Agenda and minutes

Audit and Governance Committee - Friday 24 January 2020 10.00 am

Venue: Meeting Room 1&2 - Shire Hall, Gloucester. View directions

No. Item


Declarations of Interest

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


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



No declarations of interest were made. 




The Chairperson asked the Committee to partake in a minutes silence in respect of Cllr Roger Wilson who had sadly passed away. 



Minutes pdf icon PDF 114 KB

To approve as a correct record the Minutes of the Meeting held on 11th October 2019. 



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




That the minutes of the meeting held on the 11th October 2019 be approved as a correct record and signed by the Chairperson. 


Grant Thornton Progress Report pdf icon PDF 851 KB

The Committee is asked to note the report.


The Committee welcomed Barrie Morris from Grant Thornton, to the meeting. 


Katie Whybray presented the report, which detailed the progress Grant Thornton had made in delivering their responsibilities as the external auditors. 


It was noted that the outstanding 2016/17 objection was on hold pending legal action and there was no further information available at this time.   In response to a question, members were advised that GCC was not legally ‘out of time’ in relation to the Value for Money conclusion.  


The Committee discussed the article on Page 20 of the report by Paul Dossett, Head of Local Government at Grant Thornton in relation to the Strategic Overview function in relation to Audit.  Mr Morris explained that the National Audit Office (NAO) set the code for Auditors and there was some appetite for a single overarching body.  This view was echoed by the Director of Corporate Resources who explained that County Treasurers Group were supportive of this position and had written to the PSA over the discharge of work and its disjointed nature.  The consensus of the Committee was that something needed to change and that perhaps CIPFA should also be involved.




That the report be noted.


Grant Thornton 2019/20 Audit Plans pdf icon PDF 447 KB

The Committee is asked to note the following reports:             

- County Council Audit Plan,

            - County Council Audit Scope Letter

            - Pension Fund Audit Plan.

Additional documents:


Katie Whybray, Grant Thornton presented the Council Audit Plan in detail.   This covered the planned approach to the 2019/20 financial statements and value for money audit.  


It was noted that in terms of value for money arrangements, Grant Thornton’s risk assessment regarding GCC arrangements to secure value for money had identified two VFM significant risks, these being future financial sustainability and children’s services. 


In response to a question, relating to the valuation of the Pension Fund net liability, one member wished to know how Grant Thornton proposed to test the competency of the actuary.  It was explained that this was a requirement under International Auditing Standards (IAS) and External Auditors were required to review the competence of the actuary. The auditors also confirmed that they utilised an Auditors Expert, Price Waterhouse Cooper (PWC), to assist them in this review.  It was noted that different Councils used different actuaries who would use different assumptions and the PWC report provided some assurance by comparing these and suggesting areas that local auditors might want to focus on.  The Chairman requested that members of the Pension Board checked the risks and email Grant Thornton directly with any queries or amendments. 


During the discussion it was noted that the Energy from Waste scheme as referred to on Page 32 of the report be amended, as it was not a PFI scheme.  The External Auditor agreed to amend the terminology. 


The External Auditor advised the Committee that materiality at the planning stage of the audit was £14.6m for 2019/20, which equated to 1.5% of the prior year’s gross expenditure.  It was noted that the reduction in materiality reflected the higher profile of local audits following external reviews.  It was anticipated that Regulators would continue to monitor materiality levels to ensure that they were appropriate and reflected the risks of the organisation. 


The External Auditor advised the Committee of the key matters impacting the audit process.  During the presentation it was noted that Local Government funding continued to be stretched with increasing cost pressure.  The Director of Corporate Resources explained that the Authority was carrying extra costs and resources across the board.  He added that GCC was trying to put resources in place, whilst putting additional funds in place for the next financial year.  It was a question of cost increases in order to steady the ship across the service areas.  Members were informed that risks were at a point in time and officers would continue to monitor the situation via the audit programme. 


The Committee discussed the continuity of the External Audit Team, it was noted that David Bray would be returning to cover Katie’s maternity leave.  The External Auditor advised members that Grant Thornton were committed to delivering a high quality service.


During the discussion it was noted that there were audit fee variations and a decade ago the fees were some three times higher.  Members were advised that there was increased scrutiny over valuations and pensions. In response, external auditors were increasing the level  ...  view the full minutes text for item 5.


Capital, Treasury and investment Strategy pdf icon PDF 363 KB

To consider, and comment as appropriate on the proposed strategies for 2020/21. 

