Agenda and minutes

Audit, Pensions and Standards Committee
Tuesday, 17th July, 2018 7.00 pm

Venue: COMMITTEE ROOM 1 - HAMMERSMITH TOWN HALL

Contact: David Abbott  Tel: 020 8753 2063

Items
No. Item

1.

Appointment of a Vice Chair and Membership of the Pension Sub-Committee

The Committee is asked to appoint a Vice Chair from its membership for

the 2018-19 Municipal Year.

Minutes:

RESOLVED

1.    That Councillor Matt Thorley was appointed Vice Chair for the 2018-19 Municipal Year.

 

2.    That the following membership of the Pension Sub-Committee for the 2018-19 Municipal Year was agreed:

·         Councillor Iain Cassidy

·         Councillor Jonathan Caleb-Landy

·         Councillor Rebecca Harvey

·         Councillor Asif Siddique

·         Councillor Matt Thorley

 

2.

Minutes of the Previous Meeting pdf icon PDF 266 KB

To approve the minutes of the previous meeting and to note the outstanding actions.

Additional documents:

Minutes:

RESOLVED

The minutes of the meeting held on 14 March 2018 were agreed and signed by the Chair.

3.

Apologies for Absence

Minutes:

Apologies for absence were received from Councillor Jonathan Caleb-Landy.

 

Councillor Matt Thorley noted that he would be leaving early to attend another engagement.

4.

Declarations of Interest

If a Councillor has a disclosable pecuniary interest in a particular item, whether or not it is entered in the Authority’s register of interests, or any other significant interest which they consider should be declared in the public interest, they should declare the existence and, unless it is a sensitive interest as defined in the Member Code of Conduct, the nature of the interest at the commencement of the consideration of that item or as soon as it becomes apparent.

 

At meetings where members of the public are allowed to be in attendance and speak, any Councillor with a disclosable pecuniary interest or other significant interest may also make representations, give evidence or answer questions about the matter.  The Councillor must then withdraw immediately from the meeting before the matter is discussed and any vote taken.

 

Where Members of the public are not allowed to be in attendance and speak, then the Councillor with a disclosable pecuniary interest should withdraw from the meeting whilst the matter is under consideration. Councillors who have declared other significant interests should also withdraw from the meeting if they consider their continued participation in the matter would not be reasonable in the circumstances and may give rise to a perception of a conflict of interest.

 

Councillors are not obliged to withdraw from the meeting where a dispensation to that effect has been obtained from the Audit, Pensions and Standards Committee.

Minutes:

Councillor Alex Karmel declared a general non-pecuniary interest with respect to pension matters as a deferred member of the Local Government Pension Scheme.

5.

Annual Statement of Accounts 2017-18 pdf icon PDF 227 KB

This report presents the Council’s Statement of Accounts, including the Pension Fund, for 2017/18.

Additional documents:

Minutes:

Hitesh Jolapara (Strategic Director of Finance & Governance) presented the report on the Council’s Statement of Accounts, including the Pension Fund Accounts, and Annual Governance Statement for 2017/18 and the external auditor’s (KPMG) draft opinion on the accounts. It was noted that the External Audit Report and the Council’s Management Representations Letter were contained in a supplementary agenda and an addendum was tabled which set out minor adjustments to the accounts and had been agreed with the auditor.

 

Jennifer Townsend (KPMG, the Council’s external auditor) informed the Committee that, subject to a small number of queries and procedures being satisfactorily resolved, they intended to issue an unqualified audit opinion on the Authority’s financial statements and the Pension Fund’s financial statements. She then took the Committee through the report noting the following points:

·         Four prior-year recommendations had been identified that required further action by management. One new low-priority recommendation had been made as a result of the 2017/18 work. The recommendations (in Appendix 1 of the report) related to the completion of schools’ year-end bank reconciliations.

·         Under key audit risks there were no significant issues raised. She highlighted the managed services contract as an area of significant improvement. In the past it had been a risk area but local controls had mitigated this.

·         There was one Pension Fund risk around hard to value investments.

·         The Council had achieved the highest assurance possible around Value for Money work with no significant concerns.

