Meeting documents
Corporate Audit Committee
Tuesday, 18th May, 2010
BATH AND NORTH EAST SOMERSET COUNCIL
CORPORATE AUDIT COMMITTEE
DRAFT MINUTES OF THE MEETING OF 18TH MAY 2010
Present:- Cllr Tim Ball, John Barker (Independent Member), Cllr Andy Furse (Chairman), Cllr Malcolm Lees (sub, Cllr Bryan Organ), Cllr Brian Simmons, Cllr Brian Webber
Also in attendance: Andrew Pate (Director of Resources and Support Services), Tim Richens (Divisional Director - Finance), Jeff Wring (Head of Risk and Assurance), Andy Cox (Risk Manager), Gary Adams (Finance & Resource Manager), Stephen Malyn (District Auditor, Audit Commission), Chris Hackett (Audit Commission)
1 EMERGENCY EVACUATION PROCEDURE
The Clerk read out the procedure.
2 ELECTION OF VICE-CHAIR
RESOLVED that a Vice-Chair was not required on this occasion.
3 APOLOGIES FOR ABSENCE AND SUBSTITUTION
Apologies were received from Cllrs Armand Edwards and Bryan Organ. Cllr Malcolm Lees substituted for Cllr Organ.
4 DECLARATIONS OF INTEREST
There were none.
5 TO ANNOUNCE ANY URGENT BUSINESS AGREED BY THE CHAIRMAN
There was none.
6 ITEMS FROM THE PUBLIC - TO RECEIVE DEPUTATIONS, STATEMENTS, PETITIONS OR QUESTIONS
There were none.
7 ITEMS FROM COUNCILLORS AND CO-OPTED AND ADDED MEMBERS
There were none.
8 MINUTES: 2ND FEBRUARY 2010
These were approved as a correct record and signed by the Chairman.
9 TREASURY MANAGEMENT STRATEGY STATEMENT AND ANNUAL INVESTMENT STRATEGY 2010/11
The Divisional Director - Finance introduced this item. He said that the report contained in the appendix had been considered by Council at its meeting on 16 February 2010 and was being presented to the Corporate Audit Committee for comment in accordance with the revised CIPFA Treasury Management in Public Services Code of Practice.
A Member said that it was regrettable that the report had only come to the Corporate Audit Committee after the Council meeting and that it would have been more useful if the Committee had been able to comment on it before. The Divisional Director - Finance responded that this would be possible in future. Unfortunately, the revised CIPFA Code had not been adopted by the Council until the February meeting, so it had not been possible on this occasion. The Finance and Resource Manager said that in future it should be possible to present the report to the Committee in January before it was considered by the Council in February. Another Member suggested that as the Strategy set a financial framework, it would be better if the Committee had a chance to comment on it before the budget process began. The Divisional Director - Finance replied that this would be difficult, because certain aspects of the Strategy, such as the setting of prudential indicators, had to be aligned with budget setting. A Member thought that the Council would not be able to review its decision to approve the Treasury Management Strategy for six months. The Divisional Director - Finance replied that the Council would be able to amend it at any time to reflect market conditions or other factors, including recommendations from the Committee.
A Member commented that public finance was likely to in an uncertain state for some time as the government strove to reduce public debt, and a steady rate of economic growth could not be assumed as in the past. The Committee needed to be satisfied that adequate governance arrangements were in place to address this situation. The Divisional Director - Finance said that officers monitored a wide range of financial information in an effort to anticipate trends; for example, investments in Spain had been reduced before the recent turbulence in the Spanish finance sector. The Director of Resources and Support Services said that it was conceivable that financial conditions could impact on the Strategy, but suggested that they were more likely to fall within the remit of the Corporate Performance and Resources (CPR) O&S Panel than that of the Committee, which was concerned with resources not governance. In response to a question from the Chairman, he said that a variety of financial reports were prepared, for example an annual report on Treasury Management, copies of any of which could be provided to the Committee. A Member suggested that the Committee should only consider exceptions noted in reports, its role being to ensure that proper governance was in place.
RESOLVED
(i) to note the 2010/11 Treasury Management Strategy and Annual Investment Strategy;
(ii) to review the 2011/12 Treasury Management Strategy and Annual Investment Strategy before it is submission to Council in February 2011.
10 PROGRESS OF IFRS (INTERNATIONAL FINANCIAL REPORTING STANDARDS) IMPLEMENTATION
The Divisional Director - Finance introduced the report. He reminded Members that a detailed report had been presented at the last meeting of the Committee; the present report was a brief update. Finance officers were raising awareness about the need for International Finance Reporting Standards (IFRS) compliance through the senior managers' internal information bulletin, and training sessions and regular meetings were being held for key staff. He drew attention to paragraph 4.4 of the report and said that all the outstanding issues in relation to the Council's property leases would be resolved shortly.
