| Place: | Wheel Room, Civic Centre, West Paddock, Leyland PR25 1DH |
| Present: | Councillors O'Hare (Chairman), A F Ogilvie, Mrs A A Ball, J E J Breakell, Vacancy (2). |
| In attendance: | Corporate Directors (Policy and Neighbourhoods) (John Dakin) and (Resources) (Mike Nuttall), Head of Shared Assurance Services (Garry Barclay), Principal Auditors (Jan Minchinton and Dawn Highton), Democratic Services Officer (Carol Eddleston) and the Cabinet Deputy for Finance and Resources (Councillor Mrs Williams). Representatives from the council?s External Auditors (Audit Commission) Fiona Blatcher and Gareth Winstanley. |
| Public attendance: | 2. |
| Other Officers: | Head of Corporate Governance and one Principal Accountant. Other Members:- Councillors Foster and Titherington. |
| Item | Description/Resolution | Status | Action | |
|---|---|---|---|---|
| OPEN ITEMS | ||||
| 9 |
Apologies for Absence There were no apologies for absence. |
Noted | ||
| 10 |
Minutes of the Last Meeting Minutes attached RESOLVED: That the minutes of the meeting held on 30 June 2009 be approved as a correct record and signed by the chairman. |
Agreed | ||
| 11 |
Audited Statement of Accounts 2008/9 Report attached Statement of Accounts attached Auditor's Annual Governance Report (231K/bytes) attached At the chairman?s invitation, the council?s External Auditors presented their Annual Governance Report which summarised the findings from their audit of the council?s financial statements, the Use of Resources assessment and their conclusion on the council?s value for money arrangements. Mr Winstanley confirmed that the Annual Governance Report was very positive. There were very few amendments to the Statement of Accounts which meant that the Audit Commission could issue an unqualified opinion. The council had been assessed as performing well (level 3) in the Use of Resources (UoR) assessment, (about which more detail would be presented at the next meeting), and its value for money arrangements had been found to be adequate. Members of the committee asked a number of questions and made a number of observations which, in view of the amount of information contained in the report, focused on the audit procedure, the auditors? findings and value for money: Audit procedure ? in response to questions from the chairman, the External Auditors explained that the audit had commenced in early August and had involved a team of 3-4 staff working on site on the accounts of South Ribble and Chorley Borough Councils and the Shared Services Joint Committee. The key contacts had been Susan Guinness (Head of Shared Financial Services and Mike Nuttall (Corporate Director (Resources)). Working papers had been clear and officers had responded promptly to any queries from the external auditors. The new joint working arrangements were working well. The fact that the External Auditors were responsible for auditing both authorities and the joint committee had improved the quality of the audit and had shown that there was a consistent approach across the board. As always, the timescale for completing the audit had been tight but there had been added pressure this year due to the new methodology and timetable for the Use of Resources assessment. From the audience, Councillor Foster enquired whether the council had benefited from a reduced audit fee for 2008/09 as a result of the simultaneous audit of the two authorities and the joint committee. This appeared to have made the audit easier and the council should therefore see some benefit. Mr Winstanley replied that the audit fee for 2008/09 had not been reduced as this had been the first year of the Shared Services Partnership and, as such, benefits would probably not have been easily identified beforehand, but he said that he hoped that there might be some benefit in future. The chairman acknowledged Councillor Foster?s comment but pointed out that the committee had agreed at its last meeting that the audit fee had not been unreasonable. A member of the public asked whether Councillor S Robinson?s accountancy background had had a positive impact on the council?s accounts, especially in view of the Icelandic banks situation. Mrs Blatcher replied that his professional background was unlikely to have had a bearing on the production of the council?s financial statements but his presentation to the last Governance Committee had provided them with a level of assurance that elected members had an understanding of financial matters affecting the council. In response to a comment from a member of the public that residents should be invited to discuss the council?s accounts with the External Auditors, Mr Winstanley pointed out that any local elector was welcome to come and talk to the auditors on an appointed day which was publicised in advance in the Lancashire Evening Post. No residents had attended on the appointed day. He confirmed that residents from other local authority areas did avail themselves of the opportunity. Auditors? findings In response to a question from the chairman about ?None of the changes made have any impact on the Council?s reported outturn position? as stated in para 3 of page 3 of the Annual Governance Report, Mr Winstanley explained that, after the date that the accounts were approved, CIPFA had published amended guidance on the accounting treatment of monies invested