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AUDIT AND GOVERNANCE COMMITTEE 29 July 2015

PRESENT: Councillor David d’Orton-Gibson - Chairman; Councillor Ian Clark - Vice-Chairman; Councillor Laurence Fear. ALSO PRESENT: Councillor John Beesley – Leader of the Council, Chair of the Cabinet and Resources and Councillor Donald McQueen. OFFICERS: Ian Milner, Acting Executive Director, Finance and S151 Officer Tanya Coulter, Service Director Legal and Democratic and Monitoring Officer Robin Ingleton, Service Director, Strategic Finance Feriser Tasdelen, Head of Audit and Management Assurance Shaun Darcy, Group Finance Manager Estelle Sherry, Senior Audit Manager Fiona Manton, Risk and Insurance Manager Chris Dale, Revenue and Benefits Client Manager Darren Vickers, Operations Manager, Revenues and Benefits Gary Bentham, Principal Community Development Officer Sam Harding, Grant Thornton The meeting commenced at 10.30 am Note: To see a copy of the public reports that were considered by the Committee at this meeting please visit: http://www.bournemouth.gov.uk/CouncilDemocratic/CouncilMeetings/CommitteeMeetings/AuditandGovernanceCommittee/2015/07/29/Agenda/29-July-2015-Agenda-and-Reports-Portfolio.pdf

SECTION I - BUSINESS RECOMMENDED TO THE COUNCIL

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SECTION II - BUSINESS DECIDED UNDER DELEGATED POWERS 43. APOLOGIES Apologies were received from Councillor Simon Bull and Councillor Anne Filer, Cabinet Member for Corporate Efficiency.

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Audit and Governance Committee, 29 July 2015 44. DECLARATIONS OF INTEREST There were no declarations of interest made at this meeting. 45. SUBSITUTE MEMBERS There were no substitute members for this meeting. The Head of Democracy reported that the Committee was quorate. 46. CONFIRMATION OF MINUTES DECISION MADE: That the minutes of the meeting of the Committee held on 22 April 2015 be confirmed as a true and accurate record. 47. PUBLIC ISSUES There were no deputation requests, public questions or petitions for this meeting. 48. LOCAL IMPROVEMENT FUND The Committee considered a report on the Local Improvement Fund- LIF. The Committee at its meeting on 21 January 2015 recommended a review of the guidance for Members. The Principal Community Development Officer reported that officers administering the fund had now reviewed the guidance in consultation with the Section 151 Officer and Monitoring Officer. The report explained the purpose and administration of the LIF and provided an updated document setting out the criteria for approving applications and the process for applying for funding. The Committee was advised that the review had provided the opportunity to improve the transparency of the process and to provide an escalation process if there were any disputes.

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Audit and Governance Committee, 29 July 2015 Councillor Beesley, Cabinet Member for Resources explained that the report had been submitted to the Committee in light of expenditure on the Bournemouth Air Festival. He reported that the review of the guidance provided the opportunity to ensure that clarity existed on the process for the Fund. He reminded the Committee that the fund does not form part of the base budget however £1,500 was allocated to each member with a total fund of £81,000. He suggested that it would be useful to send the final report and the two appendices to all members of the Council. DECISION MADE: 1. That the revised criteria and process document be approved. 2. That an email be sent to all Members of the Council, on behalf of the

Chairman, with the report and revised criteria and process document. 49. AUDIT OF ACCOUNTS 2013/14 The Committee considered a report on the outcome of the objection in relation to the 2013/14 Accounts. Members were informed that the external auditors had conducted a full investigation into the objection and have concluded that there is no foundation for the objection and have subsequently completed the audit. The Service Director, Strategic Finance reported that the fee estimate for the external auditor’s investigation into the objection was £19,000 plus internal costs. The Committee commented on the considerable costs associated with the investigation. The Chairman asked if there would be any press release relating to the outcome of the investigation. Officers explained that the statutory public notice had appeared in the local press and the report before the Committee had been published on the Council’s website which was sufficient. The Cabinet Member for Resources referred to the substantial level of the costs associated with this investigation with no foundation and previous investigations following objections from the same complainant. Sam Harding explained that legislative changes would provide external auditors with the discretion to dismiss complaints where appropriate. DECISION MADE: That the outcome of the external auditors conclusion to the objection to the 2013/14 accounts as appended to the report be noted.

