Agenda and minutes

The Chairman made a short address to remind everyone present that the meeting would be broadcast live to the internet, and would be capable of repeated viewing, which could infringe their human and data protection rights.

(Director of Governance) To declare interests in any item on this agenda.

There were no declarations of interest pursuant to the Council’s Member Code of Conduct.

(Director of Governance) To confirm the minutes of the last meeting of the Committee held on 28 November 2016 (previously circulated).

http://rds.eppingforestdc.gov.uk/documents/g8718/Printed%20minutes%2028th-Nov-2016%2019.00%20Audit%20and%20Governance%20Committee.pdf?T=1

Resolved:

(1)        That the minutes of the meeting held on 28 November 2016 be taken as read and signed by the Chairman as a correct record.

(Director of Governance) To consider any matters arising from the previous meeting.

There were no matters arising from the previous meeting for the Committee to consider.

(Director of Governance) To consider the attached Work Programme for 2016/17.

The Director of Governance informed the Committee that the Grant Claims Audit Report for 2015/16, which was due to be considered at this meeting, would now be submitted to the next meeting on 27 March 2017.

The Chief Internal Auditor also advised the Committee that the unallocated item on the Work Programme, Information Regarding the Whistle Blowing Policy, was currently planned to be presented to the Committee at its meeting in June 2017.

The Committee noted the current Work Programme for 2016/17.

(Director of Governance) To consider the attached report (AGC-015-2016/17).

The Director of Governance presented a report on the revised Code of Corporate Governance.

The Director reported that the Chartered Institute of Public Finance & Accountancy (CIPFA) and Society of Local Authority Chief Executives (Solace) had published the CIPFA/LASAAC Code of Practice on Local Authority Accounting in the United Kingdom for 2016/17, which was a new framework for Corporate Governance which would apply from this year. The Accounts and Audit Regulations 2015 also required an authority to conduct a review at least once in a year of the effectiveness of its system of internal control and include a statement reporting on the review with any published Statement of Accounts. For a local authority in England, this statement was the Annual Governance Statement and local authorities in England were required to provide this statement from this year in accordance with “Delivering Good Governance in Local Government: Framework (2016)”. The overall aim of the Framework was to ensure that:

         (a)          resources were directed in accordance with agreed policy and according to          priorities;

         (b)          there was sound and inclusive decision making; and

         (c)          there was clear accountability for the use of those resources in order to achieve            desired outcomes for service users and communities.

The Director stated that Officers had undertaken a review exercise of its current governance arrangements against a series of seven principles set out at paragraph 6 of the report. Each Principle had a series of sub-principles against which the proposed new code had been matched. The final draft document had been attached for approval, and was required to be adopted before April 2017. The next Annual Governance Statement (due in June) would then need to relate to the new framework and demonstrate how the requirements of the framework were met. Therefore, the structure of the Annual Governance Statement would change. The Committee was requested to approve the revised Code of Corporate Governance.

The Vice-Chairman queried the use of the word ‘Social’ in point (iii) of paragraph (6). The Director clarified that the word ‘Social’ had a broader definition in this context; the Council was not responsible for providing social services, but it could partner with other organisations to produce social benefits for the benefit of the District. The Chairman highlighted that section 3 of the draft Code of Governance provided more detail in terms of potential social benefits.

Decision:

(1)        That the draft revised Code of Corporate Governance be approved and subject to an annual review by the Committee.

(Chief Internal Auditor) To consider the attached report (AGC-016-2016/17).

The Chief Internal Auditor presented a report on the external quality assurance of Internal Audit against the Public Sector Internal Audit Standards.

The Chief Internal Auditor informed the Committee of the results of an independent external quality assessment of the Internal Audit shared service against the Public Sector Internal Audit Standards (PSIAS), which came into effect in April 2013. The overall conclusion of the report was that the Internal Audit shared service complied with the PSIAS and continued to provide an effective and efficient service to each Council (Epping Forest, Harlow and Broxbourne). A key theme throughout the report was the need to develop aspects of the audit process to improve the focus on the significant risks facing the Council in the achievement of its objectives. The Internal Audit shared service was continuing to develop an approach which reflected full recognition of risk factors.

