Agenda and minutes

Audit and Governance Committee - Friday 22 January 2016 10.00 am

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

Contact: Andrea Griffiths 01452 324206 

No. Item


Minutes pdf icon PDF 117 KB

To approve the minutes of the previous meeting. 

Additional documents:


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




That the minutes of the Audit & Governance Committee meeting held on the 25th September 2015 be approved and signed as a correct record by the Chairman.  


Grant Thornton Annual Audit Letter pdf icon PDF 378 KB


Terry Tobin, Grant Thornton presented the report in detail.  The report summarised the findings from the 2014/15 audit, which was undertaken by Grant Thornton.  It included key messages arising from the audit of the council’s financial statements and the results of the work that had been undertaken to assess the Council’s arrangements to secure value for money in its use of resources. 


It was noted that the fee charged for the audit was £130,680.  Members were reassured that the financial statements were brought to the attention of the relevant bodies and any views were shared with stakeholders.  Some members felt that the terminology used in the third bullet point, in the financial statement was misleading and suggested that it should be amended to “how to improve in the future”.  Terry accepted the comment and informed the committee that a “wash up” meeting took place at the end of the audit to deal with any issues that may have arisen during the course of the audit and highlight any future improvements that could be made. 


During the discussion it was noted that there may be a capacity issue for auditing firms to deal with the earlier closure of Local Authorities accounts given the new time lines.  Officers referred to the proposed change in Minimum Repayment Policy (MRP), during which it was explained that other authorities were also considering changes to their Minimum Repayment Policies.  Sharing knowledge and information with other organisations is regarded as good practice.  The council’s approach to MRP is supported by Grant Thornton. It was noted that Grant Thornton continue to share best practice methods with its clients. 


Earlier closure of accounts from 2017/18 was discussed.  It was explained that a small number of other councils already close their accounts early.  As a learning exercise officers had visited two authorities to observe their methods.  During the discussion it was noted that there was a need for a cultural change, which officers, members and all partners would need to embrace, in order for the accounts to be competed earlier.  It was inevitable that in order to speed up the year end process it would be necessary to use more estimates.


Some members suggested that in order to conform to the new time line, Pension actuaries would need to provide their information earlier.  It was accepted that the various partners and providers of information would need to be on board to achieve the earlier closure.  This includes work on the interface between the schools and council systems.  The Director of Finance informed the committee that the finance team were sensibly preparing to achieve the new timeline by trialling an earlier timetable for the 2015/16 accounts. 


In response to a question, it was noted that Grant Thornton audit information was shared with the public accounts committee. 


Terry informed that the Grant Thornton report “Where Growth Happens’ was available online and link would be circulated in due course via email. 




That the link to Grant Thornton publications be circulated via email.  ...  view the full minutes text for item 2.


Grant Thornton Audit & Governance Committee Update Report pdf icon PDF 640 KB


Terry Tobin presented the report, which 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.  Members were informed that accounting, audit and emerging issues would be flagged up as part of the regular report.  Members were informed that internal and external auditors met on a regular basis to discuss any issues that may arise. 


The committee was further reminded that from 2017/18 the new date for approving the statement of accounts would be the 31st July (2018), in the interim the date for approval by the committee remained as the 30th September of each year. Officers reiterated that nationally there was some concern over the peak of resources, given the new deadlines for local authorities would clash with those for health, this situation would continue to be closely monitored. 


Members reiterated their request to have the accounts earlier this year, to allow more time to review the accounts in advance of the September committee meeting.   Officers explained that bringing the closure of accounts forward for 2015/16 would improve the situation, and that the Director of Strategic Finance would ensure, where possible, that the accounts and supporting narrative would be produced earlier in the process to allow members to have sufficient time to comment. 


Terry informed the committee that earlier audit testing was already taking place, to assist Grant Thornton and the Authority during the main part of the audit. It was suggested that in the future perhaps a section on value for money, fraud and decision making would be useful in the document to aid the discussion.


The committee referred to the Audit Committee Effectiveness Review section of the report, many members felt that a presentation on this area would be most beneficial to the committee.  Members requested a shared audit effectiveness training session, it was agreed that this would be arranged and the invitation could be extended to the districts.  Members were informed that copies of Grant Thornton publications could be accessed via


In response to a question relating to Governance it was noted that Internal Audit focused on risk management, as it was a key area of governance. Members were informed that Internal Audit also monitored the constitution and if any major amendments were made the Chief Internal Auditor would focus the appropriate audit resources to ensure compliance. 