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Audit and Governance Committee, 29 July 2015 50. INTERNAL AUDIT MONITORING REPORT FOR THE PERIOD

ENDING JUNE 2015 The Committee considered a report setting out the significant issues arising from the work of the Internal Audit function for the period ending June 2015. The Senior Audit Manager explained that 25 audits had been completed during the reporting period. The Committee was informed that of these 25 the internal audit follow up review of Council Tax had resulted in a minimal audit opinion. The Committee was advised that in respect of the follow up review of Council Tax while the control framework over the Council tax system was fundamentally sound only minimal assurance could be provided to management because of a lack of response to previous years audit recommendations. Members asked a number of questions including how credit balances are dealt with, the review of cases in respect of the single person discount and how the Council calculates the bad debt provision. The Chairman sought clarification on what assurances the Council had received that the recommendations would be implemented. The Operations Manager, Revenues and Benefits highlighted the monthly review which was undertaken in conjunction with the S151 Officer. The Acting Executive Director, Finance reported that in some cases residents would not know that they were due a refund and may have moved which can create difficulties. The Committee requested that they be updated in respect of the progress on this Audit. The Senior Audit Manager reported that eight audit reviews had resulted in a partial audit opinion, six of which related to individual service reports arising from the corporate wide debt management audit with the remaining two partial assurance audits relating to Directorate Schemes of Delegation and Adult Social Care – Direct Payments. She reported that internal audit continues to provide support, advice and guidance to Service Units throughout the implementation of their actions, to ensure co-ordination of new procedures and understanding across the Council. The Senior Audit Manager explained that if the Council was targeting work correctly it would identify issues which would generate improvements. The Committee was informed that in respect of the delivery of the 2014/15 Internal Audit Plan the Internal Audit Service has met with best practice in that it has completed to draft report stage all planned assignments by the end of June 2015. The Chairman on behalf of the Committee congratulated the team on this achievement. The Senior Audit Manager, in light of the change in the membership of the Committee, had circulated the Internal Audit Plan for 2015/16 which had been agreed in April and provided an update on the progress with the delivery of this plan.

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Audit and Governance Committee, 29 July 2015 Members were advised of the professional qualifications held by the auditors within the team and those officers who were currently undertaking training, which was a requirement of section 1210 of the Public Sector Internal Audit Standards. The Senior Audit Manager also reported that internal audit staff attend and participate in the West of England Chief Internal Auditors Group and associated sub groups providing an opportunity to share best practice, discuss new developments and identify significant issues affecting Councils across the region. The Senior Audit Manager acknowledged that there are outstanding actions required following internal audit reviews and these delays are for valid reasons such as the recent Local Borough Elections. She reported that it was essential to liaise with Managers to ensure that the intention was maintained for the implementation of all actions. DECISION MADE: 1. That the significant issues arising from the work of the Internal Audit

function for the period ending June 2015 be noted. 2. That the current progress to date and the outcomes of audit reviews

for the period reported be noted. 51. CHIEF INTERNAL AUDITOR’S ANNUAL REPORT & OPINION The Committee considered the Chief Internal Auditor’s Annual Report on her review of adequacy and effectiveness of the internal control environment in compliance with the Public Sector Internal Audit Standards 2013. Members were advised that they should consider the Annual Report and opinion before consideration of the Annual Governance Statement. The Chief Internal Auditor reported that she had considered the factors as set out in paragraph 3 of the report in formulating her opinion. The Committee was informed that the conclusion of the Chief Internal Auditor was that the Internal Audit Service complies with professional standards and has completed sufficient and appropriate work to provide assurance that the adequacy and effectiveness of the Council’s internal control environment is satisfactory.

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Audit and Governance Committee, 29 July 2015 The Chairman asked if there were any issues in respect of the minimal assurance audit review which had been reported earlier in the meeting. The Chief Internal Auditor reported that management understand the control framework, supported by an escalation process, and are clear on the implementation of recommendations. DECISION MADE: 1. That the Chief Internal Auditor’s Annual Report and opinion on the

overall adequacy of the internal control environment be noted. 2. That the achievement of 95% of draft reports issued against the

industry best practice performance target of 90% be noted. 3. That the Audit and Governance Committee confirm that it is assured

that the Council’s Internal Audit Service is effective in line with Regulation 6 of the Accounts and Audit (England) Regulations 2011.

