Agenda, decisions and minutes

Virtual Meeting (At present, members of the public are not able to attend), Governance and Audit Committee - Tuesday, 9th February, 2021 2.00 pm

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Venue: Virtual Meeting

Contact: Ann Holmes 01248 752518 

Items
No. Item

Due to temporary connection issues experienced by Councillor Peter Rogers, the Committee’s Chair, Mr Dilwyn Evans was elected Chair to start the meeting and took the first item on the agenda. The remainder of the meeting was chaired by Councillor Rogers.

1.

Election of Vice-Chairperson

To elect a Vice-Chair for the Audit and Governance Committee.

 

Minutes:

Mr Dilwyn Evans was elected Vice-Chair of the Audit and Governance Committee.

 

On his appointment Mr Dilwyn Evans referred to his predecessor in the post of Vice-Chair and fellow lay member on the Committee, Mr Jon Mendoza who had since resigned as a member of the Committee commenting that he had enjoyed working alongside Mr Mendoza during his time on the Audit and Governance Committee.

2.

Declaration of Interest

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

Minutes:

Councillor Peter Rogers declared a personal interest in item 10 on the agenda.

 

Councillor Rogers paid his own tribute to former Lay Member and Vice-Chair, Mr Jon Mendoza saying that he appreciated and was grateful for the latter’s contribution as an independent member of the Committee. Those sentiments were echoed by the remainder of the Committee’s members.

 

It was resolved that the Chair on behalf of the Committee, write to Mr Jon Mendoza to thank him for his contribution to the Audit and Governance Committee during his period as Lay Member and to wish him well for the future.

3.

Replacement of Lay Member on the Audit and Governance Committee pdf icon PDF 128 KB

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

Minutes:

The report of the Director of Function (Resources)/Section 151 Officer setting out the considerations with regard to the replacement of Lay Member of the Audit and Governance Committee was presented for the Committee’s consideration. The matter had arisen following the resignation of Mr Jonathon Mendoza as Lay Member of the Committee with his last meeting being on 1 December, 2020.

 

The Director of Function (Resources)/Section 151 Officer reported that the Local Government (Wales) Measure 2011 required the Local Authority to ensure at least one member of its Audit Committee is a lay member. The Isle of Anglesey County Council has extended this requirement; its Constitution provides for the Audit and Governance Committee to consist of two lay members to serve for a fixed term to coincide with the length of the Council i.e. 5 years, currently until May, 2022. The Local Government and Elections (Wales) Act 2021 passed on 20 January, 2021 introduces changes to the Audit and Governance Committee in the form of a new name, additional functions and responsibilities and the Act also amends the Committee’s membership making it a requirement that one third of its members be lay members. If the Committee continues with 8 elected members, there would therefore be a requirement for 4 lay members. The Chair will also be required to be a lay member. Whilst the date on which the new provisions will commence remains to be confirmed, following enquiries made with Welsh Government by the WLGA it is understood that it is intended that the Committee’s new name and new functions/ responsibilities will come into effect as from April 2021 and that the changes to membership will become effective as from May, 2022. The Council will therefore have to undertake a recruitment exercise in 2022 to recruit the lay members in preparation for this change.

 

In light of the above, the Committee was asked to consider whether it wished to recruit a replacement lay member for the remainder of the term to be served i.e. until May 2022 or for the Council’s Constitution to be changed to reduce the number of lay members required to one until the new legislation commences.

 

In considering the matter, the Committee sought clarification of the recruitment timescale and the likelihood of success given the current pandemic related constraints and the shortened term of service until May 2022 which might be a disincentive to apply for potential applicants.

 

The Director of Function (Resources)/Section 151 Office advised that the recruitment process does take time from initial advertisement through to appointment meaning that a replacement is unlikely to be appointed before April/May. Added to that are the costs of advertising the position as well as the time needed for any appointee to settle in and to become familiar with the way the Committee operates over the limited number of meetings that will be held in the time the term of office will cover before the recruitment process begins again. For practical reasons therefore, he believed that the second option  ...  view the full minutes text for item 3.

