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AUDIT COMMITTEE

 

Minutes of a meeting held on 13th July, 2015.

 

Present:  Councillors J.C. Bird, Mrs. P. Drake, J. Drysdale, K. Hatton, K.P. Mahoney and A.C. Williams and Mr. P. Lewis   

 

 

Also present: Ms. L. Hallett (Grant Thornton UK LLP).

 

 

212     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.

 

 

213     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.

 

 

214     APOLOGIES FOR ABSENCE – 

 

This was received from Councillor M.R. Wilson and Mr. J. Golding (Grant Thornton UK LLP) and Mr. S. Barry (Wales Audit Office).

 

 

215     MINUTES – 

 

RESOLVED – T H A T the minutes of the meeting held on 20th April, 2015 be approved as a correct record.

 

 

216     DECLARATIONS OF INTEREST – 

 

No declarations were received.

 

 

217     RISK MANAGEMENT – ANNUAL CORPORATE RISK REGISTER REVIEW (CRMG) –

 

Committee was updated on the emerging risk themes identified as part of the 2015/16 service planning process and were provided with an update on the current position of the Corporate Risk Register.

 

The Corporate Risk Management Group (CRMG) met on a quarterly basis to review the Risk Register to consider the position of each corporate risk identified.  The Group evaluates whether there had been any changes in either the internal or external environment as well as any new mitigating controls that were being put in place that would prompt a re-evaluation of the risk in terms of its score / position.

 

The CRMG had, on 5th November, 2014 agreed that the Job Evaluation and Climate Change risks would be removed from the Risk Register and the Register was also revised in light of its recommendations that the Risk Register template be amended to capture the horizon scanning of risks to enable us to better forecast whether a risk was likely to move in an upward or downward direction in the future. 

 

Audit Committee, on 18th November, 2014 had received a half yearly report and had noted the current position and key developments associated with the risks contained within the Risk Register.  Committee had recommended that the Climate Change risk be retained within the Register and this recommendation has been actioned. 

 

A revised approach to service planning had been implemented across all service areas during the 2015/16 Service Planning cycle.  In terms of risk management, the Service Plans now focussed on undertaking a risk assessment across the Directorate as a whole rather than aligning risk to individual service objectives.  This approach had enabled the Council to better reflect the cross cutting nature of risks and take a more holistic assessment of the risks that impacted on the Directorate. 

 

In line with the Council’s Corporate Risk Management Strategy an annual analysis of the emerging Service Plan risk themes had been undertaken.  This analysis looked at identifying any common risk themes that may have a cross cutting impact on existing corporate risks.  Within the current Risk Register, 12 risk themes had been identified.  These themes included business continuity, collaboration, sustainability, health and safety, work force planning, sickness absence, equalities, information management, project management, financial management, communication and reputation. 

 

An analysis of the risks identified in Service Plans enabled the Council to categorise any new/emerging risks and risk themes that may merit a position of the Risk Register.

 

A summary of the common Service Plan themes is shown below: 

  • all service areas mentioned the implications of reductions in budgets, insufficient funding and the loss of grants as key risks
  • Local Government reform becoming a distraction to service delivery and the Reshaping Services agenda featured across all Service Plans
  • the fragility/sustainability of services and the failure of services was a key feature in Service Plans such as non statutory services having a higher risk of losing resources, the financial failure of support providers and closure/failure of commissioned providers
  • the capacity to meet demand and access to services was a common theme; this was linked to a variety of factors such as digital exclusion, failure to deliver accessible Library services, meeting demands for growing numbers of children with SEN, service users not being able to access services quickly enough to meet their needs, insufficient staff capacity to undertake timely assessments, inability to meet statutory responsibilities to respond to people who are at risk, and a reduction in service availability due to increased demand and expectations
  • the failure to effectively respond to/implement requirements of new legislation was a common feature in the Service Plans particularly in relation to the Social Services Wellbeing Act, Future Generations Bill and Housing (Wales) Bill
  • workforce issues featured broadly across all Service Plans and covered a range of issues such as recruitment and retention, workforce needs (planning), equal pay issues, loss of experienced staff and knowledge base and staff capacity
  • collaboration of services also featured as a core theme in terms of the ability to manage the collaboration agenda and the failure to engage in opportunities regionally due to lack resources and capacity
  • assets and facilities management features were a recurring theme both corporately and in relation to schools; corporately, this related to compliance of public buildings with current legislation, inability to meet WHQS standards/requirements; in relation to schools, this related to the risk of school closure due to a building failure
  • customer focus and reputational risks featured consistently across the Service Plans; in relation to the customer, this related to the ability to provide appropriate levels of service to our customers in light of reductions in resources/funding and a reduction in the service availability due to increased demand, expectations from the customer base; in terms of the reputational risk, this related to information security breaches, poor performance and increased requirements on the public (leaseholders) to make a financial contribution. 

