Meeting documents

Governance Committee
Wednesday, 21st September, 2016

Place: Wheel Room, Civic Centre, West Paddock, Leyland, PR25 1DH

 Present: Councillor Ogilvie (in the chair).

Councillors Foster, Patten and Mrs K Walton.
 In attendance: Garry Barclay (Head of Shared Assurance Services), Carol Eddleston (Democratic Services Officer), Susan Guinness (Head of Shared Financial Services), Dawn Highton (Principal Auditor), Lee Hurst (Principal Systems and Financial Accountant), Denise Johnson (Director of Development, Enterprise and Communities) and Steve Nugent (Head of Human Resources).

Councillor Mrs Snape in her capacity as portfolio holder for Finance.

Mark Heap, Richard Watkinson and Gareth Winstanley from the Council's External Auditors, Grant Thornton.
 Public attendance: 0
 Other Officers: 7

Other Members:-
Councillors Clark, Martin, Mullineaux and P Smith.

Item Description/Resolution Status Action
12 Apologies for Absence

An apology for absence was submitted on behalf of Councillor Mrs Moon.

13 Declarations of Interest

There were no declarations of interest.

14 Minutes of the Last Minutes, Held on 29 June 2016
Minutes attached

RESOLVED (unanimously) that:

The minutes of the meeting held on 29 June be approved as a correct record and signed by the chairman.

15 External Audit - The Audit Findings for SRBC
Report (547K/bytes) attached

Mark Heap, Engagement Lead with the Council?s External Auditors, Grant Thornton, introduced Gareth Winstanley, Audit Manager and Richard Watkinson, Auditor in charge.

Mr Heap confirmed that the audit was substantially complete subject to a few procedures to be finalised, as listed on page 4 of the report. He said that the small number of disclosure changes that the Council had made had not affected its financial position and, as indicated on pages 9, 10 and 11, the external audit had not identified any significant issues in relation to the significant and other risks identified in the audit plan.

Mr Heap confirmed that the outcome of the Scrutiny Committee Task Group?s report surrounding the commissioning of a review of the investigation of taxi licensing had informed the qualified Value for Money (VFM) conclusion. The audit would not be closed because the external auditors were still considering the task group?s findings and were considering whether they needed to apply their statutory powers in relation to these considerations.

The chairman said that he was quite surprised by the VFM conclusion given that, at the time the audit findings were prepared, the task group report was only a draft and was yet to be considered by full Council and he wondered whether the external auditors had been a little ?heavy handed?. Mr Heap did not believe this to be the case and referred the meeting to page 21 of the report which outlined the External Auditors? position.

In response to questions from the chairman and Councillor Foster about the External Auditors? statutory powers and the impact of a qualified VFM conclusion, Mr Heap confirmed that their consideration of whether to apply any of their statutory powers would be informed by how the authority took forward the task group?s recommendations following the full Council meeting on 5 October. External Audit?s consideration would include the ?whole picture? surrounding the review, including when the issues were first communicated to them. A qualified VFM conclusion was unusual but not unknown and Mr Winstanley confirmed that there had not been an unqualified opinion issued in relation to this authority in the years that he had been involved in our audits. The External Auditors gave only one opinion each year and part of the 2016/17 audit would focus on progress made in the intervening 12 months to address issues highlighted. The effect of a qualified conclusion meant different things to different people. There was no outright financial penalty but next year?s audit fee would increase due to the additional workload associated with the findings of the Scrutiny Task Group, although it was too early to say at this stage what the level of increase would be.

Mr Heap explained that a ?Public Interest report? was used to report on any matters that the External Auditors believed to be of public interest. Such a report had to be considered by the full Council concerned and required an action plan to be agreed and taken forward by the relevant Council. An ?advisory notice? was rarely, if ever, used but was issued to a local authority when the External Auditors believed that the authority was about to do something illegal.

In response to a question from Councillor Patten, Mr Winstanley confirmed that the 2nd disclosure change referred to on page 18 was simply a transposition error in the disclosure amount column.

RESOLVED (unanimously):
That the report be noted.

16 Internal Audit - First Internal Audit Interim Report
Report (50K/bytes) attached

The Principal Auditor presented the report which advised of progress on the South Ribble and Shared Services Internal Audit Plans for the period April 2016 to July 2016 and gave an appraisal of the Internal Audit Service?s performance to date.

