Meeting documents

Finance, Audit and Risk Committee
Thursday, 1st March, 2012 7.30 pm

Time: 7.30pm Place: Committee Room 1, Council Offices, Gernon Road, Letchworth Garden City
 PRESENT: Councillor David Levett (Chairman), Councillor John Booth (Vice-Chairman), Councillor Mrs A.G. Ashley, Councillor Paul Clark, Councillor Bill Davidson, Councillor David Kearns and Councillor Marilyn Kirkland.
 IN ATTENDANCE: Norma Atlay - Strategic Director of Finance, Policy and Governance
Andy Cavanagh - Head of Finance, Performance and Asset Management
Fiona Timms - Performance and Risk Manager
Helen Maneuf - Head of Assurance - SIAS
Nigel Schofield - Committee and Member Services Officer
 ALSO PRESENT:
Item Description/Resolution Status Action
PART I
58 APOLOGIES FOR ABSENCE

There were no apologies of absence received from Councillors, but apologies had been received from Phil Westerman and Denis Thorpe of Grant Thornton.
 Noted   
59 MINUTES
Minutes

RESOLVED: That the Minutes of the Meeting of the Finance, Audit and Risk Committee held on 16 January 2012 be confirmed as a true record of the proceedings and be signed by the Chairman.
 Agreed   
60 NOTIFICATION OF OTHER BUSINESS

There was no other item of business tabled.
 Noted   
61 CHAIRMAN'S ANNOUNCEMENTS

The Chairman welcomed everyone to the meeting and reminded Members that, in line with the Code of Conduct, any Declarations of Interest should be declared immediately prior to the item in question. The Chairman also advised that the next meeting of this Committee in 2012 - 2013 had been provisionally set at Thursday 14 June 2012.
 Noted   
62 PUBLIC PARTICIPATION

There was no public participation.
 Noted   
63 RISK MANAGEMENT UPDATE
Report
Appendix A
Appendix B
Appendix C

The Performance and Risk Manager (PRM) presented the report of the Head of Finance, Performance and Asset Management which provided an update on the management of the Strategic and Corporate Risks owned by the Senior Management Team (SMT) and Cabinet.

The PRM advised the Committee that SMT had reviewed and challenged the Top Risks in February 2012 and that an internal audit on Risk Management had been completed by SAIS, which had a substantial level of assurance with one medium and four merits attention recommendations. The PRM advised the Committee that Heads of Service and Corporate Managers had been reminded that the risk register for each service should be up to date so that risk management controls were effective. The Committee noted that where appropriate changes had been made to the scope of each risk and updates made to progress against any mitigating actions.

The PRM proposed that the Top Risk - Organisational Development should be deleted and that the Office Accommodation and Flexibility Works components had been completed. All risks from the remaining initiatives were included in the Organisational Workload Risk which was presented at Appendix B. The PRM advised the Committee that it was likely that the obligation to produce a Sustainable Community Strategy would be removed as actions had been refined and reduced which reflected a reduction in partnership resources at NHDC and other agencies. There was no funding for Local Strategic Partnerships and consequently the risk was no longer significant to be considered as a Top Risk for NHDC.

The PRM confirmed that the risk of Climate Change Strategy Implementation had been revised and renamed - The Authority's Response to Climate Change - which was presented at Appendix C for clarification and reflected the changes required under the Nottingham Declaration 2 which would be ratified soon. The changes would allow Councils to undertake actions that could be achieved and that NHDC would only take action to mitigate CO2 emissions if cost savings could be made.

The PRM next referred the Committee to Appendix B which detailed the number of risks that had come from the Government Policy Initiatives attached as sub-risks to the Top Risk of Organisational Workload. The PRM advised the Committee that additional sub-risks emanating from the Localism Act (except Planning Control) and the Public Health and Social Care Bill would be added soon. Overall, the number of new government initiatives with the backdrop of diminishing resources, had led to the probability of the risk being increased to a ‘3' giving an overall increase in this risk to a level ‘7' which had recently been agreed by SMT.

Following previous comments made by FAR it had been proposed to rename the Financial Management Risk as ‘Managing the Council's Finances' and that this risk would remain as one of the highest risks facing NHDC. The Committee were pleased to note that the Financial Resilience audit undertaken by Grant Thornton provided assurance that this risk was effectively managed by NHDC.

