Agendas, reports and minutes

Present:

Mrs M Davidson, Mr B Fernie, Dr D Alston, Mr R Balfour, Mr D Bremner, Mrs C Caddick, Mrs H Carmichael, Mr A Christie, Mr B Clark, Dr I Cockburn, Mr J Ford (Substitute), Mr K Gowans, Mr A Henderson, Mr E Hunter, Ms L MacDonald, Mr G MacKenzie, Mr A MacKinnon, Mr A Rhind, Mr G Rimell, Ms G Ross, Mr J Stone

Non-Members also present:

Mr D Fallows, Mr R Laird

Officials in Attendance:

Ms M Morris, Assistant Chief Executive
Mr D Yule, Director of Finance
Mr N Rose, Head of Internal Audit and Risk Management
Miss D Sutherland, Audit and Risk Manager
Mr S Fraser, Head of Legal and Democratic Services
Mr R MacKenzie, Head of Support Services
Mr D Goldie, Head of Housing
Mr N McLaughlin, Business Systems Manager
Mr D Roberts, European Officer
Miss J MacLennan, Democratic Services Manager
Miss C Maragh, Administrative Assistant

Also in attendance:

Mr S Boyle, Assistant Director, Audit Scotland
Ms M Bruce, Senior Audit Manager, Audit Scotland

An asterisk in the margin denotes a recommendation to the Council. 
All decisions with no marking in the margin are delegated to Committee.

Mrs M Davidson in the Chair

1.  Apologies for Absence
Leisgeulan

Apologies for absence were intimated on behalf of Mr D Hendry, Mr N MacDonald, Mr B Murphy and Mr J Rosie

2.  Declarations of Interest
Foillseachaidhean Com-pàirt

There were no declarations of interest.

3.  Recess Powers
Cumhachdan Fosaidh

It was NOTED that the Recess Powers granted by the Council at its meeting on 27 June 2013 had not been exercised in relation to the business of the Audit and Scrutiny Committee.

4.  Internal Audit Reviews and Progress Report
Ath-bhreithneachaidhean In-sgrùdaidh agus Aithisg Adhartais

There had been circulated Report No. AS-20-13 (381kb pdf) dated 13 September 2013 by the Head of Internal Audit and Risk Management which summarised the final reports issued since the date of the last meeting, together with details of work in progress and other information relevant to the operation of the Internal Audit Section.

In relation to the internal audit reports, it was advised that since the last meeting it had been decided to move from four to five audit opinions with the addition of a ‘reasonable assurance’ opinion and the details of this change had been highlighted within the report.

Reports which were in progress and which would be the subject of a future report to the Committee had also been provided as an appendix to the report which showed that 9 draft reports were in progress and 5 draft reports had been issued. 

The Section had also been involved in a variety of other work which related to Irregularity/ Fraud Investigations, Grant Claims, Joint Board work and work for other organisations or Committees, Advice and Assurance, Computer Audit and the Scrutiny Working Group.

In regard to Staffing Resources, Vacancies and Progress Against Plan, it was confirmed that staffing proposals had been presented to and agreed by the Finance, Housing and Resources Committee on 5 June 2013 and a revised structure had now been implemented.

During discussion, Members welcomed the information which had been contained within the report in regard to staffing and congratulated Ms D Sutherland on her appointment to the post of Audit and Risk Manager.

Thereafter, the final reports were presented as follows:- 

(i) Education, Culture and Sport – Schools - Financial Procedures (Limited Assurance)

The objectives of the review had been to ensure that the school budget was adequately controlled and monitored and that the budgetary position was regularly reported to all relevant parties, that goods and services were purchased from approved contract suppliers in accordance with approved ordering procedures and creditor invoices were properly authorised, processed promptly and accurately, that all income received was receipted, processed, secured and banked accurately and promptly, that imprest accounts (petty cash) were administered in accordance with Financial Regulations and associated guidance, that inventory records were maintained accurately and timeously in accordance with Financial Regulations and associated guidance and that adequate control was exercised over the School Fund account in line with the Council's School Fund Guidelines and Financial Regulations.

In terms of the main findings, it was confirmed that the objectives had been substantially achieved in that the budgetary control systems in operation of all of the Schools had been found to be satisfactory. However, there was some scope for improvement and this had been detailed within the report.

