Agenda and minutes

Audit and Governance Committee - Friday 16 September 2016 10.00 am

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

Contact: Andrea Griffiths 01452 324206 

Items
No. Item

37.

Declarations of Interest

Would members please sign the declaration of interest sheet.

Minutes:

Councillor Parsons declared he was a Cotswold District Councillor and a member of the Pension Committee. 

38.

Minutes pdf icon PDF 118 KB

 

To approve the minutes of the previous meeting. 

 

 

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 24th June 2016 be approved as a correct record and signed by the Chairman. 

39.

Grant Thornton Audit Findings Gloucestershire County Council Report pdf icon PDF 588 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 2016. 

 

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.   Liz Cave explained that the earlier production of the accounts had enabled a smoother audit process and allowed time for officers to provide detailed explanations when applicable.

 

Members appreciated the expertise, hard work and effort of the finance team in compiling the early accounts and agreed they should be congratulated on their exceptional effort.  The Chief Financial Officer explained her team’s position in preparing a complex set of accounts and the effort that had gone into producing the earlier set of accounts. 

 

Grant Thornton also took the opportunity to record their appreciation for the excellent assistance provided by the finance team and other staff during the audit process.  Specifically, they acknowledged the considerable effort that had been made in redesigning the year-end closedown timetable in order to accommodate an earlier accounts production and audit date.  It was noted that Grant Thornton would issue a completion certificate in due course. 

 

Liz explained that the new requirement of a narrative report for the 2015-16 financial statements was comprehensive and met the requirements of the code.  The report was deemed to be clear and informative. 

 

It was noted that a significant prior period adjustment was identified and processed in the year which resulted in a £29.7m adjustment to both the revaluation reserve and capital adjustment account.  Grant Thornton had conducted specific audit work on the reason for and the calculation of the adjustment and were able to verify the reasonableness of this adjustment.  It was anticipated that an unqualified audit opinion would be provided in respect of the financial statements. 

 

In relation to the Better Care Fund, it was noted that Grant Thornton had identified that the majority of council’s budgets in respect of joint commissioning were aligned rather than pooled budgets.  Grant Thornton added that based on their review they agreed that the accounting treatment was appropriate given the nature of the financial relationship.  It was anticipated that this confidence would develop overtime and involve a greater position of risk sharing.  In response to a question, it was explained that GCC currently controlled their own risk in terms of the Better Care Fund costs and budgets setting processes.  

 

The committee discussed the Audit Findings in relation to the significant risks. 

The Chief Financial Officer explained that accounting instructions existed in relation to accountable bodies.  It was suggested that perhaps it would be advisable to extend those principles to the Better Care Fund.  Officers agreed to look at this proposal in more detail. 

 

In response to a question, The Chief Financial Officer explained that she had a statutory role to ensure that governance arrangements were  ...  view the full minutes text for item 39.

40.

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

The committee is asked to note the report.

Minutes:

Terry Tobin, Senior Manager, Grant Thornton 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 2016. 

 

Members were informed that Grant Thornton had identified no adjustments that affected the Funds reported financial position.  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 2015/16 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.   

 

The Chief Financial Officer added she had great pride in her team’s ability to achieve the challenge set in producing an earlier set of accounts. Members wished to record their appreciation and congratulated the team on their hard work and efforts. 

 

Resolved

 

That the report be noted

41.

Annual Statement of Accounts pdf icon PDF 128 KB

The committee is asked to approve the Statement of Accounts for the year ended 31st March 2016, including Gloucestershire Pension Fund Accounts 2015/16

Additional documents:

Minutes:

The committee requested the reports and summary of accounts earlier, in order to fully consider the detail.  Officers explained that they had a statutory duty to produce the accounts in accordance with CIPFA’s Code of Practice, however they would continue to work on a more readable version. 

 

John Kear, Financial Accounting Manager informed the committee that the draft accounts were produced and presented for audit on 6th June 2016, nearly three weeks earlier than in previous years.  The Strategic Finance Director approving the Statement of Accounts for 2015/16, 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 2016 and the income and expenditure for the year. 

 

It was noted that the Statement of Accounts for 2015/16 had been prepared in accordance with the Accounts and Audit Regulations 2015, these draft accounts were available for public inspection for 30 working days, this included access via the Council’s web site.

 

Members were informed that since the production of the draft accounts and during the audit of accounts, only one amendment had been made to the accounts, which related to the classification of pre-payments. Members were reminded that this issue was detailed in the covering report. 

 

Officers emphasised that this amendment did not change the Council’s outturn position, as approved by Cabinet in June 2016, or the level of usable reserves or balances reported in the balance sheet.

 

It was explained that the committee was being asked to approve the accounts which included all minor amendments and updates as agreed with Grant Thornton. 

 

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. 

 

The Chairman informed the committee that the summary 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 2015/16 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.

