Agendas, reports and minutes

Audit and Scrutiny Committee

Date: Wednesday, 24 September 2014

Minutes: Read the Minutes

Minutes of Meeting of the Audit and Scrutiny Committee held in the Council Chamber, Council Headquarters, Glenurquhart Road, Inverness on Wednesday, 24 September 2014 at 10.30am.

Present:

Mrs M Davidson, Mr B Fernie, Dr D Alston, Mr D Bremner, Mrs C Caddick, Mrs H Carmichael , Mr A Christie, Mr B Clark, Dr I Cockburn, Mr A Duffy, Mr K Gowans, Mr A Henderson, Ms L MacDonald, Mr D Mackay, Mr G MacKenzie, Mr A MacKinnon, Mr T Prag (substitute), Mr J Rosie

Officials in Attendance:

Ms M Morris, Depute Chief Executive/Director of Corporate Development
Mr D Yule, Director of Finance
Mr N Rose, Head of Internal Audit and Risk Management
Ms V Nairn, Head of Digital Transformation
Miss D Sutherland, Audit and Risk Manager
Ms K Lackie, Business Manager
Mr K Fox, ICT Operations Manager
Ms L Johnstone, ICT Delivery Manager
Mr R Evans, Head of Roads and Transport
Mr S Duncan, Property Risk Management Officer
Mr T Murdison, Engineering Officer (Maintenance)
Miss J Maclennan, Principal Administrator
Miss C Maragh, Administrative Assistant
 
Also in attendance:

Mr S Boyle, Assistant Director, Audit Scotland
Ms M Bruce, Senior Audit Manager, Audit Scotland

An asterisk in the margin denotes a recommendation to the Council.  All decisions with no marking in the margin are delegated to Committee.

Mrs M Davidson in the Chair

1. Apologies for Absence
Leisgeulan

Apologies for absence were intimated on behalf of Mr R Balfour, Mr J Ford, Mr D Hendry, Mr B Murphy, Mr A Rhind, Mr G Rimell and Mr J Stone.

2. Declarations of Interest
Foillseachaidhean Com-pàirt
 

There were no declarations of interest.

3. Recess Powers
Cumhachdan Fosaidh

 
It was NOTED that the Recess Powers granted by the Council at its meeting on 26 June 2014 had not been exercised in relation to the business of the Audit and Scrutiny Committee.

4. Internal Audit Reviews and Progress Report                                        
Ath-bhreithneachaidhean In-sgrùdaidh agus Aithisg Adhartais

There had been circulated Report No. AS/16/14 dated 15 September 2014 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.

In regard to the operation of the Internal Audit Section, and during the period covered by the report, the Section had been involved in a variety of work which included Irregularity/Fraud Investigations, Grant Claims, Work for other Organisations, Boards and Committees, Advice, Assurance and Other Work and the Scrutiny Working Group. 

In terms of the Scrutiny Working Group, it was confirmed that the next topic for consideration by the Working Group would be around the Council’s performance in managing sickness absence and the scope of the review would be presented for approval to the next meeting on 20 November.

Information was also provided on staffing resources, vacancies, training and progress against the Audit Plan. In this latter regard, it was confirmed that one review – National Recruitment Portal - had been removed from the Audit Plan as a new system was being introduced which was unlikely to be in place until the end of the year. It was envisaged that the Audit Plan would be delivered and this would continue to be monitored through future quarterly reports.

In relation to the summary of progress against the programme plan, it was clarified that the narrative of the Chief Executive Office report - Inverness City Arts Group - was reviewing the governance of Inverness Old Town Arts and ensuring that the new corporate governance arrangements were in place.

At this point in the meeting, it was AGREED that the first report on the agenda – Care and Learning – Primary School Fund – should be DEFERRED on the basis that it would be submitted to a future meeting following the outcome of legal proceedings  

The final reports were then presented as follows:-  

(i)  Community Services/Corporate Development – Business Continuity Planning Arrangements (follow up)
     (Limited Assurance)

The objectives of the review had been to ensure that the management agreed actions had been implemented to ensure that the Council had an established and approved business continuity management policy and procedures which were regularly reviewed and met the requirements of the Civil Contingencies Act, that roles, responsibilities and accountabilities had been formally allocated, recorded and communicated and appropriate training provided, that a change management process was in place to identify and take into account the implications of any changes that occurred including training needs for new staff. In addition, a clearly defined and documented testing programme and post-exercise review process had been established. In this regard, policies and procedures had been established to ensure relevant information, data, documentation and IT facilities were held securely and readily accessible by authorised officers.

