Apologies for absence were received from Councillor Christy Bolderson and Councillor Bob Matthews.

To receive details any details of members nominated to attend the meeting in place of a member of the committee.

Councillor Roger Phillips attended the meeting as a substitute member for Cllr Christy Bolderson..

To receive declarations of interests in respect of Schedule 1, Schedule 2 or Other Interests from members of the committee in respect of items on the agenda.

There were no declarations of interest.

To approve and sign the minutes of the meeting held on 19 March 2019

RESOLVED:

That the minutes of the meeting held on 19 March 2019 be confirmed as a correct record and signed by the chairman.

To receive questions from members of the public.  

Deadline for receipt of questions is 5.00 pm on 24 July 2019  (3 clear working days from date of meeting).

Accepted questions and answers will be published as a supplement prior to the meeting. 

Questions received and responses given are attached as appendix 1 to the minutes.

To receive any questions from councillors.  

Deadline for receipt of questions is 5.00 pm on 24 July 2019 (3 clear working days from date of meeting).

Accepted questions and answers will be published as a supplement prior to the meeting. 

There were no questions from councillors.

To update members on the progress of internal audit work and to bring to their attention any key internal control issues arising from work recently completed. To enable the committee to monitor performance of the internal audit team against the approved plan.

The chairman used his discretion and moved the progress report on the 2018/19 internal audit plan to the first item on the agenda.

The head of internal audit, South West Audit Partnership (SWAP), presented the reported and highlighted the following:

·         This was the quarter 4 report for 2018/19.

·         SWAP bring four progress reports to the committee each year.

·         Details of any partial assurance audits are brought to the attention of the committee.

·         Information about the number of completed, in progress and draft audit reports were contained on page 57 of the agenda pack.

·         There were no high corporate risks identified. 

·         There were five priority findings and an overview of these findings were detailed on pages 58-59 of the agenda pack. 

·         The responsibility for any audit findings in connection with schools sat with the governing body of the relevant school. 

·         Page 66 of the agenda pack highlighted progress on follow up audits.   Follow up audits were carried out where there were partial assurance findings.  

·         Any changes to the plan were agreed with the chief finance officer

During the discussion of the item, the following points were highlighted: 

·         Comparative information with regard to the progress in each quarter would be helpful, together with details of how it changes in the financial year.  There was also a request for a comparison to previous years to see if there was improvement. 

·         The number of schools in the sample audit was 4 and a summary report was issued to all schools.

·         In connection with the EU General Data Protection Regulations (GDPR) audit, it was acknowledged that there would be continuous improvement.   Progress was being made on the recommendations. 

·         GDPR was a challenge for most councils and a lot of work had been done in order to implement the regulations.    Good progress had been made and it was an ongoing process.  Herefordshire was not unusual in having actions on-going. 

RESOLVED

(a)     performance against the approved plan was reviewed and any areas for improvement identified

The purpose of this report is to provide those charged with governance an opinion on the overall adequacy and effectiveness of the organisation’s governance, risk management and internal control environment. The report provides independent assurance to the committee and enables the committee to determine any potential items for inclusion in its future work programme.

The head of internal audit, SWAP, presented the report and highlighted the following:

·         the annual opinion was an overall opinion in light of the work undertaken.  

·         Pages 31 to 33 of the agenda pack set out an assessment of the annual opinion. 

·         57 audits had been completed.

·         54% of audits completed were either substantial or reasonable.

·         There were no issues of key financial controls.

·         There was management acceptance of the findings. 

·         Details of removed or deferred audits were set out in the report.

·         There had been no identified fraud during the year and there had been no fraud investigations in the year. 

·         There was a good relationship between SWAP and senior management.   Senior management approach the team to seek advice on issues which showed an open approach to audits.

·         Where there have been findings in connection with governance processes in connection with compliance, management is responsible for ensuring compliance with existing policies / processes in place.  The council have recognised that this is an area for improvement.

·         Having considered the balance of work, SWAP were able to offer a reasonable assurance.

During the discussion of the item, the following points were highlighted:

·         The advisory audits were requested by the chief finance officer and did not have any actions because they were areas where there were already concerns.   It was noted that the advisory audits were the ones of most interest for members of the public.   It was confirmed that if there were any priority 1 or 2 recommendations from these audits, they would be reported to the committee.   The chief finance officer was requested to consider in future including within the report the reasons why he had requested the advisory audits.  

