Members were asked to consider whether they had any disclosable pecuniary interests and/or any other relevant interest in connection with any item(s) on this agenda and, if so, to declare them and state what they were.

Councillor Les Rowlands declared a pecuniary interest in Item 8 on the meeting agenda (ICT Progress Report) by virtue of his membership of Merseytravel. He left the meeting room whilst the matter was debated.

Councillor Jeff Green declared a non-pecuniary interest in Item 9 on the meeting agenda (Procurement – use of procedure rules approval document permitted under the Council Contract Procedure Rules) by virtue of his membership of Magenta Housing. He remained in the meeting room whilst the matter was debated.

The Chair proposed, and it was agreed that item 7 on the agenda (Performance Appraisal) be considered after item 2 on the agenda (Minutes) given the attendance of the Acting Head of Human Resources / Organisational Development to report solely on this item.

To approve the accuracy of the minutes of the meeting held on 14 March 2017.

Resolved – That the minutes of the meeting of the Committee held on 14 March 2017, be confirmed as a correct record.

The Acting Head of Human Resources / Organisational Development introduced his report that set out the Council’s position in relation to its performance in completing employee appraisals in 2016/17. The report stated that the Council’s performance in this area had been a regular item for discussion at Audit and Risk Management Committee as part of the Annual Governance Statement update reports, and that, at its meeting held on 30 January 2017, Members had requested a report on the latest position in respect of employee appraisals.

The Acting Head of Human Resources / Organisational Development informed of the background to the process, which uses a top-down staged approach for completing appraisal throughout the year, starting with Chief Officers. Members noted that this approach was used in order that senior management objectives were aligned with corporate objectives and compliance with the Wirral Plan, Service Plans and supporting strategies.

The Committee was advised of the current levels of performance against performance appraisals 2016/17. The report showed that 92% of managers had received their appraisals by 31 March 2017, compared to 46% recorded and completed in 2014/15 and 78% in 2015/16. The Acting Head of Human Resources / Organisational Development informed that there was a clear expectation that all employees have an annual appraisal and that the process must be embedded and valued as part of a performance management culture.

Members commented on the report expressing the importance of the measures, particularly in terms of quality, values and behaviour and the link between performance appraisal reviews and training.

A Member also commented on the importance of Senior Management appraisal, and noted the inclusion of the statistical breakdown of the figures between Managers and ‘All Staff’ detailed in Appendix One to the report.

The Committee questioned the Officer on a number of key points within his report and expressed views on such matters as:

• expectations regarding the quality of appraisals and the impact on values and behaviour;
• the importance of the appraisal of senior management year-on-year;
• review against a set of key objectives and information about good / moderate / poor performance and the monitoring of any actions agreed;
• the addressing of training needs – the responsibility of which falls to service management and Departmental Management Teams (DMTs); and
• the quality of data collection and where this is held; and the tracking and review of objectives and identification of training needs.

Resolved – That

(1)  the Committee notes and takes into account the response of the officers to ensure that the system for appraisal and staff development be improved; and

(2)  a further report be brought back to the Audit and Risk Management Committee on the points raised by Members above.

The Chief Internal Auditor introduced his report that identified and evaluated the performance of the Internal Audit Section and included items of note arising from the actual work undertaken during the period 1 March to 31 May 2017. The report focused upon:

·  Any items of note arising from audit work conducted;

·  Any issues arising that require actions to be taken by Members;

·  Performance information relating to the Internal Audit Service;

·  Developments being undertaken to improve the effectiveness of the Internal Audit Service.

Members’ attention was drawn specifically to the following items of note that had been identified, namely:

Attendance Management (sickness absence) – An action plan identifying areas for improvement had been completed by officers and the actions reported to and agreed by, the Strategic Leadership Team with agreed timescales. Internal Audit would be following up this Action Plan later in the year and would report the outcome to the Committee.

Personal Finance Unit (PFU) – Internal Audit’s report identify that good progress has been made in implementing effective actions arising from both the independent review of the service and internal audit work undertaken. Follow up work has been scheduled within the Audit Plan for 2017/18 to evaluate the effectiveness of actions implemented and this will be reported upon to Committee in due course.