in Icelandic banks. Although this had resulted in an increase of the Council?s impairment charge, it had not impacted on the overall outturn position as it was an accounting entry that was reversed out through the Statement of Movement on the General Fund Balance to prevent any impact on council tax at this stage. Mrs Blatcher pointed out that, although reversing out that entry was currently allowed by DCLG , the situation would change at some point in the future at which time there would be an impact on council tax. In response to a request from Councillor Foster for further clarification on this matter, Mrs Blatcher indicated that the latest guidance was that creditors with preferential status, (local authorities were thought to be included), would receive back around 83% of their investments in Landsbanki, although preferential status was still subject to legal challenge. She explained that the increased ?impairment? was the difference between the potential loss based on a return of 83% of investments and that based on a previously expected 95% return. She assured the meeting that the Audit Commission was satisfied that the council had accounted for these monies appropriately and in line with recommended guidance. The Corporate Director (Resources) pointed out that changing information / guidance in the future might result in changes to the way that the accounting of these monies was treated but the Local Government Association?s position at the current time was that local authorities had preferential status, although, as Mrs Blatcher had indicated, this was still subject to legal challenge in Iceland. In response to questions from the chairman, Mr Winstanley explained that materiality levels were calculated on a risk basis and, as this authority was perceived to be relatively low risk, its materiality level for 2008/09 had been calculated at ?919,000, which represented 10% of the authority?s gross expenditure. Mrs Blatcher explained that the triviality level for 2008/09 had been defined as 1% of the materiality level, which meant that the External Auditors were obliged to inform the authority of any errors or adjustments above ?9,100, although they would not necessarily expect the authority to change the accounts as a result of any such findings. The committee noted the External Auditors? findings on the Building Control Account (para 14, page 7 of the report). The chairman explained that the council budgeted each year to break even or generate a surplus on its charges for Building Control Regulations services but this had not been achieved over the three year period to 31 March 2009. Councillor Ogilvie stated that he would take no part in the ensuing discussion as Cabinet Deputy for Regeneration and Planning (Planning and Economic Development). The other members of the committee discussed how best to deal with the matter and concluded that the Cabinet member with responsibility for Regeneration and Planning should be asked to investigate the matter and report back to the committee with an immediate response as to how this situation could be improved by 31 March 2010. In response to questions from Councillor Ogilvie about materiality and triviality levels, Mrs Blatcher explained that the 2008/09 audit had not been more rigorous than that conducted in 2007/08. However, the definition of the triviality level for 2008/09 as 1% of the materiality level, meant that the External Auditors now had to report significantly smaller errors or adjustments than had been the case in 2007/08 when the triviality level was defined as 10% of the materiality level. The Corporate Director (Resources) said that he could not recall anything below ?9,100 being reported to the council previously. A member of the public welcomed the fact that detailed discussions on the accounts now took place in meetings of this committee, but said that more members of the public should be able to hear what officers and cabinet members discussed with the External Auditors. He pointed out that the way the accounts were presented made it difficult for members and members of the public to understand them. The chairman explained that there were statutory requirements for the presentation of the Statement of Accounts and he pointed out that this was a public meeting at which all persons present could ask questions. Mrs Blatcher confirmed that the presentation of the Statement of Accounts was heavily prescribed and changes to the presentation could only be agreed by the Government and CIPFA. Mr Winstanley pointed out that the council had an opportunity to publish a summary of its income and expenditure in a more flexible format in the form of an Annual Report. Had the council not followed the statutory format, the External Auditors would have had to report this in their findings. Value for money In response to a comment from the chairman about the level 3 score in all three Use of Resources themes, Mrs Blatcher said this confirmed that the authority was performing consistently well. It was not yet possible to compare SRBC?s performance against other authorities as national results would not be published until later in the year but a detailed report would be issued in time for the next meeting. The Corporate Director (Policy and Neighbourhoods) said that, whilst the national results were awaited, he saw the overall 3 score as