In all, eighteen recommendations had been made – one of which had been classified as high priority, ten as medium priority and seven as low priority.

During discussion, it was confirmed that the proposed actions relating to non-compliance with existing School budget management guidance and procedures would be included within a letter which would be issued to all Head Teachers at the start of the academic year 2013/14 and this letter would include any issues raised by Members at the meeting.

In this regard, it was suggested that reference should be made to the importance of induction training, not just for Head Teachers but for all other relevant members of staff within Schools. Also, a high priority should be placed at all times on the financial monitoring systems within Schools and clarification should be provided on the guidance surrounding the use of contract suppliers and if necessary further information given on the reasons for the use of such suppliers.

It was also stressed that it was important that the same level of support and guidance was provided for both larger and smaller Schools (and as such the recommendations within the report to take this forward were welcomed), that further information should be provided for Schools on the rollout of electronic software packages and that the stipulations surrounding the verification procedures for the banking of cash by School staff should be reinforced.

Thereafter, and following further general discussion, it was AGREED that a further review be included within the Audit Plan for 2014/15 with a sample of different schools in order to provide reassurance that the recommendations had been accepted and were being fully and correctly implemented.

(ii) Housing and Property – Housing Rents (Substantial Assurance)

The objectives of the review had been to ensure that relevant properties were identified and included on the rent roll, rent charges were properly raised for all relevant properties in accordance with rent levels and other charges set by the Council, payments received were promptly processed and correctly posted to tenants' accounts, write offs, rebates, refunds and voids were properly controlled; arrears follow-up procedures were properly controlled and rent charges were correctly recorded in the rent accounting system and financial ledger.

In terms of the main findings, it was confirmed that policies and procedures in relation to housing rents were well documented and could be accessed by all staff. The main concerns which had been identified related to the lack of documentation to evidence the testing of rent increases and the failure to notify the Housing and Property Systems Support and Development Team when users no longer required access to the Housing Information System.

In all, seven recommendations had been made – two of which had been classified as medium priority and five as low priority – and all were due to be resolved by 31 March 2014.

(iii) Housing and Property – Housing Stores/ Repairs and Maintenance (Substantial Assurance)

The objectives of the review had been to ensure that there were appropriate controls over the issue of stock items from Housing and Property Stores (specifically that issues were authorised and could be traced to a relevant job number, items issued were appropriate and there was a programme of inspections to ensure that the items were used on the jobs concerned) and that there were appropriate  controls over repairs and maintenance carried out by the Housing and Property Service (specifically that variations between the work described when a fault was reported and that actual work carried out were subject to appropriate authorisation and monitoring and that there was a programme of inspections to ensure that repairs were completed to the required standard and that stores issues were accurately recorded and used to complete the repair).   

In terms of the main findings, it was confirmed that there was an effective system in place to ensure that stores issues could be traced to both the tradesperson issued with items and the job on which the items had been used. Areas for improvement in respect of variations and inspections had been identified but these had been recognised by the Service through their own performance monitoring and they had initiated improvement work in this regard.

In all, four recommendations had been made – three of which had been classified as medium priority and one as low priority – and all were due to be resolved by the end of March 2014.

The Committee NOTED the terms of the report as circulated.

5.  Benchmarking Report 2012/13 
Aithisg In-sgrùdaidh a thaobh Slatan-tomhais 2012/13

There had been circulated Report No. AS-21-13 (229kb pdf) dated 12 September 2013 by the Head of Internal Audit and Risk Management which provided information in respect of the 2013 Benchmarking exercise which had been analysed in order to assess how well the Section performed in comparison with other Authorities and made reference to identified areas for improvement.

In this regard, Members were reminded that this was the fourth year in which the Internal Audit Section had taken part in the Chartered Institute of Public Finance and Accountancy (CIPFA) Audit Benchmarking Club. 

During a summary of the report, it was confirmed that the benchmarking had identified two areas for improvement in respect of increasing the annual number of chargeable audit days and introducing a programme of continuous auditing exercises, both of which had been detailed and included in the Action Plan at Section 6 of the report.

