Meeting documents
Audit and Risk Management Committee
Thursday, 28th June 2007
Present
Chair
PM Southwood
Councillors
C Blakeley, SA Brown, T Harney
Deputy
DE Roberts (for Cllr S Foulkes)
Index to Minutes
- Minute 1 - PROCEDURAL MATTERS
- Minute 2 - DECLARATIONS OF INTEREST
- Minute 3 - MINUTES
- Minute 4 - APPOINTMENT OF VICE CHAIR
- Minute 5 - FINANCE AND BEST VALUE: ANNUAL AUDIT AND INSPECTION LETTER
- Minute 6 - FINANCE AND BEST VALUE: AUDIT AND INSPECTION PLAN
- Minute 7 - FINANCE AND BEST VALUE: SOCIAL SERVICES BUDGETARY CONTROL
- Minute 8 - GRANT CLAIMS AND RETURNS - AUDIT COMMISSION REPORT
- Minute 9 - DATA QUALITY REVIEW
- Minute 10 - AUDIT COMMISSION REVIEW OF INTERNAL AUDIT
- Minute 11 - COMPREHENSIVE PERFORMANCE ASSESSMENT USE OF RESOURCES ACTION PLAN PROGRESS
- Minute 12 - AUDIT COMMISSION REPORTS
- Minute 13 - STATEMENT ON INTERNAL CONTROL
- Minute 14 - CORPORATE RISK AND INSURANCE MANAGEMENT
- Minute 15 - INTERNAL AUDIT PERFORMANCE MANAGEMENT
- Minute 16 - INTERNAL AUDIT WORK: MARCH TO JUNE 2007
- Minute 17 - INTERNAL AUDIT ANNUAL REPORT
- Minute 18 - OFFICE SECURITY
- Minute 19 - MUSEUM AND ART GALLERY SERVICE
- Minute 20 - REVIEW OF THE SYSTEM OF INTERNAL AUDIT
- Minute 21 - STATEMENT OF ACCOUNTS
- Minute 22 - CORPORATE GOVERNANCE
- Minute 23 - MEMBERS TRAINING
- Minute 24 - SUBMISSION TO ALARM AWARDS 2007
Minute 1 - PROCEDURAL MATTERS
Minute Text :
Councillor C Blakeley moved that the meeting be deferred to an alternative date as he had to attend a public meeting and alleged that officers had changed the starting time of the meeting without having consulted with each of the party spokespersons. In the absence of a seconder, the motion could not be voted upon, and Councillor Blakeley indicated that he would be considering his position about minority reports if appropriate.
The Head of Legal and Member Services explained the legal position regarding the comments made by Councillor Blakeley.
Minute 2 - DECLARATIONS OF INTEREST
Minute Text :
Members were asked to consider whether they had personal or prejudicial interests in connection with any item(s) on this agenda and, if so, to declare them and state what they were. No such declarations were made.
Minute 3 - MINUTES
Minute Text :
Minute Decision :
Resolved - That the minutes of the meeting held on 29 March 2007, having been received or approved by the Council, be received.
Minute 4 - APPOINTMENT OF VICE CHAIR
Minute Text :
The Head of Legal and Member Services requested members to give consideration to the appointment of a Vice-Chair.
On a motion by Councillor Southwood and seconded by Councillor Brown, it was -
Minute Decision :
Resolved - That Councillor T Harney be appointed Vice-Chair for the ensuing municipal year.
Minute 5 - FINANCE AND BEST VALUE: ANNUAL AUDIT AND INSPECTION LETTER
Minute Text :
Further to minute 13 (Cabinet - 24 May 2007) the Audit Manager presented the Annual Audit and Inspection Letter on behalf of the District Auditor. He provided a summary of the document and explained that the key messages related to the assessment that Wirral was 'improving well' in relation to value for money, services and its direction of travel as a reflection of progress made and the maintenance of good performance in key areas. The Council's overall CPA score was two stars and in order to achieve a three star assessment it was necessary to achieve level three for its Use of Resources, which at present remained at 2 out of 4. He indicated that the Council continued to face significant challenges, particularly in relation to efficiency savings to be achieved during 2008 - 2011, and he set out the action needed by the Council to continue improving performance. In response to a comment from a member with regard to the action required to be taken by the Council, he commented that action plans were included in reports presented during the year to relevant Overview and Scrutiny Committees.