The Risk Register had now been revised to include 'customer relations' as an additional risk theme based on the risk analysis that emerged from the Service Planning process.  As part of Risk Register refresh work, CRMG would be looking to review and rationalise all existing risk themes to ensure that they remain the most pertinent and relevant ones to capture in the Register.

 

CMT had endorsed CRMGs recommendation that the funding and collaboration risks be downgraded to a low status and therefore removed from the Risk Register.  Although these risks would no longer feature in the Risk Register, CMT agreed that they should continue to be monitored by the Service Areas.

 

In terms of the funding risk itself, the reduced funding position of the Council was likely to continue for the foreseeable future as part of the Public Sector austerity measures.  It was highly unlikely that this could be mitigated by representations to either Welsh Government or Central Government as the position now effectively constituted an issue to be addressed through other actions rather than a risk to be mitigated in its own right.

 

Similarly, the CRMG also agreed that the collaboration risk be removed as a corporate risk and replaced by a risk theme associated with Reshaping Services.  Collaboration was now an integral feature of the majority of strategic projects that the Council undertook such as the regionalisation of Regulatory Services and the regionalisation of Adoption Services.  Although it was proposed that both the funding and collaboration risk be removed from the Risk Register, specific risks associated with these themes would continue to be monitored via Service Plans where relevant.

 

Since the last Audit Committee risk update report in November 2014, four new/emerging risks had been considered by the CRMG.  These included a safeguarding risk, a public buildings compliance risk, a risk associated with the transfer of mental health services to Llandough Hospital and the risk associated with the Deprivation of Liberties Safeguards. 

 

CRMG considered the risks associated with the transfer of mental health services and felt that this was an issue that was more service specific and could continue to be monitored at the Service Plan level.

 

On reviewing the public buildings compliance risk, CRMG recognised that the lack of corporate co-ordination presented a substantial corporate risk to the Council (in terms of potential fines and/or litigation).  However, the Group felt that these were issues that could be resolved without escalating it via the Corporate Risk Register.  Instead, it was recommended that a report be produced for CMT by the Head of Housing and Building Services and the Operational Manager for Property Services that set out all the issues and proposed recommendations.  This report was currently being finalised.  CRMG agreed that this risk would not be added to the Risk Register at present.

 

CRMG agreed that the safeguarding risk should be incorporated on the Risk Register given the cross cutting nature of this risk and the potentially detrimental consequences associated with it should the mitigating actions which are being put in place fail to manage the risk effectively.  This has now been actioned and incorporated into the Risk Register. 

 

In relation to Deprivation of Liberties Safeguards, these were statutory requirements to undertake assessments within given timescales.  The recent Supreme Court ruling to extend protection to a wider population of people had also impacted on capacity within Social Services to meet these requirements.  The CRMG had identified that these were primarily capacity issues that were specific to Social Services and so had limited impact on other service areas.  On this basis, the CRMG recommended that this new risk continued to be monitored via the Service Plan, but that this risk be reconsidered by the Group should the risk escalate. 

CMT on 8th April identified three new risks for inclusion in a Risk Register.  These were the Reshaping Services Agenda, Local Government Reform and Integrated Health and Social Care.  These three strategic policy/service delivery drivers would impact on how services were delivered by the Council to its customers in both the short to medium term.  By identifying these as corporate risks, the Council could closely monitor their impact and put in place appropriate mitigating actions to ensure that the Council could minimise the risk and any detrimental impact.  These new risks had been incorporated in the Risk Register.

 

CRMG on 23rd June, 2015 felt that the remit of the new risk regarding Local Government Reform should be expanded to focus on legislative change (of which Local Government Reform was part).  The Group felt that this would enable the Council to more effectively monitor risks/implications associated with the preparation and implementation of any new legislation that would have a cross cutting effect on the Council such as the Social Services Wellbeing Act and the Wellbeing of Future Generations (Wales) Act.  This proposed revision to the risk was endorsed by CMT and this has now been actioned within the Risk Register. 