It was also advised that the actions arising from the 2012 benchmarking exercise had now been implemented and had been instrumental in ensuring better compliance with the CIPFA Code of Practice which had increased the score from 174 to 190. The final position was 99% (190/192) compliance which was the maximum achievable as two standards would not be implemented for the reasons set out at Section 3.2 of the report.

The annual benchmarking exercise had identified some further areas for improvement and in this respect actions had been agreed and would be addressed by 31 March 2014.

During discussion, Members congratulated the Audit Team on the excellent results which had been achieved through the self-evaluation exercise and as evidenced within the report.  

Thereafter, the Committee NOTED:-

i.     the results of the 2013 benchmarking exercise;
ii.     that the Internal Audit Section would continue to participate in the    
       annual CIPFA Benchmarking Club in order to seek continuous improvement in
       the service provided; and
iii.    that an Action Plan had been prepared which identified areas for 
       improvement and this would be followed up to ensure that the required 
       actions were addressed.

6.  New Public Sector Internal Audit Standards and Revisions to the Internal Audit Charter 
Inbhean Ùra In-sgrùdaidh an Raoin Phoblaich agus Ath-sgrùdaidhean don Chairt In-sgrùdaidh

There had been circulated Report No. AS-22-13 (55kb pdf) dated 2 September 2013 by the Head of Internal Audit and Risk Management which provided details of the new Public Sector Internal Audit Standards and the updated Internal Audit Charter.

During a summary of the report, it was confirmed that the Public Sector Internal Audit Standards had come into effect on 1 April 2013 and had replaced the previous guidance which had been set out in the Chartered Institute of Public Finance and Accountancy Code of Practice for Internal Audit in Local Government in the United Kingdom. In this respect, the Standards were broadly similar to the Code but there had been some changes and the most significant of these had been highlighted within the report and would be detailed within the Head of Internal Audit’s Statement of Internal Control and Annual Report which was provided to the Committee in June of each year.

The Internal Audit Charter had also now been updated to reflect the requirements of the new Standards and had been attached as Appendix 1 to the report. In this respect, the main changes related to the inclusion of definitions for the purposes of Internal Audit activities, reference to a risk-based plan and inclusion of the requirement to produce an Annual Internal Audit opinion and report to would be used to inform the Council’s governance statement.

Work had also been undertaken to update the Internal Audit Section’s Internal Audit Manual to reflect the updated requirements of the Standards.

The Committee:-

i.     NOTED the new Public Sector Internal Audit Standards and their
      requirements; and
ii.    APPROVED the revised Internal Audit Charter which had been provided as
      Appendix 1 to the report.

7.  Action Tracking Report – Update 
Aithisg a’ Leantainn Gnìomhachd – Fios as Ùr

There had been circulated Report No.AS-23-13 (35kb pdf) dated 11 September 2013 by the Head of Internal Audit and Risk Management which provided an update on progress in implementing the management agreed actions in respect of the audits referred to within the Action Tracking report which had been presented to the previous meeting in June.

Overall, all actions currently due for completion had been undertaken in respect of the various audit reviews referred to within the report.

In this regard, it was confirmed that there were two actions in relation to the Electronic Content and Document Management System which were not due to be implemented until 31 December 2013.

Four actions had now been completed in relation to Phoenix e1 with one remaining action to be completed by 1 April 2014.

All of the actions in respect of AXIS Counter Receipting and Income Management and the on-going work referred to within the report regarding audits of AXIS sites had now been completed. In addition, the actions in respect of matters arising from the Statement of Internal Control and Car Park Income Collection had also been completed.

In conclusion, it was confirmed that all of the audit actions had been satisfactorily implemented within the agreed timescales and managements agreed action would continue to be subject to the normal action tracking process with the next Annual Report being presented to the Committee in June 2014.  

During discussion, Members welcomed the progress which had been made as detailed within the report.

It was also AGREED that a further update on future actions required as part of the Phoenix e1 system, including the Risk Register, should be provided in due course. 

Thereafter, the Committee otherwise NOTED the results of the update report and the assurances provided that audit actions had been implemented as agreed.

8.  The Highland Council Pension Fund – Monitoring of Retirements  
Maoin Pheinnsein Chomhairle na Gàidhealtachd – Sgrùdadh Chluaineasan

There had been circulated Report No. AS-24-13 (959kb pdf) dated 17 September 2013 by the Director of Finance which provided information relating to retirements from the Highland Council Pension Fund for the year ended 31 March 2013.

