Agenda and minutes

To confirm the Minutes of the Meeting held on 26 September 2017 (to be laid on the table half an hour before the meeting).

RESOLVED that the minutes of the meeting held on 26 September 2017 be confirmed and signed.

To receive apologies for absence.

Apologies for absence were received from Cllr Mike Band, Cllr Nicholas Holder and Cllr Stephen Mulliner.

To receive from Members, declarations of interests in relation to any items included on the Agenda for this meeting, in accordance with the Waverley Code of Local Government Conduct.

There were no disclosures of interest in relation to items on the agenda.

The Chairman to respond to any questions received from members of the public of which notice has been duly given in accordance with Procedure Rule 10.

There were none.

Background Papers

Unless specified under an individual item, there are no background papers (as defined by Section 100D(5) of the Local Government Act 1972) relating to the reports in Part I of these minutes.

The Audit Committee is asked to consider the revised Financial Regulations (to follow) and recommend them to the Council, in compliance with Audit Committee Terms of Reference under Article 8 of the Constitution. Specifically, the Audit Committee is required to maintain an overview of the Council’s Constitution in respect of financial regulations.

Recommendation

It is recommended that the Committee recommends the revised Financial Regulations to the Council for adoption.

Peter Vickers, Head of Finance, introduced the revised Financial Regulations (attached) to the Committee. The Financial Regulations had last been updated in April 2015 and had been rewritten in line with the Council’s commitment to continual review within the Annual Governance Statement.

The objective of the revision was to ensure that the Financial Regulations reflect the full scope of the Council’s required governance arrangements; to remain secure in relation to risk and statutory compliance whilst incorporating changes in technology, service delivery and corporate priorities.

The revised Financial Regulations were aligned to the Council’s Constitution, Contract Procurement Rules and Scheme of Delegation, all of which had been updated within the 2017/18 financial year.

The layout and structure of the Financial Regulations had been revised to facilitate ease of reading and clarity of understanding. Use of headings and sub headings had been enhanced to aid navigation of the regulations.

The following changes had been made to content:

a.         New section: Purpose and key principles overarching the regulations;

b.         New section: Statutory requirements, compliance and responsibilities are described and explained;

c.         Content of the previous Financial Regulations has been reordered under a “financial framework” inclusive of updated and enhanced governance criteria. The regulations were previously grouped under five themes.

d.         The Scheme of Virement has been revised to enable services to self manage budgets with a greater degree of autonomy, in line with the changes to the Executive approval threshold of £100,000 and minimising Management Board intervention.

The Scheme of Virement had been redesigned to enable service managers to be more proactive in managing budgets with minimal bureaucracy. A new electronic purchase ordering facility would be going live in the new year that limits managers to only commit expenditure within a pre-existing budget provision. Using electronic workflow approval process, managers would be able to identify and effect a virement within the approval limits on their directly controllable budgets. Full details are set out in Annexe 1 of the Financial Regulations.

The Committee noted that the document was much more reader-friendly. Members felt that the regulations provided a robust framework, ensuring that all checks and balances are in place without imposing any unnecessary delays. The Committee also found the glossary to be a very useful addition.

Cllr Frost was concerned that the Agresso system update hadn’t been fully implemented as there was still no link with the housing maintenance system. Peter Vickers responded that work was under way in the background, being led by Walter Stockdale, Financial Services Manager, and that the full roll-out would be complete in January 2018.

The Committee agreed that this was a very important piece of work and asked that it be brought to the attention of all members, in particular the Executive, and that it be suggested that they retain a copy of the document for easy reference. Officers would be arranging training sessions for managers on this in due course and Members suggested also inviting the Portfolio Holder to attend.

The Committee thanked officers for  ...  view the full minutes text for item 32.

Background Papers

The background papers relating to the following report items in Part II are as specified in the agenda for the Committee.

The attached Annual Audit Letter, produced by Grant Thornton, summarises the key findings arising from the work they have carried out at Waverley Borough Council for the year ended 31 March 2017.

The Letter provides a commentary on the results of Grant Thornton’s work to the Council and its external stakeholders, and highlights issues they wish to draw to the attention of the public. 

Recommendation

It is recommended that the Audit Committee receives and comments on the Annual Audit Letter from Grant Thornton.

Iain Murray from Grant Thornton presented the Annual Audit Letter 2016/17 to the Committee. The Letter provided a summary of the messages that the Committee had received at its meeting in July and didn’t include any new information. The key areas to draw out were that the Council had successfully delivered its final accounts in accordance with the earlier timetable and that Grant Thornton had issued an unqualified Value for Money conclusion.

Cllr Gray, who had discussed the report with Cllr Mulliner prior to the meeting, noted that the level of materiality was £1,629k, which was 2% of the Council’s gross revenue expenditure, and felt that this was quite high. Iain Murray responded that Grant Thornton used a number of thresholds to drive their audit work and this included setting a materiality benchmark. 2% was the highest level of materiality they set and this reflected the Council’s good track record. Anything above the lower threshold of £81k would be reported to the Audit Committee in the Audit Findings Report; and anything below this would be considered trivial. Cllr Hyman asked how the lower threshold was calculated and Iain responded that this was 5% of the materiality figure.