Minute Decision :
Resolved - That the Annual Audit and Inspection Letter be noted.
Minute 6 - FINANCE AND BEST VALUE: AUDIT AND INSPECTION PLAN
Minute Text :
Further to minute 14 (Cabinet - 24 May 2007), the Committee considered the detailed Audit and Inspection Plan, which set out the proposed planning arrangements underlying the statutory audit and inspection work by the Audit Commission for the 2007 - 2008 financial year.
Minute Decision :
Resolved - That the report be noted.
Minute 7 - FINANCE AND BEST VALUE: SOCIAL SERVICES BUDGETARY CONTROL
Minute Text :
The Audit Manager presented members with the final report of the Audit Commission review of budget monitoring arrangements in Social Services and he outlined the main findings. The Director of Adult Social Services presented his budgetary control report, which had been considered by the Cabinet at its meeting held on 24 May 2007 (minute 15 refers), and he commented that following the 2004 - 2005 overspend, there had been a clear commitment by officers and Members to address the significant financial pressures being faced by Social Services as demand for services and expectations continued to rise. The Audit Commission report recognised that the Council had provided significant additional resources in 2006 - 2007 and 2007 - 2008 across the Adults and Children and Young People’s Departments, and it acknowledged the further improved procedures for budgetary control and reporting during 2007. Progress had been made in relation to the level of PCT debt and the report set out a number of recommendations to further strengthen budget monitoring arrangements, which were set out in the Audit Action Plan. The report also recognised the significant progress that had been made to strengthen delegated budget management and reporting procedures within the Department of Adult Social Services.
It was essential that the most robust set of arrangements were in place to effectively monitor and control the Department’s budget and plan for future demand, and he indicated that there would be further work undertaken by the Commission during 2007 to test the effectiveness of the new arrangements, which would be reported to the Cabinet or Overview and Scrutiny Committees as appropriate. In response to comments from members, the Director of Adult Social Services indicated that all of the points within the action plan had been progressed and were being monitored by the Departmental Management Team, and he agreed to circulate a detailed and updated briefing note to all members of the Committee.
Minute Decision :
Resolved -
(1) That the report and the improvements being made in the financial management of the Adults Social Services Department be noted.
(2) That a detailed and updated briefing note be circulated to all members of the Committee within the next two weeks.
Minute 8 - GRANT CLAIMS AND RETURNS - AUDIT COMMISSION REPORT
Minute Text :
The Director of Finance and the Audit Manager presented the Audit Commission annual report on grant claim performance and issues in relation to the 2005/2006 financial year. The Director commented that the Authority received approximately 25 annually recurring grants, which required claim forms to be submitted and audited and in addition there were also a number of ‘one off’ claims, which tended to be linked to specific projects often, but not exclusively, within the Regeneration Department. The Authority also acted as an ‘Accountable Body’ for a number of grants which it passed on to third party organisations and he indicated that a separate annual audit certificate had to be produced by the Audit Commission for each claim and returned to the relevant grant paying body. The Audit Commission undertook the grant audit role alongside its other duties as external auditor to the Authority.
The Director outlined the findings of the Audit Commission report and he indicated a number of concerns that had been highlighted together with four recommendations of key actions. In response to the report he commented that the Authority had already brought in measures to tackle some of the issues raised in the Audit Commission report and a number of other measures would also be undertaken to address issues raised. In addition, all of the recommendations within the report had been accepted and would be implemented with immediate effect.
Minute Decision :
Resolved - That the report be noted.
Minute 9 - DATA QUALITY REVIEW
Minute Text :
The Audit Manager presented the Audit Commission Data Quality Review report. He outlined the three stage approach to the review of data quality that had been developed by the Audit Commission and indicated that the report had concluded that the Council's management arrangements for data quality met required standards. Data quality systems and processes were developing, and although they were not yet being applied consistently, the Council was committed to improving its data quality arrangements and progress had been made since the last review. The Council had some arrangements in place for the governance, monitoring and review of data quality, although these were not formalised in an overarching data quality strategy. Systems and process were sufficiently developed and defined, with resources in place to collect performance information. However, there still remained a high number of errors found with reported performance data, and the roles and responsibilities of staff involved in the process were not in place or clearly defined. The use made of Internal Audit in the data quality process also needed to be further considered.
