Combined Authority’s financial statements for the year ended 31 March 2017.

Table 2: Adjusted disclosures


1 Related Party Transactions The payments for the related party disclosures were incorrectly linked via a formula

and did not agree to the payments made in the year. The note has now been

amended to reflect the ledger.

2 Members Allowances A note for members' allowances was not included within the accounts despite

amounts being present. In line with requirements from the CIPFA code a disclosure

has now been included.

3 Accounting Policies There was no reference to Soft Loans within the Accounting Policies note, this is

now to be included in line with the CIPFA code.

4 Officers Remuneration The payments made to the Head of Paid Service had not been included within the

note as these were paid on a consultant basis, however, it was deemed that this

was a fundamental disclosure to the reader of the accounts and thus this is now to

be included.

5 Capital Commitments The Authority have now included £16m of capital commitments following the

resolution of the audited adjustment difference (No.4) on page 31. This disclosure

is to reflect the committed expenditure to Sheffield City Region Financial

Interventions.

Page 40





Unadjusted audit differences

We have not identified any unadjusted audit differences.

Table 2: PTE Adjusted disclosures (cont.)


6 Officers Remuneration Further disclosure was required within Note 24 regarding officer remuneration. The

table highlighting the remuneration bandings included senior management and yet

this had not been disclosed in the narrative below the table, as is required by the

CIPFA code.

Page 41




Materiality and reporting of audit differencesAppendix Four

Material errors by value are those which are simply of

significant numerical size to distort the reader’s perception

of the financial statements. Our assessment of the

threshold for this depends upon the size of key figures in

the financial statements, as well as other factors such as

the level of public interest in the financial statements.

Errors which are material by nature may not be large in

value, but may concern accounting disclosures of key

importance and sensitivity, for example the salaries of

senior staff.

Errors that are material by context are those that would

alter key figures in the financial statements from one

result to another – for example, errors that change

successful performance against a target to failure.

We used the same planning materiality reported in our

External Audit Plan 2016/17, presented to you in April

2017.

Materiality for the Authority’s accounts was set at £2

million which equates to around 1% percent of the groups

gross expenditure. We design our procedures to detect

errors in specific accounts at a lower level of precision.

Reporting to the Audit Committee

Whilst our audit procedures are designed to identify

misstatements which are material to our opinion on the

financial statements as a whole, we nevertheless report to

the Audit Committee any misstatements of lesser

amounts to the extent that these are identified by our

audit work.

Under ISA 260, we are obliged to report omissions or

misstatements other than those which are ‘clearly trivial’

to those charged with governance. ISA 260 defines ‘clearly

trivial’ as matters that are clearly inconsequential, whether

taken individually or in aggregate and whether judged by

any quantitative or qualitative criteria.

ISA 450 requires us to request that uncorrected

misstatements are corrected.

In the context of the Authority, we propose that an

individual difference could normally be considered to be

clearly trivial if it is less than £0.1 million for the Authority.

Where management have corrected material

misstatements identified during the course of the audit,

we will consider whether those corrections should be

communicated to the Audit Committee to assist it in

fulfilling its governance responsibilities.

Materiality – Pension fund audit

The same principles apply in setting materiality for the

Pension Fund audit. Materiality for the Pension Fund was

set at £3 million.

We design our procedures to detect errors at a lower level

of precision, set at £0.15 million for 2016/17

The assessment of what is material is a matter of professional judgment

and includes consideration of three aspects: materiality by value, nature

and context.

Page 42




Appendix Five

Declaration of independence and objectivity

Auditors appointed by Public Sector Audit Appointments

Ltd must comply with the Code of Audit Practice (the

‘Code’) which states that:

“The auditor should carry out their work with integrity,

objectivity and independence, and in accordance with

the ethical framework applicable to auditors, including

the ethical standards for auditors set by the Financial

Reporting Council, and any additional requirements set

out by the auditor’s recognised supervisory body, or any

other body charged with oversight of the auditor’s

independence. The auditor should be, and should be

seen to be, impartial and independent. Accordingly, the

auditor should not carry out any other work for an

audited body if that work would impair their

independence in carrying out any of their statutory

duties, or might reasonably be perceived as doing so.”

