friday meeting room 1&2 meeting room 1&2 ---- shire hall

AUDIT AND GOVERNANCEAUDIT AND GOVERNANCEAUDIT AND GOVERNANCEAUDIT AND GOVERNANCE

COMMITTEECOMMITTEECOMMITTEECOMMITTEE

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28 JUNE 201328 JUNE 201328 JUNE 201328 JUNE 2013

Meeting Room 1&2 Meeting Room 1&2 Meeting Room 1&2 Meeting Room 1&2 ---- Shire Hall, Shire Hall, Shire Hall, Shire Hall,

GloucesterGloucesterGloucesterGloucester

MEETING PAPERS

AUDIT AND GOVERNANCE COMMITTEE

TIME: 10.00 am

DATE: Friday 28th June, 2013

VENUE: Meeting Room 1&2 - Shire Hall, Gloucester

A G E N G A

ITEM TOPIC CONTACT 1. Apologies To receive any apologies for absence. Andrea Griffiths

Tel: 01452 425006 2. Declarations of Interest To note any declarations of interest. Andrea Griffiths

3. Minutes (Pages 1 - 12) To confirm and sign minutes of Friday 12th April 2013. Andrea Griffiths

4. Appointment of a Hearings Panel (Pages 13 - 14) To appoint five members of the council to the Hearings Panel Sub

Committee. The membership of the panel to include two members from the Conservative Group, one member from the Liberal Democratic Group, one member from the Labour Group and one other member.

Jane Burns Tel: 01452 428472

5. Treasury Management Annual Report (Pages 15 - 38) Mark Spilsbury Tel: 01452 426127

6. Annual Report on Internal Audit Activity (Pages 39 - 88) Theresa Mortimer

7. Annual Report on Risk Management Activity 2012/13 (Pages 89 - 102)

Theresa Mortimer

8. Grant Thornton - Auditing Standards (Pages 103 - 118) Communications with the Audit & Governance Committee. Peter Barber

9. Grant Thornton - Audit & Governance Committee Update (Pages 119 - 134)

Peter Barber

10. Date of next meeting The next meeting is scheduled for Thursday 26th September 2013.

NOTES

(a) MEMBERSHIP – Councillors Cllr Iain Dobie, Cllr Colin Guyton, Cllr Tony Hicks, Cllr Barry Kirby, Cllr Shaun Parsons, Cllr Nigel Robbins, Cllr Mike Sztymiak, Cllr Brian Tipper and Cllr Roger Wilson

(b) DECLARATIONS OF INTEREST – Members requiring advice or clarification about whether to make a declaration of interest are invited to contact the Monitoring Officer: Jane Burns �01452 328472 /fax: 425149/e-mail: [email protected] prior to the commencement of the meeting.

GENERAL ARRANGEMENTS

(1) Will Members please sign the attendance list.

EVACUATION PROCEDURE - in the event of the fire alarms sounding during the meeting please leave as directed in a calm and orderly manner and go to the assembly point which is outside the main entrance to Shire Hall in Westgate Street. Please remain there and await further instructions.

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AUDIT AND GOVERNANCE COMMITTEE

MINUTES of the meeting of the Audit and Governance Committee held on Friday 12th April, 2013 commencing at 10.00 am at the Meeting Room 1&2 - Shire Hall, Gloucester.

PRESENT MEMBERSHIP:

Phil Awford John Burgess Philip McLellan Shaun Parsons

Mike Sztymiak Brian Tipper Suzanne Williams

Substitutes:

Apologies: Ron Allen and Sonia Friend

16. APOLOGIES

Apologies were received from Councillor Allen and Councillor Friend.

17. DECLARATIONS OF INTEREST Councillor Burgess declared a personal non-prejudicial interest in respect of the fact that he received a local government pension from Gloucestershire County Council. He also declared he had been an employee of Cotswold District Council, a District Councillor and Cabinet Member of Cotswold District Council relating to the Cotswold Water Park item. It was also noted that Councillor Burgess was a member of the GCC’s Water Park Joint Committee. Councillor Burgess also declared that he was interviewed during the Cotswold Water Park Review. Councillor Parsons declared that he was previously a member of the Cotswold Water Park Joint Committee and had been interviewed by Graham Garbutt. Both the Chairman and Cllr Mike Sztymiak declared a personal non-prejudicial interest in respect of them being members of the Pensions Committee. It was duly noted that Cllr Sztymiak was employed by Capita. The Chairman declared that he is a school governor at Coney Hill Primary School and that he is a member of the Appeals Panel. It was also noted that he and Elizabeth Cave attended the same local church.

18. MINUTES All matters arising had been dealt with and communicated to members of the Committees.

Agenda Item 3

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Minutes subject to their acceptance as a correct record at the next meeting

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RESOLVED THAT the Minutes of the Audit & Governance Committee meeting held on 24th January 2013 be signed as a correct record by the Chairman. Members were updated as to the independent person’s interview process, it was noted that three independent members were appointed and a training session on the 26th March 2013 had taken place and the response had been very positive. It was explained that the independent members would be invited to attend the new member induction sessions.

19. GRANT THORNTON AUDIT & GOVERNANCE COMMITTEE UPDATE Peter Barber presented the report. It was noted that Grant Thornton had devised the plan in association with the Authority. Accounting, audit issues and emerging issues would be flagged up as part of the regular report. It was noted that officers would have the opportunity to respond to the challenge questions within in each section and present to the committee. In response to a question regarding pooling, it was felt that this was a positive arrangement, as the County Council and District Council’s could offset top-up and tarrif allowances which will significantly reduced the amount the districts had to pay central government (originally 80%, now decreased to 20%, thereby increasing the amount of business rates retained in the Gloucestershire pool to the benefit of all pool members). It was confirmed that CFO’s from the County Council and District Council’s meet regularly to monitor the pool arrangements. The committee discussed the situation for writing off debts, it was explained that the individual districts had their own policies. However ‘writing off’ debts depended greatly on the age of the debt and the chances of recovering the funds. Members were informed that each Chief Financial Officer would have a responsibility to minimise the debt write off. Resolved That the report be noted.

20. 2012/13 AUDIT PLAN FOR GLOUCESTERSHIRE COUNTY COUNCIL AND 2012/13 AUDIT PLAN FOR GLOUCESTERSHIRE PENSION FUND Elizabeth Cave presented the report which informed the Committee of the audit work to be undertaken for the 2012/13 financial year for Gloucestershire County Council, and the fee involved.

It was explained that the plan clearly set out the process and had a greater

emphasis on the elements of risk. Members felt that the plan referred to challenges and there were no opportunities detailed within the report. Members suggested that employment could be considered as an opportunity and should be included in the

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future. In response to a question, members were informed that audits were based on materiality, therefore the audit was designed to consider material error. The committee was informed that Internal Audit and Grant Thornton had ongoing dialogue throughout the financial year.

A discussion took place regarding journals, members were informed that only

certain members of staff had the authority to make a journal entry. It was noted that strict control processes were in place, as journals were a recognised practice that would continue for many years. It was noted that each journal entry had a reference number attached to it.

During the discussion, members were informed that officers were planning a training day for the new committee. It was explained that the training would encompass all the different areas with the Audit and Governance committee’s remit.

The total indicative fee for the audit for 2012/13 was £136,930. It was noted that

this was a 40% reduction on 2011/12 fees of £220,000. Liz Cave explained that the objection from 20011/12 audit had now been concluded.

RESOLVED

THAT the reports be noted. 2012/13 AUDIT PLAN FOR GLOUCESTERSHIRE PENSION FUND Peter Barber presented the report which informed the Committee of the audit work to be undertaken for the 2012/13 financial year for Gloucestershire Pension Fund, and the fee involved. It was explained that audit focused on three key areas, Academy Schools, Pooled Investment Vehicles and return on investments. In response to a question, members were informed that non teaching staff within Academy Schools continued to remain part of the Local Government Pension Scheme. It was noted that the auditors did not provide a separate value for money conclusion on the pension fund. The committee noted that the pension fund was within the remit of the Pensions Committee who reviewed the Auditors annual report. Officers explained that triennial valuations, considered the liability and the contributions, of the Gloucestershire Fund and that the performance of the fund was the responsibility of the Pensions Committee. The total indicative fee for the audit for 2012/13 was £23,800. It was noted that this was a 40% reduction on 2011/12 fees. In response to a question, the committee was informed that the opinion was an opinion and not a judgement. Members wished to confirm that the plan was presented to the Pensions Committee. RESOLVED That the report be noted That the plan was presented to the Pensions Committee for information

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21. GRANT THORNTON AUDIT FEES LETTER 2013/14 Elizabeth Cave presented the report, which informed the Committee of the audit work to be undertaken for the 2013/14 financial year for Gloucestershire County Council and the fee involved.

It was explained that the Council’s scale fee for 2013/14 had been set by the Audit

Commission at £130,680 which compared to the audit fee of £130,680 for 2012/13. It was noted that the Audit Commission would be giving the Authority a rebate of £11,500 for the 2012/13 audit.

Resolved That the report be noted.

22. FREEDOM OF INFORMATION ACT 2000 & DATA PROTECTION ACT 1998 REPORT Heather Forbes, Head of Information Management & Archives, presented the report. The committee discussed the report in detail. During the discussion members requested that future reports contain a graph for year on year comparison showing time spent answering requests over a four year period. The monitoring officer explained that people’s motivations regarding freedom of information can be different. Officers were publishing more information on the County Council website, in a bid to reduce Freedom of Information requests. Members were referred to the Information Commissioner’s Audit Report (summarized in Appendix A). It was noted that the Information Commissioner was impressed with the Internal Audit Management arrangements, and they were highlighted as being good practice. The Council’s processes for monitoring and completion of freedom of information requests were also highlighted as good practice. It was evident that a lot of work had been undertaken within the past two years. Members were informed that the Authority was rated the second highest category of “reasonable assurance” in all three areas inspected. The committee welcomed the report and praised officers on their efforts. It was noted that a detailed action plan had been drawn up which would be re-examined by the Information Commissioner in six months. Consequently the action plan would be subject to an internal audit in early 2014. Resolved That the report be noted.

23. INTERNAL AUDIT PLAN 2013/2014 Theresa Mortimer, Chief Internal Auditor (Internal Audit, Risk Management & Insurance Services) presented the report which provided a summary of the

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proposed 2013/14 Risk Based Internal Audit plan as required by the Accounts and Audit (England) Regulations (2011) and the Public Sector Internal Audit Standards (PSIAS) to be effective from 1st April 2013. It was reported that the plan focused on the key strategic priorities of the Council and the key risks associated with the achievement of those priorities. As such, the plan had been developed to provide independent assurance that those risks would be controlled effectively. The committee welcomed the report and noted that the internal audit planning approach has been highlighted as one of the areas of good practice within the GCC Data Protection Audit review undertaken by the Information Commissioners Office (ICO), dated March 2013. The committee was informed that the plan was flexible and dynamic and would need to respond accordingly to any key changes to the Council’s priorities and risks. All changes to the plan will be reported to the Committee as part of the regular internal audit plan monitoring process. RESOLVED The Committee approved the 2013/14 Internal Audit Plan.

24. INDEPENDENT REVIEW OF COTSWOLD WATER PARK Jo Walker, Strategic Finance Director presented the report. The report updated the committee as to the current actions taken in respect of the recommendations made during the review. Members were asked to note the progress taken to address the improvements areas highlighted. Complaints Process The Chief Financial Officer informed the committee that the action was now closed. It was reported that the wording in the policy had been revised according to the recommendations of the committee and the policy had been agreed by Cabinet, to go live as of the 1st April 2013. Members requested that any user feedback should be retained to inform and develop the policy where necessary. It was noted that Internal Audit would monitor the compliance with the new complaints process. Resolved That the action be closed. That Internal Audit would monitor the compliance with the new complaints process during 2013/2014.

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Freedom of Information

The Monitoring Officer reported that this item was now closed and referred to the Information previously presented by Heather Forbes. (Agenda Item 7). It was noted that an Annual Review of Freedom of Information (FOI) would be conducted and would be presented to the committee on annual basis.

Resolved That the action be closed Scheme of Delegation At this juncture, Rodney Semple, Business Efficiency Manager, presented an additional report (a copy is attached to the signed minutes) which suggested recommendations to the points raised in Appendix 1. It was noted that the report arose from the 17 October 2012 meeting of the Constitution Committee. During this meeting the committee members had considered proposed amendments to the council’s scheme of delegation and had sought clarification on several points. It was explained the recommendations had been discussed in detail with Professor Garbutt, who had written the original report that led to the proposed changes, prior to the committee meeting. The committee discussed the report in detail and considered each of the recommendations. During the discussion the following points were noted:

• Recommendation 1 – It was noted that senior officers exercised an element of judgement when taking such decisions under the scheme of delegation. It was agreed that the committee noted the views of Professor Garbutt and reiterated its support for the £250,000 threshold for the reasons set out in the report. Resolved That the recommendation be agreed.

• Recommendation 2 & 3 – The committee noted Professor Garbutt’s support

for the provision as currently worded. The committee agreed to respond to

the Constitution Committee in the following terms: “The concepts of

sensitivity and contention are inevitably subjective and will vary from case to

case. It is not possible to provide a definition that covers all eventualities and

advise that the current wording is left unchanged.”

Resolved That the recommendation be agreed.

• Recommendation 4 – During the discussion, an amendment was suggested,

as indicated below. The committee agreed to respond to the Constitution

Committee with the following advice: “We have reviewed the current

arrangements and are satisfied that there are effective routes available for

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officers to express concerns and have the ability to escalate concerns until

they are satisfactorily resolved. We support reiteration for officers across the

council via corporate training programmes.”

Resolved

That the recommendation be agreed

• Recommendation 5 – The committed suggested an amendment to the

original wording, as indicated below. The committee responded to the

Constitution Committee as follows: “We have reviewed the proposed

amended Scheme of Delegation and are satisfied that the proposed

amendments set out below would result in a scheme that is fit for purpose.

However, we advise that there is a need for improved training and guidance

for officers and that Internal Audit would undertake a review of compliance

with the revised scheme of delegation.”

Resolved


Internal Audit would undertake a review of compliance with the

scheme of delegation during 2013/2014

Subject to the above recommendations being accepted by the

Constitution Committee, it was agreed that this action be closed.

• Recommendation 6 - The committee noted the changes and the proposed

new text and agreed that they should be submitted to the Constitution

Committee for approval.

Resolved


That the final report be submitted to the constitution committee for

approval.

Disposals of Property Mark Spilsbury, explained that the policy had been amended to take account of the points raised by members. It was noted that in future any properties disposed of at undervalue of greater than £250,000 or 30% of the asset value will be subject of a report to Cabinet. Officers explained that this approach had been tested against a selection of recent disposals and believed it represented a proportionate response.

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Members questioned the figure of 30%, some councillors believed the limit was set at 20% as agreed in parliament. Officers agreed to seek clarification on this point. Resolved That clarification be sought on the percentage of asset value, subject to this the action be closed. Internal Audit would undertake a review of compliance with the revised

disposals policy during 2013/2014

Governance Simon Harper, Lead Democratic Services Adviser presented the report. It was explained that members, under the new scheme would be required to regularly report back to the Council on their involvement with the outside bodies they are appointed too. It was suggested that members should be reminded on a quarterly basis of their duty to report back. A detailed review of the legal obligations in respect of the different types of outside bodies had been undertaken by the Director of law and Administration and the guidance to members had been updated. The information would be available following the May 2013 election. It was noted that the intention was to give guidance to members on an individual basis, depending on the type of outside body they were appointed too. Members suggested that “Is there an inherent conflict of interests” be included on the form. Members raised concerns regarding members who were self appointed to school governing bodies. The monitoring officer explained that the ultimate test would be the register of interest which members were obliged to complete. As members were required to comply with the member’s code of conduct and the Nolan principles. Resolved That the suggestion “Is there an inherent conflict of interests” be included on the form. That the report be noted

25. REPORTS BACK ON ACTION REQUESTED FROM INTERNAL AUDIT REPORTS School Deficit Budgets Mark Spilsbury presented the report on behalf of Neil Egles. The report updated members on the progress made in relation to school deficit budgets. Members were informed that following consideration by Cabinet and Full Council the decision was made to write the deficits off. The deficits (£1.2m) were written off against the

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dedicated schools grant, which was held for that purpose. Officers reported that the schools deficit at the end of 2012/13 totalled £0.2m, a very significant reduction on the position one year ago. Resolved That the report be noted.

26. DATE OF NEXT MEETING The committee noted that its next meeting would take place on 28th June 2012

CHAIRPERSON

Meeting concluded at 12:48pm

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Audit Committee – 12th April 2013

Topic Action Responsibility Progress

1 2012/13 Audit Plan For Gloucestershire Pension Fund

That the plan be presented to the Pensions

Committee for information

Jo Walker/Graham Burrow

Completed

2 Cotswold Water Park Review

Complaints Process

Scheme of Delegation

Disposals of Property

Governance

That Internal Audit would monitor the compliance with the new complaints process during 2013/2014.

Internal Audit would undertake a review of compliance with the scheme of delegation during 2013/2014

That the final report be submitted to the constitution committee for approval.

That clarification be sought on the percentage of asset value, subject to this the action be closed.

Internal Audit would undertake a review of compliance with the revised disposals policy during 2013/2014

That the suggestion “Is there an inherent conflict of interests” be included on the form.

Theresa Mortimer Theresa Mortimer Rodney Semple Mark Spilsbury Thesresa Mortimer Simon Harper

Duly noted & Ongoing Duly noted & Ongoing Completed submitted 10/6/13 Completed Duly noted & Ongoing Completed

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APPOINTMENT OF A HEARINGS PANEL

The committee is required to establish a Sub-Committee known as the Hearings Panel to hear allegations that Members have failed to comply with the Authority’s Code of Conduct. The sub-committee will be convened when necessary to hear allegations against members of the Authority who may have failed to comply with the Authority’s Code of Conduct and determine in consultation with an independent person.

The committee is asked to appoint five members to a Hearings Panel Sub-Committee. The membership of the panel will include two members from the Conservative Group, one member from the Liberal Democratic Group, one member from the Labour Group and one other member.

Hearings Panel Sub-Committee Terms of Reference

Membership: 5 County Councillors proportional to the political composition of the Council. Quorum of 3 members present for its duration.

Frequency of Meetings: as often as necessary to perform its functions.

Basic Function: to hear allegations that a Member of the Authority has failed or may have failed to comply with the Authority’s Code of Conduct for Members; and determine in consultation with an independent person if this is the case.

Specific Functions:

(1) To receive reports referred from the Monitoring Officer following investigations into complaints and other steps associated with that function.

(2) To conduct standards hearings and all other steps associated with that function, including taking into account the advice of the Independent Person.

(3) If the panel determines that a breach of the Authority’s Code of Conduct has occurred, the panel can impose one or more of the following if appropriate:

a) Censure; b) Report to Council; c) Recommend actions to the Leader of the Council; d) Recommend actions to Group Leader; e) Removal from Outside Bodies; f) Withdrawal of facilities, such as Council email/website/internet access; g) Exclusion for the Council offices or other premises with the exception

of meeting rooms as necessary for attending Council, Committees or Sub-Committees and/or nominating a single point of contact; and/or

h) Requesting the Member to undertake actions deemed appropriate e.g. training, issue of an apology.

(4) To set-up when necessary an interview panel comprising of the lead members of each party to shortlist and interview candidates for the role of Independent Person.

• To recommend successful candidates to the County Council to be chosen by a majority of Councillors.

Agenda Item 4

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Audit and Governance Committee

28th June 2013

Title of Report

Treasury Management Annual Report 2012/13

Purpose of Report

Each year GCC produces an Annual Report covering its Treasury Management activities for the previous year. The Annual Report is now submitted each year to the Audit and Governance Committee to allow greater scrutiny under the Treasury Management Code.

Recommendations

To consider the Treasury Management Annual Report 2012/13.

Officers

Jo Walker: Strategic Finance Director (01452) 427492 [email protected] Mark Spilsbury: Head of Finance – Head of Financial Management (01452) 426127 [email protected] Kathryn Oakey: Principal Accountant (01452) 427609 [email protected]

Agenda Item 5

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Treasury Management Annual Report 2012/13

REPORT CONTENTS 1. Background

Gloucestershire County Council’s (GCC) treasury management activity is underpinned by CIPFA’s Code of Practice on Treasury Management (the Code), which requires local authorities to produce annually Prudential Indicators and a Treasury Management Strategy Statement on the likely financing and investment activity. The Code also recommends that members are informed of treasury management activities at least twice a year. To comply with this requirement the Treasury Management Strategy Statement and Annual Investment Strategy is agreed annually by full Council as part of the budget setting process, and scrutiny of this, a Mid Year Report, and the Annual Report is delegated to the Audit and Governance Committee. Treasury Management is defined as: “The management of the local authority’s investments and cash flows, its banking, money market and capital market transactions; the effective control of the risks associated with those activities; and the pursuit of optimum performance consistent with those risks.” Overall responsibility for treasury management remains with GCC. No treasury management activity is without risk; the effective identification and management of risk is integral to GCC’s treasury management objectives. This report includes technical terms and acronyms, and therefore a glossary is provided at Appendix A.