It was confirmed that, in terms of the main findings, the majority of the previous audit agreed actions had not been completed and this follow-up audit had the same opinion of Limited Assurance as the original audit.  In this regard, this follow-up had highlighted issues in action tracking by managers and the failure to communicate changes of target dates with Internal Audit. Consequently, Business Continuity Planning had been recognised as a risk within the Council and appeared on the Corporate Risk Register.

During discussion, Members raised the following issues:-

  • in relation to the design review, further information was requested as it was considered that the Service responses in terms of Business Continuity were still quite vulnerable;
  • in recognising the slow process, it was suggested that the Service Committees report back on how they were proposing to take forward their Business Continuity and that this should be incorporated in their relevant Service Plans;
  • due to concerns regarding repetitive follow-ups, it was queried as to when the planning arrangements were reviewed; and
  • clarification was sought relating to the timescale on the annual testing of the data centre. 

In all, there were four high and four medium grade recommendations which had been accepted by management – all the agreed actions would be completed by 30 April 2015.

The Committee also AGREED that, in relation to annual testing of the data centre, the Head of Digital Transformation should investigate the dates when testing was carried out and report back to the Chair and Vice-Chair and that Service Committees should report back on their own Continuity Planning

(ii)  Corporate Development - Corporate Governance Arrangements 2013/14
      (Substantial Assurance) 

The objectives of the review had been to ensure that the Council had adequate Corporate Governance arrangements in place, in particular that actions were allocated to appropriate officers, progress was monitored on a regular basis to ensure that actions were on target, there was evidence to show that the appropriate action had been taken and where actions were not on target appropriate remedial action was taken or these were carried forward to next year's Code.

In this regard, and as part of this audit, a sample of twelve actions which were due to be completed during the year had been selected from the Code for review including some actions carried forward from the previous year’s Code.

It was confirmed that, in terms of the main findings, good progress had been made in strengthening the Council’s Corporate Governance arrangements with the majority of actions either completed or on target to be delivered. These arrangements would be strengthened further when the remaining incomplete actions were achieved.

In all, one recommendation had been made which had been classified as medium priority. The recommendation had five agreed actions which were allocated to different officers within the Council and had various target dates – the final action was due to be implemented by 31 December 2014. 

(iii) Development and Infrastructure – Contractors’ Framework Agreement for Works up to £50,000 (follow up)
      (Reasonable Assurance)

The objectives of the review had been to ensure that the recommendations made in the previous report had been implemented and the following could be achieved - the process for establishing the Contractors' Framework Agreement for Construction Works up to £50,000 complied with the Council's Contract Standing Orders and procurement legislation, that the operation of the Contractors’ Framework Agreement for Construction Works up to £50,000 complied with the Council's Contract Standing Orders and procurement legislation, that the operation of the Contractors’ Framework Agreement was effectively monitored, that sample testing of contractors and works awarded under the new framework agreement since September 2012 was undertaken as part of this follow-up review. In addition, the scope of this audit had been expanded slightly following the receipt of an anonymous letter which had alleged that certain contactors were being favoured in the award of works. In this regard, the allegation had been investigated and had been included within the report as it directly linked to the operation of the framework agreement.

It was confirmed that, in terms of the main findings, not all recommendations from the previous audit had been implemented although the new framework was operating effectively with the vast majority of applicable jobs being awarded to contractors on the framework. It was further confirmed that some application documents had been lost and it was not possible to verify that applications which had been received by the deadline. However, these problems were the result of processes which were no longer followed and it was intended that, from September 2015, online forms would be used to receive framework applications.

During discussion, Members raised the following issues:- 

  • it was queried as to whether the Council had a system in place for potential staff involvement with local work; and
  • in recognising the importance of the recommendations, assurance was sought from the Service Director and the Chair of the Planning, Development and Infrastructure Committee that consideration had been given and the amended guidelines had been completed.

