Agenda and minutes

Audit and Governance Committee
Friday 6 October 2017 10.00 am

Venue: Cabinet Suite - Shire Hall, Gloucester. View directions

Contact: Andrea Griffiths 01452 324206 

Items
No. Item

13.

Apologies

 

To note any apologies for absence.

 

Minutes:

Apologies were received from Councillor Norman, Councillor Tipper, Jo Walker and Liz Cave. 

14.

Declarations of Interest

Members of the Committee are invited to declare any pecuniary or personal interests relating to specific matters on the agenda.

 

Please see note (b) at the end of the agenda

Minutes:

No declarations of interest were made. 

15.

Minutes pdf icon PDF 130 KB

To approve as a correct record the Minutes of the Meeting held on 28th July 2017.

Additional documents:

Minutes:

All matters arising had been dealt with and communicated to members of the committee. 

 

Resolved

 

That the minutes of the Audit & Governance Committee held on the 28th July 2017 be approved as a correct record and signed by the Chairman. 

16.

Grant Thornton Audit Committee Update pdf icon PDF 14 MB

The Committee is asked to note the report. 

Minutes:

David Bray presented the report.  The report detailed the progress Grant Thornton had made in delivering their responsibilities as the external auditors. 

 

It was noted that Grant Thornton had devised the plan in association with the Authority.  Accounting, audit issues and emerging issues would be flagged up as part of the regular report. 

 

The Committee were informed that Grant Thornton were unable to issue a value for money conclusion earlier in the year, due to an objection.  Grant Thornton were aiming to complete this work by 31st March 2018.  It was explained that once the work had been completed, Grant Thornton would assess whether there were any implications for the value for money conclusion. 

 

Members were informed that Grant Thornton were also unable to issue the 2106/17 Audit certificate at this stage. At the time, Grant Thornton gave their opinion on the Council’s financial statements the objection had not been resolved, in addition the Authority had not prepared the Pension Fund Annual Report.  Also, Grant Thornton had not completed their work on the Whole of Government Accounts (WGA) statement. 

 

With regards to the procurement of auditor services, the Committee were advised that Grant Thornton had been successful in securing the largest lot in the recent PSAA tender exercise.    It was anticipated that Grant Thornton would remain Gloucestershire County Council’s external auditors.  However, these appointments would be confirmed in December 2017. 

 

RESOLVED

 

That the report be noted

17.

Value for Money Presentation

The Committee will receive a presentation to prompt a discussion. 

Minutes:

The Committee received a detailed Value for Money (VfM) presentation. 

 

During the discussion, members requested to know if the External Auditor consulted with the administration, in terms of the Leader of the Council and Cabinet Members.  It was explained that Grant Thornton did not consult with the administration but agreed it was a valid point and should be given due consideration. 

 

In response to a question, it was noted that Grant Thornton made a presumption that standard procedures were working correctly, unless there was evidence to the contrary.  It was noted that the external auditor performed a watchdog role.

 

Members questioned the comparative nature of value for money, it was explained that the new VfM Framework made an assessment of the arrangements in place.  Comparisons were inevitably difficult, as it was hard to find a comparable authorities.  Officers explained that lots of high level data was available via CIPFA to make any comparisons necessary.

 

The Committee were informed that the VFM Framework was underpinned by three main factors:-

-       Informed decision making, which relied on acting in the public interest through demonstrating and applying the principles and values of sound governance.  Whilst understanding and using appropriate cost and performance information (including, where relevant, information from regulatory/monitoring bodies) to support informed decision making and performance management.  In addition, reliable and timely financial reporting that supported the delivery of strategic priorities.  Whilst managing risks effectively and maintaining a sound system of internal control. 

-       Sustainable resource deployment  which involved the planning of  finances effectively to support the sustainable delivery of strategic priorities and maintain statutory functions.  The managing and utilising of assets effectively to support the delivery of strategic priorities.  Working with partners and other third parties to effectively commission services and procure service to effectively deliver strategic priorities.

 

It was explained that the value for money assessment covered a whole year and one of tests of the assessment was the outturn in the end of year financial statements, as a big difference from the expectation could suggest that the arrangements were unsatisfactory. The risk assessment undertaken by Grant Thornton should be consistent with Management’s understanding of the authority.  

 

It was agreed that a copy of the presentation would be circulated via email. 

 

Resolved

 

That the presentation be received. 

 

 

 

18.

Treasury Management Update Report pdf icon PDF 427 KB

The committee is asked to note the report.

Minutes:

Kathy Oakey, Finance Manager explained that the update report had been produced in accordance with the CIPFA Code of Practice for Treasury Management in Public Services which required an update report to be produced to inform members about the Treasury Management activities for 2017/18 Financial Year to date.

 

During the period 1st April – 31st August 2017 GCC had taken on no new long term external debt.  Officers explained that premium charges remained high for repaying external debt early.  

 

It was explained that cash flow statements showed that during the period August 2016 to August 2017 the Council’s investment balances ranged between £300 million and £358 million, giving a core cash position of up to £300 million.