In addition, the appendix to the report provided a detailed summary of retirements, including Highland Council retirements, non-Highland Council retirements and comparisons with previous years (reflecting changes since 1996/97).

In this regard, it was confirmed that the total number of retirements for the whole fund had decreased between 2011/12 and 2012/13 by 134 (from 410 to 276) with a reduction of 62 in normal retirements (from 218 to 156) and 16 in ill-health retirements (from 40 to 24).

Efficiency retirements had also reduced from 2 in 2011/12 to 1 in 2012/13 and redundancy retirements had decreased by 75 from 134 in 2011/12 to 59 in 2012/13 as Scheme employers concluded their current round of workforce management programmes.

The number of approved flexible retirements had steadily increased from 7 in 2010/11 to 16 in 2011/12 and now 36 in 2012/13 as this method of retirement increased in popularity.

During discussion, it was AGREED that in future consideration should be given to the terminology used in reports in respect of the reporting of redundancies and if possible accompanying notes provided to clarify redundancy figures. 

Thereafter, the Committee otherwise NOTED the terms of the report as circulated.

9.  EU Programme Audit (ERDF): Successful Audit of the Portree to Staffin Project 
Sgrùdadh Prògram an Aonaidh Eòrpaich: Sgrùdadh Soirbheachail de Phròiseact Phort Rìgh gu Stafainn

There had been circulated Report No. AS-25-13 (33kb pdf) dated 30 August 2013 by the Director of Transport, Environmental and Community Services which explained the recent European Audit of the Portree to Staffin project and the successful outcome.

During a summary of the report, it was confirmed that the audit had been undertaken onsite at Highland Council Headquarters by members of Audit Scotland and had commenced with a comprehensive presentation of the project followed by scrutiny of the financial management, payments to contractors, procurement and publicity. In all elements, the auditors had been satisfied that the project had clearly operated within the Scottish ERDF Programme Rules and European Regulations and this had been communicated to the Scottish Government. Thereafter, verbal confirmation had been received that no further actions were required.   

The Committee NOTED the successful outcome of the audit of the Portree to Staffin project as detailed in the report.

10.  Scottish Public Service Ombudsman Cases Received by the Council – Update Report 
Cùisean Ombudsman Sheirbheisean Poblach na h-Alba a Fhuaireadh leis a’ Chomhairle – Aithisg as Ùr

There had been circulated Report No. AS-26-13 (32kb pdf) dated 17 September 2013 by the Chief Executive which set out the number and types of complaint about the Council which had been determined by the Office of the Scottish Public Services Ombudsman (SPSO) in the period from March to September 2013.

In this regard, it was confirmed that the SPSO reports could be accessed and read in full on the SPSO website

In terms of the statistics, there had been six cases formally determined, with one complaint upheld, two partially upheld and three not upheld and these had been detailed within the report. It was also confirmed that where upheld cases had contained recommendations from the Ombudsman, all the required actions had been undertaken within the specified timeframe and the opportunity had been taken to learn, review and improve procedures.  Consequently, there were no outstanding actions for the council arising from Ombudsman recommendations.

The Committee NOTED the terms of the report as circulated.

11.  Inspection Report – Covert Surveillance 
Oifis Choimiseanair an Sgrùdaidh – Aithisg Sgrùdaidh

There had been circulated Report No. AS-27-13 (408kb pdf) dated 10 September 2013 by the Assistant Chief Executive which detailed the outcomes from a recent inspection of covert surveillance by the Office of the Surveillance Commissioner (OSC) following which the Commissioner had concluded that the Council had responded positively to the previous inspection report and that all recommendations had been discharged either fully or in part. Areas of best practice undertaken by the Council had also been identified as well as some recommendations for further improvement.

During a summary of the report, it was confirmed that a number of areas of strength in the way that Highland Council managed the Regulation of Investigatory Powers (Scotland) 2000 (RIP(S)A) process and complied with the legislation had been highlighted, including the excellent RIP(S)A management structure and the impressive, dedicated and enthusiastic Officers who comprised the team, the good systems which existed for training Officers and the establishment of RIP(S)A awareness within the Council and the excellent handbook for Officers.