The Principal Auditor referred to the National Fraud Initiative and confirmed that data relating to members and officers was currently being collated. The results from the data matching exercise were due to be released in January 2017.

The chairman said he was pleased to see the allocation of audit days for licensing in the 2016/17 Internal Audit Plan. When he queried the absence of reference to the flexitime and overtime schemes in the plan the Principal Auditor confirmed that work on these areas would be undertaken as part of the Annual Governance Statement process towards the end of the current financial year.

RESOLVED (unanimously):
That the report be noted.

17 SRBC Audited Statement of Accounts 2015/16
Appendix A (4M/bytes) attached
Report (134K/bytes) attached
Appendix B (129K/bytes) attached
Revised AGS (465K/bytes) attached

a) Annual Governance Statement

The Director of Development, Enterprise and Communities presented the revised Annual Governance Statement, explaining that it was based on the report that came to the June meeting of the committee but updated on the basis of the discussions at that meeting. Appendix B was the Draft Corporate Governance Action Plan 2016/17 which was brought to the June meeting and Appendix C was an addendum which took account of the recommendations of the Scrutiny Committee Task Group as they currently stood, as well as the significant qualitative aspects outlined in the External Auditors? audit findings.

The chairman enquired why an ?enhanced role for Standards Committee?, as referred to on page 17, was deemed to be necessary, and how and by whom the new role would be developed. He wondered whether the authority had sufficient capacity in terms of resource to deliver the actions in the plan within the suggested timeframes. The Director of Development, Enterprise and Communities said that the Standards Committee had an opportunity to strengthen its role by having an annual work programme for strengthening the ethical governances arrangements in the Council. It would ultimately be for the Interim Chief Executive and the Monitoring Officer to take this forward.

The chairman observed that many of the actions in Appendix C related to the Interim Chief Executive and he would think it appropriate for the appointee to ?buy into? the action plan rather than have it presented as a fait accompli. The Director of Development, Enterprise and Communities considered that having set out the actions in Appendix C was a definite statement of intent although the suggested actions could be developed further.

Councillor Foster expressed a number of concerns about the Council?s interim arrangements in relation to Statutory Officers and enquired who was currently ensuring statutory compliance. He did not see how the action plan addressed the serious governance issues within the authority, or how the actions could be delivered. He wondered whether the Deputy Monitoring Officer had had training on the statutory function and enquired whether any thought had been given to bringing in an interim Monitoring Officer in the coming months.

The Director of Development, Enterprise and Communities confirmed that the Council had a Chief Executive in post until 4 October and was moving as quickly as it could on the appointment of a new Chief Executive. The recruitment pack for the Interim Chief Executive post clearly outlined the responsibilities which s/he would have. The Director confirmed that consideration had been given to how the role of the Deputy Monitoring Officer could be supported and strengthened and there were plans to bring in some support, although the first priority had been considered to be the recruitment of an Interim Chief Executive. The Director understood that we were statutorily compliant. The suspension of the Monitoring Officer was a neutral act: he was still Monitoring Officer and the authority had a Deputy Monitoring Officer.
Councillor Foster suggested that the committee was not currently in a position to approve the Annual Governance Statement. Councillor Mrs K Walton said that she would not be entirely confident in agreeing to the statement being signed off tonight. Councillor Foster said that some of the alleged corporate governance weaknesses had been highlighted in the interim report from Wilkin Chapman and although he had previously asked for sight of it, he had been refused by the Chief Executive on the basis of ?public interest?. He wondered whether it might still be beneficial for the committee to see this report. The chairman said that he too had personal concerns about this.

The chairman said his main concern was whether what the authority was doing was statutorily and constitutionally compliant and he enquired whether this was expected to be signed off tonight and by whom. The Director of Development, Enterprise and Communities said she did not believe it could be signed off at this meeting and the Head of Shared Financial Services stressed that the committee and signatories had to be confident that it addressed all the issues highlighted. As she understood matters, this could not be the case until after the task group?s findings had been discussed at full Council on 5 October. The potential impact of not signing the statement or the Letter of Representation at tonight?s meeting was essentially reputational damage.

The chairman sought clarification of whether not signing the Annual Governance Statement automatically meant that the Statement of Accounts could not be approved and the Letter of Representation could not be signed off. The Principal Systems and Financial Accountant pointed out that his covering report to the Statement of Accounts laid out an alternative recommendation for consideration in this eventuality.

