Agenda and minutes

Audit and Governance Committee - Friday 25 September 2015 10.00 am

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

Items
No. Item

35.

Declarations of Interest

Minutes:

Councillor Hay and Councillor Parsons declared they were members of the Pensions Committee. 

36.

Minutes pdf icon PDF 122 KB

To approve the minutes of the previous meeting.

Additional documents:

Minutes:

All matters arsing had been dealt with an communicated to members of the committee. 

 

Resolved

 

That the minutes of the Audit & Governance Committee held on 26th June 2015 be approved and signed as a correct record by the Chairman. 

 

 

37.

Grant Thornton Audit Findings Gloucestershire County Council Report pdf icon PDF 561 KB

The Committee is asked to note the report. 

Minutes:

Elizabeth Cave, Engagement Lead, Grant Thornton presented the report which informed the Committee of the key matters arising from the audit of Gloucestershire County Council’s financial statements for the year ended 31st March 2015. 

 

The new timeline for the production and audit of the accounts were discussed in detail by the committee.  Members welcomed and supported the opportunity to discuss the accounts earlier and fully endorsed the objective.  The Chief Financial Officer explained that for the 2016/17 accounts an even earlier timeline would be required to meet statutory deadlines.  In order to achieve the new deadlines, which would be accounts prepared by 31st May and approved by committee by 31st July, it would be necessary to make greater use of estimates when preparing the accounts.  Resources required to prepare the accounts within the timeframe would need to be reviewed.  In order to prepare for this change it is anticipated that an earlier timeline will be used for the 2015/16 accounts. Members understood the position and requested further details.  It was agreed that a briefing note including a timeline  and it would be presented to the January 2016 committee meeting. 

 

The committee noted that there were no material errors within the accounts.  There were two non material adjustments affected the Council’s reported financial position in its comprehensive income and expenditure statement and/or the balance sheet.  The adjustments mainly related to accounting for school revaluations, as referred to in the statement of accounts, and had been adjusted in the accounts being presented to committee for approval.  The total indicative fee for the audit for 2014/15 was £130,680. 

 

Members discussed the valuation of school land and buildings in considerable detail.  New school accounting code requirements had resulted in the Council recognising an additional net £201million of assets on the balance sheet.  It was noted that Grant Thornton confirmed their agreement of officer’s treatment of the assets and technical adjustments in the accounts. 

 

The committee discussed in detail the materiality of accrued leave which had not been restated and the impact on the accounts.  In response to a question, Grant Thornton explained that they operated with a £750k minimum threshold, some members felt that they should not have such a definitive cut off view.  It was noted that this minimum threshold was merely an accounting adjustment and a common practice method, and any issues of fraud were automatically reported whatever the level.  Grant Thornton was merely reporting the issues arising and it was for officers and members to take the judgement on how to deal with such issues, and whether an adjustment to the accounts was necessary.  The Head of Finance reassured members that the decision not to adjust the accrued leave provision was reasonable and in no way affected the integrity or meaning of the accounts. 

 

In response to a question, it was noted that GCC had made reasonable judgements in preparing the accounts and had made appropriate adjustments as required by Grant Thornton.  Grant Thornton reiterated the view that they had no  ...  view the full minutes text for item 37.

38.

Grant Thornton Audit Findings Pensions Fund Report pdf icon PDF 521 KB

The Committee is asked to note the report

Minutes:

Elizabeth Cave, Engagement Lead presented the report. The report highlighted the key issues arising from the audit of Gloucestershire Pension Fund financial statements for the year end 31st March 2015. 

 

Members were informed that Grant Thornton had identified no adjustments that affected the Funds reported financial position and one reclassification on the audit of the valuation of level 3 investments as a significant risk.  It was anticipated that an unqualified opinion would be issued on the funds financial statements.  It was noted that the total indicative fee for the audit for 2014/15 was £24,989.

 

The performance of the fund was the responsibility of the Pensions Committee.   It was noted that the auditors did not provide a separate value for money conclusion on the Pension Fund.  The committee noted that the Pension Fund was within the remit of the Pensions Committee.    Members congratulated officers on their efforts. 

 

Resolved

 

That the report be noted

39.

