• Agenda

Minutes of Meeting of the Audit and Standards Committee held in Committee Room 3, Council Headquarters, Glenurquhart Road, Inverness on Thursday, 5^th October 2006 at 10.30 a.m

 

 

Non-Members also present:

 

Mr G M Smith                                                           
Mr A Milne

 

Officials in attendance:

Mr A Dodds, Director of Corporate Services

Mr A Geddes, Director of Finance

Mr N Rose, Principal Auditor, Internal Audit

Mrs M Grigor, Finance Manager

Miss J MacLennan, Principal Administrator, Corporate Services

 

Also in attendance:

Mr R Clark, Audit Scotland

Mrs F Kordiak, Audit Scotland

 

Mr D Briggs in the Chair

 

Business

 

1.      Apology for Absence

 

An apology for absence was intimated on behalf of Mr W Fernie.

 

2.      Minutes of Meeting – 24 August 2006

 

There had been circulated for information the approved Minutes of Meeting of the Committee held on 24 August 2006.  - which were NOTED.

 

3.      Annual Report On Ombudsman Complaints – 2005/06

 

The Chairman - with the consent of the Committee - agreed that this item should be considered at this point in the meeting. 

 

There had been circulated Report No. AS-18-06dated 26 September 2006 by the Chief Executive which advised of the number, nature and outcome of Ombudsman complaints against the Highland Council in 2005/06 and commented on the content of the Scottish Public Services Ombudsman’s Annual Report for 2005/06.

 

It was confirmed that, in regard to the overall pattern of Ombudsman complaints in 2005/06, there had been 73 enquiries and complaints against the Council. Of these, one complaint had been settled by local agreement and one had been partially upheld after investigation. Twenty-nine had been enquiries only, twenty-one had been premature, one had been out with jurisdiction and seven had been discontinued or disposed of without settlement. The remaining fourteen complaints were still to be dealt with by the Ombudsman.

 

The levels of contact by the public with the Ombudsman on matters relating to the Council had remained fairly constant between 2004/05 and 2005/06 in comparison with a considerable increase in enquiries and complaints at a Scottish level. Notwithstanding this, however, the Council was 5^th top in the number of complaints received in Scotland and, when adjusted for population, the Ombudsman had indicated that the Highlands and Islands Scottish Parliamentary region had the highest number of complaints per 10,000 people which was considered to be a reflection of the number of complaints received concerning planning issues.

 

During discussion, it was confirmed that the Ombudsman could accept complaints from individual members of the public (but not Community Councils) and undertake checks on procedures followed. It was not, however, within the remit of the Ombudsman to change discretionary decisions.               

 

The Committee NOTED the terms of the report – and the Annual Report - as circulated.

 

4.   Internal Audit Reviews – Period – 12 August to 22 September 2006

 

There had been circulated Report No. AS-15-06 dated 22 September 2006 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:-

 

Housing – Repairs and Maintenance – confirmed that the main findings had been that a suitable system of authorisation cover for orders over £5000 did not exist in the Lochaber Area. Also, in regard to the Inverness Housing Service, recharges had not been carried out since the end of 2005 and temporary staff had been employed for periods of time which were contrary to Personnel policy.

 

During discussion, and in response to a query as to the arrangements which would be made for temporary staff should housing stock transfer proceed, it was confirmed that the staff in question were agency staff who had been employed on a temporary basis to undertake work in relation to the housing stock. This represented a money saving exercise for the Council and provided a degree of flexibility where work was required to be undertaken immediately and it had proved difficult to recruit on the open market but it was not considered that this type of arrangement would be expanded in future.            

 

In all, seven recommendations had been made – three at Grade 2 and four at Grade 3. It was advised that the imminent Housing Stock Transfer vote would delay progress on the recommendations in relation to the reviews on Schedule of Rates and Temporary Staff. The remaining recommendations were expected to be completed within six months – with the exception of the recommendation in relation to recorded Highland wide assets (properties) where the Housing Service had decided not to carry out the recommendation but to instead accept the risk.       

 

Pensions – confirmed that the only finding had been that there was currently no review process to verify that all members of the scheme who were receiving payments were still alive. It had therefore been recommended that Pension Section staff should be given access to the death certificates issued by the Registrars of Births, Deaths & Marriages to Council Tax staff after first establishing that this did not contravene Data Protection regulations. 