 

It was explained that the current year budget for interest earned was £1.16 million and the current forecast was that this would be exceeded by £1.5 million in 2017/18. 

  

Officers reported that longer term investments of over 1 year, totalled £100.6 million, this included £64 million long term investments with other local authorities, a property fund of £25 million and a number of secured deposits with financial institutions.  

 

Members were referred to the implementation of the Markets in Financial Instruments Directive II (MiFID II), which comes into effect on the 3rd January 2018.  It was explained that MiFID II was EU legislation that regulated firms, whilst strengthening consumer protection and improving the functioning of markets.  It was recommended that the Council opt up to professional client status, officers explained that all the appropriate documentation was available to provide to the relevant financial institutions.    The Head of Financial Management explained that the Pensions Committee would also have to opt up to professional status. 

 

In response to a question relating to the significant differences in investment balances, it was explained that the difference was due to grants, and payment profiles from various government departments.    Members welcomed  the report and noted the advice given by Arlingclose, Treasury Management Advisors in relation to investment rates.  

 

During the discussion members requested that in future the credit ratings be included on the In-House Investments table.  The Committee were advised that credit ratings could change on a regular basis but agreed to take on board the request.   

 

The Committee discussed the volatility of investment balances and the low interest rates in relation to market demand in detail.  In response to a question, it was explained that the Financial Manager used a Treasury Management Matrix which fed directly into the strategic risk register.   During the discussion it was agreed that more information on risk, in terms of how the authority managed and mitigated risk would be included within future Treasury Management reports. 

 

RESOLVED

 

The Treasury Management update report was duly noted. 

 

The Committee agreed to the immediate commencement of the application for elected professional client status with all relevant institutions in order to ensure the Council could continue to have an effective investment strategy.

 

The Committee agreed to give delegated authority to the Strategic Director of Finance and the  ...  view the full minutes text for item 18.

19.

Internal Audit Activity Progress Report pdf icon PDF 51 KB

To inform members of the progress of Internal Audit activity in relation to the 2017/18 Internal Audit Programme.

Additional documents:

Minutes:

Theresa Mortimer, Chief Internal Auditor (CIA) presented the report which informed members on the progress of Internal Audit activity in relation to the 2017/18 Internal Audit Plan and provided a progress report on those audits undertaken during the June – September 2017 period, including the opinions provided on risk and control.

 

The Committee welcomed the report which provided the relevant risk and control assurance opinions in relation to the audit activity during the above period.  It was highlighted that the opinions provided during this period showed an overall satisfactory and above rating of 64% on control and 82% on risk.  It was explained that 36% of the opinions on control were limited, this was related to transformational change and specific requests from Directors, who were asking for areas to be reviewed where issues had arisen or where independent assurance was required. 

 

The Chief Internal Auditor informed the Committee that all 47 recommendations made by Internal Audit to improve the control environment during this period had been accepted by management. 

 

Members’ attention was drawn to four limited assurance opinions provided on control, relating to:

-       Section 20, The Children’s Act,

-       Approval of Payments for Agency Staff,

-       Electronic Call Monitoring (ECM) – All Ages All Disabilities,

-       Exempt Report.

 

It was noted in relation to Section 20, The Children’s Act, Internal Audit had made 7 high priority recommendations, which were being considered by Management. 

 

However, the CIA recommended that the relevant senior management attended the next meeting of the Committee to provide an update on the progress made in relation to the recommendations made.  In response to a question, it was noted that Internal Audit would do a follow up audit to provide assurance.

 

The Committee were informed that as a result of participation in the Cabinet Office’s National Fraud Initiative data matching exercise, £71k of repayments has been made in relation to pensioners’ overpayments.  Members congratulated officers on the recoupment of funds. 

 

A member wished to know if the failing of children services was a one off or systemic in its nature, he felt that good audit work had taken place and supported the view that management should come back to the next Committee meeting.  A discussion also took place, relating to the bespoke software packages, system compatibility and staff training. 

 

In response to a question, the CIA explained that she was not aware of the issues raised as part of the Children’s Service Ofsted.   The CIA highlighted that limited assurance opinions had been provided to the Committee in relation to the audit if children’s direct payments and the audit of Section 20 of the Children’s Act. 

 

Some members felt that the financial pressures placed on adult services had concentrated resources but at the expense of the quality risk of children’s services.  In response to a question, the CIA explained that the safeguarding of children risk had been recorded on the Strategic Risk Register as a high residual risk for over seven years.  The Chairman explained that the Children  ...  view the full minutes text for item 19.

20.

Limited Assurance Audit Reports pdf icon PDF 88 KB

An update on actions taken in relation to the key recommendations:  

-       Retrospective Orders

Minutes:

Andy Hammerton, Finance Manager and Ian Mawdsley, Head of Commercial Services presented the report in detail. 

 

It was explained that Retrospective purchase orders were orders that were produced within SAP (the Council’s Financial Management System) after the delivery of goods or services to which they relate. They were introduced to allow SAP procurement processes to be demonstrated for those activities where advance notification of supply and cost was not possible, such as emergency repairs.

