Agenda and minutes

(a) To approve as an accurate record and the Chairman to sign the minutes of the meeting of the Audit and Pensions Committee on 17^th February 2011.

(b) To note the outstanding actions.

Councillor Iggulden asked for clarification of the 6% and 6.5% return over the 3 years April 2007 to 31st March 2010, given in different items. Pat Gough, Assistant Director Of Finance- Business Support, undertook to provide this.

RESOLVED THAT

The minutes of the meeting held on 17^th February 2011 be agreed as a true and correct record.

There were none.

If a Councillor has any prejudicial or personal interest in a particular item, they should declare the existence and 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 prejudicial 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, unless a dispensation has been obtained from the Standards Committee. 

Where Members of the public are not allowed to be in attendance, then the Councillor with a prejudicial interest should withdraw from the meeting whilst the matter is under consideration unless the disability has been removed by the Standards Committee.

Councillor Cartwright and Councillor Murphy declared in a personal interest in items  6, 7, 8, 9, 10, 11, and 21 as members of the London Borough of Hammersmith and Fulham Pension Fund. Councillor Cartwright declared in a personal interest in items 13 and 16 as a Governor of Sacred Heart and Larmenier & Sacred Heart schools.

RESOLVED THAT

(i)         The membership and terms of reference be noted

(ii)        Councillor Michael Cartwright be appointed as Vice-Chairman of the Committee.

Councillor Cartwright raised concerns regarding the recruitment process for the Committee’s co-opted member, with respect to the equalities impact of the appointment, and what work had been done to quantify this, in light of the Equalities Act 2010. Jane West, Director of Financial and Corporate Services, said that she would investigate whether an assessment was necessary, and report back on the issue.

Councillor Murphy also raised concerns that the appointment had not been widely advertised, and that it would have been best practice to advertise the appointment, with the aim of drawing on a wider group of potential members.

The Chairman said that the appointment of Ms White was a pragmatic one, and based on her exceptional knowledge and experience, which had been further demonstrated in her previous year of membership. He said that the time, cost and officer resource required to run a recruitment process as suggested would be disproportionate. He suggested that matter be put to the vote, and the Committee agreed the appointment by 4 votes to 2.

RESOLVED THAT

Eugenie White be appointed as an independent non-voting member of the Committee.

This report prepared by P-Solve, provides details of the performance and the market value of the Council’s pension fund investments for the quarter ending 31st March 2011.

Simon Jones, P-Solve, introduced the report, which set out the performance of the Pension Fund in the period to 31 March 2011. He said that the period, together with the 12 month period, had seen turbulent market conditions, and this was reflected in performance, though performance against the 3 year benchmark remained strong. With regards to individual mandates, he said that the performance of Majedie and MFS had been below the benchmark for the quarter, while both dynamic asset allocation mandates had also underperformed the benchmark. Within the Matching Fund, performance was as expected, though legal opinion had been received in support of the proposed alteration of the Legal and General Mandate, which would be implemented in the third quarter of the year, subject to negotiation including on the fee structure. The fund value had risen to 604 million by the end of the following period, which ended on the day of the meeting.

The Chairman asked if the underperformance was a blip or part of a trend. Simon Jones said that he believed the effect was temporary, but that some rebalancing from equities might need to be done.

In response to questions from Councillors regarding the benchmark, he said that the benchmark was set above a level of market performance, and most fund managers would not reach or exceed the benchmark. In terms of changing managers, he said that 2 years of quarter-on-quarter underperformance would cause him concern, as investment was best made on a long-term basis, particularly given the time and cost it took to tender a mandate.

Eugenie White said that the benchmark should not be amended because the fund manager holding a mandate failed to reach it, if the Committee was confident that the benchmark had been set correctly, given that it was the basis on which the tender had been awarded, and for which the investment manager was being paid a contract fee. She also said that the fund managers holding the mandates had performed well over a cycle, though did require monitoring. Councillor Iggulden added that the performance of any fund manager should also be measured against their peers.

SheelaSelvajothy, Trade Union Representative, asked what the impact on the fund would be if, following the introduction of increased contributions, there was an increased number of employees leaving the fund. Simon Jones said that quantifying the impact of the changes would be the role of the actuary. Jane West, Director of Financial and Corporate Services, said that public sector pension reform was proposed but still the subject of negotiation, and that an assessment would be made by the actuary of the impact of any changes agreed, and reported to the Committee.

In response to questions from Councillor Ginn and Councillor Murphy, he agreed to supply the Committee with a breakdown of Majedie’s holdings, and with a breakdown of how the fund’s holdings divided by sector. Councillor Murphy also asked if the overall summary could give the 6 month figure, in addition to those  ...  view the full minutes text for item 6.

