Audit Committee

Read the Minutes

Minutes of the meeting held on 25 January 2007

Present:

• Councillor Priest - In the Chair 
• Councillors Andrews, Clayton, Isherwood, Lyons, Ramsbottom, and Trotman.
  

AS/07/1 Minutes

Decision

To approve the minutes of the meeting held on 29th September 2006 as a correct record.

AS/07/2 Use of Resources Assessment

The Committee considered a report of the City Treasurer about the results of the assessment of the Use of Resources undertaken by the Audit Commission as part of the Comprehensive Performance Assessment of the City Council.

The Committee noted that the review covered five areas; financial reporting, financial standing, financial management, internal control and value for money. The criteria adopted to judge Use of Resources was significant for a number of reasons, as well as forming part of the overall CPA assessment, the criteria represented important control dimensions which needed to be considered in the Council's annual review of internal control and in the production of the Statement of Internal Control included within the Accounts. Several of the criteria also represent important elements in assessing whether or not the Council provides value for money in the delivery of its services. While the report evidenced that progress was being made across the board in relation to the use of resources judgment criteria, it also indicated that 2007 would present many challenges.

The District Auditor, Clive Portman, attended the meeting and outlined the five areas that were subject to review and the basis of ranking performance on the scale 1-4. He indicated that officers had demonstrated that significant progress was being made in relation to asset management, risk management and value for money and the Council's new business planning process which formed a key driver in delivering integrated improvement across a range of areas contained within the Use of Resources assessment, and, whilst he was reasonably confident that the right things were being done, he would want to see sustained evidence over time that the new and improved processes introduced were culturally embedded within the authority.

Members discussed with the District Auditor a suggestion made by the City Treasurer that the Council's scores were considered harsh in comparison with those awarded to other 'like' Council's. The District Auditor indicated that the inspection team based its assessment on the basis of what it saw and what was presented to it, but he accepted also that there was an element of judgement involved based on each authority's record of achievement in delivering sustained service improvements.

Reference was also made to the value for money evaluation and the extent to which considerations about 'high spending on services' took proper account of the demographic and socio-economic factors in areas demonstrating high levels of deprivation. The District Auditor accepted that these factors undoubtedly had an impact and whilst there was a deprivation weighting within the overall assessment process, this was not tailored to an individual authority and may not therefore properly underpin specific deprivation issues. He recognised that a great deal of work was in hand to assess high spending within the Council, specifically in relation to children's services and adult social care, and he recognised also that this was not a straightforward assessment of expenditure or comparison, but rather an evaluation of the outcomes and benefits for the vulnerable people involved. Members took issue with the use of the term 'unintended high spending' within the Value for Money assessment where this represented expenditure necessary for the Council to properly respond to presenting needs and statutory duties, and members suggested that it be replaced by 'unanticipated high spending' to better reflect the essentially uncontrollable nature of the expenditure. The District Auditor accepted the point and agreed to change his report accordingly. He indicated to the Committee that every effort was made to distinguish cases where a budget estimate was incorrect from the outset, against those where budgets were based on historical circumstances and something exceptional happens that needs to be properly recognised. Risk management, he suggested, could help prevent many things, but could never reflect every eventuality.

Members then turned to consider the implementation of the Council's new internal accounting processes which the report identified had been subject to an ex tended period of stabilisation. The City Treasurer outlined the implementation issues involved in undertaking wholesale change on this scale and for staff to familiarise themselves with new working practices and securing the optimum deliverable benefits from it. The Chair indicated that this was essentially a scrutiny item that the Finance and General Purposes Overview and scrutiny Committee already had as part of its future work programme.

Decision

To note the on-going action to maintain and improve the Council's performance in relation to the use of resources, and the importance of this against the rule change proposed by the Audit Commission that unless a Council achieves a Level 3 score in Use of Resources it will be limited to a Level 2 score overall.

AC/07/3 Risk Management

The Committee considered a report of the City Treasurer informing members about progress in developing risk management methodologies in the light of Use of Resources assessment criteria.

The Committee noted that the Audit Commission in its annual "Use of Resources Assessment" had increased the assessment of risk management arrangements from Level One to a Level Two, and had indicated that to move to Level Three the Council would need to evidence that the Council's approach to risk management was fully embedded within services.

The Head of Audit and Risk Management reported on the way that the Council had radically redesigned it's business planning methodologies, including how they addressed risk management as the main process for continuing to embed risk management. Whilst the resultant business plans were still in draft, the content had been used to assess the extent to which risk management is effectively being undertaken across the Council and also as a source of information against which the operation of the Corporate Risk Register can be assessed.

The Committee noted the criteria which needed to be addressed to move to a level three assessment and outlined progress and actions against each of these criteria. Members also noted the proposal to hold, during February, a series of developmental workshops to assist Heads of Service and their teams in strengthening and embedding risk management within business plans and within day to day management arrangements.

The Committee then turned to consider what the specific needs of councillors were in terms of risk management training. As a minimum it was accepted that all members should be offered training that would provide a base understanding and awareness of risk management issues and methods, and of their duties as councillors to evaluate and challenge the risk analyses made by the officers. It was then suggested that those members serving on the Audit Committee and the Finance and General Purposes Overview and Scrutiny Committee should be offered more detailed training to reflect their greater exposure to the issues.

Decision

1. To note the progress being made in embedding risk management within business planning processes and the way in which this is informing the operation of the Corporate Risk Register.

2. To note the intention to resubmit the Corporate Risk Register to the March 2007 meeting of the Committee for consideration.

3. To agree that there is a need for a two-tier approach to member training and development in relation to risk management-

• Access for all members to information, understanding and awareness of risk management principles and methodologies
• 
  More detailed training for those members who serve on the Audit Committee and the Finance and General Purposes Overview and Scrutiny Committee, to reflect their greater exposure to the issues and principles involved

4. A meeting of the Audit Committee to be held early in June each year by way of a dedicated training meeting to refresh members' understanding of risk management principles and to bring them up to date with new developments.

5. To request the Sub Group established to look at the Council's relationship with strategic partnerships, to consider whether there are any specific needs in relation to risk management training in terms of scrutinising those relationships, over and above those catered for in Decision 3 above, that need to be specifically catered for.