4.

Minutes of the Previous Meeting pdf icon PDF 342 KB

To present the minutes of the previous meeting of the Audit and Governance Committee held on 1 December, 2020.

Minutes:

The minutes of the previous meeting of the Audit and Governance Committee held on 1 December, 2020 were presented and were confirmed as correct.

 

Arising thereon –

 

The Head of Audit and Risk referred to the point raised in the discussion on the Cyber Security Annual Report for 2019/20 about ensuring that non-councillor members of the Council’s Committees who have access to a range of information are included in cyber security training and protocols, and she clarified that having made enquiries with the HR Training and Development Team she could confirm that two members of the Audit and Governance Committee have to date completed the cyber security awareness E-learning module. She added that as undertaking this training is mandatory, members who have yet to complete the module are advised to schedule time to do so. In order to facilitate the process she would contact the HR Training and Development Team to ask that a reminder be circulated to the Committee’s members along with guidance on accessing the E-Learning Portal.

 

ACTION: Head of Audit and Risk to contact the HR Training and Development Team to request that members of the Audit and Governance Committee who have not yet completed the Cyber Security awareness E-learning module be reminded to do so and that guidance on accessing the E-Learning Portal be also provided.

5.

Isle of Anglesey County Council - Annual Audit Summary 2020 pdf icon PDF 199 KB

To present the report of External Audit.

Minutes:

The Annual Audit Summary report for 2020 for the Isle of Anglesey County by Audit Wales was presented for the Committee’s consideration. The report shows the audit work completed since the last Annual Improvement Report issued in July, 2019 which it replaces and references pieces of work relating specifically to the Council including reports issued by other Inspectorates as well as national studies and inspections.

 

In presenting the Audit Summary Mr Alan Hughes, Audit Wales confirmed that the report provides a synopsis of the year’s audit work at the Council and nationally and its outcome, and that there are no new issues or concerns to report arising therefrom.

 

In considering the report the following points were raised by the Committee –

 

           The projected demographic changes on Anglesey highlighted in the key facts section of the summary report and their implications for service planning. The Committee noted that the Island’s population is projected to decrease by 0.6% between 2020 and 2040 from 69,896 to 69,499, including a 10.5% decrease in the number of children, an 8.3% decrease in the number of the working-age population and a 22.7% increase in the number of people aged 65 and over.

 

The Director of Function (Resources)/Section 151 Officer in acknowledging the point said that changes in demography influence the amount of funding the Council receives from Welsh Government through the funding formula since population characteristics are a factor in how funding is distributed among local authorities. In recent years the more rural councils to the North and West of Wales have fared less well than councils in the South in relation to the funding formula due mainly to demographic changes which have seen an increasing proportion of the working age population moving to larger urban centres. Consequently this drift has implications for those council areas which have experienced a fall in the working population as this is then reflected in the amount of money they receive as part of the Revenue Support Grant. In the long term the decrease in funding as a result of population changes can lead to problems as those councils who lose out have to make up the shortfall either by cutting services or by raising taxes so demographic changes have implications for the Council’s budget as well as for service planning.

 

           The delays in certifying Housing benefits claims. The Committee further noted that the auditors highlight that the volume of errors identified is higher than they would have expected and are recurrent thereby raising concerns about quality control arrangements and the basis for identifying and addressing the training needs of staff working in this area. The Committee enquired about progress in bringing the position up to date and also sought assurance with regard to the training and quality arrangements issues raised.

 

The Director of Function (Resources/Section 151 Officer advised that Audit Wales has completed its work on the 2017/18 Housing Benefit grant subsidy claim and the audit letter to be forwarded to the Department of Works and Pension  ...  view the full minutes text for item 5.

6.

