To receive apologies for absence.

Apologies for absence were received from Councillor AJ Hempton-Smith.  Apologies had also been received from Councillor A Seldon, Chairman of General Overview and Scrutiny Committee.

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

In accordance with paragraph 4.1.23 of the Council’s Constitution, Councillors* C Nicholls attended the meeting as a substitute member for Councillor AJ Hempton-Smith.

The Chairman welcomed the following to the meeting, alongside the expected Councillors and officers: Phil Jones and Terry Tobin (external audit, Grant Thornton) in respect of agenda items 5 and 6 (minutes 47 and 48 below), Mukhtar Khangura (internal audit, KPMG) for item 7 (minute 49), and Jake Bharier and David Stevens MBE (Independent Persons) for item 8 (minute 50 below).

To receive any declarations of interest by members in respect of items on the agenda.

No declarations of interest were made.

To approve and sign the minutes of the meeting held on 5 December 2012.

The Head of Governance / Monitoring Officer drew attention to minute 41 (Standards Panel Report - 22 November 2012) and, to reflect the intention of the Committee to report the outcome to Council, recommended the following amendments to the resolution:

‘That:        (a)   The report of the Standards Panel meeting on 22 November 2012 be approved noted; and

(b)    The following recommendations of the Independent Person be approved:

1)        the Audit and Governance Committee present a report on the consideration of the investigation of the complaint to Council; and

2)        the Monitoring Officer be requested to arrange training for the subject member, to be undertaken by the subject member within three months of the date of this meeting.’

RESOLVED:  That subject to the above amendments, the minutes of the meeting held on 5 December 2012 be approved as a correct record and signed by the Chairman.

To inform the Audit and Governance Committee of the work to be undertaken by Grant Thornton over coming months for 2012/13 financial year.  The report also includes the proposed indicative fee.

The Chief Officer Finance and Commercial confirmed that Grant Thornton had been appointed as the external auditors to the Council.  The representatives from Grant Thornton were invited to present the report and comment on the Annual Audit Fee Letter.  The key considerations were identified as follows:

i.           The scale fee for the Council for 2012/13 was £164,803 which compared to the audit fee of £274,672 for 2011/12, a reduction of 40%.  It was emphasised that the reduced fee would not diminish the quality of the audit work.

ii.          Attention was drawn to the outline audit timetable which included the timing of the final accounts audit and value for money conclusion.

iii.         In view of the demanding financial context, the authority would need robust policies to cope with the scale of the savings required.

In response to a question about reference to ‘a composite indicative fee’, Mr. Jones of Grant Thornton explained that this related specifically to the certification of grant claims and returns.  He added that the composite indicative fee had been adjusted to reflect a reduction in the number of schemes and, at £10,600, was a small proportion of the total audit fee.

Committee Members welcomed the reduction in the audit fees but further clarification was sought about arrangements for additional work.  It was reported that each additional piece of work would be separately agreed and a detailed project specification and fee agreed with the Council.  Committee Members suggested that consideration be given to the associated financial implications and risks.  In response to a question, Mr. Tobin of Grant Thornton confirmed that the £274,672 was the actual figure for 2011/12.

The Chairman drew attention to paragraph 15.2 of the report which stated that ‘Certain assumptions are included such as Hoople providing appropriate access and working papers of the required standard’.  Mr. Tobin said that the position was within the control of the Council and he was encouraged by the improvements discussed with Hoople.

A Committee Member commented that any contract could appear to be good value superficially and it was critical that the auditors had the means to identify flaws and waste.  Mr. Jones said that auditors could not look at every contract and relied on a systematic approach which focused on the main risks.  Previewing the following agenda item, he said that Grant Thornton would be seeking assurances from the Council that appropriate systems were in place.

RESOLVED:That

(a)      Audit and Governance Committee notes the content of Grant Thornton’s Annual Fee letter; and

(b)    Audit and Governance Committee notes* the planned outputs.

The report covers the process to ensure there is effective two way communication between the Audit and Governance Committee and the external auditor, namely Grant Thornton.