 

Officers explained that the Council’s Financial Regulations and Accounting Instruction 1 required all orders should be placed in advance of receipt of the relevant good/service, unless the expenditure type was stated within the agreed exception list or the expenditure was part of a recurring contract or purchased through petty cash or via a purchase card.

 

It was noted that audit of the area was requested by Strategic Finance for assurance over the approved policy approach and the use of retrospective orders at the Council.  Following the SAP download, Internal Audit had identified numerous issues in relation top non-compliance, it was noted that management were actively working to overcome such issues, ensuring the appropriate procedures were in place.   

 

During the discussion, members requested to know why Children & Families produced such a high number of retrospective orders.  Officers explained that this was often due to the foster orders, which were required at urgent and short notice given the nature of the service demand.  Members were interested to learn where the biggest value lay.  The Committee requested a list of the top ten retrospective orders, it was agreed that this information would be circulated in due course. 

 

The CIA explained that out of a random sample of 100 retrospective orders, only 8 were compliant.  The Head of Commercial services explained that failure was due to poor administration, therefore it was essential to re-educate staff.  In response to a question, it was noted that of the 1200 retrospective orders, approximately 800 orders were for elderly home care via GIS and the cost of each order varied depending on the level of care required. 

 

Resolved

 

That the report be noted.

 

That Officers would report back on the progress made in due course. 

 

 

21.

Member Code of Conduct Review pdf icon PDF 95 KB

The committee is asked to note the report and to indicate any areas for development. 

 

Additional documents:

Minutes:

Jane Burns, Director of Strategy and Challenge and Monitoring Officer presented the report which reminded the Committee of the statutory arrangements governing the conduct of elected members.  It was noted that the Council had two Independent Persons who assisted the Monitoring Officer when allegations were made.  It was reported there had been no reason to convene the Hearings Panel in 2016/17. 

 

The Committee was advised that the Department for Communities and Local Government were consulting on proposals to disqualify Councillors on a range of offences.  Members discussed the grounds for disqualification and the possible timescales involved depending on the nature of the offence, for example, the Sex Offenders Register, Anti-Social Behaviour Orders, etc.  The Monitoring Officer agreed to produce a response to the consultation in support of proposals. 

 

Also, in relation to Data Protection, it was explained that the new General Data Protection Regulations from the EU, would be incorporated into English Law as of May 2018.  As such, the LGA and the Information Commissioners Office would be making the guidance available in due course. 

 

The Monitoring Officer agreed to arrange for Nick Holland, Information Governance Specialist (GDPR) to attend the next committee meeting, in order to brief members. 

 

Resolved

 

That the report be noted. 

22.

Annual Report from the Local Government Ombudsman pdf icon PDF 76 KB

The committee is asked to note the Local Government Ombudsman’s Annual Review Letter 2016/17.

Additional documents:

Minutes:

Jane Burns, Director of Strategy and Challenge and Monitoring Officer presented the report.  The report informed the Committee of the Council’s arrangements for handling complaints and investigations by the Local Government Ombudsman (LGO).  The Committee noted that in 2016/17 the LGO received 70 complaints about the County Council; 10 of which were upheld. 

 

It was explained that the County Council kept local data about these complaints, and the records showed 47 complaints were brought to a conclusion by the LGO, of which 7 had been upheld and local resolutions. 

 

The LGO only provided the number of complaints received and not the detailed data which sat behind it, so it was impossible to reconcile the two sets of data. It was likely that the higher number of LGO complaints would include some which were not pursued.

 

The Committee discussed the nature of complaints, as such the Monitoring Officer agreed to circulate a copy of the LGO complaints spreadsheet for information.

 

In response to a question, the Monitoring Officer explained that any civil litigation involving the Council was closely monitored and there were confidential caveats involved. 

 

During the discussion, it was noted that both complaints and compliments were welcome, as it gave modern organisations a broad overview and helped to improve its processes. 

 

RESOLVED

 

That the Committee noted the Local Government Ombudsman Annual Review Letter 2016/17. 

 

 

23.

Exclusion of the press and public

THAT in accordance with Section 100 A (4) of the Local Government Act 1972 the public be excluded from the meeting for the business specified in agenda item 14because it is likely that if members of the public were present there would be disclosure to them of exempt information as defined in paragraph 3 and 7 of Part 1 of Schedule 12 A to the Act and the public interest in withholding the information outweighs the public interest in disclosing the information to the public.

Minutes:

THAT in accordance with Section 100 A (4) of the Local Government Act 1972 the public be excluded from the meeting for the business specified in minute 37 because it is likely that if members of the public were present there would be disclosure to them of exempt information as defined in paragraph 3 of Part 1 of Schedule 12 A to the Act and the public interest in withholding the information outweighs the public interest in disclosing the information to the public.

 

24.

Exempt Limited Assurance Reports

The Committee is asked to note the reports. 

Minutes:

The Committee received and discussed the reports in detail and requested that senior management attend the next meeting of the Committee.

 

Resolved

 

That senior management attend the next meeting of the Committee to provide an update on the actions taken in relation to the Exempt Limited Assurance report.

 

That the reports be noted.