Update on Internal Audit Strategy and Priorities 2020/21 pdf icon PDF 313 KB

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

Minutes:

The report of the Head of Audit and Risk providing an update as at 27 January 2021 on the work of Internal Audit  since the last report to Committee on Internal Audit activity in December, 2020 was presented for the Committee’s consideration. The report outlined the current workload of the Internal Audit Service together with the priorities for the short to medium term.

 

The Head of Internal Audit and Risk updated the Committee on the following aspects of Internal Audit’s work –

 

           The assurance work completed since the last update with reference to the table at paragraph 5 of the report. Of the six audits listed in the table, three had resulted in a Substantial Assurance rating; two had resulted in a Reasonable Assurance rating and one audit – Payments: Supplier Maintenance had resulted in a Limited Assurance rating. (In accordance with agreed practice the Limited Assurance report and accompanying action plan was issued separately to the Committee’s members and relevant Portfolio Holders).

           Work in progress as illustrated by the table in paragraph 8 of the report which provides information regarding the audits underway, the stage reached at the time of writing and the anticipated reporting date. These will be prioritised for completion by the end of year whilst still ensuring that Internal Audit remains agile to react to any work at short notice as well as any request from the Senior Leadership Team. The previously identified priority areas for audit will be carried forward into the Internal Audit Strategy for 2021/22.

           The biennial National Fraud Initiative exercise which is underway. The first tranche of matches which involved matching Council Tax Single Person Discount and Electoral Register data to identify any fraudulent claims have been received. An initial review of the matches has highlighted a data quality issue which Internal Audit is currently investigating. The remainder of the matches is expected to be released in February, 2021.

           Overdue actions confirming that work is progressing to support services with implementing all outstanding actions as shown in the 4action dashboard at Appendix 1 to the report. Services have been working hard to address outstanding Issues/Risks leaving only three actions overdue relating to guidelines around Universal Credit, the payment of housing rent by standing order and independent check of payroll exception reports.

           Providing assistance to the Learning Service with developing new guidance about the proper operation and arrangements of school funds following the Internal Audit review of School Unofficial Funds which resulted in a Limited Assurance rating. Two training events for head teachers and governors on their responsibilities as regards the proper operation of a school fund have been provided and Internal Audit has also offered to arrange and fund an independent audit of funds where the head teacher is struggling to appoint an auditor or has not had the fund audited for some years.

           Providing assistance with three investigations at the request of Human Resources.

 

In the ensuing discussion the following points were raised by the  ...  view the full minutes text for item 6.

7.

Internal Audit Assurance Provision 2020/21 pdf icon PDF 135 KB

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

Minutes:

The report of the Head of Audit and Risk in relation to the current arrangements for ensuring the Head of Audit and Risk will have sufficient assurance to support the Internal Audit Annual Opinion for 2020/21 to ensure no limitation of scope was presented for the Committee’s consideration and approval.

 

The Head of Audit and Risk reported that the impact of dealing with Covid-19 on all public services has been considerable and for internal auditors it has raised the question of whether they will be able to undertake sufficient internal audit work to gain assurance during 2020/21 this being a key consideration to fulfil the requirement of the Public Sector Internal Audit Standards (PSIAS) where the Head of Audit and Risk is required to issue an annual opinion on the overall adequacy and effectiveness of the Council’s framework of governance, risk management and control.

 

In recognition of the considerable challenges under which local government bodies are currently operating in having to make difficult decisions about the best use of their available staff and financial resources to meet critical needs whilst the professional and regulatory expectations to ensure that internal audit arrangements conform with PSIAS have not changed, CIPFA has prepared guidance for internal auditors working in or for local government in the UK. The guidance details six key requirements for local government bodies that heads of internal audit or the chief audit executive, leadership teams and audit committees should follow; these are set out in paragraph 5 of the report. The Head of Audit and Risk has therefore revised and agreed the Internal Audit Team’s priorities to cover the new risks and changes from the impact of Covid-19 with the Senior Leadership Team (SLT) to ensure that there will be no limitation of scope and that Internal Audit will have sufficient assurance to support the annual opinion. The key pieces of work that will contribute to the assurance are Corporate Risk register audits; Review of Covid-19 Emergency response (Self-Assessment) and Follow-up completed between April and June, 2020 and Emergency Management Assurance (First-line assurance) currently at fieldwork stage. As the risks continue to change and the risk registers are reviewed and updated by the SLT, Internal Audit will revise its priorities accordingly.