 

Councillor Matt Thorley asked how the Council arrived at valuations for items on the Council’s asset register and how the auditor verified them. Emily Hill (Assistant Director for Corporate Finance) said the Council used an independent valuer (Wilks Head & Eve's) and had an in-house valuer who reviewed their work. Jennifer Townsend said the auditor looked at the information provided to the valuer then ‘sense checked’ the valuations against that data. They also had their own surveyors who provided analysis. The auditor also assessed the valuers as experts – did they have the requisite experience and credentials etc.The Council valued material assets every year and had a five-year rolling valuation programme to value assets not captured by this process. The auditor also looked at any additions and disposals.

 

Councillor Alex Karmel questioned why, when property prices had fallen over the past year, had the total valuation of land and buildings risen from £1.746bn in 2017 to £1.77bn in 2018. Emily Hill noted that the figures included additions of £54m and depreciation of £36m.

 

Councillor Matt Thorley asked what type of assets the ‘hard to value’ Pension Fund investments referred to earlier were – and how much of the fund was made up of them. Jennifer Townsend said she would have to take advice on exactly what type of assets they were but the Pension Fund’s investments were categorised into levels 1, 2, and 3 (3 being the harder to price category). Seven percent of the total were categorised as level 3.

 

Councillor Alex Karmel asked if the controls imposed in the  ...  view the full minutes text for item 5.

6.

Treasury Outturn Report 2017-18 pdf icon PDF 468 KB

This report presents the Council’s annual Treasury Management Outturn Report for 2017/18 in accordance with the Council’s treasury management practices.

Minutes:

Phil Triggs (Director of Treasury and Pensions) presented the Council’s annual Treasury Management Outturn Report for 2017/18 in accordance with the Council’s treasury management practices. He highlighted the table at 4.2 of the report showing interest paid and received and the table at 4.4 showing a breakdown of types of investments.

 

The Chair asked what the PFI payments in section 4.12 related to. Officers said they related to St. Vincent’s House, an Extra Care scheme entered into a number of years ago.

 

RESOLVED

 

The Committee noted the report.

7.

Corporate Anti-Fraud Service End of Year Report 2017-18 pdf icon PDF 588 KB

This report provides an account of fraud related activity undertaken by the Corporate Anti-Fraud Service from 1 April 2017 to 31 March 2018.

Minutes:

Andy Hyatt (Head of Fraud) presented the report that provided an account of fraud related activity undertaken by the Corporate Anti-Fraud Service (CAFS) from 1 April 2017 to 31 March 2018. He noted that, since April 2017, CAFS had identified 149 positive outcomes, including over 100 tenancy and housing-related successes. For the period 1 April 2017 to 31 March 2018, fraud identified by CAFS had a value of over £1.2million.

  

The Chair asked how the Council decided which cases to highlight and make public. In his role as Ward Councillor he had dealt with the case of a resident who their parking permit fraud publicised and it had made it difficult for her to get a job. Andy Hyatt said officers did take a considered approach to these matters. The more serious cases tended to be highlighted as a deterrent. The Council would only publish names where a case went to court.

 

Councillor Alex Karmel noted that the figures in the report suggested very low levels of social housing fraud. However, analysis by HJK Investigations, housing fraud specialists, suggested a fifth of council tenancies had ‘indications of fraud’. Andy Hyatt responded that the figures quoted did not result in any recoveries. To prove a case and recover a property was a very long process. The Council had used data matching to identify risks and inform housing tenancy audits. The key issue was that sub-tenants were often complicit in the fraud making it very hard to build cases.

 

The Chair asked what the expected rate of tenancy fraud was in the borough. David Hughes said the Audit Commission estimated between 3 and 5 percent social housing fraud across London. The Chair asked if there were any Local Authorities who were particularly effective at tackling tenancy fraud. David Hughes said there was a direct correlation direct correlation between number of investigators and the number of properties recovered. H&F had 4.5 qualified investigators, one trainee investigator, and one financial expert.

 

RESOLVED

 

The Committee noted the fraud work undertaken during the year 1 April 2017 to 31 March 2018.