 

In response to a question, it was noted that school reserves were 100% ring-fenced to schools. Officers explained that non-school earmarked reserves had increased between 2014/15 and 2015/16 by £12.1 million, reflecting increased risks around funding and service pressures.   

 

In addition, unapplied capital grants were fully committed to fund the approved capital programme. 

 

Officers explained that general reserves had essentially remained unchanged at a level of nearly £20 million.  This equated to around 4.6% of the net budget and was within the Council’s target range of between 4% and 6% of the net budget.  This level of general reserve equated to only six working days of average gross expenditure, or twelve working days of net expenditure, but this was considered to be a satisfactory level  ...  view the full minutes text for item 41.

42.

Annual Governance Statement and The Local Code of Corporate Governance 2015/16 pdf icon PDF 66 KB

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

Additional documents:

Minutes:

Theresa Mortimer, Chief Internal Auditor (CIA), 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 2015/2016 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 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:

1.         the requirement to have good governance in working with others i.e. partnerships, alternative service delivery models and contractual arrangements

2.         test the council’s governance arrangements against the new CIPFA Delivering Good Governance in Local Government 2016 guidance and reflect these principles in the 2016/17 AGS and

3.         to undertake a self-assessment against the new CIPFA counter fraud guidance to measure the council’s counter fraud and corruption culture and response, while proposing amendments as required.  It was noted that the CIA would report back to the committee on the new principles in due course. 

 

The Chairman reminded members that the CIA had provided a detailed presentation on the AGS and the Local Code of Corporate Governance at the recent training session. 

The CIA explained that within the Internal Audit team there were counter fraud specialists, who supported the organisations by helping staff to understand fraud risks.  It was suggested that a fraud training session could be held for members in the new year, following the review of the council’s counter fraud arrangements.  The committee agreed with the CIA that it would be advisable to raise staff awareness, including libraries and schools through the use of posters, staff net, etc.   

 

In response to a question, members were informed that whilst there were generic  ...  view the full minutes text for item 42.

43.

Appointment of External Auditors for the Statement of Accounts 2018/19 pdf icon PDF 94 KB

The committee is asked to endorse Option 3 for the appointment of external auditors and recommends to Council to opt-in to the Public Sector Audit Appointment Ltd (PSAA) as the Sector-Led Body for the appointment of the Council’s external auditors from 2018/19.

Minutes:

Paul Blacker, Head of Financial Management presented the report. 

 

It was explained that the report summarised the changes to the arrangements for appointing External Auditors following the closure of the Audit Commission and the end of the transitional external audit arrangements at the conclusion of the 2017/18 audits. 

 

The report outlined the options for the appointment of the Council external audits for the 2018/19 Statement of Accounts and allowed the committee to discuss and if they deemed appropriate recommend to council the preferred appointment process. 

 

In response to a question, it was noted that a sector led prospectus would be circulated in due course.  Officers explained that it was necessary to be pragmatic and realistic, given the size of the sector led body and the reality of control mechanisms. 

 

During the discussion, members wished to formally recognise the good work and efforts Grant Thornton had clearly shown to date. 

 

The Chief Finance Officer explained that the SLB would maintain a list of appointed auditors and would rotate auditors to avoid familiarity.  Some members suggested that it was necessary to retain control and not be tied into long term service agreement, if the service was unsatisfactory. 

 

After some discussion, the committee endorsed option 3 for the appointment of external auditors and agreed to recommend to council to opt-in to the Public Sectors Audit Appointment Ltd (PSAA) as the sector led body for the appointment of the council’s external auditors from 2018/19.  

 

Resolved

 

That the committee endorsed option 3 for the appointment of external auditors and agreed to recommend to council to opt-in to the Public Sectors Audit Appointment Ltd (PSAA) as the sector led body for the appointment of the council’s external auditors from 2018/19.  

44.

Treasury Management Update Report pdf icon PDF 529 KB

The committee is asked to note the report.

Minutes:

Paul Blacker, 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 2016/17 Financial Year to date.

 

During the period 1st April – 31st August 2016 GCC had taken on no new long term external debt.  Officers explained that premium charges remained high for repaying external debt early and therefore none had been repaid in the first 5 months of 2016/17, however a long term external debt of £4.9 million was due to mature in December 2016 and would be repaid at that time.

 

The Head of Financial Management explained that cash flow statements showed that during the period April to August 2016 the council’s investment balances ranged between £276 million and £357 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 £0.3 million in 2016/17, despite the recent cut in interest rates due to additional diversity and longer term investment periods. 

  

Officers reported that longer term investments of over 1 year, totalled £133.1 million, this included £66 million long term investments with other local authorities

 

RESOLVED

 

The report was duly noted. 

45.

Internal Audit Activity Progress Report pdf icon PDF 47 KB

To inform members of the progress of Internal Audit activity in relation to the 2016/17 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 2016/17 Internal Audit Plan and provided a progress report on those audits undertaken during the June – September 2016 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 82% on risk.  It was explained that 23% 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. 

