| Place: | Cross Room, Civic Centre, West Paddock, Leyland, PR25 1DH |
| Present: | Councillors O'Hare (in the chair), Foster (vice-chairman), W Bennett, Michael Green, Mrs Mort and Patten. |
| In attendance: | Director of Corporate Governance (Maureen Wood), Head of Shared Assurance Services (Garry Barclay), Head of Shared Financial Services (Susan Guinness), Internal Audit Manager (Clare Ware), Principal Management Accountant (Jane Blundell) and Democratic Services Officer (Carol Eddleston) and the Cabinet Member for Finance and Resources (Councillor Stephen Robinson) Gareth Winstanley (Audit Commission). |
| Public attendance: | 0 |
| Other Officers: | 2 |
| Item | Description/Resolution | Status | Action | |
|---|---|---|---|---|
| OPEN ITEMS | ||||
| 1 |
Apologies for Absence There were no apologies for absence. |
Noted | ||
| 2 |
Declarations of Interest There were no declarations of interest. |
Noted | ||
| 3 |
Minutes of the Last Meeting Minutes attached RESOLVED (unanimously): That the minutes of the meeting held on 24 March 2011 be approved as a correct record and signed by the chairman. |
Agreed | ||
| 4 |
Certification of Claims and Returns 2009/10 ? Annual Report Report attached Gareth Winstanley presented a report which summarised the findings from the Audit Commission?s certification of three 2009/10 claims and returns totalling ?55 million and responded to members? questions. The commission?s work was to check that the Council had claimed for and received the funding from government departments to which it was entitled. The Housing and Council Tax Benefit Subsidy was subject to a full review on an annual basis but the National Non-Domestic Rates Return and the Disabled Facilities Grant were subject to a limited review. The Audit Commission had identified a classification error (around backdates) in the Housing and Council Tax Benefit Subsidy which it had had to report to the relevant government department. The amendment required had not affected the Council?s total claim and had resulted in an increase of the level of subsidy received by just over ?4,000. The Audit Commission was satisfied with the council?s control environment and did not have concerns about how the errors had occurred. Mr Winstanley said that although the Audit Commission did not make certification arrangements for claims and returns below ?125,000, he was not aware that this Council had any claims below that threshold. RESOLVED (unanimously): That the report be noted and the officers concerned be congratulated on the low level of errors in view of the overall value of the claims. |
Agreed | ||
| 5 |
Annual Audit Fee 2011/12 Report attached Mr Winstanley outlined the work and the fee for the audit work that the Audit Commission proposed to undertake at this council for the 2011/12 financial year. He explained that the process for setting the fee for 2011/12 had been slightly different than in the past in that the Audit Commission had set the scale fee for each audited body and there was no scope for local deviation. In response to questions from members, Mr Winstanley explained that the audit of the financial statements was the primary area of work. Starting in July two or three Audit Commission auditors would be on site for approximately one month. The commission would also look at the council?s efficiency and effectiveness in order to issue a value for money conclusion and would audit the council?s grant claims. Whereas audit fees for the private sector might be based on ?man days? and a breakdown of the tasks involved, local authority audit fees were based on a percentage of the authority?s gross expenditure and the perceived level of risk which, in the case of this council, was low. Health service auditors were contracted via a tendering process and the Audit Commission?s fees were comparable. The reduction in scale fee for 2011/12 was in part due to the Audit Commission?s new approach to local value for money audit work and lower continuing audit costs after implementing International Financial Reporting Standards. As yet it was not clear what the audit framework would look like once the Audit Commission was disbanded. It was quite possible that audited authorities would be ?packaged? together and that one firm of auditors would ?win? a packaged group, in which case the level of choice and input from the individual authorities might be somewhat limited. The Cabinet Member for Finance and Resources and members of the committee shared concerns about the level of uncertainty over the future of the audit framework and in particular the potential lack of choice, input and opportunity for challenge that this council might have. The cabinet member expressed the importance of continuity wherever possible and said that the worst thing that could happen was that the auditing firm changed on an annual basis. The Head of Shared Assurance Services advised members that there was still an opportunity to participate in the DCLG consultation exercise on the Future of Local Public Audit and, should the Cabinet Member wish to submit a response, the Head of Shared Assurance would assist him with this. Following a question from the chairman, the Head of Shared Financial Services confirmed that the council was very happy with the service provided by the Audit Commission. RESOLVED (unanimously): That the committee accept the Audit Commission audit fee and work for 2011/12. |
Agreed | ||
| 6 |