 

The removal of the funding and collaboration risks and the inclusion of the three new risks identified by CMT had now been actioned.  There were now 13 risks included in the Corporate Risk Register of which 8 had remained unchanged (kept the same score), 1 risk status had increased (Safeguarding) and 1 risk had decreased (LDP).  The remaining 3 risks (Reshaping Services, Local Government Reform and Integrated Health and Social Care) were new risks, so no direction of travel was applicable.  In terms of risk status, 2 risks were medium/high and 11 risks were medium. 

 

Although most of the risks in the Risk Register had remained relatively static, one of them, in relation to Waste Management was forecast to move in an upward direction based on known circumstances that were on the horizon.  It was forecast that this risk was likely to escalate over time, due to the likely implementation of new legislation that would require the Council to source segregate recycling. 

 

In terms of the LDP, this had now been approved via Full Council on 24th June, 2015 and as a consequence the risk level had now been reduced to a medium score.  Although the LDP was still subject to examination by independent inspectors in Autumn 2015, the risks associated with this had now reduced. 

 

In relation to the safeguarding risk, there had been no developments, changes to this risk since the CRMG last reviewed it, but the Group felt that the status of the risk should be elevated to a medium given the severity of the impact should there be any safeguarding issues that arise. 

 

The Risk Register had been refreshed to ensure that where relevant, any mitigating actions outlined in the Service Plans were reflected in the countermeasures sections of the associated risks.  Further work would be undertaken to ensure that any actions identified through Team Plans would also be appropriately reflected in the Risk Register. 

 

Once the Risk Register had been refreshed, the CRMG would be asked to sign off its content so that it could be published on the Council’s website.  The Risk Strategy would be reviewed and a new version published on the Council’s website, this summer.

 

Members enquired if publicity could be given to the existence of the Corporate Risk Register to inform the public of the issues that the Council was dealing with.

 

Members were advised that much of the content of the Register would be included within the Corporate Plan but, nevertheless consideration would be given as to what publicity could be given.

 

RESOLVED -

 

(1)       T H A T the emerging risk themes identified as part of the 2015/16 Service Planning process, and the current position of Corporate Risks be noted.

 

(2)       T H A T the recommendations made by the Corporate Risk Management Group and the Corporate Management Team regarding changes to be made to the Risk Register be endorsed.

 

Reasons for decisions

 

(1)       To highlight the emerging risk themes as part of the Service Planning process that impact on the Corporate Risk Register and identify the current position of corporate risks for the Council.

 

(2)       To ensure that all corporate risks for the Council are effectively monitored, addressed, reviewed and updated on a regular basis.

 

 

218     ANNUAL GOVERNANCE STATEMENT 2014-2015 (MD) –

 

Committee reviewed the Annual Governance Statement and were requested to recommend its adoption by the Leader of the Council and the Managing Director. 

 

The Accounts and Audit (Wales) Regulations 2014 require every Welsh Local Authority to conduct a review, at least once in a year, of the effectiveness of its system of internal control and the governance arrangements with its Annual Statement of Accounts.  The production of an Annual Governance Statement was a statutory requirement for local authorities in Wales to support the Annual Statement of Accounts.

 

The Annual Governance Statement (AGS) should relate to the mechanism used to demonstrate that, during the financial year ended 31st March, 2015 the Council had an adequate governance regime in place and all business was conducted in compliance with the existing arrangements.  Significant events for developments related 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 reported.

 

The AGS for the 2014/15 financial year relating to the activities of the Council was attached at Appendix A to the report.  It had been drawn up with regard to the Code of Practice on Local Authority Accounting in the U.K.: A Statement of Recommended Practice.  It also had regard to guidance issued by CIPFA/SOLACE in its publication 'Developing Good Governance in Local Government’ and the Council’s Code of Corporate Governance.

 

It was reported that the overall Annual Governance arrangements within the Vale of Glamorgan Council for the financial year 2014/15 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 of the Statement - Significant Governance Issues of the AGS.

 

RESOLVED - T H A T the Annual Governance Statement for 2014/2015 be recommended for adoption by the Leader and the Managing Director.