The Chief Internal Auditor highlighted the benchmarking analysis and that the shared service was outperforming Local Government generally in terms of delivering the service. There were some further actions identified by the external assessor which would enhance service provision but these did not affect the overall level of compliance with the PSIAS, but would ensure that the Internal Audit shared service continued to develop and demonstrate best practice. An Action Plan would be developed to address the recommendations for improvement noted during the review.

In response to questions from the Committee, the Chief Internal Auditor stated that the recommendations from the exercise were not mandatory; it was the responsibility of the Chief Internal Auditor to implement the recommendations and there would be no need to report back to the external assessment team. The Committee enquired as to why it had been recommended to change the audit opinions given for each report again; the Chief Internal Auditor stated that Harlow District Council currently utilised four levels of opinion and this recommendation dealt with an issue that needed to be considered and implemented across all three Councils.

The Committee welcomed the results of the assessment, and the Chairman suggested that a further recommendation be agreed to note the excellent performance of the shared service when benchmarked against other Local Authorities.

Resolved:

(1)        That the compliance of the Internal Audit Shared Service with the requirements of the Public Sector Internal Audit Standards be agreed;

(2)        That the actions proposed to enhance the Internal Audit shared service be noted; and

(3)        That the excellent performance of the Internal Audit shared service when benchmarked against other Local Authorities be noted.

(Chief Internal Auditor) To consider the attached report (AGC-017-2016/17).

The Senior Internal Auditor presented the Internal Audit Monitoring Report for the period November 2016 to February 2017.

The Senior Internal Auditor advised the Committee that three reports had been issued since the previous meeting – Treasury Management, Housing Health & Safety (Gas Safety), and Waste Management – all of which had been awarded substantial assurance. In addition, the Committee was requested to approve the deferral of seven audits in the 2016/17 Audit Plan to 2017/18, but it was emphasised that there would be sufficient coverage through the remaining audits for the Chief Internal Auditor to give their annual opinion for 2016/17.

The Senior Internal Auditor reported that the Recommendation Tracker contained five recommendations which had passed their target dates. Four were of medium priority and related to the audit reports issued for Grounds Maintenance, Email, Internet & Telephone Usage, Sundry Debtors, and Off Street Car Park Income; and one was of low priority and related to the audit report issued for the HR Sickness Absence Performance Indicator. The high priority recommendation relating to Health & Safety issues at Townmead Depot had now been completed.

The Senior Internal Auditor highlighted that the Corporate Fraud Team was continuing to focus on Right-to-Buy applications received by the Council, and a further six applications had been stopped or withdrawn; another four properties had been recovered as a result of fraud intervention. The Team was currently engaged in a number of criminal investigations, including a money laundering case on behalf of Broxbourne Borough Council. Finally, the third Eastern Corporate Fraud Group meeting took place last month and was hosted by the Corporate Fraud Team.

The Senior Internal Auditor added that the Service continued to be represented on a number of business groups and project teams, including: Programme & Project Management; Corporate & Business Planning; Electronic Invoicing; and Information Management.

The Senior Internal Auditor informed the Committee that the Internal Audit Charter was reviewed on an annual basis to ensure it remained current and relevant, and the last review was presented to the Committee in November 2015. It had been previously agreed to defer the review in 2016 until after the External Quality Assessment had been undertaken. This had now been completed, and the Internal Audit Charter was reviewed as part of this exercise where no deficiencies or enhancements were identified by the Assessor. Therefore, it was proposed for the Committee to approve the Charter unchanged – save for the date on the front.

The Senior Internal Auditor reminded the Committee it had agreed at the last meeting that it would be beneficial for the Committee to evaluate its overall knowledge and skills, which in turn could be used to guide Member training. A proposed template for collating this information had been attached as an Appendix to the report, and made a clear distinction between the core areas of knowledge for all members of the Committee and other specialisms that could add value to the Committee. It was suggested that the Chief Internal Auditor would circulate the checklist to the  ...  view the full minutes text for item 44.

(Director of Resources) To consider the attached report (AGC-018-2016/17).

The Director of Resources presented a report on the Treasury Management Strategy Statement for 2017/18, which was a requirement of the Chartered Institute of Public Finance & Accountancy (CIPFA) Code of Practice on Treasury Management and covered the Council’s treasury activity for the financial year 2017/18. The Strategy Statement set out the risks associated with the Council’s treasury activity and how these were managed.

