Agenda and minutes

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Venue: Committee Room 1, Council Offices, Llangefni. View directions

Contact: Ann Holmes 

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 Previous Meeting pdf icon PDF 350 KB

To the minutes of the previous meeting of the Audit and Governance Committee held on 4 December, 2018.

Minutes:

The minutes of the previous meeting of the Audit and Governance Committee held on 4th December, 2018, were presented and were confirmed as correct.

 

Arising thereon –

 

           The Head of Audit and Risk confirmed that the North Wales Chief Auditors Group met in January, 2019 as scheduled; the Group is now working on a self-assessment that can be used across North Wales to assess Audit Committees’ compliance with CIPFA’s new guidance on the role of Audit Committees in Local Authorities and the Police which has extended the scope of audit committees. Members of the Committee will therefore be receiving a questionnaire shortly to obtain their views on where they feel the Committee is at currently.

 

           The Head of Audit and Risk tabled information on the reimbursements made to operators for concessionary travel for each of the years from 2014/15 to 2017/18 as requested by the Committee at its previous meeting when considering the Concessionary Travel Fraud Internal Audit review (following a publicised case of fraud against Gwynedd Council). The Officer said that she had also contacted Welsh Government to seek its views on whether concessionary travel payments had varied across Wales following the fraud. Although the Welsh Government’s Auditor did not confirm that that was the case, the data shows that there has been a subsequent reduction in concessionary travel payments. As a follow-up to the fraud, North Wales Police and Welsh Government intend to hold a workshop in North Wales to which each Council’s Chief Audit Executive is invited with the aim of looking at areas of fraud that can be addressed generally across public services and more specifically, concessionary travel.

 

           The Head of Audit and Risk tabled information about the position of Councils in Wales with regard to school meals income collection/school meals debts for 2017/18 which the Committee had also requested at its previous meeting. The information was derived from a BBC news piece on school dinner debts in Welsh Councils. The Officer said that although the article refers to the majority of councils in Wales, Anglesey is one of the councils omitted because it is not able to give a total accurate arrears position at present due to the fact that there are two systems in operation with some schools operating on a cashless basis whilst others are not. It is envisaged that all the Council’s schools will have transferred to the new system by September thereby enabling the Council to provide a reliable figure for school dinner arrears at that time.

 

The Head of Function (Resources)/Section 151 Officer confirmed that some schools currently record school dinner arrears on individual registers in classes; some calculate the sum total on a summary form; some are part cashless, part cash whilst others are completely cashless meaning there are different versions of the system each holding different pieces of information. The objective is to reconcile those pieces of information into one global arrears figure bearing in mind also that the figure changes on a daily  ...  view the full minutes text for item 2.

3.

Corporate Health and Safety Annual Report 2017/18 pdf icon PDF 496 KB

To present the Annual Report for 2017/18.

Minutes:

The Corporate Health and Safety Annual Report for 2017/18 was presented for the Committee’s consideration.

 

The Environmental Health Operations Manager summarised the main considerations to be drawn from the report as follows –

 

           Significant work has been carried out to revitalise Health and Safety within the Council which has involved Senior Officers, Human Resources and Corporate Health and Safety. The development of a new Corporate Health and Safety Policy clarifying roles and responsibilities for all stakeholders within the Council has been the key work stream at a senior level. In addition, the revised role of Health and Safety Co-ordinators to being more proactive in improving health and safety is a significant change in the arrangements.

           For 2017/18, a total of 1322 incidents was recorded which is a reduction of 111 from the number of incidents in the previous year. A total of 249 employee related incidents were recorded which is 46 fewer than for the previous year. An analysis of the incidents is provided in the report and where trends or patterns have emerged, work has been done to reduce the risk. This should have helped reduce the number of incidents and is a continuous process.

           A total of 20 incidents were reported to the Health and Safety Executive (HSE) as required by RIDDOR (Reporting of Injuries, Diseases and Dangerous Occurrences Regulations) with the HSE being provided with a report on each incident. No follow-up action was taken by the HSE indicating that it was satisfied with the work done to prevent reoccurrence.

           A total of 92 short training courses on a range of health and safety subjects were provided during the year which were attended by a total of 892 members of staff.

           Partnership work was carried out between the six North Wales Corporate Health and Safety teams with information being provided by the Welsh Local Government Association to assist with Health and Safety work streams. Gwynedd Council has provided Occupational Health and Training support.

           Information to assist the HSE has been provided. Although there were no interventions by the HSE in 2017/18, the Corporate Health and Safety team carried out 336 proactive interventions to assist with Health and Safety issues. A monthly Health and Safety bulletin was also introduced to raise awareness of health and safety issues within the Council.