In all, the follow-up audit had found that the previous recommendations had either been addressed or were in the process of being addressed. Also, there had been a   further three recommendations (all of which were medium priority) and a new high grade recommendation had been made following investigation of the allegations made in the anonymous letters received.  All had been accepted by management, with agreed action due to be completed by 30 September 2015.

The Committee also AGREED that, subject to assurance in due course from the Chair of the Planning, Development and Infrastructure Committee and the Director of Development and Infrastructure, the necessary guidance regarding contractor selection had been completed

(iv)  Finance – Creditors Payments
      (Reasonable Assurance)

The objectives of the review had been to ensure that there was an adequate control framework over access to and operation of the Accounts Payable system, that expenditure was properly authorised and recorded in the Accounts Payable ledger in a consistent and timely manner and was complete, accurate and valid, that payments were made only to valid suppliers, were authorised and properly recorded in the Accounts Payable ledger, that outputs from the Accounts Payable ledger were complete, accurate and valid and were produced in a consistent and appropriate format in a timely manner and that data within the Accounts Payable system was protected against loss, corruption or system failure.

It was confirmed that, in terms of the main findings, the Accounts Payable system was operating adequately. All raised orders and invoices were authorised and transactions reviewed were supported by a proper invoice. In addition, it was reported that the Accounts Payable reconciliations, exception reports, BACS payment controls, system back-ups and user access controls were all operating satisfactorily.

During discussion, Members raised the following issues:- 

  • clarification was sought on the sample order process relating to transactions carried out in comparison to the payments and invoices raised and whether this was considered reasonable assurance;
  • in relation to the new electronic system, the implementation date was requested along with information as to whether there would be an initial audit benchmarking in place for the new system to ensure that it had been correctly implemented; and
  • clarification was sought on the length of time to activate/deactivate the bank accounts.

In all, six recommendations had been made – two which had been classified as high priority and four as medium priority – all of which were due to be implemented by 1 June 2015.

The Committee also AGREED, in terms of the activated bank accounts, that the Head of Internal Audit and Risk Management should investigate the process and report back to Councillor Allan Henderson as requested at the meeting.

(v)   Finance – Revenue Budgetary Control
      (Substantial Assurance)

The objectives of the review had been to ensure that the responsibilities of Members and Council Officers for the setting and control of budgets were properly defined, that budgets were set in accordance with the priorities set out in the Council's Programme, that revenue items were properly controlled by the effective periodic monitoring of financial out-turns against detailed budgets, that significant variances were promptly identified, reported and acted upon and that the system contributed to the Council's ability to demonstrate that resources were being used in an economical, effective and efficient way.

It was confirmed that, in terms of the main findings, there were sufficient arrangements for the control and reporting of revenue budgets. The report also highlighted improvements to the process, which included an amendment to Financial Regulations, improvements to the narrative of the Revenue Budget Monitoring Reports, clearer reporting of the remaining trading operation objective, examining the different options to achieve Best Value and more specific reporting of Best Value challenges to budgets.

In this regard, it was highlighted that the two Audit Scotland reports referred to in Section 3.5 of the report advised that the Council should go further in order to demonstrate Services were achieving Best Value. In addition, it reminded Councils that they had a statutory duty to provide Best Value as set out in the Local Government in Scotland Act 2003. It was explained that that the Executive Team Leader would action and review the performance management systems within the Council and the recommendations would be included in the Scrutiny Working Group report due to be submitted to the next meeting in November 2014  

In all, three medium recommendations had been made and one low grade recommendation – all of which had been accepted by management and were due to be completed by 30 September 2015.

(vi)   Finance – Housing Benefit Payments 2013/14
       (Substantial Assurance)

The objectives of the review had been to ensure that benefits were awarded to valid applicants only, claims were accurately assessed and benefit was calculated and classified in accordance with the relevant Regulations and Department for Work and Pensions (DWP) rates, that the system parameters in relation to Housing Benefits for 2014/15 had been correctly uprated in accordance with DWP HB Circular A24/2013 (Revised). In addition, that the agreed actions arising from the previous audit report on Housing Benefit and Council Tax Benefit 2012/13 (HK12/011) issued on 17 March 2014 were satisfactorily actioned by management.