General Data Protection Regulation (GDPR) – The regulation, which replaces the current EU Data Protection Directive 95/46/EC, is expected to come into force in May 2018. Internal Audit are scheduled to undertake a review of progress towards compliance in Quarter 3, and in the meantime have recommended that failure to comply with GDPR be included on the Corporate Risk Register to ensure it is mitigated in a timely manner.

The Chief Internal Auditor informed that the outstanding audit recommendations that related to ICT systems were the subject of a separate report on the meeting agenda (see Minute 9 post). He further informed of the ongoing actions undertaken by the Internal Audit service to improve overall efficiency and effectiveness that included incorporating and developing areas of best practice from across the Internal Audit profession.

Resolved – That the report be noted.

The Chief Internal Auditor introduced his report that provided an overall opinion as to the effectiveness of the Council’s control environment.

The Chief Internal Auditor directed the Committees attention to Sections 3, 4 and 5 of the report that set out the Audit Outcomes for 2016/17 and the Effectiveness of Internal Audit for the same period. He stated that his overall opinion is that:

“On the basis of our programme of work last year, I can provide moderate assurance overall that there is a generally sound system of internal control, designed to meet the Council’s objectives, and controls are generally being applied consistently.

However some weaknesses in the design and inconsistent application of controls put the achievement of particular key objectives at risk. The key governance, risk and internal control issues of which the Chief Internal Auditor was made aware during the year and that impact on the overall opinion are included within Sections 3 and 4 of this report”.

The Chief Internal Auditor further informed that the elements that affected his opinion included assessment of the governance, risk management and overall framework of assurance and the outcomes of risk based assignments and external assessments undertaken during the year..

The Committee noted the numerous audits undertaken in the past year (103), and the majority of ratings assessed as being Moderate, Minor or Negligible. The Chief Internal Auditor reported that only 2 reports were classed as presenting a Major Organisational Risk and that in both these areas actions had been agreed with management to improve arrangements, with both areas having further follow-up work scheduled during 2017/18.

Resolved – That the report be noted.

The Chair, supported by the Chief Internal Auditor, introduced the Audit and Risk Management Committee Chair’s Annual Report 2016/17.

Prepared in consultation with Internal Audit, the Chair’s Annual Report for 2016/17 had been compiled in accordance with the CIPFA best practice publication ‘A Toolkit for Local Authority Audit Committees’.

The report informed how the Audit and Risk Management Committee had fulfilled its terms of reference during a challenging year and noted Member’s commitment to helping the development of standards and protocols across a wide range of governance areas, further assisting with improvements across the Council’s governance and control environments in a timely manner.

The Chair’s Annual Report further informed Members of specific matters regarding the Audit and Risk Management Committee’s core activities during the year.

Resolved - That the Annual Report 2016/17 of the Audit and Risk Management Committee be approved and submitted to CABINET and to COUNCIL (for noting).

The Chief Internal Auditor introduced his report that provided Members of the Committee with details of the outcome of the recent periodic review of the Council’ overall Counter Fraud and Corruption arrangements and sought formal Committee approval for the proposed Counter-Fraud and Corruption Strategy, Anti-Fraud and Corruption Policy, Fraud Response Plan and revised Anti-Bribery Policy.

Members noted that on completion the assessment tool measuring the Council’s effectiveness against five key principles of management of the risks of fraud and corruption a written statement had been generated by the Chartered Institute of Public Finance (CIPFA). The Chief Internal Auditor informed that he was comforted that the following activities having been assessed against three levels of performance ‘Good’, Basic’ and ‘Poor’ achieved the results as follows:

• Acknowledge responsibility – Good
• Identify Risks – Basic
• Develop Strategy – Basic
• Provide Resources – Good
• Take Action – Good
• Overall Assessment - Good

Members noted that in aligning the Council’s Counter Fraud and Corruption Strategy with CIPFA’s Code of Practice on managing the risks of fraud and corruption, the Council continues to apply best practice. Members further noted that the adoption and promotion of an effective Counter Fraud and Corruption Strategy helped the Council proactively encourage the detection of fraud and irregularities, and manage them appropriately.

