Agenda and minutes

Audit and Governance Committee - Friday 26 June 2015 10.00 am

No. Item




Apologies were received from Councillor Tony Hicks, Jane Burns, Elizabeth Cave and Mark Branton. 



Declarations of Interest


Councillor Parsons declared he was a member of the Pension Committee


Minutes pdf icon PDF 104 KB

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




THAT the minutes of the Audit & Governance Committee held on 17th April 2014 be approved and signed as a correct record by the Chairman. 



Grant Thornton Committee Update pdf icon PDF 267 KB


Terry Tobin 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. 


A copy of Grant Thornton’s ‘Sustainable Future’ was available to members of the committee for via the website




That the report be noted.


Grant Thornton Audit Fee Letter 2015/16 pdf icon PDF 272 KB


Terry Tobin presented the report, which informed the Committee of the audit work to be undertaken for the 2015/16 financial year for Gloucestershire County Council and the fee involved.


It was explained that the Council’s scale fee for 2015/16 had been set by the Audit Commission at £98,010 which compared to the audit fee of £130,680 for 2014/15.

In response to a question, members were informed that there was a 25% reduction in the fee due to Audit Commission being abolished and the ability to bulk buy services.  Members questioned if the reduction in cost would result in a reduced audit service, officers explained that it would not result in a reduced service function.  It was noted that the local audit function was governed by a code of practice.


Grant Thornton explained that the fee was sufficient to cover the value for money conclusion and if any risks were highlighted, they would be discussed with the Director of Finance.  In response to a question, members were informed that the Internal Audit team worked in a collaborative manner with external audit to minimise duplication. Officers explained that the Audit Commission was previously a national body and consequently the working practices had now changed, as peer reviews had replaced local authority inspections.


The PSSA is expected to advise local government on the outcome of their consultation about contract extension or localisation of contracts soon.  Members were informed that the external audit contract was for a period of 5 years and that the fee had been previously been set centrally by the Audit Commission.  Members noted that the PSSA have an option to roll over contracts for a further two years in an effort to retain the lower fee.  It was recognised that nationally the issues were being debated and that the PSSA was currently the new contract holder following the demise of the Audit Commission. 


It was noted that in the future Councils would be able to appoint there own external auditors.  The committee welcomed this opportunity, which would allow a discussion around specifying the audit requirement, whilst recognising that there may be an impact on the fees.     




That the report be noted.


Annual Report Treasury Management pdf icon PDF 322 KB


Mark Spilsbury, Head of Finance, explained that each year the council produced an Annual Report covering its Treasury Management activities for the previous year.  The annual report for 2014/15 was submitted to the Audit and Governance Committee to allow greater scrutiny under the Treasury Management Code.  The committee discussed the report in great detail. 


The overall borrowing requirement at 31st March 2015 was £353.760m. £0.037m of this requirement was currently funded through internal balances.


No new external borrowing was taken out to fund the capital programme in 2014/15 as the Council’s strategy was to fund as much of its borrowing requirement as possible via internal borrowing, in order to minimise debt interest payments.  The key point noted was that £5.3m of external debt and £22m of internal debt was repaid in 2014/15.  


In response to  a question, members were informed that internal rather than external debt was repaid, as the penalties imposed by the Public Works Loans Board, for example a £4.8m loan, with a coupon rate of 9.25%  which expires in December 16 would have a premium of around £1m added to it if we repaid now. Members noted that repaying internal debt still had a budgetary saving of 4% per annum, MRP that we would have had to pay as a result of reducing the Capital Financing Requirement and avoided increased costs associated with future interest rate rises.


Officers explained that redeeming debt was considered as part of the financing of the capital programme, as this provided the council with a key opportunity to maximise value for money.  As officers they were actively looking for ways to actively maximise the opportunity for the council and it was a question of investment versus debt reduction.  It was explained that current capital programmes included, investing in IT (work smart), investment in the Shire Hall building (new windows, cladding, PV) and a paper was going to Cabinet on the potential of ground maintained PV. 


Some members felt that council be reminded that project investment was necessary in order to reap a better return. It was explained that this was not a policy change, as all schemes were detailed within the capital programme, which was presented to Cabinet and Council.  It was agreed that a paragraph be added to the budget monitoring report to update members on debt redemption in July. 


It was requested that in the future the loan maturity profile chart (Page 39) include the loan rates, as this would provide a full overview of the current position.   


The total investment balance at 31 March 2015 was £249.900million.  Officers reported that GCC’s long term investments had increased. These were largely with OLA’s which were seen as having a very low risk because we could precept on another Council if they got into financial difficulties. In addition, the second key point was GCC had ceased its arrangement with our external fund managers.  This was due to their poor return rates of around 0.4% during the year.  However, all investments were  ...  view the full minutes text for item 29.


Annual Report on Risk Management Activity 2014/2015 pdf icon PDF 248 KB

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Theresa Mortimer, Chief Internal Auditor, (Internal Audit, Risk Management and Insurance Services) presented the report.  The Committee welcomed the report and noted that the Council had continued to build on its success in managing risk throughout 2014/154.


