Minutes of Meeting of the Audit and Scrutiny Committee held in the Council Chamber, Council Headquarters, Glenurquhart Road, Inverness on Tuesday, 29 November 2011 at 2.00pm.
Present:
Mr D Fallows, Mr D Mackay, Ms M Smith , Ms A MacLean, Mr P Cairns, Mr B Clark, Mr H Wood, Mr R Pedersen, Mr K MacLeod, Mr J Ford, Mr L Fraser, Mr T Prag
Non-Members also present:
Dr D Alston
Officials in Attendance:
Mr N Rose, Head of Internal Audit and Risk Management
Mr D Robertson, Head of Accounting
Mr G Robson, Head of Environment and Development
Mr A Yates, Acting Head of Environmental Health
Mr S MacNaughton, Head of Transport and Infrastructure
Mr G Fyfe, Public Relations Manager
Mr M Watters, Senior Web Development and Freedom of Information Officer
Ms S McKandie, Exchequer Manager (Policy and Development)
Ms K Lackie, Business Manager
Miss D Sutherland, Principal Auditor
Miss J MacLennan, Democratic Services Manager
Miss C Maragh, Administrative Assistant
An asterisk in the margin denotes a recommendation to the Council.
All decisions with no marking in the margin are delegated to Committee.
Mr D Fallows in the Chair
1. Apologies for Absence
Apologies for absence were intimated on behalf of Mr D Bremner, Mr J Rosie, Mrs J Urquhart, Mr R Coghill, Miss J Campbell, Mr R Greene, Dr A Sinclair, Mr A Rhind, Mr J Gray and Mr G Rimell.
2. Declarations of Interest
There were no declarations of interest.
3. Internal Audit Reviews and Progress Report
There had been circulated Report No. AS-21-11 (351kb pdf) dated 21November 2011 by the Head of Internal Audit and Risk Management 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 – Grant Income (Follow Up)
The objectives of the review had been to ensure that the recommendations made in the previous audit report had been implemented as agreed with management, namely the Guidance Note attached to the Financial Regulations on grant claims to be re-drafted to provide direction on maintaining a Grant Register within Services, the content requirements of the Register to be implemented and Finance Service approval received in relation to all grant claims submitted.
In terms of the main findings, it was confirmed that until Grant Income Registers had been established across all Services, there was no cohesive grant monitoring system in place. As a result, there was a risk that grants could be omitted, deadlines for grant claims missed or not all available grants claimed which could result in the failure to maximise grant income within the Council.
One further recommendation had been made at Priority Grade 2 which had now been fully addressed.
Corporate – Equality Impact Screening and Assessments
The objectives of the review had been to ensure that the Council was complying with the public sector duties under the Equality Act 2010 and was able to demonstrate how it gave due regard to the general duty of eliminating unlawful conduct, advancing equality of opportunity and fostering good relations across relevant protected characteristics and also that equalities implications were being considered in all Committee reports.
In terms of the main findings, it was confirmed that overall all of the audit objectives had been partially achieved and there had been significant progress made by the Council over the last few years in that an Equal Pay Statement and a draft Single Equalities Scheme or Plan were in place, as well as a requirement to screen budget proposals for equality implications. This had enabled the Council to follow the majority of best practice guidance and comply with the general duty defined within the Act. However, equality impact screening and assessment procedures had not been applied in all cases and more needed to be done to ensure compliance with the specific duties of the Act which were expected to be introduced in early 2012. It had therefore been suggested that mandatory training should be provided to all Heads of Service, Service Managers and report authors.
In all, 5 recommendations had been made – 4 of which were at Priority Grade 2 and 1 at Priority Grade 3. These had been accepted by management and were due to be implemented by 30 November 2012 with the exception of a rolling corporate training programme which would commence in April 2012.
Planning and Development – Vacant and Derelict Fund
The objectives of the review had been to ensure that there were appropriate policies and procedures in place to confirm that the Vacant Derelict Land Fund grant was being administered properly and that the Council complied with the Scottish Government’s grant terms and conditions. Also, the audit had sought to confirm that there were appropriate controls in place to ensure that all projects had been properly costed and approved prior to commencing and in terms of governing the payment of grants and that these were accounted for properly and in terms of adherence to Contract Standing Orders.
In terms of the main findings, and with the exception of a £216,027 underspend, it was confirmed that the grant had been fully spent by 31 March 2011 and the Council had written to the Scottish Government and obtained Ministerial approval for the 2011/12 Delivery Plan and to carry over the underspend.