The Director reported that the Council undertook capital expenditure on long-term assets, funded by capital receipts, grants or borrowing. The Committee noted that the Council planned to borrow to carry out its capital investment, and that the Capital Programme envisaged a balance of £1.368million in capital receipts and £0 in the Major Repairs Reserve on 31 March 2020, from which it was concluded that adequate resources, including borrowing, still existed to fund the Capital Programme in the medium-term. The Council’s underlying need to borrow was referred to as the Capital Finance Requirement (CFR). As a consequence of the Housing Revenue Account Subsidy reform, and some large projects within the Capital Programme, an authorised limit of £240million had been set for borrowing, rising to £260million by the end of 2019/20.

The Committee was reminded that the Council’s current investments were subject to regular advice from it’s treasury management advisors, Arlingclose, regarding the use of counterparties. Members noted that the Council currently had an investment portfolio of £48.5million, of which £46.5million was invested in the United Kingdom (UK) and £2million in Sweden. The Committee noted that the maturity profile of the investments ranged from £15.5million available for instant access, to £14million with a maturity date between one and three months; it was important that the cash flow of the Council was carefully monitored and controlled to ensure that sufficient funds were available each day to cover its outgoings. Members were advised that this would become more difficult as the Council used up capital receipts and investment balances reduced.

The Director advised members of the key risks associated with the Council’s treasury management activity, and how these had been managed throughout the year via the use of prudential indicators:

            (i)         The Credit and Counterparty risk was the possibility of a counterparty             going into liquidation and failing to meet its obligations to the Council. The   Council’s counterparty list was both prudent and regularly updated by its         treasury advisors, and the authority kept its investments fairly liquid within a      restricted counterparty list. The most significant change from the previous Strategy was an increase in the minimum credit rating for counterparties from            BBB to BBB+.

            (ii)        The Liquidity risk was the possibility that sufficient cash would not be             available to the Council when required. In mitigation of this risk, a number of             Money Market Funds were maintained and the Director of Resources held monthly meetings with treasury staff to review cash flow requirements.

            (iii)       The Interest Rate risk was concerned with potential fluctuations in   interest rates. It was proposed to maintain no more than 75% of the Council’s          investments in variable  ...  view the full minutes text for item 45.

Section 100B(4)(b) of the Local Government Act 1972 requires that the permission of the Chairman be obtained, after prior notice to the Chief Executive, before urgent business not specified in the agenda (including a supplementary agenda of which the statutory period of notice has been given) may be transacted.

The Chairman commented on the Equality Analysis Reports (EAR), which had accompanied each report on the agenda for tonight’s meeting, stating that they were very confusing and enquired whether Officers could reconsider the format and also reduce the size of each one.

The Director of Governance acknowledged the concerns of the Chairman and explained that the requirement for these EARs had come from a High Court ruling. This was the first cycle of meetings that the template had been used, which ensured that Officers undertook a proper equality analysis process, and the format would be reviewed in the light of experience of their use – by both Officers and Members.

Exclusion:

To consider whether, under Section 100(A)(4) of the Local Government Act 1972, the public and press should be excluded from the meeting for the items of business set out below on grounds that they will involve the likely disclosure of exempt information as defined in the following paragraph(s) of Part 1 of Schedule 12A of the Act (as amended) or are confidential under Section 100(A)(2):

The Local Government (Access to Information) (Variation) Order 2006, which came into effect on 1 March 2006, requires the Council to consider whether maintaining the exemption listed above outweighs the potential public interest in disclosing the information. Any member who considers that this test should be applied to any currently exempted matter on this agenda should contact the proper officer at least 24 hours prior to the meeting.

Background Papers: 

Article 17 of the Constitution (Access to Information) define background papers as being documents relating to the subject matter of the report which in the Proper Officer's opinion:

(a)        disclose any facts or matters on which the report or an important part of the report is based;  and

(b)        have been relied on to a material extent in preparing the report and does not include published works or those which disclose exempt or confidential information and in respect of executive reports, the advice of any political advisor.

The Council will make available for public inspection one copy of each of the documents on the list of background papers for four years after the date of the meeting. Inspection of background papers can be arranged by contacting either the Responsible Officer or the Democratic Services Officer for the particular item.

The Committee noted that there was no business which necessitated the exclusion of the public and press from the meeting.