52. ANNUAL BREACHES, WAIVERS & EXEMPTIONS REPORT FOR

THE PERIOD 1 APRIL 2014 TO 31 MARCH 2015 The Committee considered a report which set out the breaches, waivers and exemptions which have been signed off during the 2014/15 financial year as required by the Council’s Financial Regulations and Procurement Rules as introduced on 1 April 2013. The Head of Audit and Management Assurance clarified the exemption relating to Children’s Commissioned services. She explained that it was not practical due to the nature of the service to undertake an individual tendering exercise. She confirmed that this exemption had been signed off by the S151 Officer. DECISION MADE: 1. That the breaches, waivers and exemptions during 2014/15 as per the

Council’s Financial Regulations and Procurement Rules identified or otherwise notified to the Section 151 Officer be noted.

2. That the actions taken by the Service Units to address the breaches of

the Council’s Financial Regulations and Procurement rules have been considered and noted.

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Audit and Governance Committee, 29 July 2015 53. RISK MANAGEMENT – CORPORATE RISK REGISTER UPDATE The Committee considered a report which provided an update on the position of the Council’s Corporate Risk Register following the quarterly review by the Corporate Management Team. The Risk and Insurance Manager reported that during the reporting period there have been no changes to the corporate risks or their scores. She explained that Appendix A attached to the report set out the action to date to mitigate the risks. The Risk and Insurance Manager reported that part of the role of the Risk Management Team was continuous “horizon scanning” to indentify issues that may give rise to risk to the Council. She reported that when matters were identified these were raised with the relevant Service Director. The Risk and Insurance Manager in response to questions from Members explained the difference between the gross score, which was the level of a risk with no controls, and the net score, which reflected the risk with controls. The Vice-Chairman referred to Risk 10 – inability to deliver Council services due to insufficient resource funding which showed a gross score and net score of 12. The acting Executive Director, Finance explained that the scores recognised the concerns of austerity and its on-going nature. The Chairman requested that it would be useful where there have been changes to provide the previous score in brackets. The Risk and Insurance Manager reported that changes to the scores would also be reflected in the report. A Member commented on Risk 6 – Major failure in business delivery as a result of inadequate business continuity arrangements – in particular he highlighted the Disaster Recovery Plan and stressed the need to take this forward. Alyson Whitley, Resilience and Safety Manager reported on the development of the Disaster Recovery Plan which was in a transitional phase. The acting Executive Director, Finance reported that the Annual Governance Statement highlighted significant risks and actions to address them. DECISION MADE: That the outcome of the Corporate Management Team’s review of the Risk Register be noted.

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Audit and Governance Committee, 29 July 2015 54. ANNUAL GOVERNANCE STATEMENT 2014/15 AND ACTION

PLAN The Committee considered a report on the Annual Governance Statement 2014/15 and Action Plan. Members were reminded that the Accounts and Audit (England) Regulations 2011 require the Council to produce an Annual Governance Statement – AGS to accompany the Council’s Statement of Accounts. The Head of Audit and Management Assurance reported that the Committee, having considered the efficiency and effectiveness of the Internal Control Environment, the breaches, waivers and exemptions and corporate risks, were now required to consider the Annual Governance Statement for 2014/15. The Committee was informed that no new significant governance issues had been indentified, however the Council’s Statutory Officers had determined that the three significant governance issues disclosed in the 2013/14 AGS had not been addressed sufficiently and as such remain significant governance issues for the Council. Therefore the following have been included in the Annual Governance Statement for 2014/15:

• Business continuity planning; • Fire safety management and reporting arrangements; and • Information Governance

The Head of Audit and Management Assurance drew Members attention to the continuing improvement on the above and the proposed actions arising from the 2014/15 Governance Statement. The Committee commented further on business continuity planning. Officers reported that there was a clear project in place and part of the process was to test the plans to ensure that they worked. Members were informed that plans for the service areas had been completed which provided the building blocks to develop the Corporate Business Continuity Plan including the Disaster Recovery Plan. The Head of Audit and Management Assurance explained that a key part of that was the role of Kier. She confirmed that all relevant risks were considered to provide an assurance to the Committee that appropriate action was being taken. The Cabinet Member for Resources welcomed the discussions relating to the Disaster Recovery Plan and in particular recognising the urgency in progressing the necessary work with the Council’s partners.