           A Corporate Health and Safety Action Plan has also been developed to further improve Health and Safety standards within the Council.

 

The Committee considered the information and made points as follows –

 

           The Committee noted that the overall message from the report is positive and reflects an improving Health and Safety culture at the Council; the Committee welcomed the greater prominence and visibility given to Health and Safety within the Council along with the actions taken to place Health and Safety on a sound footing.

           The Committee noted that although the total number of incidents has reduced from the previous year, the number of physical assaults (client and pupil  ...  view the full minutes text for item 3.

4.

Annual Audit Letter 2017/18 pdf icon PDF 166 KB

To present the Annual Audit Letter for 2017/18.

Minutes:

The Annual Audit Letter for the Isle of Anglesey County Council for 2017/18 was presented for the Committee’s consideration. The Letter confirmed that on 28 September 2018, the Auditor General issued an unqualified audit opinion on the Council’s financial statements confirming that they present a true and fair view of the Council’s financial position. The key matters arising from the audit were reported to the Audit Committee’s September 2018 meeting.

 

The Committee noted the Audit Letter and noted also that it comments on the financial challenges which the Council is facing in seeking to set a balanced budget against a backdrop of diminishing general fund balances and that it refers specifically to demand pressures in Children and Adults’ Social care as key drivers of the £3.3m deficit which the Council is projecting on the provision of services in 2018/19. In light of this the Committee sought clarification of the following –

 

           Whether the Health Service contributes towards the cost of children’s care placements or is asked to do so.

           Whether the Authority is seeking a long-term resolution to the shortage of children’s placements locally by increasing the capacity on the Island thereby reducing the use of out of area placements which account for a large proportion of the expenditure on Children’s social care.

 

The Chief Executive said the Authority has specific responsibilities in relation to safeguarding and promoting the welfare of children whom it looks after; over the past three years the Authority has worked hard to ensure that the services it provides for its looked after children are of the highest quality with significant improvements having been made in that time. There are however instances where the needs of a looked after child are also health related, and in those cases the Authority does engage with the Health Service.

 

The Officer said that the Audit Letter also highlights the Council’s diminishing General Fund balances as a risk and that it observes that it is not sustainable to rely on reserves to support the ongoing cost of demand led care/Children’s Services. The Officer added that the risk posed by demand pressures on Children and Adults’ Social care budgets is currently an issue for all local authorities in Wales and is not unique to Anglesey.

 

With regard to addressing the shortage of placements locally, the Leader of the Council said that the Authority has received Executive approval both for the Small Group Homes Model of care which entails the Council utilising appropriate dwellings from its own housing stock to provide accommodation for up to 2 looked after children and for an enhanced Foster Carers’ support package which is intended to facilitate the recruitment of Foster Carers. Whilst these measures will bring savings in the long-term by reducing the use of distance placements/private Foster Carers there will always be children in the Authority’s care whose needs are such that they require specialist placements that are not available in-county. The Welsh Government has launched a £100m Health and Social Services Transformation  ...  view the full minutes text for item 4.

5.

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 which provided an update on Internal Audit’s latest progress with regard to service delivery, assurance provision and reviews completed was presented for the Committee’s consideration.

 

The Head of Audit and Risk highlighted the main points as follows –

 

           That one audit review report was finalised during the period relating to IT Cyber Security which resulted in a Reasonable Assurance opinion (the Committee was provided with a copy of the full report).  Although the review concluded that overall the Council has a number of effective operational controls in place to manage the risk to cybersecurity and to prevent and reduce the impact to Council Services, systems and information of malicious, external attacks, it also identified that a lack of proactive monitoring of the extent and nature of current and emerging cyber threats faced by the Council could compromise success in this area. A total of five issues/risks were raised and an Action Plan to address those issues has been agreed with Management.

           That one follow-up review was finalised during the period which was a third follow –up review of Logical Access and Segregation of Duties. A review of logical access and segregation of duties controls was undertaken initially as part of the Annual Internal Audit Plan in 2014/15; this resulted in a Red rating with 14 recommendations and one suggestion being made. A first follow-up review in January, 2015 again resulted in a Red rating and found that 12 recommendations remained outstanding. A second follow-up review took place in December 2017 which confirmed that 5 recommendations remained unaddressed. Consequently, this review resulted in a Limited Assurance opinion in accordance with the new audit approach. In December 2018, a third follow-up review was undertaken. This confirmed that from five issues/risks outstanding, two have been addressed and three - which relate to segregation of duties in Payroll - are in the process of being addressed.