It had been recommended that the Council should address the issues arising from the Examination of the RIP(S)A Documents section of the report and fully discharge the recommendation of the previous report which would involve Authorising Officers spending time articulating within the forms the consideration of the issues of proportionality and necessity.

It had also been recommended that the RIP(S)A authorisation form should be amended to accord more closely with the Home Office RIP(S)A form, that the Council should ensure that where a Covert Human Intelligence Source was employed, he or she was managed in accordance with legislation, that there should be a reduction in the number of Authorising Officers and that amendments should be made to the Policy, Procedures and Processes on Directed Surveillance and the Covert Human Intelligence Source.   

As such, these recommendations had been considered and accepted by the Council’s RIP(S)A Management Group and external training for Officers engaged in RIP(S)A applications and authorisations had already been arranged and delivered.

During discussion, Members stressed the importance of covert surveillance work being undertaken within a strict framework which took account of proportionality and necessity in order to ensure public confidence in the process and to avoid any possible future challenge in this regard.

Following further general discussion, the Committee:-

i.     NOTED the findings and recommendations of the OSC Inspection Report as
       detailed in Section 3 of the report; and
ii.    AGREED that the recommendations should be accepted and fully
       implemented.

12.  Code of Corporate Governance
Còd Riaghladh Corporra

There had been circulated Report No. AS-28-13 (80kb pdf) dated 13 September 2013 by the Assistant Chief Executive which confirmed that the full Council had approved the Code of Corporate Governance for 2013/14 at the meeting on 5 September 2013 and had noted progress in the delivery of actions for 2012/13. As such, the Code was now being reported to the Audit and Scrutiny Committee for its scrutiny of this progress and the revised Code for 2013/14.

In this regard, it was confirmed that the majority of actions (47) had been completed for 2012/13 and a further 25 were on target to be delivered. There were only 7 actions with some slippage and these had been included in the revised Code to ensure completion. In addition, it was advised that the full implementation of the Council’s Performance and Management System (PRMS) had been completed and all Services were now using this system for monitoring purposes in relation to performance indicators, programme commitments and the Code and this enabled exception reporting at Quarterly Performance Reviews and Strategic Committees.

It was also noted that the Code of Corporate Governance for 2013/14 had been detailed in full as Appendix 1 to the report.        

During discussion, Members highlighted the review of community planning governance further to the approval of the Single Outcome Agreement and it was confirmed that this would be undertaken in the first instance through the Highland Public Service Partnership Performance Board with further reports thereafter.

It was also noted that, in relation to the Committee’s scrutiny role, further Training Sessions were to be arranged for Members and the Head of Internal Audit and Risk Management would review best practice elsewhere and report back in due course.      

Thereafter, the Committee NOTED:-

i.     the progress made in delivering the agreed actions in the Code of Corporate 
      Governance for 2012/13 ; and
ii.    the Code of Corporate Governance for 2013/14 as detailed in Appendix 1 to
       the report.

13. Audit Scotland National Reports
Aithisgean Nàiseanta Sgrùdadh Alba

There had been circulated Report No. AS-29-13 (49kb pdf) dated 4 September 2013 by the Head of Internal Audit and Risk Management which provided details of the National Reports issued by Audit Scotland and the action taken within the Council to address the report findings.

In this regard, it was confirmed that four reports had been issued and considered by the relevant Strategic Committees as follows:-

• Major Capital Investment in Councils (presented to the Finance, Housing and Resources Committee on 5 June 2013);
• Maintaining Scotland’s Roads (presented to the Transport, Environmental and Community Services Committee on 15 August 2013);
• Housing in Scotland (presented to the Finance, Housing and Resources Committee on 28 August 2013); and 
• Managing Early Departures from the Scottish Public Sector (presented to the Finance, Housing and Resources Committee on 28 August 2013).

The respective Committee Minutes had also been circulated for information.

The Committee NOTED the action being taken by the respective Committees to address Audit Scotland’s National Reports as detailed in the report.

14.  Audit of Local Authority Charities  
Sgrùdadh de Charthannais Ùghdarrais Ionadail

There had been circulated Report No. AS-30-13 (81kb pdf) dated 16 September 2013 by the Director of Finance which advised Members of the implications of changes to the audit requirements of Local Authority Charities and the actions being taken by Officers to mitigate the financial implications.