In relation to the risks that had been identified in the 2016/17 audit plan, Cllr James asked how the valuation of plant, property and equipment was undertaken. Graeme Clark responded that the Council had three qualified valuers and so most of this work was done in house. If any specialist valuation was required then this would be procured on an ad hoc basis.

Cllr Hyman queried whether the ongoing audit into Waverley’s Air Quality reporting would affect the Letter. Graeme Clark responded that if any governance issues were identified in the investigation then these would be reported through the Annual Governance Statement process. The audit was being undertaken by an independent auditor and the findings would be shared with Grant Thornton in due course. They would then decide whether this needed to be taken into account when preparing their Annual Audit Letter for 2017/18.

The Committee also noted that Homes and Communities Agency Compliance Audit was new for 2017/18 and queried how this had come about. Graeme Clark responded that the Council had received a financial contribution from the HCA for the development at Wey Court and a requirement of this was that the Council commission a third party audit. Iain Murray added that the low fee for this work was indicative of the minimal work involved.

Iain Murray also presented a progress report which updated the Audit Committee with the most recent progress on the 2016/17 and 2017/18 audits. The Trust Accounts Audit was complete, as was the HCA Audit. The Audit of Housing Receipts was ongoing, and a delay had been caused due to awaiting the terms of reference from DCLG. The Certification of Housing Benefits was on track to be delivered by the end of November. Grant Thornton was just starting to plan for the 2017/18 Audit and an  ...  view the full minutes text for item 33.

The purpose of this report is for the Audit Committee to consider governance progress in relation to informing the Annual Governance Statement (AGS) for the year ended 31 March 2018.

Recommendation

It is recommended that the Audit Committee:

1.    Reviews the 2016/17 Annual Governance Statement and pass comment for development of the 2017/18 statement;

2.    Identifies and considers any internal governance issues; and

3.    Considers any issues in the public domain from a governance perspective.

The Committee received a report inviting members to comment on any emerging internal governance issues that they felt should be taken into account in the preparation of the Annual Governance Statement for 2017/18.

One area raised by Members was the Air Quality Audit and any governance issues that may be identified following that. Cllr Gray also suggested that the number of planning appeals could be included. However officers suggested that this would be considered as more of a risk rather than a governance issue. Members also noted that Environment O&S was monitoring this situation and making appropriate recommendations.

A further area was raised in relation to a potential safeguarding issue at one of the Council’s properties. In view of the recently published Safeguarding policy, Cllr Seaborne felt that this could be a good opportunity to show that the governance procedures were working well. He also felt that it was important to know that policies in relation to Health and Safety reporting were working effectively. Members felt that the most effective way to measure this would be by way of a KPI to O&S and asked officers to look into the best way of monitoring and reporting this.

The Committee concluded that the AGS was a useful tool for promoting the good work of the Council and assuring members of the public that governance issues were being taken seriously. Members also agreed that there should be an opportunity at every meeting for the Committee to review emerging governance issues.

The Committee RESOLVED that:

1.    The comments above be passed to officers for consideration in preparation of the 2017/18 Annual Governance Statement; and

2.    A standing item be added to the Committee’s agenda to consider any new potential internal governance issues or issues in the public domain that may have an impact on governance.

This report presents the latest corporate risk register as refreshed by Heads of Service.

Recommendation

It is recommended that the Audit Committee considers the revised corporate risks register at (Exempt) Annexe 1 and passes comments and observations to officers.

The Committee received the latest version of the corporate risk register as refreshed by Heads of Service. The register set out 16 corporate risks, as well as a change log which highlighted the changes that had been made since the Committee last reviewed the register.

Peter Vickers informed the Committee that early next year officers would be working with representatives from Zurich to look at risk appetite, taking into account all emerging risks coming forward through the budget preparation process.

Cllr Frost suggested that the potential for a pandemic should be added as a risk, however officers advised that this was covered by the overarching business continuity risk set out in the report.

The Committee also felt that the risk relating to property investment should be given a higher impact rating and officers agreed to review this.

The Committee RESOLVED that the revised corporate register be noted the comments noted above be passed to officers for consideration.

Each year, the Audit Committee is invited to review its Terms of Reference. The attached document includes changes that have been proposed in consultation with officers.

Recommendation

It is recommended that the Audit Committee:

1.    reviews its terms of reference; and

2.    recommends to the Standards Committee that the highlighted amendments be adopted by Council.

The Committee reviewed the proposed changes to its Terms of Reference and agreed that the amendments made the document easier to read and the Committee’s remit clearer.

Members noted that the words ‘if sought fit’ had been removed from line 2.4 but were included within line 1.3 and suggested that these be removed for consistency.