 

The payroll section is currently undergoing a restructure. Once the Northgate project is finished, the new structure will be implemented. The first round of consultations on the new structure has just taken place and will progress during January, 2019. Once implemented in full, the Accountancy Service Manager is confident that this will address the remaining issues/risks originally raised. Although progress has been made, taking consideration of the results of the follow-up review, the assurance level of the report remains as Limited Assurance with a further follow-up planned for July, 2019.

           That two reports with a Limited Assurance rating are scheduled for a follow-up review before the end of the financial year – Child Care Court Orders under the Public Law Outline and Payment Card Industry Data Security Standard Compliance. Both follow up reviews were in progress at the time of the drafting of the report and it can be confirmed that since writing the update the follow-up review of the Child Care Court Orders under the Public Law Outline audit has been finalised and has been  ...  view the full minutes text for item 5.

6.

Outstanding Internal Audit Issues and Risks pdf icon PDF 769 KB

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

Minutes:

The report of Head of Audit and Risk providing an update on the status and detail of the outstanding risks that Internal Audit has raised as at 27 January, 2019 was presented for the Committee’s consideration.

 

The Head of Audit and Risk reported that the graph at 3.4 of the report shows that the Council has been steadily improving is performance with regard to addressing issues and risks raised by Internal Audit with the overall implementation percentage at 93%.A slight dip in performance in addressing High/Red/Amber issues and risks from 93% in Quarter 3 to 87% in Quarter 4 to date is attributable to several issues/risks becoming due in December for the Learning Service which coincided with a change in staff responsible for updating the 4action system. As at 27 January, 2019, no High risks were outstanding; 7 Medium risks were outstanding and 12 Low risks and, from the previous audit system, 1 Red risk was outstanding, 18 Amber risks, 18 Yellow risks and 3 Green risks. Details of the outstanding risks/issues were provided in Appendix A to the report.

 

The Officer said that many of the recommendations that remain within the system were made under the previous Internal Audit administration and system and those may not be as relevant to the new system/approach. Heads of Service have been advised to postpone the requirement to keep recommendations updated until the new system is fully implemented pending the resolution of some software issues. Therefore, rather than undertaking a data cleansing exercise with regard to existing data, a decision has been taken with the Section 151 Officer’s approval to start anew. Issues and risks that have been raised since the new audit approach was introduced will be inputted into the new system. The Officer confirmed that the recommendations relating to the Child Care Court Orders under the Public Law Outline which are included in Appendix A have now all been addressed. It is anticipated that Internal Audit will be able to provide a report based on the new system to the Committee’s July meeting.

 

The Committee noted that an Amber risk in relation to Housing Rents – Readiness for Universal Credit remains outstanding and that the risk arises from the Housing Rents Orchard system not being up to date with the current recovery process. The Committee sought clarification of whether having identified the risk, steps are being taken to address the issues arising given that the longer they remain unactioned the greater the implications for the Council in terms of the income it should be collecting as part of rent arrears recovery.

 

The Head of Audit and Risk said that the Service would look at this particular issue as part of the current audit of Welfare Reform and that she would update the Committee at its next meeting.

 

It was resolved to note the Council’s progress in addressing the outstanding Internal Audit recommendations and issues/risks raised since April 2014 as reflected in the report and in the oral update provided by the  ...  view the full minutes text for item 6.

7.

Treasury Management Strategy Statement 2019/20 pdf icon PDF 1 MB

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

Minutes:

The report of the Head of Function (Resources)/Section 151 Officer incorporating the Treasury Management Strategy Statement for 2019/20 was presented for the Committee’s consideration. The report set out the Council’s proposed approach to investment and borrowing arrangements for 2019/20 in light of current and forecasted economic conditions.

 

The Head of Function (Resources)/Section 151 Officer reported on the main points of the Strategy as follows –

 

           That in setting the Treasury Management Strategy, consideration must be given to the economic situation as this has an impact on investment rates, the cost of borrowing and the financial strength of counterparties. The economic outlook is set out in detail in Appendix 3 to the report with the main points summarised in section 3.1. The main message is that increases in interest rate levels are expected to be gradual and minimal over the course of the next few years with the returns on investment also remaining low.

           The Council’s current external borrowing position is set out in Table 2 of the report which provides a summary of the Council’s current outstanding loans.