In considering issues of independence and objectivity we

consider relevant professional, regulatory and legal

requirements and guidance, including the provisions of the

Code, the detailed provisions of the Statement of

Independence included within the Public Sector Audit

Appointments Ltd Terms of Appointment (‘Public Sector

Audit Appointments Ltd Guidance’) and the requirements

of APB Ethical Standard 1 Integrity, Objectivity and

Independence (‘Ethical Standards’).

The Code states that, in carrying out their audit of the

financial statements, auditors should comply with auditing

standards currently in force, and as may be amended from

time to time. Public Sector Audit Appointments Ltd

guidance requires appointed auditors to follow the

provisions of ISA (UK&I) 260 ‘Communication of Audit

Matters with Those Charged with Governance’ that are

applicable to the audit of listed companies. This means

that the appointed auditor must disclose in writing:

— Details of all relationships between the auditor and the

client, its directors and senior management and its

affiliates, including all services provided by the audit

firm and its network to the client, its directors and

senior management and its affiliates, that the auditor

considers may reasonably be thought to bear on the

auditor’s objectivity and independence.

— The related safeguards that are in place.

— The total amount of fees that the auditor and the

auditor’s network firms have charged to the client and

its affiliates for the provision of services during the

reporting period, analysed into appropriate categories,

for example, statutory audit services, further audit

services, tax advisory services and other non-audit

services. For each category, the amounts of any future

services which have been contracted or where a

written proposal has been submitted are separately

disclosed. We do this in our Annual Audit Letter.

Appointed auditors are also required to confirm in writing

that they have complied with Ethical Standards and that, in

the auditor’s professional judgement, the auditor is

independent and the auditor’s objectivity is not

compromised, or otherwise declare that the auditor has

concerns that the auditor’s objectivity and independence

may be compromised and explaining the actions which

necessarily follow from his. These matters should be

discussed with the Audit Committee .

Ethical Standards require us to communicate to those

charged with governance in writing at least annually all

significant facts and matters, including those related to the

provision of non-audit services and the safeguards put in

place that, in our professional judgement, may reasonably

be thought to bear on our independence and the

objectivity of the Engagement Lead and the audit team.

General procedures to safeguard independence and

objectivity

KPMG LLP is committed to being and being seen to be

independent. As part of our ethics and independence

policies, all KPMG LLP Audit Partners and staff annually

confirm their compliance with our Ethics and

Independence Manual including in particular that they have

no prohibited shareholdings.

Our Ethics and Independence Manual is fully consistent

with the requirements of the Ethical Standards issued by

the UK Auditing Practices Board. As a result we have

underlying safeguards in place to maintain independence

through: Instilling professional values, Communications,

Internal accountability, Risk management and Independent

reviews.

We would be happy to discuss any of these aspects of our

procedures in more detail.

Auditor declaration

In relation to the audit of the financial statements of

Sheffield City Region Combined Authority and the

Passenger Transport Pension Fund for the financial year

ending 31 March 2017, we confirm that there were no

relationships between KPMG LLP and Sheffield City

Region Combined Authority and the Passenger Transport

Pension Fund, its directors and senior management and its

affiliates that we consider may reasonably be thought to

bear on the objectivity and independence of the audit

engagement lead and audit staff. We also confirm that we

have complied with Ethical Standards and the Public

Sector Audit Appointments Ltd requirements in relation to

independence and objectivity.

Page 43




Appendix Six

Audit fees

As communicated to you in our External Audit Plan 2016/17, our scale fee for the audit is £38,200 plus VAT (£38,200 in

2016/17), which is the same as the prior year.

However, we propose to seek additional fee due to additional work undertaken in relation to the restatement of the prior

years pension asset and liabilities which the PTE has now claimed responsibility. To reach a conclusion on the issue we

were required to review historic information dating back to 1983, review various correspondence from the actuary and

the pension fund and consult with internal KPMG specialists. We were also required to revisit the accounts after the

audit had ended to ascertain the accounting adjustments made.

We have also experienced delays to the finalisation of our audit report due to awaiting external confirmation with regards

the transactions within SCR Financial Interventions.

Delays have been further experienced with Journals testing for which the initial listing we were provided was

incomplete, these issues have arisen due to changes to the finance system.

Audit fees

Note 1: Accounts opinion and use of resources work

For 2016/17, we have discussed additional fee with the S151 officer. This is still subject to PSAA determination.

All fees are quoted exclusive of VAT.