Compliance with International Auditing Standards (Assurance on the Council?s arrangements for assessing, identifying and responding to risks of fraud) Report attached The Head of Shared Assurance Services presented the report which provided a number of assurances that the Audit Commission sought as part of the audit of the 2010/11 accounts. Internal Audit had carried out a review to identify the evidence required and the draft responses confirmed that the council?s arrangements were sound and that there was nothing material to report. In response to questions from members, the Head of Shared Assurance Services and Mr Winstanley explained that this was the second year that the council had to demonstrate its compliance with a set of standards which were internationally recognised by the accounting profession and qualifications boards. The public sector was essentially being aligned more closely with the requirements placed upon the private sector. If the council were to report a case of fraud to the Audit Commission the latter might look at the controls in place and undertake more testing, depending upon the nature of the fraud and whether it was internal or external. The Audit Commission would be looking at the likelihood of a material misstatement in the Statement of Accounts. The Internal Audit Manager explained that the council had been obliged to report incidences of fraud above ?10,000 for many years. That figure had been set by the Audit Commission but any incidences of fraud, regardless of the amount, would be reported to this committee. Members noted that the Fraud and Anti-corruption Member Learning Hour on 18 June had not been particularly well attended. Those who had taken part had found it to be beneficial and recommended that it should be mandatory for all members. RESOLVED (unanimously): That the chairman and the Chief Executive be authorised to sign the assurance letters requested by the Audit Commission. |
Agreed | ||
| 7 |
South Ribble Borough Council Statement of Accounts a) Budget Outturn Report 2010/11 b) Core Financial Statements 2010/11 (a) (424K/bytes) attached (b) (312K/bytes) attached The Head of Shared Financial Services presented the report which outlined the 2010/11 budget out-turn position in relation to both the Revenue and Capital expenditure. She was pleased to report that the out-turn for the year showed a substantial improvement on what was expected, mainly due to one-off savings and additional income which could only be identified at year end. Mr Winstanley was confident that all the minor external audit issues raised in relation to the 2009/10 audit had been addressed but this would be checked in the course of the forthcoming audit work. In response to a question from the chairman about the bullet points on page 2, the Cabinet Member for Finance and Resources confirmed that the remaining savings came from smaller savings which were too numerous to list individually. The Head of Shared Financial Services explained that at year end the council had to put a value on any outstanding leave and flexi-time credit as, technically, this was ?owed? to the members of staff concerned and the outstanding holiday entitlement would have to be paid if a member of staff left the organisation without having taken their entitlement at that time. Mr Winstanley explained that the Audit Commission had traditionally come to the Civic Centre on the appointed day when electors could come along and question the council?s external auditors, although only one member of the public had ever attended in recent years. The council was legally obliged to advertise details of the appointed day in the local press rather than just on its website. In response to an observation from the chairman that forecasts had been mostly fairly accurate, the Head of Shared Services explained that the finance team worked very closely with budget holders when predicting the out-turn and Councillor S Robinson reminded members that there was close budget monitoring throughout the year. Members noted that the capital programme underspend was again significant and said that work that was planned to be done should be done. The Cabinet Member for Finance and Resources said that there were sometimes specific reasons why projects were deferred or came in under budget. He had appeared before the Scrutiny Committee on this issue. From the audience the Chief Executive said that members? concerns were valid and he said that efforts were being made to make the actions in the new Corporate Plan realistic and ensure they were appropriately resourced. Mr Winstanley said that there tended to be slippage in the capital progammes of other local authorities but he could not comment on their magnitude. Asked by Councillor Foster whether the ?2.2 million which had not been spent could have been invested in a longer term investment, Councillor S Robinson said that although there was some validity in that it was not quite that straightforward. Although the finance was available it was the project preliminaries and capacity to deliver which affected the timing of the spend and he agreed that this was something that should be examined. He confirmed that the Icelandic bank situation had not impacted on the delivery of the capital programme. Councillor Patten feared that the council?s failure to spend its full budget might affect future grant settlements from central government. Councillor S Robinson said that the comment was valid but that the council received very little government support for capital spending and there was a balance to be struck and capital financing was not just about money from a bank but could be in the form of leasing of vehicles. In response to questions from the chairman, the cabinet member said