The Director of Development, Enterprise and Communities confirmed that she had taken external advice, including from the External Auditors and the Local Government Association on how best to proceed. Their advice was that using the committee and the revised Annual Governance Statement to state our intentions going forward was a sound approach. The first action was to appoint an Interim Chief Executive and the Director of Development, Enterprise and Communities agreed that it would be appropriate for the committee to meet with him/her as soon as possible following his/her appointment.

The chairman asked members of the committee to consider whether they would be minded to accept the revised Annual Governance Statement in light of an opportunity to meet with the new Interim Chief Executive as soon as possible. Councillor Foster acknowledged that the new actions in the action plan had been proposed with the best of intentions but too late and without the right individuals.

b) Audited Statement of Accounts

The Head of Shared Financial Services introduced the report, confirming that all the statements were correct, with a few minor adjustments having been made since the statements were originally made available to committee. Page iii of the covering report included the authority?s response to part of the action plan at the back of the External Auditors? report.

The Principal Systems and Financial Accountant said that the covering report covered much of what had been raised in the Audit Findings report, including management responses to the Action Plan. The Principal Systems and Financial Accountant explained that the Letter of Representation at Appendix B was intended to give assurance to the External Auditors on aspects that they could not readily test as part of their audit. He confirmed that the Letter of Representation should be signed by the Chair and the Chief Financial Officer, or other such alternative appropriate officer as determined by Council, at the time that the committee agreed the sign off.

Mr Heap explained that the External Auditors could give an audit opinion on the Statement of Accounts while the audit was still open but could not issue the Audit Opinion Letter until the Annual Governance Statement was finalised and they had fully considered their statutory powers.

RESOLVED (unanimously) that:
1) the revised Draft Annual Governance Statement be noted but not signed off;
2) the proposed actions in Appendix C be welcomed, albeit with concerns about the level of capability and resource available to enable them to be delivered within the timeframes outlined;
3) a special meeting be convened with the incoming Interim Chief Executive as soon as possible after his/her appointment in order to enable the committee to gain the confidence required to be able to approve the Annual Governance Statement for sign off by the Leader and Chief Executive;
4) the approval of the audited Statement of Accounts and signing of the Letter of Representation be deferred to the special meeting of the committee referred to in 3) above;
5) a notice be published as soon as reasonably practicable stating that the authority has not been able to publish the Statement of Accounts and the reasons why, and
6) any report from the auditor containing the final audit findings issued before the conclusion of the audit be published as soon as reasonably practicable after its receipt.

18 Treasury Management Activity Mid Year Review 2016/17
Report (136K/bytes) attached

The Head of Shared Financial Services presented the report which reviewed the Treasury and Investment Strategies approved by Council in March, reported on the year?s performance to date and on compliance with prudential and treasury indicators and recommended that Council be recommended to approve changes to Prudential and Treasury Indicators.

The Head of Shared Financial Services reminded the committee that the authority was required to borrow in order to finance the Capital Programme but we continued to use our own cash balances rather than borrowing externally. If Treasury Indicator 1 (Upper limit on variable rate exposure) were not increased as proposed on page 10, it was possible that the authority would not comply with its agreed indicators and this could be a longer term issue if we had not spent our budgeted Capital Programme.

The possible options to avoid having to invest in low interest accounts outlined on page 4 would be considered by the incoming Chief Executive and Chief Finance Officer, with their recommendations then being brought back to the November committee meeting for discussion and approval to recommend to full Council.

In relation to the borrowing advice on page 14, the Head of Shared Financial Services explained that it made sense to borrow externally if the rates at which we could borrow externally were lower than the cost of borrowing from ourselves, but it was unlikely that we would ever be in the position where we needed to top up our cash balances by external borrowing. She confirmed that we were not permitted to borrow in order to invest.

In response to an observation about ?Property Funds? at the bottom of page 8, the Head of Shared Financial Services confirmed that due diligence had not been undertaken on this type of investment yet. However, it was considered appropriate to keep the category on the Investment Counterparties 2016/17 table at this time so that due diligence would be undertaken and brought to committee. The committee reconfirmed that the policy for any investments of this type had yet to be brought before this committee. It was possible that this category of investment would be removed from the counterparty list when the Treasury Strategy was next reviewed.