The Chief Internal Auditor summarised his report stating that the Strategies and Policies named in his report be embedded within the culture of the Council and pro-actively be drawn to the attention of all employees and Members of the Council. To facilitate this, they were to be made available on the Council’s Intranet and Internet sites and e-learning packages.

Resolved – That the following strategy and policy documents be approved -

(1)  Counter-Fraud and Corruption Strategy (Appendix 1 to the report);

(2)  Anti-Fraud and Corruption Policy (Appendix 2 to the report);

(3)  Fraud Response Plan (Appendix 3 to the report); and

(4)  Revised Anti-Bribery Policy (Appendix 4 to the report).

The Assistant Director: Law and Governance and interim Senior Information Risk Owner (SIRO) introduced his report that provided Members with a progress update on actions taken by Digital Officers to remove and mitigate risk associated with underinvestment in IT infrastructure in the past. He informed that the former Head of Digital  and SIRO had provided a verbal report to the Committee at its 30 January 2017 (minute 43 refers), and that Members had subsequently requested a written report and attendance of a senior member of Digital to attend the June meeting.

The Assistant Director: Law and Governance and interim Senior Information Risk Owner (SIRO) referred Members to Appendix 1 of his report, informing that the Data Centre Review IT (project 15054) under implementation currently showed no expected signs of slippage, and delivery for completion was scheduled for 29 September 2017. The project included use of the Merseytravel datacentre as part of the Council’s IT Contingency and Disaster Recovery.

Mr George Mallam, Business Change Manager and Project Manager for the Data Centre Review IT project informed the Committee of key elements of the project, namely:

• Use of 2 data centres to improve resilience;
• Compression of computer data racks from 22 to 8 (due to a mixture of available space and improvements in computer technology);
• Simplification of IT Structures;
• Reduction of the number of servers required from 33 to 4; and
• Transfer of Production Services.

Members questioned the Business Change Manager on specific elements of risk i.e. recent well publicised cyber-attacks and data security, and whether the Council had been affected in any way. Members were assured that as a result of the Council’s current systems, no such attacks had been successful and no loss of service had occurred.

The Assistant Director: Law and Governance and interim Senior Information Risk Owner (SIRO) informed Members that a further update report would be presented to the next meeting of the Audit and Risk management Committee, and that information on the project would be circulated to Members outside of the Committee meeting cycle.

Resolved – That the report be noted.

Councillor Les Rowlands declared a pecuniary interest in this item by virtue of his membership of Merseytravel. He left the meeting room whilst the matter was debated.

The Assistant Director: Finance and Section 151 Officer introduced the report of the Head of Procurement that informed the Committee of the range, and number of, contracts awarded which had been subject to Contracts Procedure Rules (“CPRs”) Rule12 Extension/Variation; Rule 11 Waiving the Rules, as required under the CPRs.

The report appendix detailed the contracts subject to the Extension/Variation or Waiver rules for the period 1 April 2016 to 31 March 2017 that under Contracts Procedure Rule 16 were required to be reported to Audit and Risk Management Committee:-:

a)  A contract is awarded the total value of which exceeds £500,000.

b)  A variation or extension to a contract approved by the Assistant Director of Finance (S151 Officer) and by others as per the Appendix.

c)  A waiver or breach of the Contract Procedure Rules in relation to a contract which exceeds £50,000 in value.

The Assistant Director: Finance and Section 151 Officer informed that 142 Procedure Rules Approval Documents (PRADs) had been actioned during the year, with 69 exceptions to the CPRs having been approved. The remaining PRADs as detailed in the report appendix were as follows: 

• Extensions 47 (extended within contract terms)
• Variations 12 (within the interests the Council)
• Awards 14 (over £500,000, under a full tender)

 Members questioned the Assistant Director: Finance and Section 151 Officer on who had responsibility for exceptions and the expenditure quoted in relation to contract extensions for temporary workers. 