he hoped to have a better capital programme spend compared with budget in the coming year. The Head of Shared Financial Services said that one of the outcomes of the scrutiny review into the slippage of the capital programme was earlier reporting of slippage or variations from the original budget. From the audience, the Chief Executive explained that last year?s underspend had partly arisen due to contract hiring some newly acquired refuse collection vehicles and this was not ?counted? as capital expenditure. In response to a question from Councillor Foster, the Head of Shared Financial Services said it would be possible to provide more details about variances if members would find it helpful although the cabinet member said he did not see the need for a further separate report as the next meeting would receive a budget monitoring report. Councillor W Bennett queried whether the previously agreed target level for General Fund Reserves of 10% of the net budget requirement was adequate in the current climate. He recommended that the percentage figure should not be quoted explicitly as it might affect the amount of grant settlement from central government. Councillor Foster expressed concern that the current level of reserves was higher than it should be at a time when some residents were struggling to pay their council tax each month and he felt that the council needed to ensure that it was providing quality services to its residents. He suggested that it would be useful to have a separate meeting to look at this in more detail. Councillor S Robinson explained that the 10% target had been in place around 10 years and was no longer appropriate as the level had to be in keeping with the perceived level of risk. His view was that a general reserve of ?1.5 million was insufficient to protect an organisation of this size in view of the serious challenges ahead. He acknowledged that the current level of ?3 million was not a figure that he had anticipated and could be perceived to be on the high side. He said the current administration had to be able to justify the level of reserves and a review was certainly warranted. The chairman asked for a paper to be brought to the committee outlining what the cabinet member considered to be an appropriate threshold and what the General Reserves were for. Councillor S Robinson said that he would be happy to put some ideas forward but these would be based on estimates as the council only knew its grant settlement figure for one more year. In response to a question from the chairman about any changes in fixed assets, the Head of Shared Financial Services said that the council?s fixed assets did not relate to any cash values and was a book entry for accounting purposes. The Head of Shared Financial Services explained that the South Ribble Partnership was responsible for allocating and spending the Performance Reward Grant ? the council was the accountable body and checked that it was spent correctly. The Cabinet Member for Finance and Resources confirmed that the deficit in Building Control was due to the fact that very little building work was going on rather than that the council?s Building Control Service was less competitive than other service providers. Referring to Appendix A, Councillor Foster said that members would have been very critical if the budget had been overspent and he thought that they should equally not be happy that it had been underspent. The council had been through a lot in the last couple of years and he wondered whether, if budget estimates had been better, the Council could have maintained some funding to external bodies or reduced the level of efficiencies that it had made. The Cabinet Member for Finance and Resources pointed out that the saving achieved from the one-off vehicle replacement programme could not have been foreseen at the time the budget was set. When the contract was put out to tender the council realised that it could make savings on the costs and got the best possible deal. In forecasts for next year the council was looking to make savings of ?2.2 million, taking ?400,000 from the General Reserves to balance the books. In noting that two thirds of the savings had been achieved from three items, the chairman asked Mr Winstanley if this was typical among local authorities. Mr Winstanley said that the situation varied from authority to authority but it was not unusual for there to be an underspend, especially in the current climate. What was crucial though was for authorities to understand where the savings were coming from. Councillor W Bennett noted the ?29,000 lower costs for Publicity and Promotion on page 14 and said that if staff could not produce publicity and promotion for their area they may see their budget reduce by that amount next year. The Cabinet Member for Finance and Resources said that the Head of Financial Services? team was in the process of identifying what were one-off savings and what were recurring. At this time it was thought that approximately ?200,000 were recurring but he urged members not to pre-empt the work that was still being carried out. The Chief Executive added that the Audit Commission were looking closely at how financially resilient all local authorities were in the current economic climate and would probably be reporting later in the year. Members thanked Mr Winstanley for attending the meeting, presenting the external auditors? reports and responding to members? questions on those and on the budget out-turn report. RESOLVED (unanimously): That 1) the contents of the report and appendices be noted; 2) the budget