PSAA fee table

Component of audit

2016/17

(actual fee)

£

2015/16

(actual fee)

£

Accounts opinion and use of resources work

PSAA scale fee set – Combined Authority 38,200 38,200

PSAA scale fee set – Pension Fund 21,000 21,000

PSAA scale fee set – South Yorkshire Passenger Transport Executive 35,861 35,861

Page 44


© 2017 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of

independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss

entity. All rights reserved.

The KPMG name and logo are registered trademarks or trademarks of KPMG International

Page 45

1. Introduction

1.1 Further to the endorsement of the format of the Strategic Risk Register (Risk Management Action Plan) at the Audit Committee meeting in July, a further two action plans areas have now been completed (Appendix A & B)

1.2 In addition, appendix C provides an overview of the status of the strategic risks, in the form of a dashboard, and of the related action plans.

2. Proposal and justification

2.1 The Committee is asked to note the Risk Management Action Plans Appendix A & B and provide feedback on the current controls and actions identified to further manage the risks. The Committee is also asked to provide feedback on the style of the draft dashboard.

2.2 Next steps

The remaining risk management action plans and a complete dashboard will be presented to the October Audit Committee for comment.

Purpose of Report

Further to the endorsement of the format of the Strategic Risk Management Action Plan by the Audit Committee this paper provides the action plans for the strategic risks around ‘risk management arrangements’ and ‘audit and scrutiny arrangements’. It also provides a draft dashboard style report for consideration.

Freedom of Information and Schedule 12A of the Local Government Act 1972

Under the Freedom of Information Act this paper and any appendices will be made available under the Combined Authority Publication Scheme. This scheme commits the Authority to make information about how decisions are made available to the public as part of its normal business activities.

Recommendations

The Committee is asked to note the Risk Management Action Plans Appendix A & B and provide feedback on the current controls and actions identified to further manage the risks. The Committee is also asked to provide feedback on the draft dashboard.

SCR Audit Committee

31st August 2017

Strategic Risk Management Update

Page 47

Item 9

3. Consideration of alternative approaches

3.1 SCR’s approach to strategic risk management has been endorsed by the Audit Committee and approved by the CA.

3.2 The Audit Committee endorsed the new format of the Strategic Risk Register (Risk Management Action Plan) in July.

4. Implications

4.1 Financial

Failure to manage significant risks could result in fines, loss of revenue etc.

4.2 Legal

Failure to manage significant risks could result in legal action.

4.3 Risk Management

Risk management is vitally important to the successful delivery of SCR’s objectives. Therefore, a defined risk management process is a key component of the governance and control framework that underpins this. The Audit Committee plays a vital role in providing assurance to the CA of the effectiveness of risk management arrangements.

4.4 Equality, Diversity and Social Inclusion There are no equality, diversity or social inclusion implications.

5. Communications

5.1 Strategic risks and the progress of their management are communicated internally via Statutory Officer Group meetings, Senior Leadership team meetings and staff briefings.

6. Appendices/Annexes

6.1 Appendix A – Risk Management Action plan for ‘Risk Management Arrangements’

Appendix B – Risk Management Action Plan for ‘Audit and Scrutiny Arrangements’

Appendix C – Risk Status Overview REPORT AUTHOR Claire James POST Governance & Compliance Officer

Officer responsible Ruth Adams Organisation Sheffield City Region

Email [email protected] Telephone 0114 220 3442

Background papers used in the preparation of this report are available for inspection at: 11 Broad Street West, Sheffield S1 2BQ Other sources and references: none

Page 48


Strategic Risk: Risk Management DATE: August 2017Risk Owner: Dave SmithRisk Description: Likelihood Impact Risk Rating

Cause: Failure to create, maintain and develop an effective strategic and operational approach to risk management Event: that would have the consequence of the CA having the inability to actively identify, assess and manage threats and opportunities Impact: resulting in poor decisions and a failure to achieve intended outcomes.

Current Controls(Controls that are confidently in place and relied upon)

Risk Policy and Strategy endorsed by the Audit Committee and approved by the CA is in place.Risk management processes are defined and considered in all aspects of decision making.

The strategic risk management strategy is aligned with achieving organisational objectives.An independent audit committee is in place and provides assurance regarding the adequacy and effectiveness of risk management processes and recommendations are acted upon.Robust risk management arrangements are in place for all capital investment projects - Strategic outline business case for all capital investment projects include risk management and mitigation plans (as a one of five strategic cases) which are appraised using Treasury Green Book methodology. Each capital investment project has a risk register as part of its business case which is reported on a quarterly basis to Programme Office as part of the Programme Management process. Any new risks or risks that have become issues with a material impact are escalated appropriately.

