Agenda and minutes

To receive any declaration of interest by any member or officer in respect of any item of business.

No declaration of interest was received.

To present the minutes of the previous meeting of the Audit and Governance Committee held on 19 September, 2018.

The minutes of the previous meeting of the Audit and Governance Committee held on 19th

September, 2018, were presented and were confirmed as correct subject to amending the reference to 31 March, 2017 in the first bullet point under item 8.2 to read 31 March, 2018.

Arising thereon –

•           The Head of Audit and Risk reported that the Audit and Governance Committee’s revised Terms of Reference were endorsed by the Executive on 29 October and will now be presented to the Full Council for approval on 11 December, 2018.

The Committee noted that the new terms of reference extend its responsibilities appreciably; the Committee was concerned that it is not meeting those expectations currently and it sought assurance therefore that it will be able to do all that is expected of it within the schedule of meetings assigned to the Committee over the course of the year.

The Head of Audit and Risk said that the new guidelines issued by CIPFA on the function and operation of Audit Committees in local authority and police bodies have increased their responsibilities meaning that the Committee will have to be provided with the information that will enable it to meet all its oversight responsibilities. It is unlikely that all audit committees are fully compliant with the CIPFA terms of reference at this point in time; the CIPFA guidance also includes a self-assessment of good practice which the Audit Committee will undertake to establish where it is at; whether further training might be necessary or desirable and to assess the reports and papers it is likely to need in future to fulfil its enhanced oversight role and to perform effectively. The Officer said that the new expectations on audit committees in relation to this Committee specifically did not overly concern her as taking on the new responsibilities will be a step by step process with the plan being to introduce the new duties incrementally. In addition, a sub-group of the North and Mid-Wales Auditor Partnerhsip (the Heads of Audit) is looking at the issue in terms of moving audit committees forward to ensure they are doing what is expected of them. A meeting of the sub-group scheduled for January, 2019 will consider a plan of action to enable audit committees to reach a position of full compliance. They  are working on a plan from the perspective of the region with one of the suggestions being that Audit Committee members may benefit from sitting in on a meeting of an audit committee in another local authority area to observe practice in other audit committees.

•           The Committee noted that previously there was a provision whereby the Chair and Vice-Chair could meet privately with Internal/External Audit which was useful in terms of being able to raise issues which could then be reported back to the Committee as necessary.

The Head of Audit and Risk said that arrangements for the Chair and Vice-Chair to meet privately with Internal and External Audit without the presence of Management  ...  view the full minutes text for item 2.

To present the report of External Audit.

The report of External Audit on the outcome of a review of the scrutiny arrangements at the Isle of Anglesey County Council was presented for the Committee’s consideration. The review explored with each of the 22 councils in Wales how “fit for the future” their scrutiny functions are and how well councils are responding to current challenges in relation to their scrutiny activity as well as how councils are beginning to carry out their scrutiny of Public Service Boards. The review also examined how well placed councils are to respond to future challenges in particular the continued pressure on public finances and the possible move towards more regional working between local authorities.

Mr Alan Hughes, WAO reported that the review of the scrutiny function at the Isle of Anglesey County Council found that the Council has strengthened its overview and scrutiny function and is making arrangements to meet future challenges. The review came to this conclusion because –

•           The Council is supportive of overview and scrutiny, and arrangements necessary to help overview and scrutiny members meet future challenges are being put in place.

•           Overview and scrutiny committee practice is improving, the range of evidence sources they draw on has increased, and scrutiny committees’ forward work programmes align with the work of the Executive, and

•           The overview and scrutiny function is contributing to improvements in performance and decision-making, and the Council regularly evaluates its effectiveness.

The review made the two following proposals for ways in which the Council  could further improve the effectiveness of its overview and scrutiny function to make it better placed to meet current and future challenges –

•           The Council’s Overview and Scrutiny function should further improve arrangements for promoting the engagement of the public and other stakeholders in scrutiny activity.

•           The Council should build on its experience through further self-assessment, to consider more innovative methods of undertaking scrutiny activity.

Some of the improvements made to Overview and Scrutiny at the Council which has strengthened the function include the following –

•           Councillor roles and responsibilities for scrutiny are clearly set out in the Constitution with member and chair role descriptions, and the member training and development programme has enabled those involved in the scrutiny function to develop a clear understanding of their roles.

•           The Council provides training on effective scrutiny and chairing skills as part of its councillor induction and scrutiny members’ development.

•           The Council has recognised the need to strengthen scrutiny of the Public Services Board and has begun to scrutinise elements of PSB activity including its draft well-being plan in March, 2018. The Scrutiny Improvement Programme action plan also identifies the further work that needs to be done in relation to scrutinising the PSB. This is set out in the report.