variances for 2010/11 listed at Appendix A be noted; 3) the budget items listed at Appendix D be carried forward to 2011/12; 4) the financing of the capital programme for 2010/11 and the carry forward of capital re-phasing to 2011/2 be noted as outlined in the report; 5) the capital programme for 2010/11 and the carry forward of capital re-phasing to 2011/2 detailed in 4) above be aligned with the Corporate Plan and any slippage be monitored closely; 6) the Cabinet Member for Finance and Resources be requested to review the target level for General Fund in light of the current economic climate and bring proposals for a way forward back to the committee, and 7) whilst the committee await the outcome of 6) above, the retention of reserves at Appendix C be endorsed, together with the proposed contributions to and withdrawals from these reserves as detailed within the Statement of Accounts, in accordance with the policy as set out in this report. b) Core Financial Statements 2010/11 The Head of Shared Financial Services presented a draft summary of the Core Financial Statements plus key messages that would form part of the Council?s year end Statutory Statement of Accounts (SOA) for 2010/11. This was the first year in which they had to comply with the Code of Practice on Local Authority Accounting in the United Kingdom 2010/11 (The Code) which was based on International Financial Reporting Standards and had resulted in some significant changes in both the approval process and format. The chairman commended the format of the report which he considered to be a far more sensible way of dealing with the accounts at this stage. In response to a request for clarification from Councillor Patten, the Head of Shared Financial Services explained that the council?s investment property had increased in value although the council had not received any cash. This item was now classified in the revenue account and, in accordance with accounting requirements, reversed out lower down so as not to impact on council tax payers.. RESOLVED: That the report be noted. |
Agreed | ||
| 8 |
Draft Annual Governance Statement Report and AGS (154K/bytes) attached The Director of Corporate Governance presented a report which provided assurance on the Council?s standards of corporate governance spanning all the Council?s priorities and covering all activities. She explained that a considerable amount of work had been completed to improve further the areas that had been identified in the previous year?s review. Members congratulated the Director of Corporate Governance on the report and on the Council?s strong governance arrangements and Councillor Foster commended the work of this committee over the last two years under Councillor O?Hare?s chairmanship. The Director of Corporate Governance explained that the next employee survey was planned to take place later this year and the results would be shared with members. She did not have to hand a breakdown of the results so could not confirm if employees felt that any of the council?s core values were applied more or less than any of the others, but she emphasised that she had used an average response rate based upon each of the values. In response to a question about the ?voluntary? nature of the Code of Conduct for Employees, it was explained that a national code for employees had been produced and, although it had not so far been prescribed in legislation (unlike the Code of Conduct for Elected Members), it was essentially mandatory for all employees of this Council. The committee congratulated the council on not using its powers under the Regulation of Investigatory Powers Act unless absolutely necessary. Members noted that there would be significant capital expenditure over the coming years and considered that it would be appropriate to consult with the local community after policies, projects and services had been implemented as well as beforehand. Following comments from members, the Director of Corporate Governance said that she would be happy to make the following minor amendments and/or clarifications to the report: page 4, 2, para 2 ? delete ?and not absolute?; page 5, 3.2 bullet 5 ? alternative wording to ?cross-cutting?; page 6, 3.3, bullet 4 ? include the date of the last employee survey; page 6, 3.4 ? amend ?voluntary Code of Conduct for Employees? to ?local Code of Conduct for Employees?; page 7, 3.6 ? re-consider in the context of the community involvement review; page 9, para 5 ? give full name of the ?Shared Services Joint Committee?; page 11, bullet 1 ? expand to include engaging with the community after policies, projects and services etc had been implemented. The Director of Corporate Governance and the Head of Shared Assurance Services explained that the high level statements in section 5, page 11, would be converted into a detailed action plan with timescales and future progress would be reported to this committee. RESOLVED (unanimously): That the Annual Governance Statement be approved subject to the amendments proposed above. |
Agreed | ||
| 9 |
