| Place: | Cross Room, Civic Centre, West Paddock, Leyland, PR25 1DH |
| Present: | Councillors O'Hare (in the chair), Breakell, Mrs C J Moon, Ogilvie and M Tomlinson |
| In attendance: | Head of Shared Assurance Services (Garry Barclay), Head of Shared Financial Services (Susan Guinness), Internal Audit Manager (Clare Ware), Principal Auditor (Dawn Highton), Democratic Services Officer (Carol Eddleston) 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: | 1 |
| Other Officers: | 1 Other Members:- Councillors Clark, Hamman and P Smith |
| Item | Description/Resolution | Status | Action | |
|---|---|---|---|---|
| OPEN ITEMS | ||||
| 20 |
Apologies for Absence All members of the committee were present. |
Noted | ||
| 21 |
Minutes of the Last Meeting Minutes attached RESOLVED (unanimously): That the minutes of the meeting held on 22 September 2010 be approved as a correct record and signed by the chairman. In relation to minute no 17 4) the Cabinet Member for Finance and Resources explained that representation to Lancashire County Council would be made by the Chief Executive in conjunction with other Lancashire Chief Financial Officers about the actuarial assumptions regarding rates of salary increases were used to evaluate the pension fund deficit. |
Agreed | ||
| 22 |
Annual Audit Letter - SRBC Audit 2009/10 Report (254K/bytes) attached Representatives from the council?s external auditors (Audit Commission) presented the statutory Annual Audit Letter which summarised their work on the statement of accounts, gave an unqualified audit opinion, gave a value for money conclusion and recognised the challenges that the council would face in the future, with this council being better placed than many to face those challenges. In response to a number of questions from the chairman, Ms Blatcher explained that, although the report was very similar in content to the Annual Governance Report submitted to the September meeting, the external auditors were statutorily obliged to produce two separate reports: one before the work on the accounts was completed and one afterwards. The findings in the report were very pleasing and, compared to other local authorities, this council was ?one of the better councils? due to a combination of processes and procedures and strong and effective leadership at both a member and management level. The move to international financial reporting standards, whilst not a particular concern, undoubtedly signified a considerable amount of work but this council had put in place all the necessary arrangements that it could do. Mr Winstanley said that the Audit Commission had undertaken a couple of ?snap surveys? in the course of the year to gauge how the council was progressing and was happy to see that it was moving in the right direction. South Ribble Borough Council had strong governance arrangements in place which were constantly being strengthened and the Internal Audit service played a role by testing those arrangements. The Governance Committee fulfilled its role well by providing a significant level of robust challenge. The Audit Commission had not identified any areas for improvement but stressed the significance of the challenges ahead for all local authorities. Councillor Ogilvie said he found the report very pleasing and congratulated all those involved. He referred to page 4, paragraph 5 of the Annual Audit Letter and enquired whether the council?s forward projections over the next five years were based on a recovery from Landsbanki of 95% or 38%. The Cabinet Member for Finance and Resources confirmed that a recovery of 95% was the best advice that the council had at this time and financial modelling was based on this and not a 38% recovery. Legal challenge to the ?preferential status? of local authorities was expected to start in Icelandic courts at the end of January but guidance from the Local Government Authority?s legal advisors was that this status was solid and for this reason no modelling based on 38% would take place unless that guidance changed. Ms Blatcher confirmed that the reference on page 10, para 32 to ?update treasury management strategies? was a generic concern around the global economy rather than specific to this council and was further complicated by recent government announcements regarding borrowing from the Public Works and Loans Board. She acknowledged that the council already had ?robust arrangements? in place to do what was referred to in paragraph 32 and agreed with Councillor Clark?s suggestion that it was more about a need to continually monitor and review its arrangements. Councillor P Smith said he was overjoyed to read the report which showed how the council was moving forward and saving money. He congratulated all members and officers who had contributed to this. The Cabinet Member for Finance and Resources said he was very satisfied with the report and in particular with the references to governance and scrutiny and the process for challenging the finance and resources portfolio. This council had a good track record of efficiencies, was not in debt and was well ahead on shared services. Feasibility and preparatory work on shared services was very complex and took a good deal of time before any shared service came to fruition. Ms Blatcher agreed that the practicalities of shared services were very complex and although some authorities in other parts of the country were involved in sharing services on a larger scale, South Ribble Borough Council was leading the way in Lancashire. The member of the public queried the amount of time that members of the public had to study the accounts before they had to be signed off. Ms Blatcher pointed out that the council had improved its arrangements over the last two years to allow a longer period of time for any necessary amendments identified to be incorporated before the accounts were signed off. In response to the member of the public Ms Blatcher said that, as far as the Audit Commission was aware, the council was not ?near the wire? or ?on the bone? as far as making efficiencies were concerned. Members joined the chairman in thanking Ms Blatcher and Mr Winstanley for presenting their report and responding to questions. RESOLVED (unanimously): That the report be noted. |
Agreed | ||
| 23 |
