Agenda and minutes

Audit and Governance Committee
Tuesday, 11th February, 2020 2.00 pm

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

Contact: Ann Holmes 01248 752518 

No. Item


Declaration of interest

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


No declaration of interest was received.


Minutes of the Previous Meeting pdf icon PDF 322 KB

To present the minutes of the previous meeting of the Audit and Governance Committee held on 3 December, 2019.


The minutes of the previous meeting of the Audit and Governance Committee held on 3rd December, 2019, were presented and were confirmed as correct.


Arising thereon –


           Item 2 – IoACC Annual Audit Letter 2018/19 - The Committee sought an update on the position with regard to the finalisation and receipt of the Wales Audit Office’s report on the financial sustainability of the Council the draft findings of which were expected to be made known to the Council by the end of the previous calendar year. The Committee was advised by the Director of Function (Resources)/Section 151 Officer that the Wales Audit Office has undertaken work to assess the financial sustainability of all 22 local authorities in Wales; it was understood that each authority would be provided with initial verbal feedback and that subsequently local reports for the individual authorities would be issued. A draft national summary report of the findings is also expected to be issued around April, 2020. The Officer confirmed that hitherto the Council in Anglesey has not received feedback from the exercise.

           Item 6 - Internal Audit Update (resources available to the Internal Audit Service) - The Committee sought an update on the staff position of the Internal Audit Service. The Director of Function (Resources)/Section 151 Officer confirmed that the Internal Audit Service’s permanent staff structure includes 5 full-time members of staff (Head of Audit and Risk, Principal Auditor and 3 Senior Auditors) and has been supplemented recently by a temporary secondment from the Accountancy Service. Currently there are two Senior Auditor vacancies – one due to a secondment to the Accountancy Service and the other due to a permanent appointment to the Accountancy Service – meaning the Service’s staff level at present stands at 3.6 against an establishment level of 5 full time staff. The Officer in confirming that an advertisement for one full time permanent Senior Auditor post and one full time temporary Senior Auditor post had been issued, said that due largely to enforced cutbacks Internal Audit teams across local authorities have reduced in size and  the nature of the Internal Auditor post has also changed with fewer entrants at the lower assistant level. Recruitment is therefore focused on attracting fully qualified and experienced internal audit staff and notwithstanding this Authority has lately been successful in this respect, the process can be challenging. The alternative would be to reconsider the Internal Auditor posts with a view to appointing at a lower level and provide on the job training; and although the “grow your own” model is one that is favoured by the Authority the drawback of this approach would likely be felt in reduced output by the Internal Audit team in the short-term.

           Item 7 – Review of the Audit and Governance’s Terms of Reference – The Committee sought an update on the position with the provision of training on governance matters which has been identified by a session of the 22 chairs and heads of audit in Wales  ...  view the full minutes text for item 2.


Treasury Management Practices pdf icon PDF 1 MB

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


The report of the Director of Function (Resources)/Section 151 incorporating a statement on the Authority’s Treasury Management Practices in compliance with the CIPFA Code of Practice on Treasury Management (2017) was presented for the Committee’s consideration.


The Finance Manager reported that the report is presented to ensure that the Council is implementing best practice in accordance with the CIPFA Code of Practice for Treasury Management. The Code recommends that the Council documents its treasury management procedures as Treasury Management Practices (TMPs). Section 7 and schedule 2 of the Code include suggestions on what should be included in authorities’ TMPs. The Council’s current TMPs were completed and approved in 2016.These have been reviewed and updated and they endorse many of the suggestions provided by the CIPFA Code as well as  including a section  (TMP13) on non-treasury investments held by the Council as required by the revised CIPFA Treasury Management Code. The Council’s non treasury management investments are the investment properties which are managed by Property Services.


The Officer provided a brief overview of the 13 listed TMPs and referred to the newly added TMP13 on non-Treasury Management Investments explaining what this practice refers to and highlighting how the other TMPs - with TMPs 1, 2, 5, 6 and 10 being the most relevant - apply to non-treasury management investments. The 2018/19 Statement of Accounts shows that the Council’s investment portfolio was valued at £6m which are mainly industrial units. Both in 2017/18 and 2018/19 there was net income stream from the Council’s investment portfolio.


In response to questions arising on the report, the Committee was advised –


           That unlike in England where local authorities are invested with a general power of competence that allows them to invest financially in assets such as shopping centres, hotels and cinemas both within and outside their authority area, councils in Wales do not have such powers and would have to use other economic development powers if they were minded to pursue such investments which would in any case be limited to their own areas. The Council’s investment property portfolio does include commercial and industrial units as well as the odd retail property but it is not invested in any larger retail assets.