The PRM concluded her presentation by reference to the Equalities Act of 2010, and that the risks of NHDC failing in its Public Sector Equality Duty were recorded on the Risk Register. To fulfil its obligations the Council's risk management approach was holistic and took account of commercial and physical risks and the possibility of not delivering a service that would contravene the Equalities Act.

The Chairman thanked the Performance and Risk Manager for the update on Risk Management and invited comments or questions from the Committee.

The Committee discussed the various proposals made by the PRM and agreed the referral to Cabinet of deleting the Cabinet Top Risks for Organisational Development and Sustainable Community Strategy Implementation. However, during discussions on climate change which covered the expected Nottingham 2 Declaration on Climate Change and the changes for NHDC as advised by the PRM above and The Localism Act 2011 where green spaces and parks would be promoted it was considered whether it was appropriate to reduce the climate change risk. One Member considered that the needs of Nottingham 2 and The Localism Act might well result in an increase in the risk probability score. In response to a question the Strategic Director of Finance, Policy and Governance (SD) advised that it was now a question of how NHDC would respond to climate change and Nottingham 2. The SD confirmed that there would be a report to Members and publication in MIS with advice once guidance was received.

The Committee expressed concern about the Organisational Workload and whether the Localism Act, Welfare Bill and Health Bill would be overwhelming for officers. One Member questioned if there was an increase in risk following the appointment of the Interim Chief Executive who would continue as Strategic Director of Planning, Housing and Enterprise. The PRM advised the Committee that the many aspects of this type of risk overarched and all of the sub risks would be carefully monitored. The SD also commented that from a fairly stable situation there were now four or five issues at once which had to be determined no later than 1 April 2013, yet detailed information was unlikely to be available before autumn - winter 2012. An example of this was that an NHDC pay policy had to be agreed by 1 April 2012 but no guidance had been received until 17 February this year.

RESOLVED:

(1)That the proposal to delete the Cabinet Top Risk of Organisational Development be agreed;

(2)That the proposal to delete the Cabinet Top Risk of Sustainable Community Strategy Implementation be agreed;

(3)That the increased probability score of a ‘3' for the Organisational Workload Senior Management Team Top Risk, with an overall risk matrix score of a ‘7' be noted;

(4)That the proposal to amend SMT title for the Senior Management Risk - The Authority's Response to Climate Change be noted, but that no action would be taken at the moment on changing the risk probability score.

RECOMMENDED TO CABINET:

(1)That the recommendation to delete the Cabinet Top Risk of Organisational Development be endorsed by Cabinet at the meeting to be held on 20 March 2011;

(2)That the recommendation to delete the Cabinet Top Risk of Sustainable Community Strategy Implementation be endorsed by Cabinet at the meeting to be held on 20 March 2011;

REASON FOR DECISION:
To allow the Finance, Audit and Risk Committee make comments and observations on the Risk Management Update.
 Agreed  Performance and Risk Manager
64 ANNUAL GOVERNANCE STATEMENT 2010 - 2011
Report
Appendix A
Appendix B

The Performance and Risk Manager (PRM) presented the report of the Head of Finance, Performance and Asset Management which described progress against the Improvement Action Plan within the 2010-2011 Annual Governance Statement for implementation in 2011 - 2012. The PRM advised that there was one minor amendment to the Local Code of Corporate Governance (Paragraph 5, Appendix B), and that the Code presented at Appendix B (Paragraph 3.3) had been amended to reflect the re-assessed Corporate Priorities that would apply from 1 April 2012.

The PRM referred the Committee to Appendix A which listed outstanding actions from the meeting of FAR held in September 2011. The PRM described the actions taken on the following: AGS019 - Section 106 Agreements; AGS021 - Members Expenses and AGS022 - Legionella Controls. The Committee noted that the Planning Obligations Supplementary Document had yet to be reviewed and would not be reviewed by the end of this financial year as further guidance was expected from the Localism Act 2011, the evolving National Planning Policy Framework and the Council's Local Development Framework and the Community Infrastructure Levy. The Members Allowance Scheme for 2012-2013 had been amended to confirm that VAT receipts were required for mileage claims. With regard to legionella controls the PRM confirmed that not all risk assessments for NHDC buildings had been reviewed, but all surveys had been carried out and it was expected to complete the reviews by 9 March 2012. The PRM proposed that the outstanding actions in the current plan would not be carried forward into 2011-2012, but would remain active on Covalent until completed and could be reviewed by Members at any time.