It was confirmed that, in terms of the main findings, the Benefits team were faced with diverse and onerous challenges as a result of the need to make complex benefit determinations on a daily basis and deal with constantly evolving legislation. In this regard, case testing revealed that whilst all details were verified and evidence retained, input errors and an inconsistent calculation had led to three small underpayments of benefits and one where subsidy entitlement had been lost. However, the errors had been corrected with underpayments being paid and the subsidy correction to be reclaimed in 2014/15.

In all, three recommendations had been made – all which had been classified as medium priority and were due to be implemented by 31 August 2015.

(vii)  Finance – End User Computing Spreadsheet Controls
       (Substantial Assurance)

The objectives of the review had been to ensure that staff who designed, created and used spreadsheets were adequately trained and aware of good practice, that the Council was aware of its important spreadsheets, where they resided and who was responsible for them. In addition, that existing important spreadsheets were well designed and error-free.

It was confirmed that, in terms of the main findings, and although the good practice guidance needed to be updated, the most important control – that the reviewed spreadsheets were error free – had been achieved.

Thereafter, the Committee 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.

The Committee also NOTED the deletion of the audit of the National Recruitment Portal from the Audit Plan.

5. Compliance with Public Sector Internal Audit Standards – Action Plan   
Gèilleadh ri Inbhean In-sgrùdaidh na Seirbheis Poblaich – Plana-gnìomh

There had been circulated Report No. AS/17/14 dated 29 August 2014 by the Head of Internal Audit and Risk Management which referred to the completion of an action plan to demonstrate how the Internal Audit Section was proposing to comply with the requirements of the Public Sector Internal Audit Standards (PSIAS).

During a summary of the report, it was confirmed that, from 1 April 2013, new Public Sector Internal Audit Standards (the Standards) had come into effect which were developed by the Chartered Institute of Public Finance and Accountancy (CIPFA) and the Chartered Institute of Internal Auditors (CIIA). The Standards were intended to promote further improvement in the professionalism, quality and effectiveness of internal audit across the public sector. It was further reported that there was a new requirement that the Head of Internal Audit and Risk Management should include a statement on conformance with the Standards within his annual report.

In order to evaluate the effectiveness of Internal Audit performance, an assessment of compliance with the new standards had been presented to the Audit and Scrutiny Committee on 19 June 2014 and the results had shown 76% compliance, 14% partial compliance and 10% non-compliance.

In this regard, it was confirmed that an action plan had been compiled which showed that various actions, as outlined in the report, had been taken to date including Internal Audit Charter; Internal Quality Assessment; Engagement Planning; and Document Retention. In terms of the key actions scheduled for completion at the end of the financial year, it was highlighted that a further report would be provided to the Committee in March 2015 to assess the level of compliance to date and to identify the actions still to be progressed.

It was further emphasised that the current areas of partial or non-compliance did not impact on the ability to demonstrate compliance with the Standards in the key areas.

During discussion, it was commented that the improvement from 76% to 86% compliance reflected the excellent work being carried out.

Thereafter, the Committee NOTED:-

i.   the actions which had been identified to address the areas of partial compliance and non-compliance together with the respective target dates;
ii.  the actions taken since the previous meeting on 19 June 2014 which had led to the achievement of an 86% compliance rate;
iii.  that the current areas of partial compliance or non-compliance did not impact significantly on the ability to demonstrate overall compliance with the Standards;
iv.  that a further report would be presented to the meeting in March 2015 detailing the remaining actions required to achieve full compliance;

and AGREED:-

v.  the approach being taken and the timetable detailed in the Action Plan.

6. Revision of Internal Audit Charter         
Ath-sgrùdadh air Cairt In-sgrùdaidh

There had been circulated Report No. AS/18/14 dated 8 September 2014 by the Head of Internal Audit and Risk Management which referred to a review of the Internal Audit Charter in order to comply with the requirements of the Public Sector Internal Audit Standards (PSIAS).

It was reported that an Internal Audit Charter was in place which set out the purpose, authority and responsibility of Internal Audit within the Highland Council and that the PSIAS had replaced the previous CIPFA Code of Practice and had introduced additional requirements in respect of the Charter.

In this regard, it was confirmed that the revised Charter, as attached at Appendix 1 to the report, fully met the requirements of the PSIAS.

The Committee APPROVED the revised Internal Audit Charter as detailed.

