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Agenda and minutes

Venue: Committee Rooms A, B and C, Civic Offices, Elstree Way, Borehamwood

Contact: Allan Siao Ming Witherick  020 8207 7806

Items
No. Item

151.

Membership

To receive details of any change in Membership of this Committee notified since the agenda was printed.

Minutes:

There had been no changes in membership of the Committee.

152.

Communications and Apologies for Absence

(a) Communications (if any) relating to business on the agenda.

(b) Apologies for absence.

Minutes:

All Members were present.

 

The Chair moved to reorder the agenda so that that Item 8, Progress Report for the Shared Internal Audit Service was taken after Item 12, Governance of Council owned companies, with Item 11, Risk Management Progress Update taken last.

The Committee voted in favour with the exception of Cllr C Gray who asked that their vote be recorded.

 

These Minutes reflect the order of debate.

153.

Declarations of Interest

Members are required to declare any disclosable pecuniary interests they or their spouse/partner have in any matter which is to be considered at this meeting.  Members must also declare any other pecuniary or non-pecuniary interests they have in any matter to be considered at this meeting. The responsibility for declaring an interest rests solely with the member concerned.

 

Members must clearly state to the meeting the existence and nature of any disclosable pecuniary interest, other pecuniary interest or non-pecuniary interest and the agenda item(s) to which it/they apply.

 

Disclosable Pecuniary Interests are prescribed by the Relevant Authorities (Disclosable Pecuniary Interests) Regulations 2012 as follows;

 

Employment, office, trade, profession or vocation

 

Any employment, office, trade, profession or vocation carried on for profit or gain.

 

Sponsorship

 

Any payment or provision of any other financial benefit (other than from the relevant authority) made or provided within the relevant period in respect of any expenses incurred by a member in carrying out duties as a member, or towards your election expenses. This includes any payment or financial benefit from a trade union within the meaning of the Trade Union and Labour Relations (Consolidation) Act 1992.

 

Contracts

 

Any contract which is made between the relevant person (and a body in which the relevant person has a beneficial interest) and the relevant authority— (a) under which goods or services are to be provided or works are to be executed; and (b) which has not been fully discharged.

 

Land

 

Any beneficial interest in land which is within the area of the relevant authority.

 

Licences

 

Any licence (alone or jointly with others) to occupy land in the area of the relevant authority for a month or longer.

 

Corporate tenancies

 

Any tenancy where (to the member’s knowledge) - (a) the landlord is the relevant authority; and (b) the tenant is a body in which the relevant person has a beneficial interest.

 

Securities

 

Any beneficial interest in securities of a body where - (a) that body (to the member’s knowledge) has a place of business or land in the area of the relevant authority; and (b) either (i) the total nominal value of the securities exceeds £25,000 or one hundredth of the total issued share capital of that body; or (ii) if the share capital of that body is of more than one class, the total nominal value of the shares of any one class in which the relevant person has a beneficial interest exceeds one hundredth of the total issued share capital of that class.

 

In cases of disclosable pecuniary interest, Members must withdraw from the meeting room while the matter is being considered.

 

Minutes:

Councillor A Sachdev declared a non-pecuniary interest in Item 12, Governance of Council owned companies, as a director of Hertsmere Developments Limited (HDL), as it did not remunerate directors.

 

Councillor D Carter declared a non-pecuniary interest in Item 12, Governance of Council owned companies, as a director of Hertsmere Developments Limited (HDL), as it did not remunerate directors.

 

Councillor P Hodgson-Jones declared a non-pecuniary interest in Item 12, Governance of Council owned companies, as a director of Hertsmere Developments Limited (HDL), as it did not remunerate directors.

Councillor P Hodgson-Jones also declared a pecuniary interest in Item 12, Governance of Council owned companies, as a director of Elstree Film Studios Ltd (EFS Ltd), and would withdraw from the meeting for the item.

 

Councillor M Reeve declared a pecuniary interest in Item 12, Governance of Council owned companies, as a director of Elstree Film Studios Ltd (EFS Ltd), and would withdraw from the meeting for the item.

 

Councillor M Bright declared a pecuniary interest in Item 12, Governance of Council owned companies, as a director of Elstree Film Studios Ltd (EFS Ltd), and would withdraw from the meeting for the item during the debate but had been provided a dispensation to answer questions of the Committee for the start of the item.