Annual Statement of Accounts pdf icon PDF 147 KB

The Committee is asked to approve the Statement of Accounts for the year ended 31st March 2015, including Gloucestershire Pension Fund Accounts 2014/15.

 

 

Additional documents:

Minutes:

John Kear, Financial Accounting Manager informed the committee that the draft accounts were produced and presented for audit on 17th June 2015, with the Strategic Finance Director approving the Statement of Accounts for 2014/15 on the 29th June 2015.  By doing so the Director was confirming the accounts as presenting a true and fair view of the Council’s financial position as at the 31st March 2015 and the income and expenditure for the year. 

 

It was noted that the Statement of Accounts for 2014/15 had been prepared in accordance with the Accounting Code of Practice issued by the Chartered Institute of Public Finance and Accountancy (CIPFA), which was based on International Financial Reporting Standards.   The Council was legally required to follow this Code of Practice. This was designed to promote consistency and allow comparison of service expenditure and income between authorities.

 

In response to a question, members were informed that the draft accounts were available for public inspection for a four week period over the summer.  It was noted that no members of the public had viewed the accounts in Shire Hall, however there were over 150 visits to the online page and over 50 downloads of the document by members of the public.  It was suggested that in the future advice from the communication team should be sought  to engage and to publicise the fact the accounts were available to view online.  Members suggested that different narratives should be used to attract specific interest groups.  Officers agreed to discuss these options with the communications team for next year’s accounts.   

 

The Chairman informed the committee that the covering report was intended to draw member’s attention to the key pieces of financial and accounting information contained within the Council’s Statement of Accounts. Therefore, this information should be considered in conjunction with the explanatory foreword of the 2014/15 Statement of Accounts. Members were reminded that an accounts training session was recently held to help provide members with an opportunity to ask detailed questions about the accounts.

 

Officers explained that since the production of the draft accounts and during the audit of accounts, two amendments and updates had been made to the accounts, with the agreement of Grant Thornton.  It was emphasised that these amendments did not change the Council’s outturn position approved by Cabinet in June 2015 or the level of usable reserves or balances reported in the balance sheet.

 

Members were reminded that the Accounts & Audit Regulations required the annual Statement of Accounts be produced and published by 30th September, and that they needed to be approved by the Audit & Governance Committee. 

 

At the training session held on 18th September 2015, members had requested more information on the relationship of the accounts to the overall financial standing of the council, a paper was tabled at the meeting providing this additional information (a copy is attached to the signed minutes).  This paper detailed information about the council’s usable reserves, outturn positions and balance sheet movements.  In response to a question, members  ...  view the full minutes text for item 39.

40.

Annual Governance Statement and The Local Code of Corporate Governance 2014/15 pdf icon PDF 65 KB

The Committee is asked to review and approve the Annual Governance Statement and Local Code of Corporate Governance.

Additional documents:

Minutes:

Theresa Mortimer, Chief Internal Auditor, presented the report.  It was explained that the  Council was required under the Accounts and Audit Regulations 2015 to produce an Annual Governance Statement which was a public statement, detailing how the Council directs and controls its resources, which is to be signed by the Leader of the Council, Chief Executive and Director of Finance.

 

Members were informed that GCC operated through a governance framework that had been summarised within a revised Local Code of Corporate Governance 2014/2015 which was consistent with the six core principles of the CIPFA/SOLACE Delivering Good Governance in Local Government 2012 framework. 

 

The Chief Internal Auditor explained the Council’s Local Code of Corporate Governance was a public statement of the Council's commitment to these principles and specifically identified the key actions taken by GCC in relation to each of the core principles. It was noted that the code was reviewed and updated annually.

 

The CIA explained that to enable the development of the AGS, an embedded assurance framework was required, that not only provided the relevant assurances, but also a framework that underpinned and evidenced the statements made within the AGS.

 

A significantly strengthened governance assurance process was developed and implemented to provide a framework for the annual assessment of the effectiveness of the governance arrangements operating within the Council. This included the relevant Lead Cabinet Member overview and oversight, governance assurance statements obtained from Directors and Heads of Service (across Commissioning and Delivery) and robust challenge by the Council’s Statutory Officers i.e. Chief Executive, Monitoring Officer and Director of Finance.  