           That the Council does not currently have an approved overdraft facility with its bank. The Council regularly reviews and manages its cash flow requirements so that it does not become overdrawn. Also, the banking arrangements have been implemented so that all bank accounts under the corporate contract with NatWest are taken into account when determining the Council’s overall balance. This means that if any account is overdrawn, if the other accounts are in credit to the amount overdrawn or more the Council will not be in an overdraft position. In addition, should it be required the Authority is able to borrow at short notice with the PWLB - such a loan whether short term or longer term would cost less than an overdraft. The Committee took assurance from the fact that  ...  view the full minutes text for item 3.


Treasury Management Strategy Statement 2020/21 pdf icon PDF 1 MB

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


The report of the Head of Function (Resources)/Section 151 Officer incorporating the Treasury Management Strategy Statement for 2020/21 was presented for the Committee’s consideration. The report set out the Council’s proposed approach to investment and borrowing activities in the forthcoming financial year in light of current and forecasted economic conditions.


The Finance Manager in confirming that there are no proposed amendments to the core principles and policies of the 2019/20 Statement highlighted the main points of the 2020/21 TM Strategy as follows -


           The wider context to the Treasury Management Strategy. Setting out the Strategy cannot be undertaken in isolation, and 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. A full summary of the economic outlook is provided at Appendix 3 to the Statement and the main points are summarised in section 3.1. Uncertainty surrounding Brexit and its impact on the UK and Eurozone economy is likely to continue and investment returns are expected to remain low during 2020/21 with little increase in the following two years.

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

           The Council’s capital programme for 2020/21 to 2022/23 as set out in Table 3 of the report and how this will 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. Regulations require that the Council approves a MRP Statement in advance of each financial year – the policy for 2020/21 is set out in Appendix 6 and is unchanged from that for 2019/20 following extensive revision in 2018. The impact of the Council’s capital expenditure plans and the MRP charge on the CFR and the level of external and internal borrowing is shown in Table 4 of the report.

           The Council’s borrowing strategy and the factors impinging thereon as set out in section 6 of the Statement. The Council continues to maintain an under borrowed position meaning that the Council’s capital borrowing need (CFR) has not been fully funded with loan debt as cash supporting the Council’s reserves, balances and cash flow has been used as a temporary measure. Whilst this approach is prudent as investment returns are low and counterparty risk is still an issue to be considered, the ability to externally borrow to repay the reserves and balances if needed, is important. Table 4 of the Statement indicates that  ...  view the full minutes text for item 4.


Internal Audit Progress Update pdf icon PDF 967 KB

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


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 Principal Auditor highlighted the main points as follows –


           That two reports were finalised during the period (copies of which were made available to the Committee) – Managing the Risks of Brexit and Business Continuity Planning both of which resulted in a Reasonable Assurance opinion. No issues/risks were raised on the former whilst four issues/risks for management attention were raised on the latter three of which are classed as “Major” due to the potential impact of the risk in this area. Notwithstanding, the outcome of the Internal Audit review is mainly positive and an action plan to address the issues raised has been agreed with Management and will be monitored through Internal Audit’s action tracking system.  

           Four follow-up reviews have been finalised in the period - Direct Payments (first follow-up – Reasonable Assurance); Schools Information Governance Health Check (first follow-up – Reasonable Assurance); Governance Review at Ysgol Kingsland (first follow-up – Substantial Assurance) and Primary Schools Income Collection (first follow-up – Limited Assurance). With regard to the latter although much work has been undertaken and progress made in addressing the issues/risks originally raised, in many cases it has been insufficient to address the issue/risk. Unrealistic timescales coupled with staffing issues across a number of departments have meant that a number of actions are still outstanding. In addition the Primary Senior Manager post will need to approve the new process and this post is yet to be filled. The follow up review also found that some of the management actions originally proposed even if fully implemented would not wholly address the issue/risk raised. Further actions have therefore been discussed and agreed with Management. Consequently the assurance rating has remained Limited; the action plan will be revisited by Internal Audit in September, 2020.


The Director of Education, Skills and Young People provided the Committee with an update on progress confirming that although the second follow-up is not scheduled until September, 2020 the Service will in the meantime be actively addressing the issues raised. Steps have and continue to be taken to respond to the Internal Audit review in order to improve  the assurance rating. In response to questions about the vacant Primary Senior Manager post hampering progress and whether to avoid delay, the next Officer in line would then be expected to undertake the necessary actions, the Director of Education as well as confirming that an appointment to the post has now been made, clarified that in the period since his own appointment he had sought to build a team with a particular focus on sharing a leadership mind-set so as to avoid “putting all the Service’s eggs in one basket” and to ensure therefore that there is joint approach to different elements of the service. Three new senior lead positions have been established  ...  view the full minutes text for item 5.


