To receive the Audit Commission’s Annual Audit and Inspection Letter 2008 (Appendix 1 to this report). The external auditor will present the report to the Committee.

To receive a response from the Chief Executive on each of the action points in paragraph 9 of the Annual Audit and Inspection letter (Appendix 2 to this report).

[Note: The Committee agreed to consider this Agenda Item (6), and Agenda Item 5 (Use of Resources Report 2008) together, in view of the strong link between subject matters.]

Ms Liz Cave and Mr Terry Tobin presented the Audit Commission’s Annual Audit and Inspection Letter which had examined the Council’s overall current performance and had allocated an overall Star Rating of 2, indicating that it was “improving adequately”.  This assessment had taken the form of a report, and had focussed on the Council’s culture, finances, value for money, grant claims, and various initiatives such as the proposed joint working with the Primary Care Trust, and the Herefordshire Connects Programme.  In addition, the report had also examined the independent investigation of financial and contractual arrangements in the Council’s Information and Communications Technology (ICT) Department, conducted by Mr Ian Crookall, and what actions the Council was taking to address the issues in the report (hereafter referred to as “the Crookall Report”). 

Ms Cave and Mr Tobin highlighted the following points in particular:

• The Council’s Overall Performance: Significant factors contributing to the Council’s drop in overall Star Rating from Three to Two included the issues addressed in the Crookall Report, and a housing score of One.  Ms Cave explained that the housing score was anomalous, because in reality there had been a significant reduction in the number of families in temporary accommodation for long periods, but the impact of this had been to worsen some of the performance indicators in the short term, which had had a detrimental effect on the Star Rating.  She added that the Council was improving overall, although not as quickly as some local authorities in a similar position.  There were still some concerns in respect of improvements in children’s and adults’ services, which were being addressed.  There had been significant improvements in the Council’s performance indicators, well above average compared to other authorities, and some excellent and detailed plans were now being produced.  Although Ms Cave acknowledged the improvements, she warned against producing numerous individual performance plans, because she said that this would make issues too complicated.  Overall, the Council needed to be clearer on where its strengths and weaknesses lay. 

• The Crookall Report: The Audit Commission was satisfied that Mr Crookall’s report and the preceding external investigation had been thorough, independent and open.  Because of this, and because it was clear that the Council had taken the report seriously, there was no requirement for the Audit Commission to conduct a separate investigation.  Ms Cave said that the emphasis must now be on implementing the Crookall Report’s recommendations as promptly as possible, and on the Council’s forward direction.  She would therefore assess progress from the present day onwards.  She would look in particular at the Council’s procurement strategy. 

• The Development of the Herefordshire Public Service Trust: Ms Cave reported that, during August and September 2007, the Audit Commission had assessed joint working between the Council and the Primary Care Trust, in the lead-up to the creation of a Public Service Trust (PST), and had recently produced a report.  The Chief Executive said that he had written a response, and members requested that they receive a both the report and the response, for information in time for the Committee’s next meeting. 

During the ensuing discussion, the following key points were made:

• Councillor RH Smith emphasised the importance of ensuring that the quality of the Council’s written documentation was of the highest standard, so that it was timely, clear, correct, and with the appropriate amount of detail.  He added that the Resources Directorate had made recent improvements in this, and in particular, that the quality of financial information was improving.  Councillor ACR Chappell said that more information was needed on reports, so that the public had greater access.  Councillor Toon cited an example of a recent Cabinet report about a property matter, which she felt contained insufficient information for members to be able to make an informed decision.  The Director of Resources reported that she was aware of the particular issue, which she felt had been an exception to the normal standard, and she said that she had taken steps to secure improvements in quality. 

• Councillor Chappell asked for the Internal Audit and Inspection Letter to be corrected at Paragraph 91 (Page 73 of the agenda), so that the word “Two” in the penultimate sentence read: “One”.  Ms Cave said that future copies of the document would be corrected. 

