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Meeting of Governance Committee on Wednesday, 27th June, 2012

Meeting documents

Governance Committee
Wednesday, 27th June, 2012

Place:

Cross Room, Civic Centre, West Paddock, Leyland, PR25 1DH

Present:	Mr W L Bennett, Mr M A Green, Mr G O'Hare, Mr J Patten.
In attendance:	Director of Corporate Governance (Maureen Wood), Head of Shared Financial Services (Susan Guinness), Internal Audit Manager (Clare Ware), (Principal Financial Accountant), Gordon Whitehead, Risk Manager (Andy Armstrong), Principal Auditor (Dawn Highton), Auditor (Linsey Roberts) and Democratic Services Officer (Carol Eddleston).
Public attendance:	0
Other Officers:	4 Other Members:- Councillors Mrs M and P Smith.

Item	Description/Resolution	Status	Action
OPEN ITEMS
1	Apologies for Absence Apologies for absence were submitted on behalf of Councillors Foster and Mrs Mort.	Noted
2	Declarations of Interest There were no declarations of interest.	Noted
3	Minutes of the Last Meeting Minutes attached Min no 56 ? Consultation on the Tendering Process for the Council?s Banking Services from 01/01/2013 to 31/03/2018 The Head of Shared Financial Services explained that she had noted the committee?s comments at the meeting but said that the evaluation criteria and scoring system would be kept as previously notified and the procurement would proceed on that basis. Min no 58 ? Forward Plan ? IT procurement policy The chairman referred members to the comprehensive update provided via email by the Director of Business Transformation on 12 June. RESOLVED: That the minutes of the meeting held on 25 April 2012 be approved as a correct record and signed by the chairman.	Agreed
4	SRBC Statement of Accounts 2011/12 (a) Budget Out-turn Report 2011/12 (b) Draft Core Financial Statements 2011/12 (a) Report attached (b) Statements attached (a) Budget Out-turn Report 2011/12 The Cabinet Member for Finance and Resources presented the report which notified members of the 2011/12 Budget Out-turn position in relation to both Revenue and Capital expenditure. He was pleased that the good performance of the Council?s budget in spite of the current economic climate, had allowed a surplus of ?0.123 million to be transferred to general reserves. He was also pleased that the Council had started to receive monies back from Landsbanki. It had wisely accounted for these using the timescales published by Landsbanki rather than those initially recommended by CIPFA. CIPFA had subsequently issued new guidance which more closely followed the assumptions made in the Council?s Statement of Accounts The chairman informed members that up until 2011 the committee had received the full statement of accounts at its June meeting. This year, as in 2011, the committee was being presented with the core statements but would have an opportunity to go through the detailed accounts more thoroughly in a dedicated session on 17 July 2012. Members joined the chairman in commending the Head of Shared Financial Services on an excellent, comprehensive report which flowed logically and gave a good explanation of the salient points and on all the hard work that had gone into compiling the report. Councillor W Bennett said that the forecasting throughout the year had been superb. His only concern was about how another proposed contribution to the General Fund was likely to be perceived. The Cabinet Member for Finance and Resources said he was very pleased with the Council?s level of reserves when an even greater period of uncertainty lay ahead, including uncertainty over the impact of the new council tax benefit support scheme and potential further cuts in Government funding. He was comfortable that the current level of reserves would help to maintain services and staff. When the cap on council tax rises was announced the rate of inflation was in excess of 5%, however, the rate had decreased rapidly and therefore, any new cap would be set very low. In response to a question from Councillor Patten about the final bullet point in section 3 on page 2, the Head of Shared Financial Services said that she would confirm to members outside of the meeting if there was any threshold below which the Council did not attempt to recover Housing Benefit overpayments. In response to whether the Council might consider hedging the risk of the impact of fluctuating exchange rates on the value of its investments in Icelandic Banks, the Cabinet Member for Finance and Resources explained that this was not an appropriate option for the Council. The majority of the monies recovered so far had been in ?sterling, $US or euros but the Council had to accept that there was a slight element of risk relating to foreign exchange rates and receipts in Icelandic Krone. The chairman welcomed the contribution to reserves and observed that the percentage of reserves against the total budget was considerably higher than the 10% historical ?target? but this was in the context of the Council?s total expenditure having reduced. The Cabinet Member for Finance and Resources again said that he was pleased with the contribution to general reserves and with the level of reserves at this time, and pointed out that with ongoing uncertainty over government funding in 2013/14, the Council was forecasting a significant deficit. In relation to (2) on page 17, members were informed that the three companies listed were billed late because the government?s valuation office had not provided the Council with the information that it needed for calculation purposes until the start of the new