7. Risk Management Update
Cunntas As Ùr mu Rianachd Cunnairt

There had been circulated Report No. AS/19/14 dated 12 September 2014 by the Head of Internal Audit and Risk Management which provided details of changes to the actions in place to address the Council’s corporate risks. In addition, details were provided of other risk management activities which had been recently undertaken.

During a summary of the report, it was confirmed that a review of the Council’s corporate risks had been undertaken and the results from this review reported to the Audit and Scrutiny Committee on 19 June 2014.

In terms of the review of the actions, it was confirmed that this resulted in actions being updated/amended against five of the corporate risks, as provided at Appendix 1 to the report, and details of the changes could be found in the Update section.  It was further highlighted that no changes had been made to the risks identified and the risk profile reported in June remained unchanged. 

Following discussion, specific thanks were conveyed to the Internal Audit staff for the considerable work carried out. 

Thereafter, the Committee NOTED the recent risk management activities and the next steps, both of which were intended to assist in the continuing improvement of risk management within the Council.

8. Inspection of Equipment in Schools – Internal Audit Report Update       
Sgrùdadh Uidheamachd ann an Sgoiltean – Fios Às Ùr mu Aithisg In - sgrùdaidh

There had been circulated Report No. AS/20/14 dated 12 September 2014 by the Director of Development and Infrastructure which informed Members of the objectives and findings of the Audit Report which had been presented to the Audit and Scrutiny Committee on 19 June 2014 and updated them on progress against the agreed action plan.

At this point, and based on the findings of the previous report, the Chair requested full assurance that the schools’ gym equipment was safe to use before proceeding with the arrangements of the new contract.

During a summary of the report, it was confirmed that the audit had examined the contractual management arrangements in respect of the Inspection and Testing of Plant, Equipment and Fixed Electrical Installations contract that was in place at that time. As a result of concerns regarding the overall performance of the contractor, gym equipment and fixed electrical installation inspections and testing were removed from the contract during the course of the audit review. 

In terms of the audit findings, the audit had found that these contracts had historically not been appropriately resourced, administered and scrutinised, with appropriate steps taken to resolve issues. 

In respect to defects identified, it was explained that work was being carried out in conjunction with the Care & Learning Service, Facilities Management team and Physical Education teachers to obtain a better understanding of the whole process with the contractor, in particularly, how this equipment was set aside and put forward for repair.

During discussion, Members raised the following comments:-

  • clarification was sought with regard to how the equipment identified with defects had been withdrawn; and
  • the completion of the target dates and monitoring arrangements thereafter were queried.

During further discussion, it was suggested that an assurance report be submitted to the next meeting reflecting the target dates and status along with the new policies and practices which were expected to be implemented.

Thereafter, the Committee:- 

i.   NOTED the findings of the Audit Report presented to the Committee on 19 June 2014 and the progress being made against the agreed action plan; and
ii.  AGREED that an assurance report and confirmation that target dates had been achieved should be submitted to the next meeting on 20 November 2014.

9. Scottish Public Service Ombudsman Cases Received by the Council – Update Report         
Cùisean Ombudsman Sheirbheisean Poblach na h-Alba a Fhuaireadh leis a’ Chomhairle – Aithisg as Ùr

There had been circulated Report No. AS/21/14 dated 14 September 2014 by the Chief Executive which set out the number and types of complaint about the Council which had been determined by the Office of the Scottish Public Services Ombudsman (SPSO) in the period since the last report to the Committee.

In this regard, it was confirmed that the SPSO reports could be accessed and read in full on the SPSO website.

In terms of the number of cases reviewed, the statistics showed that that there were thirty-one cases initiated by the Ombudsman in the period covered by the report of which sixteen were not upheld, two upheld and one partially upheld.  It was further confirmed that twelve cases had yet to be determined. 

In recognising the importance of the Ombudsman complaints, it was stressed that an overview was required to obtain a clearer understanding on the reports submitted to the Ombudsman relating to Arms-Length External Organisations and Adult Social Care Services.  In this regard, it was highlighted that these points would be addressed at the next Committee.  

The Committee NOTED the details of the report as presented.  

10. Code of Corporate Governance 
Còd Riaghladh Corporra

There had been circulated Report No. AS/22/14 dated 6 August 2014 by the Depute Chief Executive/Director of Corporate Development which provided an update on progress with delivering the actions agreed in Local Code of Corporate Governance for 2013/14 and presented the Code for 2014/15 which had been approved by the full Council on 4 September 2014.