SCR Executive team receive advice and guidance regarding risk management arrangements from the risk and audit team at BMBC.

Build capacity/champions to ensure policies and procedures are widely implimented and subject to regular review in line with best practice.

Trained six internal risk champions. Schedule of review still to be agreed.

RA

Schedule an internal audit at an appropriate time to gain assurance on the adequacy and effectiveness of risk management processes.

Internal Audit of Risk Management Processes is scheduled for Q3 (Oct-Dec 17)

RA Dec-17

Undertake a risk management health check and develop a risk improvement plan across all risk management perspectives (Strategic, Operational, Programme & Project)

Discussion underway to ensure ToR for Q3 internal audit supports health check activity.

CJ Sep-17

Ensure that operational planning activity considers the threats to the delivery of operational plans and that RMAP are put in place for each operational area.

RA

Ensure SCR risk management arrangements are included in induction training for new starters.

CJ

Ensure a PDR process is in place that supports the identification of training requirements in relation to risk management and ensure training is available for those who require it.

RA

Ensure key team members have responsibilities for risk management clearly set out in job roles/descriptions.

RA

Ensure a review of the adequacy and effectiveness of risk management processes is included in the Audit Committee work plan.

Draft work plan to be presented to the Aug Audit Committee meeting.

CJ

Seek assurance from subsidiary bodies regarding their risk management arrangements and understand where any liabilities may impact on the CA.

Paper to be prepared for AC on PTE risk management arrangements for Oct 17.

Develop a process to ensure any lessons learnt activity from the management of an 'issue' is mapped against strategic risks and associated risk management action plans to ensure opportunities for strengthening controls or for the additon of further actions to mitigate potential risks are identified and acted upon. Ensure internal audit recommendations are reviewed against the strategic risk management action plan.

CJ

Ensure a process is in place to support the identification of risk where the CA chooses to pursue opportunities for, but not limited to: alternative sources of funding; bids for pilot schemes; acquisition of assets

Considering how the Appraisal Panel could be utilised for this.

Action Plan(Identified risk mitigations to reduce the impact and/or likelihood)

Progress

Action OwnerCompletion/Re

view Date

Progress against the Action Plan

(RAG)

None

Processes need strengthening to ensure CA Audit Committee has appropriate oversight of risk at a group level esp. PTE.

None - Capacity strengthened in new Project and Contracts Management function to regularly review all capital risk registers and escalate any concerns to the capital programme board.

None

Current Risk Assessment

2 4

8

Adequacy concerns

None - Policy and strategy will be subject to annual review

Risk management processes at strategic and project level are defined and embedded, however, whilst risk management arrangements for operational risks are described within the Risk Management Strategy document, until Corporate and Operational plans are developed it is difficult to make an assessment regarding risks to their delivery. The development of Corporate and Operational plans are referred to in the RMAP for 'Organisational Performance and Viability'

Appendix A

Page 49

Strategic Risk: Audit & Scrutiny Arrangements Risk Owner: Andrew FrosdickRisk Description: Likelihood Impact Risk Rating

Cause: Failure to have in place effective audit and scrutiny arrangements Event: having the consequence of a lack of assurance that the CAs affairs are administered in a proper and effective mannerConsequence: resulting in poor accountability, transparency and ultimately a failure to achieve intended outcomes.

Current Controls(Controls that are confidently in place and relied upon)

Audit and Scrutiny Committees are established as described in the Constitution and provide constructive challenge to support balanced and effective decision making.

Audit Committee is scheduled appropriately to allow for consideration of external auditor's annual audit and inspection letter and to monitor issues of concern identified through the external audit process.Arrangements are in place to ensure the Audit Committee is given the opportunity to review the effectiveness of:- the system of internal control and AGS- internal audit and the internal audit strategy- risk management arrangements- performance management arrangementsThe Head of Internal Audit regularly attends the Statutory Officer Group meeting to provide feedback on the internal audit plan and to discuss the findings of any internal audits.Membership of both the Audit Committee and the Overview and Scrutiny Committee is politically proportionally, balanced and take into account SCR demographics. Following local elections membership is revised to account for any changes in political balance. In order to maximise committee skills sets where possible committee members also sit on their respective districts audit and scrutiny committees.