The report had been discussed and agreed with the Head of Policy, who indicated that an action plan setting out the Council's response to the recommendations contained within the report would be presented to the next meeting of the Committee. However, he commented that the action plan was near to completion and would be placed on the Virtual Committee agenda on the Council's intranet when finalised.
Minute Decision :
Resolved -
(1) That the report be noted.
(2) That the action plan in respect of the recommendations contained within the Audit Commission report be presented to the next meeting of the Committee and members be advised when the finalised document is available for inspection on the Virtual Committee agenda.
Minute 10 - AUDIT COMMISSION REVIEW OF INTERNAL AUDIT
Minute Text :
The Director of Finance reported that the Audit Commission was required to review the effectiveness of internal audit in all Local Authorities and a significant part of the review process was a three yearly comparison of internal audit with the CIPFA Code of Practice for Internal Audit. This had recently been completed and the Audit Manager submitted the Audit Commission report for consideration. The overall conclusion was that "Internal Audit provides effective service and makes a good contribution to the Council's system of internal control". The report also set out five key recommendations to further strengthen Internal Audit and the Director submitted an Action Plan that had been prepared to address the issues and recommendations. In response to a comment from a member, the Director indicated that improvement opportunities that had been identified would be made from within existing resources.
Minute Decision :
Resolved - That the report be noted.
Minute 11 - COMPREHENSIVE PERFORMANCE ASSESSMENT USE OF RESOURCES ACTION PLAN PROGRESS
Minute Text :
The Director of Finance reported that Use of Resources (UoR) was assessed annually by the Audit Commission, and the UoR assessment provided a judgement of performance over five themes: financial reporting; financial management; financial standing; internal control and value for money. The UoR assessment fed into the overall CPA scoring framework and within this framework the UoR was classed as a level one assessment area, which meant that it had a high weighting within the overall CPA scoring matrix. In 2006, Wirral was assessed as scoring 2 in its UoR assessment, which equated to 'adequate performance' and the Director indicated that the 2007 and 2008 assessments would take place under a harder test regime. An action plan had been devised to provide the continuous improvement that was required and he set out progress that had been made against the five themes. In response to a comment made by a member with regard to achieving and improving value for money, the Head of Policy indicated indicated that a series of VFM challenge sessions had been held to examine potentially high cost areas based upon the Audit Commission VFM profiles. Progress and proposed actions from the challenge sessions were to be reported to the Cabinet on 26 July 2007.
Minute Decision :
Resolved - That the progress in delivering the Use of Resources Action Plan be noted.
Minute 12 - AUDIT COMMISSION REPORTS
Minute Text :
The Director of Finance provided a summary of reviews undertaken by the Audit Commission since April 2006 and he set out the action that had been taken by the Council to implement the recommendations contained within the associated reports. He commented that the Financial Regulations (4.3.15) stated that it was incumbent on Chief Officers to ensure that the receipt and action taken in response to the recommendations within external audit reports, related to services for which they were responsible, were reported promptly to the appropriate Committee. In response to a request from the Chair, the Director agreed that those reports would in future also be placed on the Virtual Committee agenda.
Minute Decision :
Resolved -
(1) That the report be noted.
(2) That reports of action taken in response to recommendations contained within external audit reports be placed on the Virtual Committee agenda in addition to being presented to the appropriate Overview and Scrutiny Committee.
Minute 13 - STATEMENT ON INTERNAL CONTROL
Minute Text :
The Director of Finance reported that Regulation 4 of the Accounts and Audit Regulations 2003, as amended in 2006, specified that a Statement on Internal Control (SIC) should be published together with the financial statements of the local authority. Wirral Council had complied fully with best practice guidance issued by CIPFA and the Director commented that the system of internal control included control mechanisms, information and communication procedures and monitoring the effectiveness of internal controls. It included controls to ensure policies were put into practice, that values were met, laws and regulations were complied with, required processes followed, that financial statements and other published information were accurate and reliable and that human, financial and other resources were managed efficiently and effectively.