This report is to appraise the Committee of the recommended award of the Framework agreement for the provision of Pension Administration Services which was submitted for approval by the Cabinet on the 20^th June 2011

Pat Gough, Assistant Director of Finance- Business Support, introduced the report, which set out the results of the retendering of the pensions administration contract. It was noted that the new contract framework produced a significant saving, with the potential for further savings as more Councils joined the framework.

RESOLVED THAT

The report be noted.

The report draws the Committee’s attention to the Local Government Pension Scheme retirements that occurred in 2010/2011 and the consequential effect on the pension fund. It also reports the number and value of redundancy payments made by the Council in 2010/11 for information.

Pat Gough, Assistant Director of Finance- Business Support, introduced the report which set out retirements and redundancies in the 2010/11 financial year. In response to a question on the contribution rate, she said that the figure given took into account anticipated reductions in staffing numbers, and the return of H & F Homes staff.

Jane West, Director Of Finance And Corporate Services, said that the figure was misleading, as it did not differentiate the Council’s contribution to its past service deficit from the contribution rate for current employees; the division of past service deficit by employee was thus potentially misleading, and the Council would consider whether it could express past service deficit contributions in cash terms instead.

Councillor Iggulden asked about the tables on page 51 and 52 of the agenda. Jane West said that officers would respond to the Committee separately with a response.

RESOLVED THAT

The report be noted.

This report sets out work undertaken by the Audit Commission, as external auditors, since the last meeting of the Committee.

Jon Hayes, District Auditor, Audit Commission, said that the external auditor had received the 2010/2011 Pension Fund accounts, and would receive the 2010/11 Council accounts on the day following the Committee. He said that work had also been undertaken on the value for money audit of the Council’s Tri-Borough proposals.

RESOLVED THAT

The report be noted.

This report sets out the fee letters for the external audit for the Council and Pension Fund accounts for 2011-12.

Jon Hayes, District Auditor, Audit Commission, introduced the fee letters, stating that they showed a further cut in expenditure.

RESOLVED THAT

The annual audit fee letters for 2011/12 be noted.

This report provides updates on the implementation of Audit Commission recommendations and of the AGS 2010 Action Plan.

Geoff Drake, Chief Internal Auditor, introduced the report, which set out progress on recommendations made by the Audit Commission, and on actions identified in the Annual Governance Statement. He said that all Audit Commission recommendations were now complete, but that 2 of the 4 entries on the Annual Governance Statement Action plan were not complete, and would need to be rolled into the following year’s statement. He noted that Business Continuity for IT, which had been in progress for some time, would shortly be completed.

Councillor Murphy expressed concern regarding the completion of work to deadlines, noting that the issue with reconciliations had resulted in increased work for the External Auditor and increased cost to the Council. He asked whether this was reflective of poor performance.

HiteshJolapara, Deputy Director of Finance, said that the organisation took seriously its duty to meet deadlines, and adhered to strict deadlines for its internal monitoring deadlines. The roll out of World Class Financial Management would address the issues cited on reconciliations.

Councillor Cartwright expressed concerns with the performance of the Housing Benefit service, which was the cause of a large proportion of Councillors’ caseloads. Jane West said that the recommendation closed related specifically to the subsidy claim, an area that the Council had improved substantially by the introduction of a dedicated team. She said that the performance of the service as a whole had been impacted on a 50% increase in caseload, with no additional staffing resource. She said that, as a result, there had been some diminution in performance. In order to address this, work was being undertaken by Ernst & Young to improve systems in the service, with particular focus on the customer experience. The work would also ensure that staff had the necessary skills to continue the work following the end of Ernst & Young’s work. Jane West agreed to update the Committee on the work undertaken at its September meeting. She also noted that the introduction of universal credit might result in the transfer of the function, and staff, to the Department of Work and Pensions.

RESOLVED THAT

The report be noted.

This report updates the Committee of the implementation of risk management arrangements in Tri Borough planning.

Michael Sloniowski, Principal Consultant- Risk Management, introduced the report, which set out the risk management measures taken with regards to the Tri-Borough programme. He said that the preferred approach was that of the London Programme Management Approach. He said that work had been undertaken on identifying and capturing the risks associated with the programme and that these were being entered in the Council’s risk register. Work was also being undertaken with the officers responsible for risk management at RBKC and Westminster to consolidate issues and reporting standards.

Councillor Cartwright said that there had been insufficient opportunity for member scrutiny of the proposals, and the governance structure of the programme did not give sufficient opportunity for member input, and seemed to be officer-led. He considered that this formed a risk to the programme’s future.

