| Place: | Cross Room, Civic Centre, West Paddock, Leyland, PR25 1DH |
| Present: | Councillor O'Hare (in the chair), Breakell, Edwards, Mrs Moon, Ogilvie and M Tomlinson. |
| In attendance: | Director of Corporate Governance (Maureen Wood), Head of Shared Financial Services (Susan Guinness), Internal Audit Manager (Clare Ware), Gordon Whitehead (Acting Principal Financial Accountant), Dawn Highton (Principal Auditor), Linsey Roberts (Auditor), Carol Eddleston (Democratic Services Officer) and the Cabinet Member for Finance and Resources (Councillor S Robinson). Representatives from the council?s External Auditors (Audit Commission) Fiona Blatcher and Gareth Winstanley. |
| Public attendance: | 0 |
| Other Officers: | 7 Other Members:- Councillors Clark, Mrs M Smith and P Smith. |
| Item | Description/Resolution | Status | Action | |
|---|---|---|---|---|
| OPEN ITEMS | ||||
| 11 |
Apologies for Absence All members were present. |
Noted | ||
| 12 |
Minutes of the Last Meeting Minutes attached RESOLVED: That the minutes of the meeting held on 14 June be approved as a correct record and signed by the chairman. |
Agreed | ||
| 13 |
Audited Statement of Accounts 2009/10 Report attached Annual Governance Report attached Appendix A 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 (unqualified audit opinion and financial statements free from material error) and the results of the work they had undertaken to assess the council?s arrangements to secure value for money in its use of resources (unqualified certificate). Members of the committee asked a number of questions and made a number of observations on the audit procedure and the auditors' findings: Audit procedure ? in response to questions from the chairman, Mr Winstanley and Ms Blatcher explained that meetings had taken place on a weekly basis with the Head of Shared Financial Services to discuss audit arrangements and the requirements of the new International Financial Reporting Standards. The final audit work, involving two auditors from the Audit Commission, had commenced towards the end of July and concluded mid September. The fact that the same team was working on this council?s accounts as well as those of Chorley Borough Council and the Shared Services Joint Committee had made the process more efficient. Auditors? findings - in response to questions from a number of members about the amendments to the draft accounts, Mr Winstanley and Ms Blatcher confirmed that an amount of ?88,000 should have been classified as an earmarked reserve rather than as a creditor as it was income that the council had received from roundabout sponsorship and was not therefore a liability on the balance sheet. As a consequence of this adjustment the council now had a choice about where to credit this amount within the earmarked reserves. With regard to the auditors? recommendation that the council should ?review and act on the lessons it has learnt from its development and use of shared services to date?, Ms Blatcher and the Head of Shared Assurance Services confirmed that a review of Shared Services against the business plan had taken place and a summary had been presented to the Joint Committee at its meeting in June. The low number of misstatements and necessary adjustments were an indication of the quality of the financial statements which was due in part to regular and effective budget monitoring. Although a statement from the Chancellor indicated that a change in the measure of inflation used for public sector pensions was expected to result in reduced benefit obligations on the council in future, the details were unknown at this stage and other factors might counter the effect of that change. Whilst the external auditors relied on the council to provide it with a great deal of information which subsequently fed into the audit findings, they took pains to cross refer and verify the quality of the data provided. The understatement in the figures in the Related Party disclosure note relating to the financing of the shared services with Chorley had been identified when the external auditors had compared the figures provided in this council?s statements with those of the Joint Committee. The council had achieved significant efficiencies in 2009/10 and would need to carefully monitor planned efficiency savings throughout 2010/11 in the face of the significant financial pressures facing all local authorities. Ms Blatcher took the opportunity to outline the implications for local authorities following the government?s announcement that the Audit Commission would be disbanded. From 2012/13 when this council?s current agreement with the Audit Commission came to an end, it would be able to choose which external auditors it wished to use. The regulatory framework was, as yet, unclear but was expected to be included in the forthcoming Locality Bill. The Audit Commission currently set out specific requirements for how transition to a new external auditor should be managed and Ms Blatcher