Minutes of Meeting of the Audit and Scrutiny Committee held in the Council Chamber, Council Headquarters, Glenurquhart Road, Inverness on Thursday, 20 August 2009 at 10.30 a.m.
Present:
Mrs J Urquhart, Mr D Bremner, Mr D Mackay, Mr J Rosie, Mr R Greene, Mr A Rhind, Mr P Cairns, Mr E Hunter, Mr B Clark, Mr H Wood, Mr D Kerr, Mr J Gray, Mr I Brown, Mr K MacLeod, Mrs G Sinclair, Mr L Fraser, Mr T Prag, Mr G Rimell
Non-Members also present:
Mr G Farlow, Mr G M Smith, Mr B Fernie, Dr D Alston
Officials in Attendance:
Mr A Geddes, Depute Chief Executive
Ms M Morris, Assistant Chief Executive
Mr D Robertson, Head of Accounting
Mr N Rose, Head of Internal Audit and Risk Management
Mr A Gould, Head of Procurement
Miss D Sutherland, Principal Auditor
Miss J MacLennan, Democratic Services Manager
Mrs R Daly, Committee Administrator
Also in attendance:
Ms K Jenks, Senior Auditor, Audit Scotland
Ms G Menger, Senior Auditor (ICT), Audit Scotland
Mrs J Urquhart in the Chair
Business
An asterisk in the margin denotes a recommendation to the Council. All decisions with no marking in the margin are delegated to the Committee.
1. Apologies for Absence
Apologies for absence were intimated on behalf of Dr A Sinclair, Mr A Torrance, Mrs A MacLean, Mr J Ford, Mr A S Park and Dr M E M Foxley.
2. Recess Powers
It was NOTED that the Recess Powers granted by the Council at its meeting on 25 June 2009 had not been exercised in relation to the business of the Audit and Scrutiny Committee.
3. Internal Audit Progress Report
There had been circulated Report No. as-13-09 dated 6 August 2009 by the Head of Internal Audit and Risk Management which provided details of work in progress and other information relevant to the operation of the Internal Audit Section.
During a summary of the report, it was confirmed that there had been no final reports issued during the period due to a high level of work in progress; unplanned work; work on behalf of the Joint Boards and staffing vacancies. Internal Audit had been involved in a range of other work, including Caithness Heat and Power; irregularity/fraud investigations; complaints/queries; and computer audit. It was confirmed that a meeting with the Director of Audit Services (Local Government), Audit Scotland would be held imminently to discuss how the work on Caithness Heat and Power should be taken forward.
In relation to a formal complaint received from a contractor alleging unfair allocation of contract work, it was confirmed that this had been investigated. While concerns relating to formal tendering were unfounded, it had been agreed to put in place a system to select contractors from the Council’s maintained list and the Director of Housing and Property had undertaken to introduce guidance on this with effect from September 2009.
In terms of staffing, interviews for three vacant auditor posts had been held resulting in one appointment being made. Since two vacancies still remained, the services of Recruitment Agencies had been sought, while still utilising the Council’s advertising process through its internet site. Interviews were scheduled for 1st and 2nd September 2009 after which it would be clear whether or not the option to appoint a trainee would be necessary.
It was also confirmed that an update report would be submitted to the next meeting of the Committee assessing progress against the Audit Plan and the impact of unplanned work.
During discussion, Members welcomed the fact that work could commence on scrutiny topics in the near future on the basis that the Council’s Efficiency Agenda and Looked After Children had previously been selected.
After discussion, the Committee NOTED the terms of the report as circulated.
The Committee also NOTED that an update report would be submitted to the next meeting of the Committee assessing progress against the Audit Plan and the impact of unplanned work.
4. International Standard on Auditing 260
There had been circulated Report No. as-14-09 dated 23 July 2009 by the Depute Chief Executive which sought delegated powers to deal with the requirements of the International Standard on Auditing 260 (ISA 260).
During a summary of the report, it was confirmed that ISA 260 placed a responsibility on Auditors to communicate with “those charged with the governance in an audit of financial statements”. Since the Committee meeting schedule prevented Audit Scotland from communicating with the Committee in advance of signing the audit certificate, it was proposed that authority be delegated to the Depute Chief Executive, in consultation with the Chair and Vice Chair of the Committee, to deal with the requirements of ISA 260.
It was also confirmed that Members would have the opportunity to consider any issues arising from the ISA 260 report when Audit Scotland presented their Report to Members at the conclusion of the 2008/09 Audit.
The Committee AGREED to delegate powers to the Depute Chief Executive, in consultation with the Chair and Vice Chair of the Committee, to deal with the requirements of the International Standard on Auditing 260.
5. Compliance with the McClelland Report (Follow Up)
There had been circulated Report No. as-15-09 dated 10 August 2009 by the Head of Internal Audit and Risk Management which provided an update on progress in complying with the McClelland Report within Highland Council.
During a summary of the report, it was confirmed that the McClelland Report had proposed significant changes to the procurement landscape in Scotland and had made a number of recommendations, including that Internal Audit should carry out work on the procurement governance framework for all organisations in the public sector. Scottish Local Authorities Chief Internal Auditors Group (SLACAIG) had produced a procurement audit toolkit to assess critical success factors in the procurement process based on the McClelland report recommendations and best practice.
Between March 2008 and April 2009, the Council’s overall compliance with the McClelland report had increased from 72% to 83% which demonstrated considerable improvement. Set against a national compliance target of 67%, the Council’s increased compliance rate of 83% therefore demonstrated significant progress in procurement governance. Progress would continue to be monitored annually with results reported to the Committee.
In response to questions, it was also confirmed that the Council’s commitment to Fair Trade status met the requirements of procurement practice.
After discussion, the Committee NOTED the terms of the report as circulated.