The Head of Shared Financial Services confirmed that it was her understanding that if there was no action taken in relation to a S151 Officer by 5 October she would undertake that role by proxy. Councillor Clark confirmed from the audience that a report would be taken to Council on 5 October covering this issue and discussions would begin with the incoming Interim Chief Executive on how to take this forward. If the report was approved by full Council there would be no gap in S151 Officer cover.

The Head of Shared Financial Services confirmed that she had taken steps to approve payroll, spend and investment decisions wherever possible ahead of her forthcoming leave.

Councillor Foster said he was still concerned about the interim arrangements. Councillor Clark pointed out that there were always risks but, following the discussions that he had had about business arrangements, he considered that the risk was minimal. The chairman reminded the meeting that the current Chief Executive was in post and available until 4 October. He confirmed that he had not been consulted about the interim arrangements.

The Cabinet Member for Finance, Councillor Mrs Snape, acknowledged that everyone had concerns given that there had been so much change in such a short period of time. She considered that the arrangements that had been put in place were as good as they could be in the circumstances.

The Director of Development, Enterprise and Communities stressed that things were moving as quickly as they could, especially given that much of what had happened could not have been foreseen.

RESOLVED: (unanimously) that:
1) The report be noted with the comments above, and
2) The proposed changes to Prudential Indicators and Treasury Indicators presented at Appendix B be recommended to Council for approval.

19 Revenue and Capital Budget Monitoring Report 2016/17 - April to July
Report (26K/bytes) attached
Apps 1 + 2 (304K/bytes) attached
App 3 (33K/bytes) attached

The Head of Shared Financial Services presented the report, explaining that a potential budget overspend could be incurred at the end of the year due to the efficiency targets programme not having been achieved. The chairman expressed disappointment that even at this early stage we were not expecting to meet our efficiency savings targets and he hoped that the committee would soon see some detail on how we intended to bridge the budget gap.

The Head of Shared Financial Services said that matters currently being dealt with by the authority had diverted attention from the efficiency programme but the efficiency targets could be reorganised or re-evaluated at a later date.

The Head of Shared Financial Services responded to questions and observations from the committee. She confirmed that the underspend on ?Employee Costs? was due to a mixture of current vacancies (some of which had been vacant all year) and posts which were not going to be filled. She would be happy to provide details of the long term vacancies. The overspend on ?Supplies and services? included costs relating to Licensing. A review of the City Deal financial model was currently underway which would inform an internal review of the Council?s revenue and capital budgets as part of the 2017/18 budget setting process. This would include the commitments made, profiling of payments into City Deal and the receipt from City Deal including additional income received via New Homes Bonus, Community Infrastructure Levy and Business Rates.

The budget deficit was likely to be higher than that projected at the time of the budget setting process due to changes in Business Rates Retention coming into effect in 2019/20. The Head of Shared Financial Services confirmed that her team understood the new framework and how it would work but at this stage had no assessment of the values concerned. Some or all of the growth we had generated in the tax base would be reclaimed by the government and overall the retention scheme was likely to have a negative impact on us.

In response to a question about due diligence in relation to the Momentum Business Park, the Director of Neighbourhoods, Environmental Health & Assets confirmed from the audience that the authority had employed consultants to help it through the process. The final draft report on the Asset Review had just been received and was due to be considered by the Senior Management Team at its next meeting.

The chairman observed that it was proposed to re-phase around 40% of the Capital Programme and pondered whether, based on the committee?s questions in the past about our ability to deliver the programme, there were questions around our ability to estimate.

In response to whether an underspend could be used on a scheme in Kingsfold, the Cabinet Member for Regeneration and Leisure confirmed from the audience that there was a full programme of schemes planned for the next two years, including the Bamber Bridge improvements and there was no capacity to add Kingsfold at this time.

Following a comment about a significant rephasing in relation to affordable housing, the Director of Development, Enterprise and Communities said that we were moving as quickly as we could in this area and the Commuted Sums Policy agreed at Cabinet earlier in the month would assist in this regard.

Councillor Foster said he had been trying to get some clarity around the Wesley Street Mill site for some time. He recalled that the Council had paid ?600K for the Mackenzie Arms which was subsequently demolished. Although we were told at the time that all the overage clauses had been dealt with, the authority now seemed to be incurring fees in the region of ?50K. The Head of Shared Financial Services said that the land would be accounted for in the statement of accounts according to what it was valued at and we would use our professional judgement in that regard. The Director of Neighbourhoods, Assets and Environmental Health confirmed that when the authority was ready to take the site forward it would have to have the land revalued. Councillor Foster queried the process for writing down any future loss and whether any decision to sell the land would have to come back to full Council or could be done by delegated decision. He said there did not appear to be any process for challenging the original decision. The chairman agreed that the committee would welcome clarification on the process and policies in place within the council in relation to the writing down of losses.