It was explained that GCC’s Risk Management Strategy and framework was in line with good practice principles, guidance and international standards (ISO31000). 


Members were informed that a key tangible positive outcome was where the Council’s risk management arrangements were externally recognised as part of the Liability Insurance Tender process, which resulted in a 14% reduction in annual premiums.


It was noted that strategic ownership of risk management within GCC was evident in so far as the Director of Finance was the lead Officer and the Lead Cabinet Member for Finance and Change had responsibility to ensure effective risk management arrangements were in place. Officers explained they received regular updates throughout the year.  In addition directors and heads of service are required to provide assurance via the Annual Governance Statement assurance gathering process, that risks are being managed within their service areas.


The committee was informed that Risk Management continued to be fully integrated into key business systems and processes such as performance, option appraisals, business planning, financial planning and decision making processes.  Risk Management continued to be one of the key mandatory standards within the Council’s corporate programme and project management governance arrangements including the Meeting the Challenge projects.


A risk appetite model had been introduced and used as part of the risk and opportunity decision making processes. This helped the Council to be less risk averse and enable the Council to understand which risks it might be willing to accept.  


Members were referred to the fact that CoMT continued to take ownership of the strategic risk register.  It was noted that each of the strategic risks were owned by a CoMT member. The Strategic Risk Register was monitored and reported quarterly to CoMT, Overview and Scrutiny Management Committee and Cabinet.  This provided ongoing assurance that key strategic risks were being managed, and informed decisions were made. It was noted that CoMT had a collaborative approach to managing risk, which included benchmarking against other local authorities strategic risks and arrangements.  Officers were confident that robust frameworks and processes were in place. 


In response to a question, members were informed that the strategic risk register was presented to Cabinet as part of the Corporate Performance report on a quarterly basis.  During the discussion, it was agreed that SR2.1 (Finance Risk) would be reviewed and amended or deleted accordingly.


Ongoing emerging risks were identified as part of this process with three new risks added during 2014/2015 relating to the risk of legal action being taken against the LA due to failure to complete a Deprivation of Liberty Safeguard assessment within the stated times, the emergence of the Community Infrastructure Levy and implications of the implementation of the Care Act 2014.


Internal Audit undertook Risk Based Internal Auditing where they focused control assurance work on  ...  view the full minutes text for item 30.


Annual Report on Internal Audit Activity 2014/2015 pdf icon PDF 946 KB

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Theresa Mortimer, Chief Internal Auditor, (Internal Audit, Risk Management and Insurance Services), presented the report. She explained that as the provider of the internal audit service to Gloucestershire County Council she was required to provide an annual opinion on the overall adequacy and effectiveness of the Council’s Internal Control environment comprising risk management, control and governance, this opinion supported the Council’s Annual Governance Statement and consequently a “satisfactory opinion was provided”.


The CIA informed members that since the ICT audit plan was not delivered, due to transitional arrangements of both the Council’s ICT provider and ICT audit provider, it had not been possible to provide an opinion on the effectiveness of the ICT control environment.  However, actions had been taken to address this issue, and all key ICT audits had been carried forward to 2015/2016 audit plan. 


During the discussion it was agreed that a report on ICT, highlighting the work smart position and any remedial action necessary be suggested for presentation to OSMC.  In response to a question, members were informed that the ICT audit provider had its payment withheld until the work had been completed, it was anticipated that the completion of the plan would be by December 2015.  The CIA had made the ICT audit provider aware of the implications if they did not fulfill their contractual agreement. 

It was noted that the underlying principle to the 2014/15 plan was risk and as such, audit resources were directed to areas which represented in year risk and there were no limitations to the scope of the Internal Audit activity.


Members were referred to the summary of the overall opinions during 2014/2015.  It was demonstrated that 83% of audited activity received substantial or satisfactory opinion on control and 96% on risk.


The CIA provided the committee with a summary of the 6 limited assurance opinions on control provided during the year; and a summary of the 2 limited assurance opinions on risk, it was noted that these had been reported to the committee.  Members received a summary of irregularity work undertaken during the year, which had resulted in recoveries totalling £97,640.


It was noted that the Public Sector Internal Standards (PSIAS) required the Chief Internal Auditor to annually report on compliance, reporting any non conformance; and summarise the performance of the Internal Audit function.   Members were informed that an external assessment had been undertaken by the Chartered Institute Internal Auditors (national standard setters) and Mary Hardy would be presenting the outcome of the external assessment. 


The Chief Internal Auditor informed the committee that the net effect of changes to the plan based on in year demand had resulted in Internal Audit achieving 83% of the overall revised plan.  This reflects that resources were redirected as a result of the increase in special investigations and irregularity work and that the ICT plan has not been completed. All key assurance activity has been included within the 2015/2016 audit plan.  


It was explained that Internal Audit Customer satisfaction survey results demonstrated that  ...  view the full minutes text for item 31.


Report on External Quality Assessment for Internal Audit pdf icon PDF 533 KB

To be presented by Mary Hardy, on behalf of the Chartered Institute of Internal Auditors. 


The committee welcomed Mary Hardy, Chartered Institute of Internal Auditors to the meeting. 