 

When delivering the risk-based audit strategy, the Head of Audit and Risk supported by the SLT has made every effort to make best use of available internal audit resources during the pandemic including by implementing the measures detailed in paragraph 10 of the report.

 

The Committee sought clarity on how limitation of scope is defined and applied. The Head of Audit and Risk clarified that a limitation of scope should be considered if it is deemed not enough work has been carried out to provide assurance in the three key areas relating to   the Council’s governance, risk management and internal control processes. Whilst the amount of work required to provide a full assurance opinion is left to professional judgement within each organisation, the CIPFA guidance is clear that efforts  ...  view the full minutes text for item 7.

8.

Delivering with Less: Leisure Services - Isle of Anglesey County Council pdf icon PDF 445 KB

To present the report of External Audit.

Minutes:

The report of External Audit setting out the findings of a follow-up review to the Auditor General’s 2015 national report – Delivering with Less – Leisure Services was presented for the Committee’s consideration. The report considers the impact of reductions in local government funding on the Council’s leisure services and the effectiveness of the Council’s arrangements for delivering those services.

 

Mr Alan Hughes, Audit Wales referred to the context of the report and clarified that the fieldwork was completed and the contents of the report finalised prior to the onset of Covid-19 hence no reference is made to the impact of the pandemic on the leisure service; with this in mind it was agreed that the report should be released with this caveat. Overall the report is positive in its messages and concludes that the Council has continued to deliver its leisure centres with less resources and it has a clear vision for the future of the service, but that run down facilities pose a financial challenge. In detail, the report finds that –

 

           There has been a reduction in the Council’s leisure service resources since 2014-15 and the service net cost has decreased. The leisure service budget has reduced by 77% in the last four years partly offset by an increase in income of 31% and a fall in expenditure of 11%.

           The Council has a clear vision for its leisure service and is effectively considering the service’s financial sustainability. The Council recognises its run down leisure centres are a risk. The Council has considered the requirements of the Well-Being of Future Generations (Wales) Act 2015 in setting priorities and developing its new strategy for leisure services and is able to demonstrate examples of improved well-being through leisure. As part of that strategy the Council has focused on taking a more commercial approach to leisure by investing in its facilities and growing membership and income to make the service more self-sustaining; this is beginning to have an impact with income at the Plas Arthur Leisure Centre in Llangefni exceeding expenditure by 9% in 2018/19. The Council has also reviewed and compared potential delivery options for its leisure service.

           The Council has robust performance monitoring and governance arrangements but recognises it could improve its understanding of the outcomes achieved. The Council has a clear accountability structure for its leisure service and a management information dashboard system that allows officers to monitor performance. However, the Council recognises it could make further use of its data and technology to improve understanding of the effects of its service e.g. to identify non users and target their services more effectively and by further analysis of data to reach a better understanding of the outcomes of different activities.

           Most service users are satisfied with the leisure service and the Council uses customer feedback to inform the design and delivery of the service. Most respondents to the survey by External Audit were happy with the Council’s leisure service with 50% of the  ...  view the full minutes text for item 8.

9.

Treasury Management Strategy Statement 2021/2022 pdf icon PDF 949 KB

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

Minutes:

The report of the Director of Function (Resources)/Section 151 Officer incorporating the Treasury Management Strategy Statement for 2021/22 was presented for the Committee’s consideration. The Statement sets out the Council’s strategy for the forthcoming financial year with regard to borrowing and investment and the constraints on borrowing, determines the prudential indicators and the Council’s risk appetite and also its approach to investments.  