a positive result given the fact that the Audit Commission?s new approach to UoR was widely acknowledged to be a much harder test than that of previous years. In response to a question from Councillor Foster, Mr Winstanley confirmed that this year?s assessment had been totally different and based on a different set of criteria and that it was not appropriate to make a year on year comparison. In response to a question from a member of the public, Mrs Blatcher confirmed that there was no guidance from the External Auditors on salary levels for senior officers of local authorities. In response to questions from the chairman about the adjusted amendments to the accounts shown in Appendix 2 Adjusted amendments to the accounts, Mr Winstanley confirmed that the impairment charge of ?269,362 was as a direct result of recently issued revised guidance on how the Icelandic bank investments should be accounted for. He also confirmed that the Council Tax and NNDR income in advance had been classified incorrectly but this had not affected the overall creditors balance on the Balance Sheet. In response to an observation from Councillor Breakell about the values of errors shown in Appendix 3 Unadjusted misstatements in the accounts, Mrs Blatcher pointed out that the figure relating to the Cash Flow Statement had been derived from supporting reconciliation papers submitted rather than in the Statement of Accounts which the committee had seen. She said that, whilst the errors identified in Appendix 3 were not trivial, they were not material but the External Auditors were required to bring them to the council?s attention without requiring the statements to be adjusted. She reassured the committee that the fact that the items in the Cash Flow statement did not balance did not cause the Audit Commission concerns about the statement. The Corporate Director (Resources) acknowledged that it was notoriously difficult to reconcile some items on Cash Flow statements in local authorities. In response to questions from the chairman, the Corporate Director (Resources) explained that the understatement in the provision for Council Tax bad debts provision in 2008/09 would be taken into account when Bad Debt Provision was calculated for 2009/10. Had the error been material, the accounts would have been adjusted, but, whilst it was ultimately the committee?s decision on how this error should be handled, an adjustment would impact on a number of different statements and he would recommend that this item remain unadjusted. In response to a comment from Councillor Ogilvie, the Corporate Director (Resources) assured the committee that any errors identified below the ?919,000 threshold were considered and a decision on whether or not to adjust was taken in the context of the individual item concerned. In response to a comment from Councillor Foster about continuing pressure on the council?s cash flow, the Corporate Director (Resources) said that the error was identified in a year-end statement which could only be produced at year-end but he assured the meeting that the bank reconciliation and other key reconciliations were perfomed on a regular basis. Following this discussion, members agreed unanimously to accept the accounts with unadjusted misstatements. In response to a question from a member of the public, the Corporate Director (Resources) confirmed that any errors identified in the Statement of Accounts after its publication could still be brought to the attention of the council. The Corporate Director (Resources) briefly highlighted key points from the covering report to the Statement of Accounts which had been drafted after discussions with the External Auditors. The chairman observed that the totals showing under credit risk (page 44) appeared to have changed by different amounts although he would have expected them to balance. The Corporate Director (Resources) explained that the council had had to write down a greater amount for the Landsbanki investments and that the amount received from the Heritable bank had been higher than what had been expected in July. Referring to the Annual Governance Statement (pages 12 - 19), the chairman said that it had been agreed at the last meeting that consultation with local residents should take place on their perception of the council?s ethical arrangements, but this did not appear in the Annual Governance Statement in the audited Statement of Accounts. From the audience, the Head of Corporate Governance confirmed that the committee had indeed agreed that such consultation had taken place and discussions had already been held with the Community Engagement Officer on how this could be built into the next Citizens? Panel Survey. Whilst the Annual Governance Statement had not been amended to reflect this decision, the Corporate Governance Action Plan resulting from the AGS now included consultation with residents on ethical arrangements, and progress on the Action Plan would be reported to the January meeting. It would certainly feed into the assurance process for 2009/10 and members would see evidence of progress in the Statement of Accounts for 2009/10. The chairman thanked the External Auditors for presenting their report and for responding to questions. RESOLVED: That the committee: 1) note the contents of the Auditor?s Annual Governance Report, 2) approve the revised