The Committee received a report which outlined the process to ensure that there is effective two-way communication between the Audit and Governance Committee and the external auditor.

Mr. Tobin advised that the external auditor was required to ask ‘those charged with governance’ (the Audit and Governance Committee, supported by the Council’s officers) how responsibilities were discharged in the following areas: fraud; laws and regulations; going concern; related party transactions; and accounting for estimates.  Attention was drawn to the ‘Auditing Standards - Communication with the Audit Committee’ document appended to the report which set out a series of questions from the external auditor and the corresponding management responses.  It was noted that the questions also related to important aspects of the Terms of Reference of the Committee.

A Committee Member said that the document was logical and provided context to the role of the Committee.  In response to a question, Mr. Tobin advised that the process conformed to International Standards on Auditing at a high level but it also sought to identify what happens specifically at this Council.  It was noted that the document would be updated in due course to reflect experiences gained by Grant Thornton in working with other authorities.

The Vice-Chairman said that the Committee should not lose sight of the document and Mr. Tobin advised that the content would be revisited alongside the Letter of Representation.  He added that any significant changes in the interim would be notified to the Committee through the normal reporting mechanism.

The Chairman suggested that Members review the document again in advance of the informal meeting with the auditors following the Committee meeting on 15 March 2013.

Referring to the ‘Hereford Futures Governance Update’ received by the General Overview and Scrutiny Committee (minute 27 of 14 January 2013 refers), a Committee Member commented that the Audit and Governance Committee should receive reports about the governance of* related parties.  The Chief Officer Finance and Commercial noted that the membership details of partner organisations had been circulated to Committee Members previously and said that this could be refreshed.  Committee Members expressed a wish to receive reports at future meetings.

A Committee Member suggested that the report title be reviewed and a dating method utilised to enable comparison with previous years in the future.

RESOLVED:  That the Audit and Governance Committee notes the content of Grant Thornton’s report as attached as Appendix A to the report.

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.

The Committee received an update on the progress of internal audit work and internal control issues arising from work recently completed.  The principal points covered by Mr. Khangura included:

1.         To date, seven audit reviews had been finalised and nine reviews were being completed by Audit Services, with draft reports issued in four areas.

2.         Two areas had been graded as providing ‘limited assurance’, these being Income Collection - Industrial Lets and Public Health - Food Licensing.  These areas would be reviewed as part of the 2013/14 audit work to ensure that recommendations had been implemented.

3.         In respect of Industrial Lets, it was reported that the Council needed to establish a clear framework of control, undertake reconciliation, and tighten processes.  Furthermore, Audit Services had identified incorrect commercial lets which meant that some income had not been received in 2012/13 but this was being rectified.

4.         In terms of Food Licensing, the Council needed to develop the function’s controls in a number of areas, including documentation associated with food hygiene inspections, follow up inspection visits, and staff training.

5.         Two areas had been graded as providing ‘Substantial Assurance’, these being Treasury Management and Council Tax/National Non-Domestic Rates.

6.         A number of reviews were currently being completed by Audit Services and any significant issues arising from these areas would be reported to future meetings of the Committee.

7.         Audit Services had received very positive feedback to date in response to an audit satisfaction questionnaire circulated to key service managers involved in the audit process so far.

A Committee Member commented that the contamination of beef products with horsemeat was entirely unrelated to the audit review of Food Licensing, nevertheless the authority needed to be aware of the implications and potential reputational risks associated with recent international developments. 

The Chairman proposed that an update on the implementation of recommendations in respect of Food Licensing be made at the next, or a subsequent, Committee meeting.  A Committee Member noted the statement that ‘reporting to the Regulatory Committee required further development’ and said that clarity was needed about the appropriate route to progress this element and for a level of assurance to be provided regarding the effectiveness of the process.  Another Committee Member commented on potential consumer confusion about the award of ‘stars’ for food hygiene inspections.

With reference to the audit review of IT systems, it was requested that information be shared with both the General Overview and Scrutiny Committee and the Health and Social Care Overview and Scrutiny Committee to assist imminent work in relation to IT.