 

Members were informed that following the review, three key improvement areas were identified to further enhance the governance arrangements, these were identified within the AGS action plan and related to the requirement to have a detailed scheme of delegation for adults and public health (i.e. defined decision making powers), Governance in working with others i.e. partnerships, alternative service delivery models and the ICT control environment.

 

In response to a question, members were informed that whilst there were generic principles/assessments that were required to be covered within the statement, the AGS included reference to all the key governance issues that had occurred during 2014/2015. In addition, the key improvement areas identified changes to the report content were detailed within the action plan, which is attached to the AGS.  The CIA explained that she benchmarked the requirements against other County Council’s statements to ascertain good practice. The CIA also followed national guidance and utilised relevant publications on good governance, which included Grant Thornton’s publications. The Director of Finance reiterated that the Internal Audit function had been recently audited by an external auditor had received an exemplary report. 

 

During the discussion, members agreed that the Committee would receive updates on the actions taken to address the issues identified, at the January 2016 Committee.  The committee requested that in the future a table of contents would be included within the AGS, as this would help as a guide. 

 

The CIA noted that officers  ...  view the full minutes text for item 40.

41.

Treasury Management Update Report pdf icon PDF 226 KB

The Committee is asked to note the report.

Minutes:

Mark Spilsbury, Head of Financial Management 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 2015/16 Financial Year to date.

 

It was explained that there were a number of key issues, firstly the Authority had repaid nearly all of its internal borrowing.   Officers explained that given this, and the fact that premium charges remained high for repaying external debt early, this meant that the Authority was only likely to repay the one external debt of £4.9 million that matures in December 2015.  Members congratulated officers on their approach to debt redemption. 

 

It was noted that during the first five months of 2015/16, officers had continued the policy of not taking out any new borrowing. Members were informed the budget for investment income in 2015/16 was £1.2 million and officers currently forecasted that the Authority would generate investment income of £1.76 million, thereby over achieving by £0.5 million.  

 

In response to a question, members were informed that the Chief Financial Officer was due to meet with the pension fund actuary to discuss the 2016 Pension Fund valuation.  It was noted that different actuaries had different views.  It was hoped that the national pension’s board would possibly have a clearer opinion on assumptions and made in actuarial valuations.   

 

Officers reported that longer term investments of over 1 year, had now grown to £66 million in accordance with the strategy of lengthening investment duration, this had increased from £39m at the start of the year, as depicted in the table on page 311 of the report.

 

The committee were notified that the authority’s Treasury Management advisors were still forecasting low interest rates with their first predicted rise being in June 16, with gentle rises predicted up to 1.75% by September 2018.   It was explained if investment balances average £280 million over a year, each 0.25% increase in interest rates could generate additional interest in the order of £0.7 million in a full year.

 

Members requested to know the Euro conversion rate and if there was a target figure.  Officers agreed to circulate this information via email. 

 

RESOLVED

 

That the Euro conversion rate and target figure, be circulated via email. 

 

The report was duly noted. 

42.

Internal Audit Activity Progress Report pdf icon PDF 305 KB

To inform Members of the progress of Internal Audit activity in relation to the 2015/2016 Internal Audit Programme.

Additional documents:

Minutes:

Theresa Mortimer, Chief Internal Auditor presented the report which informed members on the progress of Internal Audit activity in relation to the 2015/16 Internal Audit Plan and provided a progress report on those audits undertaken during the June – September 2015 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 77% on control and 100% on risk.

 

The Chief Internal Auditor informed the committee that all 39 recommendations made by internal audit to improve the control environment during this period had been accepted by management. 

 

Member’s attention was drawn to two limited assurance opinions provided on control relating to the Provision of Care and Support - Extra Care Housing Schemes, this involved issues relating to contract management arrangements and invoicing and payment systems.  Also Gloucestershire Music, had issues relating to their shared working governance/contract arrangements with a partner Council and financial systems and processes.  Consequently, all contracts had been suspended with the partner Council. 