2. Economic Background

Treasury management activities at GCC are driven by the prevailing economic conditions. In the UK the economy shrank in the first, second and fourth quarters of calendar year 2012. It was the impressive 0.9% growth in the third quarter, aided by the summer Olympic Games, which allowed growth to register 0.2% over the calendar year 2012. The UK avoided a ‘triple-dip’ recession, however household financial conditions and purchasing power were constrained as wage growth remained subdued at 1.2% and was outstripped by inflation. Annual CPI dipped below 3%, falling to 2.4% in June 2012 before picking up to 2.8% in February 2013. Higher food and energy prices and higher transport costs were some of the principal contributors to inflation remaining above the Bank of England’s 2% CPI target.

The lack of growth and the fall in inflation were persuasive enough for the Bank of England to maintain the UK Bank Rate at 0.5% and also sanction additional £50 billion asset purchases (Quantitative Easing, QE) in July 2012, taking total QE to £375 billion. The possibility of a rate cut was discussed at some of the Bank’s Monetary Policy Committee meetings, but was not implemented as the potential drawbacks outweighed the benefits of a reduction in the Bank Rate. In the March 2013 Budget the Bank’s policy was revised to include the 2% CPI inflation remit alongside the flexibility to commit to intermediate targets.

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The Chancellor largely stuck to his fiscal plans with the austerity drive extending into 2018. In March 2013 the Office for Budgetary Responsibility (OBR) halved its forecast growth in 2013 to 0.6%, which then resulted in the lowering of the forecast for tax revenues and an increase in the budget deficit. The government is now expected to borrow an additional £146bn and see gross debt rising above 100% of GDP by 2015/16. The fall in debt as a percentage of GDP, which the coalition had targeted for 2015/16, was pushed two years beyond this horizon. With the national debt metrics out of kilter with a triple-A rating, the UK’s sovereign rating was downgraded by Moody’s to Aa1. The AAA status was maintained by Fitch and S&P, albeit with a Rating Watch Negative and with a Negative Outlook respectively.

The government’s Funding for Lending (FLS) initiative commenced in August 2012 which gave banks access to cheaper funding on the basis that it would then result in them passing this advantage to the wider economy.

One direct consequence of the FLS was the sharp drop in rates at which banks borrowed from local government. 3-month, 6-month and 12-month Libid rates which were 1%, 1.33% and 1.84% at the beginning of the financial year fell to 0.44%, 0.51% and 0.75% respectively. This can be clearly seen in Appendix B. The impact of this on GCC is also reflected with rates available on fixed deposits and money market accounts falling off markedly over the year. This is discussed in more detail in section 4 of this report.

3. The Borrowing Requirement and Debt Management

PWLB Certainty Rate The Certainty Rate was introduced by the PWLB in November 2012, allowing GCC to borrow at a reduction of 0.2% on the Standard Rate.

As GCC has a fully funded capital programme there was no new borrowing requirement for 2012/13, with all new schemes being funded in full from grants, revenue contributions to capital outlay or contributions. GCC’s strategy is to reduce debt, and in 2012/13 GCC reduced it’s Capital Financing Requirement from £416.0m to £396.6m. The opening and closing external borrowing portfolio (including PFI liabilities brought on balance sheet is summarised below:

Balance on

31/3/2012 £m

Debt Maturing

£m

Debt Prematurely Repaid £m

New Borrowing

£m

Balance on

31/3/2013 £m

Avg Rate %

Fixed rate loans – PWLB

277.251 5.000 - - 272.251 5.47

Variable rate loans – PWLB

15.000 - - - 15.000 0.58

Fixed rate loans – Market

41.050 - - - 41.050 4.32

TOTAL BORROWING

333.301 5.000 - - 328.301 5.10

Other Long Term Liabilities

10.493 1.520 - 13.400 22.373

TOTAL EXTERNAL DEBT

343.794 6.520 - - 350.674

Internal Borrowing 72.232 26.298* 45.934

Total Borrowing Requirement

416.026 396.608

Increase/ (Decrease) in Borrowing £m

(32.818) - 13.400

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* This figure represents the reduction in the internal borrowing position. Contributing to this figure is a £15.662m voluntary revenue payment funded by £11m capital receipts, £3.733m from GCC underspend, and £0.929 of available capital financing.

The table below reconciles the borrowing increase / repaid position to the year-end balance:

The minimum revenue provision (MRP) shown above of £17.2m is a statutory minimum amount by which GCC must reduce debt, calculated on the Capital Financing Requirement CFR) of GCC. In addition to this GCC has chosen to make an additional voluntary revenue provision (VRP) during the year. This voluntary amount totals £15.7m, and has been funded through £11m capital receipts, £3.7m from underspends, and £1.0m from the capital financing budget. Part of this voluntary provision has been used to repay a maturing loan of £5m during the year, and the rest of the MRP and VRP has been used to reduce the internal borrowing position of GCC. A graph of the maturity profile of our external loans during 2012/13 is shown in Appendix C. Generally the maturity profile is well spread. GCC’s underlying need to borrow as measured by the Capital Financing Requirement (CFR) as at 31/3/2013 was £396.6m. GCC’s borrowing requirement during the year was nil as all approved schemes were fully funded through grants, revenue contribution to capital outlay and contributions. Internal Borrowing Given funding cuts to local government which put pressure on Council finances, the strategy followed continues to be to maintain borrowing internally, with no new borrowing being taken out. The use of internal resources in lieu of borrowing continues to be the most cost effective means of funding residual capital expenditure. This has, for the time being, lowered overall treasury risk by reducing both external debt and temporary investments. This internally borrowed position is subject to continued review to ensure that it is sustainable.

£m

Opening CFR 416.026

New Borrowing Required 0.000

Minimum Revenue Provision -17.156

Maturing Loans Repaid -5.000

Additional Voluntary Revenue

Provision Against Internal

Position -10.662

Total -32.818

New PFI Scheme 13.400

Closing CFR 396.608

-15.662Total Voluntary

Repayment

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4. Investment Activity

The CLG’s revised Investment Guidance came into effect on 1st April 2010 and reiterated the need to focus on security and liquidity, rather than yield. It also recommended that strategies include details of assessing credit risk, reasons for borrowing in advance of need and the use of treasury advisers.

During 2012/13 treasury management has been conducted according to the Policy Statement approved by the County Council in February 2012. The approved 2012/13 strategy was one of minimising risk and ensuring liquidity above investment returns in line with the revised investment guidance. Security of capital remained GCC’s main investment objective. This was maintained by following GCC’s counterparty policy as set out in its Treasury Management Strategy Statement for 2012/13, attached at Appendix D. Investments during the year included:

• Deposits with the Debt Management Office

• Deposits with Australian Banks

• Deposits with the LAMIT Property Fund

• Investments in AAA-rated Stable Net Asset Value Money Market Funds

• Call accounts and deposits with UK Banks and Building Societies.

All investments made during the year complied with GCC’s agreed Treasury Management Strategy, Prudential Indicators, Treasury Management Practices and prescribed limits. Maturing investments were repaid to GCC in full and in a timely manner.

Credit Risk: GCC receives regular correspondence from its appointed Treasury Advisors on credit risk, and this is taken into account before transactions are made. Counterparty credit quality was assessed and monitored with reference to credit ratings; credit default swaps; GDP of the country in which the institution operates; the country’s net debt as a percentage of GDP; any potential support mechanisms and share price. GCC used both long and short term credit criteria during 2012/13, with minimum long-term counterparty credit rating determined for the 2012/13 treasury strategy being A-/A-/A3 across rating agencies Fitch, S&P and Moody’s. In June Moody’s downgraded a swathe of banks with global capital market operations, including the UK banks on GCC’s lending list - Barclays, HSBC, Royal Bank of Scotland/Natwest, Lloyds TSB Bank/Bank of Scotland, Santander UK plc - as well as several non UK banks. Only Royal Bank of Scotland fell below GCC’s minimum short term credit rating threshold, and was therefore suspended until February 2013, when it came back onto the lending list following revisions to the 2012/13 strategy included within the 2013/14 Treasury Strategy. These strategy amendments included removal of the short term credit rating category on the advice of GCCs Treasury Advisors. Counterparty credit quality has progressively deteriorated throughout the year as a result of a number of downgrades. Appendix E shows GCCs position in relation to other clients, and the risk vs return on investments. These figures exclude the Icelandic investments we hold. Most clients sit towards the higher risk end due to the deterioration in credit quality over the year.

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Liquidity: In keeping with the CLG’s Guidance on Investments, GCC maintained a sufficient level of liquidity through the use of Money Market Funds, overnight deposits and call accounts.

Yield: GCC sought to optimise returns commensurate with its objectives of security and liquidity. The UK Bank Rate was maintained at 0.5% through the year. Short term money market rates remained at very low levels (as shown in the table in Appendix B) which had a significant impact on investment income. Income earned on longer-dated deposits provided some cushion against the low interest rate environment; however following the downgrades of the Royal bank of Scotland, deposits with this institution were suspended resulting in lower overall yields.

GCC’s investment income for the year had been estimated at £1.18m. The average cash balances representing GCC’s reserves, and working balances (excluding funds held by the Fund Manager) were £187.25m during the period and interest earned was £1.7m.

Internal Investment of temporary surpluses The summary below shows the number of loans made by GCC during the year, together with the value of the loans made and durations.

Total number of loans made to 31 March 2013 210

Daily range £0.10m to £18.6m

Total value of loans made to 31 March 2013 £1,058m

Maximum value per term loan made (non call) £5.0m

Maximum value of loans made (Call) £18.6m

Periods Overnight to 367 days* * A deal was taken out for slightly longer than a year due to a weekend falling on the maturity date.

UK base rate was stable during 2012/13 remaining at 0.5% throughout the year. The average internal rate of return for the year on internal investments was 0.9%. The table below shows a comparison between years of the durations of deposits and the mix of counterparties used by GCC.

Average Length of investments (Excluding Iceland)

At 31/3/12 %

At 31/3/13 %

Less than 1 month (including Call) 80.5 30.7

Between 1 to 3 months 7.8 21.1



Over 12 months 0.0 3.0

Total 100.0 100.0

Investments by type of institution (Excluding Iceland)

At 31/3/12 %

At 31/3/13 %

Building Societies 0.0 15.0

UK Banks 15.6 51.2

Other Local Authorities 29.3 0.0

Call Accounts 15.6 18.1

Money Market Funds (MMF’s) 35.6 12.7

Australian Banks 3.9 0.0

Property Fund 0.0 3.0

Total 100.0 100.0

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The treasury strategy in 2012/13 allowed the use of many previously suspended UK banks and building societies. Although Australian banks have been used in year there were no investments outstanding at year end. During 2012/13 GCC has accessed Certificates of Deposit (CDs) through a custody account with King & Shaxson. This has given GCC access to the highly rated UK bank Standard Chartered, which only trades through this CD facility. The CDs are not available for local authorities to trade without a custody account facility because these financial instruments require use of specialist trading platforms. Towards the end of the financial year a £5m deposit was placed in the Church, Charity and Local Authority (CCLA), Local Authority Mutual Investment Trust (LAMIT) Property Fund, which is only available to Local Authorities. The Fund seeks to identify and hold properties which offer strong potential for growth in income and capital over the long-term. The Fund ensures that the properties held are broadly spread by type, location and size to reduce the problems which can come from having too much exposure to any single property or part of the market. Once purchased, the managers continue to actively manage the property to ensure that the Fund derives the greatest benefit from its potential. The opening and closing investment portfolio is summarised below, which gives a snapshot of the investments balances on specific dates.

Investments

Balance on 31/03/2012

£m

Investments Made £m

Maturities/ Investments

Sold £m

Balance on 31/03/2013

£m

Short Term Investments

131.457 1,052.832 1,015.614 168.675

Long Term Investments

0.000 5.000 5.000 0.000

Funds Managed Externally

20.010 0.216* - 20.226

TOTAL INVESTMENTS

151.467 1,108.116 1,081.541 188.901

* GCC is now part of a Pooled Fund with Investec Asset Management Ltd. The “Investments Made” balance therefore represents reinvested profit on the fund.

Externally Managed Funds The remaining proportion of GCC’s funds are managed by Investec Asset Management Ltd. These funds are held in a Pooled Fund to give access to a broader investment opportunity set and also to provide good diversification without compromising credit quality. The fund has over 300 different holdings, thereby diversifying risk. The cumulative return on the pooled fund since April 2012 is 1.07%, and annualised performance since inception of the pooled fund is 0.97%. Ideally the aim of the fund is to return LIBOR plus 125 basis points, so performance has been disappointing over the year. The second quarter of the financial year returned the best performance however yields fell off during the final two quarters, which kept returns down. Performance in April 2013 is strong, and it is hoped that this will continue for 2013/14.

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The balance remaining with Investec at 31st March 2013 is £20.2m (excluding fees), up from £20.0m at the start of the financial year.

Update on Investments with Icelandic banks In December 2011, the Courts determined that local authority deposits with Glitnir and Landsbanki qualified for priority status. Securing priority creditor status means that deposits with Glitnir are set to recover 100%, whilst Landsbanki deposits are estimated to recover 98%. The decisions were final and there is no further right of appeal.

§ Glitnir – in March 2012, £7.4m was recovered from a mixture of GBP, EURO and USD payments. The EUR and USD amounts were converted via a spot rate into GBP. The remaining amount is currently held in Icelandic Krona, and recovery is ongoing.

§ Landsbanki – it has been expected that 98% will be recovered overall.

Approximately 43% has been recovered to date, via a mixture of EUR, USD and GBP payments, which on conversion totalled £0.489m. The EUR and USD amounts were converted via a spot rate into GBP. 2% remains held in Icelandic Krona, and this amount is expected to rise to 18% as further repayments are made. Regular payments are expected every December, until December 2019 for the outstanding balance.

Issues remain around foreign exchange risks for both Landsbanki and Glitnir, as payments have been and will continue to be received in Euros, US Dollars, GBP and Icelandic Krona. GCC has discussed these foreign exchange transactions with its bank and suitable arrangements have been put in place to accept the payments. There are still uncertainties regarding funds currently held in Krona, as they cannot currently be converted into GBP. The LGA in conjunction with GCC and other authorities affected, are working on a practical solution for recovery of these amounts.

Non-Iceland Domiciled Banks

§ Heritable – It is still expected that 88p/£ will be recovered overall. 70% has been recovered to date, with further payments expected in 2013/14.

Further accounting guidance was issued by CIPFA on the accounting treatment surrounding these transactions for the 2012/13 statement of accounts. This guidance has been followed as part of the closedown process. Impairment Reserve An impairment reserve was set up in 2009/10 following the collapse of the Icelandic banking system to offset potential investment losses. This reserve was initially credited with £7.3m to reflect the worse case scenario for recovery of principal amounts outstanding. Following the successful court process, the impairment reserve has been reduced and currently stands at £3m.

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5. Compliance with Prudential Indicators

GCC can confirm that it has complied with its Prudential Indicators for 2012/13, which were set in February 2012 (updated February 2013) as part of GCC’s Treasury Management Strategy Statement (which can be accessed through the following link: http://www.gloucestershire.gov.uk/budget . Details can be found in Appendix F. In compliance with the requirements of the CIPFA Code of Practice this report provides members with a summary report of the treasury management activity during 2012/13. None of the Prudential Indicators have been breached and a prudent approach has been taken in relation to investment activity with priority being given to security and liquidity over yield.

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Appendix A GLOSSARY OF TERMS Basis Point A measure of percentage where 1 basis point is equivalent to 0.01%. Call Account A bank account with instant access to funds held on deposit. Capital Financing Requirement The total borrowing required by GCC to support the Capital programme. Certainty Rate A borrowing rate offered by the PWLB at 20 basis points below normally available rates. Certificate of Deposit (CD) A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate and can be issued in any denomination, although GCC only trades in sterling. A CD can be sold before maturity. CIPFA – Chartered Institute of Public Finance and Accountancy Leading professional accountancy bodies in the UK and the only one which specialises in the public services. Credit Default Swap (CDS) A credit default swap (CDS) is a financial swap agreement that the seller of the CDS will compensate the buyer in the event of a loan default or other credit event. Custody Account A facility to enable GCC to access alternative investments instruments that require specialist electronic settlement systems. Debt Management Office (DMO) An Executive Agency of Her Majesty's Treasury. The DMO's responsibilities include debt and cash management for the UK Government, lending to local authorities and managing certain public sector funds. Discount A deductable sum - calculated on normal actuarial principles – which a lender pays to GCC if a loan is repaid early and if interest rates are presently higher than the loan rate. The discount reflects the gain to the lender of foregoing the remaining instalments of interest, and receiving funds which have to be re-invested at current interest rates. Funding for Lending Scheme The Bank and HM Treasury launched the Funding for Lending Scheme (FLS) on 13 July 2012. The FLS is designed to incentivise banks and building societies to boost their lending to the UK real economy. It does this by providing funding to banks and building societies for an extended period, with both the price and quantity of funding provided linked to their lending performance. GDP Gross Domestic Product.

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Gilt Long term fixed income debt security (bond) issued by the UK Government and traded on the London Stock Exchange LAMIT Local Authority Mutual Investment Trust. LOBO (Lender’s Option / Borrowers Option) Money Market instruments that have a fixed initial term (typically one to ten years) and then move to an arrangement whereby the lender can decide at pre-determined intervals to adjust the rate on the loan. At this stage the borrower has the option to repay the loan. London Inter-Bank Bid Rate (LIBID) The interest rate at which major banks in London are willing to borrow (bid for) funds from each other. Minimum Revenue Provision The minimum amount which must be charged to an authority’s revenue account each year and set aside towards repaying borrowing Money Market The term applied to the institutions willing to trade in financial instruments. It is not a physical creation, but an electronic/telephonic one. PFI Liabilities A requirement under current accounting standards to include all Private Financing arrangements within the borrowing requirement, to reflect the additional liability on GCC from these schemes. Pooled Fund Investments are made with an organisation who pool together investments from other organisations and apply the same investment strategy to the portfolio. Pooled fund investments benefit from economies of scale, which allows for lower trading costs per pound, diversification and professional money management. Premium An additional sum - calculated on normal actuarial principles – which the authority pays to a lender if a loan is repaid early and if interest rates are presently lower than the loan rate. The premium reflects the loss to the lender of foregoing the remaining instalments of interest, and receiving funds which have to be re-invested at current interest rates. Prudential Indicator Indicators set out in the Prudential Code that calculates the financial impact and sets limits for treasury management activities and capital investment. PWLB – Public Works Loan Board An independent statutory body operated within the Debt Management Office, which is able to meet all of a local authority’s needs for long-term borrowing. The PWLB is prepared to lend to authorities who act prudently and comply with all relevant legislation.

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RISK: Credit and counterparty risk The risk of failure by a counterparty to meet its contractual obligations to the organisation under an investment, borrowing, capital, project or partnership financing, particularly as a result of the counterparty’s diminished creditworthiness, and the resulting detrimental effect on the organisation’s capital or current (revenue) resources. Liquidity risk The risk that cash will not be available when it is needed, that ineffective management of liquidity creates additional unbudgeted costs, and that the organisation’s Interest Rate risk The risk that cash will not be available when it is needed, that ineffective management of liquidity creates additional unbudgeted costs, and that the organisation’s business/service objectives will be thereby compromised.

Refinancing risk The risk that maturing borrowings, capital, project or partnership financings cannot be refinanced on terms that reflect the provisions made by the organisation for those refinancings, both capital and current (revenue), and/or that the terms are inconsistent with prevailing market conditions at the time. Legal Risk The risk that the organisation itself, or an organisation with which it is dealing in its treasury management activities, fails to act in accordance with its legal powers or regulatory requirements, and that the organisation suffers losses accordingly. Operational Risk The risk that an organisation fails to identify the circumstances in which it may be exposed to the risk of loss through fraud, error, corruption or other eventualities in its treasury management dealings, and fails to employ suitable systems and procedures and maintain effective contingency management arrangements to these ends. It includes the area of risk commonly referred to as operational risk. Market Risk The risk that, through adverse market fluctuations in the value of the principal sums an organisation borrows and invests, its stated treasury management policies and objectives are compromised, against which effects it has failed to protect itself adequately. Stable Net Asset Value Money Market Funds The principle invested remains at its invested value and achieves a return on investment. Voluntary Revenue Provision Any amount set aside to reduce the Capital financing Requirement over and above the MRP.