Mr Hackett drew attention to the comments on the implementation of IFRS contained in the 2010/11 Audit Fees Letter.
A Member asked whether Finance staff resources were sufficient to ensure IFRS compliance. The Divisional Director - Finance replied that there was a particular resource issue in relation to the preparation of the Council's annual accounts. Extra resources had been engaged, but there was a long-term review of financial management with the aim of securing capacity without increasing expenditure.
RESOLVED to note progress to date in the implementation of IFRS.
11 ANNUAL GOVERNANCE STATEMENT
The Head of Risk and Assurance presented the report. He said that the Governance Statement was a management statement, which would be signed by the Chief Executive and the Leader of the Council. He circulated a "long list" of eight significant issues being considered for inclusion in the Council's Annual Governance Statement 2009/10.
He drew attention to the criteria for identifying significant issues contained in paragraph 4.7 of the report. He commented on the items in the list.
1. Economic Downturn and Financial Challenge to the Council
He said that the impacts of the economic downturn were only just being felt last year and they were more apparent now. Regular reports had been made to the Cabinet and the CPR O&S Panel. The Council had lost income from parking charges and planning fees. The Chairman noted the reference to the risk that the NEET (young people not in employment, education or training) Stretch Target would not be met, and said that the number of NEETs was likely to increase. However, he had been pleased to hear that young single mothers were increasingly returning to education. A Member commented that training for young people was voluntary, yet their failure to take up training affected one of the Council's performance indicators. The Director of Resources and Support Services responded that Bath and North East Somerset was performing well in this regard compared with the regional and national average, and the Council's response to this target informed the work of every service. He acknowledged, however, that performance against the target was partly outside the control of the Council.
2. Community Governance Review - Norton Radstock Town Council
This was taking place because of two petitions from the Ward.
3. Bath Transport Package - Planning
This qualified as a significant issue because it had attracted keen public interest. Funding risks remained. The Director of Resources and Support Services said that there were fall-back plans in relation to all capital projects.
4. Severe Weather
In January there had been heavy snow falls, severe ice and freezing temperatures. This had impacted on the ability of the Council to deliver the full range of services. There had been significant achievements, as detailed in the document circulated, but the Council needed to monitor how it would continue to deliver critical front line services in similar circumstances in future.
5. Organisational Change
In 2009/10 there was organisational change within Customer Services Directorate. Planning and Transport and Environmental Services were restructured and there were redundancies.
A Member expressed concern that there was a risk of the Council becoming top heavy if only front line staff were reduced, and suggested that balance should be maintained by appropriate reductions in more senior staff. The Director of Resources and Support Services responded that the responsible Director had taken a view of the appropriate balance and that he could not second-guess his decisions. He emphasised that in a situation of ongoing change it was important that the Council had sufficient management capacity.
A Member asked whether resource issues posed any risk for Council/PCT integration. The Head of Risk and Assurance replied that Council/PCT integration was identified as a significant risk in the 2008/09 statement, and a lot of work had been put into establishing the governance framework for the partnership. Ongoing integration would not be a governance issue.
6. Information Security
Audit reviews had identified issues relating to the management of key information management systems within the Council. All of the issues identified had been accepted and action plans put in place. Internal Audit would look at all these areas during 2010.
7. Information Compliance
There were a number of one-off issues:
- role of third parties in holding credit card information
- Data Protection breaches where personal information has been mislaid or incorrectly used
- inability to archive personal information from a key system
Where a review had taken place an action plan had been agreed and would be monitored by Internal Audit in 2010.
8. Agency Staff
The Council has a joint framework agreement with Wiltshire County Council for the procurement of a large majority of agency staff employed by the Council. Failure to use the contract and use nominated suppliers can result in claims from the nominated suppliers for loss of income. In 2009/10 a small payment had to be made in settlement of such a claim. A new contract will be let in 2010/11 which will reduce this risk.
A Member wondered whether the breach of the contract had been caused by the ignorance of an individual or some systemic reason. The Head of Risk and Assurance replied that it arose from a mixture of issues. A supplier of agency staff had made a direct approach to the Council offering a lower rate.
A Member expressed concern that the existing agreement made it difficult for local people to get agency jobs with the Council and that therefore the Council was not supporting the local economy to the extent it should. The Head of Risk and Assurance acknowledged this might be a problem with the existing contract and that it would be considered in the re-tendering process.