 

In all, one recommendation had been made at Grade 3 which had been accepted by management and was due to be implemented within one month of the issue of the final report.   

 

Implementation of Oracle Financials (General Audit) – confirmed that the main findings had been that, although the coding structure within the financial ledger had been reviewed, there was still scope for a more detailed review of cost centres. Also, the system for expenditure approval by e-mail had not yet been implemented; there was no defined list of standard management reports to be produced on a regular basis from Oracle projects and there was no independent monitoring of data at transaction level. Despite these outstanding actions it was reported that the majority of key controls within the various modules were working satisfactorily and that eight areas of good practice had been identified.

 

During discussion, concern was expressed in regard to further changes to the system in a move towards a new Council and the introduction of multi-member wards when it was considered that budgetary controls in particular would require to be especially robust. In response, it was confirmed that it was not envisaged that there would be a substantial change to current workloads and whilst the changing of codes, etc would open up a degree of risk, this would be managed as part of the process and the situation monitored closely during the transition period.  

 

In all, nine recommendations had been made – three at Grade 1, two at Grade 2 and four at Grade 3 – nearly all of which had already been identified by the Project Team and were currently under development.      

 

TECS – Stores System (Computer Audit) – confirmed that the main findings had been that the Stores System did not meet the Council’s security requirements for logical access or audit trails, data input controls were insufficient and significant errors had been found in the small data sample which had been checked. However, it was reported that a general audit review was now in progress which would look in more detail at the controls over the purchase, issue and control of stock and this would be reported to the Committee in due course.

 

During discussion, a number of Members expressed concern at the findings of the review and suggested that this was an area which appeared to be especially open to fraud. There was general disappointment that the situation had not improved over time and it was considered essential that work was undertaken as a matter of urgency to deal with the issues which had been raised and that the concerns of the Committee were brought to the attention of the Senior Management Team. 

 

In all, nine recommendations had been made – three at Grade 2 and six at Grade 3 – all of which had been accepted by management and due to be completed by the end of June 2007. It had been recognised however that the implementation of a new system was a major undertaking and numerous factors could affect the timescale.  

 

It was therefore AGREED that the concerns of the Committee should be conveyed to the Senior Management Team in regard to the conclusions drawn from the review, namely that the Stores System was old and could not be made to comply with the Council’s Information Systems Security Framework, staff members required improved guidance on security and control procedures when using the Stores System and the security and checking of stores items must be improved.

 

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

 

 

5.  External Audit Reviews

 

There had been circulated Report No. AS-16-06 from the Council’s External Auditors (Audit Scotland) as follows –

 

Audit Risk Analysis and Plan 2005/06 - confirmed that, based on analysis, the Plan set out the risks facing the Council and planned work in 2005/06, including tracking management assurances which had been given in relation to the management of a number of the Council’s key risks, follow-up of a number of recommendations made in previous years (including those relating to financial strategy), review of progress in implementing the Best Value Improvement Plan and Efficient Government Initiative, review of implementation of the Council’s upgraded housing management system, assessment of the reliability of statutory performance information, audit of the financial statements and provision of an opinion on whether they presented fairly the financial position of the Council and its income and expenditure for the year, review of the Corporate Assurance Statement to assess whether the disclosures were consistent with knowledge of the Council and provision of an opinion on a number of grant claims and returns.

 

In terms of Reporting Arrangements, it was confirmed that matters arising from the audit would be reported on a timely basis during the year and would include action plans. Draft reports would be issued to Directors and Senior Officers to confirm factual accuracy with responses expected within four weeks of submission. A copy of final agreed reports would be sent to the Chief Executive, Director of Finance, other relevant Senior Officers, Internal Audit and Audit Scotland’s Performance Audit Group.

 

The agreed fee for the Audit of the Council in 2005/06 was £472,800 comprising a local audit fee of £296,000 and a fixed charge of £176,800 which covered all of the work and outputs (including grant claims) in the Plan and the Financial Statements Strategy, a contribution towards the costs of national performance studies and statutory reports by the Accounts Commission, attendance at Audit and Standards Committee and other key meetings, access to advice and information on relevant audit issues, access to workshops/seminars on topical issues and all travel and subsistence costs.

 

The Committee NOTED the position.               

 

There had also been circulated Letter dated 29 September 2006 from Audit Scotland in relation to the Audit of Highland Council 2005/06 and specifically matters arising from the audit of financial statements.