RESOLVED (unanimously) that:
1) The report and appendices be noted, with the comments expressed above;
2) the committee welcome further detail of long term vacancies, and
3) clarification be provided on the process and policies to be used for writing down losses.

20 Flexi-time and Overtime Assurance
Report (35K/bytes) attached
Overtime (17K/bytes) attached
Flexi-time (16K/bytes) attached

RESOLVED (unanimously) that:

Given the late availability of the report and appendices, the item be deferred to the next meeting.

21 Urgent Item of Business - Establishment of an Appointment and Employment Panel for Statutory Officers
Report attached
Appendix attached

The Head of Human Resources presented the report which outlined the reasons for the establishment of an Appointment and Employment Panel for Statutory Officers as a standing committee of the Council.

The Head of Human Resources pointed out that the Council?s constitution required full Council to agree the most appropriate body (panel) for the selection and appointment of the Head of Paid Service (Chief Executive). The panel must include at least one member of the Cabinet and must reflect the Council?s political balance. Given the timescales involved an informal recruitment panel had been working on the recruitment of an Interim Chief Executive and it was planned to take a report to full Council on 5 October to seek Council approval to appoint. Councillors Clark, Mullineaux, Foster and Howarth were members of this panel but Councillor Titherington had substituted for Councillor Foster given the latter?s work commitments.

The Head of Human Resources pointed out that at the time the current panel was established there were three official groups on the Council but he confirmed that political balance requirements related to the totality of committee seats across the whole of a Council?s committees rather than on each individual committee. Proportionality across the committees would change as a result of any changes to the political make up of the Council.

The Head of Human Resources confirmed that full Council was required to approve the appointment of the Head of Paid Service (Chief Executive) but not those of Monitoring Officer or S151 Officer. However the panel could be used to consider how to recruit to those roles in future. One of the first tasks for the incoming Interim Chief Executive would be to resolve any issues relating to the S151 Officer role. From the audience, Councillor Clark suggested that the main question for the committee should be whether it believed that the proposed establishment of this panel satisfied the requirements of the Council?s constitution which he considered it to do. He confirmed that plans were in place to resolve outstanding issues and discussions could start once an Interim Chief Executive was in place. The Head of Human Resources confirmed his view that the proposal was compliant with the constitution.

The Head of Human Resources then outlined in further detail the proposed employment aspects of the panel. He reminded the meeting that this committee, Cabinet and Council had debated long and hard on proposals for a statutory disciplinary panel relating to Protected Officers. The new disciplinary procedures required following the coming into force of the Local Authorities (Standing Orders) (England) (Amendment) Regulations 2015 were being incorporated into a revised Conditions of Service Handbook being issued this month by the JNC for Local Authority Chief Executives.

The Head of Human Resources explained that it would be for the six members of the proposed panel to decide which of them would form the Investigation and Disciplinary Sub-committee of three and consequently which three would form the Appeals Committee. It was acknowledged that as each required a member of the Cabinet the membership outlined on page 3 should be amended to read [including at least two Cabinet members].

Referring to the Initial Filter Panel, Councillor Foster enquired whether this process would now be applied retrospectively in relation to the statutory officer who was currently suspended. The chairman pointed out that the panel would not be approved until Council on 5 October and that this committee was not being asked to determine whether the panel would operate retrospectively.

The Head of Human Resources confirmed that formal records of Initial Filter Panel meetings would be taken but careful consideration would be required as to whether they could be made available. He confirmed that he would seek wherever possible for the Standing Investigating and Disciplinary Committee to have recourse to external expert advice from e.g. the Local Government Association but as this could not always be guaranteed he did not consider it appropriate to build it into the flow chart.

The committee acknowledged that the constitution would require amending accordingly following approval of the establishment of the panel by full Council.

RESOLVED (unanimously):
That Council be recommended to approve the establishment of an Appointments and Employment Panel for Statutory Officers as a standing committee of the Council.


  Published on Monday 17 October 2016
The meeting ended at 9.20pm.