He reported also that Regulation 6 included a new requirement that bodies review the effectiveness of their system of internal audit once a year and for the findings of the review to be considered by a Committee of the body, as part of the consideration of the system of internal control referred to in Regulation 4. The Deputy Director of Finance had reviewed the effectiveness of the system of internal audit and had prepared a separate report (see minute 20 post).
Minute Decision :
Resolved - That the Statement on Internal Control for 2006/2007 be signed by the Chief Executive and Leader of the Council.
Minute 14 - CORPORATE RISK AND INSURANCE MANAGEMENT
Minute Text :
The Director of Finance reported upon progress made in corporate risk and insurance management against the objectives for the services, and anticipated developments in the coming months. The Director referred to the second risk management training event for members that was to take place on 5 July 2007 and he stressed the importance of training, particularly for those members who had not attended the previous course.
Minute Decision :
Resolved - That the report be noted.
Minute 15 - INTERNAL AUDIT PERFORMANCE MANAGEMENT
Minute Text :
The Director of Finance reported that following the introduction in January 2007 of the new CIPFA Code of Practice for Internal Audit in Local Government and a recent review of the Internal Audit service by the Audit Commission a number of indicators for regularly measuring the performance of the audit service had been implemented to enhance those already in use. The following existing performance indicators would continue to be monitored on a regular basis and appropriate action action would be taken to address any shortfall -
(i) Percentage of Internal Audit Plan days achieved against a target of 90%.
(ii) The number of audit reports completed within 14 days of the completion of the audit, against a target of 100%.
(iii) Percentage of Customer Survey Feedback forms returned indicating a ‘good’ opinion of the service, against a target of 100%.
He reported also that to enable the Internal Audit Section to continually evaluate the efficiency and effectiveness of the service that it provided and ensure that it developed in line with best professional practice, in the form of the CIPFA Code of Practice for Internal Audit in Local Government, and the recommendation of the Audit Commission, the following additional performance indicators had been implemented to measure output for 2007/2008 -
(i) Percentage of Internal Audits completed, against a target of 100%.
(ii) Number of follow-up audits undertaken as a percentage of the total number of audits completed, against a target of 100%.
(iii) Number of high risk systems audited as a percentage of the total identified, against a target of 100%.
In view of comments made by the Chair with regard to performance indicators, the Director indicated that targets would be re-assessed and would continue to be reviewed.
Minute Decision :
Resolved - That subject to a review of targets, the introduction of the new performance indicators for Internal Audit be agreed, in line with the Audit Commission recommendation.
Minute 16 - INTERNAL AUDIT WORK: MARCH TO JUNE 2007
Minute Text :
The Director of Finance reported that in order to assist in effective corporate governance and fulfil statutory requirements, the Internal Audit Section of the Finance Department reviewed management and service delivery arrangements within the Council as well as financial control systems. Work areas were selected for review on the basis of risks as assessed by Internal Audit in consultation with Chief Officers and Managers. He summarised the work undertaken between 6 March 2007 and 5 June 2007 and commented that during the period, 59 reports were produced, with 36 high and 73 medium recommendations issued. He provided an analysis of the recommendations made and indicated that management had agreed to implement all of the recommendations within a satisfactory timescale.
He reported also upon significant aspects of current work, which included the effectiveness of controls over the system for Merseyside Pension Fund Investments; an evaluation of progress made by Chief Officers towards the implementation of recommendations with regard to Conflicts of Interest and Gifts and Hospitality; compliance of secondary schools with the Financial Management Standards in Schools; action plans in relation to Recruitment and Selection systems; lettings contracts at the Liscard Complex; the effectiveness of controls in the allocation of work to Schedule of Rates contractors; and a review of controls operating within the leasing system.
Minute Decision :
Resolved - That the report be noted.
Minute 17 - INTERNAL AUDIT ANNUAL REPORT
Minute Text :
The Director of Finance reported that the Internal Audit Section of the Finance Department planned and completed audits to review all relevant areas of risk and reports, including recommendations produced following audits, were presented to managers. The Audit Commission had reviewed the operation of Internal Audit and had indicated satisfaction with the service with no major issues to be reported and the Director presented the Internal Audit Annual Audit Report for 2006/2007. The audits conducted during the year were principally planned to review the financial control systems in compliance with the requirements of the Accounts and Audit Regulations 2003. However significant attention was paid to Performance Management, Comprehensive Performance Assessment, Local Public Service Agreements, Corporate Governance, Risk Management, Financial Management Standards in Schools, and Service Delivery. The Audit Plan was compiled on a risk assessment basis that included consideration of the sensitivity and complexity of all risks identified. Client requests, systems being developed, and the availability of resources were other factors that were also taken into account during the year.