8.

Risk Management Update Report pdf icon PDF 437 KB

This report provides an update on risk management within the Council, and presents the Corporate Risk Register for consideration.

Minutes:

Michael Sloniowski (Risk Manager) introduced the report that provided an update on risk management within the Council, and presented the Corporate Risk Register for consideration. He noted that the Council took risk very seriously and it was a top priority for the Council’s Senior Leadership Team. The Committee had previously made recommendations to track risks and compare them over time – and compare ourselves with similar London boroughs. The Committee had also asked officers to look at business continuity, disaster management, and supply chain risks in more detail. These elements were discussed in the report.

 

Councillor Alex Karmel asked for clarification of the Committee’s remit – was it responsible specifically for corporate risk or risk more generally. Officers said the Committee had oversight of both, although traditionally it was the corporate risk register that came before members. In future officers would look at bringing community risks to the Committee as well.

 

The Chair asked why Risk 11 focussed solely on the West Kensington Estate and not housing estates in general (page 299). He also asked for more detail on Paragraph 4.4.15 and the figure of just 25 percent compliance. Simon Davies explained that the figure of 25 percent compliance was a combined figure – but it was partly a data quality issue. Work had often been completed but wasn’t recorded. The expectation was that compliance would be in the high 80s. A work plan was being produced to close that gap further.

 

Michael Sloniowski replied that officers were looking closely at contractual arrangements with the facilities management contractor to improve compliance on around estates. Simon Davies added that the Council was currently in negotiations with the contractor due to inadequate performance. As part of the work to support negotiations, officers had carried out an extensive compliance audit across all assets – looking at fire risk, asbestos, water etc. Officers expected to have a full picture of the Council’s position by the end of July.

 

The Chair asked, of the various compliance risks, which was the most urgent. Simon Davis said water was a key concern due to the possibility of Legionella outbreaks. Officers have been going through the checks and had put management action plans in place.

 

David McNulty (Assistant Director, Operations – Growth & Place) addressed the Committee and informed members that in Housing, fire risk assessment compliance was 100 percent. The fire risk assessments for blocks of six stories and above had been published on the Council’s website. The Council remains compliant with regards to Gas and Asbestos however as noted in the report there are some issues with the principal contractor which are being raised through contract mechanisms.

 

Councillor Rebecca Harvey asked for more detail on Risks 22 and 23 that related to the numbers of looked after children and high needs budget pressures.Steve Miley said these risks had emerged over the past few years and all councils were seeing increases. On the high needs block (the money the Council spent on children with additional  ...  view the full minutes text for item 8.

9.

Internal Audit Quarterly Update Report pdf icon PDF 407 KB

This report summarises internal audit activity during the period 1 January to 31 March 2018 - and reports on the performance of the Internal Audit service.

Minutes:

David Hughes (Director of Audit, Risk, Fraud and Insurance) introduced the report that summarised internal audit activity between 1 January and 31 March 2018 and reported on the performance of the Internal Audit service and progress against 2016/17 external audit recommendations and 2016/17 Annual Governance Statement agreed actions.

 

Outstanding Audit Recommendations – Public Services Reform

 

Lisa Redfern (Acting Director of Public Services Reform) discussed the outstanding audit recommendations – noting that she had only very recently picked up the portfolio. Many recommendations were part implemented and action plans were in place. Management met every week to report on progress. She said they would update the Committee once the recommendations were completed.

ACTION: Lisa Redfern

 

The Chair noted that the number of implemented audit recommendations was significantly down on last year. David Hughes clarified that there was a lag in the cycle and he expected those numbers to increase throughout year. He also noted that the audit team were looking to put in smarter controls not more controls for their own sake.

 

RESOLVED

That the Committee noted the contents of the report.

 

10.

Final Audit Report - Legal Services Budget Management 2017-18 pdf icon PDF 687 KB

Minutes:

Hitesh Jolapara informed the Committee that he had asked for an audit because of a reported overspend that wasn’t expected due to client charges not happening consistently. He noted that since Rhian Davies (Assistant Director of Legal Services and Governance) had taken over the service in April 2018, management had strengthened financial controls and charges were consistently monitored.