Members noted that any amendments to the constitution, which related to the Audit & Governance Committee, would be discussed with this committee.  It was noted that the Monitoring Officer was a lead officer on this committee and the constitution committee and undoubtedly if she thought there were any issues, they would be raised accordingly.  The Chairman requested that this issue was clarified with the Monitoring Officer. 


The issue of devolution and the possibility of two constitutional arrangements were raised, members were advised that this was an issue for the Constitution Committee.  However, the Monitoring Officer would be asked to  ...  view the full minutes text for item 3.


Treasury Management Strategy 2015/16 pdf icon PDF 939 KB


Mark Spilsbury, Head of Financial management presented the proposed Treasury Management Strategy for 2016/17, which met the CIPFA Code of Practice, and governed how the Authority undertook Treasury Management activities.


It was noted that the strategy will be approved by full Council as part of the Medium Term Financial Strategy (MTFS) and was being submitted to the Audit and Governance Committee in accordance with its terms of reference to regularly monitor the Council’s Treasury Management policy and practices.


Members were informed that it was a very detailed and important document in the context that the Council regularly had in excess of £300 million of balances invested, with external Capital borrowing forecasted to be just under £300 million at the end of 2015/16.


It was noted that the Audit & Governance committee members had undertaken in depth Treasury Management training session, prior to the formal meeting.  During the discussion the key changes to the strategy were summarised. 


The committee were referred to the Approved Investment Counterparties, as shown in section 8.4, table 2. Members were informed that approved Counterparties had been split to detail secured and unsecured deposit limits.  In addition, limits on unsecured investments had been lowered to reflect the additional risk this category carried.


A new category had been added with a limit of £30 million in total for loans to corporates. This was to allow for secured investments in corporate bonds, subject to advice from Arlingclose.  Also the lowest risk category approved for use had been raised from BBB- to BBB to reflect the additional risks following the bail in legislation. 


Officers explained that the investment limit had been slightly increased for balances over 364 days to allow flexibility in the use of longer dated instruments, from £100 million to £120 million in 2016/17. The limit with foreign counterparties had increased to £30 million per country to allow more flexibility in the use of secured investments.  


The committee noted that of all the proposed changes, the most significant was the Minimum Repayment Policy (MRP) policy. It was noted that the MRP had been amended to allow for a lower contribution, whilst still maintaining a prudent provision.  Members were informed that changes had been discussed with and were supported by Arlingclose, the Authority’s Treasury Management advisors.  The proposed approach was discussed in detail with the External Auditors who told officers they had no objections to the proposed approach.   

It was noted that under the new proposal if there was no further borrowing going forward debt would be repaid in 62 years.  However, under the current methodology it was never repaid because it was 4% on a reducing balance.  Members noted that at the end of 62 years the CFR would be zero under this proposal but would still be £35 million under the current methodology.


The committee was pleased to note that the strategy enabled the Authority to reduce the capital financing budget from £11.4 million to £7.4 million.  The £4 million saving was indicated in the  ...  view the full minutes text for item 4.


Statement of Accounts Update pdf icon PDF 130 KB


John Kear, Financial Accounting Manager presented the report.  Some discussion arose concerning the earlier timetable for closing accounts, in accordance with the Account and Audit Regulations, and the external auditing arrangements.  Officers indicated that initial discussions had already taken place with external auditors to agree a revised audit timetable and members supported the approach that this should be progressed sooner rather than later. 


Officers explained that there was a fundamental change in the approach regarding the timing of accounts and the committee meeting schedule to approve the accounts, including the requirement for Committee to approve the 2017/18 by the end of July 2018. It was confirmed that given the earlier timetable being trialled for the production of the 2015/16 accounts, it was anticipated that this would give officers the opportunity to produce a shorter, more focused summary set of accounts and narrative for members to review at the September committee meeting.  Members reiterated the benefits of having headline messages for the benefit of all.  However, officers also confirmed that the committee in September would still be asked to approve the full set of accounts, as required by the statute. 


The consensus was that it was necessary to bring about cultural change to the organisation.  The reality was that a fundamental review would be required to achieve those earlier target dates. 


During the debate, members referred to the inclusion of the Highways as an asset within the accounts.  Officers explained that extensive preparatory work had been undertaken over the last two years by both Finance and Highways staff and the Council is well placed to meet the statutory requirement.  In principle a dry-run audit of the asset has been agreed Grant Thornton in autumn 2016.  It was recognised that colleagues in the Highways department have a great deal of knowledge and expertise in the area, as the Council already takes an asset driven approach to highways, and were supporting finance in their preparation for the change.  Grant Thornton added that GCC was currently ahead in assessing its Highways Asset and they were impressed by the level of work which had already been undertaken. 