 

The committee was informed that the report provided information of how Gloucestershire County Council was currently working with the Gloucestershire Counter Fraud Unit to counter fraud within Gloucestershire. It was highlighted that Internal Audit had secondment agreements in place which enabled two fraud unit investigators to work with the Council. This meant that operational work could now commence around areas such as assistance with internal investigations and any subsequent prosecutions, development and implementation of fraud awareness and training programmes etc. 

In response to a question, the committee noted that in February 2015 Audit Cotswolds successfully bid for £403,000 funding from the Department of Communities and Local Government (DCLG) on behalf of Local Authorities in Gloucestershire and West Oxfordshire District Council to accelerate the development of a dedicated Counter Fraud Unit. 

Member’s attention was drawn to three limited assurance opinions provided on control, relating to the following:

           Data Storage – Structures (issues identified included lack of review of super user privileges; no data archiving/deletion policy and lack of analysis of commercially sensitive unstructured data).

           Direct Payments – Children – audit identified that an ongoing monitoring system was required to ensure the requirements of the direct payment agreements were followed.  The CIA explained that that management were being proactive in liaising with Adult services, to identify good practice and enable a consistency in approach in relation to direct payments practices.

           Contact Team Follow up review whilst significant progress had been made with implementing the recommendations from the previous audit, the limited assurance opinion provided was based one specific issue relating to a recruitment process, which was being reviewed by management with the support of HR.

The CIA explained that recommendations were made to improve the control environment in all the above reviews and all had been accepted by management and IA would continue to 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  ...  view the full minutes text for item 45.

46.

Internal Audit limited Assurance Reports pdf icon PDF 97 KB

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

·         Client Contributions

Minutes:

Client Contributions – Tina Reid, Operations Director for Adult Social Care presented the report. 

 

It was noted that Gloucestershire County Council’s Adult Social Care relied on people who use services making a financial contribution to the cost of providing them, if they were able to do so. Clearly, the administrative function was a vital element of any service and integral to the effectiveness of the work of the FAB Team. 

 

The Financial Assessments & Benefits (FAB) team ensured that any financial contributions required from service users for residential and non-residential Social Care services were calculated fairly and in accordance with GCC policies and Government guidelines. 

 

The team also helped to maximise income for individuals as well as maximise charging revenue for GCC by providing welfare benefit advice and practical assistance to all service users, their partners and carers to ensure that they are in receipt of their full welfare benefit entitlement. 

 

The committee noted that nine of the audit recommendations were accepted and had been implemented.  FAB policies and procedures had been updated to reflect changes introduced under the Care Act.  A service level agreement had been developed and agreed between FAB and the administration team, setting out the tasks required and the standards expected for effective business support. 

 

Members were informed that recommendation 10 – the quality assurance process was currently under investigation.  The Operations Director for Adult Social Care gave a detailed explanation of the storing of financial assessment data and the methods which were investigated to overcome the challenges faced by the service.  The committee took assurance that the users financial documentation needed to be appropriately recorded and destroyed after use.  It was noted that the Operations Director for Adult Social Care and the Head of ICT were actively considering the use of mobile technology to assist FAB officers in data collection and verification purposes.  As such they were looking to source capital funding before the end of 2016. 

 

The CIA thanked the FAB team for their hard work and efforts to fully implement the recommendations. 

 

At this point of the meeting, there was a discussion with Committee regarding an audit review of the ‘SAP access controls’. The CIA confirmed that an audit of this area is included within the current Internal Audit Plan and that the resource would be used to review the effectiveness of the controls in place (following review of the area by Capgemini). The Committee would welcome the internal audit review in Quarter 4 of the 2017/2018 financial year.

 

Resolved

 

That the report be noted

47.

Members Code of Conduct Review pdf icon PDF 91 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 2015/16. 

 

It was noted that the committee felt the existing arrangements for dispensations were clear. 

 

The committee discussed the request by Councillor Leppington that consideration be given to require members to declare an interest regarding membership of the Freemasons or any other secret society.  The Monitoring Officer explained that any changes would need to be agreed by the Constitution Committee and full council. 

 

After a robust discussion, it was noted that there was no unanimous view to change the Code of Conduct. 

 

Resolved

 

That the report be noted. 

48.

Annual Report from the Local Government Ombudsman pdf icon PDF 73 KB

The committee is asked to note the Local Government Ombudsman’s Annual Review Letter 2015/16.

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 2015/16 the LGO received 62 complaints about the County Council. 

 

It was explained that the County Council kept local data about these complaints, and the records showed 40 complaints were brought to a conclusion by the LGO, of which 5 had been up-held. 

 

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. The higher number of LGO complaints would include some which were not pursued. 

 

RESOLVED

 

That the committee noted the Local Government Ombudsman Annual Review Letter 2015/16.