The PRM reminded the Committee that the Chairman had to provide an Assurance Statement to support the Annual Governance Statement for 2011-2012 and that the AGS would comply with the requirements of the Equality Act 2010 to show that the Council would meet the obligations arising from the Public Sector Equality Duty.

The Chairman thanked the Performance and Risk Manager for the presentation and invited comments and or questions from the Committee.

With regard to the S016 Agreements a Member expressed concern about the delays and that it was very important to allocate and expend monies on the appropriate schemes as soon as possible. Another Member expressed concern about the delays in completing the Legionella controls work and the Head of Finance, Performance and Asset Management (HF) confirmed that NHDC had entered into a Health and Safety Compliance Contract with an outside provider following a slip of three months in the checking process. The HF accepted that there could be serious consequences for NHDC if the survey work was not done on time and in a competent manner, but advised the Committee that there was currently 90 per cent compliance with Health and Safety Legislation and the work would be completed in the next few weeks. It was agreed that targets for any work should be challenging and achievable even though a biennial review was part of the Council's own policy on legionella controls which was based on the Health and Safety Executive's Guidance. In response to another question the HF advised that costs for the Legionella surveys were an NHDC liability but the outside contract price did include a budget for remedial works. The HF assured the Committee that officers were very aware that problems could arise at any moment and that the outside contractor would be part of the monitoring process.

RESOLVED:

(1)That the progress against the action plan that arose from the Annual Governance Statement for 2010 - 2011 for delivery in 2011 - 2012 be noted

(2)That the changes to the Local Code of Corporate Governance as detailed at Paragraph 3.3 of Appendix B to the report be noted;

(3)That the proposal for the Chairman of the Finance, Audit and Risk Committee to provide assurance to inform the Annual Governance Statement be agreed

REASON FOR DECISION:
For the Finance, Audit and Risk Committee to review and comment on the arrangements for Corporate Governance and agree actions to ensure compliance with best practice.
 Agreed   
65 SHARED INTERNAL AUDIT SERVICES UPDATE (POSITION AGAINST THE 2011 - 2012 ANNUAL AUDIT PLAN)
Introduction
Report

The Head of Assurance - SIAS (HA) advised the Committee that this report described progress against the NHDC Internal Audit Plan for 2011-2012 which had been approved at the meeting of the Audit and Risk Committee held on 28 February 2011 (Minute 44 refers).

The HA confirmed that at 27 January 2012, 68 per cent of the audit plan days had been delivered and referred the Committee to Appendix A which included a status update on each audit within the plan. The Committee noted that a minimum of 90 per cent of the amended 2011-2012 Audit Plan would be delivered by 31 March 2012. The HA advised the Committee that there were three amendments to the Audit Plan: Corporate Governance Arrangements; Herts Recycling Consortium and Management Information.

With regard to an audit of the Bancroft Re-Development Contract the HA advised the Committee that due to the lengthy application process with the Heritage Lottery Fund she had been advised by officers at NHDC that contracts would not be let during 2012 -2013 and consequently no audit was planned in 2012-2013.

The HA next referred the Committee to Appendix B which detailed the Implementation Status of High Priority Recommendations and to the supplementary Appendices A and B which gave details of the Final audit reports with limited or ‘no' assurance only. The HA advised the Committee that there were eight completed High Priority Recommendations that should be removed and this was agreed by the Committee.

The Chairman thanked the Head of Assurance for the updating on the Internal Audit Plan and invited questions and or comments from the Committee. Whilst the Committee were pleased to note the changes to the Internal Audit plan and that overall there would only be 10 per cent of work not completed at the end of March 2012 there was still concern about real time reporting of the current status of an audit and certainly the need for a more detailed reporting of status of compliance to audit High Priority Recommendations which had been highlighted at the last meeting of the Committee on 16 January 2012 (Minute 51 refers).

The Committee regarded the inclusion of an additional column in the tables at Appendix B that would show precise progress towards completion of work identified in the high priority recommendations as an important tool for assessment by the Committee. The Head of Finance, Performance and Asset Management advised the Committee that such detail was available on Covalent and this detail could be made available as a report to Members.