anticipated that there would be some provisions for the transitionary arrangements in 2012/13. Councillor S Robinson said he had been sorry to hear of the demise of the Audit Commission and had some concerns about what framework would take its place in the future. Members joined him in thanking Ms Blatcher and Mr Winstanley and their Audit Commission colleagues for the work that they had undertaken to date with this council. RESOLVED: (unanimously) That 1) The representatives of the Audit Commission be thanked for attending the meeting and presenting their findings and for their work to date with this council; 2) Officers involved in the post-audit work be thanked for their hard work in ensuring an unqualified opinion from the Audit Commission; 3) The contents of the Auditor?s Annual Governance Report be noted; 4) The revised Statement of Accounts for 2009/10 be approved, and 5) The Deputy Chief Executive be authorised to sign the letter of Management Representation as set out in the Auditor?s Annual Governance Report. |
Agreed | ||
| 14 |
An Overview of the National Fraud Initiative Report (65K/bytes) attached Appendix 1 (2M/bytes) attached Appendix 2 (60K/bytes) attached Linsey Roberts, Auditor, presented a report which outlined the work undertaken by the council in respect of the Audit Commission?s National Fraud Initiative (NFI) and demonstrated how the council was complying with and contributing to the initiative. In response to questions from members, Ms Roberts confirmed that the National Fraud Initiative was publicised in Forward and in council press releases. Reference to the initiative was usually included in articles about recent prosecutions, e.g. relating to benefit fraud and fraudulent claims for single person discount (council tax). Members questioned why, in 2008/09, there were sanctions in only nine of the 1139 cases reported. Ms Roberts explained that there was a three months time-lag between the data being extracted and the results being issued and, in that time, a number of changes in circumstances could have been reported to the council. Mrs Ware pointed out that an individual who appeared on the payroll of more than one organisation could be flagged up although there was no fraud involved. Investigations were carried out by the Benefit Enquiry Unit in accordance with the council?s Anti-fraud & Corruption Strategy and Combating Benefit Fraud Policy. Parameters for sanction and prosecution were set out in these documents and in the Corporate Prosecutions Policy. Ms Roberts undertook to circulate information relating to the amount of overpayments which had been returned to the council. The chairman thanked Ms Roberts for presenting the report and for responding to members? questions. RESOLVED: (unanimously) That 1) The report be noted, and 2) Details of the rate of return of overpayments be circulated to members of the committee, 3) Details of the hotline and enquiry telephone numbers for Benefits fraud and General fraud or NFI (National Fraud Initiative) be added to the ?Useful Contact Numbers? sections on area committee agendas. |
Agreed | ||
| 15 |
Interim Report on Internal Audit Activity Report (234K/bytes) attached Dawn Highton (Principal Auditor) presented a report which advised members of the work undertaken in respect of the Annual Internal Audit Plan in the five months up to the end of August 2010 and gave an appraisal of the Internal Audit Service?s performance to date. The audit plan was on target to be completed and the majority of the completed reviews had resulted in an ?adequate? assurance rating being given. In response to questions from members, Ms Highton confirmed that the audit of ?capital? was currently underway in Quarter 2 as planned. Whilst a review of data quality in its own right was no longer required following the abolition of the Comprehensive Area Assessments (including Use of Resources and Data Quality), it was still considered to be important and would be built into individual service area reviews where relevant. ?Key control issues? were actions which were recommended by Internal Audit and agreed with the key auditees. Unplanned reviews were undertaken either upon request from a particular service area, e.g. a review of the cashing up procedures relating to the Longton Brickcroft donations box, or where the Internal Audit Service had become aware of an issue which warranted some review work, e.g. post opening procedures at the Civic Centre and Worden Arts Centre. Control ratings would be provided in the next quarterly report on areas where work was currently underway and for which ratings had not yet been given. From the audience Councillor Clark observed that some residents may deliberately fail to register on the electoral role to give more credence to another resident?s claim for single person discount and enquired how the council might deal with this. Ms Highton said that the council?s whistle-blowing policy and the National Fraud Initiative were valuable tools in this regard. The chairman thanked Ms Highton for presenting the report and for responding to members? questions. RESOLVED: (unanimously) That the report be noted. |