In all, 3 recommendations had been made – 2 at Priority Grade 2 and 1 at Priority Grade 3 – all of which had been accepted by management and would be addressed with any new Vacant and Derelict Fund projects going forward and taken on board for any future grants.
TEC Services – Car Park Collection
The objectives of the review had been to ensure that all ticket machine income was collected, recorded, banked and monitored car parking fines were issued in accordance with a single Council wide procedure with adequate steps being taken to recover unpaid balances and cancellations/write-offs were properly authorised. In this regard, the audit had concentrated on car park income generated in Inverness and Fort William as this accounted for 96% of the total income received by the Council.
In terms of the main findings, a key issue had been the lack of consistency between the two operational areas and the absence of a corporate approach which had led to different working procedures. Existing arrangements in the collection, counting and banking of car park income in each area had differed significantly which might not be an issue if it could be demonstrated that each was cost effective to the particular area concerned. There had also been inconsistencies in regard to the recording, cancellation and recovery of fines between the two areas which had led to a marked difference in the number of fines cancelled and the collection rate for paid fines.
In all, 8 recommendations had been made – 1 at Priority Grade 1, 3 at Priority Grade 2 and 4 at Priority Grade 3. One action had already been completed and the remainder were due to be implemented by 31 May 2012.
Finance Service – Non Domestic Rates – Billing and Collection
The objectives of the review had been to ensure that there were adequate controls in place governing the operation of the Non Domestic Rates Billing and Collection system, that the process was carried out in an accurate and timely manner and accorded with relevant legislation, there were adequate controls in place to ensure that data relevant to Non Domestic Rates was accurately recorded and maintained in a timely manner, income was completely and accurately recorded and there were adequate systems in place to maximise the collection of Non Domestic Rates and effective use was made of all possible payment methods.
In terms of the main findings, the vast majority of billing and collection processes involved in the operation of the Non Domestic Rates had been found to operate efficiently and effectively and it had been recognised that there were a significant volume of transactions involved in the management of the function. A number of issues had been found with regard to the incorrect application of rates relief granted, particularly in respect of the application of more than one type of mandatory relief and the lack of documentation to support the review of ongoing relief claims.
In all, a total of 4 recommendations had been made – 2 at Priority Grade 2 and 2 at Priority Grade 3 – all of which had been accepted by management and were due to be implemented by 31 July 2012.
Finance Service – Housing Benefit and Council Tax Benefit
The objectives of the review had been to ensure that benefits were awarded to valid applicants only, claims were accurately assessed and benefit calculated in accordance with the relevant Regulations and Department of Works and Pensions (DWP) rates and benefit awards were correctly recorded in the Benefits, Housing Rents and Council Tax systems and the financial ledger.
In terms of the main findings, the assessment and calculation of benefits had been found in the majority of cases reviewed to be in line with the requirements and procedures of the DWP, particularly the Verification Standards, with claims only being provided to valid applicants. Also, improvements recommended in the previous audit report with regard to the process for the uprating of benefits had been satisfactorily implemented. However, only two of the three agreed management actions in response to the recommendations made in the previous audit report had been fully implemented and the third recommendation had only been partially fulfilled. Therefore, the previous audit concern that there was no single Officer responsible for the overview of all reconciliations to ensure that the benefit related systems agreed remained. However, although some unexplained variances had occurred in the individual component reconciliations, there had not been considered to be material.
In all, a total of 2 recommendations had been made – at medium priority Grade – which when fully implemented would further strengthen the controls in place within the Benefits system.
It was therefore the Audit Opinion that Substantial Assurance could be given that whilst there was a generally sound system, there were areas of weakness which put some of the system objectives at risk and/or there was evidence that the level of non compliance with some of the controls might put some of the system objectives at risk.
Planning and Development – LEADER Programme 2010/11
The objectives of the review had been to ensure that the obligations in the Service Level Agreement had been adhered to, the projects funded by the LEADER project complied with Highland Council and Scottish Government procedures and all grant claim expenditure had been incurred in terms of the conditions of the grant and the agreed actions arising from the previous audit report had been satisfactorily implemented by management.