• In response to a question from Councillor AM Toon, Mr Tobin said that some of the “softer” elements of the action plan (as opposed to those items which could be monitored through devising systems and indicators) would be implemented through training (for example, training in ethical governance).  He said that he would monitor other aspects - such as the Council’s culture - through online surveys, and through the annual corporate assessment. 

• Councillor Toon felt that the Council needed to improve its strategy for following up resolutions made at its various meetings, so that every decision was implemented without delay.  She suggested that a single monitoring system should be applied to the Council’s entire decision-making process, to ensure consistency.  The Chief Executive said that following up resolutions was an intrinsic part of creating a culture of compliance within the Council, and that there needed to be clear consequences for non-compliance.  He said that the Council must be known for doing everything that it had agreed to do.  Councillor Smith added that the Council must also listen and respond to individual requests from Councillors.  Members acknowledged that the process would take time, and would be achieved through management development and training. 

• Councillor Chappell reported that, as a step towards integration with the Primary Care Trust (PCT), he had invited the Chair of the PCT’s Audit Committee to future meetings of this Committee, and conversely, he would attend the PCT’s Audit Committee. 

• Councillor Toon was of the opinion that the strategic development of the Public Service Trust (PST) was achievable by focusing first on the joint delivery of services, and then working backwards to decide how to achieve it, by reviewing the structure, manpower and governance of both organisations.  She felt that it was important for staff to understand in the early stages of development what their accountabilities were, and for the public to be kept informed.  The Head of Legal and Democratic Services reported that the development of the PST would be furthered in part by the formation of “strategic partnerships”.  He informed members that, if the Council were the lead authority in any of these partnerships, it would be legally accountable and would be responsible for dealing with any complaints. 

• The Director of Resources said that the Director of Corporate and Customer Services was preparing the Council’s business continuity plan, and it would be completed by 31^st March 2008.  It would be part of all of the Council’s service plans and relevant management areas for the period 2008-2011.  In response to a question, the Chief Executive confirmed that he would assess whether the business continuity plan required any decisions at member level, or purely at management level.  He agreed that the Committee would view it regardless, and Councillor Smith felt that it would be a useful tool to help make recommendations to Council on the level of expertise required for procurement and contractual management. 

• The Cabinet Member for Environment and Strategic Housing, Councillor JG Jarvis, was present at the meeting, and apprised the Committee of progress made with the Council’s Waste Management Private Finance Initiative contract.  Councillor Jarvis said that the Council was close to concluding negotiations to vary the contract, and that a revised waste collection policy would be published in the near future.  There were several options to consider in relation to waste disposal, and the views of all Councillors would be sought on this.  Ms Cave said that the Audit Commission was aware of the complexity of the issues involved, and of the measures in place to keep costs to a minimum. 

• The Director of Resources said that she would report to Cabinet on 27^th March 2008, on how all the necessary improvement measures highlighted by the Crookall report and the Audit Commission would be implemented and driven.  The Committee considered that it was vital to keep track of the numerous actions arising from the reports, and of those suggested by the Audit and Corporate Governance Committee, and agreed unanimously that an effective “bring-forward” system would be devised and considered at the Committee’s meeting to be held on 20^th June 2008. 

Ms Cave and Mr Tobin thanked the Committee for its comments, and said that the Audit Commission would require a progress report from the Council in six months’ time, in respect of its Annual Audit and Inspection Letter. 

RESOLVED:   that it be recommended to Cabinet that:

(i)                 subject to the points made above, the Audit Commission’s Annual Audit and Inspection Letter for 2008 be noted, and the action plan and the Chief Executive’s response be approved;

(ii)               the Audit Commission’s report in respect of the developing Public Service Trust, and the Chief Executive’s response, be forwarded to the Committee for information in time for its next meeting;

(iii)             the Council’s business continuity plan be considered at the next Committee meeting following its completion; and

(iv)             a “bring forward” system for actions required by the Audit Commission and the Audit and Corporate Governance Committee, be considered at the Committee’s meeting to be held on 20^th June 2008.