Minutes of Meeting of the Audit and Standards Committee held in the Council Chamber, Council Headquarters, Glenurquhart Road, Inverness on Wednesday, 21 March 2007 at 2. 15pm.
Mr D W Briggs
Mr M Macmillan
Mr I MacDonald
Mr R J Lyon
Mr F D S Black
Mr W Clark
Officials in Attendance:
Mr A Geddes, Director of Finance
Mr G Munro, Head of Internal Audit and Risk Management
Mr B Williams, Head of Corporate Finance
Mr J Clarke, Head of Property
Mr N Rose, Principal Auditor, Internal Audit
Miss J MacLennan, Principal Administrator, Corporate Services
Also in attendance:
Ms F Kordiak, Audit Scotland
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 and Mr L Fraser.
2. Minutes of Meeting – 14 February 2007
There had been circulated for information the approved Minutes of Meeting held on Wednesday, 14 February 2007 - which were NOTED.
3. Osprey House
Notwithstanding the advice from Officers that this item should be considered in private in terms of Paragraph 6 of Part 1 of Schedule 7A of the Act, the Committee agreed that it should be discussed in public as the second item of business at the meeting.
There had been circulated Report No. AS/7/07 dated 14 March 2007 by the Head of Internal Audit and Risk Management which contained the findings from a recently completed audit review in respect of Osprey House, Alness.
During a detailed summary of the report, it was confirmed that the audit had been requested by the Chairman following a report which had been submitted to the Resources Committee in November 2006 recommending that the Council should purchase Osprey House, Alness. Although approval had been given for a bid to be made on the Council’s behalf of up to £1m at the subsequent auction, confusion surrounding the telephone bidding process on the day had resulted in no bid being made on the Council’s behalf and the property had been sold to a third party.
During discussion, a number of Members expressed disappointment at events both before and during the auction process and it was stressed that it was imperative that lessons were learned from the matter for the future, particularly in relation to the auction/telephone bid procedures. It was also stressed that the Council had a legal responsibility to look after its own interests and should not rely on other outside bodies/organisations to accommodate its interests.
Following clarification of the annual loan charges estimates, it was suggested that the wider issue of strategic use/sale of properties should be examined as part of the ‘Efficient Government’ agenda and consideration should be given as to how the purchase of properties, such as Osprey House, fitted with the Council’s Asset Management Strategy.
Thereafter, the Committee AGREED that consideration should be given to ensuring that:-
(i) there was provision in Contract Standing Orders in the event of any future purchases by such means as had been identified in the report;
(ii) there was a formal documented options appraisal process for such appraisals which considered the whole life costs of the options, quantifying all future risks and benefits. In addition, the value of the property was to be considered;
(iii) there was a clear process to determine which Services should be consulted during the preparation of any options appraisal;
(iv) Committee reports should be formally signed off by the Services involved/consulted during the report preparation;
(v) an appropriate loan repayment period for properties was determined; and
(vi) there was a review of the methodology adopted in presenting Committee reports where several Services had input.
4. Internal Audit Reviews – Period – 18 January to 9 March 2007
There had been circulated Report No. AS-3-07dated 12 March 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:-
Creditors – confirmed that an analysis of all invoices processed between May and July 2006 had revealed that only 15% of the invoices had been processed using the PECOS system. A further check on the October data had also found that PECOS orders had dropped to 13% out of a total population of 11, 444 invoices. In addition, 43 users had been found to have used Housing Benefit suppliers when raising an invoice for payment and an Oracle report had found that, of a sample 60 invoices, 3 invoices had appeared to be duplicated. As a result, five recommendations had been made to improve control and efficiency – one at Grade 1, two at Grade 2 and two at Grade 3.
Housing Benefit Claims Administration – Ross and Cromarty – confirmed that a small amount of administration procedures had not been carried out in a few cases but overall the services provided had been of a high standard. All of the review had been examined and only one area had been found to have scope for improvement. As a result, one recommendation had been made at Grade 3 and was due to be implemented by the end of July 2007.
Grant Income – confirmed that assurances could not be given that all grant income available was being claimed as there were problems identifying who was responsible for submitting claims and there was no centrally held database available which detailed all the grants receivable. As a result, one recommendation had been made at Grade 1 which was to be addressed by 30 June 2007.
Telephony Computer Audit – confirmed that four of the expected controls were in place with only one area which required improvement, namely that there were a substantial amount of calls to premium rate numbers with the vast majority being not for Council business purposes and therefore representing a waste of funds. As a result, it was confirmed that calls to premium rate numbers would now cease.
Verification of Performance Indicators 2005/2006 – confirmed that the review had identified weaknesses in the procedures for collecting data and checking of figures within Services prior to submission of data to the Finance Service in a number of the indicators examined. As a result, twelve recommendations had been made – all at Grade 3 and all of which had been accepted by management with action to address the issues due to be completed by December 2007.
The Committee otherwise NOTED the terms of the reports as circulated.
5. Audit Risk Analysis and Plan 2006/2007
There had been circulated Report No. AS-4-07 dated 7 March 200 7 by the Director of Finance which contained a report from the Council’s External Auditors (Audit Scotland) which informed Members as to the risks which they perceived as being relevant to the Council and the basis on which they planned their programme of work for the year 2006/2007.
It was confirmed that some of the key challenges facing Scottish local government had been outlined together with a summary of the assessment of the key risks facing Highland Council over the next three years and the planned audit outputs for the year, taking account of the management action and internal audit work which it was intended to take assurances from and specific responsibilities. The risk analysis would be updated annually and would cover a rolling three year period.
The Committee NOTED the terms of the report as circulated.
6. Tactical Audit Plan 2007/08
There had been circulated Report No. AS-5-07 dated 5 March 200 7 by the Head of Internal Audit and Risk Management which contained details of the annual review which had been undertaken during January and February 2007 in order to revise Audit Plans for the financial year 2007/08.
It was confirmed that the revised Tactical Plan was the result of needs assessment undertaken, with the support of Service Directors, in consultation with Audit Scotland, and included consideration of the current Risk Assessment methodology adopted by the Council.
The Committee APPROVED the Tactical Audit Plan for 2007/08 as circulated.
7. Devolved School Management – Property Repairs
There had been circulated Report No. AS-6-07 dated 12 March 2007 by the Head of Internal Audit and Risk Management which referred to an audit review which had been presented to a previous meeting and showed the action taken to date to address the concerns raised.
It was confirmed that 3 out of the previous 13 recommendations had now been implemented with 10 recommendations still outstanding. The Education, Culture and Sport and Property & Architectural Services had taken the view that, in order to address the problems which had been highlighted, the appropriate course of action was to instruct schools that all works relating to the fabric of the building should be routed through Property & Architectural Services and Head Teachers had received regular written reminders in this regard. In addition, a recent report to the Education, Culture and Sport Committee had sought approval for changes to the Council’s DSM scheme in accordance with the national guidelines issued by the Scottish Executive.
The Committee NOTED the progress which had been made in implementing the agreed actions as detailed in the report.
The meeting ended at 3.20pm.