·         The treasury management audit was advisory and it was to ensure that the controls identified had been put in place. 

·         That as part of any audit SWAP will ask if there is any additional work which could be undertaken, e.g. benchmarking and the outcome of the benchmarking exercise would be shared with all councils who engage SWAP.   It was noted that it would be important that the benchmarking councils would need to be correct to ensure accurate information for Herefordshire. 

·         It was confirmed that in auditing terms, a reasonable assurance was a good reflection on the council. 

·         It was confirmed that the annual governance statement provided details of the systems and processes in place which would assist the committee with regard to assurance.  The annual governance statement was a live document and did form part of suite of documents used to manage performance within the council.   The solicitor to the council and chief finance officer agreed to look at the advice to report writers with regard to cross referencing in reports to other documents.  

The advisory audits in connection with NMiTE were discussed by the committee.  It was noted that the council had agreed to be the accountable body for NMiTE in connection with the annual Section 31 grant award.   This was a government grant and it was normal  ...  view the full minutes text for item 375.

To consider the external auditors audit finding report for the year ended 31 March 2019.

The chairman of the committee introduced the item by highlighting that a supplement had been published the previous day.    The pressure on the external auditors and officers was appreciated but the committee would not like this to be seen as a precedent and requested that the external auditors and officers could consider how this report could be provided in reasonable advance of the meeting in future.   In order to give the committee time to read the supplement, the meeting adjourned at 10.53 am and re-commenced at 11.23 am.

The external auditors, Grant Thornton, presented the report and indicated that any page numbers referred to would be those in the supplement which had been published the previous day. 

Grant Thornton requested that the first paragraph on page 13 of the supplement issued should be disregard as it was a typographical error.   The rest of the references in the audit findings report were accurate.   Grant Thornton apologised for the error which had not been picked up as part of their quality assurance process.

Grant Thornton outlined the statutory role of the committee and that the level of reporting was necessary in order to comply with auditing standards.    

Grant Thornton reported that they could not certify the completion of the audit.  This was for the same reason as the last 2 years.   Progress had been made on the issue but it cannot be resolved at this moment in time. 

Grant Thornton could not issue the value for money opinion.    This related to work which SWAP were undertaking and it was anticipated that this would be resolved by time of the September meeting and a revised audit findings report would be re-issued.    It was confirmed that there was no statutory deadline for issuing the value for money opinion. 

The materiality basis had changed from council expenditure to asset base which was to resolve the issues with materiality in previous years.   Grant Thornton confirmed that there would have been no matters reported under the previous materiality levels so moving the materiality levels had not had an impact on the audit. 

In discussion of the item, the following points were raised:

·         The de minimis level of accruals had been moved which now meant that the accounts were more accurate;

·         The valuation date of assets had moved so that it was closer to end of the financial years.   This meant that the estimates at year end were more accurate.

·         The council had amended the accounts to take in account the McCloud judgement.   The McCloud judgement was in relation to pensions and liability and was as a result of the government losing a legal claim.    It was noted that the McCloud judgement was subject to further legal challenge and reviews but nationally auditors had come to the conclusion that the liabilities should be reflected in the statement of accounts.  It was noted that Herefordshire was a member of the Worcestershire Pension Scheme and not the Herefordshire and Worcestershire Pension Scheme.

·         The Hoople pension issue was now reflected in  ...  view the full minutes text for item 376.

To agree the annual governance statement 2018/19.

The chief finance officer presented the report and highlighted:

·         The annual governance statement (AGS) was a living document

·         This was the final version for 2018/19.

·         The draft had been published on the council’s website and this version reflected changes since March 2019.  

·         The opinion on the AGS from the external auditor would be added to the statement now that it had been received.  

·         The ongoing governance review of health partnership boards did not have a date for completion and this would be communicated to the committee 

RESOLVED

That the annual governance statement 2018/19 be approved.

To approve the 2018/19 statement of accounts and associated letter of representation to Grant Thornton, the external auditors.