In this regard, it was confirmed that the majority of the actions (41) had been completed and a further 34 were on target to be delivered and were largely annual actions which would be carried forward in the revised Code. There were just two actions with ‘some slippage’ and these would also be included in the revised Code to ensure completion.

In addition, an Internal Audit of the 2013/14 Code had been undertaken and provided Substantial Assurance. The recommendations from the Internal Audit would be implemented in 2014/15 which had also been included in the new Code.

It was also noted that the Code of Corporate Governance for 2014/15 had been detailed in full as Appendix 1 to the report.

During discussion, Members raised the following issues:- 

  • in relation to Principle 6 of the Code, it was queried as to whether the Council should review how they could scrutinise at a more local level and substantially improve that area of the Council’s work;
  • it was suggested that the Communities Panel, which was being developed across the Highlands, should be included in the community consultation;
  • the importance of ensuring that effective mechanisms were in place was stressed i.e. District Partnerships but potentially review all areas;
  • it should be investigated if parts of the Code could be included for scrutiny and risk management training sessions; and
  • it was stressed that more significant decisions, in particular finance scrutiny, should be made at District Partnerships and Area Committees to potentially increase public attendance. 

Thereafter, the Committee NOTED:-  

i.   the good progress on delivering the agreed actions in the 2013/14 Code of Corporate Governance;
ii.  the Substantial Assurance provided by the Internal Audit report on the delivery of the 2013/14 Code; and
iii. the 2014/15 Code of Corporate Governance.

and AGREED:-  

iv.  that discussions should take place between the Depute Chief Executive/Director of Corporate Development, Head of Internal Audit and Risk Management and the Chair to investigate the possibility of scrutiny and risk training; and
v.   in relation to Principle 6 of the Code, Communities Panel should be included in the groups exercising local scrutiny.

11. Audit Scotland National Reports
Aithisgean Nàiseanta Sgrùdadh Alba

There had been circulated Report No. AS/23/14 dated 8 September 2014 by the Head of Internal Audit and Risk Management which provided details of the National Reports issued by Audit Scotland and the action taken within the Council to address the report findings.

It was confirmed that five reports had been issued and considered by the relevant Strategic Committees as follows:-
 

  • An Overview of Local Government in Scotland 2014 (presented to the Highland Council on 8 May 2014)
  • Re-shaping Care for Older People (presented to the Education, Children and Adult Services Committee on 21 May 2014)
  • Review of Recovery of Benefits Subsidy in 2012/13 (presented to the Resources Committee on 28 May 2014)
  • Options Appraisal: are you getting it right? (presented to the Resources Committee on 28 May 2014)
  • Self Directed Support (presented to the Education, Children and Adult Services Committee on 28 August 2014)

The respective Committee Minutes had also been circulated for information.

In regard to Re-shaping Care for Older People, it was suggested that the Education, Children and Adult (ECA) Service Committee should provide assurance that NHS Highland had responded to the important issues raised and that the outcome should be incorporated in the Change and Improvement Plan. It was explained that many areas of concern, improvement and general information had been identified.  However, the draft Change and Improvement Plan was due to submitted to the ECA Service Committee in November 2014.

In terms of Self Directed Support, it was suggested that discussion should take place between the Chair and the Chair of the ECA Committee regarding the implementation of risk analysis and the impact on the Service.  

The Committee:-  

i.  NOTED the action being taken by the respective Committees to address Audit Scotland’s National Reports as detailed in the report; and
ii. AGREED, in relation to Self Directed Support, that discussions should take place between the Chair and the Chair of the Education, Children and Adult Services Committee regarding the implementation of risk analysis.  

12. Audit Scotland: Benefits Performance Audit Annual Update 2013/14      
Buidheann-sgrùdaidh na h-Alba: Fios Bliadhnail Sgrùdadh Buaidh nan Sochairean 2013/14

There had been circulated Report No. AS/24/14 dated 1 September 2014 by the Director of Finance which provided the outcome of Audit Scotland’s Benefits Performance work across Scotland in 2013/14.