 

The Director of Function (Resources)/Section 151 Officer in highlighting  the main points form the report as follows, confirmed that there are no proposed amendments to the core principles of the 2020/21 Statement –

 

           The external context in the form of the wider economic situation as that impacts on investment interest rates, the cost of borrowing and the financial strength of counterparties. A full summary of the economic outlook was set out in Appendix 3 to the report and a distillation of the man points provided in section 3. Having considered the available information and having taken advice form the Council’s Treasury Management Advisors, the table at paragraph 3.2 of the report set out the Council’s view on interest rate levels to March, 2024 which are not expected to change significantly in that period.

           The Council’s current external borrowing position as set out in the table at paragraph 4.1.1 of the report which shows that it has approximately £122m of loans with PWLB and £2.6m of loans with Salix a publicly funded scheme that provides interest free loans for energy efficiency improvements.

           The proposed capital expenditure programme for 2021/22 to 2023/24 as set out in section 5.6 of the report including proposed capital spend, how this is to be financed and the balance to be funded from borrowing - £7.553m for the Schools Modernisation Programme

           The impact of the Council’s capital expenditure plans and the Minimum Revenue Provision (MRP) charge on the Capital Financing Requirement (CFR) and the level of external and internal borrowing as shown in Table 4 of the report.

           The Minimum Revenue Provision – the charge which the Council is required to make to the revenue account each year to ensure that there are sufficient funds available to repay debt as it fall due. The MRP Policy is detailed in Appendix 6 to the report and has not changed since it was substantially revised in 2018.

           The Council is currently maintaining an under borrowed position. This approach is prudent as investment returns are low and counterparty risk is still an issue that needs to be considered. As part of its strategy, the ability to externally borrow to repay the reserves and balances if needed is important. Table 4 indicates that £8.884m may need to be externally borrowed if urgently required which is the amount of Council reserves and balances used in the past to fund the capital programme instead of taking out borrowing.

           The Council will not borrow more than or in advance of its needs solely to profit from the investment of the extra sums borrowed. In determining  ...  view the full minutes text for item 9.

10.

Internal Audit Charter pdf icon PDF 224 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 Charter was presented for the Committee’s consideration.

 

The Head of Audit and Risk reported that the Public Sector Internal Audit Standards provide for a periodic review of the Internal Audit Charter with final approval residing with the Audit and Governance Committee. The Committee last reviewed and approved the Charter in September, 2018. Whilst a review of the Charter by the Head of Audit and Risk has not identified any significant changes it should be noted that the statement on page 11 of the report with regard to Internal Audit resources that the service structure with all posts filled equates to 1,250 days applies only if the posts filled are full-time. At present, it has only been possible to recruit on a part time basis to back fill for one of the secondments meaning that the 1,250 days is currently reduced to 953 days. When the secondment ends it is intended to retain the part time hours to make up the difference.

 

In response to a question about preserving objectivity the Head of Audit and Risk clarified that arrangements are in place to limit the impairment of independence and objectivity due to the Head of Audit and Risk’s line management of the Risk Management and Insurance Service. The Head of Audit and Risk will not scope or review internal audit activity relating to this service area and the reports will instead be signed off by the Director of Function (Resources)/Section 151 Officer.

 

It was resolved to note the review and to approve the continued appropriateness of the Internal Audit Charter.

 

NO PROPOSAL FOR ADDITONAL ACTION WAS MADE

11.

Forward Work Programme pdf icon PDF 171 KB

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

Minutes:

The report of the Head of Audit and Risk incorporating the Committee’s Forward Work Programme to April, 2021 was presented for the Committee’s consideration.

 

The Head of Audit and Risk advised that the Work Programme is limited to the April, 2021 meeting due to the uncertainty arising from the Local Government and Elections (Wales) Act 2021 which will come into force in April, 2021; the Act introduces new duties and responsibilities to the Audit and Governance Committee which will have to be incorporated into the Committee’s work programme subsequently.

 

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