 

Concerns were raised as to whether directors of council companies could participate even if they were not in receipt of an allowance.  The Head of Legal advised that Hertsmere Developments Limited (HDL) directors did not have a pecuniary interest and would be unable to declare a prospective interest.

154.

Minutes pdf icon PDF 124 KB

To confirm and sign the minutes of the meeting of the Committee held on 30 May 2019.

 

In accordance with the Constitution, no discussion shall take place upon the minutes, except upon their accuracy.

Minutes:

The minutes of the meeting held on 30 May 2019 were confirmed and signed as a correct record.

155.

Anti-Fraud Annual Report 2018/19 - (SAFS) pdf icon PDF 235 KB

This report provides details of the Anti-Fraud Report 2018/19 and performance of this service against the Anti-Fraud Plan 2019/20.

Additional documents:

Minutes:

Report A/19/19 provided the Committee with details of anti-fraud performance against the Council’s 2018/19 Anti-Fraud Action Plan.  This showed that in common with many areas the majority of the cases related to Housing Benefit and Council Tax Reductions with initial concerns being raised by staff and members of the public.  Additional work included working with partners on related areas such as Blue Badge (disabled parking) fraud.

 

The service had approximately 1.5 officers assigned to Hertsmere and had achieved £313k in identified fraud against a target of £150k.  Clarification was provided that this included £203k being in year losses with a further fraud savings of £110k identified.  A further £241k of new Council Tax Liability had also been identified.  The Department for Works and Pensions (DWP) also provided funding to offset potential Housing Benefit losses due to the level of likely recovery.

 

The Committee queried how future savings were calculated and whether attempts were made to recover costs including staff time.  Officers responded that future savings were based on an estimate of 52 weeks or 1 year, this allowed for variations where a fraud might have continued a further six months to three years for example.  Where a case was submitted for court SAFS did include a schedule of costs and were successful in some cases.

 

It was noted that the move to Universal Credit would shift the responsibility for investigation and the risk to the DWP however Council Tax fraud would remain with the Council.

 

RESOLVED that the work of the Shared Anti-Fraud Service be noted in:

1)    Supporting the Councils work to combat fraud in 2018/19.

2)    The performance of SAFS in meeting its KPIs in 2018/19.

3)    The progress delivering the Councils 2019/20 Anti-Fraud Plan.

156.

External Audit Results Report 2018/19 pdf icon PDF 5 MB

The National Audit Office’s Code of Audit Practice (the Code) requires the Council’s external auditors to report to those charged with governance – the Audit Committee – on the work they have carried out to discharge their statutory audit responsibilities together with any governance issues identified. The report TO FOLLOW summarises the findings from the Ernst and Young 2018/19 audit.

Minutes:

The Council’s external auditors, Ernst & Young, submitted a report which detailed the outcome of their 2018/19 audit of the Council’s Statement of Accounts. The representative of Ernst and Young reported that they still needed to close the file on the audit of the Council’s 2018/19 accounts however they would sign the unqualified audit opinion on the financial statements.

 

The two main differences from the draft Financial Statements related to net pension liability and consolidation of the group accounts, however the External Auditor was not aware of any issues.  They would bring back to the Committee any reporting misstatements, however the only anticipated change was to the reporting threshold.

 

The Pension Liabilities issue was linked to the recent “McCloud Ruling” linked to age discrimination in the pension fund and this had led to an additional £840k being added to the Council’s pension liabilities.  The level of risk was required to be noted and the report and impacts had been reviewed.  Other areas such as the risk of fraud, valuation of property, plant and equipment had also been reviewed.

 

Changes, such as the implementation of IFRS 9 Financial Instruments and IFRS 15 Revenues from contracts with customers, had not raised any concerns.

 

The Committee queried the changes due for IFRS 16 Leases next year.  The External Auditor responded that this would impact on the way that Leases would be accounted for and potential bring more things on to the balance sheet.  Setting a suitable de minimis amount for the consideration for chattels such as photocopiers was given as an example of the potential challenges.