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Appendix B

Economic and Money Market Data, PWLB Rates The average, low and high rates correspond to the rates during the financial year and rather than those in the tables below Table 1: Bank Rate, Money Market Rates

Date Bank Rate

O/N LIBID

7-day LIBID

1-month LIBID

3-month LIBID

6-month LIBID

12-month LIBID

2-yr SWAP Bid

3-yr SWAP Bid

5-yr SWAP Bid

01/04/2012 0.50 0.55 0.55 0.61 1.00 1.33 1.84 1.24 1.30 1.59

30/04/2012 0.50 0.50 0.65 0.60 0.99 1.32 1.84 1.35 1.43 1.68

31/05/2012 0.50 0.48 0.65 0.57 0.97 1.30 1.82 1.20 1.20 1.34

30/06/2012 0.50 0.50 0.50 0.55 0.83 1.13 1.65 0.96 0.99 1.25

31/07/2012 0.50 0.50 0.65 0.45 0.63 0.92 1.43 0.76 0.77 1.02

31/08/2012 0.50 0.50 0.52 0.40 0.57 0.81 1.23 0.75 0.78 1.01

30/09/2012 0.50 0.25 0.52 0.40 0.47 0.66 0.95 0.70 0.76 1.00

31/10/2012 0.50 0.25 0.44 0.40 0.44 0.55 0.82 0.69 0.77 1.05

30/11/2012 0.50 0.25 0.30 0.40 0.44 0.54 0.80 0.73 0.80 1.05

31/12/2012 0.50 0.25 0.43 0.40 0.44 0.54 0.80 0.69 0.76 1.00

31/01/2013 0.50 0.42 0.43 0.40 0.44 0.54 0.80 0.73 0.86 1.17

29/02/2013 0.50 0.41 0.42 0.40 0.44 0.54 0.80 0.59 0.69 1.05

31/03/2013 0.50 0.40 0.40 0.40 0.44 0.51 0.75 0.59 0.68 0.97

Minimum 0.50 0.25 0.30 0.40 0.44 0.51 0.75 0.55 0.65 0.90

Average 0.50 0.39 0.49 0.45 0.62 0.82 1.19 0.84 0.90 1.17

Maximum 0.50 0.55 0.65 0.61 1.00 1.33 1.84 1.38 1.45 1.72

Spread --

0.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

1.60

1.80

2.00

Money Market Rates 2012/13 (LIBID)

Overnight

1 month

3 months

6 months

1 year

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Appendix C

Loan Profile 2012/13

Although the spread of borrowing is generally smooth there are a number of peaks. The first peak in 2019/20 is because the variable rate loan of £15m matures. The peak in 2051/52 is because there are three loans maturing, one of which is for £15m. The peak in 2077/78 is the final date of maturity for a number of LOBOs loans. Note that LOBO loans are shown at maturity rather than the earliest call date.

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Appendix D

Specified and Non Specified Investments Specified Investments Specified Investments will be those that meet the criteria in the CLG Guidance, i.e. the investment:

- is sterling denominated - has a maximum maturity of 1 year - meets the “high credit quality” as determined by GCC or is made with the UK government or

is made with a local authority in England, Wales, Scotland or Northern Ireland or a parish or community Authority.

- the making of which is not defined as capital expenditure under section 25(1)(d) in SI 2003 No 3146 (i.e. the investment is not loan capital or share capital in a body corporate).

“Specified” Investments identified for GCC’s use are:

• Deposits in the DMO’s Debt Management Account Deposit Facility

• Deposits with UK local authorities

• Deposits with banks and building societies

• *Certificates of deposit with banks and building societies

• *Gilts: (bonds issued by the UK government)

• *Bonds issued by multilateral development banks

• Treasury-Bills (T-Bills)

• Local Authority Bills (LA Bills)

• Commercial Paper

• AAA-rated Money Market Funds with a Constant Net Asset Value (CNAV)

• AAA-rated Money Market Funds with a Variable Net Asset Value (VNAV)

• Other Money Market Funds and Collective Investment Schemes i.e. credit rated funds which meet the definition of a collective investment scheme as defined in SI 2004 No 534 and SI 2007 No 573.

1. * Investments in these instruments is on advice from GCCs Treasury Advisor. 2. The use of the above instruments by GCCs Fund Manager will be by reference to the

fund guidelines contained in the agreement between GCC and the individual manager. For credit rated counterparties, the minimum criteria will be the lowest equivalent short-term and long-term ratings by Fitch, Moody’s and Standard & Poor’s (where assigned). Long-term Short-term

Fitch A- F1

Moody’s A3 P-1

S&P A- A-1

GCC will also take into account information on corporate developments of and market sentiment towards investment counterparties.

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New specified investments will be made within the following limits: Instrument Country/

Domicile Counterparty Maximum

Counterparty / group Limits £m

E.g.

Term Deposits UK DMADF, DMO No limit

Term Deposits/Call Accounts

UK Other UK Local Authorities No limit

Term Deposits/Call Accounts/CDs

UK Counterparties rated at least A- Long Term and F1 Short Term (or equivalent)

£30m

Term Deposits/Call Accounts/CDs

Non-UK Counterparties rated at least A- Long Term and F1 Short Term (or equivalent) in select countries with a Sovereign Rating of at least AA+

£20m

Gilts UK DMO No limit

T-Bills UK DMO No limit

LA-Bills UK Other UK Local Authorities No limit

Bonds issued by multilateral development banks

(For example, European Investment Bank/Authority of Europe, Inter-American Development Bank)

£30m overall EIB; CoE; IADB Bonds

AAA-rated Money Market Funds

UK / Ireland / Luxembourg domiciled *

CNAV MMFs VNAV MMFs (where there is greater than 12 month history of a consistent £1 Net Asset Value)

£50m overall** £10m limit per CP **

Deutsche Bank; State Street; HSBC; Goldman Sachs; Prime Rate; RBS; Ignis etc. Aviva VNAV MMF Investec Liquidity Fund

Other MMFs and CIS

UK/Ireland/ Luxembourg domiciled *

Pooled funds which meet the definition of a Collective Investment Scheme per SI 2004 No 534 and subsequent amendments

£10m per CP** Payden & Rygel; Investec Short Bond Fund

Note: Any existing deposits outside of the current criteria will be reinvested with the above criteria on maturity. *All MMFs are separate ring fenced legal entities, independent and registered with a regulatory body. Despite being domiciled in Ireland (or Luxembourg) they do not have exposure to Irish bank debt or Irish sovereign securities. All MMFs on our counterparty list have zero exposure to Irish investments. The maximum invested with a single MMF will be no more than 0.5% of that MMF’s assets in order to contain risk. **This limit excludes funds held by GCCs Fund Manager, Investec. Councils Bank Account GCC banks with HSBC. At the current time, it does meet the minimum credit criteria of A- (or equivalent) long term. Even if the credit rating falls below our minimum criteria within the financial year it will continue to be used for short term liquidity requirements (overnight and weekend investments) and business continuity arrangements.

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Approved counterparties (limits are per table above):

Instrument Country/ Domicile

Counterparty

Term

Deposits / Call Accounts / CDs

UK

Santander UK Plc (Banco Santander Group)

Bank of Scotland (Lloyds Banking Group)

Lloyds TSB (Lloyds Banking Group)

Barclays Bank Plc

Clydesdale Bank (National Australia Bank Group)

HSBC Bank Plc

Nationwide Building Society

NatWest (RBS Group)

Royal Bank of Scotland (RBS Group)

Standard Chartered Bank

Australia

Australia and NZ Banking Group

Commonwealth Bank of Australia

National Australia Bank Ltd (National Australia Bank Group)

Westpac Banking Corp

Canada

Bank of Montreal

Bank of Nova Scotia

Canadian Imperial Bank of Commerce

Royal Bank of Canada

Toronto-Dominion Bank

Finland Nordea Bank Finland

France

BNP Paribas

Credit Agricole CIB (Credit Agricole Group)

Credit Agricole SA (Credit Agricole Group)

Société Générale

Germany Deutsche Bank AG

Netherlands

ING Bank NV

Rabobank

Sweden Svenska Handelsbanken

Switzerland Credit Suisse

US JP Morgan

Gilts UK DMO

T-Bills UK DMO

LA-Bills UK Other UK Local Authorities


(For example, European Investment Bank/Authority of Europe, Inter-American Development Bank)

AAA-rated Money Market Funds

UK / Ireland / Luxembourg domiciled *

CNAV MMFs VNAV MMFs (where there is greater than 12 month history of a consistent £1 Net Asset Value)

Other MMFs and CIS

UK/Ireland/ Luxembourg domiciled *

Pooled funds which meet the definition of a Collective Investment Scheme per SI 2004 No 534 and subsequent amendments

Notes:

• This list could change if, for example, a counterparty / country is upgraded, and meets our other creditworthiness tools. Alternatively if a counterparty is downgraded, this list may be shortened.

• Any existing deposits outside of the current criteria will be reinvested with the above criteria on maturity.

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• All non-UK banks restricted to a maximum exposure of £40m.

• GCCs full list of current counterparties, in accordance with these criteria, is held in GCC Treasury Management Policies.

* All MMFs are separate ring fenced legal entities, independent and registered with a regulatory body. Despite being domiciled in Ireland (or Luxembourg) they do not have exposure to Irish bank debt or Irish sovereign securities. All MMFs on our counterparty list have zero exposure to Irish investments. The maximum invested with a single MMF will be no more than 0.5% of that MMF’s assets in order to contain risk. ** VNAV funds currently used by GCC Fund Manager, Investec. *** Currently used by GCC Fund Manager, Investec.

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Non-Specified Investments Having considered the rationale and risk associated with Non-Specified Investments, the following have been determined for GCCs use:

Instrument In-

house use

Use by fund managers

Maximum maturity (yrs)

Max % of portfolio

Capital expenditure

E.g.

Deposits with banks, building societies & local authorities

ü ü

5 10 No

CDs with banks and building societies ü ü 20 No

Gilts

ü*

ü 10 70 No


ü*

ü 10 70 No

EIB Bonds, Authority of Europe Bonds etc.

Bonds issued by financial institutions guaranteed by the UK government

- ü 10 70 No

Sterling denominated bonds by non-UK sovereign governments

ü*

ü 70 No

Money Market Funds and Collective Investment Schemes, which are not credit rated

ü* ü

These funds do

not have a defined maturity

date

30 No

Investec Target Return Fund; Elite Charteris Premium Income Fund

Government guaranteed bonds and debt instruments issued by corporate bodies

ü ü

10 70 Yes

Non-guaranteed bonds and debt instruments issued by corporate bodies

ü ü

10 70 Yes

Collective Investment Schemes (Pooled funds) which do not meet the definition of collective investment schemes in SI 2004 No 534 or SI 2007 No 573

ü* ü

These funds do

not have a defined maturity

date

20 Yes

Way Charteris Gold Portfolio Fund; Lime Fund

*Use of this instrument will be on the advice of the Treasury Advisor

1. In determining the period to maturity of an investment, the investment should be regarded as commencing on the date of the commitment of the investment rather than the date on which funds are paid over to the counterparty.

2. The use of the above instruments by GCCs Fund Manager will be by reference to the fund

guidelines contained in the agreement between GCC and the individual manager.

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Appendix E The chart below shows the position of GCC in comparison to the other clients of our treasury advisors. GCC is marginally below the average of the client base.

The value weighted average reflects the credit quality of investments according to the size of the deposit. GCC aims to achieve a score of 7 or lower, to reflect GCC’s overriding priority of security of monies invested and the minimum credit rating of threshold of A- for investment counterparties.

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

3.50%

4.00%

4.50%

1 2 3 4 5 6 7

Average Rate of Investments

Average Credit Risk Score - Valued Weighted Average

Arlingclose Client Benchmarking

Benchmarking Gloucestershire CC - 31/03/2013

Higher RiskLower Risk

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Appendix F

Capital Financing Requirement The Capital Financing Requirement is the total amount required by GCC to fully fund the Capital Programme. In effect it is therefore the total borrowing requirement of GCC. The outturn position for GCC’s cumulative maximum external borrowing requirement for 2012/13 is shown in the table below:

*Other long term liabilities are GCCs PFI schemes. This includes a Fire Joint Training Centre, and 4 new Fire Stations and a Community Life Skills Centre. Under current accounting regulations GCC must show these liabilities as part of the total debt of GCC.

**Reserves shown here differ slightly to those shown in the Statement of Accounts following approval by Cabinet for carry forwards, which increase the final reserves amount.

In the Prudential Code Amendment (November 2012), it states that the chief finance officer should make arrangements for monitoring with respect to gross debt and the capital financing requirement such that any deviation is reported, since any such deviation may be significant and should lead to further investigation and action as appropriate. *The gross debt is higher than approved due to a number of Fire Station PFI schemes coming onto GCCs Balance Sheet due to a change in accounting standards.

Prudential Indicator Compliance

(a) Authorised Limit and Operational Boundary for External Debt

31/03/2013 Actual £m

CFR 396.608

Less: Existing Profile of Borrowing

328.301

Less: Other Long Term Liabilities*

22.373

Cumulative Maximum External Borrowing Requirement

45.934

Usable Reserves 133.819**

Cumulative Net Borrowing Requirement / (Investments)

-87.885

31/03/2013 Approved

£m

31/03/2013 Actual £m

CFR 401.270 396.608

Gross Debt 329.862 350.674*

Difference 71.408 45.934

Borrowed in excess of CFR? (Y/N)

N N

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The Local Government Act 2003 requires GCC to set an Affordable Borrowing Limit, irrespective of their indebted status. This is a statutory limit which should not be breached. GCC’s Affordable Borrowing Limit was set at £525m for 2012/13. This limit represents a worse case scenario for debt required and is calculated as the total capital financing requirement, plus the minimum revenue provision, plus maturing debt, and capital receipts. Added to this is an allowance to cover the possibility of not being able to make monthly salary payments. This allows GCC flexibility with its total borrowing requirement. The Operational Boundary is based on the same estimates as the Authorised Limit but reflects the most likely, prudent but not worst case scenario without the additional headroom included within the Authorised Limit. The Operational Boundary for 2012/13 was set at £495m. There were no breaches to the Authorised Limit and the Operational Boundary during the year; borrowing at its peak was £355.7m.

(b) Upper Limits for Fixed Interest Rate Exposure and Variable Interest Rate Exposure

• These indicators allow GCC to manage the extent to which it is exposed to changes in interest rates.

• The upper limit for variable rate exposure allows for the use of variable rate debt to offset exposure to changes in short-term rates on our portfolio of investments.

Limits for 2012/13

£m Maximum during

2012/13 £m

Upper Limit for Fixed Rate Exposure

450 241

Compliance with Limits Yes

Upper Limit for Variable Rate Exposure

200 -54

Compliance with Limits Yes The limits are set as total fixed rate borrowing plus total fixed rate investments, and for variable as total variable borrowing plus total variable investments.

(c) Maturity Structure of Fixed Rate Borrowing

• This indicator is to limit large concentrations of fixed rate debt needing to be replaced at times of uncertainty over interest rates.

Maturity Structure of Fixed Rate Borrowing

Upper Limit %

Lower Limit %

Actual Fixed Rate (£m) Borrowing

as at 31/03/2013

% Fixed Rate Borrowing

as at 31/03/2013

Compliance with Set Limits?

under 12 months 25 0 36.050* 11.0 Yes

12 months and within 24 months 25 0 9.863 3.0 Yes

24 months and within 5 years 50 0 14.590 4.4 Yes

5 years and within 10 years 75 0 62.171 18.9 Yes



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50 years and above 100 0 0.000 0 Yes

* Following the 2011 revision to the Cipfa Treasury Management Code LOBO loans are now classified in their call period and therefore for the purposes of this prudential indicator are classified as short term.

(d) Actual External Debt

This indicator is obtained directly from GCC’s balance sheet. It is the closing balance for actual gross borrowing (short and long-term) plus other deferred liabilities. The indicator is measured in a manner consistent for comparison with the Operational Boundary and Authorised Limit.

Actual External Debt as at 31/03/2013 £m

Borrowing 328.301

Other Long-term Liabilities 22.373

Total 350.674

(e) Total principal sums invested for periods longer than 364 days

• This indicator allows GCC to manage the risk inherent in investments longer than 364 days.

• The limit for 2012/13 was set at £30m.

(f) Capital Expenditure This indicator is set to ensure that the level of proposed capital expenditure remains within sustainable limits, and, in particular, to consider the impact on Council tax.

2012/13 Estimate

£m

2012/13 Actual £m

Capital Expenditure 60.472 56.223

Capital expenditure has been and will be financed or funded as follows:

Capital Financing 2012/13 Estimate

£m

2012/13 Actual £m

Capital receipts & Fund 0.000 0.053 Government Grants 40.364 24.929 Revenue contributions 14.593 23.056 Capital Contributions 5.415 8.185 Total Financing 60.472 56.223 Supported borrowing 0.000 0.000 Unsupported borrowing 0.000 0.000 Total Funding 0.000 0.000 Total Financing and Funding

60.472 56.223

The table shows that the capital expenditure plans of GCC could be funded entirely

Page 37

24

from sources other than external borrowing.

(g) Ratio of Financing Costs to Net Revenue Stream

• This is an indicator of affordability and highlights the revenue implications of existing and proposed capital expenditure by identifying the proportion of the revenue budget required to meet financing costs.

• The ratio is based on costs net of investment income.

2012/13 Approved

%

2012/13 Actual %

Ratio of Financing Costs to Net Revenue Stream

9.70 7.61

(h) Incremental Impact of Capital Investment Decisions

• This is an indicator of affordability that shows the impact of capital investment decisions on Council Tax. The incremental impact is calculated by comparing the total revenue budget requirement of the current approved capital programme with an equivalent calculation of the revenue budget requirement arising from the proposed capital programme.

Incremental Impact of Capital Investment Decisions

2012/13 Approved

£

Increase in Band D Council Tax

0.12

(i) Adoption of the CIPFA Treasury Management Code

• This indicator demonstrates that GCC adopted the principles of best practice.

Adoption of the CIPFA Code of Practice in Treasury Management

GCC approved the adoption of the CIPFA Treasury Management Code at its Council meeting on 24th February 2010*.

*GCC has incorporated the changes from the revised CIPFA Code of Practice (published November 2011) into its treasury policies, procedures and practices.

(j) Upper Limit for Total Principal Sums Invested Over 364 Days

• The purpose of this limit is to contain exposure to the possibility of loss that may arise as a result of GCC having to seek early repayment of the sums invested.

2012/13 Approved

£m

2012/13 Revised

£m

Upper Limit for total principal sums invested over 364 days

30.0 30.0

Page 38

Audit and Governance Committee

Date: 28th June 2013 Agenda No:

Title of Report: Annual Report on Internal Audit (IA) Activity 2012/13

Purpose of Report: To provide the Committee with an annual report on Internal Audit

Activity which fully meets the Chief Internal Auditor’s annual reporting

requirements, as set out in the CIPFA Code of Practice for Internal

Audit in Local Government in the UK 2006.

Recommendations: It is recommended that the Committee:

1. Assesses, from the findings set out in this Internal Audit Annual

Report whether it can take reasonable assurance that the internal

control environment, comprising risk management, control and

governance is operating effectively;

2. Requests senior management attendance at the next meeting of

the Committee to provide an update on the actions taken in

relation to the recommendations made, in the Developers

Contributions audit report; and

3. Notes that the performance of Internal Audit meets the required

standards.

Officer (s) Contact: Theresa Mortimer; Chief Internal Auditor: Internal Audit, Risk Management and Insurance Services. Tel: 01452 427013 [email protected]

Mark Spilsbury; Head of Financial Management. Tel: 01452 426127 [email protected]

Key Risks Failure to deliver an effective Internal Audit Service will prevent an

independent, objective assurance opinion to be provided to those

charged with governance that the key risks associated with the

achievement of the Council’s objectives are being adequately

controlled.

Report Content 1. Introduction 2. Responsibilities 3. Purpose of this report 4. Internal Audit’s Opinion on the Council’s Internal Control

Environment 5. Summary of IA’s Activity undertaken compared to that planned 6. Summary of IA’s Activity undertaken which informed our opinion 7. Summary of additional Audit Activity 8. Internal Audit Performance Appendix 1: End of year progress report 2012/2013 including audit

assurance opinions Appendix 2: Completed Internal Audit Activity during the period April –

June 2013 relating to 2012/2013 Planned Activity

1

Agenda Item 6

Page 39

internalaudit

ANNUAL REPORT ON

INTERNAL AUDIT ACTIVITY

2012/2013

Gloucestershire County Council

2

Page 40

(1) Introduction

All local authorities must make proper provision for internal audit in line with the 1972 Local

Government Act (S151) and the Accounts and Audit (England) Regulations 2011. The latter

states that authorities must “maintain an adequate and effective system of internal audit of

its accounting records and of its system of internal control, comprising risk management,

control and governance, in accordance with the proper practices in relation to internal

control”. Gloucestershire County Council’s Internal Audit function, which sits within Strategic

Finance, carries out the work required to satisfy this legislative requirement and reports its

findings and conclusions to management and to this Committee.

During 2012/2013, the guidance accompanying the Regulations recognises the “CIPFA

Code of Practice for Internal Audit in Local Government in the United Kingdom 2006” as

representing “proper internal audit practices”. The Code defines the way in which the Internal

Audit Service should be established and undertakes its functions.