Jane West, Director of Finance and Corporate Services, said that there had been opportunities for the Council’s Scrutiny Committees to examine the proposals, and that all proposals had been agreed by the Council’s Cabinet.

Councillor Nicholas Botterill said that the programme was politically driven, with considerable input from members into the design and shape of the programme. He said that the process had been an emerging one, and there would be further opportunity for scrutiny as the detailed design was put in place.

Councillor Iggulden asked what arrangements were in place for dispute resolution and what mechanisms there were for strategic direction. Jane West said that the Council had had dispute resolution mechanisms in place during its merger with the PCT, and arrangements would be similar. The arrangements for strategic direction were set out in the sovereignty guarantee.

Councillor Murphy asked how officers had drawn on external experience of mergers in assessing the risks related to the project. Michael Sloniowski said that all three boroughs worked to a common externally agreed standard for risk management.

Councillor Murphy asked about the legal position with regards to appointments and equalities law, asking if the proposed appointment of Derek Myers as Chief Executive of two boroughs could be discriminatory. Jane West said that the issue had been examined, and was considered to be of low risk, particularly in the case cited. Appointments would also be subject to the normal approval procedure.

Councillor Murphy asked about the structure of the programme, which appeared to show the same officers acting as Sponsor and Owner of the programme. Jane West clarified that different officers sat on the Sponsoring Group and the Central Policy Board, which was not shown, with the Members’ Group sitting above them.

Geoff Drake, Chief Internal Auditor, said that there was an audit of Tri-Borough governance arrangements scheduled.

RESOLVED THAT

The report be noted.

This report informs the Committee on the overall arrangements for, and performance of, risk management across the Council.

Michael Sloniowski, Principal Consultant- Risk Management, introduced the report, which set out work undertaken on risk management in the period since the last meeting. This included work on risks associated with the 2012 Olympics and work on service resilience.

Councillor Iggulden asked about the issue of gas safety certificates. Geoff Drake, Chief Internal Auditor, said that the issue would be reported to the Committee’s next meeting.

RESOLVED THAT

The report be noted.

This Head of Internal Annual Assurance report is a summary of all audit work undertaken during the 2010/11 financial year and provides assurances on the overall System of Internal Control, the System of Internal Financial Control, Corporate Governance and Risk Management.  In all cases a satisfactory assurance has been provided with the exception of the significant control weaknesses recorded in the report.  The report is a key element of the evidence supporting the Annual Governance Statement (AGS).

Geoff Drake, Chief Internal Auditor, introduced the report, which gave the annual internal assurance report. The report was a requirement, and was created in support of the Annual Governance Statement. It set out overall levels of assurance, and identified any significant control weaknesses.

Councillor Iggulden asked about the failure of controls identified in 2.11.4, and the failure to secure a reduction in the external audit fee as a result. Geoff Drake said that he would be raising the issue at the Council’s internal Financial Strategy Board.

Eugenie White asked about the Council’s performance with regards to Freedom of Information Requests. Jane West said that work was underway to improve responsiveness, but that the decrease in performance was also reflective of a 100% increase in the volume of requests over the last 5 years.

RESOLVED THAT

The contents of the report be agreed.

This report is a summary of recent issues arising in relation to St Mary’s Catholic Primary School.

Dave McNamara, Assistant Director of Finance and Resources- Environment and Children Services, introduced the report, which set out measures taken with regards to the nil assurance audit received by St Mary’s Primary School reviewed by the Committee at its last meeting. He said that, following the substantial assurance gained at its previous audit in 2007, and that the Schools Finance team had assumed that the issues they had observed were a result of the instability that came with the changes in Headteachers at the school. He said that considerable work had been done by the school to ensure that the audit’s recommendations were implemented, but that investigations into the circumstances behind the audit had not yet completed.

The report also set out new measures to be introduced following the report’s findings- firstly, that where a school changed head, an audit would be carried out to give assurance (where the school had not been audited in the previous 12 months), and secondly, that Children’s Services would hold quarterly meetings with the Audit service to identify which schools were of most concern.

In response to a question from Councillor Iggulden as to why the issues had not been detected and what steps would be taken to prevent a similar problem in the future, Dave McNamara said that the Schools Finance team had regular contact with schools, and had an overview of returns and reconciliations where they related to Council funds. However, where transactions related to school holdings (as in the case of money raised by voluntary aided schools), and were not entered into the financial system as recommended by the Council, irregularities in those accounts would be difficult to detect.