Agreed | ||
| 16 |
Review of the Constitution - Consideration of Items for Review The chairman circulated a briefing note on the following proposals for the committee to consider as items for review in 2010/11: revision to the existing protocol for member involvement in planning procedures; development of a new protocol for member involvement in partnership working; changes required as a result of new executive arrangements currently required to be implemented at the start of the next Council year; remuneration scheme and Committee Procedure Rules. Members agreed that all of the above areas were appropriate for review but acknowledged the great deal of work and tight timescales involved, given that the committee?s recommendations would need to be finalised by the end of March for consideration by Cabinet and Council before the start of the new Council year. RESOLVED: (unanimously) That 1) The review be undertaken in the following order: (i) Committee Procedure Rules (ii) Protocol for Member Involvement in Partnerships (iii) Executive Arrangements (iv) Remuneration Scheme (v) Protocol for Member Involvement in Planning Procedures 2) The review group be composed of all members of the committee, 3) A draft timetable of review group meetings, to commence late October, be circulated for agreement. |
Agreed | ||
| 17 |
Budget Monitoring Report - Quarter 1: April - June 2010/2011 Report (343K/bytes) attached The Head of Shared Financial Services presented a report which provided an update on the Council?s overall financial position and financial strategy for the first quarter of the financial year and responded to questions and observations from members. The report outlined revenue performance against budget (a net underspending of ?163,000 against the profiled budget); an explanation of budget variations; efficiency savings/additional income against targets, and implications of the coalition budget. The Building Control budget holder was aware of the current income shortfall and was looking at expenditure and how income levels might be increased and efficiencies made. External pressures were involved as building control was very much dependent upon the state of the economy and this authority was not the only one in a similar position at this time. Forecasts going forward were that the service was unlikely to break even. Councillor M Tomlinson acknowledged that the building control situation was unlikely to improve in the short term and sought some assurance that plans and provisions were in place in view of this. The chairman explained that the committee had previously asked the Cabinet Member for Strategic Planning and Housing to investigate the shortfall in the Building Control Account and to take steps to try and alleviate the situation. Councillor Hughes had subsequently done so and updates had been provided to members of the Governance and Scrutiny Committees. Ill health had prevented Councillor Hughes attending the Scrutiny Committee meeting but the Leader was sure that he would be willing to report to a future Governance Committee meeting if requested to do so. The Leader pointed out that some Building Control personnel had been redeployed to Housing for the time being and the Deputy Chief Executive stressed that the council was keen to retain skilled building control officers for when the upturn came and there would be demand for them in a competitive market. In response to a question from the chairman, the Deputy Chief Executive confirmed that the one-off redundancy/severance costs amounting to ?277,000 related to redundancy payment and pension provision for two people and was budgeted to be taken out of the General Reserves. With reference to the overall commentary in 2.3 of the report (page 5), the Cabinet Member for Finance and Resources pointed out that the budget and income monitoring process was much more meaningful in quarter three than in quarter one and he was hopeful that targets would be met by the end of the year. The Head of Shared Financial Services acknowledged the chairman?s comment that the government had indicated that it would offset any budget shortfall arising from a freeze on Council Tax but explained that it was not yet known what the level of compensation might be. The Cabinet Member for Finance and Resources pointed to the positive implication on the budget of the two year pay freeze and contrasted this with the assumption of 5.05% increases in salaries in 2008/09 and 2009/10 made by the actuaries responsible for estimating the assets and liabilities of the County Council Fund of the Local Government Pension Scheme. He pointed out that the pension scheme deficit would be significantly lower if the actuaries were more realistic in their estimations. In response to a question from Councillor P Smith in the audience about