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AUDIT COMMITTEE

 

Minutes of a meeting held on 7th July, 2014.

 

Present:  Councillors K.J. Geary, K. Hatton, A.C. Williams and M.R. Wilson.

 

 

Also present: Ms. G. Turner (Grant Thornton UK LLP) and Ms. H. Keatley (Wales Audit Office).

 

 

159     APPOINTMENT OF CHAIRMAN -

 

RESOLVED - T H A T Councillor K. Hatton be appointed Chairman of the Audit Committee for the current Municipal Year.

 

Councillor Hatton took the Chair.

 

 

160     APPOINTMENT OF VICE-CHAIRMAN -

 

RESOLVED - T H A T Mr. P. Lewis be appointed Vice-Chairman of the Audit Committee for the current Municipal Year.

 

 

161     APOLOGIES FOR ABSENCE -

 

These were received from Councillors Mrs. P. Drake and J. Drysdale.

 

 

162     MINUTES -

 

RESOLVED - T H A T the minutes of the meeting held on 28th April, 2014 be approved as a correct record.

 

 

163     DECLARATIONS OF INTEREST -

 

No declarations were received.

 

 

164     PRESENTATION BY GRANT THORNTON - ROLE OF THE AUDIT COMMITTEE AND EXTERNAL AUDIT -

 

Gail Turner of Grant Thornton gave a brief presentation on the role of the Audit Committee.

 

Committee were advised that the purpose of an Audit Committee was to provide independent assurance on the adequacy of the risk management framework and the associated control environment, independent scrutiny of the authority’s financial and non-financial performance to the extent that its affects the authority’s exposure to risk and weakens the control environment, and to oversee the financial reporting process.

 

Members were advised that an Audit Committee should provide a Council with assurance that effective internal control arrangements were in place and should have the following remit: 

  • to conclude on the adequacy and effective operation of the Council’s overall internal control system
  • independently monitor, review and report to the Council on governance processes
  • review management responses in relation to change to accounts.

In terms of Membership, it was suggested that what works well is an Audit Committee that:

  • comprises Members with previous relevant experience
  • has at least one Member with financial accounting or audit experience
  • is non-political
  • had clear terms of reference.

Following the presentation, Members were offered an opportunity to ask questions

 

 

165     BUILDING SERVICES - A PLAN FOR CHANGE (DVSH) -

 

Committee were provided with an update on the progress with the Building Services Change Plan prepared by the Head of Housing and Building Services, and agreed by the Cabinet Working Group on 30th September, 2013.

 

On 15th March, 2013 it had been brought to the attention of the Head of Accountancy and Resource Management that a budget monitoring process had uncovered potentially serious issues within Building Services. 

 

A robust Audit investigation was carried out, the results of which were presented to Audit Committee on 8th July, 2013.

 

A 'Change Plan’ was presented to the Cabinet Working Group (the agreed monitoring vehicle) on 30th September, 2013 which was endorsed by Cabinet and presented to Audit, Corporate Resources and Housing and Public Protection Committees subsequently. 

 

The report detailed the progress that had been made in key areas.  An update of the Change Plan was attached at Appendix A to the report. 

 

The main areas of concern on which the original audit was based, and evidence found as a consequence of the audit work were:

  • idle time being charged to responsive repairs jobs
  • operatives not being where they should be or claiming to be
  • large gaps in the Opti time calendar
  • extended lunch breaks not recorded honestly on timesheets
  • operatives visiting the depot without need
  • operatives using vans for non-work related activities.

The following had been introduced to address the issues raised:

 

Staffing and Training

 

A partial re-structure had been undertaken to clearly define management roles within the responsive repair service.  The Senior Maintenance Officer for responsive repairs was in place and two customer care Planners had been recruited and had commenced their role in May 2014.

 

All senior and middle managers within the responsive repair scheme had received leadership and management training.

 

All senior and middle managers within the team had received Standing Orders and Financial Regulations training.

 

Regular team meetings were held with all operatives. 

 

The Head of Housing and Building Services meets with all front line staff on a quarterly basis to discuss departmental performance management and financial viability issues, all operatives were aware of how each service area was doing in terms of this. 

 

In May 2014, a new Operational Manager for Building Services took up the role.

 

Timesheet Management

 

On analysis of the Opti system, ticketed work and time sheets, it was recognised that hours of work were being lost in the system due to inaccurate or missing information on timesheets.  Those unallocated hours were therefore charged to the DLOs trading account resulting in increased on costs.  In April 2014 electronic timesheets were introduced linked to the DLOs contracting system.  This had been rolled out to all responsive repairs staff.  The service could now accurately allocate operatives time on a job by job basis.  All lunch breaks were accurately recorded through this method.

