Agenda and minutes

To note any changes to the membership.

It was noted that there were no changes to the membership.

To receive declarations by Members and Officers of the existence and nature of any personal or prejudicial interests in matters on this agenda.

Councillors Boothroyd and Warner declared that they were members of the Standards Committee which was referred to in the report on Maintaining High Ethical Standards at the City Council.

To approve the minutes of the meetings held on 16 and 24 November 2016.

RESOLVED:  That the minutes (Public and Exempt versions) of the meeting held on 16 and 24 November be signed as correct records of proceedings.

Report of the City Treasurer

4.1     The Committee received a report on the annual review undertaken by Grant Thornton on the grants the City Council claims. The key messages from the Grant Certification Audit are communicated to the Audit and Performance Committee as the body charged with overseeing governance at the Council. 

4.2     There was only one claim/return audited by Grant Thornton in relation to the 2015-16 financial year and this related to Housing Benefit subsidy. The committee noted that Grant Thornton had no recommendations to raise for members consideration. This was the fourth successive year that there had been no recommendations. 

4.3     There was only one minor issue identified by the audit.  This related to one manual error that resulted in a £6 overpayment on one benefit claim.  The claim was subsequently corrected.  Officers were referred to the fact that although only one error was identified this was based on a sample test of twenty cases and not all of the applications processed.  In response to questions Paul Dossett, Grant Thornton, explained that the number of cases tested was set by the Department for Work and Pensions and applied equally to all local authorities.  If an error is discovered testing is permitted on a further forty cases to identify whether there are any underlying issues.

4.4       RESOLVED:  That the report be noted.

Report of Grant Thornton, External Auditors

5.1     The Committee considered the external audit plan which outlined the work that Grant Thornton propose to undertake for the audit of the Council’s Financial Statements and the Pension Fund for the financial year 2016-17. The plans are based upon Grant Thornton’s risk based approach to audit planning.

5.2     The committee welcomed Paul Dossett, Engagement Lead, and Elizabeth Jackson, Engagement Manager, Grant Thornton, to the meeting. 

5.3     Members noted and asked questions about the identified significant risks on the Managed Services Partnership (MSP) and appeals provision for National Non-Domestic Rates (NNDR), the identified other risks around the valuation of property and the significant risk around value for money relating to capital projects.  With regards to the audit plan for the Council’s pension fund members also noted and asked questions about risks in relation to property funds.

5.4     With regards to the significant risk relating to MSP, members commented that due to on-going difficulties with the implementation the degree of cooperation from BT this year may differ compared to the previous year.  The committee questioned how this would affect the audit.  Mr Dossett advised that in this event Grant Thornton would write to the City Council to inform them of the circumstances and request that they ask BT to provide its cooperation.

5.5     The Council’s provision for business rates appeals is the largest in the country and is a highly material balance in the financial statements.  The provision is based on significant judgements made by management and uses a complex estimation technique to prepare provision.  The Committee expressed concern about the implications for the Council’s appeals provision following the new 2017 NNDR valuation list.  Officers advised that this would not affect the current year’s accounts but might affect those in the future.  Steve Mair, City Treasurer, explained that the finance team was in the process of addressing the impact of the changes in the same way that it had in when the NNDR valuation list was last updated in 2010.

5.6     Officers were asked how frequently the Council’s property assets are valued.  The City Treasurer explained that general fund investment assets are valued on an annual basis to comply with financial accounting requirements.  Other assets are valued at an average of 20% per annum.  In response to concerns that this proportion seemed low, Mr Mair explained that increasing the sample or undertaking a valuation more frequently would lead to increased costs for the Council.  Mr Dossett stated that a figure of 20% was common across local authorities.  Members questioned whether a greater proportion of assets should be assessed more frequently given property values in central London are likely to change more than in other parts of the country.  Concern was expressed that some properties could be incorrectly valued if assessed only once every 5 years

5.7     In respect of the significant value for money risk on capital projects, Ms Jackson advised that Grant Thornton would be reviewing the project management and risk assurance framework established by the Council in respect  ...  view the full minutes text for item 5.

Reports of the City Treasurer and the Director of Policy, Performance & Communications

6.1     Steve Mair, City Treasurer, introduced the period 9 finance report which provided details of the forecast outturn in respect of revenue and capital and projected revenue and capital expenditure by Cabinet Member including key risks and opportunities.  The report also included details in relation to the revenue and capital expenditure for the Housing Revenue Account.

6.2     The Committee expressed on-going concern over the capital forecast outturn variances against budget .  Members expressed concern about the ability of service areas to produce robust forecasts.  The City Treasurer stated that the City Council was a large and complex and business with a budget of over £800 million per annum and a large and significant capital programme.  Therefore, it was not unusual given its complexities for slippage to occur in the capital programme.  Effective forecasting relied on a combination of leadership and project management skills.  He advised that the finance team does robustly challenge the assessments from those leading on capital projects.  He further advised that the Council was not currently borrowing to finance capital expenditure but that this would be the case in the future.  He explained that the Council had introduced a new business case arrangement for awarding capital programme expenditure to projects and that the finance team was working with service colleagues to address this.  Moreover, the chief executive had commissioned a report to investigate the Council’s programme management and delivery processes. Members suggested that a report on this issue should be added to the committee’s work programme.

6.3     The Committee expressed concern over the possibility that a large number of projects that are currently delayed may all progress at the same time and they questioned whether officers would be have the capacity to deal with such a challenging workload.  The City Treasurer advised that this issue would be picked up as part of the full service review.

