Agendas, reports and minutes

Minutes of Meeting of the Audit and Scrutiny Committee held in the Council Chamber, Council Headquarters, Glenurquhart Road, Inverness on Thursday 19 September 2019 at 10.30am.

Present:
Mr G Adam, Mr R Balfour, Mrs J Barclay, Mr B Boyd, Mr R Bremner, Mrs M Davidson, Mr D Louden, Mr G MacKenzie, Mr S Mackie , Mr D Macpherson, Mr P Saggers, Mr B Thompson                                

Non-Members also present:
Mr K Gowans, Mr B Lobban, Mrs B McAllister

Officials in Attendance:
Mrs D Manson, Chief Executive
Ms K Lackie, Executive Chief Officer – Performance and Governance
Mr E Foster, Head of Corporate Finance & Commercialism
Miss D Sutherland, Corporate Audit Manager
Ms E Johnston, Corporate Audit & Performance Manager
Mr S Carr, Corporate Performance Manager
Mr J Campbell, Senior Auditor 
Mr J Shepherd, ICT Operations Manager
Ms L Dunn, Principal Administrator
Ms F MacBain, Committee Administrator

Also in Attendance:
Mr J Boyd, Senior Manager, Grant Thornton
Ms J Brown, Engagement Leader, Grant Thornton

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

Mr G MacKenzie  in the Chair

Preliminaries

The Chair referred to the previous year’s survey of Audit & Scrutiny Members which had an initial low response rate but had proved valuable in improving the effectiveness of the Committee. The Committee NOTED the next annual survey would be issued shortly and Members were urged to complete it, with the results to be reported at the November 2019 meeting.

1. Apologies for Absence
Leisgeulan

An apology for absence was intimated on behalf of Mrs M Paterson.

2. Declarations of Interest
Foillseachaidhean Com-pàirt

There were no Declarations of Interest.

3. Recess Powers
Cumhachdan Fosaidh

The Committee NOTED that the Recess Powers granted by the Council at its meeting on 27 June 2019 had not been exercised in relation to the business of this Committee.

4. External Audit Reports     
Aithisgean Sgrùdaidh bhon Taobh A-muigh

There had been circulated the external audit reports prepared by the Council’s External Auditors (Grant Thornton) issued since the last Audit and Scrutiny Committee:-

a)  Annual Report 2018/19 to Elected Members and the Controller of Audit 
b)  Letter of Representation 

Representatives from Grant Thornton presented the reports and key messages for the Committee.

During discussion, Members considered the following issues:

• Information was requested on areas in the Local Government Benchmarking Framework where improvement was required. These had been extracted from Audit Scotland reports and while they were not the only means of measuring performance, information could be shared with the Committee. It was clarified that benchmarking data had been reported to the Council;
• It was suggested the level of confidence in the Council’s ability to meet its saving targets this year was not adequately reflected in the report, with reference to the redesign of services that was underway;
• Assurance was sought, with reference to the actuarial revaluation of pensions detailed in the report under ‘IAS 19 Defined Benefit Pension Scheme’, on the likelihood of further unexpected changes. In response the complexity of pension issues was highlighted, and reference was made to tribunal and discrimination cases that could impact, however controls were in place with the Council’s actuarial service to monitor and anticipate issues as much as possible;
• Rebasing of the budget was suggested as a means of breaking the pattern of failing to achieve a balanced budget, with overspends being identified earlier in the year. Reference was made to the benefits of a more commercial approach to financial accounting that provided a clearer vision of the current financial situation to facilitate more immediate reactions to challenges. It was explained that the current format of financial monitoring was similar to other Local Authorities and was considered appropriate;
• It would be helpful if future reports contained information on trends and progress over five years;
• The monthly budget meetings were proving beneficial;
• The new structure and governance arrangements for the Committee were welcomed;
• Involvement in the City Region Deal Monitoring Group was welcomed;
• Concern was expressed at the low level of Council reserves, noting that 2% of the total Council budget was recommended as an appropriate level. There were planned actions in place to deliver savings and build up reserves in due course;
• The importance of effective ownership of actions resulting from Audits was emphasised to ensure they were realised;
• Attention was drawn to issues with the European Social Fund which had been frozen due to Scottish Government auditing difficulties. There had been a request from COSLA to the Scottish Government to underwrite funds but this had not yet been agreed; and
• The Chair asked that the reporting of the council tax uplift in the section of the report, ‘Financial planning 2019/20,’ be clarified in the final report.