(2) Responsibilities

Management are responsible for establishing and maintaining appropriate risk management

processes, control systems (financial and non financial) and governance arrangements.

Internal Audit plays a key role in providing independent assurance and challenge, advising

the organisation that satisfactory arrangements are in place and operating effectively.

Internal Audit is not the only source of assurance for the Council. There are a range of

external audit and inspection agencies as well as management processes which also

provide assurance and these are set out in the Council’s Code of Corporate Governance

and its Annual Governance Statement.

(3) Purpose of this Report

One of the key requirements of the Code is that the Chief Internal Auditor should provide an

annual report to those charged with governance, timed to support the Annual Governance

Statement. The content of the report is prescribed by the Code which specifically requires

Internal Audit to:

provide an opinion on the overall adequacy and effectiveness of the organisation’s

internal control environment and discloses any qualifications to that opinion, together

with the reasons for the qualification;

compare the actual work undertaken with the planned work, and presents a summary

of the audit activity undertaken from which the opinion was derived, drawing attention

to any issues of particular relevance;

summarise the performance of the Internal Audit function against its performance

measures and targets; and

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comment on compliance with the standards of the CIPFA Code of Practice for

Internal Audit in Local Government in the UK 2006.

When considering this report, the Committee may also wish to have regard to the quarterly

interim Internal Audit progress reports presented to the Committee during 2012/2013 and the

Annual Report on Risk Management Activity 2012/2013.

(4) Internal Audit’s Opinion on the Council’s Internal Control Environment

In providing our opinion it should be noted that assurance can never be absolute. The most

that Internal Audit can provide is a reasonable assurance that there are no major

weaknesses in risk management arrangements, control processes and governance.

The matters raised in this report, and our quarterly monitoring reports are only those that

were identified during our internal audit work and are not necessarily a comprehensive

statement of all the weaknesses that may exist or represent all of the improvements

required.

Opinion

We are satisfied that, based on the internal audit activity undertaken during 2012/13 and

management’s actions taken in response to that activity, enhanced by the work of other

external review agencies, sufficient evidence is available to allow us to draw a reasonable

conclusion as to the adequacy and effectiveness of Gloucestershire County Council’s overall

internal control environment.

In our opinion, for the 12 months ended 31 March 2013, Gloucestershire County Council has

an adequate overall control environment, to enable the achievement of the Council’s

outcomes and objectives.

This opinion will feed into the Annual Governance Statement which will be included within

the Annual Statement of Accounts.

(4a) Scope of the Internal Audit Opinion

In arriving at our opinion, we have taken into account:

The results of all internal audit activity undertaken during the year ended 31st

March 2013 and whether our high and medium priority recommendations have

been accepted by management and, if not, the consequent risk;

The effects of any material changes in the organisation’s objectives or activities;

Matters arising from internal audit quarterly progress reports or other assurance

providers to the Audit and Governance Committee;

Whether or not any limitations have been placed on the scope of internal audit

activity; and

4

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Whether there have been any resource constraints imposed on internal audit

which may have impacted on our ability to meet the full internal audit needs of the

organisation.

(4b) Limitations to the scope of our activity

There have been no limitations to the scope of our activity or resource constraints imposed

on internal audit which have impacted on our ability to meet the full internal audit needs of

the Council. Whilst the core Internal Audit service is provided in-house, during 2012/2013,

the Chief Internal Auditor has:

Commissioned external specialist ICT audit via Warwickshire County Council’s

Internal Audit Framework Agreement;

Set up joint working arrangements in relation to Internal Audit, Risk Management and

Insurance Services, with the Chief Internal Auditor at Warwickshire County Council;

and

Is in the process of agreeing a Service Level Agreement with Gloucestershire NHS

Counter Fraud Service to provide support with investigations, National Fraud

Initiative analysis and a pro-active counter fraud awareness programme.

(5) Summary of Internal Audit Activity undertaken compared to that planned

The underlying principle to the 2012/2013 plan is risk and as such, audit resources were

directed to areas which represented ‘in year risk’. Since the original risk based plan was

approved in April 2012 by the Committee, a number of additional audit activities have proved

necessary and some of the planned audits were no longer required. Variations to the plan

are required if the plan is to adequately reflect the ongoing changing risk profile of the

Council.

The net effect is that although the work undertaken was slightly different to that originally

planned we are able to report that we achieved 82% of the overall revised plan and 81.3% of

the high priority activities (excluding fraud/irregularity) as at 31st March 2013.

The above reflects that resources were redirected as a result of the increase in special

investigations and irregularity work, i.e. 21 new referrals during 2012/13, coupled with some

long term sickness.

The pie charts below summarises the percentages of planned audits per service area, i.e.

Adults, Communities and Infrastructure etc. and category of activity, i.e. fundamental

financial systems, governance etc, compared with the percentage of actual audits

completed.

5

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6

Page 44

7

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(6) Summary of Internal Audit Activity undertaken which informed our opinion

The schedule provided at Appendix 1 contains a list of all of the audit activity undertaken

during 2012/2013, which includes, where relevant, the assurance opinions on the

effectiveness of risk management arrangements and control processes in place to manage

those risks and the dates where a summary of the activities outcomes has been presented

to the Audit and Governance Committee. Explanations of the meaning of these opinions are

shown below.

In addition, please refer to Appendix 2 which provides the summary of 2012/13 audits which

have not previously been reported to the Audit and Governance Committee, including, very

importantly, three limited assurance audit opinions.

Assurance

levels

Risk Identification Maturity Control Environment

Substantial Risk Managed Service area fully aware of the risks relating to the area under review and the impact that these may have on service delivery, other directorates, finance, reputation, legal, the environment client/customer/partners, and staff. All key risks are accurately reported and monitored in line with the Corporate Risk Management Strategy.

System Adequacy – Robust framework of controls ensures that there is a high likelihood of objectives being achieved

Control Application – Controls are applied continuously or with minor lapses

Adequate

Risk AwareService area has an awareness of the risks relating to the area under review and the impact that these may have on service delivery, other directorates, finance, reputation, legal, the environment, client/customer/partners, and staff, however some key risks are not being accurately reported and monitored in line with the Corporate Risk Management Strategy.

System Adequacy – Sufficient framework of key controls for objectives to be achieved but, control framework could be stronger

Control Application – Controls are applied but with some lapses

Limited

Risk Naïve Due to an absence of accurately and regularly reporting and monitoring of the key risks in line with the Corporate Risk Management Strategy, the service area has not demonstrated an adequate awareness of the risks relating to the area under review and the impact that these may have on service delivery, other directorates, finance, reputation, legal, the environment, client/customer/partners and staff.

System Adequacy – Risk of objectives not being achieved due to the absence of key internal controls

Control Application – Significant breakdown in the application of control

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(6a) Internal Audit Assurance Opinions on Risk and Control

The pie charts provided below show the summary of the risk and control assurance opinions

provided within each category of opinion i.e. substantial, adequate and limited. Comparisons

with 2011/2012 have been shown for information purposes; however, please note that these

are not direct comparisons due to the differing internal audit activity undertaken within the

two financial years. The increase in limited risk and control opinions would not be deemed

unusual due to the significant amount of increased complexities and organisation change

during 2012/2013. That said, it is pleasing to report that the Council is still showing that 90%

of the activities reviewed have received a substantial (18%) or adequate (72%) opinion on

control.

Risk and Control Opinions 2011/12

Risk and Control Opinions 2012/2013

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(6b) Limited Control Assurance Opinions

Where audit activity record that a limited assurance opinion on control has been provided,

the Audit and Governance Committee may request Senior Management attendance to the

next meeting of the Committee to provide an update as to their actions taken to address the

risks and associated recommendations identified by Internal Audit.

(6c) Audit Activity where a Limited Assurance Opinion has been provided on

Control

During 2012/2013, 6 limited opinions on control were provided. These related to:

Supplier A Landlines (reported to Committee 27th September 2012);

Contract Award and Monitoring – Property Agency Framework Agreement (reported

to Committee 24th January 2013);

Fostering Payments Extras (reported to Committee 24th January 2013);

Developer Contributions - monitoring systems (page 20 of this report);

Gloucestershire Fire and Rescue Service – Procurement of a New Mobilisation,

Control and Command system (page 22 of this report); and

Project Management Capacity – Cinderford Northern Quarter Spine Road (page 23

of this report).

(6d) Adequate Control Assurance Opinions

Where audit activity record that an adequate assurance opinion on control has been

provided where recommendations have been made to reflect some improvements in control,

the Committee can take assurance that improvement actions have been agreed with

management to address these.

(6e) Internal Audit recommendations made to enhance the control environment

Year Total No.

of high

priority

recs

% of high

priority recs

accepted by

management

Total No.

of medium

priority

recs

% of medium

priority recs

accepted by

management

Total No.

of recs

made

2011/12 31 100 120 98 151

2012/13 71 98 124 99 195

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The Committee can take assurance that all high priority recommendations will remain under

review by Internal Audit, by obtaining regular management updates, until the required action

has been fully completed.

(6f) Risk Assurance Opinions

There were two audits where a limited assurance opinion was given on risk during

2012/2013, these related to:

Supplier A Landlines (reported to Committee 27th September 2012); and

Contract award and monitoring – Property Agency Framework Agreement (reported

to Committee 24th January 2013).

Where limited assurance opinions on risk are provided, the relevant reports are given to the

Risk Champions to ensure that the risks highlighted by Internal Audit are placed on the

relevant risk registers. The monitoring of the implementation of the recommendations is then

owned by the relevant manager and helps to further embed risk management into the day to

day management, risk monitoring and reporting processes.

In addition, Risk Management and Insurance Services are provided with the Internal Audit

reports where a limited assurance opinion is provided, to enable their prioritisation of risk

management support, if deemed appropriate.

Internal Audit’s Review of Risk Management

During 2011/2012, 100% of the audited areas rated the effectiveness of the risk

management arrangements as substantial (51%) or adequate (49%) with 0% obtaining a

limited assurance opinion.

During 2012/2013, 95 % of the audited areas rated the effectiveness of risk management

arrangements as substantial (45%) or adequate (50%) with 5% obtaining a limited

assurance opinion. Highlighting the same comments as at 6a above, re the increase in the

limited assurance risk opinions, this evidences that risk management continues to be further

embedded into the Council’s business activities.

Internal Audit also undertake, on a rotational basis, reviews on the effectiveness of risk

management arrangements, operating across all service areas, looking at the Strategic and

Operational Performance/Business Plans and associated Risk Registers, to ensure that

actions recorded to mitigate risks are in place and operating as intended.

This year, Internal Audit reviewed the risk management arrangements operating within

Safeguarding Adults, Public Health, Legal Services, Asset Management and Property

Services (AMPS), Human Resources (HR) and Strategic Finance.

These internal and external assessments, coupled with the external recognition received for

the numerous risk management initiatives undertaken over past years, the detailed risk

based assurance statements obtained from all Directors (Commissioning and Delivery) as

part of the formulation of the Annual Governance Statement, has led Internal Audit to

conclude that robust risk management arrangements operate within the authority.

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(6h) Governance Arrangements

Gloucestershire County Council has responsibility for conducting, at least annually, a review of

the effectiveness of its governance framework including the system of internal control.

In undertaking this review GCC has :-

Set out the key documents and processes which incorporate its governance system;

Sought independent assurances from external assessments where available;

Obtained detailed risk based assurance statements from Directors (Commissioning and

Delivery), countersigned by either the Chief Executive, Deputy Chief Executive or Chief

Operating Officer depending on line management responsibilities covering all areas of

the business, to confirm that adequate governance arrangements are in place in

relation to:

Service delivery;

Key partnerships;

Risk management and internal control;

Performance management;

Financial management;

Adherence to laws, regulations, rules and procedures;

Human resources issues;

Management of natural resources;

Asset management; and

Information governance.

We can confirm that this process is consistent with the Delivering Good Governance in Local

Government: Briefing Note published by CIPFA.

One key issue to note is that Council commissioned an independent review of the Cotswold

Water Park (CWP) in 2011/12, examining areas such as governance arrangements,

adherence to policies and decision making processes. This was known as the ‘Garbutt

Review’. The findings of the review were initially fully considered by this Committee on 12th

March 2012. The recommendations, which include Mr Garbutt’s suggestions for the future

course of action in respect of the County Council’s relationship with the CWP, as well as

matters concerning the general governance of the Council, were incorporated into an action

plan. The implementation of the plan was overseen by the Audit and Governance Committee

during 2012/2013.

In addition to supporting the development and implementation of the CWP action plan, Internal

Audit’s role, during 2013/2014, will be to undertake reviews of compliance with the revised:

Corporate Complaints process;

Employee Code of Conduct;

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Officers Scheme of Delegation; and

Property Assets Disposal Policy.

The outcomes of these compliance reviews to be reported back to this Committee.

(7) Summary of additional Internal Audit Activity

(7a) Special Investigations/Counter Fraud Activities

The Counter Fraud Team within Internal Audit received 21 new referrals in 2012/13 although

we continued to be involved in 6 cases which were referred in previous years. 5 of the cases

referred in 2012/13 are continuing to be investigated in 2013/14, although at the time of

writing this report 3 of those have now closed.

Of the 6 cases brought forward, two involved alleged theft by an employee and referral to the

Police which consequently involved a lot of input from Internal Audit, particularly the Counter

Fraud Team.

Internal Audit has also been involved in other investigations/reviews which have not

necessarily resulted in sanctions but in major procedural changes, although one piece of

work has resulted in the repayment of a significant sum of money for the non fulfilment of a

contract. This particular piece of work has led to the inclusion of related counter fraud activity

within 2013/14.

Other investigations involved work within schools concerning non fulfilment of contracted

hours, procurement issues, additional Headteachers’ pay, procedural issues concerning the

letting of a contract, procedural issues in respect of the collection of income and the viability

of an extended school club.

National Fraud Initiative (NFI)

Internal Audit has continued to support the National Fraud Initiative (NFI) which is a biennial

data matching exercise administered by the Audit Commission.

We made the initial data submission to the Audit Commission in October 2012 which

resulted in the matches being supplied to Gloucestershire County Council from the end of

January 2013 onwards. All recommended matches are to be investigated by either Internal

Audit or the appropriate service area. IA is currently investigating one data match, based on

the data matches received to date.

To ensure effective outcomes, the Counter Fraud Team continues to fully collaborate with

the following external agencies/assurance providers:

Various Police Forces as necessary;

Other Local Authorities on National Fraud Initiative work;

Audit Commission; and

Local NHS Counter Fraud Specialists.

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The Committee can take assurance that the Statutory Officers Group, comprising the Chief

Executive, Director: Strategic Finance (s151 Officer) and the Monitoring Officer are fully

briefed on all such activity, monitor progress to date and approve all police referrals.

(8) Internal Audit Performance

The Accounts and Audit (England) Regulations 2011 require relevant bodies ‘to conduct an

annual review of the effectiveness of its internal audit’.

This process is also part of the wider annual review of the effectiveness of the internal

control system, and significantly contributes towards the overall controls assurance

gathering processes and ultimately the publication of the Annual Governance Statement.

The Accounts and Audit Regulations also states that internal audit should conform to ‘proper

practices’ and it is advised that, during 2012/13 proper practice for internal audit is set out in

the Code of Practice for Internal Audit in Local Government in the UK published in 2006 by

the Chartered Institute of Public Finance and Accountancy (CIPFA).

To meet the above requirements a self assessment of the Internal Audit Service was

undertaken, benchmarking the service against this proper practice.

The Code consists of 11 standards, containing over 190 detailed questions, (summarised

below) which set out how the internal audit service should perform its functions, against

which an annual assessment should be undertaken.

Standard Criteria

The Scope of

Internal Audit

Deals with formal terms of reference, coverage/scope of the internal control

environment and defining audit’s role in relation to fraud and corruption and

consultancy work.

Independence Deals with overall organisational independence as well as auditors own

independence and objectivity.

Ethics Sets minimum standards for the performance and conduct of all internal

auditors under the four main principles of integrity, objectivity, competence and

confidentiality.

Audit Committees Deals with the relationship between Internal Audit and the Audit Committee.

Relationships Sets out the principles of good relationships with management, other internal

auditors, external auditors, other regulators and inspectors and elected

members.

Staffing, Training

& CPD

Deals with staff resources, skills, competencies and training.

Audit Strategy

and Planning

Deals with the requirement to produce a strategy document and annual audit

plan.

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Undertaking Audit

Work

Deals with risk based internal auditing, the processes to be carried out in

individual audit assignments, incl. planning, fieldwork and quality control.

Due Professional

Care

Deals with auditor competence, responsibilities, and diligence.

Reporting Sets out the principles of reporting on audit assignments, identifying risk

exposure, follow up and escalation procedures and providing an annual

opinion on the control environment.

Performance,

Quality and

Effectiveness

Sets out the need for an audit manual and establishing quality and

performance measures.

The self assessment against the Code of Practice has identified that the internal audit

service fully meets the requirements of the Code.

Public Sector Internal Audit Standards (PSIAS)

As summarised above, since 2006, the CIPFA Code of Practice for Internal Audit has been

advised as the proper practice for internal audit. However, a collaboration announced by the

Chartered Institute of Internal Auditors (CIIA) and the Chartered Institute Public Finance and

Accountancy (CIPFA) in May 2011 has led to the development of a new set of Internal Audit

Standards, namely the Public Sector Internal Audit Standards (PSIAS).

The new PSIAS have been developed to provide a consistent standard across the UK public

sector and applies to central government, local government and NHS organisations.

Following a consultation period in 2012, these new standards have been compiled and

reviewed by the Internal Audit Standards Advisory Board (IASAB) which comprised of

representatives from the Chartered Institute of Internal Auditors (CIIA), the Chartered

Institute of Public Finance and Accountancy (CIPFA), HM Treasury, Scottish Government

and other relevant standard setters. These new standards, which replace the CIPFA Code of

Practice, became effective from 1 April 2013 and have four key objectives:

Define the nature of internal auditing within the UK public sector;

Set basic principles for carrying out internal audit in the UK public sector;

Establish a framework for providing internal audit services, which add value to

the organisation, leading to improved organisational processes and

operations; and

Establish the basis for the evaluation of internal audit performance and to

drive improvement planning.

These standards are mandatory and the Chief Internal Auditor will be expected to report on

conformance in the 2013/2014 annual report. As such, the Chief Internal Auditor will

undertake a self assessment against the PSIAS and revise the Internal Audit Charter (Terms

of Reference) and implement any changes, as required.

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As part of our joint working arrangements with Warwickshire County Council, the Chief

Internal Auditors will compare respective processes during 2013/14.

The revised self assessment, action plan, (summarising improvement areas identified) and

revised Internal Audit Charter (Terms of Reference), to be presented to the Audit and

Governance Committee for Approval.

Customer Satisfaction Survey results 2012/13

At the close of each audit review a customer satisfaction questionnaire is sent out to the

Service Manager or nominated officer. The aim of the questionnaire is to gauge satisfaction

against areas such as timeliness, quality and professionalism. For each question, within

each of the categories as detailed below, customers are asked to rate the service between

excellent, good, fair and poor. A target of 80% was set where overall, audit was assessed as

good or better. The latest results as summarised below, shows that the target has been

exceeded, with the highest score of 94.1% reflecting Internal Audit as being a positive

support to their service.

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In addition, the following positive comments have been received from our customers:

“Audit was very well handled by the auditor - felt this was a positive and constructive

process that was about learning lessons for the future”

“The auditor’s supportive attitude even when she needed to deliver criticism was much

appreciated”

“The auditor’s approach was constructive and helpful throughout”

“Openness and supportive approach”

“This was a difficult area to grasp because there has been such a lack of clarity about

these payments, but the auditor was sensitive to the issues that the social workers and

managers have been trying to address in their use of this budget”

“The appropriate light touch approach and clear communication throughout”

“I appreciated the fact that the auditor understood what he was auditing and his positive

comments about my approach to the evidence pack”

“The manner in which the audit was conducted”

“Usefulness of having an outside view and valuable feedback”

“It was helpful to be subject to examination and questions of this nature to test our

processes”

“The timescale given to receive and respond to feedback”

“Willingness to listen and work through the audit to ensure it captured the concerns and

recommendations”

“An independent and trusted perspective on the events and roles of different parts of the

organisation in the action plan”

Lessons Learned from customer feedback and actions taken by Internal Audit

One of the lessons learned, following customer feedback is around more customer contact

particularly prior to the audit commencing. Internal Audit has responded by enhancing its

customer liaison/briefing processes. Monitoring of our customer feedback will, where

possible, inform how our service is delivered, to ensure it continues to add value to the

Council.