The Committee RESOLVED to recommend to the Standards Committee that, subject to the amendment to line 1.3 set out above, the highlighted changes to the Committee’s Terms of Reference be adopted by the Council.

The Committee’s Terms of Reference include provision for the Committee to comment on the progress made in the achievement of the Audit Plan. An update on the current position of the reviews in 2017/18 is presented.

Recommendation

It is recommended that the Committee:

1.    receives the progress report for the Internal Audit Plan 2017/18, as attached at Annexe 1 and make any comments to officers; and

2.    endorses the deferral of the review on the Approval of Invoices on Agresso and approves the new additional review of Income Streams.

The Committee received a report setting out the progress against the Internal Audit Plan for 2017/18. A change to the plan was proposed that would defer the Agresso review to the 2018/19 Audit Plan, and use the days allocated to review income streams instead. Gail Beaton, Internal Audit Client Manager, also reported that the contractor was making good progress and that some reports which were shown to be at draft stage were now final.

Cllr Frost expressed concern about the roll-out of Universal Credit and the effect this could have on rent collection. Members suggested that this could be included as a review in the 2018/19 Audit Plan and Gail agreed to meet with Hugh Wagstaff, Head of Housing Operations, and Nicky Harvey, Benefit Manager to discuss this further. Cllr Gray added that the Value for Money and Customer Service O&S Committee was also looking into the impact of Universal Credit.

The Audit Committee RESOLVED that:

1.    The progress on the Internal Audit Plan 2017/18 be noted; and

2.    The deferral of the review on the Approval of Invoices on Agresso be endorsed and the inclusion of the new review of Income Streams be approved.

To inform the Audit Committee of Senior Management’s progress in implementing the recommendations raised by Internal Audit following a review in their service areas.  This report will enable the Committee to consider what action is required in respect of those that are overdue or appear likely to be implemented later than the target date.

Recommendation

It is recommended that the Committee:

1.    considers the information contained in Annexe 1 and, following discussion at the Audit Committee meeting, identifies any action it wishes to be taken; and

2.    notes the progress on the project to implement the new GDPR requirements and provides any comments to officers.

The Committee received a report setting out the latest position on the implementation of overdue internal audit recommendations. At its last meeting the Committee expressed concern in relation to the amount of progress that had been made towards three recommendations regarding data protection. Officers provided an update that since the last meeting the Executive had approved £50,000 of resource to support GDPR implementation and an external consultant been appointed to complete an information audit. Additionally,  an action plan was is place, GDPR ‘champions’ had been appointed across the organisation and briefings had been held for all staff. The Council would also be working in partnership with East Hampshire on technical issues.

The Committee thanked officers for the update and whether any further resources were required to progress this. Graeme Clark responded that the internal project manager and external specialist were working well, however in the long term there would be the requirement to appoint an Information Manager and this would be put forward as a growth bid from Robin Taylor, Head of Policy and Governance.

The Committee was generally pleased with the progress that had been made, but felt that the situation needed to be closely monitored going forward.

The Committee RESOLVED that:

1.    The progress made on the project to implement the new GDPR requirements be noted; and

2.    Officers be asked to bring an update to the next meeting on the progress made relating to the implementation of GDPR requirements.

The report provides an update to the Committee on the progress made by Waverley Borough Council officers on the work being completed in investigating all types of fraud, primarily focusing on Housing Tenancy fraud, enhanced by the co-operation and supported by all the members of the Surrey Counter Fraud Partnership and extended partners including Registered Social Landlords.

Recommendation

That the Audit Committee notes the success of the investigation activity and the results achieved.

The Committee received a report setting out the progress being made on fraud investigations, mostly relating to housing. The Committee noted that the financial value of the outcomes had increased in Quarter 2, and now included seven properties that had been relinquished and were now available to be re-let to tenants on the waiting list.

Cllr Hyman asked how long it took from being alerted to a potential fraud case to actually getting the keys to the property back. Gail Beaton responded that this had been approximately two years, but that new controls and procedures had been put in place to reduce this time. This would be achieved by working more closely with other teams within the organisation and ensuring that reporting mechanisms were easily accessible and straightforward to use.

The Committee was very pleased with the ongoing success of the work and felt that it was important that all opportunities for positive publicity were taken.

The Committee RESOLVED that the success of the investigation activity and the results achieved be noted.

Recommendation

The Audit Committee is invited to note the recurrent annual work programme, attached.

The Committee RESOLVED to note its Annual Recurrent Work Programme.

The Committee to consider whether to webcast future meetings of the Audit Committee.

The Committee discussed the positives and negatives of webcasting meetings of the Audit Committee, while also noting that there had been some recent technical difficulties with the system.

The Chairman then put to a vote the recommendation that meetings of the Audit Committee not be webcast at the current time, and that this be reviewed again in six months. The recommendation was carried with four members in favour and one against. Cllr Hyman requested that his vote against the recommendation be recorded in the minutes.

The Committee therefore RESOLVED that meetings of the Audit Committee not be webcast, and the situation be reviewed in six months’ time.