 

Rhian Davies took the Committee through each of the recommendations, discussing what action had been put in place to resolve each issue:

·         Recommendation 1 - This year management had several meetings with Finance to set an achievable budget. They also looked at the trading account to recover costs and ensure the service was achieving its income target.

·         Recommendation 2 - Since April management had been having regular meetings with Finance, sharing reports and income numbers. There was also a management meeting every week to ensure both individuals and the entire department was hitting its targets.

·         Recommendation 3 - Section 113 charges didn’t apply now that H&F was operating as a sovereign borough.

·         Recommendation 4 – Chargeable hours were monitored on a weekly basis in management meetings.

·         Recommendation 5 – Solicitors were now recording non-chargeable time which will assist.

·         Recommendation 6 – The spreadsheets for recharges had now been simplified.

 

Councillor Alex Karmel asked for an update on the merger with LGSS Law. Kim Dero replied that the merger was a tri-borough initiative and Legal Services were now sovereign. Hitesh Jolapara noted that it had been publicly reported that the merger was on hold.

 

Councillor Rebecca Harvey asked how the service made money. Rhian Davies explained that all their work was chargeable – either internally amongst H&F departments or, wherever possible, externally for other local authorities.

11.

Final Audit Report - Payroll Shared Services pdf icon PDF 579 KB

Minutes:

David Hughes introduced the report and noted that officers were still finding issues around data quality and completeness of records.Mark Grimley (Director of Corporate Services) noted that the new Hampshire solution that would be replacing BT Agresso would address the issues highlighted in the report.

 

Mark Grimley explained that there continued to be numerous issues with BT Agresso but it had moved to a ‘good enough’, stabilised service while the Council secured a new provider. Officers had closed some of the issues raised such as the historic payroll overpayments in Appendix 1. This and other issues would be resolved as part of the commercial settlement with BT.

 

Councillor Alex Karmel asked if BT were liable to pay fines for poor performance under the current contract. Mark Grimley explained that the system’s ‘go-live’ was never accepted so the contract KPIs never kicked in. The Council was coming out of the contract early and there would be a commercial settlement with BT. There would be penalties if BT failed to deliver their part of the transition to the new service.

 

The Chair asked if officers were confident about the transition of data to the new service. Mark Grimley said the Council had put in place a very detailed exit plan. Supply of data and quality of data was fundamental to that plan. All relevant risks were in the risk register. Officers had just completed the first parallel run and were working through the issues it raised with the providers. The new system would be in place by the Autumn, no later than November.

 

Councillor Rebecca Harvey asked if officers were confident in the quality of the new system. Mark Grimley said it was a tried-and-tested solution currently serving over 65,000 service workers (including Oxfordshire County Council, Fire Services and the Police). He had previously undertaken five similar payroll implementations in different organisations. 200 people across the organisation were getting ready to test it. The only new area for Hampshire was leaseholders but additional systems had been put in place to deal with this.

12.

Final Audit Report - Property Services Framework Procurement 2017-18 pdf icon PDF 530 KB

Minutes:

David McNulty presented the final audit report and noted the governance issues and KPIs highlighted by the report. He reported that, in both areas, officers were making progress. A risk log was in place and there was regular reporting to the Assistant Director responsible. A report was scheduled for Cabinet in October on the Framework that would resolve all of the issues raised.

13.

Head of Internal Audit Annual Assurance Report 2017-18 pdf icon PDF 908 KB

This report summarises the work of Internal Audit during 2017/18 and provides an opinion on the overall system of internal control across the Council.

Minutes:

David Hughes (Director of Audit, Fraud, Risk and Insurance) presented the report that summarised the work of Internal Audit during the 2017/18 year and provided an opinion on the overall system of internal control across the Council. He noted that there were positive assurance levels across the organisation the only issues stemming from BT Managed Services.

 

RESOLVED

 

The Committee noted the contents of the annual summary report.

Appendix 1 - Addendum and Errata pdf icon PDF 296 KB