Draft Internal Audit Strategy 2020/2021 pdf icon PDF 379 KB

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


The report of the Head of Audit and Risk incorporating a draft Internal Audit Strategy for 2020/21 was presented for the Committee’s consideration and review.


The Principal Auditor reported that the draft IA Strategy is presented to the Committee for comment and to determine whether it meets the Council’s assurance requirements. Following its evaluation by this Committee and the incorporation of any subsequent feedback, the Head of Audit and Risk will present a final Internal Audit Strategy including an Operational Plan to the Audit and Governance Committee for approval at the 21 April, 2020 meeting.


The Officer explained that the Corporate Risk Register has been used to determine the priorities for internal audit activity with the red and amber residual risks on the register being priority areas for Internal Audit review.  Currently, the Corporate Risk Register includes 12 areas where the residual risk has been assessed as red or amber – the top 5 are highlighted in the Strategy. In addition, meetings have been held with the Council Leader, the Senior Leadership Team and all Heads of Service to discuss their views on the proposed areas for review and their specific areas of concern.  Those concerns which reflect areas of potential and/or emerging risks are outlined in the Strategy and will be kept on Internal Audit’s radar and reviewed as proposed.


In considering the report the Committee questioned the omission of an operational plan for 2020/21 as a component of the Strategy. The Principal Auditor clarified that due to the uncertainty around recruitment an operational plan has not as yet been developed. Once recruitment is complete a plan will be developed and kept under review as necessary and it will be adjusted in response to changes in the Council’s business, risks, and operations and programmes to ensure that it remains responsive and relevant.


With regard to areas of concern, the Committee briefly discussed the risks around the rising number of Looked After Children and the increasing complexity of cases which has financial implications for the Council. The Committee was assured by the arrangements in place for Scrutiny and Executive oversight of service expenditure and budget management in this area.


It was resolved to note the Internal Audit Strategy for 2020/21 accepting that the approach and priorities as outlined meet the Council’s assurance needs.




Exclusion of the Press and Public pdf icon PDF 118 KB

To consider adoption of the following:-


“Under Section 100(A)(4) of the Local Government Act 1972, to exclude the press and public from meeting during 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”.


It was resolved 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 Public Interest Test presented.


Corporate Risk Register Update

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


The report of the Head of Audit and Risk incorporating the revised Corporate Risk Register and associated appendices was presented for the Committee’s consideration.


The Risk and Insurance Manager reported that the Senior Leadership Team reviews a small number of risks each month. The frequency with which each individual risk is reviewed depends on the perceived residual risk level; the higher the residual risk level the more frequent the review hence red risks are reviewed monthly, amber risks are reviewed quarterly, yellow risks are reviewed every six months and green risks are reviewed every nine months. The Officer highlighted that as a result of the latest review by the SLT in January, 2020 the following changes/amendments have been made 


           No risks have been closed or removed from the Corporate Risk Register

           One new risk has been added to the register in clarification of the Council’s overall safeguarding responsibilities as opposed to its safeguarding responsibilities in connection with the risk of harm to children and vulnerable adults which remains a separately classified risk.

           That due to changing circumstances and/or increase/decrease in control activity the level of residual and/or inherent risk has changed for YM9, YM11, YM29, and YM40.

           The top (red) risks to the Council have been identified as YM28 (IT related), YM29 (Gypsies and Travellers accommodation needs related), YM40 (Brexit related) and YM41 (Funding related).


In considering the report the Committee discussed whether or not the Coronavirus outbreak should be recognised as a risk within the Corporate Risk Register. The Committee was advised that the risk needs to be evaluated and defined at this stage being mindful that  some aspects may already be covered by current risk planning arrangements e.g. Business Continuity Planning (YM9); the matter will be discussed at the SLT’s next review meeting.


The Committee’s Lay Members also requested an update on the draft Risk Verification Policy which was considered at the last meeting in December, and whether the suggestions which had been offered for ensuring the robustness of the policy had been taken on board. The Director of Function (Resources)/Section 150 Officer confirmed that the proposed policy will be presented for Executive approval on 17 February, 2020 and that the comments made  have been reflected in the policy and methodology. A copy of the Executive report will be provided to the Committee’s Lay Members.


It was resolved to note the amendments to the Corporate Risk register as part of the Council’s arrangements for managing its risks and to take assurance that the Senior Leadership team has recognised and is managing the risks to the achievement of the Council’s priorities.