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inte

rna

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Appendix

1

Pro

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(Liq

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Pro

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eport

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24/0

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Contr

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eport

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28/0

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24/0

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Auth

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Pro

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ata

Bre

ach

Hig

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eport

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Not

Applic

able

Not

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able

28/0

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New

Activity

Auth

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Wid

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ode o

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Hig

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Cots

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Wate

r P

ark

Hig

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eport

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Not

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Not

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28/0

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013

New

Activity

Auth

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Wid

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(C

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ren's

Centr

es)

Hig

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eport

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Substa

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Adequate

28/0

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013

New

Activity

Auth

ority

Wid

eC

ontr

act

Monitoring -

Main

tenance C

ontr

acto

rs' F

ram

ew

ork

for

Day t

o D

ay M

ain

tenance u

p t

o £

5,0

00

Hig

hF

inal R

eport

Issued

Adequate

Adequate

28/0

6/2

013

Auth

ority

Wid

eM

eeting t

he C

halle

nge (

MtC

) -

Pro

gra

mm

e T

rain

ing

Hig

hF

inal R

eport

Issued

Substa

ntial

Adequate

28/0

6/2

013

Auth

ority

Wid

eM

eeting

the

Challe

nge

(MtC

)H

igh

Fin

alR

eport

Issued

Substa

ntial

Adequate

28/0

6/2

013

Auth

ority

Wid

eM

eeting

the

Challe

nge

(MtC

)H

igh

Fin

alR

eport

Issued

Substa

ntial

Adequate

28/0

6/2

013

Auth

ority

Wid

eC

ontr

act

Aw

ard

and M

onitoring (

Mears

Safe

at

Hom

e)

Hig

hC

arr

ied F

orw

ard

to 1

3/1

4

Str

ate

gic

Fin

ance

Key C

ontr

ols

2011-1

2H

igh

Fin

al R

eport

Issued

Substa

ntial

Substa

ntial

29/0

6/2

012

Str

ate

gic

Fin

ance

Accounting I

nstr

uctions -

Invento

ries C

om

plia

nce

Hig

hF

inal R

eport

Issued

Adequate

Adequate

27/0

9/2

012

Bro

ught

Forw

ard

fro

m 2

011/1

2

Str

ate

gic

Fin

ance

Debto

rs I

ncom

e C

olle

ction -

Adult C

are

Serv

ices

Hig

hF

inal R

eport

Issued

Adequate

Adequate

27/0

9/2

012

Bro

ught

Forw

ard

fro

m 2

011/1

2

Str

ate

gic

Fin

ance

RM

- S

trate

gic

Fin

ance

Hig

hF

inal R

eport

Issued

Substa

ntial

Substa

ntial

29/0

6/2

012

Bro

ught

Forw

ard

fro

m 2

011/1

2

Str

ate

gic

Fin

ance

Payro

llH

igh

Fin

al R

eport

Issued

Adequate

Adequate

27/0

9/2

012

Bro

ught

Forw

ard

fro

m 2

011/1

2

Str

ate

gic

Fin

ance

Ris

k M

anagem

ent

HR

Hig

hF

inal R

eport

Issued

Substa

ntial

Substa

ntial

27/0

9/2

012

Bro

ught

Forw

ard

fro

m 2

011/1

2

Str

ate

gic

Fin

ance

Ris

k M

anagem

ent

- A

MP

SH

igh

Fin

al R

eport

Issued

Substa

ntial

Substa

ntial

27/0

9/2

012

Bro

ught

Forw

ard

fro

m 2

011/1

2

Str

ate

gic

Fin

ance

Ris

k M

anagem

ent

- Legal and D

em

ocra

tic S

erv

ices

Hig

hF

inal R

eport

Issued

Substa

ntial

Adequate

24/0

1/2

013

Bro

ught

Forw

ard

fro

m 2

011/1

2

Str

ate

gic

Fin

ance

Key C

ontr

ols

2012-1

3 J

ourn

als

Hig

hF

inal R

eport

Issued

Substa

ntial

Adequate

27/0

9/2

012

Str

ate

gic

Fin

ance

Debto

rs I

ncom

e C

olle

ction -

Genera

lH

igh

Fin

al R

eport

Issued

Adequate

Adequate

24/0

1/2

013

Bro

ught

Forw

ard

fro

m 2

011/1

2

Str

ate

gic

Fin

ance

Main

Accounting S

yste

mH

igh

Fin

al R

eport

Issued

Adequate

Adequate

28/0

6/2

013

Str

ate

gic

Fin

an

ce

SA

P P

rob

ity

Hig

hC

arr

ied F

orw

ard

to 1

3/1

4

Str

ate

gic

Fin

ance

Key C

ontr

ols

2012-1

3H

igh

Cancelle

dG

T n

o longer

required I

nte

rnal A

udit a

ssura

nces

Str

ate

gic

Fin

ance

Budget

monitoring u

nder

the N

ew

Opera

ting M

odel

Hig

hC

arr

ied F

orw

ard

to 1

3/1

4

Supera

nnuation F

und

Managem

ent

of

LG

PS

Hig

hF

inal R

eport

Issued

Not

Applic

able

Adequate

29/0

6/2

012

Form

ed p

art

of

Annual G

overn

ance S

tate

ment

Supera

nnuation F

und

Pensio

n P

aym

ents

Hig

hC

arr

ied F

orw

ard

to 1

3/1

4

St

ti

Fi

Ph

Cd

Mdi

Fi

lR

tI

dA

dt

Ad

t27/0

9/2

012

Str

ate

gic

Fin

ance

Purc

hase C

ard

sM

ediu

mF

inalR

eport

Issued

Adequate

Adequate

27/0

9/2

012

Str

ate

gic

Fin

ance

Goods R

eceip

ting

Mediu

mF

inal R

eport

Issued

Substa

ntial

Adequate

27/0

9/2

012

Str

ate

gic

Fin

ance

Revie

w o

f A

ccounting I

nstr

uctions

Mediu

mO

ngoin

gN

ot

Applic

able

Not

Applic

able

24/0

1/2

013

New

Activity (

IA o

verv

iew

of

revis

ed A

I's)

Str

ate

gic

Fin

ance

Mem

bers

' E

xpenses

Mediu

mC

arr

ied F

orw

ard

to 1

3/1

4

Adults a

nd P

ublic

Health

Deprivation o

f C

apital -

Pro

pert

y D

isre

gard

sH

igh

Fin

al R

eport

Issued

Adequate

Adequate

27/0

9/2

012

Adults a

nd P

ublic

Health

Local A

uth

ority

Top U

p P

aym

ents

Hig

hF

inal R

eport

Issued

Substa

ntial

Substa

ntial

29/0

6/2

012

Bro

ught

Forw

ard

fro

m 2

011/1

2

Adults a

nd P

ublic

Health

Ord

er

of

St

John C

ontr

act

Hig

hF

inal R

eport

Issued

Adequate

Adequate

28/0

6/2

013

Adults a

nd P

ublic

Health

Direct

Paym

ents

Adults

Hig

hF

inal R

eport

Issued

Substa

ntial

Adequate

28/0

6/2

013

Bro

ught

Forw

ard

fro

m 2

011/1

2

Adults a

nd P

ublic

Health

Ord

er

of

St

John V

FM

Hig

hC

ancelle

dC

ancelle

d d

ue t

o c

om

mis

sio

nin

g o

f E

rnst

Young

Adults a

nd P

ublic

Health

GIS

Com

munity E

quip

ment

- P

oole

d b

udget

Hig

hF

inal R

eport

Issued

Substa

ntial

Adequate

28/0

6/2

013

Adults a

nd P

ublic

Health

Safe

guard

ing A

dults

Hig

hC

arr

ied F

orw

ard

to 1

3/1

4

Adults a

nd P

ublic

Health

Rem

odelli

ng o

f contr

acte

d D

om

icill

iary

Care

Pro

vis

ion

Hig

hC

onsultancy

Not

Applic

able

Not

Applic

able

28/0

6/2

013

Ongoin

g

Adults a

nd P

ublic

Health

Rem

odelli

ng o

f D

irect

Paym

ent

Support

Serv

ices

Hig

hC

onsultancy

Not

Applic

able

Not

Applic

able

28/0

6/2

013

Ongoin

g

Adults a

nd P

ublic

Health

Qualit

y A

ssura

nce F

ram

ew

ork

Hig

hC

onsultancy

Not

Applic

able

Not

Applic

able

28/0

6/2

013

Adults a

nd P

ublic

Health

Join

t F

inancin

g -

Section 2

56 A

gre

em

ents

Hig

hC

arr

ied F

orw

ard

to 1

3/1

4

Adults a

nd P

ublic

Health

Exte

rnal C

are

Revie

ws -

Follo

w u

pH

igh

Carr

ied F

orw

ard

to 1

3/1

4

Adults a

nd P

ublic

Health

Bra

ndon T

rust

Hig

hC

/F t

o 1

3/1

4 C

onsultancy

Audit c

ancelle

d d

ue t

o c

om

mis

sio

nin

g o

f E

rnst

Adults a

nd P

ublic

Health

Self D

irecte

d S

upport

Hig

hC

ancelle

dA

udit c

ancelle

d d

ue t

o m

anagem

ent

revie

w

Adults a

nd P

ublic

Health

Com

plia

nce w

ith g

enera

l socia

l care

best

pra

ctice -

Socia

l W

ork

Taskfo

rce -

caselo

ad m

anagem

ent

Mediu

mC

arr

ied F

orw

ard

to 1

3/1

4W

ork

forc

e D

evelo

pm

ent

of

Socia

l W

ork

ers

-

Adults &

Child

ren

Adults a

nd P

ublic

Health

Public

Health T

ransitio

n -

Ris

k M

anagem

ent

Arr

angem

ents

Hig

hC

arr

ied F

orw

ard

to 1

3/1

4

Child

ren a

nd F

am

ilies

Pupil

Refe

rral S

erv

ice

Hig

hF

inal R

eport

Issued

Adequate

Adequate

24/0

1/2

013

Child

ren a

nd F

am

ilies

Qualit

y A

ssura

nce o

f S

ocia

l C

are

audit p

rocess

Hig

hF

inal R

eport

Issued

Substa

ntial

Adequate

27/0

9/2

012

Child

ren a

nd F

am

ilies

School D

eficit B

udget

Hig

hF

inal R

eport

Issued

Substa

ntial

Substa

ntial

29/0

6/2

012

Bro

ught

Forw

ard

fro

m 2

011/1

2

Child

ren a

nd F

am

ilies

Independent

Revie

win

g O

ffic

ers

(IR

O)

Hig

hF

inal R

eport

Issued

Substa

ntial

Adequate

24/0

1/2

013

Child

ren a

nd F

am

ilies

Foste

ring P

aym

ents

- e

xtr

as

Hig

hF

inal R

eport

Issued

Adequate

Lim

ited

24/0

1/2

013

Bro

ught

Forw

ard

fro

m 2

011/1

2

Child

ren a

nd F

am

ilies

Support

ing P

eople

Contr

acts

Hig

hF

inal R

eport

Issued

Not

Applic

able

Not

Applic

able

28/0

6/2

013

Child

ren a

nd F

am

ilies

Sponsore

d A

cadem

ies -

deficit a

nd r

edundancy c

osts

Mediu

mF

inal R

eport

Issued

Substa

ntial

Adequate

27/0

9/2

012

Child

ren a

nd F

am

ilies

Schools

Mediu

mF

inal R

eport

s I

ssued

See p

age 4

3 f

or

opin

ions

See p

age 4

3 f

or

opin

ions

28/0

6/2

013

Deta

ils o

f outc

om

es p

rovid

ed in a

nnual re

port

June 2

013

Child

ren a

nd F

am

ilies

Paym

ents

to F

oste

r C

are

rsM

ediu

mF

inal R

eport

Issued

Adequate

Adequate

28/0

6/2

013

Child

ren a

nd F

am

ilies

Youth

Support

Serv

ice

Mediu

mC

ancelle

dM

ediu

m p

riority

Child

ren a

nd F

am

ilies

Tra

nsport

for

Socia

l C

are

Mediu

mC

arr

ied F

orw

ard

to 1

3/1

4

Child

ren a

nd F

am

ilies

Budget

Hold

er

Lead P

rofe

ssio

nal S

erv

ice

Mediu

mC

arr

ied F

orw

ard

to 1

3/1

4

Page 1

of

2

18

Page 56

inte

rna

lau

dit

Appendix

1

Pro

gre

ss R

ep

ort

in

clu

din

g A

ssu

ran

ce O

pin

ion

s

Dep

art

men

tA

cti

vit

y N

am

eP

rio

rity

Acti

vit

y S

tatu

sR

isk O

pin

ion

Co

ntr

ol

Op

inio

nR

ep

ort

ed

to

Au

dit

Co

mm

itte

Co

mm

en

ts

Child

ren a

nd F

am

ilies

Glo

uceste

rshire M

usic

Serv

ice

Mediu

mC

arr

ied F

orw

ard

to 1

3/1

4

Child

ren a

nd F

am

ilies

Data

Pro

tection B

reach

Hig

hC

onsultancy

N/A

N/A

28/0

6/2

013

Com

munitie

s a

nd I

nfr

astr

uctu

reR

esid

ual W

aste

Pro

ject

Hig

hF

inal R

eport

Issued

Substa

ntial

Adequate

28/0

6/2

013

Com

munitie

s a

nd I

nfr

astr

uctu

reG

louceste

rshire F

irst

(Gfirs

t)H

igh

Fin

al R

eport

Issued

Substa

ntial

Adequate

28/0

6/2

013

Com

munitie

s a

nd I

nfr

astr

uctu

reN

ew

Hig

hw

ays C

ontr

act

Hig

hF

inal R

eport

Issued

Substa

ntial

Adequate

28/0

6/2

013

Com

munitie

s a

nd I

nfr

astr

uctu

reP

roje

ct

Managem

ent

Capacity -

Elm

bridge T

ransport

Hig

hF

inal R

eport

Issued

Substa

ntial

Adequate

28/0

6/2

013

Com

munitie

s a

nd I

nfr

astr

uctu

reP

roje

ct

Managem

ent

Capacity -

Local S

usta

inable

Tra

nsport

Fund

Hig

hF

inal R

eport

Issued

Adequate

Adequate

28/0

6/2

013

Com

munitie

s a

nd I

nfr

astr

uctu

reP

roje

ct

Managem

ent

Capacity -

Cin

derf

ord

Hig

hF

inal R

eport

Issued

Substa

ntial

Lim

ited

28/0

6/2

013

Com

munitie

s a

nd I

nfr

astr

uctu

reR

esid

ual W

aste

Pro

ject

(Contr

actu

al A

rrangem

ents

)H

igh

Carr

ied F

orw

ard

to 1

3/1

4

Com

munitie

sand

Infr

astr

uctu

reC

arb

on

Reduction

Energ

yE

ffic

iency

Schem

eM

ediu

mF

inalR

eport

Issued

Substa

ntial

Adequate

27/0

9/2

012

Com

munitie

sand

Infr

astr

uctu

reC

arb

on

Reduction

Energ

yE

ffic

iency

Schem

eM

ediu

mF

inalR

eport

Issued

Substa

ntial

Adequate

27/0

9/2

012

Com

munitie

s a

nd I

nfr

astr

uctu

reT

he L

ocal A

uth

ority

Mort

gage S

chem

eM

ediu

mF

inal R

eport

Issued

Adequate

Adequate

28/0

6/2

013

Com

munitie

s a

nd I

nfr

astr

uctu

reP

rocure

ment

of

a n

ew

Mobili

sation,

Contr

ol and C

om

mand S

yste

mM

ediu

mF

inal R

eport

Issued

Adequate

Lim

ited

28/0

6/2

013

Com

munitie

s a

nd I

nfr

astr

uctu

reT

rain

ing o

f fire

-fig

hte

rsM

ediu

mF

inal R

eport

Issued

Substa

ntial

Adequate

28/0

6/2

013

Com

munitie

s a

nd I

nfr

astr

uctu

reR

evenue G

uara

nte

e P

ublic

Tra

nsport

Contr

acts

Mediu

mC

arr

ied F

orw

ard

to 1

3/1

4

Com

munitie

s a

nd I

nfr

astr

uctu

reF

leet

Managem

ent

Mediu

mC

ancelle

dT

ransfe

rred t

o S

trate

gy &

Challe

nge

Com

munitie

s a

nd I

nfr

astr

uctu

reG

louceste

rshire H

ighw

ays -

KP

I's

Mediu

mC

ancelle

dM

ediu

m p

riority

Com

munitie

s a

nd I

nfr

astr

uctu

reG

ypsy a

nd T

ravelle

r sites

Mediu

mC

ancelle

dM

ediu

m p

riority

Com

munitie

s a

nd I

nfr

astr

uctu

reT

radin

g S

tandard

s -

Seiz

ed G

oods

Mediu

mC

ancelle

dM

ediu

m p

riority

Str

ate

gy a

nd C

halle

nge

Data

Qualit

y o

f K

ey P

erf

orm

ance I

ndic

ato

rs (

KP

Is)

Hig

hF

inal R

eport

Issued

Substa

ntial

Adequate

28/0

6/2

013

New

Activity

Str

ate

gy a

nd C

halle

nge

Data

Qualit

y -

Child

ren's

Serv

ices I

nfo

rmation M

anagem

ent

Syste

m -

Liq

uid

Logic

Hig

hC

arr

ied F

orw

ard

to 1

3/1

4

Str

ate

gy a

nd C

halle

nge

Supplie

r A

Landlin

es

Mediu

mF

inal R

eport

Issued

Lim

ited

Lim

ited

27/0

9/2

012

Bro

ught

Forw

ard

fro

m 2

011/1

2

Enablin

g a

nd T

ransitio

nP

ropert

y D

isposals

Hig

hF

inal R

eport

Issued

Not

Applic

able

Not

Applic

able

27/0

9/2

012

Part

of

Cots

wold

Wate

r P

ark

Revie

w

Enablin

g a

nd T

ransitio

nC

RB

checks

Hig

hF

inal R

eport

Issued

Adequate

Adequate

27/0

9/2

012

Bro

ught

Forw

ard

fro

m 2

011/1

2

Enablin

g a

nd T

ransitio

nP

roC

ontr

act

(e-p

rocure

ment

suite)

Hig

hF

inal R

eport

Issued

Adequate

Adequate

28/0

6/2

013

Enablin

g a

nd T

ransitio

nS

taff

severa

nce a

gre

em

ents

Hig

hF

inal R

eport

Issued

Adequate

Adequate

24/0

1/2

013

Bro

ught

Forw

ard

fro

m 2

011/1

2

Enablin

g a

nd T

ransitio

nA

ppoin

tment

of

Agency S

taff

Mediu

mC

ancelle

dM

ediu

m p

riority

Ebli

dT

iti

Fk

llff

tt

Mdi

Ci

dF

dt

13/1

4E

nablin

g a

nd

Tra

nsitio

nF

ram

ew

ork

call-

off

contr

acts

Mediu

mC

arr

ied

Forw

ard

to13/1

4

Enablin

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Page 2

of

2

19

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Appendix 2

Completed Internal Audit Activity during the period April – June 2013

Summary of Limited Assurance Opinions on Control

Service Area: Authority Wide

Audit Activity: Developers Contributions

Scope

In the role of a Planning Authority Gloucestershire County Council receives substantial

income from developers and others that may have an interest in the land through the use of

Planning Obligations. Planning Obligations are used following the granting of planning

permission (normally major developments) to secure community infrastructure to meet the

needs of residents in new developments and/or to mitigate the impact of new developments

upon existing community facilities. A Planning Obligation is created under Section 106 of the

Town and Country Planning Act 1990 and can:

require payments to be made to GCC as the planning authority;

require the carrying out of specified actions;

regulate or restrict the use of land.

In the financial year 2011/12 s106 contributions received amounted to £6.7m (£5.3m

highways and £1.4m for Education and Libraries) and brought forward receipts at the

beginning of 12/13 amounted to £16.0m.

The objectives of the audit was to ascertain that the Council has systems and processes in

place to identify: when a Planning Obligation (s106) is required and that subsequent s106

agreements are established, recorded and monitored efficiently and effectively; in particular

to give assurance that financial contributions are received and accounted for in an accurate

and timely fashion.

Risk Assurance - Adequate

Control Assurance - Limited

Key findings

Although there has been some improvement in recent years to adopt a more joined-up

approach, the existing processes across the Council remains fragmented.

Within GCC there are two points of contact regarding s106 developer contributions, Asset

Management and Property Services (AMPS) - Enabling and Transition) and the

Development Management Team (Communities and Infrastructure).

20

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Appendix 2

Both sections have different structures, processes and recording systems and operate

independently of one another. Although there may be some advantages to this approach,

the disadvantages include:

A lack of clarity regarding the overall GCC framework and strategy

within which developer contributions are negotiated and secured;

Ineffective use of resources as a result of duplication of processes and

recording of information;

Inconsistencies in approach; and

Increased bureaucracy for developers with enquiries regarding pre-

applications.

We also found that across the teams there were numerous spreadsheets that were

retained, with duplicate information, and that management information regarding the

overall picture of S106 contributions across GCC including receipt of contributions,

numbers of schemes, and the likely future contributions is difficult to obtain.

Also across the teams there is a lack of clarity around the roles and responsibilities of

each of the teams, with this being particularly evident in the monitoring of receipt of

the contributions once the agreement has been secured across Gloucestershire

Highways, AMPS and Finance.