In response to a question, it was noted that CIPFA was accountable for the decision to include highways on the balance sheet.  Members wished to know the initial cost of the exercise, officers explained that they had not yet costed the project, in terms of finance, highways time, etc.  It was noted that many Authorities had conveyed their feelings to CIPFA on this issue.   




That the committee noted the report. 


Annual Governance Statement - Governance Issues Improvement Plan 2014/15 pdf icon PDF 68 KB

The Committee reviews and considers the actions taken to address the governance improvement areas identified.


Theresa Mortimer, Chief Internal Auditor (CIA) presented the report.  The report provided assurance to the Audit and Governance Committee that the improvement areas and associated actions identified as part of the annual review of the governance arrangements operating within GCC, had been/were being addressed.  It was recommended that the Committee reviewed and considered the actions taken to address the governance improvement areas identified.


It was explained that the Council was required by the Accounts & Audit Regulations 2015 to publish an Annual Governance Statement (AGS), in accordance with ‘proper practices’ in order to report publicly on the extent to which we comply with our own Local Code of Corporate Governance, including monitoring the effectiveness of our arrangements in year and on any planned changes to our governance arrangements in the coming year.


The Chief Internal Auditor explained that following the annual review, three key improvement areas had been identified to further enhance the governance arrangements.  These areas were highlighted within the AGS improvement plan and related to the requirement to have a detailed scheme of delegation for adults and public health, good governance in working with others (partnerships, alternative service delivery models, etc.) and the ICT control environment.


In response to a question relating to the outcome of partner organisation audits, it was noted that the Council’s Anti Fraud and Corruption Strategy has  been disseminated to the various partners, schools, nhs, etc.  In addition, it is a requirement of the Council’s Risk Management Strategy that joint partnership risk registers are maintained and that the risk management principles (including the consideration of fraud and irregularity risk, financial risk and supply chain risk) are also fully considered as part of any contractual arrangements. 


The CIA explained that risk management was one of the key elements of the contract management framework.  Members requested to see a copy of the contract management framework.  It was agreed the appropriate link would be circulated via email.    


In response to a question members were informed that as part of the risk based internal audit planning process, where it is identified that the Council has been designated as the accountable body, full consideration was given to including an audit within the plan of reviewing the effectiveness of the Governance arrangements in operation, e.g. The Local Enterprise Partnership.  It was noted that audit plan was dynamic and would respond to in year demand and risk.  The Committee was assured that every audit undertaken was reported back to the committee. 


In response to a question, it was noted the accountable body in association with the Authority was predominantly the Local Enterprise Partnership (LEP).  Consequently, the authority worked collaboratively with the LEP to build sound processes.  The committee requested a list of accountable bodies, in terms of audit work, previous and planned. 


The report provided assurance to the Committee that the improvement areas and associated actions identified as part of the annual review of governance arrangements operating within GCC, had been/were being addressed.


Officers explained the key risk was that failure  ...  view the full minutes text for item 6.


Risk Management Policy Statement and Strategy 2016/17 pdf icon PDF 446 KB

To receive an updated Strategic Risk Management Policy Statement and Strategy to be effective from 1st April 2016.


Theresa Mortimer, Chief Internal Auditor (CIA) presented the report in detail.  The proposed Risk Management Policy Statement and Strategy, reflected national good practice/standards and aligned with the Council’s operating model. 


The CIA explained nationally unprecedented challenges continued for those tasked with delivering public services.  It was evident that budgetary pressures would have an effect on all major services, at the same time demographic changes and an increased demand for services would compound these pressures.  There was an increasing focus on alternative service delivery models which would see more public services being delivered by, or in partnership with other public sector bodies, charities, communities or private sector organisations (e.g. Devolution).

The continuing shift in the structure of service provision would create real challenges and an increasingly complex matrix of risks and opportunities.


In terms of the local context and taking the national factors into consideration, it was now deemed an appropriate time to refresh and reaffirm the Risk Management Policy Statement and Strategy, to ensure that the Council’s risk and assurance framework continued to reflect national good practice and standards. This would enable the Council to effectively manage the potential opportunities and threats, thus improving service delivery to the local communities.


The report set out the proposed updated Risk Management Policy Statement and Strategy for 2016 – 2017. The aim of the strategy was to support the challenges that the Council may face, allowing it to react dynamically to changing external circumstances by enabling the Council to handle risk effectively and deliver successful outcomes.


It was noted that there were only very minor changes which had been highlighted in within the strategy.  In particular, the reference to new Risk Management Standards; and reference to Directors to assist in the preparation of the Council’s Annual Governance Statement by providing an annual assurance statement for the internal control framework operating within their service area.   