The Committee were advised that each contract extension had to be permissible under the terms of the initial contract and was the subject of a review considering performance and value for money. These considerations were primary to permissions being granted, often providing a financial saving to the Council.

Members commented on the detail of the report appendix finding it most helpful in understanding the compliance with the Council’s Contract Procedure Rules against an overall third party spend of in excess of £170 million during 2016/17.

Resolved – That

(1)  the report be noted; and

(2)  further updates be provided to Committee on a six monthly basis.

Councillor Jeff Green declared a non-pecuniary interest in this item by virtue of his membership of Magenta Housing. He remained in the meeting room whilst the matter was debated.

The Assistant Director: Finance and Section 151 Officer introduced the report of the Chief Executive that set out the draft Annual Governance Statement and  Action Plan for 2016-17.

The Assistant Director: Finance and Section 151 Officer informed that the draft Annual Governance Statement 2016-17 covered the period from April 2016 to March 2017 and therefore the significant governance issues identified are those which relate to this period. He further informed that progress had been made in relation to the compliance issues including performance appraisal (item of separate report on the meeting agenda, minute 4 refers) and Contract Procedure Rules (minute 10 refers)., The Statement recognises that compliance issues remained outstanding and were retained on the action plan.

Issues relating to IT (minute 9 refers) has been included in the Action Plan. Whilst progress has been made, and continues to be made, the issues were such that this merited inclusion in the Action Plan..

The report informed that the Annual Governance Statement 2016/17 Action Plan outlined the progress that had been made to date on the aforementioned outstanding compliance issues. This progress had included regular updates to this Committee and the report set out the manner in which the Council would continue to ensure the issues were addressed during the current Municipal Year.

The Committee noted that the draft Annual Governance Statement followed the previously utilised format, summarising the significant governance issues identified during 2016/17, together with a detailed report that set out the following key points under the headings:

• Scope of Responsibility;
• What is Corporate Governance?
• The Purpose of the Governance Framework;
• The Governance Framework – monitored against the CIPFA/SOLACE framework that identified seven core principles of governance best practice;
• Review of Effectiveness – that included information on Internal and External Audit, Responsible Officer and key items of report namely the Children’s Services Ofsted Inspection 2016, Serious Case Review and ICT Business Continuity and Resilience Planning;
• Significant Governance Issues and Action Plan; and
• Certification

Members commented on a number of matters of report, questioning the level of reputational risk that could occur should there be insufficient holding to account of Members, Officers and/or particular Service Areas.

The External Auditor provided additional information to Members, informing that the draft Annual Governance Statement can be updated prior to consideration by Cabinet and sign-off by the Leader of the Council, and that the use of ‘significant’ in the context of the Issues and High Level Action Plan referred to those issues in relation to the Council achieving its vision. Additional detailed information relating to the actioned may be found elsewhere in supporting documentation held within Internal Audit.

The Chair recommended that the reporting of the Annual Governance Statement Action Plan to each meeting of the Audit and Risk Management Committee would ensure progress on each issue be closely monitored. 

Resolved – That

(1)  the report be updated to indicate the receipt of further letters from Ofsted and the guidance and input from the DfEE;

(2)  the steps that will be taken to  ...  view the full minutes text for item 11.

The Manager: Insurance and Risk introduced the report of the Chief Executive which dealt with the forthcoming quarterly review of the Corporate Risk Register. A summary of the status of key mitigating actions for the existing Corporate Risks at the end of the Municipal Year 2016/17 were appended to the report. The Manager: Insurance and Risk informed that the report was currently in draft format and was shortly to be reviewed by the Senior Leadership Team (SLT) of the Council, and that an updated version would be circulated to the Committee, and that any significant changes to the content would be highlighted to Members.

The report informed that all mitigating actions appeared to be progressing as planned with the exception of:

·  The development of extra care housing (Risk 5: Integration of Health and Social Care)

·  Review of the Members’ Code of Conduct (Risk 8: Governance)

·  Implementation of the new Asset Strategy (Risk 10: Resources and Infrastructure)

A Member questioned the accuracy of the level of risk reported relating to Safeguarding, given the resignation of the Chair of the Improvement Board. The Manager: Insurance and Risk informed that the position relating to the Safeguarding risk will form part of the Quarter 4 review, and that as there had been a number of recent changes this will have to be considered. He added that each of the controls relating to the Q4 summary listing (snapshot report) were held in the full Risk Register. Review by the SLT would address progress in relation to the management of corporate risks as well as emerging risk areas for possible addition to the register.