Members were informed that the objective of this External Quality Assurance (EQA) review was to undertake an independent assessment of the effectiveness of Gloucestershire County Council's (GCC) internal audit (IA) function which also provides internal audit services to the Chief Constable and Police and Crime Commissioner (CC/PCC). This has included considering the team’s conformance to the International Professional Practices Framework as reflected in the Public Sector Internal Audit Standards, benchmarking the function’s activities against best practice and assessing the impact of internal audit on the organisation.


It was noted that there were 56 fundamental principles to achieve with more than 150 points of recommended practice in the IPPF. Mary explained it was the EQA view that GCC's internal audit function conformed to all of the 56 principles.  This was an excellent performance given the breadth of the IPPF and the challenges facing the function. 


Members were informed that there was one major weakness that needed to be addressed as a matter of urgency.  The ICT Audit work was currently outsourced under a framework agreement to an external provider. This arrangement had been in place since April 2014, but, to date, the provider had only completed one of the audits scheduled for GCC for 2014/15. It appeared that they did not have sufficient resources to fulfil all the contracts they have taken on.


As a result, the Chief Internal Auditor's (CIA's) annual opinion for GCC for 2014/15 noted that she cannot give assurance on ICT controls and this would also be reflected in the Annual Governance Statement, which sits alongside the Council's published accounts. The committee agreed that ICT was a major risk for GCC it was important that this situation be resolved as soon as possible.


The CIA assured the committee that there was an action plan in place to address this issue which included the option of looking for another ICT audit provider within the public sector procurement rules in the event the current provider did not perform in line with the agreed action plan. It was noted that the ICT audit provider for 2015/16 would also be required to prepare an ICT audit needs assessment to support the audit plan.


Mary explained that the only comment she could make was that Internal Audit lacks diversity in age which could lead to problems with succession planning, however senior officers were aware of the situation and were making provision for succession planning as part of the shared services restructure.   Officers recognised the need for younger experienced auditors to add value to the team early on in the process. 


Mary praised the CIA and her team for a well structured audit function.  Members welcomed the report and its findings.  They congratulated officers on their hard work and efforts to provide an outstanding service. 



Reports back on action requested following on from Internal Audit Limited Assurance Audit reports pdf icon PDF 74 KB

Reports back on action requested following on from Internal Audit Limited Assurance Audit reports:

·         Business Continuity

·         Workforce Development of Social Workers

·         Financial Assessment and Benefits team (FAB Team)

·         Gloucestershire Care Partnership 


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Business Continuity Management – Eddie Coventry, Head of Trading Standards, Registration and Coroners presented the report. 


Members were informed that corporate oversight by senior management had been significantly strengthened, and the Chief Fire Officer as the Risk Owner attended the BCM Assurance Group and reports the group’s activities directly to CoMT, through a rigorous governance process.  In response to a question it was noted that the assurance group itself was made up of senior managers from across the whole council each of whom facilitated effective planning in their respective business areas.


The committee noted there was a Civil Protection Officer who oversees the co-ordination of the Council’s BCM arrangements and also assisted and challenges Service Managers in the development and implementation of BCM plans.


Officers explained that a recent serious interruption to the delivery of council services occurred on 1st April 2015 when the council’s access to internet was disrupted.  BCM arrangements were very successfully implemented and an organisation-wide command and control framework was activated in accordance with the Corporate Response Plan.  Whilst lessons were learnt, the impact on the council and its’ customers was minimal.


Members were informed that managers were actively encouraged to test plans on a regular basis.  The CIA informed the committee that a follow up audit review would be carried out to ensure the appropriate actions were in place. 




That the report be noted. 


Workforce Development of Social Workers – Phil Shire, Interim Commissioner for Older People Services and Deborah Greig, Head of Adult Social Care presented the report in detail. 


It was noted that as the interim post holder, Phil was focusing on new management arrangements for adult social work within the partnership with Gloucestershire Care Services NHS Trust, as a result of which line management of social work would be taken back into the Council as of the 1st August 2015. This was in response to concerns about the external care budget and the performance and quality of the social work service.


Members were informed that the planned changes included a revamp of the quality assurance process that would enable standards of practice to be monitored and controlled more rigorously. The new head of service role had a direct reporting line to the Commissioning Director for Adults and would be directly accountable for the adult social work service.


Officers explained that consideration was also being given to establishing a new principal social worker role for adults as part of the management restructure, which would enable more attention to be given to the standards.


The key SWRB recommendations in relation to workforce planning and development are within the terms of reference of the Adult Social Care Workforce Strategy Group. There was a comprehensive training programme, including post qualifying awards and support for the Assessed and Supported Year in Employment (ASYE). However, more work was needed on workforce planning.


Officers reported that there had been a successful drive to reduce the number of care home admissions.  It was noted that the older  ...  view the full minutes text for item 33.


Training Opportunities


Members were reminded that training events were available on:


           Governance Training, provided by Grant Thornton on the 8th September, 6.30pm

           Final Accounts & Annual Governance Statement on the 18th September 2015, 1pm

           Treasury Management – date to be advised.


It was noted that details of the training events would be included on members matter.  If members wished to attend any of the events and haven’t already done so, they should contact Democratic Services.