 

The Committee asked about Value for Money judgements and the level of risk related to partnerships and whether using public or private sector partners and shared services had an impact, for example with the levels of inherent risk.  They were informed that the arrangements and agreements in place often had more of a bearing than the structure.  Members then broadened this to look at how resource sharing arrangements, including expenses, were scrutinised and managed.  The External Auditor noted that their scope was limited to the governance over operations as a whole; therefore they would monitor how the Council dealt with the outcomes of the governance report.

 

Members queried what a reasonable timescale for implementation might be and why there was no note on materiality or the forgone income due to the Governance of Council owned companies report.  The External Auditor responded that the materiality issue only applied to financial statements and that the Value for Money was not a quantitative driven exercise but linked to risks which were significant to the Council as a whole.  As such they would look at the arrangements in place and although it was non-statutory would expect the report to be dealt with quickly and efficiently.

 

The External Auditor reported that as part of the process they had reviewed all 77,542 journal postings using a system which had then highlighted those to check manually.  This had resulted in 48.9% by value being manually  ...  view the full minutes text for item 156.

157.

Presentation and approval of Statement of Accounts 2018/19 pdf icon PDF 284 KB

This report submits the Council’s Statement of Accounts 2018/19 for approval by the Committee following completion of the external audit and is TO FOLLOW.

Additional documents:

Minutes:

The Head of Finance & Business Services presented the Council’s Statement of Accounts for 2018/19 to the Committee for approval. The meeting was reminded that it had, on 30 May 2019, approved the submission of the accounts to Ernst & Young for external audit.

 

The audit had now been completed and there were only two areas of change.  These related to the pension liabilities, as reported to the previous meeting, and the consolidation of the Council company group accounts.  The Elstree Film Studio Ltd accounts had also had been adjusted by changes in their own pension liabilities.

 

RESOLVED that:

1)    The audited Statement of Accounts 2018/19 (Appendix 1 to Report A/19/21), as required by the Accounts and Audit (England) Regulations 2015, be approved.

2)    The contents of the Letter of Representation 2018/19 (Appendix 2 to Report A/19/21) which must be agreed and signed by the Corporate Director (in their capacity as the Chief Finance Officer) and the Chairman of the Audit Committee and submitted to the external auditor (EY) prior to the issue of their audit opinion, be noted.

3)    The Corporate Director and the Chair of the Audit Committee be authorised to sign the final audited Statement of Accounts and confirm that they represent a true and fair view of the Council’s financial position as at 31 March 2019 and for the year then ended.

158.

Annual Report 2018/19 (SIAS) pdf icon PDF 2 MB

The Shared Internal Audit Service Annual report provides detail on the activity of the Service in the 2018/19 financial year.

Minutes:

The Committee had before it the 2018/19 annual report from the Shared Internal Audit Service (SIAS) and noted that the Service had, despite challenges, delivered above target with 96% of days commissioned by clients achieved and hit the target for number of Audits delivered to Draft Report Stage.

 

The improvement had also allowed the service to move beyond a focus on service delivery to providing additional training and support to staff and facilitating investment in wider service projects.

 

The Committee queried the frequency and use of third-party sub-contracting.  The Head of SIAS responded that this was primarily done through BDO, whose contract had been renewed following a recent tender process.  The contract helped to provide resilience when required as well as access to specialist skills and services. Prior to 2015 PwC had fulfilled the role.

 

Assurance was provided that there were no concerns with regards to political bias in audit and consultancy reports.  Auditors were professionally required to provide a declaration of interest with multiple staff of varying seniority involved in the planning, delivery, quality review and / or writing of reports so that there were a number of checks and balances in place to ensure neutrality, especially on high profile audit matters.

 

RESOLVED that the information contained in the Shared Internal Audit Service Annual report 2018/19 be noted.

159.

Treasury Management Outturn Report and Actual Prudential Indicators 2018/19 pdf icon PDF 90 KB

This report provides Members with an annual review of the performance of the treasury management function including prudential indicators during 2018/19.

Additional documents:

Minutes:

Officers presented the report on the Treasury Management Outturn position and prudential indicators for 2018-19 (Appendix A) for review and scrutiny by the Committee before recommendation to full Council.

 

It was noted that the Committee had through the past year scrutinised the Treasury Management Strategy and the mid-year review and this report covered the end of year position.  The figures had formed part of the financial statements.