The chief finance officer presented the report and highlighted the following: 

The draft accounts had been published on the website for comments.  The report attached a final set of statement of accounts, together with the letter of representation for committee approval. 

The chief finance officer reported that in 2018/19 there are been a growth in ear marked and general reserves and that there were a number of councils who were not in this position.    The committee offered congratulations to the finance team.  

It was noted that Herefordshire was a small rural authority with an aging population.   The council had made some difficult decisions and were in a more resilient position than other bigger councils.  

The chief financial officer reported that the accounts were available on the website for inspection and it may be possible to check the number of “clicks” to find out how many people had viewed the draft statement of accounts.    It was noted that these were technical documents and there was an ongoing debate about how to make the accounts more accessible.   

RESOLVED

That:

(a)  the 2018/19 statement of accounts be approved; and

(b)  the letter of representation be signed by the chairman of the committee and the chief finance officer.

To approve the planned external audit fee and to note the outline timetable, as detailed in appendix 1, for 2019/20, to ensure that the council has effective statutory external audit arrangements in place as required in the council’s constitution.

The chief finance officer presented the report.

It was noted that the council had opted in to the Public Sector Audit Appointments process which had carried out a competitive tender process and Grant Thornton had been appointed as the council’s external auditor.  

RESOLVED

That the external audit outline timetable and main audit fee of £96k for 2019/20 be approved.

A briefing to enable the committee to provide assurance on the adequacy in regards of the risk framework on the measure the council is taking as the accountable body for the new model in technology & engineering (NMiTE) and the milestone payments from the Department for Education (DfE).

The chief finance officer presented the report.

The background to the assurance report was that in 2017, DfE had decided to award a £15m grant to NMITE to build the university.   The government had felt it appropriate to appoint an accountable body.   The money came via a grant under S31 agreements.    

Just before Christmas 2017, the council had received a presentation from NMITE about how the money would be used and  the council made the decision to act as the accountable body.  Under S31 monies, there is an annual report back to the relevant government department which sets out how the money had been spent and any issues.   The council was not responsible for the money.   There had been one or 2 points raised with government and the majority of spend by NMITE had been effective in delivering the milestones in the creation of the new university.   It was confirmed that as the accountable body, the council was monitoring that the university was doing what the government had said they wanted to be done. 

A member of the committee stated that it fell on NMiTE to be innovative in the work they do with their accounts.   Councils are very transparent about finances but that universities were not.  NMiTE should be exemplar and that they could be ground breaking.    

Following a query from a member of the committee, it was confirmed that the council do receive a £40k management fee for monitoring the milestones. 

It was noted that due to the concerns raised in the SWAP letter, the committee were not assured and requested that a progress report come back to the committee meeting scheduled for September 2019.    The committee felt that it would be beneficial to have full access to the appendices mentioned in SWAP letter  and requested that the solicitor to the council ascertain whether the documents could be made available to the committee.     The chief finance officer reported that there was a meeting on Thursday (1 August) for the chair of NMITE, SWAP and Thorne Widgery and clarity will be sought about how reassurance can be gained.  

The committee also requested that the relevant scrutiny committee be asked to look at the arrangements for NMiTE to follow up on the report which had been received in 2017. 

RESOLVED

That:

(a)  Officers write and seek the views of the Department for Education about the recommendations contained within the report from SWAP and seek their guidance and direction about how they would like us to react as an accountable body and how they would like the council to report progress

(b)  General scrutiny be requested to considering adding a review of the NMiTE partnership arrangements to their work programme

(c)  The solicitor to the council request the exempt background papers for the committee to view to assist with assurance

To provide an update on the work programme for the committee for 2019/20.

It was agreed that an NMiTE progress update report would be added to the work programme for the September 2019 agenda.

It was noted that for September 2019 there were a large number of items and officers were asked to look at re-working the work programme to balance out items.   

It was noted that the annual code of conduct review was due at the July meeting but there were still two complaints open after the year end and there would have been insufficient time for the standards panel to convene to undertake its annual sampling of complaints. 

Officers were thanked for the training provided to date and it was hoped that there would be ongoing training for the committee.

Grant Thornton suggested that the committee may wish to participate in and receive a report on the Redfern Review.

RESOLVED

That in consultation with the chairman of the committee, officers amend the work programme to balance out the agenda items