Agenda and minutes

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Venue: Committee Room 1 - Council Offices

Contact: Ann Holmes 01248 752518 

Items
No. Item

1.

Declaration of Interest

To receive any declaration of interest by any Member or Officer in respect of any item of business.

Minutes:

No declaration of interest was received.

2.

Minutes of the 5 December, 2017 Meeting pdf icon PDF 312 KB

To present the minutes of the previous meeting of the Audit and Governance Committee held on 5 December, 2017.

Minutes:

The minutes of the previous meeting of the Audit and Governance Committee held on 5th December, 2017 were presented and were confirmed as correct.

 

Arising thereon -

 

The Chair confirmed that as determined by the Committee at its December, 2017 meeting, a meeting between himself, Officers and the Committee’s two Lay Members had been arranged to consider how best to facilitate the Lay Members’ role on the Committee. The two Lay Members had indicated at the previous meeting that being provided with all internal audit reports as opposed to those with a Limited Assurance opinion only would help them understand how audit conclusions are reached and opinions given thereby improving the effectiveness of their oversight and scrutiny role. The Chair said that the meeting which took place on 7 February with Mr Dilwyn Evans, one of the Lay Members in attendance had proved useful and informative. The outcome of the meeting was that the current process would remain in place but that the Head of Audit and Risk would look to provide a little more detail on completed audits in the update reports to the Committee.

3.

Internal Audit Update pdf icon PDF 1 MB

To present the report of the Head of Audit and Risk.

Minutes:

The report of the Head of Audit and Risk setting out the work carried out by Internal Audit to 26 January, 2018 was presented for the Committee’s consideration. The report provided a summary of the internal audit reports issued since 17 November, 2017; the outcome of follow up reviews of previous internal audit inspections; implementation of management actions; progress in delivering the Audit Annual Plan for 2017/18 along with the latest position in relation to the planned review of the Audit Committee’s terms of reference.

 

The Head of Audit and Risk reported on the main issues as follows and in doing she confirmed that she had sought to strike a balance between providing the full audit reports which involve more information than the Committee practicably needs for challenge and assurance purposes, and increasing the level of detail about each audit –

 

           That five Internal Audit review reports were finalised during the period covering the areas noted below. All of the reviews resulted in either a Reasonable or a Substantial assurance rating:

 

           General Data Protection Regulations (GDPR) (Reasonable) – 3 moderate level risks raised

           Capital Expenditure (Substantial) – no risks or issues raised

           Housing Rents: Readiness for Universal Credit (Reasonable) – 3 major, 7 moderate and 1 minor risk/issues raised

           Supporting People Programme (Substantial) – no risks or issues raised

           Referral – Payroll Overpayment – an advisory review

 

The Head of Audit and Risk elaborated on the findings for those reviews where risks and/or issues had been raised, the nature and degree of the risks identified, current and/or planned corrective actions, and the rationale for the audit conclusion reached. The Officer referred specifically to the audit review of Housing Rents where 3 major risks had been noted. Notwithstanding, the Officer confirmed that due to the preparatory work undertaken by the Housing Service in readiness for the introduction of Universal Credit, Internal Audit was able to provide a Reasonable Assurance rating for this area.

           That 6 follow up reviews of Limited Assurance reports were finalised during the period with the following outcomes –

 

           Logical Access and Segregation of Duties (Second Follow-Up) – it was concluded that due to the length of time the risks/issues identified by the original audit in 2014/15 and subsequently by the first follow-up review in January, 2015 have been outstanding, the Council has demonstrated little progress in implementing actions agreed to address all the audit recommendations. Therefore, and because of the nature of the risks outstanding which relate to staff acceptance of ICT policies and issues around the separation of duties in the Payroll system, the level of assurance remains as Limited. The Head of Function (Resources)/Section 151 Officer explained that arrangements are in hand to update and integrate the Payroll and HR systems which will allow more tasks to be undertaken electronically and will address the issue of segregation of duties. The upgrade will also link the recruitment process to Payroll electronically thereby doing away with the need for  ...  view the full minutes text for item 3.

4.

Outstanding Internal Audit Recommendations, Issues and Risks pdf icon PDF 766 KB

To present the report of the Head of Audit and Risk.

Minutes:

The report of the Head of Audit and Risk which set out details of all the outstanding internal audit recommendations and risks raised since April, 2014 was presented for the Committee’s consideration.

 

The Head of Audit and Risk reported that as at 26 January, 2018 out of a total of 745 recommendations/risks/issues with a target implementation date of 31 December, 2017 the Council had implemented or addressed 695 or 93% with 50 remaining unimplemented / unaddressed. The percentage performance for addressing High or Red/Amber rated issues was 98%; for Medium and Yellow rated issues it was 94% and for Low and Green rated issues it was 90%. Details of the outstanding issues along with the date each matter was raised were provided in Appendix A to the report.