 

In presenting the report Officers noted that there had been no breaches of the Treasury Investment Strategy.  The council remained debt free, hence showing a negative position where capital had been expended as this was taken from reserves and there was a net interest return.

 

Officers reported that investment income had exceeded the budget.  This was due to a number of factors including to balances being higher than anticipated, for example due to CIL (Community Infrastructure Levy) income and higher than anticipated interest rates.

 

This had produced a favourable variance of £367k for 2018/19 having achieved an investment income of £567k against a budget of £200k.

 

RESOLVED that the Audit Committee, as the Council’s nominated body, recommend to Council for approving Treasury Management Annual Outturn Report and Actual Prudential Indicators 2018/19 attached at Appendix A and recommend this report to Council for noting.

[At 8.42 pm Councillor M Reeve left the meeting prior to the next Item.]

[At 8.42 pm Councillor P Hodgson-Jones left the meeting prior to the next Item.]

[At 9.58pm during the next item the Chair held a vote to extend the meeting to 10.30pm.  The vote was carried.]

160.

Governance of Council owned companies pdf icon PDF 107 KB

For the report and Action Plan recommendations of the Shared Internal Audit Service in relation to the Governance of Council Owned Companies as set out in Appendix A, be noted and referred to the Executive for consideration.

Additional documents:

Minutes:

Clarification was given by the Head of Legal that there was no requirement for past remunerated directors of Council owned companies to leave the room as they held no current pecuniary interest.  For non-remunerated directors there was no pecuniary interest to declare and non-pecuniary declarations had been made.  It was noted that Members were covered by the Council Code of Conduct which differed from Company Law where liability may be retained for the period of office even after resignation. 

Councillor Bright had been invited by the Chair to attend the meeting and would remain for the presentation and to answer questions from the Committee before withdrawing for the debate and vote, this had been agreed as a limited dispensation by the Head of Legal.  The Corporate Director recorded that they would observe and not participate in the item.

 

The Head of Legal presented the covering report as co-author, supported by the Head of Shared Internal Audit Service and the representative of BDO which had been commissioned to undertake the audit.  The Committee usually monitors high and medium priority recommendations which were actioned by Officers directly.  This report had actions for the Council and the Council owned companies to consider for implementation.

 

This was the second review of governance arrangements for council owned companies, the first having been completed in 2015.  That report had led to changes in governance, the reservation of powers and creation of lease arrangements.  This review was triggered by a Freedom of Information (FOI) request where the information had been gathered and published impartially.  In line with any governance concern this had been passed to the Shared Internal Audit Service (SIAS) for investigation to ensure independence.  SIAS is a joint service with their Officers being Hertfordshire County Council employees which limits their ability to be influenced and helps ensure independence.  SIAS in turn commissioned BDO as a larger specialist provider with extensive experience in local government and were provided resources as required through the existing internal audit arrangements.

 

The resulting internal audit report would be considered by the Executive, Council and the Elstree Film Studios Ltd (EFS Ltd) board.  The report overall had given a rating of “limited assurance” with some areas being of greater concern leading to 11 high and 11 medium priority recommendations.

It was noted later in the meeting that the SIAS standard definition for limited assurance was “The system of internal control is only partially effective, with important audit findings in key areas. Improvement in the design and/or operation of the control environment is necessary to gain assurance risks are being managed to an acceptable level, and core objectives will be achieved.”

 

The Committee, Members and Officers debated a number of areas:

-       With the concerns raised about expenses, the auditors reported that they had not looked at expense claims for all EFS Ltd Board Members as this was beyond their remit established in the terms of reference.  The focus was on Council appointed directors linked to the original FOI response.  This  ...  view the full minutes text for item 160.

[At 10.25 pm at the end of the previous item the Chair held a vote to extend the meeting past 10.30pm.  The vote was carried.]

[At 10.25 pm after the vote to extend the meeting beyond 10.30pm the Chair adjourned the meeting.]

[At 10.31 pm before the start of the next item the Chair resumed the meeting.]

[At 10.31 pm Councillor P Hogson-Jones returned to the meeting prior to the next Item.]

[At 10.31 pm Councillor M Reeve returned to the meeting prior to the next Item.]