It is evident going forward that further benefits would be gained from exploring opportunities

to avoid duplication and capturing relevant data that is currently not recorded. This could

include use of a single data-base with a single point of entry or possibly combining teams

and having a single monitoring officer for all s106 agreements.

Consequently we recommended that there is a need to undertake a full review of the

function across the teams, Asset Management and Property Services (AMPS),

Gloucestershire Highways, Development Management Team (DMT) , Finance and Legal

Services that would include:

clarification of roles and responsibilities;

documentation of processes, procedures and controls;

an assessment of required management information; and

clarification of the framework and overall strategy within which contributions are

sought and strengthen the links with other GCC policy strategies.

21

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Appendix 2

Action taken by management

Positive action has been taken by management. The Commissioning Director: Communities

& Infrastructure quickly established a working group from the principal services involved in

negotiating section 106 agreements on behalf of GCC and their subsequent administration

and monitoring. Membership of this group includes representatives from:

Asset management & Property Services;

Planning & Development Control;

Legal services;

Finance; and

Commissioning.

Internal Audit has been an observer on the Group.

The terms of reference of the group is to consider the internal audit findings and to

undertake a process mapping exercise to document how the various teams presently

interact with each other and the extent of any duplication or omissions. The Group have met

on a number of occasions and an overall approach that deals with the IA recommendations

agreed. The group will provide its final report to the Commissioning Director: Communities &

Infrastructure (by the end of June 2013) on their detailed proposals for further improving the

management of s106 agreements.

Service Area: Communities and Infrastructure (Gloucestershire Fire and Rescue Service (GFRS)

Audit Activity: Procurement of a new Mobilisation, Control and Command System

Scope

GFRS has recently undertaken a procurement process to renew its Mobilisation, Control and

Command system to provide a resilient mechanism for receiving and handling 999 calls and

then mobilising suitable assets. The objective of the audit was to provide assurance that the

procurement complied with the County Council’s Contract Standing Orders and EU

legislation, that the pre-agreed selection and evaluation processes were followed and

decisions adequately documented to support the award of the contract.



22

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Appendix 2

Key findings

Due to the estimated value of the contract the procurement was subject to EU legislation.

The route that was used for this procurement was the 'restricted' route which is a two stage

process, taking pre-selected vendors through to tender stage.

Overall the key findings from the audit were mixed. Audit found that the correct procedures

and good practice were applied in relation to the following areas:

A Gateway form was completed at the start of the procurement process;

The contract was subject to competition;

The evaluation panel comprised of appropriate officers;

The Contract Notice was published in the OJEU;

The mandatory standstill period was observed; and

The contract was sealed in accordance with Contract Standing Orders.

However, there are some areas where audit were unable to gain an appropriate level of

assurance that the expected/required processes were followed. These were:

The key decision to go out to tender, and subsequent award of contract, appears not

to have been taken in accordance with the requirements of the Council's constitution

regarding the need to obtain Cabinet/Lead Cabinet Member approval to proceed with

the procurement;

The tender evaluation report to the project sponsor was not formally documented,

detailing the recommendation of the project manager and the rationale to award the

contract to the preferred supplier; and

The Contract Award notice was not published in the OJEU as required.

Action taken by management: Management has confirmed that procedures will be

reviewed and steps taken to ensure full compliance going forward on future procurement

activities.

Service Area: Communities & Infrastructure

Audit Activity: Cinderford Northern Quarter – spine road

Scope

Supporting regeneration in Cinderford is of high priority to Gloucestershire County Council

(GCC) and in turn has representation at member and officer level on the Cinderford

Regeneration Board.

23

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Appendix 2

A key regeneration site is the Northern Quarter and with the support of the Homes and

Communities Agency (HCA) a mixed use development is proposed, including housing,

employment, tourism facilities and a college.

However, in order to unlock the development potential it would require a new spine road to be

designed and constructed circa £14m prior to the further development taking place. It was

agreed that subject to a legal agreement with the HCA that GCC would undertake the project

management of the preliminary studies in order to take this project to the stage at which

planning approval is sought and be ready to go to tender for the construction stage.

The broad objectives of this review were to ascertain the governance and project managemen

arrangements for the programme and to assess their effectiveness. In particular to confirm:

The decision to project manage this scheme has been taken at the appropriate level;

A project manager has been identified, with an appropriate level of resource

allocated by GCC to support its delivery, which is overseen by a project board to

ensure decisions are being taken at the appropriate level;

The funding has been confirmed by the Homes and Communities Agency;

Progress is being monitored corporately through VERTO (the Council's

programme/project management system); and

The risks to the successful conclusion of the programme have been considered,

control measures have been introduced to mitigate/reduce the risks identified, which

are kept under review and reported to the appropriate level.

Risk Assurance - Substantial


Key findings

On 25th November 2011 Cabinet resolved that GCC would be responsible for the project

management arrangements on a phased approach as set out in the report. Key to reducing

the risk to GCC was a requirement for a legal agreement to be set up to manage the

responsibilities of the HCA and GCC.

The legal agreement would incorporate two stages:

Stage 1: Completion of preliminary studies, taking the spine road project to where

planning approval is sought.

Stage 2: The procurement of the scheme itself.

24

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Appendix 2

Although various versions appear to have been prepared, in practice a formal legal

agreement between the key parties i.e. GCC, Forest of Dean District Council, HCA and the

Forestry Commission has never been completed.

It is therefore of concern that the service has been issuing task orders to Atkins to progress

various works without the legal agreement being in place and ensuring the receipt of formal

purchase orders from the HCA to cover the value and tasks in hand.

Due to a change in policy at national level the HCA has now advised that they wish to

manage these types of projects themselves. Consequently GCC has been in negotiations

with the HCA to seek reimbursement of the costs incurred to date on their behalf.

We understand that the HCA have resisted reimbursing the full amount but have offered to

settle the outstanding amount less overheads charged, which we understand has now been

accepted, leaving a shortfall.

The overall audit conclusion was that the project management arrangements for this project

evidenced both good and not so good practice. Officers were keen to ensure this project

progressed as smoothly as possible and were clearly concerned that any delays caused

through waiting to proceed until the legal agreement was completed, could have put key

elements of the Northern Quarter regeneration funding at risk, particularly the HCA and

Gloucester College investments. Whilst we fully understand the predicament that the

protracted negotiations with the HCA created, the requirement for officers to have

established effective financial governance and control over the work undertaken on behalf of

the HCA still remained, and hence from an audit perspective the subsequent informal

ordering arrangement adopted was not robust, exposing GCC to an unnecessary level of

risk.

Action taken by management:

Management have responded positively to the findings of this audit, and have confirmed

that, going forward, where it subsequently becomes impractical (due to the nature of

complex regeneration projects and the nature of public funding) to proceed on the basis

previously agreed, there needs to be transparency over risk quantification. This would

include reporting the developments back to the original sanctioning authority to obtain

agreement to continue under the new arrangements.

It is recommended that the Committee requests senior management attendance at its next

meeting to provide an update on the actions taken in relation to the recommendations made,

in the Developer Contributions audit report.

25

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Appendix 2

Summary of Adequate Assurance Opinions on Control

Service Area: Strategic Finance

Audit Activity: Main Accounting System

Scope

It is essential that data in the main accounting system is recorded correctly and on time in

order to facilitate the production of accurate and timely financial information. This audit

examined the effective operation of key financial controls and operating procedures under

SAP in the following areas:

SAP access controls;

Brought forward balances;

Cost centres – authorisation, access rights for input and SAP code validation

Reconciliation of suspense accounts; and

Feeder systems/interfaces.


Control Assurance - Adequate

Key findings

Seven recommendations were made, These related to:

Removing inappropriate SAP access;

Implementing controls to ensure that consolidated payments that interface with SAP

will be valid, accurate and authorised prior to being processed for payment;

Ensuring that managers are aware of the SAP transactions that will be granted to

their staff when various SAP roles are requested;

Ensuring that the new leaver e-form workflows to the SAP Support Team so that they

can terminate staff's SAP access in a timely manner;

Ensuring that authorisation has been received from budget holders/managers before

cost centre changes are made on SAP;

Ensuring that Service Advice Teams are notified once any cost centre changes have

been uploaded to SAP; and

Consideration should be given to developing an e-form for cost centre changes so

that the current manual process can be streamlined and the manual controls

removed.

Action taken by management:

Management responded positively and accepted all recommendations made.

26

Page 64

Appendix 2


Audit Activity: The Local Authority Mortgage Scheme (LAMS)

Scope

The objective of the LAMS is to increase supply of affordable housing to stimulate the

housing market and promote growth within the local economy and is aimed at first time

buyers who can afford mortgage payments but not the initial deposit to get on the property

ladder. If a buyer meets the qualifying criteria then under the scheme GCC will provide a top-

up indemnity which is supported under the cash-backed arrangement by a deposit for the full

value of the indemnity being offered. The broad objective of the audit is to provide assurance

that the decision to participate in LAMS was taken in accordance with Council policies,

strategies, systems and processes and that any agreements under the LAMS or related to

the LAMS are established, recorded, accounted for and monitored efficiently and effectively.



Key findings (as at the date of the audit)

The scheme commenced as planned in 2012 with £1.2m of the agreed £2m funding

committed, with all of the procedural arrangements and legal documentation completed as

required. To further enhance the scheme, especially the monitoring arrangements, Internal

Audit recommended that a consistent approach to performance and financial monitoring be

introduced with a clarification of roles and responsibilities going forward. Internal Audit also

recommended that follow up the advice be sought from the Audit Commission and other

Local Authorities regarding accounting treatment of LAMS.

Action taken by management/current position: Management responded positively to the

enhancements recommended. With reference to the accounting treatment of LAMS, Grant

Thornton has advised that the LAMS investment is not a Treasury management activity and

as such should be capitalised. This treatment will be adopted in the 2012/13 and 2013/14

and subsequent accounts as required.

Service Area: Communities and Infrastructure

Audit Activity: Local Sustainable Transport Fund (LSTF)

Scope

In June 2012, the Council (GCC) received confirmation from the Department for Transport

(DfT) that it had been successful in its bid and had been awarded a grant of £4.969m (under

section 31 of the Local Government Act 2003) for the Local Sustainable Transport Fund

(LSTF). Under the terms and conditions of the grant, GCC is liable in the event that the

funding is not spent in accordance with the conditions of the LSTF Grant Determination

2012:31/2063. The objective of this review was to provide assurance that GCC had

established effective governance and programme management arrangements for this Fund.



27

Page 65

Appendix 2

Key findings

The programme management arrangements were still developing and the appointment of

the Programme Manager and two project officers (to support delivery of this programme)

had significantly strengthened the control environment. In the early stages of implementation

it is envisaged that a significant proportion of the individual work packages will be

commissioned with Atkins (via the current Highways and Transportation Services contract)

although where considered the better option this will be through a competitive tendering

process, or undertaken within GCC. Consequently, the project management for each work

package will mainly rest with the appointed consultant (external / internal) with updates on

progress being provided to the programme manager through regular meetings.

The areas where the governance arrangements for this programme could be further

strengthened were:

To enhance the risk management and reporting arrangements through the

application of GCC minimum standards. Record the programme key milestones /

risks in VERTO (corporate project management system) to enable progress to be

monitored corporately;

Consider establishing a GCC officer board to provide oversight / challenge and

transparent decision making.

Action taken by management: Management responded positively and accepted the above

recommendations.


Audit Activity: Elmbridge Transport Major scheme

Scope

On 16th December 2011, the Department for Transport (DfT) confirmed Programme Entry

for the Elmbridge Transport Scheme and in general principle approval for Gloucestershire

County Council (GCC) to receive funding of £14.1m towards the Elmbridge Transport

Scheme.

This funding is subject to several conditions including GCC gaining planning permission,

purchasing the required land and achieving 'Full Approval' status from the DfT and

consequently a significant proportion of the 'upfront' preparatory costs circa £2m will not be

recovered should the Scheme not achieve 'Full Approval' status. The objective of this review

was to provide assurance that GCC had established effective governance and programme

management arrangements for this Fund.



Key findings

Our principal conclusion is that appropriate governance and project management

arrangements have been considered and are overall operating effectively.

28

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Appendix 2

In particular the:

appointment of an experienced project manager to oversee the project’s delivery with

appropriate resource available, establishment of a Project Board, coupled with the

close involvement of the Lead Commissioner and Outcome Manager provides an

appropriate level of oversight by GCC;

effective communication channels are in place to enable Lead Cabinet Members /

Commissioning Director to be kept appraised of the projects progress and / or

emerging issues in order to help inform the decision making process; and

key risks to the successful delivery of the Project have been identified and recorded.

The one area where we consider that the governance arrangements for this project need to

be strengthened is in the provision of up to date financial costs/estimates associated with the

project. Although progress against the individual “Work Packages” is reported at project

board level, there is no financial breakdown to reflect the current/projected costs associated

with these. Ideally a monthly update (to take into account changes) of these costs split into

financial years should be prepared for presentation to the board members and to others

charged with overseeing successful delivery of this project.

Action taken by management: Management responded positively to the recommendation

made.


Audit Activity: Gloucestershire First

Scope

Gloucestershire First was a county-wide economic partnership that was set up in 2001 to

develop and support the economic well-being of Gloucestershire. A Service Level

Agreement (SLA) was in place between GCC and the Gloucestershire Development Agency

Ltd (GDA) for the contribution that GCC made towards economic development in

Gloucestershire. The Gloucestershire Development Agency Ltd changed to become the

Gloucestershire Development Company Ltd (GDC) and then Gfirst Ltd.

In June 2011, the Secretary of State granted Local Enterprise Partnership (LEP) status to

Gfirst Ltd. The Gfirst Ltd board doubled as the LEP board.

The government has made various funding streams available where the LEP should be

responsible for/involved in the decision making process as to how the money is spent,

namely, LEP core funding, the Growing Places Fund and major transport funding.

All of the funding is being paid to GCC in the first instance as the Accountable Body.

The establishment of LEPs and the requirement for GCC to act as Accountable Body has

resulted in new structures having to be put in place to govern the relationships and payment

of funding between GCC, Gfirst Ltd, the LEP and the new Local Transport Body for the

major transport funding.

29

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Appendix 2

This audit included a review of the following aspects of the new arrangements as stated

above:

The current business operating relationship between GCC and Gfirst Ltd and how

that needs to change based on the introduction of LEPs;

The arrangements that are being put in place to manage the Growing Places Fund

and the major transport funding; and

GCC's role as Accountable Body.



Key findings

Although the contractual arrangements between GCC and the GDA/GDC/Gfirst Ltd have not

been entirely satisfactory due to the fact that signed agreements were not in place,

corrective steps have been taken to address this. A Cabinet Member decision was taken to

extend the contract to 31/03/13. Deeds of Termination have now been signed to formally end

the business operating relationship between GCC and Gfirst Ltd.

LEPs are not legal entities but work was underway to set up the Gloucestershire LEP as a

Community Interest Company (CIC). The LEP core funding for 2013/14 and 2014/15 is

required to be match funded. GCC has agreed to provide the £250k of match funding for

2013/14. The Director: Communities and Infrastructure has agreed to formally document the

decision to pay this funding to the newly established CIC. The match funding will replace the

current funding paid by GCC to Gfirst Ltd for the development of economic activities.

Funding for the Growing Places Fund has been received in full by GCC. A local governance

structure has been developed and this included the establishment of an Investment Panel

with set terms of reference. No monies had yet been paid to any successful applicants

although the process for allocating the funds had started.

A number of arrangements had yet to be put in place for the full operation of the fund and

management were advised to pay particular attention to the following:

An Operating Manual was in the process of being developed which would include the

detail about the operation of the fund. This should be progressed as soon as possible

so that all roles, responsibilities and processes are clearly understood by all parties;

GCC, as Accountable Body, will need to obtain assurance that the LEP is complying

with procurement and State Aid legislation and that the money is being spent legally

and for the purposes intended;

Arrangements need to be finalised as to how the Growing Places funds will be paid

to the successful applicants; and

The role of GCC as Accountable Body will need to be established so that agreement

can be reached as to how the various roles will be financed and resourced.

The major transport funding will be received by GCC as Accountable Body between 2015

and 2019.

30

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Appendix 2

The Department for Transport (DfT) has issued guidance on a governance framework. GCC

produced a local governance framework based on the national guidance and this was made

available as a consultation document. The consultation has closed and the local assurance

framework has now been sent to the DfT for their sign off.

Action taken by management: GCC's role as Accountable Body is likely to increase in the

future and as such it is important to ensure that GCC acts consistently and appropriately in

all cases. To this end, it is pleasing to report that an Accountable Body working group has

been established to draft both a policy and procedures for the operation of Accountable

Body responsibilities.


Audit Activity: Residual Waste Project

Scope

A report was taken to Cabinet in September 2012 and approval given to award the contract

for the treatment of Gloucestershire’s residual waste to Urbaser Balfour Beatty (UBB), who

had been selected as preferred bidder in December 2011. Internal Audit (IA) were asked to

review the Cabinet report and the underlying working papers and external assurances to

provide reasonable independent assurance that:-

The contract remains affordable and provides value for money;

The risks of changes in exchange rates and foreign exchange rates are mitigated;

Outstanding issues are resolved prior to contractual and financial close; and

Appropriate governance procedures have been followed resulting in a final contract

which is not ultra vires.

Risk Assurance – Substantial

Control Assurance – Adequate

Key findings

IA reviewed the affordability and value for money paper produced by the project’s financial

advisers that showed that the project is both affordable and provides value for money.

IA asked that a confidence level be given to this figure however we understand that as it is

extremely difficult to allocate probabilities to such future events as electricity prices this is not

considered possible.

We were aware of issues concerning the accuracy of financial models in other major

procurements and are pleased to note that a full model audit of the financial model was

commissioned by UBB, as the approval of their bankers was conditional on receipt of a

satisfactory report. However, as this report is the property of UBB should it prove to be

inaccurate we would not have cause for redress against its compilers.

31

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Appendix 2

However, the council’s financial advisers have reviewed and challenged every model as they

were produced and this is supported by a full email trail.

Both interest and foreign exchange rates were fixed at closure, which is the standard

approach and alleviated the need to adopt any novel financial instruments, to hedge against

changes in these rates. We advised that had any such approach been entered into then this

would have had to have been made clear to members and formal approval sought.

We note that in September 2012, when approval was sought from Cabinet, there was one

significant contractual issue outstanding, which was noted in Annex 4 of the Cabinet report.

This issue has now been resolved.

The governance of the project is considered fit for purpose and has operated as intended.

Action taken by management: Management responded positively to issues raised.


Audit Activity: Highways and Transportation Services Contract

Scope

The Council is currently operating a managed services contract with Atkins for the provision

of a number of highways and transportation services which expires in March 2014 with no

option for further extension. In September 2012, Cabinet gave approval for a compliant

competitive tender process to be conducted to provide these services after the existing

contract expires. The new contract will initially be for a 5 year period but will include options

for two extensions of 3 years up to a maximum duration of 11 years. It is anticipated that the

value of the new contract will range from £130m - £450m depending upon future budget

provisions set by GCC.

In relation to stage 1 of the procurement i.e. Pre Qualification Questionnaire (PQQ) the

objectives of the audit was to provide assurance that:

There is compliance with Contract Standing Orders and EU procurement legislation;

The PQQ evaluation criteria were pre-determined and this has been followed in the

subsequent evaluation process; and

Appropriate records are held by the procurement team to support the selection of the

preferred contractors progressing to stage 2: Invitation to Tender (ITT).



Key findings

Our principal conclusion is that the procurement is being managed well and good

compliance with the Council's Contract Standing Orders and EU procurement legislation is

evident.

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We consider that the evaluation of the PQQ submissions:

Has been undertaken by relevant officers who possess the required skills and

competencies;

The evaluation criteria stipulated in the PQQ has been followed; and

The documentation completed to support the evaluation process is appropriately

designed and overall is of sufficient quality to support the outcome of the evaluation

process and the selection of the four contractors invited to participate in stage 2: ITT.

However, it was recommended that the documentation should be further enhanced

by requiring the evaluators to formally sign the typed scoring summary sheets

relating to the “Qualitative” section to confirm the consensus scores awarded by the

panel to each contractor;

Action taken by management: Management have confirmed that they will further

enhance the evaluation documentation held, as recommended.

Service Area: Communities and Infrastructure (GFRS)

Audit Activity: Training of Firefighters

Scope

Since 2003 the majority of the training provision for firefighters has been through Severn

Park Fire & Rescue Training Centre which was constructed under a joint PFI arrangement

involving Gloucestershire Fire & Rescue Service (GFRS), Avon FRS and Devon & Somerset

FRS. The objectives of this audit were to ensure that:

GFRS is making full use of the training points allocated to them under the

arrangement;

PFI credits are being received from central government;

Each FRS is paying their agreed share of the unitary charge on a timely basis;

Training is managed effectively; and

GFRS have systems in place to identify a training need and to ensure the

firefighters/officers then attend as required.