Additional documents:


Paul Blacker, Head of Financial Services presented the proposed Capital Strategy, Treasury Management Strategy Statement and Investment Strategy for 2020/21, which met the CIPFA Code of Practice, and governed how the Authority undertook Treasury Management activities.  It was noted that the Committee was required to consider and comment on the proposed strategies for 2020/21, including the Minimum Revenue Provision Policy.


It was noted that the strategy would 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.


Member’s attention was drawn to page 95 of the report, which referred to responsible investments policy and to page 97 of the report which detailed the approved investment counterparties and ratings.  It was noted that the ‘none’ credit rating related to the green agenda more specifically and would allow the council to invest in smaller green companies (green fuels, wind farms, etc.).  Officers explained that any investment in these companies would require due diligence and would require the Section 151 Officers approval.  In essence the policy would give the flexibility for investing in green initiatives. 


The Director of Resources advised the Committee that officers were aware of the opportunities and wanted to remain flexible and could obtain further advice if required.  It was a question of security, liquidity and risk in order to gain a balanced view.  One member felt this ‘grey’ area should not be included within the Treasury Management Strategy and should be a separate standalone policy.   The vast majority of members were content with the extra flexibility this would give the  Treasury Management Strategy and were not reticent towards the opportunity for investment. 


Members requested a future report on the cost of green initiatives and the potential investments.  It was noted that there was a change in attitudes towards green investments and the public would be interested to know how their money was being invested.  Officers explained that no investments had yet been made and the report if approved by the Committee would go to Cabinet and Council for approval. 


It was noted that details of the Investments within the strategy were covered in detail at the Treasury Management training session provided by Arlingclose earlier in January 2020.  Members appreciated the detailed training session, which was well attended. 




That the Capital Strategy, Treasury Management Strategy Statement and Investment Strategy 2020/21 be commended for approval by Council.    


Internal Audit Purpose, Authority, Role and Function pdf icon PDF 71 KB

The Committee is asked to review and approve the report.   


Additional documents:


Theresa Mortimer, Chief Internal Auditor (CIA) presented the report.  The Committee were advised that Regulation and Auditing Standards required the Chief Internal Auditor to periodically review the Internal Audit Strategies, Charter, Code of Ethics and Quality Assurance and Improvement Programme (QAIP). These were presented to Senior Management and the Audit and Governance Committee to support them in their role in relation to Internal Audit and to provide assurance that the Internal Audit function operates in accordance with auditing regulation and mandatory professional standards. It was noted that due to maintaining independence, the final approval of the above resided with the Audit and Governance Committee.


The CIA explained the Public Sector Internal Audit Standards encompass the mandatory elements of the Institute of Internal Auditors (IIA) International Professional Practices Framework (IPPF) i.e. the Definition of Internal Auditing, Code of Ethics and the International Standards for the Professional Practice of Internal Auditing and define the way in which the Internal Audit Service should be established and undertake its functions.


Members were advised that the Standards required all internal audit functions to implement and retain the following:

1.         Internal Audit Strategy: sets out how the service will support and promote improvement and good governance, which is underpinned by the Internal Audit Charter.

2.         Internal Audit Data Analytics Strategy: This strategy underpins the  Internal Audit Strategy to incorporate data analytics in  Internal Audit reviews (where appropriate/relevant) to provide further intelligence over entire populations and help to identify key emerging themes and risks. This will also provide management with contextual perspective of audit findings.’

3.         Internal Audit Charter: formally defines Internal Audit’s statutory role, authority, purpose, responsibility and position within GCC.

4.         Internal Audit Code of Ethics: is a statement of principles and expectations governing the behaviour of individuals in the conduct of internal auditing.

5.         Internal Audit Quality Assurance and Improvement Programme (QAIP): enables an evaluation of the internal audit activity’s conformance with the IPPF, Definition of Internal Auditing and Standard 1300 (QAIP) within the PSIAS and an evaluation of whether internal auditors apply the Code of Ethics. The programme also assesses the efficiency and effectiveness of the internal audit activity.


In response to a question, regarding internal audits undertaken in relation to the Pension Fund and the potential for ‘ ghost’ pensioners in the pension fund, the CIA explained that Internal Audit would always include a number of pensions audits within the annual risk based internal audit plan due the inherent risk.  All audit findings are reported to the Audit and Governance Committee, however the CIA was currently in discussion with the Head of Pensions, to discuss the Pensions Committee assurance arrangements in place and any enhancements that may need to be implemented.