Draft an annual work plan for the Audit Committee to ensure adequate opportunity is given to allow the committee to consider the effectiveness of internal control and governance arrangements in a way that will add value to the organisation. Ensure the plan facilitates the committee in meeting all of its accountabilities as described in the terms of reference.

Meeting dates for 17/18 have been identified and a paper outlining the annual work plan is scheduled for the August meeting.

CJ Sep-17Establish the protocols and processes required to ensure the effective function of the Overview and Scrutiny Committee in compliance with the Combined Authorities (Overview and Scrutiny Committees, Access to Information and Audit Committees) Order 2016 including:- Review ToR and membership- Key Decisions Policy- Define procedure for pre and post decision call-in- Recruitment of a dedicated Scrutiny Officer- Develop an annual work plan ensuring the committee has sufficient information to prioritise topics- Develop a Scrutiny Initiation Document (SID) - Develop a Scrutiny Report template- Consider a structure to support 'horizon-scanning' scrutiny

Overview and Scrutiny Officer takes up post in September who will pick up the actions required.Key decisions policy approved by Stat Officers Group.OS Committee procedures presented to OS Committee 27th July.

OS Officer Dec-17Introduce an annual effectiveness self assessment for the Audit Committee and Overview and Scrutiny Committee. RAIdentify members areas of expertise and any additional training requirements including arrangements to ensure members have sufficient understanding of CA Financial Regulations and also of the obligations of the different funding sources the CA receives.

AFExplore the opportunity around a combined PTE and CA Audit Committee. Options around a group audit committee have

been considered. It was agreed to revisit this once a decision has been taken regarding devolution. EW Mar-17

Consider the recruitment of independent members to the Audit Committee. EW Sep-17Develop an induction pack for new committee members. CJ

The protocols and processes in place to ensure the effective function of the Scrutiny Committee are not yet aligned to the requirements of the Combined Authorities (Overview and Scrutiny Committees, Access to Information and Audit Committees) Order 2016.

Current Risk Assessment

2 3

6

Adequacy concerns

NoneWhilst arrangements are in place, improvements to agenda planning/annual work plan are required to ensure the committee adds maximum value and meets all accountabilities as described in the committee terms of reference. Currently there is no evidence of a review of the effectiveness of anti-fraud arrangements or of oversight of PTE risk management arrangements.

NoneA 14 person membership is required to facilitate the agreed political balance. During 16/17 all AC and OS meetings were quorate with at least a 1/4 of voting members present. However, Combined Authorities (Overview and Scrutiny, Access to Information and Audit Committees) Order 2017 (SI 67), two-thirds of members of Committees will now need to be present for meetings to be quorate going forward. This may present an issue during 17/18.

Action Plan(Identified risk mitigations to reduce the impact and/or likelihood)

ProgressAction Owner

Completion/Review

Date

Progress against the Action Plan

(RAG)

Page 50

Overview of Strategic RisksStrategic Risk(Maintaining an effective governance framework is vital to the successful delivery of the SEP. By managing the risks to the governance framework SCR will be in a stronger position to minimise or avoid threats and exploit opportunities to deliver the objectives of the SEP)

Risk Owner Current Risk Rating(How significant is this risk?)

Risk Status(Critical, High, Medium, low)

Overall Action Plan Progress

Risk Owner Confidence Statement(How well is the risk being managed? How confident is the Risk Owner that the Action Plan will have the desired effect on the risk?)

Financial & Asset Management Eugene Walker 8 High - Senior Management attention and responsibility defined

tbc

Programme Performance & Portfolio Management Ruth Adams tbc tbc tbc tbcReputation Management Mark Lynam tbc tbc tbc tbcDecision Making & Transparency Andrew Frosdick 8 High - Senior Management

attention and responsibility defined

This risk is within tolerance levels and work continues to discharge all of the relevant actions. The IA report will provide further assurance.

Ethics & Integrity Framework Andrew Frosdick tbc tbc tbc tbcInformation Assurance Ruth Adams 9 High - Senior Management

attention and responsibility defined

Whilst the current risk assessment is within tolerance it is evident that work is required to manage this risk. I am satisfied that the action identified will achieve this. Progress is being made against actions especially the propsal to improve internal capacity and expertise.