Treasury Management Annual Report 2010/11 Report (108K/bytes) attached The Head of Shared Financial Services presented the report which confirmed that the council had complied with all its Prudential and Treasury Indicators and that the return on investments (1.13%) had exceeded the benchmark that the council had set itself (0.43%). The Council had no external borrowings at this time. The Cabinet Member for Finance and Resources said that offers for the Iceland food chain (owned by Landsbanki) were currently in the region of ?1.5 billion and in his view this boded well for those of the bank?s creditors who were deemed to have preferential status. Current estimates of recovery of deposits in the Icelandic banks were 95% from Landsbanki and 85% in the case of Heritable. The Head of Shared Financial Services believed that the quality of the financial advice provided to the council had not been affected by the merger of its treasury advisors Sector with Butlers and the daily and weekly updates that they provided were adequate for the council?s purposes. The Cabinet Member for Finance and Resources confirmed that all the council?s deposits complied with its treasury strategy. RESOLVED (unanimously): That the report be noted. |
Agreed | ||
| 10 |
Internal Audit Annual Report 2010/11 Report (281K/bytes) attached The Head of Shared Assurance Services presented the report which summarised the work of the Internal Audit Service between April 2010 and March 2011, gave an audit opinion on the adequacy and effectiveness of the control environment, gave an appraisal of the Internal Audit Service?s performance and provided an evaluation of the effectiveness of the council?s system of internal audit. The Head of Shared Assurance Services and the Internal Audit Manager responded to members? questions. It was not unusual for finance audit work to straddle two financial years as this work inevitably had to start late in the financial year. Members noted that the control ratings, where available, were all either substantial or adequate. Mr Barclay confirmed that limited ratings had been given in the past. In those cases however, it was expected that there would be improvement once the recommendations and management actions had been implemented. The internal audits and reviews were carried out by a team of six with areas of work rotated around the team. Members congratulated the Internal Audit service on its retention of ISO 9001:2008 and on the excellent service that it provided to the council. Thanking members for their positive comments, the Internal Audit Manager said that she was very proud of her team. RESOLVED (unanimously): That the report be noted and the Internal Audit Service be congratulated on the excellent service that it provided to the council. |
Agreed | ||
| 11 |
Internal Audit Plan 2011/12 Report (150K/bytes) attached The Internal Audit Manager presented the Internal Audit Plan work programme for 2011/12 which had been put together following a detailed risk assessment and consultation exercise. For the benefit of the new members of the committee she explained that the committee had previously been consulted on proposals to reduce Internal Audit inputs from 2011/12 following the Comprehensive Spending Review and significant changes to the external inspection regime. This had had no impact on current staff as the service had been holding vacancies since January 2009. Members discussed whether it was appropriate for the Internal Audit Service to audit the work of its own Head of Service or whether it would be preferable to commission another authority to carry out that work. The Head of Shared Assurance Services said that the county council?s audit service could be asked to do so but assured the committee that if he did not co-operate or implement Internal Audit recommendations, Internal Audit staff would have access to this committee, the Chief Executive and the external auditors. The Director of Corporate Governance pointed out that it was valuable for Mr Barclay?s area of work to have a ?health check? both to provide him with assurance and to point out any areas for improvement that they might identify. This would be reported to this committee. Members acknowledged that the service was very strong and that the current arrangements worked well but they wondered whether, in the longer term, it might be preferable for an external body to audit the Head of Shared Assurance Services. The Internal Audit Manager confirmed that current staffing levels were appropriate to maintain the service and deliver the Internal Audit Plan, however, it had been agreed previously that the resource level would be kept under review so that consideration could be given to increasing staff if it was felt necessary. The Head of Shared Assurance Services explained that, before the Comprehensive Area Assessment and the Use of Resources regime were disbanded, internal audit was benchmarked nationally and this council?s resource level was appropriate. He was satisfied that the service had responded appropriately to the changes. The Internal Audit Manager confirmed that Post Audit Reviews involved checking that Internal Audit recommendations and management actions had been implemented and were working effectively. The Internal Audit Manager said that the council was preparing for compliance with the Bribery Act and she was working closely with the Legal Services Manager on a draft policy. The council needed to be able to demonstrate that members and officers were aware of the obligations on them. RESOLVED (unanimously): That the Internal Audit Annual Plan 2011/12 be approved. |
Agreed | ||
| 12 |
Forward Plan 2011/12 Document attached The chairman said that although there had been a heavy agenda for this meeting the forward plan for the rest of the council year was reasonable and at this time he did not foresee the need for any additional meetings. He would discuss with officers what areas of the Constitution might still need to be reviewed and would let members know whether a Constitution Task Group would need to meet. Members noted the forward plan without further debate. |
Noted | ||