In addition, the CIA explained that internal audit continues to support the National Fraud Initiative which is a biennial data matching exercise administered by the Cabinet Office. Example data sets in relation to pensions include matching death data and pension payments, although in many cases were already known to the Pensions  ...  view the full minutes text for item 7.


Internal Audit Progress Report 2019/20 pdf icon PDF 50 KB

The Committee is asked to note the amendments to and progress against the 2019/2020 Internal Audit Plan.

Additional documents:


Theresa Mortimer, CIA presented the report which informed members on the progress of the internal audit activity in relation to the 2019/2020 Internal Audit Plan and provided a progress report on the internal audit outcomes from the period October to December 2019 including the opinions provided on risk and control. 


A graphical summary of the opinions provided to date on the effectiveness of risk identification and control was provided showing an overall satisfactory and above rating of 60% on control and 85% on risk.  The CIA explained the main contributing factor to the high limited assurance percentage (40%) was due to the number of GFRS audit reports having a limited assurance opinion on control. 


Members noted there were three limited assurance opinions on control during this period. The limited assurance opinions on control related to:


           Unregulated Placements (Fostering), key issues related to evidence to support / verify processes had been undertaken was not always available, authorisation processes needed to be enhanced and timelines in completing viability assessments must improve to be compliant with relevant regulations;


           IT Disaster Recover (ITDR) (follow up audit) whilst improvements had been made further work was still required to provide assurance that all key systems and services were recoverable within acceptable timescales; and


           Section 17 spends related to children requiring support which included accommodation and subsistence amongst a range of other services.  The key issues related to ensuring that practices were consistent across all localities and that funding/support was only provided when necessary, and after appropriate authorisation. In addition, there were some areas of spend that exceeded the thresholds, as required in Accounting Instructions for obtaining quotations or completing tendering exercises.


A member commented that the satisfactory rating on risk for ITDR was generous given that it was an essential process.  The CIA explained that the risks were known by the service hence the satisfactory grading, however the controls were not fully in place to manage them, hence the limited assurance opinion on control.  In response to a question, members were advised that there were back up processes in place and that the backup data was now stored off-site. 


Julie Rzezniczek, Director of Children’s Safeguarding and Wendy Williams, Assistant Director for Integrated Children and Families were present at the meeting and explained that unregulated placements related to family and friend placements, as in terms of cost this was the most economical method.  As such an access to resource panel had been established and this encouraged managers to plan in advance rather than retrospectively. Members were advised that a standard amount of money was now in place under Section 17 for placements and the service was working in conjunction with Health.   The Director of Corporate Resources explained that this didn’t just apply children it applied to adults too, as it was a question of what could be done to make things better. 


The CIA referred members to Page 157 of the report, which gave an update on the Gloucestershire Fire and Rescue Service  ...  view the full minutes text for item 8.


Annual Governance Statement Improvement Plan 2018/19 pdf icon PDF 49 KB

The Committee is asked to review and consider the actions taken to address the governance improvement areas identified.

Additional documents:


Theresa Mortimer, Chief Internal Auditor (CIA) presented the report.  The report provided assurance to the Audit and Governance Committee that the improvement 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.


The Committee were advised the key improvement areas were identified to further enhance the governance arrangements and documented within the Annual Governance Statement (AGS) action plan.  These were:


1.     Future Financial Sustainability;

2.     Ofsted Inspection of Children’s Services;

3.     Gloucestershire Fire & Rescue Service (GFRS); and 

4.     The recruitment and retention of employees in hard to fill, critical positions. 


Members were referred to page 195 onwards of the report, which detailed the position against each action, as at December 2019.  The CIA advised that the annual review of corporate governance was currently being undertaken and that any key governance improvement actions identified will be reported, as part of the Annual Governance Statement 2019/2020, to the July Committee.


The Director of Corporate Resources referred to the recruitment and retention of staff.  He added there were was a mixed picture across the organisation which was compounded by the fact that salary levels were low in Gloucestershire, it had been necessary to increase salaries in order to attract staff especially in Highways and Legal Services.  It appeared that we were moving out of austerity, however there was not enough money available to do what was necessary and the challenge going forward was to retain the skills and expertise of staff.  Members noted that staff morale was generally positive




That the report be noted.