A Member commented that this type of framework agreement had been popular when the economy had been growing, but that it might not be advantageous in current conditions. He wondered whether this had prompted re-tendering. The Head of Risk and Assurance responded that the current contract was approaching its natural end, but it was felt that better value for money could be obtained from a neutral vendor contract arrangement.
Members felt that issue no 2 (Community Governance Review - Norton Radstock) might not merit inclusion in the final list.
RESOLVED to note the 'long list' of issues proposed for inclusion in the Annual Governance Statement 2009/10.
12 RISK MANAGEMENT STRATEGY
The Head of Risk and Assurance presented the report. He reminded Members that they had been informed at the September 2009 meeting that the strategy needed to be refreshed to take account of Council/PCT integration. A number of meetings had been held with the PCT to discuss differences in approach and methodology between their risk management strategy and the Council's. For example, the Council used a 60:40 weighting for the impact and probability of a risk, whereas the PCT used a simple 5 x 5 matrix. Council officers were willing to adopt the 5 x 5 matrix and to allow for a standardised approach for the Council and the PCT in the joint strategy. The draft strategy had been considered by the PCT Audit & Assurance Committee on 6th May and they had felt that the Council's methodology was on balance the best option and that there should be a uniform joint strategy. The core strategy was contained in Appendix 1 to the report. He drew attention to the Risk Management Vision & Objectives on page 6 of the document.
A Member noted that there were two audit committees, the Council's and the PCT's, and that whereas the Council's audit committee met in public, the PCT's did not. He felt there was a lack of transparency in relation to PCT issues. The Head of Risk and Assurance replied that was the way in which the NHS operated and it could not be changed. However, the PCT had been very open with Council officers and had allowed them to attend meetings of their Audit Committee. The Chair had attended a meeting to discuss whether it might be possible to establish a joint audit committee. A workshop would be held later in the year to further aid mutual understanding of each organisation's obligations in relation to audit issues. The Director of Resources and Support Services said that joint working with the PCT would not compromise the Council's own governance arrangements. The Member said that he was concerned by the possibility of events in the PCT impacting on the Council. The Head of Risk and Assurance replied that issued relating to the PCT and the RUH appeared on the financial dashboard used by the Council's finance officers and that there were excellent communications between the officers of the two organisations.
RESOLVED to note the draft Risk Management Strategy.
13 INTERNAL AUDIT ANNUAL REPORT
The Head of Risk and Assurance presented the report. The areas he wished to highlight were:
- Internal Audit had spent a great deal of time working with PCT internal audit and NHS Counter Fraud Service on issues affecting the Council/PCT partnership and establishing protocols
- savings of £150,000 had been achieved as a result of the audit and 'sign-off' of grant claims
- 100% of schools had achieved the Financial Management Standard in Schools (FMSiS)
He drew attention to his judgment, contained in paragraph 4.24 of the report, that
'it is my opinion that at this current time the Council's Internal Control framework and systems to manage risk are satisfactory.'
He reminded Members that a paper about future options for delivery of the Internal Audit service had been considered at the previous meeting. Since then a project manager had been appointed. An update would be given to Members, probably at the September meeting.
The Chairman commented that the performance figures and benchmarking figures were good and reflected credit on the service. Members were extremely pleased that all schools had now achieved FMSiS and congratulated the officer who led on this.
RESOLVED
(i) to note the summary of audit work during 2009/10;
(ii) to approve the Internal Audit Plan for 2010/11.
14 EXTERNAL AUDIT - OBJECTION TO THE ACCOUNTS
The District Auditor explained that an objection had been raised by a member of the public that the appointment of a consultant had been illegal. The report presented his conclusion, which was that there had been no illegality, but that there had been some procedural weaknesses.
The Head of Risk and Assurance said that the report would inform future risk assessments.
RESOLVED to note the report.
15 EXTERNAL AUDIT PROGRESS REPORT UPDATE
Mr Hackett presented the report.
RESOLVED to note the report.
16 EXTERNAL AUDIT FEES LETTER - 2010/11
The District Auditor presented this item. He said that the fees given in the attached letter were indicative and would be revised in the light of the 2009/10 audit. He drew Member's attention to the 5.8% uplift in fees to £303,776 because of work associated with IFRS compliance. However the increase of £16,776 would be refunded from Audit Commission reserves in recognition of severe financial pressures. There would be a separate fees letter in respect of the audit of the Avon Pension Fund which could not be completed in time for the meeting.
Members noted that this would be the last occasion on which Mr Malyn would attend a meeting of the Committee, as he was moving to a new role within the Audit Commission. They thanked him for his work with the Committee and wished him well for the future.
RESOLVED to note the report.
The meeting finished at 6.48pm.
Chairman.....................................
Date signed and confirmed..................