Internal Audit Progress Report as at end October 2010 report (326K/bytes) attached The Internal Audit Manager, Clare Ware, presented the second interim report of 2010/11. Referring to Appendix 1, Internal Audit Plan 2010/11, she was pleased to report that there had been no areas of overrun since the last meeting. Appendix 2 showed that for the majority of completed reviews the Internal Audit service had been able to give ?adequate? ratings with only one case of ?limited?. Appendix 3 was a revised audit plan showing a net reduction of days which could offer a potential contribution to the efficiencies for 2010/11 across the shared service. Appendix 4 included some performance information relating to Internal Audit. As reported to the last meeting, the council was still awaiting feedback from the Audit Commission?s triennial review of the Internal Audit Service but it was hoped that this would be available to incorporate into the report to the next meeting. The chairman commended the overall customer satisfaction rating for Internal Audit of 98% from respondents at South Ribble and said this reflected what was a good, strong and robust Internal Audit team. Councillor Breakell queried why the days had been originally budgeted for if they could be reduced and not ?materially impact on the level of audit coverage provided?. The Internal Audit Manager explained it was a relatively small number of days and there would be some review work that would be carried forward into the risk assessment for the 2011/12 Audit Plan. In response to the chairman, Mrs Ware explained that there were currently a number of vacancies in the Internal Audit structure which had not been filled but which had allowed a number of days to be purchased from Lancashire County Council?s audit service. It was now proposed to procure less days from LCC but without jeopardising the overall assurance on the audit plan. Councillor Mrs Moon questioned whether certain elements in the audit plan were not essential in the first place if the days originally allocated to them were now being offered up as a saving. Councillor M Tomlinson suggested that the outstanding work would still need to be carried out at some point. The Head of Shared Assurance Services referred members to Appendix 3 which detailed why certain work would not or could not be undertaken in 2010/11 and why the days allocated to it could therefore be offered up as efficiencies: Emergency planning/Business continuity ? restructures needed time to be embedded; Dedicated resource on Data Quality no longer required due to abolition of Comprehensive Area Assessment and Use of Resources regimes (although work would continue on data quality wherever necessary in individual service reviews); the future of Leyland Board was currently under consideration and Refuse collection/recycling contract was no longer appropriate for review this year to allow the new contract arrangements to be embedded. This represented a 10% reduction in the audit plan which was being offered up as a saving. In response to a comment from Councillor Ogilvie about the significant overspend on irregularities and residual work from 2009/10, the Head of Shared Assurance Services, Garry Barclay, pointed out that it was usual to have some overruns and some underruns. Councillor Mrs Moon pointed out that the savings identified might not be savings in the long term and expressed her hope that the committee would not make decisions in the future not to do certain work purely for financial reasons. In response to questions about the customer satisfaction survey, Mrs Ware explained that the survey had been sent to service manager level and above at both Chorley and South Ribble Borough Councils. Internal Audit had received an overall customer satisfaction rating of 98% from respondents at South Ribble, with the rating from respondents at Chorley being in the high 80%, with no clear reasons for the difference in ratings. Separate from that survey, all audit clients (auditees) were routinely sent a customer satisfaction questionnaire at the same time as their audit report. This questionnaire included questions on the timing of the audit, the courteousness of the auditor, the style of the report and the value of the recommendations. The results of the questionnaires were analysed twice yearly and only very rarely did the result of the report have a negative influence on the responses to the questionnaire. Councillor Ogilvie queried how the proposals for efficiency savings had been made in view of some of the productivity figures in the performance indicator tables. Mrs Ware explained that the targets to date were profiled for over the full financial year. There was currently a lot of work in progress and work was only classed as ?completed? once the final report had been sent out. Additionally a significant amount of work was programmed for the final quarter. Councillor Clark observed that much of the work carried out by the Internal Audit service had been to satisfy the Audit Commission and he wondered whether the Audit Commission would not be reducing their audit fee for 2011/12 in view of the reduced inspection requirements. Mrs Ware confirmed that the Audit Commission relied on some of the work that Internal Audit completed on data quality and other preparatory work for external inspections but there would be no reduction in Internal Audit work on the authorities? financial systems. The member of the public queried the use of the word ?adequate? for eight of the reviews and that control ratings were not yet available for a further eight. Mrs Ware explained that the areas for which control ratings were not yet available were still in progress and the ratings allocated would be communicated at a future meeting. A key was provided at the back of the report to explain the definitions of the control ratings and the key control issues identified in the course of the review were detailed in the table for those areas given a less than substantial rating. Councillor Ogilvie reminded the member of the public that the control rating given in the report was based on the findings at the time of the review and that, should a further review take place following implementation of the management actions/key control issues identified, it was hoped that a substantial rating would be given. RESOLVED (unanimously): That the report be noted without modification. |