In terms of the main findings, it had been concluded that the overall process did have appropriate controls in place. In addition, the Highland LEADER Programme was resolving the issues highlighted by the Scottish Government in their regular visits and the matters raised in previous internal audits and had shown an openness in highlighting problems with two of its projects, namely Halladale Community Hall and Lochinver Mission. These projects had been discussed with the Scottish Government and it was believed that both procurement processes were competitive whilst not completely fulfilling all the LEADER rules.
In addition, the file check which had been carried out had ensured that any problems with file completeness had been resolved although some of the outstanding issues from previous audit reports had not been addressed.
In total, 3 recommendations had been made – 2 at Medium Grade and 1 at Low Grade – and the Audit Opinion had confirmed that Substantial Assurance could be given in that, whilst there was generally a sound system in place, there were areas of weakness which put some of the system objectives at risk and/or there was evidence that the level of non compliance with some of the controls might put some of the system objectives at risk.
Finance Service/Chief Executive’s Office – BACS Payments
The objectives of the review had been to ensure that the Bankers Automated Clearing System (BACS) processing took place in a controlled environment, application controls were reliable and processing complied with BACS rules and guidance and the Council’s IS security policies and Financial Regulations.
In terms of the main findings, it had been found that BACS was heavily utilised as an electronic payment method for the Council’s bulk debit and credit payments and areas of good practice had been found within areas of the three main objectives which had been reviewed. The BACS system had been designed with layers of security controls to reduce the risk of one single point of failure and, as the audit objectives had only been partially achieved, the conclusion had been that improvement was required. In this regard, it was considered that although the controls in place were operating effectively, more were needed and there also needed to be more formalisation of BACS services carried out by the Council’s ICT partner on the Council’s behalf.
It had also been recommended that Council Officers should have more direct access to the BACS Payment Services Website for scrutiny of processes, monitoring, receipt of email alerts and service user account detail.
In total, twelve recommendations had been made – of which six had classified at Priority Grade 2 and six at Priority Grade 3 – and these were all due to be completed by April 2012.
The Committee otherwise NOTED the current work of the Internal Audit Section as detailed in the report and the final reports issued since the date of the last meeting.
4. Revisions to the Council’s Anti-Fraud and Anti-Corruption Policy
There had been circulated Report No. AS-22-11 (44kb pdf) dated 6 October 2011 by the Head of Internal Audit and Risk Management which provided a copy of the revised Anti-Fraud and Anti-Corruption Policy which had been updated to reflect the requirements of the Bribery Act 2010.
During a summary of the report, it was confirmed that at the last meeting on 22 September, Members had been asked to note the key issues arising from the Bribery Act 2010, the implications for the Highland Council and the various actions being taken to mitigate the risk of bribery. One of these actions had been the review of five Council policies to ensure that they contained the correct messages regarding the Council’s zero tolerance towards bribery and the consequences to staff, Members and others associated with the Council and a target date of March 2012 had been set for the completion of this action.
In this regard, it was advised that the first of these policies – the Council’s Anti-Fraud and Anti-Corruption Policy – had now been reviewed and a copy had been attached as Appendix 1 to the report.
It had not been necessary to significantly revise this Policy but more explicit references to bribery and corruption had been made and a new insertion had been made to refer to the framework which would ensure that there were adequate arrangements in place to prevent the bribery of Council staff and Members.
The Committee AGREED the revised Anti-Fraud and Anti-Corruption Policies as circulated.
5. Risk Management Update
There had been circulated Report No. AS-23-11 (100kb pdf) dated 21 November 2011 by the Director of Finance which provided an update on progress in reviewing and managing the Corporate and Cross Cutting Risks (CCCR).
During a summary of the report, it was confirmed that a total of 12 risks were currently above the acceptable tolerance line and required to be managed. In addition, a total of 12 risks were below the tolerance line and required no action at the present time. New risks included CCC 41 (High Life Highland), CCC 42 (Succession Planning) and CCC 43 (Local Government Election 2012).
In this regard, it was advised that the Corporate and Cross Cutting Risks were managed through the development of action plans and were fed into overall Service Plans and monitored as part of the Quarterly Performance Reviews. A revision of the Risk Management Strategy had now been completed and progress on its implementation would be reported in October 2012.
In addition, the annual review would be carried out in February 2012 and a report provided on the outcome of this process at the Committee meeting in March 2012.
The Committee NOTED the terms of the report as circulated.