Statement of Accounts for 2008/09, 3) authorise the Chairman and the Corporate Director (Resources) to sign the letter of management representation as set out in the Auditor?s Annual Governance Report, subject to the inclusion of reference to the Governance Committee in place of Accounts Committee, and 4) request that the Cabinet Member for Regeneration and Planning investigate the council?s failure to recover the full cost of providing the Building Control service over the three year period ending 31 March 2009 and report back to the committee with an immediate response as to how this situation might be improved by 31 March 2010. The chairman signed the Audited Statement of Accounts and letter of management representation 2008/09. [Mrs Blatcher and Mr Winstanley left the meeting at this point]. |
Agreed | ||
| 12 |
Internal Audit Interim Report as at 28th August 2009 Report attached The Head of Shared Assurance Services presented the first interim progress report for the current financial year. He reported that the 2009/10 Internal Audit Plan was well resourced and all the work carried out so far was on or around budget. Work undertaken to date had been a mixture of audit reviews and proactive support work. Appendix 3 showed that Internal Audit performance indicators were on or around target for the first four indicators. Information on the implementation of agreed management actions would be reported to the January meeting. In response to questions from Councillor Ogilvie, the Head of Shared Assurance Services explained that it was not uncommon to overspend or underspend days in audit work and he did not foresee any difficulty in recovering overspends. He did not believe that the work of the Internal Audit team had been affected by the presence of the External Auditors, as the only area that they had both worked on had been the Annual Governance Statement. He explained that Internal Audit was currently awaiting requests for audits which were shown in Appendix 1 as planned for all Quarters but which had not yet started. In response to this, Councillor Ogilvie recommended that future reports should make this clear as, as currently written, it could be interpreted as the Internal Audit team being behind schedule. In response to questions from Councillor Foster about the auditing of all areas of Shared Services being identified for Quarter 4 rather than throughout the year, the Head of Shared Assurance Services explained that it had been agreed with senior management that it was not appropriate for processes to be reviewed in the first half of the year. The chairman thanked the Head of Shared Assurance Services for his report and for responding to questions. |
Agreed | ||
| 13 |
Budget Monitoring Report - Quarter 1: April-June 2009/10 Budget Monitoring Report (341K/bytes) attached Councillor Mrs Williams presented the report which provided an update on the council?s overall financial position and financial strategy for the first quarter of the current financial year. She said that the target savings on possible funding from the South Ribble Partnership would not be achieved in the current financial year, as the Partnership was unlikely to receive its performance reward grant until March 2010. The chairman expressed surprise at the ?150,000 one-off savings from vacant posts during July and August. The Corporate Director (Resources) said that this had provided an opportunity to deliver efficiencies on targets set at the start of the financial year, given that a full year?s savings would not be delivered as a result of C-SMART reviews alone. Some planned C-SMART reviews had not yet been completed and a number of vacancies had been left open until the reviews were completed and it was known what, if any, restructuring might be required. He confirmed that the ?150,000 was just for July and August but, in addition to vacant posts, this figure included provision for the, as yet unsettled, pay award which had been estimated at ?250K for the year. Councillor Mrs Williams explained that it also included employee on-costs which ran at approximately 25%. In response to a comment from the chairman that this represented in the region of 27 vacancies, the Corporate Director (Resources) said that there had been approximately 30 vacancies at the start of the year and the Corporate Director (Policy and Neighbourhoods) said that several employees had left the authority in recent months. In response to a question from a member of the public, the Corporate Director (Policy and Neighbourhoods) confirmed that redundancy had been kept to an absolute minimum, partly through effective redeployment. In response to questions from the chairman, the Corporate Director (Resources) explained that the report contained information on efficiencies made in July and August in order to provide the committee with up-to-date information. The ?50% of the total annual target? referred to on page 5 of the report included savings that had already been delivered and that would be delivered. The chairman noted a comment from Councillor Foster that he believed it was wrong for a member of the Scrutiny Committee to present a budget monitoring report to this committee, but pointed out that Councillor Mrs Williams? presentation to the committee was in her capacity as Cabinet Deputy for Finance and Resources. In response to a comment