Resolved – That

1)  the report be noted; and

2)  that further reports on the Corporate Risk Register be brought to future meetings of this Committee.

The Manager: Insurance and Risk introduced the report of the Assistant Director: Finance and Section 151 Officer that set out the key actions to be taken in relation to key actions planned for corporate risk and insurance management during 2017/18 and highlighted any key decisions that needed to be made. Recent progress made in relation to key actions planned for the current year was also included.

The report informed that regular update reports would continue to be presented to the Committee on work in relation to risk management and insurance in support of the Risk Management framework, thereby maintaining the successful management of the Council’s insurance programme.

The report highlighted a number of key points, namely:

• Alignment of Risk management and Performance Management;
• Corporate Risk Register – subject of a separate report on the meeting agenda (minute 12 refers);
• Traded Service for Schools and Academies;
• Corporate Insurance Budget;
• Policy Renewals – April 2017;
• Tender for casualty and Computer Insurance;
• Policy Renewals - June 2017; Claims Handling Changes; and
• Staffing Changes

Resolved – That the report be noted.

The Manager: Insurance and Risk introduced the report of the Assistant Director: Finance and Section 151 Officer that provided a review of Risk and Insurance activity during 2016/17 and the plans for 2017/18 and beyond. It detailed the underwriting arrangements and recent loss histories for the principal areas of insured risk and described the impact of measures taken to improve their management. The provisions and reserves within the Insurance Fund at the end of 2016/17 were also confirmed.

Members attention was drawn to paragraphs 3.12 and 3.43 of the report that informed that:

“the rate of receipt of new Public Liability (PL) claims had continued to fall. During 2016/17 a total of 228 new claims were received. This was a 37% reduction over 2015/16 and a cumulative 53% fall over 5 years. The reduction of volume over the last few years will be partially attributable to the outsourcing of services, the community asset transfer program and the change to Academy status of many of the larger secondary schools. Whilst the majority of claims continue to relate to simple highway slips and trips a proportion are significantly more complex involving abuse, defamation, bullying and harassment, failure to educate, disease, tree related subsidence, nuisance and social services matters for both failure to remove and / or inappropriate removal” and that:

“the closedown of the Insurance Fund accounts for 2016/17 and review / amendment of the reserves and provisions held within it had therefore resulted in the following key actions. 

a.  The release of £2m from the provision and reserve for Liability claims to the General Fund; and

b.  The release of £500,000 from the reserve for Property claims to the General Fund”

Members noted the report and thanked the officers for their efforts and good working across departments.

Resolved – That

(1)  the Committee endorse the release of monies from the Insurance Fund to the General Fund as follows:

a.  the release of £2m from the provision and reserve for Liability claims to the General Fund; and

b.  the release of £500,000 from the reserve for Property claims to the General Fund; and

(2)  the Insurance Fund Budget 2018/19 be prepared for presentation to this Committee in January 2018.

Mr Robin Baker of Grant Thornton UK LLP, the Council’s external auditors, presented a report to Members on work undertaken with regard to progress in the delivery of their responsibilities as External Auditor covering the Year ending 31 March 2017. The report informed that:

The Chair questioned the Auditor on a statement that had been made inferring that the External Auditor had been impeded by Council in the matter of information requests relating to the Council’s borrowing (referred to as LOBO’s, Lender Option, Borrower Option loans). The Auditor was quite happy to dispel this claim having received the support and information requested. Across the country a number of authorities had received similar objections to their 2015/16 Accounts.  Further advice on these matters was being sought and once completed the matter(s) would be reported to both the Council and the Objector.