A discussion took place relating to risk monitoring and reporting arrangements, it was reiterated that risk monitoring and reporting were integral to the corporate performance management and monitoring arrangements and was within the Overview Scrutiny Management Committee (OSMC) remit.  The Council’s strategic risks were reported on a quarterly basis to OSMC.


It was noted that Internal Audit provided an opinion of the effectiveness of risk management arrangements when undertaking individual audit assignments which provided the committee with reasonable assurance that risk was being managed effectively.


The committee was asked to agree the Strategy, and once approved it would be disseminated to members and managers via the Communications Team, in order to reaffirm the risk management objectives. 




That the Strategy be approved and disseminated to members and managers via the Communications Team, to reaffirm GCCs risk management objectives.


Joint Working Agreement between Internal and External Audit pdf icon PDF 136 KB

To note the report.


Theresa Mortimer, Chief Internal Auditor presented the report in detail which summarised how internal and external audit work together. Terry Tobin, Grant Thornton added that the Internal Audit Team at GCC was very good and the service was a credit to the CIA. 




That the report be noted


Internal Audit Activity Progress Report pdf icon PDF 366 KB

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

Additional documents:


Theresa Mortimer, Chief Internal Auditor presented the report which informed members on the progress of the internal audit activity in relation to the 2015/2016 Internal Audit Plan and provided a progress report on those audits undertaken during the period October – December 2015, 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 75% on control and 96% on risk. Members’ attention was drawn to the fact that 25% of the opinions on control were limited. Officers explained that this maybe due to transformational change, whilst focusing audit activity on the key risks of the Council and as a result of specific requests from Directors.


The CIA informed the committee that all 40 recommendations made by internal audit to improve the control environment during this period, had been accepted by management. 


Members’ attention was drawn to two limited assurance opinions provided on control.  Firstly, relating to the BSC Payroll/Pensions audit, this involved issues relating to the BSC incorrectly interpreting the new LGPS legislation, which resulted in incorrect pension contribution deductions.  It was explained that this was compounded by delays in developing and testing the CARE report prior to it being submitted to Pension’s Administration manager to enable the annual benefit statements to be sent out to members.  It was noted that this review was specifically commissioned by the Director of Finance due to issues brought to her attention.


Secondly, the Adult Services Deaths and Discharges audit, which focused on issues around contractual management, monitoring arrangements and data inaccuracy/data inputting errors within the ERIC (Adult Social Care database.  This resulted in incorrect payments being made for the provision of Care and Support; delays in claw back of monies and under-recoveries made.  The committee was informed that the Council was potentially significantly under recovering unspent balances within Direct Payment accounts. Members requested to know how much had been recovered to date. 


The CIA reported that the recommendations made to improve the control environments, were all accepted by management and Internal Audit would monitor their implementation, however, it was recommended that the relevant senior management attended the next meeting of the Committee to provide an update on the actions taken in relation to these two audit reviews and answer the specific questions raised by members.  The committee accepted this recommendation. 




That in relation to the Adult Services Deaths And Discharges Audit, members requested to know how much unspent balances within Direct Payment accounts had been recovered to date. 


That the committee would receive limited assurance progress reports from management relating to the Adult Services (Deaths and Discharges) and the Local Government Pension Scheme at the April committee meeting.


That the committee accepted the report. 


Internal Audit Limited Assurance Reports pdf icon PDF 74 KB

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

Additional documents:


Gloucester Music Service

Theresa Mortimer, CIA presented the report.  During the discussion, members requested reassurance that the work was being done.  The CIA confirmed that a follow up audit would be undertaken during 2016/17 to provide the assurance that all agreed actions had been implemented. 




That the report be noted.


Provision of Care and Support – Extra Care Housing Schemes

Mark Branton, Assistant Director – Adult Social Care presented the report in detail. 


In response to a question, members were informed that the replacement of ERIC had been an ongoing discussion for a number of years.  It was suggested that perhaps a system should be built to accommodate the requirements of providers.  Some members felt the service should consider purchasing a new system or develop the current system. 


It was noted that Tina Reid (Operations Lead: Adult Social Care and Business Development) was actively involved in the process, as staff training was a key to the inputting of data.  The committee noted that ERIC was a client record system and not a management information system, which added to the issues.


In response to a question, it was noted that the implementation of phase two of the Care Act had been postponed until 2022.




That the report be noted


Exclusion of 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 14 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



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 12 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.


Exempt Internal Audit Limited Assurance Report


The committee received and discussed the report in detail.




That the report be noted.