Minutes of Meeting of the Audit and Standards Committee held in Committee Room 1, Council Headquarters, Glenurquhart Road, Inverness on Wednesday, 14 February 2007 at 2.30pm.
Mr D W Briggs
Mr M Macmillan
Mr R J Lyon
Mr F D S Black
Mr W Clark
Non-Members also present:
Mrs J N Home
Mrs H Carmichael
Mrs M Davidson
Officials in attendance:
Mr G Munro, Head of Internal Audit and Risk Management
Mr D Lamont, Head of Exchequer, Finance Service
Mr D Moreton, Senior Auditor
Miss J MacLennan, Principal Administrator, Corporate Services
Also in attendance:
Ms K Jenks, Audit Scotland
Mr D Briggs in the Chair
1. Apologies for Absence
Apologies for absence were intimated on behalf of Mr W Fernie, Mr A MacKay, Mr I MacDonald and Mr L Fraser.
2. Minutes of Meeting – 30 November 2006
There had been circulated for information the approved Minutes of Meeting held on Thursday, 30 November 2006 - which were NOTED.
3. Internal Audit Reviews – Period – 11 November 2006 to 31 January 2007
There had been circulated Report No. as-01-07 dated 1 February 2007 by the Head of Internal Audit and Risk Management which summarised the final reports issued since the date of the last meeting – together with other information relevant to the operation of the Internal Audit Section – as follows:-
PECOS System – Computer Controls – confirmed that the main findings of the review had been that there were a number of areas where controls were as expected, including good password controls were in place, input was authorised and the system audit trail was good. A number of areas did require improvement, however, and included the need for an Access Control Policy to set the standard for access to the system and the fact that reporting facilities were currently limited. Overall, six recommendations had been made – two at Grade 2 and four at Grade 3 - and five had been accepted by management and had been completed by the end of December 2006. The exception had been the installation of a software update as it was not known when the supplier would make this available.
During discussion, it was confirmed that there would be a need to include business continuity planning within future contracts.
Landbank Fund – confirmed that the main findings of the review included reference to the written procedures currently in place which did not specifically state that the transfer of Housing Revenue Account (HRA) land to the Highland Housing Alliance needed to be approved by the appropriate Area Committee prior to approval by the Housing and Social Work Committee. Also, a substantial loan of £3.37m had been made to the Highland Housing Alliance to acquire and develop land without Committee approval and loan amounts approved by the Housing and Social Work Committee were not always in agreement with the actual loan. In addition, the Council Tax income transferred to the Landbank Fund could be overstated and it had been found that, in two of the five projects reviewed, loan amounts had only been supported by copy invoices and there was no reference to the original document having been seen. Overall, five recommendations had been made – two at Grade 2 and three at Grade 3 – all of which were due to be actioned immediately.
During discussion, it was confirmed that a List of Long Term Empty Properties in the Highland area could be made available to Members if required.
TEC Stores – confirmed that the main findings of the review had been that the annual stock checks were carried out in accordance with the Financial Regulations although independent input varied from spot checks on commodity items to none at all, the current Operational Procedures were out of date and there was no trend analysis undertaken of write-off/on’s to highlight problematic areas. The overall conclusion had been that procedures needed to be strengthened, particularly regarding the receipt and issue of stock and the recording of transactions on the stores system, adjustments to the stores system and stocktaking. As a result, seven recommendations had been made – two at Grade 2 and five at Grade 3 – all of which were due to be implemented within the following three months.
During discussion, it was confirmed that follow up reviews would be undertaken with exceptions being reported to future meetings.
Council Tax – Exemptions and Discounts – confirmed that the main findings had been that there were often no review dates entered against exemptions and discounts and reviews were not regularly undertaken. Accounts in receipt of a second home discount did not always have recent evidence on file that Council Tax was being paid on a main residence elsewhere and there was not always documentary evidence on file to support the exemption awarded. Whilst there was generally a note on the account notepad recording the findings of site visits to confirm a property’s entitlement to an ‘under repair’ exemption, the reports were not always retained on file by the Area Teams to provide documentary evidence of the entitlement. Overall, five recommendations had been made – one at Grade 2 and four at Grade 3 – all of which had now been implemented.
During discussion, it was confirmed that a 3 year rolling review process was in place and further reports would be made to future meetings if required.
Income - AXIS Receipting System – confirmed that the main findings of the review had been that there was currently no report available from the system to verify that all reverse transactions had been authorised by an independent supervisor and one of the Service Points was not currently holding financial information for the correct retention period. It was confirmed that four issues identified in the report had all been peripheral to the system but were an important part of the overall control environment. Overall, four recommendations had been made – one at Grade 1, one at Grade 2 and two at Grade 3.
Income Manual Receipting – confirmed that the main findings of the review had been that staff were not commonly aware of the availability of guidance notes and procedures on the Council intranet and did not generally hold a hard copy of this documentation in the office. From the sample of five establishments visited, four had not been updating the ledger immediately after the bank or post office lodgement had been completed as was stipulated in the Financial Regulations. In addition, one establishment had not been recording surpluses and deficits on income through separate codes in the ledger. Overall, four recommendations had been made – three at Grade 3 and one at Grade 2 – two of which had already been implemented with the remaining two due to be implemented by the end of February 2007.
The Committee otherwise NOTED the terms of the reports as circulated.
4. External Audit Reviews
There had been circulated Report as-02-07 dated 1 February 2007 by the Director of Finance which contained reports from the Council’s External Auditors (Audit Scotland) as follows –
Matters Arising from the Final Accounts Audit – confirmed that the report summarised the findings from the audit of the Highland Council’s annual accounts and that in general the final accounts working papers had been found to be of a high standard. The Building Maintenance Service had completed the summary analysis of debtors and creditors particularly well with good explanations provided for year on year variances and it was suggested that this example of good practice should be shared amongst the Service Finance Managers and their Accounting Teams to encourage further improvement in the preparation of the summary and analysis of debtors and creditors balances in 2006/07.
Business Continuity Planning Follow-Up – confirmed that, as part of the 2005/06 audit, progress had been followed up in regard to the implementation of eleven recommendations from the 2004/05 review of Business Continuity Planning at Highland Council. It was confirmed that two recommendations had been implemented, five were being addressed and four remained outstanding at the conclusion of the audit in September 2006. Action was being taken to address the outstanding recommendations and this had been reflected in the target dates for completion of agreed actions in the Follow Up Action Plan which would be considered as part of the 2006/07 audit.
During discussion, it was confirmed that high priority should be given to the preparation of a Disaster Recovery Strategy and Plan for ICT Services in line with the Council’s agreed business continuity plans and priorities.
The Committee otherwise NOTED the terms of the report as circulated.
5. Ethical Standards in Public Life: Councillors’ Code of Conduct
There had been circulated Letter dated 21 December 2006 from the Chief Investigating Officer, Ethical Standards in Public Life, which provided details of a complaint received in relation to an alleged breach of the Councillors’ Code of Conduct by a Member of Highland Council and of the outcome of the investigation into the complaint.
During general discussion, a number of Members commented on the problems which arose as a result of vexatious complaints and it was suggested that it would be helpful if clarification could be provided for all Members of the Council on the criteria used by the Standards Commission when complaints were received and specifically as to how the Commission determined whether a complaint should be investigated or classified as a ‘vexatious’ complaint and no further action taken.
The Committee otherwise NOTED the terms of the letter as circulated which confirmed that the complaint had not been upheld on this occasion and as a result no further action was to be taken.
The meeting ended at 3.25pm.