The Auditor provided a brief update on a number of key areas contained within his report that included:

·  Understanding the challenges and opportunities that faced the Council;

·  Developments and requirements relevant to the audit – taking account of national audit requirements as set out in the Code of Audit Practice;

·  The concept of ‘Materiality’ – and that for the purposes of planning the audit the external auditors had determined a figure of £13,803k (being 1.9% of gross revenue expenditure – compared to a figure of £13,713k the previous year); and

·  Significant Risks as set out under ISA 240 – The external auditor identified three such presumed risks, and set out substantive audit procedures (completed and planned) in each case. Three additional significant risks were listed but fell outside ISA 240, again in each case, Members were apprised of planned work.

The external auditor concluded his report detailing his Value for Money assessment and fees summary.

Resolved:  That the report be noted.

Mr Robin Baker of Grant Thornton UK LLP, the Council’s external auditors, presented a short verbal report to accompany his letter dated 19 April 2017 that detailed the Planned Audit Fee for 2017/18, Scope of the Audit Fee, Value for Money Conclusion, Billing Schedule and Outline Timetable.

Members noted that this would be the final year of external audit by Grant Thornton UK LLP under the current contract arrangements, and that Grant Thornton had already started to progress work in terms of bids for public sector contracts in the future.

Members further noted the content of the Audit Fee Letter which stated that the Council’s scale fee for 2017/18 had been set by the Public Sector Audit Appointments Ltd (PSAA) at £159,863 (the same level as the scale fees applicable for 2016/17). 

Areas covered in the External Auditor’s Letter included:

• Value for Money conclusion – the External Auditor is required to consider whether the Council has put into place proper arrangements for securing economy, efficiency and effectiveness in its use of resources; and

• Scope of the Audit Fee – the scale fee covers – audit of the Council’s Financial Statements, work to reach a conclusion on economy, efficiency and effectiveness in the use of Council resources, and work on the Council’s whole of government accounts return.

The Letter further provided information of the Fee charge for the Pension Fund Audit of £36,882 (Mar 2018) and Grant Certification (figure to be confirmed).

Resolved:  That the report be noted.

The Group Solicitor introduced the report of the Assistant Director: Law and Governance that presented a summary of the use of covert surveillance by the Council, to detect evidence of criminal behaviour, between 1 November 2016 and 31 May 2017.

The report informed that during this period, the Council had used covert surveillance with the intention of detecting evidence of criminal behaviour, and that on 6 January and 22 May 2017 magistrates had approved authorisations to use covert surveillance to detect suspected illegal flytipping at sites in the Wirral.

Members were further informed that the Council’s Anti-Social Behaviour Team obtained on 1 December 2016 approval from a magistrate to conduct covert surveillance to detect suspected criminal damage and harassment of residents in an area of Wirral.

Members were apprised that, on 11 May 2017 a 22 year old man had been sentenced to 200 hours unpaid community works for 3 offences of fly tipping in Kelvinside Industrial Estate, Seacombe. The Court also order him to pay £450 in compensation to the Council for the cost of clearing up the site and £500 as a contribution to the prosecution costs together with a victim surcharge of £85 (a total penalty £1,035).

Resolved – That the report be noted.

The Chair introduced the report of the Chief Internal Auditor that provided Members with feedback from a recent training and development session provided to Members of this Committee by a professional trainer representing the Chartered Institute of Public Finance Accountants (CIPFA). The focus of the training had been on the role of the Audit Committee in the public sector and the aim was to inform and enlighten Members regarding their individual role and responsibilities in operating an effective Audit Committee.

The Chief Internal Auditor informed that the timing of the training had been such that not all Members had been in a position to attend and that with the Committee’s consent further training sessions be arranged for the future.

Resolved – That further ‘targeted’ training sessions be provided to Members during 2017/18.

Reference minute 5 above (Internal Audit Update), at the request of Councillor P Gilchrist, duly seconded, it was

Resolved – That the matter of Attendance Management be escalated to Cabinet, and that:

(1)  Assurance be sought on the issue of compliance regarding the recording of absences has been addressed, that these are properly recorded, lessons are learned, and appropriate actions taken; and

(2)  CABINET be requested to track data in sufficient depth so that areas of concern are correctly identified to provide assurance.