 

Reason for decision

 

To provide for a review of the Governance Framework and the system of internal control, which had been in place within the Council for the year ended 31st March, 2015.

 

 

219     UNAUDITED STATEMENT OF ACCOUNTS 2014/15 (HOF / S151O) –

 

The Statement of Accounts for 2014/15 were complete and were brought before the Committee for review and comment prior to the commencement of the external audit.

 

Under the Accounts and Audit (Wales) Regulations 2014 the Statement of Accounts must be certified by the Section 151 Officer before 30th June as presenting a ‘true and fair view’.  The 2014/15 Statement of Accounts was certified as such on 30th June, 2015.

 

The 2014/15 Statement of Accounts would be subject to external audit and the audited accounts would be presented to Audit Committee in September 2015 along with the external auditors (ISA260 report) for review prior to being submitted for approval by Council before 30th September.

 

The 2014/15 Statement of Accounts was attached to the report and had been prepared in accordance with the requirements of the International Financial Reporting Standards.  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 2014/15 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, following a review of the unaudited Statement of Accounts for 2014/15, the Statement of Accounts be noted.

 

Reason for decision

 

Following an initial review of the unaudited Statement of Accounts by those charged with governance.

 

 

220     AUDIT COMMITTEE – FORWARD WORK PROGRAMME (HOF / S151O) –

 

Committee received the updated Forward Work Programme for 2015/16.

 

RESOLVED - T H A T the updated 2015/16 Forward Work Programme be noted.

 

Reason for decision

 

To keep the Audit Committee informed.

 

 

221     INTERNAL AUDIT – OUTTURN REPORT – APRIL TO MAY 2015 (OMA / HOA) –

 

Committee were provided with the actual Internal Audit performance against the first two months of the Audit Plan for the year covering April to May 2015. 

 

It was reported that the final word of paragraph 6 i.e. 'today’ should have read 'to date’. 

 

The 2015/16 Internal Audit Plan was submitted to the Audit Committee for consideration and approval on 20th April, 2015.  The Plan outlined the assignments to be carried out and their respective priorities. 

 

The Plan provided for a total of 1,461 productive days covering the period April 2015 to March 2016.

 

The following table showed an analysis of work done in relation to the Plan:

 

Directorate

2015/16

Full Year

Plan Days

Proportion

Of Plan Day

April to May 15

April to May

Actual Days

Resources

415

70

35

Development Services

95

16

21

Visible Services & Housing

186

31

10

Learning and Skills

146

24

14

Social Services

110

18

14

Cross Cutting

334

56

100

Contingency - Unplanned

102

17

43

Contingency - Fraud & Error

73

12

11

 

1,461

244

248

 

The figures showed that 248 actual days had been achieved, which exceeded that expected by 4 days.  It was too early in the new year for Audit Committee to adequately assess Internal Audit performance or for the Head of Audit to provide any opinion on the Council’s overall control environment. 

 

At present the overall structure of the Section was based on 18.5 Full Time Equivalent (FTE) employees.  However, during the latter part of 2014/15, 3 members of the team left the Council to take up positions in other parts of the country or alternative career choices.  Following a recruitment drive, one of the posts had been filled and the individual had been in post now since early June.  Unfortunately, this increase in resource had been recently off-set by the loss of a 0.5 FTE member of the team, who was relocating to another part of the country.

 

Having regard to the issues set out above, it was inevitable that the commitment to deliver 1,461 productive days for the financial year 2015/16 will not be achieved.  It was expected that the shortfall on the year would be circa 90 productive days.  Notwithstanding this, the annual plan would be closely monitored over the coming months to ensure that all high risk areas would be covered.

 

RESOLVED - T H A T the content of the report be noted.

 

Reason for decision

 

To keep the Audit Committee informed.

 

 

222     UPDATE ON THE INTERNAL AUDIT SHARED SERVICE (OMA / HA) –

 

Audit Committee, on 13th July, 2015, considered an update on the Internal Audit Shared Service with Bridgend County Borough Council which proposed an extension to the Partnership Agreement until 31st January 2018. 

 

Cabinet, at its meeting held on 14th March 2012, approved the proposal that the Vale of Glamorgan Council becomes a partner and hosts the Internal Audit Shared Service (IASS) with Bridgend County Borough Council and authorised the Head of Paid Service and the Section 151 Officer, in consultation with the Leader, to make the necessary detailed arrangements under delegated authority to establish the IASS, including admission of further interested parties if appropriate subject to a Partnership Agreement and Contract.