           One of the main functions of Treasury management is the funding of the Council’s capital plans. The Council’s capital programme for 2019/20 through to 2021/22 is set out in Table 3 of the report which also notes how the capital programme is to be funded. An important factor to consider is the impact of borrowing on the Council’s Capital Financing Requirement which calculates the Council’s underlying need to borrow in order to finance capital expenditure. Capital expenditure will increase the CFR but only by the sum that is not funded from capital grants, receipts, reserves or revenue. The CFR will also reduce annually by the sum of the Minimum Revenue Provision (MRP) which is a charge made to the revenue account each year to ensure that the Council is able to repay debt as it falls due. The impact of the Council’s capital expenditure plans and the MRP charge on the CFR and the level of external and internal borrowing (i.e. borrowing from the Council’s own cash balances) is shown in Table 4 of the report.

           The Council continues to maintain an under borrowed position. 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 over the medium term the returns on investment are expected to continue to be below long-term borrowing rates. Consideration will be given to debt re-scheduling having regard to the factors outlined in section 6.5.2 of the report.

           The Council will take a flexible approach to the choice between internal and external borrowing. The Council has been making use of its own cash funds to finance capital expenditure in order to minimise interest payments by deferring the need to borrow externally. However, the ability to externally borrow to repay the reserves and balances if needed is an important part of the strategy. The pros and cons  ...  view the full minutes text for item 7.

8.

Internal Audit Strategy and Annual Plan 2019/20 pdf icon PDF 787 KB

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

Minutes:

The report of the Head of Audit and Risk incorporating the Internal Audit Strategy and Annual Plan for 2019/20 was presented for the Committee’s consideration.

 

The Head of Audit and Risk reported on the main points as follows –

 

           That since April, 2017 the Internal Audit Service has adopted a fully risk-based approach to its work with further efficiencies having been achieved by also adopting lean audit which is a methodology based on Systems Thinking.

           That traditionally, auditing was mostly focused on evaluating the past and ensuring compliance. Compliance is Management’s responsibility with Internal Audit providing assurance on the appropriateness and effectiveness of the Council’s system of internal control as implemented by Management. Specifically, the Internal Audit Service will be providing global assurance to the Committee and senior management on the effectiveness of internal governance and risk processes and providing assurance in support of the Annual Governance Statement.

           That there are also other sources that can be used to provide assurance that risks are being effectively managed. The three lines of defence model (as described in the report) is a framework that can be used to bring these sources of assurance together and will give assurance to Members, sector regulators and external auditors that appropriate controls and processes are in place and are operating effectively. The Service’s new risk management software (4risk) provides a facility to record the various three lines of assurance in one place, which will be rolled out in 2019/20.

           That in order to provide a flexible approach and to take account of changes in the organisation and the risk environment, the Internal Audit Service has aligned its work with the corporate risk register and will meet with senior management to discuss their latest risks, concerns and requirements. In this way, the Service will be fully up to date with, and aware of, emerging issues and will be able to focus its resources in areas of greatest priority and risk.

           Therefore, instead of being a fixed annual plan, the Audit Plan for 2019/20 will change during the year following changes to the corporate risk register. As a result, the Strategy does not provide a definitive list of the projects that the Service will carry out during 2019/20 but provides the audits that the Council has identified as its main priorities currently as listed in Appendix A to the report.

           That in accordance with the agreed Internal Audit Charter, all risks/issues included within audit reports with Limited or No Assurance ratings (according to the definition of assurance ratings set out in Appendix B to the report) will be followed-up.

           A new shorter one-page report will aid a new bilingual reporting protocol, which will also for the first time enable the Service to provide final agreed internal audit reports to the Executive Portfolio Holders and members of this Committee thereby increasing transparency and accountability and improving the quality of assurance provided. Agreed action plans will be recorded in a separate operational document  ...  view the full minutes text for item 8.

9.

2018/19 Closure of Accounts Timetable pdf icon PDF 440 KB

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

Minutes:

The report of the Head of Function (Resources)/Section 151 outlining a proposed amendment to the 2018/19 accounts approval process was presented for the Committee’s consideration.

 

The Head of Function (Resources)/Section 151 Officer reported that changes to the statutory timetable for the publication of the draft and final Financial Statements under the Accounts and Audit (Wales) Regulation as amended by the Accounts and Audit (Wales) (Amendment) Regulations 2018 mean that for the 2018/19 and 2019/20 financial years the draft financial statements must be signed and published by 15 June (as opposed to 30 June in previous years) and the final audited financial statements must considered, approved and published by 15 September (as opposed to 30 September previously). This is in preparation for the 2020/21 financial year and beyond when the date for the publication of the draft accounts is further brought forwards to 31 May with the audited accounts to be published by 31 July. The timetable at 2.2 of the report sets out the key dates in the accounts preparation, publication and committee approval process as they applied to the 2017/18 financial year and as they will apply following the changes, to 2018/19, 2019/20 and then 2020/21 onwards. The revised timetable will be very challenging, and in particular completing the draft final accounts by 14 May, only 6 weeks after the end of the financial year, will be extremely difficult for the staff concerned. In addition, completion by mid-May could compromise the accuracy and quality of the draft financial statements and could result in a greater level of external audit work and subsequent post-audit adjustments.