A Committee Member, using the example of the Yazor Brook flood alleviation scheme, commented on the need for assurance that appropriate systems were in place in respect of procurement and the monitoring of contracts.  Mr. Khangura outlined the approach for the audit review of procurement, including the sampling of some contracts.  In response to comments by Committee Members, the Chief Officer Finance and Commercial explained that an allocation had been made in the budget  ...  view the full minutes text for item 49.

To note the powers and responsibilities of the Audit and Governance Committee, and of other bodies in relation to Standards complaints against Councillors, and to consider best practice within the Council’s adopted process.

The Head of Governance / Monitoring Officer submitted a report which explained the powers and responsibilities of the Audit and Governance Committee and other bodies in relation to standards complaints against Councillors.

The Committee was advised that, in view of the comments made during the discussion at the Committee on 12 November 2012 and at Council on 4 January 2013 in respect of the report ‘Breach of the Members’ Code of Conduct by Councillor Mark Hubbard’, this report sought to clarify the process adopted by Council in relation to standards matters within a single document.

It was noted that the Localism Act 2011 had removed the standards regime which had been in place since 2001, thereby requiring local authorities to introduce local processes to handle standards complaints.  Consequently, Council approved a new Code of Conduct and a system to implement the provisions of the Act at its meeting on 20 July 2012 (minute 31).  The report set out the related functions of the Audit and Governance Committee, Council, the Monitoring Officer, Independent Persons, and the Standards Panel.

In relation to the complaints about Councillor Hubbard, a Committee Member said that new material had been brought to the attention of Council which had not been available to the Committee when making its decision on the case.  Another Committee Member commented that a Councillor had obtained this information through a Freedom of Information request.  The Head of Governance / Monitoring Officer said that he had not been the Monitoring Officer when the complaints were considered by the Standards Panel and by the Committee and he was not aware of the advice provided at that time.  He noted that the complaints had commenced under the previous standards regime and he outlined the new process for dealing with complaints.  The Committee was advised that the new system focused on improving standards and this was reflected in the limited scope of the sanctions: the Council could not fine, suspend or disqualify a member from membership of the authority.

The Head of Governance / Monitoring Officer said that the Independent Person, in consultation with the Standards Panel, considered substantial amounts of material to inform the recommendations but the Committee could request further detail if required.

Councillor EMK Chave asked that her comments to* be recorded, these included: it was difficult to assess the effectiveness of the new system at this stage given the few cases to date but the process should be monitored carefully; if the intention was a ‘light touch approach’, the treatment of the Councillor Hubbard case at Council had been disproportionate, with some comments perhaps appearing slightly malicious; clarity was sought about the time taken to deal with the recent cases and whether any complaints about other Councillors were still outstanding; and the value of apologies sought from subject members was queried.

The Head of Governance / Monitoring Officer advised that the handling of the complaints involving Councillor GA Powell and Councillor MAF Hubbard had been subject to delays, in part resulting  ...  view the full minutes text for item 50.

To note the grant of dispensations to all Members of the Council to allow them to take part in meetings of the Council which will consider the Budget for 2013/14 and set Council Tax for the same period.

The Committee received a report which noted the grant of dispensations to all Members of the Council to enable them to take part in meetings of the Council that would consider the Budget for 2013/14 and set Council Tax for the same period.

RESOLVED:  That the report be noted.

The next scheduled meeting is Friday 15 March 2013.

A meeting is scheduled for Friday 6 September 2013.  However, to ensure sufficient preparation time for the accounts, it is recommended that this meeting be moved to Friday 13 September 2013.

The next scheduled meeting was to be held on Friday 15 March 2013, this would be followed by an informal meeting for Committee Members with the internal and external auditors.

It was recommended that the meeting scheduled for Friday 6 September 2013 be moved to Friday 13 September 2013 to ensure sufficient preparation time for the accounts.

[Note: * Refers to amendments made to the minutes at the meeting of the Audit and Governance Committee on 15 March 2013.]