Minute Decision :
Resolved - That the report be noted.
Minute 18 - OFFICE SECURITY
Minute Text :
The Director of Finance presented an Internal Audit report to evaluate the adequacy of building security arrangements in operation at all of the major office complexes, which had been undertaken following a request from the Chief Executive. He set out the methods utilised during the audit and commented that the findings indicated that control over buildings security at all of the major complexes was currently ‘less than satisfactory’ due to the following fundamental issues identified during the audit that had been included in reports for managers -
(a) None of the complexes visited possessed a documented security policy identifying procedures to follow including individual staff responsibilities.
(b) Risk assessments including fire, health and safety, and bomb threats were not always being performed regularly.
(c) It was not always possible to identify if burglar alarms were being tested regularly or were adequate.
(d) Many of the systems in operation for controlling access and identity cards were not adequate.
Individual reports had been prepared for Chief Officers and individual Complex Managers in all departments identifying actions required to immediately improve existing systems within an agreed timescale. In addition, a summary report had been prepared for the Chair of the Complex Managers Group that identified all of the recommendations required to implement current professional best practice. In response to comments from members, the Director indicated that the overall responsibility for buildings management lay with the Director of Corporate Services, and he would liaise with him to ascertain when required works would be undertaken.
Minute Decision :
Resolved -
(1) That the report be noted.
(2) That a further report be presented to the next meeting of the Committee from the Director of Corporate Services with regard to timescales for the implementation of required works.
Minute 19 - MUSEUM AND ART GALLERY SERVICE
Minute Text :
Further to minute 57 (29 March 2007) the Director of Finance reported upon a follow up audit that had been undertaken to evaluate progress in the implementation of recommendations with regard to the controls in operation within the Museums and Art Gallery service. He submitted the detailed findings of the audit, which were summarised as follows -
• Two recommendations required action outside the Museum and Art Gallery Service before they could be fully implemented as they were part of larger reviews of the management structure.
• Six recommendations had been fully implemented.
• One recommendation had been partly implemented and the measures that had been put in place were sufficient to reduce the risk to an acceptable level.
• Two recommendations, regarding controls over income, had not been accepted by service management, who were of the opinion that they did not have the resources to fully implement them. However additional procedures had been put in place, which had reduced the risks to an acceptable level.
• Eleven recommendations had not yet been fully implemented, although progress was being made.
The Director commented that the target dates for full implementation had not yet been reached and he recommended that a further report on progress be presented to the next meeting of the Committee, which would include specific dates being identified in the action plan. In response to comments from members with regard to recommendations not being implemented, the Head of Cultural Services commented on procedures that had been put in place and upon the level of risk that had been accepted by the Department with regard to the Museums and Art Gallery Service.
Minute Decision :
Resolved - That a further report from the Head of Cultural Services be presented to update members on the implementation of recommendations to the next meeting of this Committee.
Minute 20 - REVIEW OF THE SYSTEM OF INTERNAL AUDIT
Minute Text :
The Director of Finance reported that the Department for Communities and Local Government (DCLG) has issued amended regulations in 2006 to the Accounts and Audit Regulations, which specified that there should be a review of “the system of internal audit” conducted annually and its results reviewed by a Committee, as part of the Statement on Internal Control (SIC). The review of the “system” was more than a review of “internal audit” and it had been conducted on the basis of a self-assessment of compliance with the CIPFA Code of Practice for Internal Audit in Local Government, a Customer Satisfaction Survey, in accordance with the current advice available and the findings of the Audit Commission review of internal audit.
The conclusion was that the internal audit section was performing effectively and making a good contribution to the control environment of the Council and action plans had been developed to address areas for improvement.
Minute Decision :
Resolved - That the report be noted.