Audit & Scrutiny Arrangements Andrew Frosdick 6 Medium - Management responsibility must be specified and actions or control procedures monitored

tbc This risk is within tolerance levels and regular monitoring of Audit and Scrutiny arrangements is in place to ensure compliance.

Business Continuity Management Ruth Adams 4 Medium - Management responsibility must be specified and actions or control procedures monitored

Whilst the current risk assessment is within tolerance it is evident that work is required to manage this risk. I am satisfied that the action identified will achieve this. The key barrier to completing the identified actions is the lack of available resource/expertise.

Risk Management Dave Smith 8 High - Senior Management attention and responsibility defined

This risk is within tolerance levels and work continues to discharge all of the relevant actions. Statutory Officers review risk at all monthly meetings and will soon commence a review across the group to provide further assurance.

Leadership & Organisational Capability Dave Smith tbc tbc tbc tbcCompliance Andrew Frosdick tbc tbc tbc tbcOrganisational Performance & Viability Dave Smith tbc tbc tbc tbcStrategy-Led Prioritisation Dave Smith tbc tbc tbc tbc

Appendix C

Page 51

1. Introduction

1.1 The established practice is for the SCR Audit Committee to meet on a quarterly basis, with dates aligned to internal and external audit, and financial reporting periods.

1.2 The Committee may call additional meetings as it may determine are required.

1.3 The dates proposed vary from the dates originally proposed to the 27th July meeting of the Committee and have been undated following further alignments with the SCR’s annual accounting timetable.

1.4 A work plan is required to ensure the Audit Committee is able to meet its accountabilities.

2. Proposal

2.1 Meeting dates Meeting dates are proposed as

• 26th October, 2017 • 25th January, 2018 • 26th April, 2018 • 14th June, 2018

Purpose of Report

This report proposes REVISED SCR Audit Committee meeting dates for 2017/18 and an annual plan of work.

Freedom of Information & Section 12A of the Local Government Act 1972

Under the Freedom of Information Act this paper and any appendices will be made available under the Combined Authority Publication Scheme. This scheme commits the Authority to make information about how decisions are made available to the public as part of its normal business activities. Recommendations

That Members note the revised meeting dates for 2017/18 and consider the proposed work plan (Appendix A).

SCR AUDIT COMMITTEE

31st August 2017

Revised Meeting Dates for 2017/18

Page 53

Item 10

• 12th July, 2018 • 30th August, 2018

2.2 Unless otherwise determined, meetings will be held at the Offices of the SCR Combined Authority, 18 Regent Street, Barnsley, S70 2HG and will commence at 11.00am.

2.3 Meetings will be webcast for live and archived viewing.

2.4 Agendas and reports will be published 5 clear days prior to meetings as per the Combined Authority’s Publication Scheme.

2.5 Work Plan

The proposed work plan (Appendix A) aims to ensure the Audit Committee are appropriately sighted on key governance issues and activities in a timely manner. The plan has been mapped against the Audit Committee terms of reference to ensure all accountabilities are met during the year. Appendix B illustrates this.

3. Consideration of alternative approaches

3.1 A work plan is required to ensure the Audit Committee is able to meet its accountabilities.

4. Implications

4.1 Financial

None.

4.2 Legal

There is a low risk of legal action. This relates to the potential of defamatory statements by members which are subsequently transmitted by webcast. The Authority’s insurers have stated the current liability policies will provide an indemnity in respect of any claims arising out of the webcast transmissions of Authority meetings.

4.3 Risk Management

None.

4.4 Equality, Diversity and Social Inclusion There are no equality, diversity or social inclusion implications.

5. Communications

5.1 None.

6. Appendices/Annexes

6.1 Appendix A – Work Plan (chronologically)

Appendix B – Fulfilling the terms of reference

Page 54

REPORT AUTHOR Craig Tyler/Claire James POST Principal Policy and Communications Officer/Governance &

Compliance Officer Officer responsible Andrew Frosdick

Organisation BMBC / SCR Monitoring Officer Email [email protected]

Telephone 01226 773001

Page 55

Appendix A

Date Agenda items Thursday 26th October 2017 IA Progress Report

IA Plan Consultation 2018/19 PTE Risk Management Arrangements CA Strategic Risk update (Final RMAP and launch of Strategic Risk Management Cycle) This will include:

• Ethics and Integrity • Decision Making and Transparency (findings of Internal Audit on