 

It was suggested by a member that consideration could be given to Gloucestershire Music being converted to charity status as it received no direct funding from Gloucestershire County Council, and this may benefit the service.  As a separate trust they might then be able to access arts council funding.  The Director of Finance agreed to discuss this issue further with the Operations Director, Education, Learning and Libraries.  An update on progress with the implementation of the internal audit’s recommendations would be presented to the January Committee meeting.   

 

In respect of the two limited assurance opinions, it was noted that recommendations had been made to improve the control environment, all of which had been accepted by management.  Whilst Internal Audit would monitor their implementation, it was agreed that the relevant senior management attend the next meeting of the Committee to provide an update on the actions taken in relation to the Provision of Care and Support – Extra Care Housing Schemes due to the nature of the findings.

 

In response to a question, members were informed that the replacement of the ERIC system had been delayed due to the Care Act.  As the new system required greater integration with SAP and NHS systems, in order to embed controls.  Officers explained that detailed discussions were taking place with the appropriate services to develop the replacement system.  Members requested the update should also include details on the ERIC replacement system and timescales. 

 

In response to a question relating to the minimum wage, officers explained that the MTFS made reference to the national living wage and that the Overview Scrutiny Management Committee also monitored this issue. 

 

RESOLVED

 

That senior management attend the next meeting of the Committee to provide an update on the actions taken in relation to the Provision of Care and Support – Extra Care Housing  ...  view the full minutes text for item 42.

43.

Internal Audit Limited Assurance Report pdf icon PDF 73 KB

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

Minutes:

Philip Williams, Lead Commissioner for Community Infrastructure presented the report.  The committee was informed that the as a result of the audit, the Public Transport Hub had been established and had met three times to discuss contracts,  changes and issues.  It was explained that improvements to record and store contract documentation were ongoing.   

 

Officers had developed a decision tree to aid the recording of decisions, this acted as a flexible framework to procure services quickly and efficiently. 

 

It was suggested that in the event of terminated bus services, ITU needed to be more proactive in communicating the message to the public aware that work was in progress to replace such services, therefore any crisis could potentially be averted.  Officers concurred that there was room for improvement on communication with key stakeholders. 

 

In response to a question, members noted that there was a fixed agreement with stagecoach in terms of concessionary fares.  Members were informed that there were target levels for urban and rural journeys, given the diverse nature of the county. 

 

The lead commissioner requested if members were aware of any duplications of route to please contact him.  It was explained that work was in progress with the health services transport Arriva to avoid duplicated services.  

 

The Chief Internal Auditor informed the committee that Internal Audit would carry out a follow up review and test the actions taken in the 2016/17 Internal Audit Plan. 

 

 RESOLVED

 

 That the report be noted. 

 

44.

Annual Report on Complaints pdf icon PDF 90 KB

The Committee is asked to note the Local Government Ombudsman’s Annual Review Letter 2014/15.

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 2014/15 the LGO received 75 complaints about the County Council. 

 

It was explained that the County Council kept local data about these complaints, and the records showed 45 complaints were brought to a conclusion by the LGO.  The LGO acknowledged their figures did not always match the data local authorities had collected but unfortunately they were unable to provide further clarification.   The higher number of LGO complaints would include some which were not pursued. 

 

Officers agreed to monitor the LGO figures on a comparative basis.  Members requested the LGO letter be circulated to all Councillors for information. 

 

 RESOLVED

 

That the committee noted the Local Government Ombudsman Annual Review Letter 2014/15. 

45.

Members Code of Conduct Review pdf icon PDF 90 KB

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

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 appointed three independent persons who the Monitoring Officer could call on for assistance if necessary.  It was reported there had been no reason to convene the Hearings Panel in 2014/15. 

 

In response to a question, it was noted that the three Independent Persons were male as no females had applied for the post.  If necessary, the Monitoring Officer could contact other authorities for a female Independent Person. 

 

The committee discussed the subject of declaring personal and other non pecuniary interests in detail. Some members felt that reminders would be helpful. The committee felt the existing arrangements for dispensations were clear. 

 

Resolved

 

That the report be noted. 

 

46.

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 13 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 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:

The committee agreed 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 13 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 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.

47.

Internal Audit Limited Assurance Report

Minutes:

The committee noted the report.