Agreed | ||
| 24 |
Shared Assurance Service Planning Proposals 2011/12 Report attached The Head of Shared Assurance Services presented a report outlining opportunities to reduce Internal Audit and Risk Management inputs for 2011/12. Following the first two years of the shared service a number of process improvements and opportunities to cut out duplication had been identified. The report contained an outline Audit Plan for 2011/12 in which it was proposed to reduce Internal Audit inputs by 210 days next year. Moving forward it was proposed to maintain a focus on key risks and key financial systems. The report contained only an outline Audit Plan at this stage as it could only be finalised once a detailed risk assessment had been completed including an assessment of the impact of the financial settlement on individual services. The proposed reduction of 210 internal audit days was a relatively modest reduction across Chorley and South Ribble Borough Councils but would generate a saving of around ?35,000 for each authority. He was confident that the reduction was manageable and would not impact on the council?s governance arrangements. Councillor M Tomlinson referred to page 3 and the statement under ?Audit Resource Implications? that ?reductions in resources could potentially lead to service viability issues which were amongst the key drivers for establishing the shared services partnership originally.? The Head of Shared Services explained that one of the reasons for the creation of the shared service was to create a critical mass to enable either authority to ?ride out? any short term staffing shortfalls due to such things as sickness and vacancies. He also explained that a feasibility study was in progress to consider establishing a larger shared Internal Audit service involving other Lancashire districts which would further assist with this. In response to a question from Councillor Ogilvie about whether the proposed internal audit savings would be achieved purely by not buying in resource from Lancashire County Council, the Head of Shared Assurance Services explained that the proposal was to offer up ?70,000 of the current vacancies savings but retain ?10,000 to buy in computer audit resources as these were specialist skills which were required. In response to questions from the chairman, the Head of Shared Assurance Services confirmed that he was comfortable with the numbers contained in the proposals. Once it was clear what all the service areas would look like in light of the government settlement, the Internal Audit service would conduct a risk assessment with each of them to determine what the required internal audit intervention would be. In response to a question from Councillor Mrs Moon about the impact of the new reporting standards, the Head of Shared Assurance Services explained that, whilst Internal Audit would review the financial systems, they would not check the procedures for the completion of the final accounts as this was an External Audit responsibility. In response to a question from Councillor Ogilvie about whether the Internal Audit service should spend more time on reviews in light of the removal of some of the requirements for external inspection, the Head of Shared Assurance Services explained that work to support the Council?s governance arrangements including the Annual Governance Statement would continue at an appropriate level. Councillor Clark observed that it was usual for a project leader to identify risks which would then get added to the risk register. The Head of Shared Assurance Services confirmed that the role of Internal Audit was not to assess risks but to ensure that the project risk management arrangements were robust. Following a comment from the member of the public about the complexity of the report the chairman and Head of Shared Assurance Services agreed that whilst there may be some scope to simplify it the report followed necessary reporting standards. Going forward, a detailed implementation plan would be submitted to the Shared Services Joint Committee in January and would be included in the final budget submissions for approval by the Cabinets of Chorley and South Ribble Borough Councils in 2011. The final Audit Plan for 2011/12 would also come back to the Governance Committee for approval. The chairman invited members to consider whether they were happy to agree to the principles contained in the proposals. Councillor M Tomlinson said he would be content to agree in principle but was concerned that implementation of the proposals could recreate some of the issues that led to the creation of the Shared Services in the first instance. The chairman said that he could see the logic for the efficiencies but did not want to see a reduction in the service on a purely cost basis and he would not want to see any major variances from the figures presented in the report. Councillor Ogilvie acknowledged this but said that this should not stop the authority from striving for further efficiencies in the future. RESOLVED (unanimously): That, subject to the comments above, 1) the corporate governance implications of the outline proposals to reduce the Shared Assurance Services budget in 2011/12 be noted, and 2) the outline proposals form the basis of a more detailed implementation plan for consideration by the Shared Services Joint Committee on 24 January 2011 and subsequent approval by Cabinet in February 2011. |
Agreed | ||
| 25 |