The Committee: 

i.    NOTED the terms of the report;
ii.   APPROVED the Letter of Representation;
iii.  AGREED further information on the figures in the bottom quartile of the Local Government Benchmarking Framework would be shared with Members;
iv.   AGREED future reports should contain information on trends and progress over five years; and
v.    AGREED under ‘Financial planning 2019/20’ information on the council tax uplift would be clarified in the final report.

5. Audited Accounts 2018/19     
Cunntasan Sgrùdaichte 2018/19

There had been circulated Report No AS/14/19 dated 11 September 2019 by the Executive Chief Officer Resources & Finance.

The Committee APPROVED the audited accounts for signature.

6. Internal Audit Reviews and Progress Report – 01/06/19 – 06/09/19    
Ath-bhreithneachaidhean In-sgrùdaidh agus Aithisg Adhartais

There had been circulated Report No. AS/15/19 dated 10 September 2019 by the Corporate Audit Manager 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 as follows:-

Corporate Resources – Review of Financial Controls (Full Assurance) 

During discussion, Members considered the following areas:

• Attention was drawn to the importance of Internal Audit reports and their usefulness in identifying potential cost savings, which could offset the cost of investigations. Discussions were ongoing with the Budget Leader in relation to the requirement for increased staffing in Audit, although it was clarified that any decision to increase staffing lay with the Council;
• In relation to procurement it was welcomed that there was officer presence in Highland and hoped there would be better understanding in future of the benefits of an effective procurement service. A summary was provided of plans in place to improve shared procurement services with Aberdeenshire Council and Aberdeen City Council;
• The importance of the Internal Audit Plan taking account of the various major changes and reviews being undertaken was emphasised, eg the Trades Review and the review of arrangements for the award of works to sub-contractors. A workshop for Members was proposed and the Chair suggested that this was premature given the Committee’s recent redesign, but should be considered once the Committee’s work had been more thoroughly embedded;
• In relation to the use of Airbnb or similar sub-letting schemes by Council house tenants, this was a breach of tenancy agreement and a zero tolerance approach would be taken, with an expectation that Housing Associations take a similar stringent approach. The message should be made clear to the public and the use of the Council’s fraud hotline or website to report any suspected abuses was promoted;
• Attention was drawn to the importance of workforce planning and the impact on service delivery of recruitment challenges;
• Suggestion was made that any budget decisions that would impact on the work of the Audit and Scrutiny Committee should be considered by the Committee and to ensure scrutiny structures remained appropriate to any redesign of services;
• Clarification was sought and received that the outcomes of Internal Audit investigation were not reported to Area Committees and remained with the remit of the Audit & Scrutiny Committee; and
• Assurance was sought and received that the splitting of orders to sub-contractors to avoid maximum contract limits in relation to procurement and tendering was not permitted and was an appropriate area for investigation if occurring.