 

The Committee considered the information presented and it noted that several issues relating to the Housing Benefit and Council Tax Reduction Scheme 2016/17 remain outstanding. The Head of Function (Resources) said that the Housing Benefit Service underwent a restructure during 2017 with the result that the service now has a full complement of staff; it has enhanced supervision arrangements as well as improved feedback on staff performance matters. At the same time, work has been ongoing on improving systems, specifically on integrating electronic benefit claim forms into the Benefit System; there has been some delay with this due to issues with the transfer of data. However, when implemented this change is expected to improve the accuracy of data input. Work is also being done on introducing an electronic document management system which will replace the current system whereby benefit claim forms are filed manually meaning they are more liable to being misplaced. It is expected these improvements will address most of the outstanding internal audit issues raised. The target implementation date has been exceeded because in the case of the electronic document management system, the software is also one that the Planning Service will use to upgrade the planning system albeit the Planning Service is on a different version – the work has involved reconciling the two so that both systems can unfold together. With regard to the missed target date, the process would have required the Housing Revenue and Benefit Manager to inform Internal Audit of the reasons for late implementation and come to an agreement on a revised target date.

 

The Committee having considered the clarification provided by the Officer above, noted and was satisfied by the improvement in performance with regard to implementing internal audit recommendations which the report reflected, and was further assured that Internal Audit is systematically tracking and following up on action to be taken by Management in response to internal audit reports and will report thereon to the Audit and Governance Committee.

 

It was resolved to note the Council’s progress in addressing the outstanding internal audit risks raised since 1 April, 2014.

 

NO ADDITIONAL ACTION WAS PROPOSED

 

5.

External Audit - Performance Work Programme Update pdf icon PDF 184 KB

To present the report of External Audit.

Minutes:

The External Audit update on current and planned Wales Audit Office work was presented for the Committee’s consideration. The report provided information on the status of financial and performance audit work in 2016/17 and 2017/18 as well as the Auditor General’s programme of national value for money examinations.

 

It was resolved to accept the report and to note the status of the External Audit performance work programme as presented.

 

NO ADDITIONAL ACTION WAS PROPOSED

 

6.

Internal Audit Strategy and Annual Plan 2018/19 pdf icon PDF 1 MB

To present the report of the Head of Audit and Risk.

Minutes:

The report of the Head of Audit and Risk incorporating the proposed Internal Audit Strategy and Plan for 2018/19 was presented for the Committee’s consideration.

 

The Head of Audit and Risk reported that the Public Sector Internal Audit Standards (PSIAS) require the chief audit executive to establish risk-based plans to determine the priorities of the internal audit activity, consistent with the Council’s goals. In prioritising resources, Internal Audit is expected to undertake sufficient work to enable the chief audit executive to deliver an annual internal audit opinion for the Council to inform its Annual Governance Statement. Historically, Internal Audit has planned its work on the basis of a three or five year planning strategy. However, the External Audit Quality Assessment undertaken in March, 2017 highlighted that although this planning methodology complied with the PSIAS, consideration should be given to whether this approach is effective given the difficulty of trying to predict what will matter to the Council in three years’ time. The assessor stated that the rate of change in local government suggests a maximum of one-year planning. With this in mind, Internal Audit has adopted a new approach to developing the Annual Plan for 2018/19 using the corporate risk register to determine the priorities for Internal Audit activity whilst also being mindful of the Audit Strategy for 2017/18 to 2019/20. Additionally, meetings were held with the WAO, the Head of Function (Resources) /Section 151 Officer, Head of Function (Council Business) and most Heads of Service to canvass their views on the proposed areas for review. This has resulted in a much more focused, relevant and risk-based plan for 2018/19. The plan is also a dynamic plan and will be reviewed and adjusted as necessary in response to changes in the Council’s business risk, operations and programmes to ensure it remains relevant. Any changes will be reported to the Head of Function (Resources) /Section 151 Officer and to the Audit and Governance Committee.

 

The Committee considered the report and made the following points –

 

           The Committee noted that the Internal Audit service structure is compact and carries no spare capacity. The Committee sought assurance therefore that the service is confident that it has the staff resources to be able to deliver the Audit Plan to target. The Head of Audit and Risk said that the new audit approach and streamline way of reporting will   reduce much of the administrative burden and non-productive days spent. Even if the audit reviews conducted are not in-depth they will be sufficient to identify any substantive or material risks/issues in the area audited; Internal Audit can then decide whether the matters raised require further investigation and can either rearrange the audit and/or modify the work plan to make the accommodation.                                             

           The Committee sought clarification of the process whereby the Committee is able to ensure that timely corrective action is taken by Management to issues raised by Internal Audit. The Head of Audit and Risk said that the Audit and Governance Committee can require  ...  view the full minutes text for item 6.

7.

Treasury Management Strategy Statement 2018/19 pdf icon PDF 1 MB

To present the report of the Head of Function (Resources) and Section 151 Officer.