 

The Officer said that in light of the shortened timetable for the completion of the draft financial statements and the practical difficulties it will bring, and given that the Accounts and Audit Regulations (Wales) 2014 and the associated CIPFA Code of Practice do not require formal approval of the draft financial statements by a Committee of the Council before they are published and presented for audit,  it is proposed that the draft financial statements are signed by the Section 151 Officer (the responsible Financial Officer) and presented for audit before they are considered by the Audit and Governance Committee. The proposed change would allow additional time for the completion of the draft financial statements. With reference to the Council’s committees calendar, a meeting of the Audit and Governance Committee has been scheduled in the calendar for both June and July, 2019 with the June meeting being for the express purpose of approving the 2018/19 draft financial statements. In light of the proposal that the draft financial statements be signed by the Section 151 Officer before they are brought to the Committee, the draft statements could instead be presented to the Committee’s July meeting. 

 

The Committee in supporting the change and revised timetable proposed by the Section 151 Officer, noted the amendments to the statutory timeframe with reservations believing that the changes put Finance Departments under pressure to prepare and complete the draft financial statements in  ...  view the full minutes text for item 9.

10.

Forward Work Programme pdf icon PDF 336 KB

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

Minutes:

The Committee’s Forward Work programme was presented for review and comment.

 

The Head of Audit and Risk reported that in light of the decision that the draft financial statements be presented to the Committee’s July meeting making it unnecessary to convene a meeting of the Committee in June, items scheduled for consideration at the June meeting will be re-scheduled to July or where possible, they will be brought forwards to the Committee’s April meeting.

 

It was resolved to note and accept the Forward Work programme subject to the change outlined by the Head of Audit and Risk.

 

ADDITIONAL ACTION: Head of Audit and Risk to update the Forward Work Programme accordingly.

11.

Exclusion of the Press and Public pdf icon PDF 119 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 that under Section 100(A)(4) of the Local Government Act,1972, the press and public be excluded from the meeting for the discussion on the following item as it involved the disclosure of exempt information as defined in Schedule 12A of the said Act and in the Public Interest Test as presented.

12.

Corporate Risk Register

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

Minutes:

The report of the Head of Function (Resources)/Section 151 Officer incorporating the Corporate Risk Register was presented for the Committee’s consideration.

 

The Risk and Insurance Manager reported that a new software system – 4risk has been introduced to record and monitor risks, the measures in place to control these risks and any actions that are to be introduced to mitigate those risks further. Although not currently populated within the 4risk system, work is being currently undertaken to record assurance against existing controls. Three lines of assurance will be recorded on 4risk namely– first line of assurance – front line action by the control owner; second line of assurance – overall management control, financial control; third line of assurance provided by internal, external audit and other regulatory bodies. This will allow the effectiveness of existing controls to be assessed and assurance provided that the residual risk has not been over or underestimated.

 

The Officer said that the version of the Corporate Risk Register presented reflects the comments of the Senior Leadership Team following a review of the register. The format of the register includes the Lines of Assurance that will be populated as risks are reviewed and audited.

 

The top Red risks to the Council are highlighted in section 7 of the report. Apart from the addition of risk YM40, there have been no other changes to the Corporate Risk Register. The Officer clarified that risk YM35 is no longer classified as a risk and is instead an issue which is being addressed and as such will be removed from the register.

 

The Committee considered the report and made the following points –

 

           The Committee noted that discounting YM35, the register contains 39 risks which it considered excessive at a corporate level making focusing on the really high level risks difficult. The Committee suggested that some risks would be more appropriately managed at departmental level.

 

The Risk and Insurance Manager said that priority is given to risks where the residual risk is Red and Amber. The Officer said that there are two approaches that could be taken in formulating the risk register – the one where the register contains generic risks only which are less accurately described but means there are fewer risks on the register, or the other where the risks are more detailed and as such are more numerous but are also more easily audited against. The Authority has opted for the detailed version but it is subject to review.

 

The Head of Audit and Risk said the 4risk system provides a better reporting tool which can focus the Senior Leadership Team’s scrutiny on the most important risks and which also allows them to be grouped into themes so that risks in relation to a specific area can be found quickly. A detailed version of the risk register is more helpful from an Internal Audit perspective.

 

           The Committee noted that there are areas where the inherent risk and residual risk levels are the same even after mitigation/reduction  ...  view the full minutes text for item 12.