6.4     The Committee noted that the £86 million capital receipt for the Moxon Street site which had yet to materialise was delayed due to challenges over Rights to Light.

6.5     The City Treasurer was asked for details of the Council’s reserves.  He reported that the general fund reserves were £41.56m at March 2016.  This is likely to increase by approximately £5m to £46.6m over the course of the year.

6.6     In response to questions he was of the view that reserves should be built up to £70m as a minimum over the next 4 years or so.  He referred to the fact that the Council cannot operate without sufficient reserves.  As mentioned previously the Council’s annual budget was approximately £800m.  A modest 3% error on income and expenditure would result in the Council having to find £48m to make up the shortfall.  He reminded the committee that in 2008 the Council had reserves of £70m which were heavily called upon following the global recession.  He explained that at the current rate it would take a further four years for the Council to build reserves to a similar level.  Members commented that  ...  view the full minutes text for item 6.

Report of the Monitoring Officer

7.1     The Committee considered an annual report which provided an overview of the arrangements in place and actions taken to maintain high ethical standards throughout the authority.

7.2     Members noted that the Monitoring Officer had considered 5 complaints about member conduct but determined in each case that there was no case to answer.  The committee further noted that the complaints were submitted by different members of the public and therefore did not indicate a pattern of vexatious behaviour. 

7.3     Members referred to the fact that to assist those who sit on planning committees a note was being prepared that would provide guidance about entering into discussions with applicants or attending site visits and/or scheme presentations in advance of committee meetings.

7.4     The committee considered the details of staff disciplinary cases and whistleblowing issues.  The committee noted that the Council concluded 13 disciplinary cases in total in the 2015/2016 financial year.  This was regarded as normal for an organisation the size of the City Council and had slightly decreased from the previous financial year. Members asked whether there were any patterns of misconduct and whether there were clusters of misconduct in service areas.  Lee Witham, Director of People Services, advised that 6 of the 13 cases involved staff in Children’s Services while 3 were in Adult Social Services.  However, he explained that these were two of the largest service areas in the Council and often involve some of the most challenging and sensitive work.  He further advised that the misconduct cases were varied and there was no case to answer in five of them.

7.5     The Committee noted that there had only been one whistleblowing matter raised via the HR Department.  Officers were asked whether this was because members of staff were hesitant to raise issues.  Members suggested that perhaps a mechanism could be developed so that officers can put forward issues that should be scrutinised by councillors.  Mr Witham undertook to look into this.

7.6     RESOLVED: That the report be noted.

Report of the Interim Shared Services Director for Audit, Fraud, Risk and Insurance

8.1     The Committee considered a report that set out the key outcomes from the internal audit work carried out in the reporting period (October to December 2016.

8.2     The Committee noted the Internal Auditor’s opinion that the Council’s internal control systems based on the areas reviewed were generally satisfactory with all 9 audits finalised in the period receiving satisfactory assurance.

8.3     Two follow up reviews were undertaken in the period.  It was noted that all the recommendations made had been implemented.

8.4     Members commented that while all 9 audits received a satisfactory assurance some of the weaknesses identified were of concern.  Some related to failures to undertake fairly basic duties in sensitive services.  Moira Mackie, Interim Shared Services Director for Audit, Fraud, Risk and Insurance, explained that the audits are undertaken across a wide area looking at the overall adequacy and effectiveness of governance, risk management and control arrangements.  Some of the weaknesses identified were procedural in nature but that on the whole the areas audited had improved compared to 2 years ago.

8.5     Moira Mackie stated that there will be a need to review those areas which are provided on a shared services basis if there is any change from a Tri or Bi- Borough basis to a sovereign service.  However, she advised that while strategically some services were being delivered on a shared basis at an operational level in a number of cases each Council still had its own procedures and processes.

8.6     RESOLVED: That the results of the internal audit work carried out during the period be noted.

8.7     ACTION: Provide the committee with an analysis of potential risks for service areas moving from a shared service to another structure.  (Action for: Moira Mackie, Interim Shared Services Director Audit, Fraud Risk and Insurance)

Report of the Interim Shared Services Director for Audit, Fraud, Risk and Insurance

9.1   The Committee reviewed a draft of the internal audit plan for 2017-18 as set out in Appendix 1 to the report.

9.2   The Internal Audit Plan had been developed following discussions with senior managers at the Council.  Balancing audit resources across the Council’s activities the Plan takes into account change, priorities and risk with cyclical reviews planned in operational areas across the 3 year period where possible.  Areas of high risk had been identified and included in the plan as well as cyclical reviews in areas of a lower financial risk (e.g. schools). 

9.3   Members asked why the number of planned audit days in Children’s Services was significantly reduced compared to the previous year.  Moira Mackie explained that some reviews were undertaken on a cyclical basis.  Moreover, a high number of audits had been undertaken in Children’s Services and Adult Social Care in the current year.  She stated that the Plan is an early draft and will be subject to some amendment before a final version is published in March.  It is possible that additional audits would be undertaken in these areas.

9.4   RESOLVED: That the draft internal audit plan 2017-18 be noted.

9.5   ACTION: Provide the committee with the updated audit plan once it is finalised in March.  (Moira Mackie, Interim Shared Services Director Audit, Fraud, Risk and Insurance)

10.1   RESOLVED:

1.     That the agenda items for 9 May meeting be agreed.

2.     That the responses to actions arising from the meetings on the 24 November 2016 be noted.