from a member of the public, Councillor Mrs Williams said that rumour of a 10% reduction in headcount across the board was unfounded. The Corporate Director (Policy and Neighbourhoods) explained that some of the proposed efficiency savings in Appendix D to the budget were known to be achievable at the time the budget was set and some were estimates in advance of outcomes from C-SMART reviews. In response to a question from the chairman, the Corporate Director (Resources) said that the ?34K savings target for Area Working/Enforcement shown in Appendix 2 was still work in progress. A member of the public queried the statement on page 4 (bullet 6) about ?the unprecedented rise in fuel has meant increase to fuel costs?. The Corporate Director (Resources) explained that the council?s contractual arrangements with its leisure partner included an index around energy which was separate from the RPI. This was indexed annually around December time and in 2008 this was likely to have been when fuel costs were at their highest. If fuel prices continued to fall this year, it was likely that that would be reflected in the index set in December 2009. In response to a question from a member of the public about proposed savings on general admin/secretarial support (Appendix 2, page 8), the Corporate Director (Policy and Neighbourhoods) explained that most of the savings achieved so far had been achieved through redeployment. In response to a question from a member of the public about the Capital Programme, the Corporate Director (Resources) explained that, at the time the budget was set, there were discussions about a joint development with Lancashire County Council. This was no longer the case as the county council was now proposing to build its own site and the figure budgeted for the joint development would be removed. The chairman recommended that the format of the report should be changed in future to make it clearer. |
Agreed | ||
| 14 |
Treasury Management ? Update Report attached Appendix B attached The Corporate Director (Resources) introduced a report updating the committee on several matters relating to the council?s Treasury Management Strategy. In response to questions from the Chairman about Appendix A, the Corporate Director (Resources) confirmed that funds in ?call? accounts could be accessed immediately. The maximum possible [?2 million] was currently invested in the Bank of Scotland and Abbey call accounts. Different interest rates offered by the same institution simply reflected different durations of deposit (one month, two months etc). Investments in Heritable Bank Limited and Landsbanki which were currently frozen were shown at their full value. In response to a question from Councillor Breakell about the HSBC Deposit Account, the Corporate Director (Resources) explained that this account paid 0.5% below the base rate, i.e. 0%. This account was effectively the council?s current account and was used for salaries and cheque payments so was subject to significant fluctuation throughout the month. Members noted the proposed key changes to CIPFA revised Treasury Management Code and acknowledged that this committee was responsible for ensuring effective scrutiny of the council?s Treasury Management Strategy and policies. Councillor Breakell said that he would benefit from further training. The chairman said that he felt that the committee had a good composition and CIPFA itself did not advocate audit / governance committees made up of accountancy and finance experts. RESOLVED: That the report be noted. |
Agreed | ||
| 15 |
Forward Plan Forward Plan attached The chairman commented that the agenda for this meeting had been very heavy and there seemed to be a large number of items scheduled for the January 2010 meeting. He would prefer to limit future agendas to a few key items, even if this meant that the committee had to meet more regularly. The Corporate Director (Resources) reported that the External Auditors had indicated that the Annual Audit and Inspection Letter and the Use of Resources Auditor Judgements/Data Quality Report were likely to be ready towards the end of November, and as such, the committee might consider holding a meeting in December to consider those, along with the Corporate Risk Monitoring Mid Year Progress Report and Budget Monitoring Report which would be considered at the Scrutiny Committee meeting on 24 November. Members felt that that was a sensible approach. The Corporate Director (Policy and Neighbourhoods) said that the Review of the Constitution item could be brought forward to the December meeting if members wanted an opportunity to shape the review before detailed proposals were brought to the March meeting. The chairmen of the Governance and Scrutiny Committees were meeting with the Corporate Directors (Policy and Neighbourhoods) and (Resources) on 23 September to discuss any areas of overlap between the two committees and their discussions may have a further impact on the Forward Plan. RESOLVED: 1) That the Forward Plan be amended in accordance with the discussions above, subject to discussions between the chairmen of the Governance and Scrutiny Committees and the Corporate Directors (Policy and Neighbourhoods) and (Resources) and 2) that a meeting of the committee be scheduled for December, subject to the discussions in 1) above. |
Agreed | ||