161.

Progress Report - Shared Internal Audit Services (SIAS) pdf icon PDF 600 KB

This report provides the Committee with:

a)    the progress made by the Shared Internal Audit Service (SIAS) in delivering the Council’s 2019/20 Internal Audit Plan as at 12 July 2019,

b)    changes to the 2019/20 Audit Plan,

c)    the implementation status of previously agreed audit recommendations,

d)    an update on performance management information as at 12 July 2019.

Minutes:

The Shared Internal Audit Service (SIAS) submitted a report to the Committee detailing progress made by SIAS on: delivery of the Council’s 2019/20 Internal Audit Plan as at 12 July 2019; proposed amendments to the 2019/20 Audit Plan; status of audit recommendations and an update on performance management information as at 12 July 2019.

 

The Committee was informed that there were two new final reports issued.  These covered the Governance of Council owned Companies, that had been tabled, and Disaster Recovery which had one new high priority recommendation.

 

The Committee noted that it was unusual to have a specific, individual report tabled unless there were concerns around the limited assurance level and the number / priority of recommendations.  The Head of SIAS responded that there was no fixed practise in place at Hertsmere; all audit reports are issued to relevant Officers however this report included a recommendation to the Executive.  Where high and medium priority recommendations are raised in internal audit reports these routinely came to the Committee as part of the SIAS Progress Report which included updates and monitoring information.  The SIAS Progress Report also contains a tabular summary of each audit report, including the assurance opinion and number / priority of recommendations.

 

Questions were raised as to whether the work of the Internal Auditor should have gone in to more depth with the specific issues and concerns which had been raised and the timing.  Officers responded that the Elstree Film Studios Ltd had their own external auditors and had access to SIAS where required.  The Council had commissioned this piece of work on an exceptions basis after concerns had been raised through a Freedom of Information request.

It was noted that, whilst the current external auditors of Elstree Film Studios Ltd were specialists in their field, it might be more appropriate to have a consistent approach with the same external auditors for all of the group accounts.

 

Clarification was given as to how SIAS, and in particular the Governance of Council owned Companies report, had been commissioned.  It was confirmed that the Council paid for a set number of days within the approved annual Audit Plan each year.  The Governance of Council owned Companies report had included the use of audit days for an existing Governance of Council-owned Companies audit within the 2018/19 Audit Plan, as well as contingency days and the reallocation of audit days from a separate governance audit.  A small number of days from the carry forward allocation within the current audit plan period had also been used.

 

RESOLVED to note:

1)    The progress made by the Shared Internal Audit Service (SIAS) in delivering the Council’s 2019/20 Internal Audit Plan as at 12 July 2019,

2)    The proposed changes to the 2019/20 Audit Plan,

3)    The implementation status of previously agreed audit recommendations,

4)    The update on performance management information as at 12 July 2019.

162.

Risk Management Progress Update pdf icon PDF 158 KB

This report reviews and updates the Strategic Risks facing this Authority.

Additional documents:

Minutes:

The Committee received a report reviewing and updating the strategic risks facing the authority.

 

A Member queried whether the level of Impact for “Role of Elected Members on Council Company Boards” [SO30] was sufficiently high due to the potential for reputational damage to the Council.  Officers clarified that whilst the Likelihood was higher than the exposure from a normal Member of the Council the Impact related to how it would influence council services directly.

 

RESOLVED that:

1)    The current strategic risks be noted and in particular the following amendments and additions as detailed in the report:

a.    The withdrawal of the risk “CIL” [SO19] and reallocation as a service risk.

b.    The withdrawal of the risk “Compliance with revised Planning Legislation” [SO21] and replacement with the new risks below.

c.    The new risk of “Local Plan” [SO31].

d.    The new risk “Joint Plan with SW Herts Group & other joint working” [SO32].

2)    That the Annual Report on Risk Management 2018-19 be noted.

163.

Dates of Future Meetings

Future meetings are scheduled to take place at 7.30pm at the Civic Offices, Elstree Way, Borehamwood, as follows:

·         24 October 2019

·         29 January 2020

·         27 May 2020

·         30 July 2020

Minutes:

The next meeting was scheduled for 24 October 2019 at 7.30pm.