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Audit and Governance Committee, 29 July 2015 DECISION MADE: 1. That the Annual Governance Statement, following consideration by

the Committee, be noted. 2. That the action to date as set out in the action plan arising from the

2013/14 AGS to address the significant governance issues be noted. 3. That the proposed action plan arising from the Annual Governance

Statement 2014/15 for implementation in 2015/16 be endorsed. 55. GRANT THORNTON EXTERNAL AUDITOR FEE LETTER 2015/16 The Committee considered a report which set out the Council’s external auditor’s proposed fee of £115,320 for the audit of the Council’s Financial Statements to be completed in 2015/16. Attached to the reported was a copy of the letter Sam Harding, Grant Thornton, explained that the Audit Commission, prior to it being closed, had set the scale of fees. She reported that this was a significant reduction on the fee charged in 2014/15. The Committee was informed that this reduction would not result in any reduction in the level of service or work undertaken. Members acknowledged that the indicative fee for grant certification work had been set at £6,070. DECISION MADE: That the external auditor’s proposed annual fee for 2015/16 as set out in the letter attached to the report be noted. 56. GRANT THORNTON EXTERNAL AUDIT ANNUAL PLAN 2014/15 The Committee considered a report which sets out the work of Grant Thornton in respect of the external audit annual plan for 2014/15. The Committee was reminded that the plan had been agreed in April 2015. As there was a significant change in the membership of the Committee the plan was circulated to the new Committee so Members were fully updated on the planned work the external auditors intend to undertake in order to provide assurance over the Council’s financial statements. DECISION MADE: That the Grant Thornton External Audit Annual Plan 2014/15 as considered by the Audit and Governance Committee in April 2015 be noted.

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Audit and Governance Committee, 29 July 2015 57. TREASURY MANAGEMENT OUTTURN 2014/15 AND

QUARTERLY MONITORING REPORT APRIL TO JUNE 2015 The Committee considered a report on the treasury management outturn for 2014/15 and quarterly monitoring report April to June 2015. Members were advised that in accordance with the requirement of the Chartered Institute of Public Finance and Accountancy’s – CIPFA – code of Practice on Treasury Management the report provides detail of the performance of the treasury function on the effects of the decisions taken and the transactions executed in the past year, and confirmation that there were no instances of non-compliance with the Council’s Treasury Management Policy Statement and Treasury Practices, for the year 2014/15. Shaun Darcy, Group Finance Manager outlined the performance against the Strategy for 2014/15 and the impact of interest rates which had not risen when previously expected. Members were updated on the level of borrowing. The Cabinet Member for Resources explained the borrowing position in respect of the HRA and commented on the loan from the Local Enterprise Partnership in relation to the Gladstone Mews development. The Service Director, Strategic Finance explained the funding arrangements for the scheme at Madeira Road and the income generated from the development. He also reported on the Housing Revenue Account outlining the income generated from rents and expenditure used for the management and maintenance of the existing housing stock and contributing to new build developments. He highlighted the quality and standard of the Council’s housing stock which exceeded the level of the Decent Homes Standard. DECISION MADE: 1. That the performance of the Treasury Management function for

2014/15 be noted. 2. That the actual Prudential Indicators 2014/15 set out in Appendix A to

the report be noted. 3. That the performance of the Treasury Management function for April

to June 2015 be noted.

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Audit and Governance Committee, 29 July 2015 58. ANNUAL REVIEW OF REGISTER OF DECLARATION OF OUTSIDE

INTERESTS & RECEIPT OF GIFTS AND HOSPITALITY BY OFFICERS

The Committee considered a report on the annual review of the registers of declarations of outside interests and gifts and hospitality for officers for the financial year 2014/15. The Monitoring Officer reported that she regularly visited management team meetings across the Council to ensure that managers understand their responsibilities in submitting the appropriate declarations which was supported by quarterly reminders. DECISION MADE: That the registers, having been reviewed, be noted. 59. FORWARD PLAN 2015/16 The Committee considered a report setting out the proposed Forward Plan for the 2015/16 financial year. The Head of Audit and Management Assurance reported that additional items can be included to ensure compliance where necessary with the Financial Regulations. DECISION MADE: That the Forward Plan be approved. 60. DATE OF NEXT MEETING The Committee considered the arrangements for the next meeting in September. Member discussed the proposals for the development of the Committee’s training plan. It was acknowledged that prior to the September meeting arrangements would be made for a training session on the statement of accounts. The acting Executive Director, Finance explained the proposed timetable for the selection of the independent person(s) to serve on the Committee following the decision of the Council the previous evening.

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Audit and Governance Committee, 29 July 2015 DECISION MADE: That the next meeting of the Committee be re-scheduled from 23 September 2015 at 10.30 am to 24 September 2015 at 10.30 am. The meeting closed at 12.30 pm Contact: Karen Tompkins, Head of Democracy 01202 4541255 karen.tompkins@bournemouth.gov.uk Website: www.bournemouth.gov.uk