Corporate Resources – Review of Information Management Arrangements (Limited Assurance)

During discussion, Members considered the following areas:

• The report and survey return rates were disappointing, with only 69% of staff having received an induction and only 19% having completed the mandatory e-learning course. Information was sought on how to improve this and catch up with staff who had missed them;
• Slippage on following up on actions from Internal Audit reports was also disappointing and it was proposed the Chair and Vice Chair discuss this further outwith the meeting, with a further suggestion to include the relevant Executive Chief Officer in any discussions of high priority actions not addressed within a specific timeframe;
• A Member from the Audit & Scrutiny Committee should be appointed to the Information Management Governance Board and anyone interested should speak to the Chair in the first instance;
• The proposed 8-9 months to have Senior Information Risk Owners in place seemed too long and consideration should be given to an interim solution;
• Information was sought and provided on what functions were being undertaken by Information Management Lead Officers;
• It was hoped the recommendations and actions from the Zurich Information Governance Health Check report would be delivered before June 2020, and they should be viewed as an asset rather than an expense or an optional extra;
• The designation of the development of an Information Management Plan, which was fundamental to achieving the objectives, as medium rather than high priority was queried;
• It was suggested that the Council was undertaking the necessary actions, and that given GDPR legislation had only been introduced 18 months previously, the progress to date was as expected, with solutions being developed; and
• Assurance was provided to Members that immediate action was being taken, including the appointment of an Executive Chief Officer, and the matter was a key area of priority in the transition programme. A summary was provided of the work being undertaken, with emphasis on the highest risk areas.

City Region Deal 

A summary was provided of recent progress following the meeting in August 2019 as follows:

• The cross party group was focussing on the programme as a whole, having identified strengths and weaknesses with the Senior Responsible Officer, and was scrutinising projects and programme management;
• The proposed reporting structure was summarised and included reports to the Group, to the Council and to the Scottish Government. Reports for Quarter One had included a programme overview, financial overviews, profiles and risks;
• The positive knock on effects were pointed out including the attraction of additional investment and the economic benefits of retaining young people in the region;
• The next meeting was scheduled for 24 October 2019; and
• The City Regions Deal should be a standing item on the Audit and Scrutiny Committee’s agenda.

The Committee:-
 
i.    NOTED the Final Reports referred to in Section 4.1 of the report; 
i.    NOTED the current work of the Internal Audit Section outlined at section 5 of the report and details of progress against the plan at Appendix 1; 
ii.   AGREED the deletions from the planned audit work as outlined at section 6.4 of the report;
iii.  AGREED a Member from the Audit & Scrutiny Committee be appointed to the Information Management Governance Board; and
iv.   AGREED the Inverness City Region Deal be a standing item on future Audit and Scrutiny Committee agendas.

7. Six-Monthly Review of Corporate Risks     
Ath-sgrùdadh Sia-Mìosail de Chunnartan Corporra

There had been circulated Report No. AS/16/19 dated 9 September 2019 by the Corporate Audit & Performance Manager. 

During discussion, Members considered the following:

• The increased flexibility of the Risk Register was welcomed and it was hoped this would improve its use and scrutiny. In future it was hoped there would be more in depth discussion of red-ragged items and this should be discussed by the Chair and Vice Chair outwith the meeting;
• In relation to red-ragged items, Lead Officers should be invited to attend Committee meetings to update on progress;
• Attention was drawn not only to the risk ragging but to the ranking of the risks; and
• Highlighted risks included rural development funding, post-Brexit market access, climate change, which required updating, and the residual waste project.

The Committee:- 

i.    NOTED the Corporate Risk Register provided at Appendix 1 and the risk profile at Appendix 2 to the report;  
ii.   NOTED that six monthly reviews of the Corporate Risk Register would continue to be reported each March and September to the Audit and Scrutiny Committee; and
iii.  AGREED in relation to red-ragged items, Lead Officers be invited to attend Committee meetings to update on progress.

8. Scottish Public Service Ombudsman (SPSO) Cases Upheld 
Cùisean Ombudsman Sheirbheisean Poblach

There had been circulated Report No. AS/17/19 dated 9 September 2019 by the Executive Chief Officer Performance & Governance. 

The Committee considered the outcomes of the SPSO cases and NOTED that the SPSO made no recommendations in relation to this matter.

Members NOTED there would be a private meeting between the Audit & Scrutiny Committee and Grant Thornton, the Council’s External Auditors, at the end of the meeting.

The meeting ended at 12.35pm.