•           The quality of papers that were observed being presented to scrutiny committees is generally good and the Scrutiny Template provides guiding principles for scrutiny members including references to the Well-being of Future Generations Act’s five ways  ...  view the full minutes text for item 3.

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

•           That two audit review reports were finalised during the period the one relating to School Income Collection Arrangements which resulted in a Limited Assurance opinion and the other relating to Concessionary Travel Fraud which produced a Reasonable Assurance opinion.

•           The Concessionary Travel Fraud review was undertaken following the press reports of fraud against Gwynedd Council which led to the conviction of the owners of two bus companies for offences including conspiracy to commit fraud by false representations. Enquiries were made with Gwynedd Council and the Council’s Transport Service to ensure that the Council is not exposed to this fraud. One of the companies had operated two contracts for which the Council reimbursed concessionary fares but was not successful when the Council re-tendered the contracts in 2015. The other had not received payments since June, 2014. In addition the following controls are in place which should ensure that the Council’s exposure to risk in the reimbursement of concessionary fares is minimised -

•           Flintshire County Council on behalf of all the North Wales Councils provides summary reports directly from the Wayfarer system to support reimbursement claims of concessionary fares so contractors cannot tamper with them. The Council’s Transport Service checks all claims for concessionary fares submitted by the bus operator against the reports.

•           From July, 2016 the Welsh Government introduced monthly detailed system reports to allow Councils to monitor smart card activity. The new reporting system means that the Council can identify and investigate anomalies and so there is a reduced risk of losses due to inflated or fraudulent claims for reimbursement of concessionary fares.

•           The Council participates in the “Tell Us Once” scheme and cancels cards when informed of deaths. The Council retains damaged cards and any card reported lost is de-activated.

•           The Internal Audit review of School Income Collection Arrangements was undertaken at the request of the previous Head of Learning due to various concerns about income collections processes within schools. Three primary schools were visited as part of the audit. The review identified policies and procedures in relation to income that were outdated; inconsistencies in accounting for income; lack of corporate monitoring, variations between schools in the monitoring of debt; weak governance of school funds and inappropriate system access controls. Most of the weaknesses found within the income collection processes adopted by schools were due to lack of knowledge and training with the Learning Service not having issued schools with up to date policies supported by procedures and training. There is also a lack of corporate compliance monitoring by the Learning Service which leaves the Council exposed to risks.

•           That four follow-up reviews of Limited Assurance reports were finalised in the period relating to Sundry  ...  view the full minutes text for item 4.

To present the report of External Audit.

The report of External Audit on the outcome of a review of the effectiveness of the Council’s arrangements for addressing proposals for improvement and recommendations made by the Wales Audit Office was presented for the Committee’s consideration. The report also considered whether the Council is evaluating the extent to which its actions are contributing to delivering improved service performance and outcomes for citizens.

Charlotte Owen, WAO reported that in December 2015, the Auditor General published his Annual Improvement Report for the Council. The report which included findings from the 2015 Corporate Assessment concluded that the Council’s self-awareness and its track record of improving governance and management were likely to support it in making arrangements to secure continuous improvement in 2015/16. The report made 6 proposals for improvements which are detailed in the report above. To gain assurance that the Council has effective arrangements for addressing the proposals for improvement, in June 2018 the WAO reviewed the progress the Council had made in implementing those proposals for improvement and the effectiveness of its arrangements for doing so. The review found that the Council has satisfactory processes for addressing proposals for improvement and recommendations from the Wales Audit Office but arrangements could be strengthened to provide greater assurance on progress to elected members.

The review came to this conclusion because –

•           The Council has satisfactory arrangements for responding to proposals for improvement and recommendations from the Wales Audit Office, but elected members are not consistently informed of progress; and

•           The Council has addressed the proposals for improvement issued in the selected reports.

The report makes the following proposals for ways in which the Council could improve its arrangements for responding to proposals for improvement and recommendations –

•           Keep elected members informed of Wales Audit Office proposals for improvement and recommendations, and the Council’s progress against them by:

•           Circulating all Wales Audit Office reports to Audit and Governance Committee members for information, and

•           Reporting annually to the Audit and Governance Committee on progress made against outstanding Wales Audit Office proposals for improvement and recommendations.