6. Action Tracking Report – 1 September 2008 to 30 July 2009
There had been circulated Report No. as-16-09 dated 11 August 2009 by the Head of Internal Audit and Risk Management which provided assurance that the agreed actions arising from Internal Audit reports had been satisfactorily implemented by management for the period 1 September 2008 to 30 July 2009.
During a summary of the report, it was confirmed that, from September 2008 to July 2009, 52 audit recommendations had been made of which 51 had been implemented. The one outstanding recommendation related to the need for a policy for the VISA purchase card scheme and this would be addressed shortly as part of the review of Financial Regulations.
In response to a request for information, it was confirmed that budget details in relation to the Joint Committee on Children and Young People would be made available when governance arrangements had been agreed between the Education, Culture and Sport and Social Work Services. Information was also requested on the financial contribution made by NHS Highland.
After discussion, the Committee NOTED the terms of the report as circulated.
It was also NOTED that budget details would be made available when governance arrangements had been agreed for the Joint Committee on Children and Young People, together with information on the financial contribution made by NHS Highland.
7. Revision of the Council’s Anti-Fraud and Anti-Corruption Policy
There had been circulated Report No. as-17-09 dated 11 August 2009 by the Head of Internal Audit and Risk Management which provided information in relation to the revised Anti-Fraud and Anti-Corruption Policy which had replaced the previous Strategy for the Prevention and Detection of Fraud and Corruption.
During a summary of the report, it was confirmed that the revised policy had been entitled “Anti-fraud and Anti-corruption” so as to stress the commitment to an anti-fraud culture within the Council. The revised document did not differ significantly from its predecessor, however, it had been streamlined and detail dealing with the investigation of fraud was now provided within the Internal Audit Operational Manual.
During discussion, Members stressed the need to communicate the revised policy to all staff. Whilst it was accepted that Service Directors were responsible for ensuring that employees were aware of the policy and that sound financial systems were in place, it was hoped that more attention could be given to encouraging a ‘culture’ of awareness.
It was also confirmed that the Policy would be placed on the Council’s website and that it would be important to refer to it in the Council’s Financial Regulations which were due to be updated imminently and would be accompanied by associated training. In response, Members were assured that the Council was conscious of its obligations and that considerable work had been carried out to ensure staff awareness.
It was also suggested that there might be merit in offering refresher training for Members, particularly in relation to the Code of Conduct for Councillors.
After discussion, the Committee AGREED the revised Anti-Fraud and Anti-Corruption Policy.
8. External Audit Reviews
There had been circulated Report No. as-18-09 dated 5 August 2009 by the Depute Chief Executive which which contained reports from the Council’s External Auditors (Audit Scotland) as follows –
a) Review of Internal Audit 2008/09
During a summary of the report, it was confirmed that Audit Scotland had concluded that Internal Audit within the Council met professional standards but had identified a total of five risk areas. The areas for improvement included the need to make a more realistic provision for unplanned work, to manage time budgets and staff performance effectively and for the Internal Audit staffing establishment to be kept fully resourced.
b) Oracle FMS ICT Review
During a summary of the report it was confirmed that Audit Scotland had found that generally the system was well managed and, in particular, that system documentation for scheduled processes, and the loading and processing of files from other systems feeding into the FMS, were well prepared, checklists were available for staff dealing with system management tasks and user set-up procedures were effectively controlled.
However, a number of areas had been proposed where improvements could be made and a total of eight risk areas had been identified. The main area for concern was the potential risk of errors and fraud by staff using both Oracle and Pecos systems and Audit Scotland had recommended that the Council put alternative measures in place to ensure good governance of the two financial systems.
After discussion, the Committee NOTED the terms of the reports as circulated.
9. Asset Management in Local Government: Audit Scotland Report
There had been circulated Report No. as-19-09 dated 7 August 2009 by the Head of Internal Audit and Risk Management which confirmed that a report had recently been published by Audit Scotland evaluating the extent to which Councils managed their property assets to ensure effective service provision and value for money.
On 10 June 2009, the Resources Committee had considered a report from the Director of Housing & Property which analysed the key messages for the Highland Council and identified how these were being aligned with the initiatives being taken forward by the Council’s Asset Management Team.
Members commented that asset management had been a high priority for the Council and that the key message from the report had reinforced the aim of the Housing and Property Service to reduce management costs through sustainability measures, rationalising assets, particularly offices, and pursuing joint working.
During discussion, Members expressed their appreciation for the way in which the challenges facing the Director of Housing and Property and his team were being dealt with, particularly as there had been no increase in resources. It was confirmed that, in terms of progressing the work with the Asset Register, it was intended that discussions be held with Members of each Ward about the properties in their areas which would allow them to examine the work in progress.
The Committee NOTED the key messages for the Council drawn from the Audit Scotland report and the alignment between these messages and the initiatives being taken forward by the Asset Management Team.
10. The Highland Council Pension Fund – Monitoring of Retirements
There had been circulated Report No. as-20-09 dated 3 August 2009 by the Depute Chief Executive which provided information in relation to retirements from the Highland Council Pension Fund for the year ended 31 March 2009.
The report contained a summary of retirements together with comparisons from previous years.
The Committee NOTED the terms of the report as circulated.
11. Standards Commission: Investigation into Complaints
There had been circulated Report No. as-21-09 dated 5 August 2009 by the Assistant Chief Executive which provided information on complaints received by the Standards Commission during the period from May 2008 to date in relation to alleged breaches of the Councillors’ Code of Conduct by Members of Highland Council and the outcome of the investigations in each case.
The Committee NOTED that, in respect of the five complaints against Highland Council Members, the Standards Commission had made no findings of breach of the Code of Conduct.
The meeting ended at 11.20 a.m.