financial year. There was some concern among members that individual companies should not be named in the report. The Head of Shared Financial Services explained that sundry debtors related to a number of invoices for various items and not Council tax collection, many of which could be relatively smaller amounts. In terms of bad debt provision and the observations made in the context of the current economic climate, she explained that it could be more difficult to recover debt when people were struggling financially. With regard to Housing Benefit the more reliable method of recovery was often to make deductions from an individual?s current Housing Benefit payments, however, if their circumstances changed and they were no longer in receipt of Housing Benefit that method would be closed to the Council. RESOLVED (unanimously) that: 1) Officers and the Cabinet Member for Finance and Resources be congratulated on their excellent forecasting throughout the year; 2) the report and appendices be noted; 3) the budget variances for 2011/12 listed at Appendix A be noted; 4) the budget items listed at Appendix D be carried forward to 2012/13; 5) the financing of the capital programme for 2011/12 and the carry forward of capital re-phasing to 2012/13 as outlined in the report be approved, and 6) the retention of reserves at Appendix C, together with the proposed contributions to and withdrawals from these reserves as detailed within the report and within the Core Financial Statements be endorsed, and 7) the Head of Shared Financial Services inform members of any threshold below which the Council would not pursue the recovery of Housing Benefit overpayments. (b) Draft Core Financial Statements 2011/12 The Principal Financial Accountant introduced the draft core financial statements for 2011/12 and explained that they served two purposes: they acted as a measure of a local authority?s performance and also enabled the Council to identify what its annual council tax requirement was. He highlighted the salient points from each of the core financial statement for Members. The chairman observed that the Council?s outstanding deposits in the Icelandic banks were classified as ?short term investments? although they were not usable in practice. Officers confirmed that this was the case and compared it to a long term investment which was still valid but could not be accessed immediately. In response to the chairman?s query about whether the Icelandic deposits should be re-classified as long term deposits rather than short term in the balance sheet the Head of Shared Services confirmed that officers had previously spoken to the auditors about this. The Principal Financial Accountant confirmed that the fluctuation in the deficit on pension assets and liabilities was as a result of actuarial assumptions on the value of those assets and liabilities. He explained that assets had to be re-valued on a yearly basis but a review of the long term liability was only carried out every three years. In response to questions about ?Heritage Assets? on page 6, the Principal Financial Accountant explained that these were assets held for their contribution to culture and learning. The fact that they were now separately identified in the balance sheet offered no financial advantages. This Council had no heritage assets. Members thanked the Principal Financial Accountant and the Head of Shared Services for their explanations and responses to their questions. RESOLVED (unanimously): That the report be noted.	Agreed
5	Draft Annual Governance Statement Report (144K/bytes) attached The Director of Corporate Governance presented the 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 some of the actions in the 2011/12 Action Plan were being carried forward to the 2012/13 Action Plan as, although significant progress had been made, there was some additional work which could add value in certain areas. Members commended the Director of Corporate Governance on the quality of the report and expressed their appreciation for the tremendous amount of work which had obviously been carried out across the authority. In response to a comment about the use of the verb ?manage? rather than ?reduce? or ?minimise? in line 1 of section 2, page 4, the Director of Corporate Governance explained that the wording of sections 1 and 2 was very much prescribed in guidance from the Chartered Institute of Public Finance and Accountancy (CIPFA), although amendments could be made if members thought they were appropriate. Members concluded that the wording in that section could remain unchanged but agreed that section 3.5 on page 7 should be expanded to include positive reference to the Council?s work-life balance policies. RESOLVED (unanimously): That the Annual Governance Statement be approved subject to the inclusion in section 3.5 of reference to the Council?s work-life balance policies.	Agreed