Budget Monitoring Report - Mid Year - April to September 2010/11 Budget Monitoring Report attached Budget Monitoring Report - App 1 & 2 attached Budget Monitoring Report - App 3 attached The Head of Shared Financial Services (Susan Guinness) presented the report which gave an update on the Council?s overall financial position and financial strategy for 2010/11 based on the latest outturn projections. The format of the report was different from those presented previously as it was based on information at the end of September but projected forward to where the council was expected to be at the end of March 2011; although there may well be some changes to the bottom line projections by the end of the year. Current predictions were indicating an underspend of ?523,000 by the end of the financial year. Since the report was issued the Council had learned that the Local Government Finance Settlement announcement would not be made until 9 December and that there would be no Regional Housing Pot Grant and the Disabled Facilities Grant had yet to be confirmed. As this would be the beginning of the four year settlement the government was currently reviewing all the formulae and weightings to decide how to apply the settlement to public sector organisations. Future reports to committee would expand on the Capital Programme element in order to put slippages into better context for the benefit of members. In response to questions from the chairman about the projected underspend, the Head of Shared Financial Services confirmed that the majority of the underpend was due to one-off items in the current year as opposed to items being overprovided for in the budget. Savings from vacancies were due to a combination of vacancy management pending restructures and where staff had left and replacements were not yet in post. In the budgetary process every post was analysed on its merit. Councillor Ogilvie said that presenting shortfalls as income in Appendix 1 was confusing and enquired why the ?277,000 one off severance / redundancy payments was still showing. The Head of Shared Financial Services explained that it was presented this way for transparency purposes as the council was obliged to report on how it was progressing against the original approved budget and it would continue to be accounted for from the General Reserve until there was a decision taken to no longer account for it in this way. In relation to the slippage in the Capital Programme, Councillor Ogilvie queried why the remaining spend was being profiled for the final quarter of the year rather than now. The Head of Shared Services reminded the members that following a recommendation made at this committee some time ago a Scrutiny Task Group had been set up to look at the ongoing slippages in the Capital Programme and that future budget monitoring reports would be expanded to allow those managing projects a greater opportunity to explain the status of each project at the time the budget monitoring report was drafted. Councillor M Tomlinson noted the projected shortfall in Building Control income and wondered when this would ever be resolved. The chairman reminded the meeting of Mr Nuttall?s statement at the last meeting that some Building Control personnel had been redeployed to Housing for the time being and that the council was keen to retain their skills for when the upturn came. In response to a question from the member of the public about the projected underspend, the Head of Shared Financial Services said that the council?s aim was to spend the budget but inevitably one-off events occurred from time to time that affected the budget. The quarterly performance reports put the financial performance of the council into context and showed that underspend had occurred not due to services not being provided but due to one-off events and some efficiency savings. RESOLVED (unanimously): That the report be noted and the committee look forward to more detailed information about the Capital Programme in future reports. |
Agreed | ||
| 26 |
International Financial Reporting Standards Report (85K/bytes) attached The Head of Shared Financial Services presented a report which outlined a number of changes that were now required to the way that certain issues were dealt with in the accounts and advised that significant progress had been made in assembling information and completing calculations to enable restatement of the accounts for previous years. The new standards were intended to bring the public sector more into line with the private sector in the presentation of its accounts. Councillor Clark observed that this would entail additional work for the external auditors and enquired whether they were likely to charge an additional fee as a result. The Head of Shared Financial Services understood that this had already been provided for in the audit fee agreed some time ago. RESOLVED: That the report be noted. |
Agreed | ||
| 27 |
Treasury Management - Update Report (184K/bytes) attached The Head of Shared Services presented a report which outlined the council?s average cash balances and rate of return during the first half of 2010/11. Members noted that one of the recommendations in the report asked the committee to recommend to Council an increase in the limit on term deposits with the partly nationalised banking groups Lloyds/HBoS and RBS which in fact Council had agreed to at its meeting on 24 November. Members queried whether such recommendations should be considered by Governance Committee before being passed on to Cabinet and Council and agreed that the Cabinet Member for Finance and Resources should be asked to provide clarification on this. Councillor Ogilvie pointed out that, according to Note 1 on page 8 of the report, there may have been sufficient flexibility in place anyway. The Head of Shared Financial Services confirmed that the council?s investments of ?18.8m as at the end of September 2010 would fall significantly by the end of the year because of the timing of certain of the authority?s outgoings. She agreed to ascertain the timings of the government settlement which, she believed, was received on a quarterly basis. In response to a question from Councillor Ogilvie about whether the change in the Public Works and Loans Board rates announced in the Comprehensive Spending Review would impact on anything that the council wanted to do in the next few years, the Head of Shared Financial Services explained that consideration had been given in the past to the possibility of borrowing, however the new increased interest rates meant that this position had now changed. RESOLVED (unanimously): 1) That the report be noted, and 2) the Cabinet Member for Finance and Resources be requested to clarify the process and lines of authority for approving changes to the Treasury Management Strategy. |
Agreed | ||
| 28 |
Forward Plan Forward Plan (37K/bytes) attached Members noted that the Forward Plan for the meeting on 9 February was quite ?heavy? following the decision at Council on 24 November to cancel the meeting previously scheduled for April. With this in mind, they agreed to consider nearer the time whether a meeting may be necessary in March. |
Noted | ||