In response to Councillor Botterill and Cartwright, who suggested that this was a cause of vulnerability, Dave McNamara agreed that this was an area of vulnerability for voluntary aided schools,

The Chairman asked if the Council issued a code of best practice on schools finance. Geoff Drake, Chief Internal Auditor, said that the school presented a complex case, and the investigation of that case would identify further lessons to be learnt, which would be shared with schools and Governing Bodies. There was also Department of Education guidance on the matter.

Councillor Murphy asked whether the Council should not be more proactive in encouraging best practice in its schools. Jane West said that, where accounts were not connected to funds for which the Council was responsible, the Diocese should be taking a large degree of responsibility.

In response to a question from Sheela Selvajothy regarding responsibility for school accounts, Dave McNamara said that all schools were discouraged from giving their Governors signing authority, given the limited sanctions against them.

Eugenie White expressed concerns that schools governors were generally ill-equipped to make judgements on school finances, particularly given the quality of comparative management information. She suggested that this was an area that the Schools Finance Service could aim to provide more training and information on.

The Chairman said that the Committee would like further  ...  view the full minutes text for item 15.

This report is a summary of the audit findings relating to schools in 2010/11.

Geoff Drake, Chief Internal Auditor, introduced the report, which set out a summary o findings in school audits in 2010/11. He said that with the exception of St Mary’s Primary School, which was covered by another report on the agenda, all schools audits had returned substantial or full assurance. He said that the report would be discussed with the Children’s Services Departmental Management Team following the conclusion of the Ofsted inspection.

RESOLVED THAT

The report be noted

This is the annual report on the progress made in delivering the 2010/11 year service plans; key results of the work undertaken; and the performance achieved.

Geoff Drake, Chief Internal Auditor, introduced the report, which set out the performance of the Corporate Anti-Fraud Service during the 2010/11 financial year.

In response to a question from Councillor Iggulden, Geoff Drake said that the Council received the 40% bounty as cash through subsidy in addition to any debt it could recover from overpayments. However, the proposed introduction of universal credit would end the Council’s responsibility for Housing Benefit, and mean that a significant income stream for the service would end. With this in mind, the Service was planning more financial investigation work and forging links with neighbouring boroughs.

In response to a question from Councillor Murphy regarding links to housing associations, Geoff Drake said that such links did exist, but the service would also, subject to Cabinet approval, be bidding for DCLG funding to extend its work on sublets to housing associations, and would wish to promote the service in that regard.

(Under Standing Order 24, the Chairman moved to extend the guillotine for the meeting to end at 10.30pm, which was agreed by the Committee)

RESOLVED THAT

The annual report be noted.

This report summarises internal audit activity in respect of audit reports issued during the period 1 January to 31 March 2011 as well as reporting on the performance of the Internal Audit service.

Geoff Drake, Chief Internal Auditor, introduced the report, which set out the performance of the Internal Audit Service in the quarter to 31 March 2011.

Councillor Cartwright raised concerns regarding the audit of Parking (Pay and Display). He said that the discrepancies in systems reconciliations were large, and could represent considerable income lost to the Council. He said that there had been longstanding problems with the service. Geoff Drake said that a loss of income was unlikely to be the case, drawing the Committee’s attention to the management response, which showed an overall surplus of £1.7 million over the period.

Eugenie White expressed concerns that, in the light of the Council’s responsibility to base its parking arrangements based on the traffic and parking needs of a given area, that the income from individual meters did not appear to be closely monitored. Councillor Murphy expressed concerns that the contract did not appear to show the relationship between the Council and RBKC working well, given the proposed closer working arrangements.

The Chairman suggested that, in the light of the Committee’s interest in the matter, officers be requested to submit a further report on Parking (Pay and Display), and the actions taken in response to the audit.

RESOLVED THAT

(i) The report be noted, and;

 (ii) That officers be requested to submit a further report, detailing the response to the Parking (Pay and Display) audit.

The Committee is invited to resolve, under Section 100A (4) of the Local Government Act 1972, that the public and press be excluded from the meeting during the consideration of the following items of business, on the grounds that they contain the likely disclosure of exempt information, as defined in paragraphs 1 and 3 of Schedule 12A of the said Act, and that the public interest in maintaining the exemption currently outweighs the public interest in disclosing the information.

RESOLVED THAT

The Committee resolved, under Section 100A (4) of the Local Government Act 1972, that the public and press be excluded from the meeting during the consideration of the following items of business, on the grounds that they contain the likely disclosure of exempt information, as defined in paragraph 1 and 3of Schedule 12A of the said Act, and that the public interest in maintaining the exemption currently outweighs the public interest in disclosing the information

RESOLVED THAT

The exempt minutes of the meeting held on 17^th February 2011 be agreed as a true and correct record.

RESOLVED THAT

The exempt aspects of the report be noted.

RESOLVED THAT

The report be noted.