RESOLVED:

(1)That the details of the Internal Progress Report of Progress against the 2011 - 2012 Annual Audit Plan including key audit findings be noted;

(2)That the proposed amendments to the Audit Plan as listed at Paragraph 2.5 be agreed;

(3)That the proposal to remove the implemented high priority recommendations listed at Appendix B as follows be agreed:
2. Asset Management and Capital Accounting (2010-2011);
6. Consultants (2010 - 2011);
7. Consultants (2010 - 2011);
11. Home Improvement Grants;
12. Home Improvement Grants;
13. Home Improvement Grants;
14. Land Charges;
17 Grounds Maintenance Contract.

(4)That the Head of Assurance - SIAS be requested to liaise with the Performance and Risk Manager to develop a progress indicator could be included in the presentation of High Priority Recommendations and any other reporting of audit recommendations presented to future meetings of the Finance, Audit and Risk Committee.

REASON FOR DECISION:
To allow the Finance, Audit and Risk Committee undertake a review of the position against the 2011 - 2012 Annual Audit Plan and consider the deletion of high priority recommendations.
 Agreed  Performance and Risk Manager
66 INTERNAL AUDIT PLAN FOR 2012-2013
Introduction
Report

The Head of Assurance - SIAS (HA) advised the Committee that the purpose of this report was to present the Shared Internal Audit Service Audit Strategy for 2012 - 2013 and the proposed NHDC Internal Audit Plan for 2012-2013 presented at Appendices A and B respectively.

The Audit Strategy was a high level statement and had been drafted to comply with the CIPFA Code of Practice for Internal Audit in Local Government in the UK 2006. The HA described to the Committee the planning principles set out in the Strategy and the approach and context taken for the Audit Planning Process. The HA referred the Committee to Appendix B which presented the draft plan for 2012-2013 (which was a risk based plan) containing the proposed outline scope for each audit (39 in total) and the expected delivery quarter during 2012-2013. The Committee reviewed the allocation of audit days at Paragraph 3.4 and noted the large commitment of 270 days (from a total 480 days) for the audit of key financial systems and other financial and operational audits. The HA advised the Committee that several audits (listed at Appendix B) had not been included in the draft audit plan, either due to low risk, no high risk identified, not seen as an area of risk, no requirement for audit, or covered elsewhere in other audits.

The Chairman thanked the Head of Assurance - SIAS for the presentation and invited questions or comments from the Committee.

A Member questioned why the Committee had not been involved in the selection of audits, or whether the appropriate Portfolio Holder or Cabinet or the Scrutiny Committee had been invited to comment on the proposed audits. The Chairman confirmed that he and the Vice - Chair had been consulted on the proposed audits on behalf of this Committee. In response to a question on the need for unexpected and additional audits the HF confirmed that there was contingency within the plan for such audits. The Strategic Director of Finance, Policy and Governance advised the Committee that as Section 501 officer she reviewed all of the audits and the risks in the plan and Cabinet had approved the budget including contingency (20 days).

A Member questioned whether the completion of the Freedom of Information audit would be on time. The HA expected this audit to be completed in the third or fourth quarter and that each progress report to the Committee would include a status report for each audit. The Committee based on evidence for the current audit plan were concerned that there would be continuing slippage to complete audits and as there was a carry over into the next year was the 480 days sufficient? The HA advised in addition to contingency days, there would be internal audits allocated to Price Waterhouse Coopers to assist the internal audit team. The HA advised that it was intended to have a consistent audit plan for all the Hertfordshire Authorities but that this would take time. Comment was also made as to presentation of audit reports compared to the presentation pre SIAS and the HA considered this was a matter of what was practical and what would be acceptable to all authorities.

RESOLVED:

(1)That the SIAS Audit Strategy for 2012-2013 as presented at Appendix A be agreed;

(2)That the proposed NHDC Internal Audit Plan for 2012 - 2013 as presented at Appendix B be agreed.

REASON FOR DECISION:
To allow the Finance, Audit and Risk Committee comment as appropriate on the Audit Strategy and Internal Audit Plan for 2012-2013.
 Agreed   
67 SHARED INTERNAL AUDIT SERVICES - TERMS OF REFERENCE (AT 1 MARCH 2012)
Introduction
Report

The Head of Assurance - SIAS (HA) advised the Committee that the CIPFA Code of Practice for Internal Audit in Local Government 2006 required each local authority to formally define the Terms of Reference for its internal audit function, as presented at Appendix A.