6. Freedom of Information Assessment and Action Plan
It was confirmed that on 28 and 29 June 2011, the Scottish Information Commissioner had conducted an assessment of the Council’s handling of information requests in relation to compliance with the Freedom of Information (Scotland) Act 2002 (FOISA), the Environmental Information (Scotland) Regulations 2004 (EIRS) and the Codes of Practice.
In this connection, there had been circulated Report No. AS-24-11 (1191kb pdf) dated 17 November 2011 by the Chief Executive which provided details of the Executive Summary and the recommendations of the Assessment Report and the agreed Plan of Action which were now being implemented.
During a summary of the report, it was confirmed that, in terms of the areas identified for development, a key feature had been the establishment of a cross-Service Working Group to share best practice with the aim of improving response rates. This Working Group would meet monthly under the chairmanship of the Joint Acting Head of Legal Services until the Action Plan was delivered and a critical outcome would be the introduction of a measure that allowed Service Freedom of Information Co-ordinators to more effectively monitor the progress of responses through a management reporting mechanism.
In this regard, improvements would include adherence to statutory timeframes for responding to requests for information and review, current procedures and practices being reviewed to ensure that each Service area was using the same approach to handing requests for information to ensure consistency, the provision of training and a review of the arrangements which the Council currently had in place.
During discussion, and specifically in relation to Equalities Implications, it was stressed that it was important to ensure that Freedom of Information processes were easily accessible for all. It was also important to ensure that these processes were used appropriately and that members of the public were made aware that routine requests for information could be answered by the Council without the need to refer to Freedom of Information procedures.
The Committee NOTED:-
i. that the Scottish Information Commissioner had recognised the
Council’s commitment to complying with the FOISA and EIRS
regulations;
ii. the Executive Summary and recommendations of the Commissioner’s
Assessment Report; and
iii. that the Council was implementing the Action Plan as detailed.
7. Food Standards Agency Audit – August 2011
There had been circulated Report No. AS-25-11 (149kb pdf) dated 17 November 2011 by the Director of Transport, Environmental and Community Services which advised of the findings of the Food Standards Agency (FSA) focused audit of the Council’s Environmental Health Section which had been carried out in August 2011.
During a summary of the report, it was confirmed that the audit had focused on businesses which had been approved to deal in foodstuffs of animal origin under EC Regulation 853/2004 and there were currently 66 of these establishments in the Highland area as follows – Dairy Products (10), Fish and Shellfish (50) and Meat and Minced Meat (6). The audit had been carried out over three days and had consisted of reviews of approved establishment files, on-site inspection of 2 establishments accompanied by the Officers responsible for the last inspection, reviews of Highland Council’s food safety policies and procedures and also reviews of Officers’ training records.
In general, the FSA had found that Highland Council was implementing an effective, risk based approach to premises inspection and that Officers were taking a graduated approach to enforcement and actively worked with businesses to achieve compliance with food law. From the on-site visits, they had been satisfied the inspections were detailed, thorough and had adequately assessed structure, hygiene and HACCP requirements. Officers had also been found to have a good understanding of the specialist processes used at the businesses.
In summary, the report had specifically identified the system for managing and checking the content of the Approved Establishment files as an area of good practice. Two areas identified as requiring action had been the use of a specific form for each type of establishment and the need for quality based internal audits.
The Committee NOTED the Food Standards Agency Audit report and the Action Plan as detailed in the report.
8. Audit Scotland National Reports
There had been circulated Report No. AS-26-11 (30kb pdf) dated 21 November 2011 by the Head of Internal Audit and Risk Management which provided details of the National Report issued by Audit Scotland entitled “Arms Length External Organisations – Are You Getting It Right?” and the action taken within the Council to address the report findings.
During a summary of the report, it was confirmed that, at the Council meeting on 27 October 2011, the key findings and points for action arising from the Audit Scotland report had been noted, together with the action which had been taken following Internal and External Audit reports on the governance of Caithness Heat and Power.
It had also been noted that Internal Audit would undertake a review of the governance arrangements of all Council Arms Length External Organisations and report on this to the Audit & Scrutiny Committee.
The Committee NOTED the action being taken by the Council to address Audit Scotland’s National Report as detailed.
9. Highland Council Pension Fund – Review of Internal Controls 2010/11
There had been circulated Report No. AS-27-11 (757kb pdf) dated 15 November 2011 prepared by the Council’s External Auditors (Audit Scotland) which provided details of the review of internal controls undertaken at the Highland Council Pension Fund.