 

The Bridgend and Vale IASS was now in its third year of the three year commitment.  In this short time, considerable service developments and progress had been made.  Overall the performance of the Partnership had been very good in respect of both the delivery of the Audit Plan and the feedback from customers, all of which had been reported regularly to the respective Audit Committees.

 

The stated aim of the IASS was to provide a shared service solution, focused on a series of identifiable and measurable objectives, in which both Councils had an equal share in terms of control, direction and influence.

 

As such, the IASS continued to meet its objectives by:

 

-               Being affordable and representing value for money

-               Enhancing the professionalism and quality of audit services provided to both Councils through shared knowledge and best practice

-               Remaining flexible and responding to changing service requirements and priorities

-               Extending access to specialist audit services and other related disciplines to both Councils

-               Delivering efficiencies and economies of scale

-               Improving the investment in staff training and development and providing opportunities for career progression for staff within the service.

 

Overseeing the IASS was the Joint Partnership Board comprising the respective Section 151 Officers (or their nominees) from each Council.  The Board monitored the performance of the IASS and ensured that it delivered the standards and expectations as set out in the Partnership Agreement.  Whilst the partners jointly oversee the performance of the IASS, the responsibility for the adequacy of the whole system of internal audit remains with the Councils themselves who were responsible for approving Audit Plans and monitoring delivery via their respective Audit Committees.

 

The individual Councils were responsible for overseeing the effectiveness of the internal audit function at Council level, and holding the Head of Internal Audit to account for delivery of the approved Audit Plan.  They were also responsible for the effectiveness of their governance, risk management and control arrangements, hold managers to account for delivery and hold regular progress updates on internal audit work; consider key themes and issues, and take them forward as necessary.

 

The coming together of the two divisions saw the immediate need for a new organisational structure which reduced the number of full time equivalents (FTE) posts between the two divisions from 29 to a maximum of 24 under the new IASS.

 

In respect of overall performance, in 2013/14 both Councils’ annual Audit Plans were achieved and the total cost of service was circa £193k underspent.  This was primarily due to a further reduction in staffing numbers and the number of vacant posts being carried by the service for the period concerned.

 

In 2014/15, both Councils’ annual Audit Plans were achieved although Bridgend achieved 93.5% of the original planned productive days.  Whilst this was a shortfall of 84 productive days, the overall impact was minimal as all high risk areas were covered and the Head of Audit was able to provide the necessary annual opinion on the Council’s overall governance, risk management and internal control arrangements.  The overall total cost of the service was circa £135k underspent and this was due to vacant posts during the year.

 

The budget for 2015/16 for the whole of the Internal Audit Shared Service had been set and showed an overall reduction of 17% from the original budget set in 2013/14.  The Internal Audit challenge would be to continue to provide the annual assurance opinion in a climate where our clients want, and need, to reduce costs.  This includes internal audit costs.  There was a need to look at how we can deliver for less obvious resources and how we use data, rather than people, to deliver the audits.  Our plans and approach would require more flexibility and there would be a need to work even more closely with senior management to ensure resources were employed to the greatest advantage.

 

Both partners had indicated their desire to continue with the partnership and wished to extend the arrangement for a further two years.  The partnership had been successful and it was considered that it would continue to be so.  Both partners had set challenging financial targets and these would have a considerable impact on the audit resources that would be available to 2017/18.  The service would continue to provide the flexibility to react, and be pro-active to changing needs.  Over the next three years, working practices would continue to develop to deliver an excellent service whilst addressing the need to do more with less.  In addition, opportunities for extending the shared service to other neighbouring Authorities would be explored, including the potential for expanding the specialist computer audit service.

 

Having considered the contents of the report, It was

 

RESOLVED –

 

(1)       T H A T Cabinet be recommended to extend the Internal Audit Shared Service Partnership for a period of two years to 31st January, 2018.

 

(2)       T H A T Cabinet be recommended to delegate authority to the Head of Finance / Section 151 Officer and the Operational Manager – Audit, in consultation with the Leader and Managing Director, to explore options for expanding the Internal Audit Shared Service.

 

Reason for decisions

 

(1&2)  To facilitate monitoring of the Internal Audit Shared Service for the Internal Audit function.