In terms of the 2013/14 Risk Assessment Programme, it was confirmed that the Council had delivered an improved speed of processing at the same time as maintaining a strong accuracy of performance and continuing to reduce local authority error overpayments. This had been achieved despite an increased workload, extended responsibilities and reduced staffing levels. In addition, continuous improvement had been delivered in most areas since the last performance audit in August 2010.  

It was further reported that the Assistant Auditor General had noted that the Council had been proactively participating in Welfare Reform discussions and working groups and had demonstrated success in working collaboratively and implementing change. Consequently, this had put the Council in a strong position to effectively deal with the challenges relating to the introduction of Universal Credit.  

In this regard, and as part of the Council’s drive for continuous improvement, the findings from other Councils’ assessments were being considered. Good practices were already evident in Highland, such as the controlled manner in which the Finance Service implemented Department of Work and Pensions Atlas (Automated Transfer to Local Authorities) notifications, as detailed in the Audit Scotland Report.  

In terms of Welfare Reform, it was reported that the Council welcomed any assistance that Audit Scotland provided which sought to remove from Scottish Councils the considerable uncertainties that persist in terms of the continuing absence of a detailed migration plan for moving customers from Housing Benefit to Universal Credit. In addition, the long term vision and funding for the local support services that authorities were expected to provide.
 
Thereafter, the Committee NOTED the findings from Audit Scotland’s Benefits Performance Audits during 2013/14, which included the involvement of the Council in a Risk Assessment study and the results of which had already been reported to the Committee.

13. External Audit Reports     
Aithisgean Sgrùdaidh bhon Taobh A-muigh

The following External Audit Reports had been prepared by the Council’s External Auditors (Audit Scotland) and issued since the last meeting:-
 
a)  Arm’s-length external organisations: are you getting it right? – A follow-up report
 
During a summary of the report, it was confirmed that in 2011 the Accounts Commission had published Arm's-length external organisations (ALEOs): are you getting it right? in its ‘’how councils work" series of reports. The purpose of these reports was to stimulate change and improve performance.

It was further reported that, as part of the 2013/14 audit, local government auditors had carried out targeted follow-up work on ALEOs within each Council. The aim of this work was to provide a position statement on Councils' use of ALEOs and in particular progress since the 2011 report was published.

In terms of the key findings, it was advised that the Council had demonstrated basic practice in its governance arrangements covering ALEOs. In addition, several areas of good practice had been identified. Internal Audit's review highlighted nine recommendations that were agreed with management to improve the existing arrangements.  It was also advised that further areas where the Council might wish to consider improvements to strengthen the approach were as outlined in the report and the action plan detailed at Appendix 1.  

b)  Assurance on Internal Controls 2013/14

During a summary of the Annual report, it was confirmed that the 2013/14 Annual Audit Plan had detailed three areas of internal audit work where Audit Scotland planned to place reliance for their financial systems assurances and these audits were currently being completed by internal audit.  Internal audit had also undertaken work to support the Head of Internal Audit and Risk Management's opinion on the adequacy and effectiveness of the Council's key financial systems and governance arrangements.  In addition, Internal Audit's work would be reviewed in these areas and reported in Audit Scotland’s findings in the annual report on the audit.

In terms of the overall audit findings, it was confirmed that the overall assessment was that the key controls within the Council's main financial systems were operating satisfactorily. Where controls had not been tested or where the evidence of a control's effective operation did not exist, the planned coverage of the financial statements was adjusted to obtain sufficient evidence that they were free of material misstatement.

In this regard, a summary of those areas where identified risk exposure required management consideration was included in Appendix A to the report. 

c)  International Standard on Auditing 260 (ISA 260) / Report to those charged with governance on the 2013/14 Audit

During a summary of the report, which set out the matters arising from the audit of the financial statements for 2013/14 that required to be reported under ISA 260, it was confirmed that subject to the satisfactory conclusion of any outstanding matters and receipt of a revised set of financial statements for final review, it was anticipated that an unqualified auditor’s report would be issued. In addition, the proposed report, as attached at Appendix A to the report, reflected that there were no anticipated modifications to the audit report.

The Committee otherwise:-

i.  NOTED the terms of the report as circulated; and
ii. AGREED that a report on issues which had been brought to light in relation to the Housing Revenue Account should be submitted to a future meeting. 

The meeting ended at 12.25pm.