The Committee reviewed the Terms of Reference at Appendix A and it was agreed that this was an important document that clarified the framework used by Internal Audit to discharge its responsibilities to those charged with governance in the SIAS partner authorities.

There were no questions for the Head of Assurance - SIAS.

RESOLVED: That the proposed SIAS Terms of Reference for 2012-2013 as presented at Appendix A be agreed.

REASON FOR DECISION:
To allow the Finance, Audit and Risk Committee comment as appropriate on the SIAS Terms of Reference for 2012-2013.
 Agreed   
68 COST OF DEMOCRACY - UPDATE
Report
Appendix A
Appendix B
Appendix C

The Head of Finance, Performance and Asset Management (HF) reminded Members that at the meeting held on 8 December 2011 (Minute 37 refers) he had been requested to enquire if nearest neighbour and geographical neighbours were members of the CIPFA Democratic Services Benchmarking club and subsequently present a future report on the Costs of Democracy using such a CIPFA report together with a more detailed analysis of direct costs and officer time allocated to ‘Costs of Democracy'.

For clarification the HF described to the Committee the definition for calculating cost allocations and referred the Committee to Table 1 which identified the four main cost lines: Direct costs; Members Allowances, Officer Time and Chairman's costs. In summary this amounted to £1.49M which was detailed at Appendix A and in percentage terms equated to: Committee Services (45-100 per cent), Community Development (35 - 50 per cent and Customer Services (33 per cent), with 70 officers in total charging some percentage of their time to the Costs of Democracy. The HF advised the Committee that officer time was reducing year on year. The HF referred the Committee to Appendix B which listed the main costs charged directly to Costs of Democracy, with the significant costs being: printing (c. £50k), postage as in Member Despatch (c. £13K) and Member's Car allowance (c. £11K).

The HF advised that the CIPFA group of authorities had been sent a ‘Costs of Democracy' questionnaire complied by NHDC Officers and referred the Committee to Appendix C which was the completed questionnaire by NHDC Democratic Services. Only one partially completed questionnaire was returned by another authority, Dacorum Borough Council (Section 4) and the paucity of returned questionnaires made any comparison difficult.

The Chairman thanked the Head of Finance, Performance and Asset Management for the updating report and Members remarked on the large expenditure attributed to printing and distribution of Committee Agenda. Following a short discussion it was proposed that Cabinet should be requested to investigate ways of reducing this expenditure as an in-year Cost Efficiency saving. Members suggested that consideration should be given to despatch of agenda electronically with hard copies given to Committee Members only thereby reducing the number of agenda printed. A Member questioned whether it was necessary to despatch a complete agenda to non Committee Members and members of the public and that perhaps just the front pages, recommendations and an executive summary of the report would be adequate for members of the public who attended Committee meetings. The HF acknowledged that the cost of printing and postage at £53K seemed to be large but besides copies to Members there were copies sent to libraries, the press and parish councils and consideration could be given to increased delegated authority to officers which could decrease the need for officer's reports. Despite this clarification the Committee were still minded to ask Cabinet to look at ways in which this cost could be reduced.

The Chairman noted that now that there was a baseline of data it should not be difficult to make a comparison with the savings made at recent re-structuring at NHDC. The HF accepted that future comparisons could be made to this information.

RESOLVED:

(1)That the contents of the updating report on the cost of Democracy be noted;

(2)That Cabinet be requested to look at the current costs of printing and despatch of Committee Agenda to Members, The Press, Libraries, Parish Councils and Members of the Public with a view to making a significant reduction in overall costs.

RECOMMENDED TO CABINET:

(1)That Cabinet be requested to re-examine closely the costs of printing and despatch of Committee Agenda by post and courier service, with a view to reducing the number of pages printed and frequency of the Courier Service;

(2)That Cabinet be requested to review the practice of printing and despatch of Committee Agenda and reports to Members, The Press, Libraries, Parish Councils and Members of the Public and the practice of making copies of full agenda with a view to making a significant reduction in overall costs.

REASON FOR DECISION:
To allow the Finance, Audit and Risk Committee comment as appropriate.
 Agreed   
69 FUTURE MEETINGS - POSSIBLE AGENDA ITEMS

No items were proposed for future meetings of the Finance, Audit and Risk Committee.

At the closure of the meeting the Chairman thanked Members and Officers for their contributions during the Civic Year 2011-2012 and gave his best wishes to all Councillors seeking re-election on 3 May 2012.
 Noted