It was confirmed that, until 2009/10, the Highland Council Pension Fund financial statements had been included within the Council’s Accounts. However, an amendment to the Local Government Pension Scheme (Administration) (Scotland) Regulations 2008 had required the administering authority to publish a separate pension fund annual report from 2010/11 and consequently auditors were required to provide a separate audit opinion on the financial statements included within the annual report.
As required by ISA 260, the report therefore set out the relevant matters arising from the audit of the Highland Council Pension Fund financial statements for 2010/11.
The Committee NOTED the terms of the report as circulated.
10. Accounts Commission – Statutory Report: Aberdeenshire Council Performance Audit of Housing and Council Tax Benefit
There had been circulated Report No. AS-28-11 (46kb pdf) dated 2 November 2011 by the Head of Internal Audit and Risk Management which informed Members of the Statutory Report prepared by the Controller of Audit (Audit Scotland) on the performance of Aberdeenshire Council’s benefits service and the subsequent findings of the Accounts Commission. The report also referred to the Highland Council’s position regarding this activity.
During a summary of the report, it was confirmed that Audit Scotland’s report summary had shown that two risk assessments had been undertaken in September 2008 and October 2010 with the latter identifying that Aberdeenshire Council had a number of areas of good performance relating to customer service and that it had also improved its accuracy and benefit fraud sanction performance. However, the Council had not fully implemented all of the agreed actions from the 2008 report, including improving the speed of processing new claims, holding service performance to account through open scrutiny and challenge at Member level and demonstrating good service management and understanding, particularly in regard to business planning and intervention.
Further, the Council had not prepared an improvement plan to address the risks identified in the 2010 report in accordance with the normal timeframe. It had however been acknowledged that improvement actions had been introduced between October 2010 and June 2011 in regard to the compilation of a revised business plan and performance reporting measures, improvement in the speed of processing new claims and introduction of a plan to review its intervention activities.
In this regard, details of the Accounts Commission’s response to the Audit Scotland report had been detailed in the report.
In terms of the Highland Council, Audit Scotland’s risk assessment report had been reported to the Audit & Scrutiny Committee on 2 October 2008 when it had been confirmed that the Council demonstrated an awareness of what constituted an effective, efficient and secure benefits service and had much in place to support local and national objectives. Some areas for improvement had been identified at that time and these had been set out in an Action Plan. In this regard, Audit Scotland had undertaken follow up work in May 2010 and had recognised the improvements made since the 2008 report and in particular the improvement in the time taken to process claims.
The main risk identified in the 2010 review had been in relation to the recovery of benefit overpayments and the way in which those over payments were being recorded. In this regard, Audit Scotland’s annual report on the 2010/11 audit, dated October 2011, had been provided as a separate agenda item and made reference to the earlier work on housing benefit inspections from which it had been concluded that the Council had taken steps to improve its procedures with the result that the overpayment rate was improving.
The Committee NOTED the Statutory Report by the Controller of Audit on Aberdeenshire Council together with the Accounts Commission’s response.
11. Annual Report on Complaints to the Ombudsman
There had been circulated Report No. AS-29-11 (41kb pdf) dated 22 November 2011 by the Assistant Chief Executive which set out the number and types of complaint against the Council which had been referred to the Office of the Scottish Public Sector Ombudsman (SPSO) in the preceding year and the subsequent judgement in the cases where the SPSO had concluded his investigation.
During a summary of the report, it was confirmed that, since the statistics for 2009/10 had been reported, the SPSO had changed the way in which his office determined and reported complaints outcomes and all cases which had been considered by the Ombudsman, whether they resulted in a formal investigation or not, were now reported publicly. This meant that it was not possible to carry out a detailed like for like comparison between the figures for 2009/10 and 2010/11 as the categories used by the Ombudsman had changed, as had the way in which cases were determined and the data reported.
It was possible however to carry out a high level comparison of data by comparing volumes of cases considered and this regard it was confirmed that in 2010/11 the SPSO had received 49 complaints against the Highland Council compared with 83 in 2009/10. In this regard, a reduction in the number of cases suggested that more customers were satisfied with the way in which the Council has resolved their complaints as compared to previous years. Of these 49 cases, 4 had been upheld - 2 of the cases being in the form of ‘Decision Letters’ and the remaining 2 cases following formal investigations.
The Committee NOTED the terms of the report as circulated.
The meeting ended at 3.15 pm.