6	Treasury Management Out-turn 2011/12 Report attached The Principal Financial Accountant presented the report which confirmed that the Council?s Prudential and Treasury Indicators had been complied with and that the return on investments (1.07%) had exceeded the benchmark (0.48%). The report also provided the latest information regarding the Icelandic investments. The Principal Financial Accountant explained that the Council?s cash balances dipped at the end of each financial year because Council Tax payments were taken over 10 months rather than 12.The Council had already started to look at the potential impact on cashflow if the government introduced a 12 month payment system. In response to whether the Treasury Management Strategy should be more fluid in the rapidly changing economic and financial climate, the Cabinet Member for Finance and Resources agreed that the strategy needed revisiting but the Council?s advisors were still advising a limit of three months for investments with counterparties other than state owned banks (for whom a limit of 12 months still existed. In relation to accounting for the interest on the Council?s deposit in Landsbanki, the Principal Financial Accountant explained that accounting standards had required the initial write down of the asset and this had resulted in a large impairment charge in the accounts. In subsequent years interest accrued at the original interest rate on the investment. The advice from the government accounting bodies was that 100% of the ?3.3m due to the Council would be received by 2018. However as at 31 March 2012 a recovery of only 97% had been provided for to cover the exchange rate risk. RESOLVED (unanimously): That the report be noted.	Agreed
7	Internal Audit (a) Review of Tender & Evaluation Process - Replacement of Doors and Windows, Civic Centre (b) Internal Audit Annual Report 2011-12 Report attached Report attached (a) Review of Tender & Evaluation Process - Replacement of Doors and Windows, Civic Centre Internal Auditor, Linsey Roberts, presented the report which had been produced following a request by the committee at its meeting on 25 April 2012. The report summarised the results of the review and was intended to provide assurance to members that Contract Procedure Rules had been followed with regards to the tender and evaluation procedure. Members commended the clear and concise nature of the report. The committee was reminded that, following the review of the Contract Procedure Rules in 2011, a councillor was no longer required to be present when tenders were opened if the Chest was used. From the audience Councillor P Smith also commended the report but said that he would have liked to see reference in the recommendation to the Council?s having followed Contract Procedure Rules. RESOLVED (unanimously) that: 1) the report be noted, and 2) the committee be pleased to accept that Contract Procedure Rules had been followed in the correct and proper manner with regards to the tender and evaluation process. (b) Internal Audit Annual Report 2011-12 The Internal Audit Manager, Clare Ware, presented the report which summarised the work undertaken by the Internal Audit Service from April 2011 to March 2012, gave an Audit opinion on the adequacy and effectiveness of the control environment in the Council as a whole and for individual Audit reviews, gave an appraisal of the Internal Audit Service?s performance and provided an evaluation following the ?review of the effectiveness of the Council?s system of internal audit?. The Internal Audit Manager informed the committee that the Shared Services Joint Committee had suggested that some of the 100% targets in Appendix 3 of the report might be rather high and recommended that members of the host Councils? Governance Committees might wish to consider at some point whether they thought the targets were appropriate. She explained that most of the management actions identified in the course of an audit were agreed with the appropriate manager but not all of them were implemented on time. Members debated this at some length and were somewhat divided over what the target should be, with some thinking that it should remain at 100% but others suggesting that an unrealistic target might harm rather than support the service?s objectives. Officers explained that they worked very closely with managers to agree management actions and timeframes for implementation but, on occasion, implementation was delayed for genuine reasons, including organisational changes and new systems. In the course of discussions where managers believed that certain timeframes were not realistic, internal auditors would re-negotiate with managers to agree realistic timeframes. If, following further discussion with managers, officers had concerns about any significant issues, they would bring them to this committee for consideration. In response to an observation from the chairman about the difference in % of agreed management actions implemented on time for Shared Services and South Ribble, the Principal Auditor explained that the implementation of the new financial system had inevitably impacted on actual % achieved for Shared Services. The Internal Audit Manager confirmed that the quarterly review process had worked better than the previous monthly process. Any concerns that Internal Audit had about specific audits would be brought to committee in an appendix to committee reports. The Head of Shared Financial Services suggested that the committee might wish to see management actions implemented promptly in areas which had received a ?limited? control rating. In response to a question from the chairman, the Internal Audit Manager confirmed that there were not different categories for different ratings. The Head of Shared Assurance Services suggested that it might be helpful to undertake some benchmarking to assist in identifying a challenging but realistic target. RESOLVED (unanimously) that: 1) the Internal Audit Annual report for 2011/12 be noted, 2) the Internal Audit Service conduct benchmarking to allow challenging but realistic targets to be identified for the percentage of agreed management actions implemented on time, and 3) the four members of the Internal Audit team concerned be congratulated on their success in their Institute of Internal Auditor exams.	Agreed