The Committee in accepting the report and its proposals noted with reference to comments about the ICT Service that there remains an outstanding recommendation from the external review of the ICT Service which relates to the application of corporate project management arrangements to technology based projects. The recommendation has not been implemented because the Council is deciding on its approach to project management. The Committee further noted that it has previously emphasised the usefulness of project management input in implementing Internal Audit recommendations as a way of co-ordinating the response to actioning Internal Audit proposals for improvement thereby reducing the delay that can occur particularly in complex or cross service reviews or where a number of officers are involved.

It was resolved to accept the external audit report and its proposals for further improving the Council’s arrangements for responding to proposals for improvement and recommendations by the WAO.

NO ADDITIONAL ACTION WAS PROPOSED

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

The report of the Head of Function (Resources)/Section 151 Officer incorporating a review of the Treasury Management position and activity mid-way through the 2018/19 financial year in accordance with the requirements of CIPFA’s Code of Practice on Treasury Management was presented for the Committee’s consideration.

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

•           The Council held £6.089m of investments as at 30 September, 2018 and the investment portfolio yield for the first 6 months of the year was 0.65%. A full list of investments as at 30 September, 2018 is provided in Appendix 3 to the report.

•           The approved limits within the Annual Investment Strategy was not breached during the first 6 months of 2018/19.

•           The Council’s budgeted investment return for the whole of 2018/19 is £0.017m; performance for the year to date exceeds the budget with £0.023m received to the end of Quarter 2. This is due to the increase in bank rate from 0.5% to 0.75% in August, 2018.

•           No borrowing was undertaken during the first half of this financial year. However, it is anticipated that borrowing will need to be undertaken during the second half of the financial year.

•           During the first half of the financial year, a short term borrowing of £5m from the Tyne and Wear Pension Fund taken out in January 2018 at an interest rate of 0.5% matured and was repaid in April, 2018.

•           Debt rescheduling opportunities have been very limited in the current economic climate as detailed in paragraph 6.4 of the report. No debt rescheduling has taken place to date in the current financial year.

•           Since Quarter 2 ended, the Authority has arranged to borrow £5m from North Yorkshire County Council. The borrowing will take place from 16 October, 2018 to 16 January, 2019 at a rate of 0.85%.This decision is in keeping with the current borrowing strategy of only borrowing longer term when the funding is required and not to borrow simply to take advantage of low borrowing rates as the cost of carry is too high.

•           Section 7 of the report describes the Council’s capital position and performance in relation to the key Prudential Indicators including that for capital expenditure (Table 7.2 of the report).

•           Table 7.4.3 of the report shows the Capital Financing Requirement which is the underlying external need to borrow to pay for capital expenditure. The Authority is currently slightly below the original forecast CFR because of the forecast underspend in borrowing mainly down to the 21st Century Schools’ Programme and the revised funding method for the Seiriol Extra Care facility.

•           The Authority is also keeping within the Operational Boundary which shows the expected debt position over the period. The 2018/19 opening borrowing position was £117.778m with the end of year position estimated at £125.623m which is well within the £172m operational boundary set out in the Treasury Management Strategy.

•           Section 7.5 of the report sets out the Authority’s  ...  view the full minutes text for item 6.

To present the Annual Audit Letter and Completion of Audit Letter for 2017/18.

(Report to follow)

Mr Alan Hughes, WAO apologised to the Committee for the non-presentation of the 2017/18 Isle of Anglesey County Council Audit Letter to this meeting; the Anglesey Letter along with the Audit Letters pertaining to a few other councils have been delayed as a result of a moderation exercise of the Wales Audit Office’s own internal processes for verifying contents relative to each council.  The Audit Letter is expected to be completed shortly but unfortunately not in time for this meeting and will be forwarded to the Council towards the end of the week or at the beginning of next week. The Audit Letter for the 2017/18 financial year is expected to make reference to the financial challenge that is facing councils across Wales and the delay is in part due to the need to agree how this message is to be articulated.

In accepting the explanation for the absence of the 2017/18 Audit Letter and in noting that the delay is not because of any issue relating to this Council, the Committee expressed its disappointment that it will not now have sight of the Letter until its next scheduled meeting in February, 2019 which is nearing the end of the current financial year and which it felt was an excessive delay.

Mr Alan Hughes in confirming that he would convey the Committee’s concerns to the Wales Audit Office said that whilst it is the procedure in Anglesey to present the Audit Letter to the   Audit and Governance Committee, this is not the practice in all councils.

It was resolved to accept the explanation for the delay in presenting the 2017/18 Audit Letter for Anglesey.

NO ADDITIONAL ACTION WAS PROPOSED

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

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

It was resolved to note and accept the Forward Work programme subject to the including the 2017/18 Audit Letter as an item for the Committee’s February, 2019 meeting.

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