During a summary of the report, it was confirmed that the Council currently administered eighty charities which were registered with the Office of the Scottish Charity Regulator (OSCR) for the benefit of various specific causes. As at 31 March 2013, the total value of these funds was £193,439 but in reality many were of low value and in this respect an extract from the Council’s Accounts had been attached as Appendix 1 to the report.

The accounting for these charities was currently undertaken as part of the normal financial accounting for the Council although summary accounts were submitted annually to OSCR comprising Statement of Receipts and Balances, Statement of Balances and Trustees’ Report. However, OSCR were now requiring Local Authorities to move towards full compliance with the Charities Accounting Statement of Recommended Practice and this required a full audit of the financial statements which would have a significant effect on the audit resources which would be needed for this additional work.

As such, Officers within the Council were currently looking at options for mitigating the implications and these included options for winding up charities for which there were no (or minimal) balances and merging charities which shared a common bond purpose. In this latter regard, it was confirmed that were charities were merged, the application/distribution of funds would be on a geographical basis.  

During discussion, it was suggested that consideration should be given as to whether there could be any role for outside organisations in the process to ease the burden on the Council.

It was also suggested that consideration should be given to the feasibility of transferring some of the Trusts which had been identified in the report back into the community.   

Thereafter, the Committee otherwise NOTED the implications of the changes and the actions being taken to mitigate the financial implications.

15.  Scottish Government Consultation:  Local Authority Accounts Regulations
Co-chomhairle Riaghaltas na h-Alba: Riaghladh Chunntasan Ùghdarrais Ionadail

There had been circulated Report No. AS-31-13 (841kb pdf) dated 16 September 2013 by the Director of Finance which sought agreement of the draft response to the Scottish Government Consultation on Local Authority Accounts Regulations.

In this regard, the draft response had been attached as Appendix 1 to the report.

During a summary of the report, it was confirmed that the consultation paper set out a range of proposed changes to the statutory arrangements for Local Authority Accounts and Audits, covering financial management and internal control, published accounts and audit and the content of remuneration reports.

As such, the main issues for consideration related to the Statutory Requirement for Internal Audit, Signing and Consideration of Audited Accounts and the Statutory Requirement for an Audit Committee and specific details of each had been highlighted within the report.   

During discussion, reference was made to the Schedule in regard to the Content of Remuneration Reports and specifically Question 26 which sought to establish whether the Council agreed that the cash equivalent transfer value of both Officers’ and Members’ pensions should be disclosed. Contrary to the proposed response within the report (which stated that Members’ pensions represented immaterial amounts and the cost to produce would outweigh the value of publishing), it was suggested that an amended response should be included to recommend that Officers’ and Members’ pensions should be the subject of separate questions and therefore should be considered separately.      

Thereafter, the Committee AGREED the draft response to the Scottish Government Consultation – subject to the amended response to Question 26 as detailed.

16.  External Audit Report    
Aithisgean Sgrùdaidh bhon Taobh A-muigh

There had been circulated Report No. AS-32-13 (911kb pdf) from the Council’s External Auditors (Audit Scotland) which summarised the following external audit report which had been issued since the last meeting:-

• ISA 260/Report to those charged with governance on the 2012/13 Audit.  

During a summary of the report, which set out the matters arising from the audit of the financial statements for 21012/13 which required to be reported under ISA 260, it was confirmed that subject to the satisfactory conclusion of any outstanding matters and receipt of a revised set of financial statements for final review, it was anticipated that an unqualified Auditor’s Report would be issued. As such, the proposed report had been attached as Appendix A to the report and there were no anticipated modifications.

In this regard, significant findings from the audit had been detailed in the report and included issues in relation to Bank Reconciliation, Police Requisitions, Grants to Third Parties, Business Rates Incentive Scheme, Retention of Pension Liabilities for High Life Highland Staff, Equal Pay Compensation Costs and Job Evaluation Provision.

Finally, and in relation to Outstanding Matters, it was advised that the Auditor was still awaiting sight of a sample of title deed documents for assets held by the Common Good Funds and it was AGREED that this would be followed up by Officers as soon as possible.   

The Committee otherwise NOTED the terms of the report as circulated.

The meeting ended at 12.05 pm.