Key findings

GFRS has recently implemented a new system - PDRpro - which is used to record training.

It also includes a Course Management System for scheduling and managing courses.

Each course equates to a set number of training points. The usage of the training points by

all three fire and rescue services is monitored by a principal accounting technician at

Gloucestershire County Council, who also monitors the credits received from the

government.

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The training team at HQ decide which courses are required and book the relevant people on

to them. Attendance on the courses is monitored by the training team who receive

notification from Severn Park.

Our principal conclusion is that there is an appropriate framework in place within GFRS to

identify and manage the training needs of the firefighters/officers. There are also processes

in place to ensure that the expected credits are received from the other two Fire & Rescue

Services as well as central government. Whilst no recommendations were made, our opinion

is formed on the basis of the sample testing carried out, on a recently implemented system.

Service Area: Enabling & Transition – Asset Management and Property Services (AMPS)

Audit Activity: Contract Monitoring – Framework Agreement for Day to Day

maintenance of up to £5k

Scope

In order to meet its objectives GCC will award contracts to third party specialist

providers/contractors for the provision of goods and/or services. Once the contract has been

awarded, it is fundamental that the Service monitors the performance of the contractor to

ensure that the goods and/or services provided under the agreement are being received and

these meet the expected standard. The degree that each contract is monitored should be

tailored accordingly. This audit covers contract monitoring on the Maintenance Contractors’

Framework for day to day maintenance up to £5,000.



Key findings

The key person to ensure that the contract is being performed in accordance with the

contract/quote/agreement is the person monitoring the contract on site. For disputes, there is

a standard adjudication / arbitration process that are detailed in GCC’s standard terms and

conditions or within the contract documentation itself. Feedback is received from sites on the

performance of the Contractor / Consultant and AMPS. If poor performance is identified,

improvements are discussed with low performing contractors and/or there is the option to

remove the Contractor / Consultant from the Framework Agreement.

Whilst expenditure on maintenance in SAP can be analysed by product categories this

cannot be done by framework contracts. It is therefore not possible from SAP to obtain an

analysis of expenditure on maintenance by framework contracts, nor identify how much has

been paid to each contractor listed on the framework contract, which is required to ensure

compliance with procurement legislation.

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Action taken by management: Recognising the issues around the monitoring

arrangements, AMPS has commenced a project aimed to link SAP with Technology Forge

(TF) - the council’s asset management property database. It is envisaged that when

completed an interface will enable all works orders raised in TF to be monitored through

SAP. This should then enable AMPS to be able to determine the amount of spend going

through each of the various frameworks to drive future procurement activity.

Service Area: Enabling & Transition

Audit Activity: Meeting the Challenge – Programme Training

Scope

The objective of the audit was to establish what support is available to project managers and

whether the guidance and training that is available helps them to effectively manage their

projects.



Key findings

The Portfolio Office within the Performance and Need Team took over the responsibility for

VERTO, a web-based project and programme management tool, in April 2012. All projects

should be managed through VERTO.

There is guidance and information on Staffnet covering all stages of project management as

well as VERTO and the Portfolio Office have also been running project management briefing

sessions. A project management forum was started in December 2012 which will be a

quarterly event, with a newsletter being produced afterwards giving details of the areas

covered for those who could not attend the event. The Portfolio Office also provides advice

when requested.

A sample of projects was selected from VERTO and the project managers were contacted

for their views on the support and training that is available.

The majority said that they were happy with the guidance and support they have received,

although there were some who said they were not aware that training was available.

Our overall conclusion is that whilst some managers had some adverse comments to make

around training provision, guidance and the use of VERTO, these comments having been

provided to the Portfolio Office, IA identified that appropriate training and support is

available.


Audit Activity: ProContract

ScopeThe drive for increased efficiency and cost reduction in the procurement process is a high

priority for the Council. To support this, GCC introduced the online e-procurement system,

ProContract. The audit objective was to ascertain how extensively service areas are using

the system throughout the Authority and assess how efficient and effective the system is.

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Key findings

ProContract is being used as a corporate e-procurement system, however not consistently

throughout the organisation. The main reasons are:-

exemption from compliance approved by Strategic Procurement e.g. alternative

tendering arrangement approved;

regular payments to consultants and other suppliers where no procurement contract

exists;

accumulated values of payments throughout the ‘contract period’ are not taken into

consideration, and

non compliance by officers.

ProContract is the current Contract Register. In order for it to be effective and reliable, it

requires individuals to input their contract details and keep them up to date. IA identified that

there is not a formal system to monitor compliance with the use of ProContract as an e-

procurement tool, or as a Contract Register and that there were out of date records and

gaps in required data.

Action taken by management: Management have responded positively and accepted the

recommendations made to address the issues identified.


Audit Activity: Meeting the Challenge (MtC)

Scope

The MtC programme is designed to contribute to the £114m of savings that the Council has

to make over a four year period from April 2011. During 2011/12 an audit was undertaken on

the MtC programme that focused on the financial governance arrangements as well as the

general governance arrangements for the programme. The objectives of this review were to

evaluate the effectiveness of the management of support services that are being applied to

the projects, and whether Verto (project management system) is being used by Project

Managers as an effective project management tool.



Key findings

In general, there is good engagement with the support services at an early enough stage of

project development where roles and responsibilities are understood, although there is

further room for improvement. We found that there is often a mismatch between the number

of days requested and the number of days of support actually provided (where the actual is

often higher than the requests) and this can cause capacity problems for the support

services.

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Improvement areas identified related to:

Communication with support services could be improved and project managers

should be encouraged to engage with support services in person and not just through

Verto. This would result in a better understanding of what is required, when it will be

required, and a more accurate forecast of the number of days required;

Enhance the guidance on VERTO about the role each support service can provide so

that the Project Managers are better informed as to whether a particular support

service is required or not.

Generally, Project Managers were supportive of VERTO and identified the following benefits:

It is a good high level system for reporting to senior management;

The system has standardised project management reporting across the Authority;

and

Allows project team members to view information without having to request it from

separate sources.

There are, however, limitations to VERTO and it would appear that the overriding view was

that it cannot be relied upon to provide all aspects of project management and a number of

project management tools cannot be accommodated.

Action taken by management: Management have responded positively to the

recommendations made, with a support service group recently being set up for sharing

common issues and agreeing actions to improve communications.

With reference to Verto the Council is evaluating whether enhancements or fundamental

change is required to its existing, project management, performance and risk management

systems. The project is being led by the Head of Performance and Need who has confirmed

that the findings of the audit will be considered as part of the options appraisal process.

Service Area: Adult Services

Audit Activity: Gloucestershire Care Partnership – Estates Strategy (Order of St John Contract)

Scope

The focus of this review was to look at the strategic fit of the Estates Strategy to ensure that

it is in line with the Council’s corporate objectives for the future delivery of adult care

provision within Gloucestershire.



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Key findings

It is important to acknowledge that since the letting of the contract in 2005 and the

subsequent approval of the Estates Strategy in 2007, national government agendas such as

the transformation of health and adult social care and the changed funding arrangements for

public bodies emanating from the Comprehensive Spending Review are key drivers that

have a direct impact upon the delivery of the 2007 Strategy.

As a consequence, whilst the Council is still committed to delivering the agreed Strategy, the

future bed provision and type of bed required needs to be reconsidered in order to ensure

that it aligns with the future care needs of the residents of Gloucestershire and which meets

the Council’s future joint commissioning intentions with Health.

It is acknowledged within the Council at both Officer and Member level, and by the

Gloucestershire Care Partnership, that the Estates Strategy needs to be reviewed to ensure

that the model meets the Council’s future objectives, with a funding model that enables

financial viability whilst still being deliverable by the Gloucestershire Care Partnership and

the Orders of St John Care Trust (OSJCT).

In light of the above, it is evident that the current Estates Strategy as agreed in 2007 now

needs to be revised to ensure that it is in line with the Council’s corporate objectives for the

future delivery of adult care provision within Gloucestershire. Whether this is achievable

under the current contractual arrangements will depend upon the Partners mutual

agreement, although any proposals for a changed provision could not be taken forward

without following the Council’s decision-making protocols.

The revision of the Estates Strategy will need careful management in order to ensure that

the significant associated risks to a changed provision are effectively managed. It is

acknowledged that there needs to be a sound governance framework for managing the

programme of work for any changed provision to the current Strategy and which aligns to the

Council’s new operating model and roles and responsibilities of Members and Officers

alongside the ongoing management of the current contractual/operational issues.

Action taken by management: Management have agreed the implementation of the two

proposed recommendations which aim to ensure that there are robust governance

arrangements to oversee the programme of work and future delivery of a revised Strategy.


Audit Activity: Direct Payments - Adults

Scope

Direct payments (DP’s) and individual budgets are at the core of the Government’s aim of

personalising Adult Social Care services around the needs of users. The Health and Social

Care Act 2001 places a requirement on local authorities to make direct payments to those

clients who are eligible and want them.

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As from April 2011, every person receiving a “new” arrangement for ongoing Council funded

support should have been receiving this via a personal budget, and by April 2013 all people

receiving such funded support are expected to have a personal budget.

Effective delivery/take-up of direct payments will require the Council to ensure that people

have access to good quality advice and support to build their confidence about direct

payments and to ensure that support to manage a direct payment is readily available should

people need it.

The objectives of this review were to establish whether the Council has effective

arrangements in place, to ensure that by April 2013, every person receiving a “new”

arrangement for ongoing Council funded support is receiving this via a personal budget, with

direct payments being the preferred delivery method and that there are effective systems

and processes in place to monitor that service users are achieving the identified outcomes to

address their assessed needs.



Key findings

The Council has a planned strategy for the implementation of the personalisation agenda

into business as usual. However the timescales for delivery has been impeded by the

remodelling of the Council and with the integration of Health.

The planned changes are detailed within the Strategic Commissioning Plan 2012/13

which reflects both the national agenda and the best practices as laid down in the “Think

Local Act Personal”, Improving Direct Payment Delivery, published in October 2011

(TLAP) and operational issues are being driven through the Personalisation Workstream.

Action taken by management: Management have accepted the three recommendations

made, these were aimed at improving the control environment, achieving better value for

money, standardising systems, processes and documentation to encourage the take-up of

direct payments and improve the information available to service users to allow greater

choice and control.


Audit Activity: GIS Community Equipment – Pooled budget

Scope

Within Gloucestershire there is a multi-million pound contract for the supply, collection,

storage, refurbishment and servicing of community equipment. With effect from April 2011

the funding for the Community Equipment Services (CES) transferred from the PCT to GCC.

The funding for the pool is provided by partners who contribute to the pool in differing

percentages or in some cases in accordance with their exact usage.

Issues were raised by GCC's Assistant Director Adult Social Care Commissioning when it

emerged that as part of the transfer, GCC would be expected to accept a financial liability.

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This was the amount being shown in the Balance Sheet of the PCT's accounts in relation to

the pool’s refundable deposits paid by the scheme.

Acting as a facilitator in the process, IA sought to establish whether all of the appropriate

accounting standards had been considered and correctly applied to arrangements for

transferring the funding from the PCT to GCC, and that correct procedures were in place to

ensure that once transferred, the funding was treated appropriately within GCC's accounts.



Key findings

Through discussion with Financial Accounting (FA) and Strategic Finance – Adults, it was

established that issues with the way in which the PCT accounted for the pooled budget

within their accounts had been identified. Further discussions with the Finance teams

established that the liability reported actually reflected the balance of the whole pool not just

the GCC element. Therefore, as each partner is only required to refund their share of the

overall liability, the amount potentially due from GCC as at the end of January 2013 was a

significantly lower amount than originally reported.

It was further identified that GCC had adopted a similar accounting strategy to that of the

PCT when it took over the running of the fund. The indication by FA is that by the end of

March 2013, taking into account write off for the old stock in the field for 2012/13 as well as a

further distribution of refundable deposits to pooled partners in February/March 2013, the

potential liability would further reduce.

Action taken by management: IA was pleased to note that challenge and scrutiny had

been and continues to be applied throughout the transfer process. Going forward,

consideration is being given to ensuring that a more robust pricing tool is in place that

accurately reflects equipment costs and life cycle.

Service Area: Strategy and Challenge

Audit Activity: Data Quality of Key Performance Indicators (KPIs)

Scope

GCC is increasingly working in partnership with the National Health Service (NHS) which on

occasion involves sharing of data. In order to continue to share data with its partners, GCC

was required to become N3 accredited.

As part of this accreditation process and in order to provide an independent opinion on the

Council’s data, IA was requested to review the robustness of the data provided by the Data

and Performance Team.

The Head of Performance and Need requested that on this occasion IA concentrate on two

of the key performance indicators (KPI’s) that form part of the Adult Social Care Outcomes

Framework:

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(1C) Proportion of people using social care who receive self-directed support, and

those receiving direct payments; and

(2B) Proportion of older people (65 and over) who were still at home 91 days after

discharge from hospital into re-ablement/rehabilitation services.



Key findings

Due to the complexity of the IT program used to calculate the KPI's, IA concentrated the

sample testing on the accuracy of the data held on ERIC that feeds into the calculations of

the KPI’s and the use of the automatic reports.

Through discussions with the Data and Performance Team, IA established that the team has

been proactive with regards to the provision of internal verification processes, including the

provision of various automatic reports. However, from discussions with a sample of end

users of the reports, it was noted that there is a lack of confidence with the data being

provided within these reports. Consequently, the end user is either spending time rechecking

the data or is almost dismissive of the reports, assuming that they are likely to be wrong.

The communication between the end users and the Data and Performance Team needs to

be enhanced to ensure that the data produced is robust and can withstand scrutiny and

challenge from internal and external sources.

Action taken by management: Management responded positively to the recommendation

made, which will strengthen the internal verification process and enhance the

communication and interaction between those producing the reports and the end users

enabling GCC and its’ partners to be able to place greater assurance on the quality of the

data produced.

Service Area: Children and Families

Audit Activity: Contract Award - Children’s Centres

Scope

Following Cabinet approval in June 2012, a competitive tender process for the award of 7

locality based contracts for the provision of children's centre services commenced. The

contract is initially for a 3 year term (with an option to extend for a further 4 years) for an

estimated total combined value of £58m.

The objective of the audit was to review the effectiveness of the procurement activity and

contract award to confirm this was undertaken in compliance with the Council's decision

making procedures, Contract Standing Orders and EU Legislation.



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Key findings

This procurement was undertaken under the new commissioning structure with support from

the commissioning support pool. Our principal conclusion is that this procurement activity

was well planned and a thorough approach was taken to the award of this substantial and

hugely complex contract.

The review confirmed that there was appropriate compliance with procurement legislation

and Contract Standing Orders. However, one minor error was identified by IA in that the

scores awarded to one bidder had been incorrectly carried forward to the summary sheets.

On this occasion the error did not affect the overall ranking of tenders but did indicate that

more effective quality assurance processes should have been applied.

Action taken by management: Management has confirmed that on future contracts a

quality assurance procedure will be put in place before the final assessment stage of the

tender process.


Audit Activity: Payments to Foster Carers

Scope

During 2012/2013 an audit was undertaken on extra (discretionary) payments made to

Foster Carers i.e. payments made above and over the standard allowances. The IA findings

resulted in a limited assurance opinion being provided (outcomes reported to the Audit

Committee 24th January 2013). Following this, it is pleasing to report that senior

management requested an audit of the generic system for making payments to Foster

Carers, as management required clarification that carers were being paid correctly and in a

timely manner to ensure that the risk of losing carers or their goodwill and damage to the

reputation of the Council, was mitigated. The specific objectives were to:

Examine the effectiveness of the current system of making payments whilst being

mindful of how the proposed new IT package might reduce the number and value of

overpayments, underpayments and late payments;

Identify the reasons why overpayments are being made and equally why some

Foster Carers are not receiving their payments within a reasonable timescale; and

Work with the relevant professional disciplines to devise a more effective payment

system.



Key findings

It is important to note that the Service was fully aware that there have been issues with

paying Foster Carers on time, which caused some carers to complain to the Service

Manager and emergency cash having to be obtained.

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In addition to this, a number of overpayments have been made to carers where a placement

end date has not been updated promptly and Finance has not been notified. Where

overpayments have occurred, we found examples where the value has been reduced

through negotiation/discretion, with some being written-off.

However, since the commencement of this audit, the Fostering Service has taken over the

responsibility for completing all Change Sheets which has streamlined the process.

Communication between staff has improved and staff awareness has been heightened. The

results of this have already been demonstrated as the Service Manager has not received

any complaints from Carers recently.

Progress is also being made in view of the fact that approval has been given to purchase a

finance management module/software (Controc) that will integrate fully with LiquidLogic,

(childrens’ case management system) although this will take a number of months to

implement.

Data Change Sheets should be marked PROTECT (when completed) in order to comply

with Data Protection requirements. The Service has agreed to ensure that Data Protection

requirements are complied with in respect of paper and electronic forms and in all

communications.

Action taken by management: Having requested this review, management have

responded positively to the recommendations made to address the issues identified. With

the planned ongoing monitoring, the supervision by management and team managers, as

well as the introduction of Controc, these controls will ensure that improvements and

enhancements to the systems are maintained.


Audit Activity: Schools

Scope

The Council’s Chief Financial Officer (S151 Officer) is required to submit an annual return

confirming that there is a system of audit in place for Local Authority (LA) maintained schools

which gives adequate assurance over their standards of financial management and the

regularity and propriety of their spending. Whilst IA provides independent assurance as to

the effectiveness of these financial management arrangements within the schools audited,

the S151 Officer also gains assurance from other teams, such as the Schools Finance Team

within Strategic Finance.

Internal Audit’s activity within schools is prioritised based on risk and as such, 8 primary

schools were visited during 2012/13. Individual reports were issued to each school where a

mixture of high and medium priority recommendations was made.

Risk Assurance – 1 out of 8 schools was given Substantial assurance; 7 schools were

given Adequate assurance

Control Assurance – 1 out of 8 schools was given Substantial assurance; 5 schools

were given Adequate assurance; 2 schools were given Limited assurance

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The key areas identified which informed the limited assurance opinions related to ineffective

monitoring of key financial systems e.g. payroll listings, creditor payments and budget

management and control, procurement activity not in accordance with school policy and

ineffective management of cash.

Action taken by management: Management responded positively to the recommendations

made.

Service Area: Information systems

Audit Activity: ICT Governance arrangements

Scope

Governance is a two way process, the council clearly communicating its objectives and

requirements from the contract and the contractor providing information on how it is

delivering those requirements to the client. The objective of this audit is to ascertain whether

management have implemented appropriate internal controls to ensure ICT services meet

users’ needs. Additionally employees should be made aware of what is required from them

and what is permissible under the council’s policies and procedures.

Risk Assurance – Adequate


Key findings

The council have a mature approach to information governance arrangements. The council

currently connect to the N3 (NHS) network that requires an annual N3 submission. The

steps required for an N3 submission ensure that a process is completed which sets out a

range of security requirements which must be satisfied in order for an organisation to provide

assurances in respect of safeguarding the N3 network and information assets therein. All

evidence from this submission is documented clearly and was made available during the

course of this audit. We are able to conclude that appropriate information security policies

are written, formally approved and widely communicated.

Furthermore, the council have recently commissioned a data protection audit from the

Information Commissioner Office (ICO). The council have been awarded reasonable

assurance from this audit (final report issued 25th March 2013) and have been provided with

an action plan to further improve this area, ensuring that on all occasions, employees are

made aware of their responsibilities that training requirements are identified and relevant

training is provided. Each finding was noted to have an action assigned which will be

followed up by Internal Audit in quarter 4, 2013/14.

The council does not have formal linkages between ICT groups including the ICT steering

group, ICT operations board, ICT programme board and the information board and the

breadth and depth of ICT expertise representing the council within the ICT steering group is

limited in comparison to that of the contractor who are ICT experts.

Action taken by management: Management responded positively to the recommendations

made to improve IT governance arrangements.

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Service Area: Information systems

Audit Activity: ICT Strategy

Scope

The objective of this audit was to ensure that an ICT Strategy is in place and is aligned with

the Corporate Strategy, individual businesses ICT Strategies and the Corporate SAP

Strategy. Alignment is critical for the achievement of the organisations goals and objectives.

This audit assessed the level of engagement and co-ordination of the various elements of

the organisation to ensure that the strategies are aligned.



Key findings

The Council has an ICT strategy for the period 2011-2014 which was developed by the

Council. This is further supported by the ICT Strategic Roadmap 2013-2016 developed by

Capita. Through review of both documents we noted that delivery may be compromised by

constraints that affect the planning and delivery of an effective ICT strategy. These include

budget constraints and the upcoming contract decision for ICT services in April 2014. Five

improvement areas have been identified. A summary of these are as follows:

There is no formal mechanism in place to update the ICT strategy where the ICT

steering group identify misalignment;

the ICT strategic roadmap has relied upon informal instruction from the business;

the council do not have a current ICT strategy which incorporates how to manage

ICT as an outsourced service;

the ICT strategy and the strategic roadmap do not include the complete scope of ICT

services such as SAP or the council's application strategy. Furthermore we noted

that the roadmap does not prioritise work; and

there is no reference in the ICT strategy to funding, assumptions made in developing

the strategy and critical dependencies.