Minute 21 - STATEMENT OF ACCOUNTS
Minute Text :
In line with the Accounts and Audit Regulations 2003, the Director of Finance presented the Statement of Accounts 2006-2007 for approval by the Committee and for signature by the Chair. The Director had signed the Accounts and certified that they represented fairly the financial position of the Authority as at 31 March 2007. The Chief Accountant (Management and Performance) submitted a draft summary leaflet and gave a detailed presentation on the information contained within the Statement of Accounts. He outlined the financial performance for the year with regard to Revenue, Balances, Capital and Assets and Liabilities. Once approved, the Accounts would be open to public inspection and referred to the Audit Commission, who would issue an audited Statement of Accounts in September. A copy would be placed on the intranet and a summary would also be presented to Area Forums for consideration.
In response to a number of questions from members, the Director commented that the Statement of Accounts set out the financial position of the authority at 31 March 2007. He provided information with regard to financial activity beyond that date and presented up to date information specifically with regard to the level of balances. In view of comments made by members, the Director agreed to review the information contained within the summary leaflet to ensure clarity.
On a motion by Councillor Harney and seconded by Councillor Brown, it was -
Minute Decision :
Resolved - That the Statement of Accounts 2006-2007 be approved and signed by the Chair.
Minute 22 - CORPORATE GOVERNANCE
Minute Text :
The Director of Finance reported upon work undertaken by Internal Audit during 2006/2007 to review the implementation of Corporate Governance in accordance with the CIPFA/SOLACE Guidance Note and Framework and in compliance with the Local Government Accounts and Audit Regulations 2006. He commented that the CIPFA/SOLACE Guidance Framework recommended that to implement corporate governance effectively and comply with the Act, each Local Authority should maintain effective arrangements within the following five key dimensions to demonstrate the principles of accountability, effectiveness, openness and inclusivity in its dealings with the local community -
- Community Focus;
- Service Delivery Arrangements;
- Structures and Processes;
- Risk Management and Internal Control;
- Standards of Conduct.
Audit reviews had been completed and the Director provided a summary of the key findings for each of the five dimensions. Discussions had taken place with all relevant Chief Officers and managers regarding all of the recommendations identified, and action plans to identify reasonable timescales for implementation had been agreed. Any issues that remained outstanding beyond this would be reported to this Committee for action.
Minute Decision :
Resolved - That the report be noted.
Minute 23 - MEMBERS TRAINING
Minute Text :
The Director of Finance reported that CIPFA guidance 'Audit Committees – Practical Guidance for Local Authorities' recommended that the members of an Audit Committee should receive specific training in their role and responsibilities as members of that Committee. During 2006/2007 the training requirements were comprehensively achieved at minimum cost by the appointment of one of the members of the working party who wrote the CIPFA Guidance to undertake the training. He set out the content of the training course, which was supplied over two sessions at a cost of £2,500 and he proposed that the existing trainer be retained in 2007/2008.
Minute Decision :
Resolved - That the continuation of the existing specific training be approved.
Minute 24 - SUBMISSION TO ALARM AWARDS 2007
Minute Text :
The Director of Finance reported that the membership of the Association of Local Authority Risk Managers (ALARM) was drawn from many parts of the public sector including local authorities, the Police Service, the Fire and Rescue Service, universities, housing associations and health authorities and trusts. Wirral had been a member for 15 years and the Director commented that the association aimed to make a positive contribution to loss reduction by pooling the knowledge and experience of its members, sharing examples of good practice and working in partnership with other agencies in the promotion of public service risk management.
The ALARM annual awards recognised excellence in the management of risk, and he indicated that the Risk and Insurance Team had submitted an entry in the Asset Risk category. The award was for an initiative that significantly improved the management of risks associated with any asset of the organisation, excluding people risks, and he commented that Wirral's submission related to a risk based approach to managing liability claims, which had led to an increase in the percentage of claims defended, a lower number of claims submitted and a reduction in overall claims costs.
The Director was pleased to report that Wirral's submission had been chosen as one of the finalists and the winner would be announced at an Awards Dinner in Cardiff on 2 July 2007. Status as a finalist meant that as a minimum, Wirral would be 'highly commended' and presented with a framed certificate.
Minute Decision :
Resolved - That the congratulations of the Committee be accorded to the Risk and Insurance Team for their submission being chosen as one of the finalists in the Asset Risk Category.
(Minutes Published: 9 July 2007)