8	Year End Risk Monitoring Report 2011/12 Outturn and Revised Corporate Risk Register 2012/13 Report (212K/bytes) attached The Risk Manager presented the report which informed members of the actions taken by management to address the key risks and opportunities in the Corporate Risk Register during 2011/12 and also presented a revised Corporate Risk Register for 2012/13. In response to questions from the chairman, the Risk Manager explained that public sector policy changes did not necessarily mean that they would be given a high risk rating. The rating was based on how much was known about the change, when the change was going to be introduced and what its impact might be. The Risk Manager said that the key actions in the corporate plan relating to each corporate risk would not be given different risk ratings as it was the effective delivery of all the key corporate actions which allowed the Council to manage each of the corporate risks. He explained that the rating against the corporate risk relating to the delivery of affordable housing had increased to red because of the ongoing risk profile affecting the Council. Noting the actions relating to affordable housing in the Corporate Plan, Councillor W Bennett said it would be interesting to see if any of the recommendations from a new Scrutiny Committee Task Group review of affordable housing might include a request for funding for some of those actions. RESOLVED (unanimously) that: 1) the progress made to manage the Council?s key strategic risks during 2011/12 by reference to the end of the year monitoring statement shown at Appendix 1 be noted, and 2) the revised CRR 2012/13 shown at Appendix 2 be noted.	Agreed
9	Compliance with International Auditing Standards Report attached The Internal Audit Manager presented the report which aimed to enable ?those charged with governance? (Councillor O?Hare on behalf of the Governance Committee) and the Section 151 Officer (Chief Financial Officer (Mike Nuttall)) to provide the assurances being sought by the Audit Commission as part of its audit of the Council?s 2011/12 accounts. The chairman said that he had had sight of the draft responses prior to submission to the committee and had been satisfied with the responses subject to one amendment relating to the role of this committee. RESOLVED (unanimously): That the chairman of the Governance Committee and the Chief Executive (Section 151 statutory chief finance officer) sign the assurance letters requested by the Audit Commission.	Agreed
10	My Neighbourhood - Governance Arrangements Report (82K/bytes) attached The Director of Corporate Governance presented the report which aimed to provide further information on the governance arrangements being developed to control the decisions surrounding the My Neighbourhood forums. She outlined the steps which had to be taken before a project could be signed off for final approval and release of funding: officers would produce a business case and scheme for consideration by members; the scheme would only progress if a majority of the members in that particular forum agreed to support it, and members would be asked to complete a formal electronic record of their approval or otherwise which would be kept as documentary evidence and would provide an audit trail of approval for work to continue on the scheme. In the case of capital expenditure each scheme would also require a full financial appraisal and legal agreement to use the monies for the proposed scheme. As of the date of this meeting only two minor schemes had been approved, both of which would be financed by core funding. Members commended the Director of Corporate Governance on the clarity of the report and the guidance offered as it addressed concerns and observations raised at previous meetings. Members learned that the procedure allowed for members to provide an explanation of why they did not approve of a proposed scheme but noted that there was no requirement for them to do so when voting on any matter at any committee or in any forum. In response to the chairman, the Director of Corporate Governance explained that the flowchart provided at Appendix A related to the delegated process. The process relating to Cabinet decisions of ?75,000 or more had been included in a separate flowchart at Appendix C to the report considered at the last meeting. RESOLVED (unanimously): That the committee welcome the strengthening of democratic accountability in the report and agree that the report addresses member concerns and comments expressed at previous meetings.	Agreed
11	Review of the Constitution 2012/13 Members discussed a number of areas of the Constitution which they believed might benefit from a review in 2012/13 and decided to focus on three areas: the call-in procedure, working groups (procedure rules) and procurement (grants and income). The timetable for the 2012/13 review would be agreed at the next meeting. RESOLVED: That the review of the Constitution 2012/13 be carried out in the following order: (i) Call-in procedure; (ii) Working Groups (procedure rules), and (iii) Procurement (grants and income).	Agreed
12	Forward Plan Forward Plan (49K/bytes) attached Members considered the latest Forward Plan and discussed appropriate changes. RESOLVED (unanimously): That the Constitution Review Timetable and Update on the National Fraud Initiative be added to the agenda for the meeting on 26 September 2012.	Agreed

Published on Thursday 5 July 2012

The meeting closed at 8.23pm.