 

In this regard, it was confirmed that the financial statements presented fairly, in accordance with applicable laws and regulations and the 2005 SORP, the financial position of the Council and its group as at 31 March 2006 and its income and expenditure for the year then ended and that the financial statements had been properly prepared in accordance with the Local Government (Scotland) Act 1973. In this regard, a clean audit certificate had been issued.

 

Four issues had been brought to the Council’s attention in regard to Lender Option Borrower Option Loans (LOBOs), provision made for settlement of claims in relation to equal pay legislation, additional payments made to the Roads and Community Works, Building Cleaning and Catering significant trading operations (STOs) in compensation for additional costs accrued by these STOs to settle equal pay claims and matters relating to a review of operating leases undertaken by Consultants employed by the Council. In response, it was confirmed that all issues were currently being addressed by the Council.        

 

The Committee NOTED the position.          

 

6.  Annual Best Value Review of Internal Audit

 

There had been circulated Report No. AS-17-06 dated 18 September 2006 by the Head of Internal Audit and Risk Management which detailed the annual review process, documented achievements against the Best Value Action Plan for 2005/06, provided evidence of improved performance and included a revised Action Plan for 2006/07.

 

During a summary of the report, it was confirmed that there had been some progress with Internal Audit during the year 2005-06 with a further 15 improvement actions being implemented – bringing the total since the original review to 49. In view of the progress made – and the placing of the Highland Council in the top four Sections within Scottish Local Authorities – it was envisaged that it would become more and more difficult to identify improvements which could have a significant effect on performance unless there were major changes in the best practice employed by the profession. Best Value exercises would continue to be revisited on an annual basis and a revised Action Plan produced for each financial year and this process would dovetail with the annual assessment of Service Improvement Priorities within the Finance Service Plan.

 

During discussion, concern was expressed in regard to the GAIN Global Benchmarking Comparison within the report which included a performance index based on a number of factors, including staffing, management, auditee satisfaction, reporting timescales and implementation of recommendations. It was noted that the Highland Council performance index had reduced from a high of 164 (in 2003) to a current low of 152 due to two factors – firstly, there had been delays in issuing reports due to a poor response rate from some Services and secondly the average number of years of staff experience had reduced due to staff changes.  

 

Concern was also expressed in relation to the chart within the report which referred to responses to Client Questionnaires and highlighted instances where more than one negative response had been obtained by the Internal Audit team. Specifically, it was suggested that there was a need to investigate situations where Managers indicated that they had been aware of weaknesses within systems but had not taken any action to rectify problems, particularly where these had been significant. It was also considered that members of staff should be encouraged to report any perceived weaknesses at an early date to Line Managers. It was however recognised that follow-up reports were undertaken by the Internal Audit team to ensure that agreed management action had been implemented.                  

 

It was therefore AGREED that the concerns of the Committee should be conveyed to the Senior Management Team, specifically in relation to the lack of promptness from Services in responding to the Internal Audit Team which had had an adverse effect on performance figures.

 

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

 

7.  Standards Commission – Annual Report

 

There had been circulated Letter dated 30 August 2006 from the Convener of the Standards Commission for Scotland which provided details of the Annual Report for the period from 1 April 2005 to 31 March 2006. Copies of the Annual Report had been circulated separately.

 

It was confirmed that the Standards Commission had taken the opportunity to use the Annual Report as part of their ongoing commitment to raise awareness and understanding of the ethical standards framework and had included information about the framework itself and the work of the Commission and Chief Investigating Officer, as well as summaries of some cases of interest and Hearings held during the year.

 

During discussion, reference was made to the Councillors’ Code of Conduct and, specifically, Sections 2 and 3 whereby it was suggested that the Council should advise the Commission of concerns in relation to the references to ‘respect’ and recommend that, if possible, modifications should be made to this wording at a time of any change to the legislation to introduce the words “treat with” before the verb “respect” within the Code.        

 

It was therefore AGREED that a letter should be forwarded to the Standards Commission to advise as follows –

 

“The Council wishes the Commission to include – in any review of the legislation (pertaining to the Councillors’ Code of Conduct) on which the Council might be consulted – introduction of the words “treat with” in front of the verb “respect” in Section 2 (Key Principles) and Section 3 (General Conduct).”

 

The Committee otherwise NOTED the terms of the letter – and the Annual Report – as circulated.   

 

The meeting ended at 12.10pm.