Minutes:

The Head of Function (Resources)/Section 151 Officer reported that as there has been no significant change in the economic position and since the outlook remains uncertain, the Council’s Treasury Management approach will continue to be based on the following –

 

           The Council will not borrow more than, or in advance of, its needs solely in order to profit from the investment of the extra sums borrowed since the returns on the investment are likely to be lower than the cost of borrowing.

           The Council will maintain a flexible approach to internal and external borrowing having regard for the factors described in section 3.3.1 of the strategy. The Council is at present maintaining an under borrowed position meaning that the capital borrowing need (the Capital Financing Requirement) has not been fully funded with loan debt as cash supporting the Council’s reserves, balances and cash flow has been used instead. This approach is prudent because investment returns are low and counterparty risk is still an issue that needs to be considered. The Capital Financing Requirement (the forecast underlying need to borrow to finance the capital programme) at year end will be £138.1m resulting in the Council being internally borrowed (using Council reserves and balances to help fund the capital programme) by £20.1m by year end.

           Consideration will be given to debt re-scheduling as well as to the potential for making savings by running down investments to repay debt prematurely. Additionally, where possible, the Council will avoid new borrowing to replace maturing external debt and will instead use cash balances.

           The Council’s investment priorities will remain security first, liquidity second and then return. The Council will make investments with counterparties in accordance with the creditworthiness policy set out in section 4.2 of the strategy.

           In terms of updates to the Treasury Management Strategy Statement, the only proposed amendment to the core principles and policies of the 2017/18 Statement is to amend the Minimum Reserve Provision (MRP) Policy so that the MRP charge going forward is consistent for both supported borrowing and unsupported borrowing and is based on the useful economic life of the asset.

           There is also one proposed change to the Authority’s Treasury Management Practices which is to increase the minimum cash balance from £6m to £6.5m.

 

The Committee considered the information presented and made the following points –

 

           The Committee noted the variance between borrowing rates and investment rates. The Committee sought clarification of whether the Council is able to offset the amount it borrows against the amount it has invested in order to reduce the capital borrowed. The Head of Function (Resources) /Section151 Officer said that the majority of the   loans taken out by the Council are fixed amounts over a fixed period with a fixed interest rate which enables it to plan over the long term and provides security against  volatility. At present due to the low interest rates, the preference is to tie into the low rates for the benefit of  ...  view the full minutes text for item 7.

8.

Forward Work Programme pdf icon PDF 333 KB

To present the report of the Head of Audit and Risk.

Minutes:

The Committee’s Forward Work Programme to December, 2018 was presented for consideration and review.

 

It was resolved to accept and to note the Forward Work Programme without amendment.

9.

Exclusion of the Press and Public pdf icon PDF 121 KB

To consider adopting the following:-

 

“Under Section 100(A)(4) of the Local Government Act 1972, to exclude the press and public from the meeting during the discussion on the following item on the grounds that it may involve the disclosure of exempt information as defined in Schedule 12A of the said Act and in the attached Public Interest Test”.

Minutes:

It was resolved to under Section 100 (A) (4) of the Local Government Act 1972, to exclude the press and public from the meeting during the discussion on the following item on the grounds that it involved the disclosure of exempt information as defined in Schedule 12A of the said Act and in the attached Public Interest Test.

10.

Corporate Risk Register

To present the report of the Head of Function (Resources) and Section 151 Officer.

Minutes:

The report of the Head of Function (Resources) and Section 151 Officer incorporating the Corporate Risk Register as reviewed and updated to the end of Quarter 2 2017/18 by the Senior Leadership Team was presented for the Committee’s consideration.

 

The Insurance and Risk Manager reported that the position was as follows at the end of Quarter 2 –

 

           No risks have been removed from the Corporate Risk Register since it was last presented to the Committee in September, 2017.

           There has been no change to the residual risk level of any existing risk since the Corporate Risk Register was last presented to the Committee

           Four new corporate risks have been identified during Quarter 2. Details of these are provided in section 5 of the report.

           The top ranked (Red) risks to the Council are identified as those listed in section 6 of the report.

 

The Officer informed the Committee that the Senior Leadership Team reviewed the Quarter 3 2017/18 position at its meeting held on 12th February, 2018 the outcome of which was as follows –

 

           No new risks were added to the Corporate Risk Register

           No risks were removed from the Register

           Four risks were de-escalated. One of those risks (YM22) remains at Amber level whilst the other three (YM29, YM33 and YM40) have been downgraded from Amber to Yellow. The residual risk level in terms of the likelihood of occurrence has reduced for all four risks.

 

The Committee noted the information presented. The Committee sought assurance that the approach to managing risk YM43 (relating to Children’s Services) remains suitably robust. The Committee was assured that the mitigating actions and the reporting and monitoring arrangements in relation to the identified risk in this service area are robust and ongoing.

 

It was resolved to note the content of the report and to note also that the Committee takes assurance that the risks to the Council’s aims and objectives are being recognised and managed by the Senior Leadership Team.

 

NO ADDITIONAL ACTION WAS PROPOSED