whether the deficit valuation was amended to take into account actual pay settlements once known, Councillor S Robinson said that he understood that the effect of the actuarial assumptions was cumulative and employers? contributions were subsequently increased to try to meet the increasing ?liability?. In response to the chairman, Councillor S Robinson said that he would be happy to write to Lancashire County Council to express concern about the way in which the pension scheme deficit was calculated. The Deputy Chief Executive confirmed that concerns had been aired with the actuary at an officer level and discussions in coming months would include requests for clarification of employers? obligations in relation to the deficit in the light of any changes to headcount on an ongoing basis. The chairman noted the significant variance in the capital programme summary on page 7 and the Head of Shared Financial Services confirmed that much of this was due to re-phasing and she predicted that further slippage was likely. Councillor Ogilvie suggested that a fourth column showing projections going forward would make a useful addition to the table. In response to a question from Councillor Edwards, the Head of Shared Financial Services confirmed that the council would have to make a judgement on how the increase in VAT might affect income levels. The Head of Shared Services confirmed that all figures reported were exclusive of VAT. Councillor Ogilvie sought clarification of why a cost saving against employees was recorded under ?expenditure?. Councillor M Tomlinson suggested that it was not in fact an ?underspend? but an efficiency saving that had been budgeted for. The Head of Shared Financial Services explained that there had been an underspend of ?246,000 against the budgeted employee costs. The information had been presented in this way to stop double counting it in the table but she would review the way the information was presented in future reports. Although the implications of the forthcoming Comprehensive Spending Review were not yet known, work was ongoing to look at areas which would have to be examined very carefully and the budget process for the coming year was extremely important. The chairman thanked the Cabinet Member for Finance and Resources and the Head of Shared Financial Services for presenting the report and responding to members? questions. RESOLVED: (unanimously) That 1) The report be noted; 2) Consideration be given to how figures relating to the variation report might be presented with greater clarity in future reports; 3) The Capital Programme Summary be expanded to include projections going forward, and 4) The Cabinet Member for Finance and Resources be requested to write to Lancashire County Council to express concern about the way in which assumptions about rates of salary increases were used to evaluate the pension fund deficit. |
Agreed | ||
| 18 |
Treasury Management - Update Report (149K/bytes) attached The Cabinet Member for Finance and Resources and Gordon Whitehead, Acting Principal Management Accountant, introduced a report which updated the committee on the council?s treasury management activity in quarter 1 of 2010/11. The council had benefited from its deposit in the Clydesdale Bank (average rate 6.69%) which had matured at the end of the quarter but interest rates were anticipated to remain unchanged until at least September 2011 and, as such, the council?s investments were unlikely to achieve as much surplus as originally anticipated. Councillor Ogilvie queried the current forecast net surplus of ?70K less than the budget (page 3) and the chairman expressed surprise that the balances were showing less than expected in spite of reduced spending. Mr Whitehead suggested that this figure might be revised in quarter 2. He acknowledged that there might have been a marginal overestimate in quarter 1 but indicated that current balances were very high. He undertook to produce and circulate a statement for quarter 2 and explain any variance in forecast for the year against budget for the year. Based on an expectation that the council would recover a total of 86% of its deposit in Heritable Bank, 14% had already been written off in the accounts as of 31 March 2010. In response to Councillor Ogilvie, the Cabinet Member for Finance and Resources explained that the variance between the ?19.528M investments shown on page 4 and the total amount shown in Appendix A on page 6 was the ?3.3M. The chairman thanked the Cabinet Member for Finance and Resources and the Acting Principal Management Accountant for presenting the report and responding to members? questions. RESOLVED: (unanimously) That 1) The report be noted, and 2) the committee be provided with a statement for quarter 2 and an explanation of any variance in the forecast for the year against budget for the year. |
Agreed | ||
| 19 |
Forward Plan Plan (42K/bytes) attached Members noted the Forward Plan without further discussion. |
Noted | ||