 

Vehicle Telemetry

 

Throughout May and June, all Council vehicles had been fitted with vehicle telemetry.  As of 1st July, 2014, senior managers were able to monitor the use of vehicles for staff management and fuel usage purposes. 

  

Review of the Opti Time System by Xmbrace

 

The initial internal audit investigation commenced as a consequence of an external health check report from the company that had developed the mobile working solution used by the Vale, Xmbrace.  The report, produced in February 2013 was scathing and listed a range of failures in terms of management and control of the system.  In May 2014 a follow up report had been commissioned by the Head of Housing and Building Services.  The report was based on a traffic light assessment.  In the previous report, the majority of areas tested failed and were recorded as a 'red’ result.  In the majority areas tested in May 2014 with the exception of a number of minor issues a 'green’ result was recorded by Xmbrace.  The report had been shared with the Audit team and the 'amber’ areas would form part of a service Action Plan. 

 

Financial Management and Budgetary Control

 

A fresh emphasis had been placed on senior managers being responsible for managing budgets.  Regular budget monitoring meetings were held.  A financial procedural note had been developed to support managers in budgetary management and control.  In terms of positive outcomes, as a consequence of the processes adopted, the responsive repairs budget had been managed effectively and had not negatively impacted on the Housing Revenue Account.  In terms of the DLOs trading account, a surplus had been created (resulting predominately from the WHQS and empty property works).  The rates applied by the DLO had been market tested through the Framework Contract for the WHQS programme.

 

Procurement

 

Procurement in terms of sub-contractors was currently a key focus, the outcome of which was to ensure transparency and compliance with both OJEU regulations and internal standing orders and financial regulations.

 

Value for Money

 

An exercise had been undertaken to benchmark the rates applied by the DLO in terms of both responsive repairs and WHQS and Voids work.  Although there were fluctuations in whether rates applied are above and below the benchmark for different entries of work the overall basket of work was growing comparable to other DLOs.  The WHQS team was currently reviewing its rates to establish if it could meet the lower rates on the WHQS framework contract.  A review of the Stores function and more specifically the services and supply costs associated with the DLO was currently underway. 

 

Next Steps

 

The Head of Housing and Building Services and the Operational Manager for Building Services would continue to work with the Building Services team and officers from the Audit Section to ensure that improvements made were sustained and areas still outstanding were addressed.  Further audit work would be undertaken throughout this year by the Audit Team to give comfort to the Committee and Cabinet in terms of the validity of the improvements detailed.

 

Having considered the report, it was

 

RESOLVED - T H A T the progress made with the Change Plan be noted.

 

Reason for decision

 

That Audit Committee are kept informed of and are assured by the work undertaken by the Head of Housing and Building Services and the team in responding to the issues highlighted within the Audit reports published as a consequence of internal audits held in 2013/14.

 

 

166     CONTRACT MONITORING (MD) - 

 

Committee received the Council’s External Auditor, Grant Thornton UK LLP report on the review of Contract Monitoring arrangements.

 

The Annual Governance Statement, published in September 2013 highlighted key control issues that had been identified as part of the work undertaken by Internal Audit.  In particular, there were concerns relating to the lack of contractual arrangements within the Waste Management Service and also to the adequacy and effectiveness of the financial and quality monitoring arrangements surrounding partnership arrangements between the Council and the Leisure Centres service providers.

 

Following on from discussions with the Managing Director, the Council’s External Auditors were commissioned to independently examine the key control issues highlighted. 

 

This report summarised the External Auditors overall assessment as to whether or not the Council had effective arrangements in place to monitor the performance of contracts.

 

The External Auditors report was attached at Appendix A to the report.  The review found that there was no performance management regime which formally and systematically tested the extent to which the contracts examined were being monitored. 

 

Four proposals for improvement had been identified and a response from the Director was being sought.

 

Of particular importance, Committee noted  comments of the External Auditor  (on page 11 of the report) regarding the level of scrutiny of questions that had been asked by Scrutiny members when discussing Leisure Centre Services with the contractor.

 

It was the view of the Committee that the comments of the External Auditor had highlighted a training deficiency on the part of Members and the view was expressed that Democratic Services Committee, as the Committee responsible for overseeing the Council’s approach of Member Development, be informed of the view of the Audit Committee.

 

Having considered the report, it was

 

RESOLVED -

 

(1)       T H A T the content of the report be noted.

 

(2)       T H A T Democratic Services Committee be advised of the concerns of the Audit Committee with regard to the training gap identified.

 

Reasons for decisions

 

(1)       To facilitate monitoring of the audit function.

 

(2)       To raise the level of scrutiny within the Council.

 

 

167     ANNUAL GOVERNANCE STATEMENT 2013-2014 (MD) -

 

Committee received the Annual Governance Statement for review.