Transparency in Q2 will feed into this) • Prog & Portfolio Performance (findings of Internal Audit on

Programme/Performance Management in Q2 will feed into this) • Reputation Management • Leadership & Organisational Capability • Compliance (findings of Internal Audit on Transparency in Q2 will

feed into this) • Organisational Performance & Viability

Thursday 25th January 2018 Update on 16/17 AGS Governance Improvement Plan Actions 17/18 AGR Process IA Progress Report Revisit RMAP on Risk Management (reflecting on findings of Q3 internal audit on Risk Management Processes) Revisit RMAP on Information Assurance (reflecting on findings of Q3 internal audit on Information Governance) Assurance Framework (Changes required) Strategic Risk Management Update (dashboard etc) Performance Management (informed by the actions coming out of the RMAPs) Could also touch on Fraud and Anti-Corruption specifically in relation to scheme performance, grants etc Financial Regs Review 18/19 Draft Treasury Management Strategy Launch of effectiveness survey

Thursday 26th April 2018 AGR findings (inc annual review of code of corporate governance) IA Plan 2018/19 IA Progress Report IA Charter External Audit Annual Plan Updated Assurance and Accountability Framework - Implementation Review of Risk Management arrangements (updated Policy and Strategy) Strategic Risk Management Update (dashboard etc)

Thursday 14th June 2018 Draft AGS Draft Accounts IA Annual Report (or could go to July meeting?)

Thursday 12th July 2018 Final AGS Final Accounts IA Progress Report Strategic Risk Management Update (dashboard etc)

Page 56

Appendix B

Fulfilling the Terms of Reference for the Audit Committee

The Authority’s Audit Committee shall have the following terms of reference and delegated authority:

How will these requirements be met?

To receive and approve under delegated powers the Authority’s statement of accounts in accordance with the Accounts and Audit (England) Regulations 2011

Papers scheduled for 14th June, 12th July and 30th August

To consider the External Auditor’s Annual Audit and Inspection Letter in accordance with the Accounts and Audit (England) Regulations 2011 and to monitor the Authority’s response to individual issues of concern identified

Paper scheduled for 30th August and 25th January (Update on Governance improvement plan)

To consider and advise the Authority on the findings of the Authority’s review of the effectiveness of its system of internal control and on the Annual Governance Statement;

Papers scheduled for 26th April

To consider and advise the Authority on the findings of the review of the effectiveness of its internal audit

Each internal audit report presented to the Audit Committee has an auditee satisfaction report. Development plan for effectiveness – paper to be scheduled appropriately.

To oversee the effectiveness of the Authority’s and SYPTE’s risk management arrangements, the control environment and associated anti-fraud and anticorruption arrangements, including approving under delegated powers the Authority’s Anti-Fraud and Corruption Policy and associated Fraud Response Plan and any changes to these

Paper on PTE Risk Management scheduled for 26th October. RMAP on Ethics and Integrity and Decision Making and Transparency for consideration scheduled for 26th October. These will facilitate a review of anti-fraud and anticorruption arrangements. Performance Management item in Jan to touch on anti-fraud and corruption in relation to schemes and grants

To challenge the Authority’s performance management arrangements

Performance Management item scheduled for 25th January. Can also link to RMAP on Organisational Performance and Viability and Org Capability

To oversee and review the Authority’s internal audit strategy, and receive reports, as appropriate, from the Internal Auditor

Reports scheduled for Oct, Jan, April, June

To engage with the External Auditor and external inspection agencies and other relevant bodies to ensure that there are effective relationships between external and internal audit

External Audit in attendance at each meeting. Schedule of meetings with Stat Officers throughout the Governance Review Process and External Audit Process

To make recommendations to the Finance Director and Monitoring Officer in respect of Part 5F of the Authority’s Constitution (Financial Regulations)

Paper scheduled for 25th January

To ensure effective scrutiny of the Treasury Management Strategy and Policies

Paper scheduled for 25th January

To consider and advise the Authority on its Code of Corporate Governance

Paper scheduled for 26th April

Page 57

Public Document Pack · 8/31/2017 · MBC), A Jones (Doncaster MBC), G Lindars-Hammond (Sheffield...

Documents

Transcript of Public Document Pack · 8/31/2017 · MBC), A Jones (Doncaster MBC), G Lindars-Hammond (Sheffield...