 

The Annual Governance Statement (AGS) should relate to the mechanism used to demonstrate that, during the financial year ended 31st March, 2014, the Council had an adequate governance regime in place and all business was conducted in compliance with the existing arrangements .  However, significant events or developments relating to the AGS that occurred between the balance sheet date and the date on which the Annual Statement of Accounts was signed by the responsible financial officer should also be reports. 

 

The AGS for the 20131/14 financial year relating to the activities of the Council was attached to the report at Appendix A.  It had been drawn up with regards to the Code of Practice in Local Authority accounting in the UK: A Statement of Recommended Practice (SORP).  It also had regards to guidance issued by CIPFA/SOLACE in its publication 'Developing Good Governance in Local Government’ and the Council’s Code of Corporate Governance.

 

The overall Annual Governance arrangements within the Vale of Glamorgan Council for the financial year 2013/14 were considered to be satisfactory.  However, issues relating to the continuing challenges facing the Council due to reductions in Welsh Government funding was reflected in Section 11 - Significant Governance Issues of the AGS.

 

RESOLVED - T H A T the Annual Governance Statement for 2013/2014 be endorsed.

 

Reason for decision

 

To provide for a review of the governance framework and the system of internal control, which has been in place within the Council for the year ended 31st March, 2014.

 

 

168     UNAUDITED STATEMENT OF ACCOUNTS 2013/14 (HF(S151O)) -

 

The Statement of Accounts for 2013/14 were now complete and were brought to the Committee for review and comment prior to the commencement of the external audit. 

 

The 2013/14 Statement of Accounts, attached to the report, had been prepared in accordance with the requirements of the International Financial Reporting Standards (IFRS).  This was intended to provide for comparable accounts across all accounting boundaries, public and private, national and international.

 

It was proposed that any comments of the Committee on the 2013/14 unaudited Statement of Accounts be referred to the Head of Finance as Section 151 Officer for subsequent discussion with the Council’s external auditors, Grant Thornton UK LLP. 

 

RESOLVED - T H A T the unaudited Statement of Accounts for 2013/14 be noted and that the pie-chart shown on paragraph 3 include the relevant amounts in (£) pounds.

 

Reason for decision

 

To allow for the initial review of the unaudited Statement of Accounts by those charged with governance.

 

 

169     INTERNAL AUDIT - OUTTURN REPORT - APRIL AND MAY 2014 (HA) -

 

Committee were informed of actual internal audit performance against the 2014/15 Plan for the period 1st April to 31st May, 2014.

 

The actual position for the first two months compared against the Plan is shown below:

 

Directorates

2014-15

Full Year

Plan Days

Proportion of

Plan Days Available for

April and May 2014.

2014-15

April to May.

Actual Days

 

Resources

565

94

62

Development Services

95

16

9

Visible Services and Housing

165

27.5

14

Learning and Skills

153

25.5

27

Social Services

110

18

15

Cross Cutting

225

37.5

60

Contingency - unplanned

95

15.5

40

Contingency - Fraud & Error

70

12

11

TOTAL PRODUCTIVE DAYS

1,478

246

238

 

The figures show that 238 actual productive days had been achieved, which equated to 97% of the overall planned productive time available for the period.

 

A summary of audits commenced and completed during the period April to May 2014 were shown in both Appendices A and B to the report.

 

The table above showed that the actual days achieved for the period were less than expected, by 8 days.  In addition, a total of 42% of the contingency for unplanned work had already been utilised. 

 

Detailed reports were issued to the relevant service managers on the results of individual audits and where significant weaknesses were identified, these would be followed up to ensure high priority recommendations were implemented.  To date, there had been no significant issues identified and as this report only covered two months of this financial year, it was not appropriate at this time to provide an overall opinion of the work completed so far. 

 

RESOLVED - T H A T the report on actual Internal Audit performance during the first two months of the financial year be noted.

 

Reason for decision

 

To facilitate monitoring of the audit function.

 

 

170     AUDIT COMMITTEE - UPDATED FORWARD WORK PROGRAMME 2014-2015 (HF) -

 

Committee received the updated Forward Work Programme 2014/15 for the Committee’s consideration and approval.

 

In order to assist the Audit Committee in ensuring that due consideration had been given by the Committee to all aspects of their core functions, an updated Forward Work Programme for 2014/15 was attached at Appendix A to the report for Committee’s consideration.

 

A request was made for the Forward Work Programme to include reference to Civil Parking Enforcement, to be scheduled for consideration by the Committee in November 2014.

 

RESOLVED - T H A T the amendments to the updated 2014/15 Forward Work Programme to ensure that all aspects of their core functions were being covered, including the reference to Civil Parking Enforcement being considered in November 2014, be noted.

 

Reason for decision

 

To keep the Audit Committee informed.

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