Action taken by management: Management have responded positively to the above

findings and will address these issues as part of the new ICT procurement process.

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Summary of Substantial Assurance Opinions on Control

Service Area: Information Systems

Audit Activity: Incident Management

Scope

To ascertain whether arrangements are in place and procedures documented to ensure that

service incident management will be undertaken and link to formal change and project

management processes.

The council operate two service desks, which were both reviewed. One managed by Capita

for infrastructure incidents and service issues and one for the SAP application. IA focussed

our review on the controls in place that enable effective incident management, reviewing the

procedures for dealing with, tracking and resolving problems.


Control Assurance – Substantial

Key findings

An incident management system has been implemented in accordance with good practice

and our findings conclude that no weaknesses were identified within existing controls over

the primary objective areas of this audit.

Service Area: Information Systems

Audit Activity: Virtualisation

Scope

Virtualisation is a relatively new approach to delivering IT services that is designed to yield a

number of demonstrable benefits including cost reduction; flexibility in the use of facilities;

simplification of project implementation and efficient use of resources.

The decision to implement and use a virtual environment was taken by the council in 2009.

The council’s strategy is to use a virtual environment to reduce carbon emissions and costs.

Capita’s server team maintain the virtual environment for the council.

The focus of the review was to establish:

Ownership and management of virtualisation is clearly defined;

Documentation of procedures and processes related to virtualisation has been

identified and is maintained; and

The design, development, testing and implementation of virtual systems are clearly

defined.


Control Assurance – Substantial

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Key findings

Virtual system management has been implemented in accordance with standards and

accords with ‘good practice’. Our findings conclude that no weaknesses were identified

within existing controls over the primary objective areas of this audit.

Summary of Consulting Activity and/or support provided where no opinions are provided


Audit Activity: Parking Management Services tender – data protection breach

Scope

Although the government’s position had previously been to encourage authorities to adopt

Civil Parking Enforcement (CPE) powers, the 2004 Traffic Management Act made the

provision to be introduced on a compulsory basis. As a consequence, decriminalised parking

was subsequently introduced into all Districts with the on-street parking services delivered by

each District through an Agency Agreement. However, in March 2012, Cabinet resolved to

end the Agency Agreements in order to consider alternative models of delivery specifically

aimed at improved efficiencies and customer service to take effect from 1st April 2013. The

transfer of the service provision to a new provider will have implications for each District

under TUPE - Transfer of Undertakings (Protection of Employment) Regulations 2006. This

review was requested by the Commissioning Director when it was identified that personal

information had been released with the Invitation to Tender documents possibly in breach of

the Data Protection Act. The broad objectives of the review were to ascertain how and why

this has arisen; to identify any lessons to be learned to avoid repetition and make

recommendations for improvement.

Risk Assurance – N/A

Control Assurance – N/A

Key findings

The review has highlighted that a combination of circumstances and events had resulted in

the situation. However, the key issue related to the project lead, who did not establish an

effective quality assurance process over this procurement activity. Information risk and how

this data was to be controlled had not being considered.

Action taken by management: The Council immediately reported the breach to the

Information Commissioners Office (ICO) on 1st October 2012. The ICO has subsequently

decided that no further action is required at this stage because “minimal detriment appears

to have been caused to the affected data subjects. The incident does not appear to involve

sensitive personal data / the incident has been contained due to the prompt remedial action

undertaken by the data controller.

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Therefore, the case, as reported to us, does not appear to meet the criteria set out in our

Data Protection Regulatory Action Policy necessitating further action by the ICO”.

In addition the following positive action has taken place to further raise the awareness of the

importance of safeguarding personal data/information and its use.

Improved guidance has been added to staff net and shared with commissioners to

address issues raised; and

Starting in December 2012, mandatory training for commissioners on data protection

and information security (has taken place) including appropriate guidance for

applying this to contracts.


Audit activity: Supporting People Contracts

Scope

Supporting People has been operational in Gloucestershire for over a decade, with the

County Council as the administering Authority from 2003. Its purpose is to provide housing-

related support to vulnerable clients to help them live independently. The groups of service

users covered by the programme include older people, people with learning disabilities,

physical disabilities, mental health, drug or alcohol problems, and ex-offenders. This

consultancy review was requested by the Commissioning Director when it was identified

within the service that a large number of the Supporting People contracts had been rolled

over and as such were now deemed not to be in compliance with the Council’s Contract

Standing Orders. The objectives of the review were to ascertain how and why this has

arisen; to identify any lessons to be learned to avoid repetition and make recommendations

for improvement.

Risk Assurance – N/A

Control Assurance – N/A

Key findings

The review highlighted that a combination of circumstances and events has resulted in the

current situation where a significant number of the contracts were not compliant with the

Council’s Contract Standing Orders / legislation and generally not facilitating delivery of the

new strategy for the Supporting People Programme. The factors include:

Major structure changes taking place within GCC resulted in interim management

arrangements being established which impacted on the strategic direction and

effective project management arrangements, to ensure continuity and defined

performance, risk management and governance arrangements;

Incorrect interpretation of the Council’s Contract Standing Orders, following the

changes to the Constitution in 2008; and

Improved clarity required between the roles of the Partnership Board and the Council

as the Administering Authority.

48

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Appendix 2

Action taken by management: Senior management has responded very positively to the

audit findings and it is pleasing to report that a Commercial Review Project, to develop a

corporate and consistent approach to contract management arrangements is underway. This

is supported by training and amendments to Contract Standing Orders to improve clarity and

transparency of decision making and the use of the Council’s Project/ Programme

monitoring system (VERTO), to provide enhanced corporate oversight.

Service Area: Adults

Audit activity: Quality Assurance Framework

Scope

Through forging close working relationships with key officers of the Council the Quality

Assurance Manager within Adult Services contacted the Lead Auditor for Adults and Public

Health to request consultancy support from IA in the development of their revised Quality

Assurance Framework, for the monitoring of the quality of the contracted provision of care, in

particular, in relation to service user’s personal monies.

IA developed a programme that that would integrate into the Quality Assurance Framework

monitoring tool to assist Review Officers with future quality assurance inspections of service

user’s contributions and personal monies.


Audit activity: Re-commissioning of Direct Payment Support Services

Scope

During 2012-13, IA has been actively involved in supporting the project working group for the

development of a Recognised Provider List for Direct Payment Support Services. Our role

has been to provide professional risk and control advice, support and challenge as the

current service provision has been decommissioned and the new arrangements

commissioned, including an independent review of the tender evaluation for the inclusion of

Providers onto the Recognised Provider List.


Audit activity: Remodelling of contracted Domiciliary Care Services

Scope

The Council currently contracts with 14 external care providers under a Framework

Agreement for domiciliary care services. These providers supply approximately 80% of the

external domiciliary care service, and the Council also places “spot” contracts with up to as

many as 55 other providers. The Council is in the process of remodelling the way in which

this contracted service is currently delivered in order to align this service with the national

reforms to social care as part of the personalisation agenda.

49

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Appendix 2

IA has been actively involved in supporting the project working group, providing professional

risk and control advice, support and challenge as the options for new arrangements are

developed to ensure that there is effective outcome based performance targets included

within the contract deliverables, and that the new arrangements include robust systems and

processes for effective contract monitoring. The work of the group is still ongoing and IA will

continue to support the project throughout 2013-14.

Internal Audit Grant Certification

Service Area: Internal Audit Grant Certification

Audit Activity: Local Enterprise Partnership Capacity Fund

Scope

Gloucestershire County Council (GCC) is in receipt of a small Grant Allocation from

Department for Business Innovation & Skills (BIS) of up to maximum claimable of £76,800

over a three year period from 1st April 2012 to 31st March 2015. It is intended to help the

Gloucestershire Local Enterprise Partnership (via GFirst) address the issues that will best

help it to deliver local growth.



Key findings

The records maintained by GFirst to support this initial claim were examined on 22nd

November 2012. Based on our findings, we concluded that the conditions of the grant

determination were being fulfilled.

Service Area: Internal Audit Grant Certification

Audit Activity: Local Enterprise Partnership – Retail Exemplar

Scope

Gloucestershire County Council is in receipt of a Grant Allocation from the Department for

Business Innovation & Skills (BIS) of up to a maximum of £50,000 claimable by 31 March

2013. It is intended to help the Gloucestershire Local Enterprise Partnership (via Gfirst)

support the Gloucestershire Retail Sector and develop a model sharing best practice on the

components of a market town. The funding is to undertake a distinct piece of research work.


Control Assurance - Substantial

Key findings

The records to support this initial claim were examined on the 22nd November 2012. Based

on our findings we concluded that the conditions of the grant determination were being

fulfilled.

50

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1

Audit and Governance Committee Date: 28th June 2013 Agenda No:

Title of Report: Annual Report on Risk Management Activity 2012/13

Purpose of Report: The Audit Committee’s role, (as per the Constitution), is to provide independent assurance on the adequacy of GCC’s Corporate Risk Management framework. This report provides appropriate information to enable the Committee to reach a judgement in this area.

Recommendations: The Audit Committee is requested to: 1. Note the Annual Report on the Corporate Risk

Management arrangements in place during 2012/13; 2. Endorse the proposals for future improvement and

development set out in section 6 of the report; and 3. Agree that on the basis of the information set out in this

report, it can be concluded that arrangements for managing risk within the Council are sound.

Officer(s) Contact: Theresa Mortimer; Chief Internal Auditor: Internal Audit, Risk Management and Insurance Services 01452 427013 [email protected] Mark Spilsbury; Head of Financial Management: 01452 426127 [email protected]

Key Risks Failure to deliver on effective risk management, particularly during periods of significant change, may have a detrimental effect on the achievement of the potential opportunities and adverse effects that challenge the assets, reputation and objectives of the Council, strategic decision making and the wellbeing of our stakeholders.

Agenda Item 7

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2

riskmanagement

ANNUAL REPORT ON

RISK MANAGEMENT

ACTIVITY 2012/2013

Gloucestershire County Council

Page 90

3

1. Background

It has always been important for organisations to identify and manage their risks. This view

has been reinforced by public sector legislation (Accounts and Audit (England) Regulations

2011) and National Standards i.e. ISO31000:2009 Risk Management Principles and

Guidance, which explicitly references to authorities risk management arrangements.

Risk Management is the systematic identification, analysis and economic control of

opportunities and risks that challenge the assets, reputation and objectives of an

organisation.

It enables the Council to effectively manage strategic decision making, service planning and

delivery to safeguard the well-being of its stakeholders and increases the likelihood of

achieving its outcomes.

Effective risk management is an essential element of good management and a sound

internal control system, risk management being a key contributor to good governance and

the Annual Governance Statement.

2. Executive Summary - Key Statement

Insurance Tender

In June, 2013 the Council’s Long Term Agreement with insurers expired. Since June, 2012

Risk Management and Insurance Services (RMIS) have been involved in compiling the risk

management information throughout the Authority that relates to the insurable risks, to

provide assurance to potential bidders that GCC has a good risk profile to keep premiums as

low as possible.

Significant risk management data was provided within the Invitation to Tender and at the

‘insurer’s day’. The outcome was very successful with the Council achieving, with effect from

2013/2014, a 12% reduction in annual insurance premiums (3 year contract) when

compared to 2012/2013 premiums, on a like for like basis. The tender report produced by

MARSH (Insurance Broker): 2013 Insurance Tender Report, Gloucestershire County

Council, May 2013 reported the following:

‘It should be noted that the winning bids offer a very competitive deal in the current market

and it is attributable to the robust risk management practices embedded throughout your

organisation. All key markets who attended the insurers meetings before the tender started

have commented how impressed they are with Gloucestershire’s management of risk and in

all cases have rewarded the Authority for this’.

3. Overview

3.1 Risk Management Policy and Strategy

During 2012/2013, the Council’s corporate Risk Management Policy and Strategy was

revised to reflect the Council’s New Operating Model, and was approved by the Corporate

Management Team, the Audit and Governance Committee in January 2013 and Cabinet in

February 2013.

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4

The Strategy clearly sets out the risk management principles and governance arrangements

in operation within the Council and is available on Staffnet.

3.2 Risk Management Structure and Framework

3.2.1 Full details of the structure and framework is available on the Risk Management & Insurance Services website at http://staffnet/riskmanagement

In summary, key responsibilities are as follows:-

• Lead Committee for Risk Management - The Audit and Governance Committee.

• Senior Management responsibilities – During 2012/2013 the Chief Officers Management

Team (CoMT) continued to take ownership of Strategic Risk Management with each of

the strategic risks being owned by a CoMT member. Quarterly strategic risk

management reports are provided to CoMT to enable effective challenge, open

discussions, help inform decisions and to provide reasonable assurance to CoMT that

the Council’s strategic risks are being effectively managed. The Director of Strategic

Finance is the Corporate Management Team member who is the CoMT lead, overseeing

the risk management activities during 2012/13.

• Lead Member responsible for Risk Management – Cabinet Member for Finance and

Change.

• Operational Risk Management. The strategy requires that all staff have a role to play in

managing risk, with risk management principles embedded into all key business

processes. There are risk champions within both Commissioning and Delivery who work

alongside RMIS and help to embed risk management into GCC’s culture. In addition,

RMIS work closely with other key specialist areas of risk such as Health and Safety,

Performance, Strategy and Challenge, Insurance, Asset Management and Property and

Emergency Management/Business Continuity.

3.2.2 Key documents, processes and initiatives which support the risk management process

include:-

• Risk Management Manual of Guidance and Toolkits:

Ø A Practical Guide to Risk Management in GCC; Ø Risk Management in GCC’s Business Planning process; Ø Partnership Risk Management in GCC – A Guide and Toolkit; Ø Practical Guide to Procurement Risk Management; and Ø A practical guide to Programme and Project Risk Management in GCC.

All of the above are available on the RMIS website to help staff to take responsibility for

managing risk within their own working environment.

• Risk Management Training Programmes / Briefing Sessions:

Ø An ‘Introduction to Risk Management’ session/quiz forms part of the Council’s

Corporate E Learning/Induction programme. RMIS continue to work with senior

managers/project sponsors across the Council to integrate risk management into

their ‘day to day’ management arrangements; and

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5

Ø Numerous risk management awareness / briefing sessions have been provided

across the Council namely: Member Scrutiny Committees, Management Team

Meetings, Traded Services Roadshows, Corporate/Directorate Business Planning

Workshops, Service Areas Team Meetings, Bursars of GCC’s secondary schools,

Service Area CPD Workshops, Partnerships and Climate Change Risk Management

Workshops.

• Provision of risk management advice/support in the development of risk registers to key

Meeting the Challenge Programme/Project Boards/Teams;

• Risk Management is embedded into key corporate strategies;

• Full integration into the performance management framework/business

planning/programme, option appraisals and project management processes;

• Development of a partnership risk management guide which has been fully integrated

into the Council’s overall partnership governance arrangements;

• Risk Management guidance is provided on STAFFNET to enable staff to take

responsibility for managing risk within their own working environment; and

3.2.3 Development and implementation of a Risk Appetite Framework/Guidance.

There are numerous definitions of organisational ‘risk appetite’, but it all boils down to how

much of what sort of risk an organisation is willing to take. The HM Treasury definition

being: ‘The amount of risk that an organisation is prepared to accept, tolerate or be exposed

to at any point in time.’ So why do we need to determine our risk appetite? If managers are

running the business with insufficient guidance on the levels of risk that are legitimate for

them to take, or not seizing important opportunities due to a perception that taking on

additional risk is discouraged, then business performance will not be maximised. At the other

end of the scale an organisation constantly erring on the side of caution (or one that has a

risk-averse culture) is one that is likely to stifle creativity and not necessarily encouraging

innovation, nor seek to exploit opportunities.

During 2012/2013, RMIS developed a framework to enable risk judgements to be more

explicit, transparent and consistent. By enhancing our approach to determining risk appetite,

we will be able to raise the Council’s capability to deliver on challenging targets to raise

standards, improve service quality, system reform and provide more value for money.

The framework considers all levels of the business, from strategic decision making, to

operational delivery. The framework is currently being piloted, via a sample of Meeting the

Challenge projects and once deemed to be ‘fit for purpose’ will be included within the

corporate risk management guidance/toolkits.

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6

3.2.4 Risk Registers - In terms of the formulation and monitoring of the

Strategic/Operational/Programme/Project/Partnership Risk Registers, a consistent and

robust approach to producing such risk registers continues to be successfully embedded

across the Council’s activities.

The risk registers are developed as part of the development and implementation of the

Council’s Strategy, and subsequent programme/project management and business planning

arrangements i.e. clearly identifying the key inherent and residual risks associated with the

achievement of identified outcomes and priorities and the controls that are in place to

manage them. (An inherent risk is a risk prior to the application of controls and a residual risk

is the risk remaining, after applying control measures). During 2012/2013, an additional

strategic risk was highlighted which related to the impact of welfare reforms. This risk was

added to the Strategic Risk Register as is monitored in line with the Strategy.

The risk registers are reviewed and updated in line with the Corporate Performance

monitoring and reporting frameworks, which is compliant with the Corporate Risk

Management Strategy.

A summary of the Strategic Risk Register as at 31st March 2013 is attached at Appendix 1.

The key to Risk Rating Scores and Level of Risk are summarised below:

Level of Risk Score Colour

Low 1 – 6 Green

Moderate 7 – 12 Blue

High 13 – 25 Red

3.3 Compliance with Best Practice – ISO 31000:2009 – Risk Management

Principles & Guidelines

ISO 31000 was published in 2009 as an internationally agreed standard for the

implementation of risk management principles. Whilst the ISO 31000 describes voluntary

risk management guidelines, not prescriptive compliance, it has become the common

reference for the application of risk management principles within both the public and private

sectors.

The ISO 31000 consists of thirteen key areas (comprising of 59 questions) which are

categorised between risk management responsibilities and key systems and processes.

To enable the identification of any improvement areas to the Council’s current arrangements,

Risk Management and Insurance Services undertook a self assessment against these ISO

standards.

The results of the self assessment indicated 95% compliance with the standards. An action

plan to further enhance existing arrangements has been drawn up with the key improvement

areas identified, informing the future developments for 2013 and onwards, as summarised at

section 6 below.

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7

The above has been identified as good practice by the members of the Midlands Risk

Management Forum who adopted our templates and processes.

4. Risk Management and links to Internal Audit – Risk Based Internal Auditing Whilst the responsibility for identifying and managing risks belongs to management, one of

the key roles of Internal Audit (IA) is to provide independent assurance that those risks have

been properly managed. In order to achieve this, Internal Audit within GCC positions its work

in the context of the Council’s own risk management framework. This approach is known as

Risk Based Internal Auditing (RBIA). Further detail of how these two service areas have

further enhanced these links to enable more effective contributions to the corporate

governance framework, can be found at paragraphs 4.1 and 4.2 below.

4.1 Risk Management links to Internal Audit - Opinion on Risk

During 2012/2013, the CIPFA Code of Practice for Internal Audit in Local Government in the

UK 2006 (with effect from April 2013 the Public Sector Internal Audit Standards) requires

Internal Audit to provide an independent opinion on the adequacy and effectiveness of the

risk management processes which management have put in place within the area under

review, and that a sound framework of controls is in place to sufficiently mitigate those risks.

This opinion feeds into the Chief Internal Auditor’s annual opinion on the overall adequacy

and effectiveness of the Council’s risk management and control environment, which

supports the Annual Governance Statement.

On each IA report an opinion is provided as to the adequacy of the control environment

(which is fully compliant with the Accounts and Audit (England) Regulations 2011).

However, in order to further embed risk management and identify and implement innovative

practice, RMIS continues to work alongside the Chief Internal Auditor where it was agreed

that each IA report would, in addition to providing an opinion on control, also provide an

opinion as to the effectiveness of the risk management arrangements operating within the

area under review.

Therefore, a statement continues to be provided on the levels of assurance (Substantial,

Adequate, Limited) that can be given within these two areas.

As can be demonstrated below, during 2012/2013, 95% of the audited areas rated the

effectiveness of the risk management arrangements as adequate or substantial, with 45%

rated as substantial and 50% adequate, with the remaining 5% obtaining a limited assurance

opinion. This evidences that risk management continues to be further embedded into the

Council’s business activities.

Please refer to paragraph 4.2 which summarises the actions taken as to the limited assurance opinions.

Page 95

The above has been highlighted as ‘innovative’ by CIPFA and these enhanced opinions

have been used as a good practice case study in the CIPFA publication ‘Effective

Audit’ released in 2010/2011.

4.2 Risk Management links to Internal Audit

Where limited assurance opinions are given on audits deemed to be of strategic importance,

the relevant reports are provided

by Internal Audit are placed on the relevant risk registers.

The monitoring of the implementation of the recommendations is then owned by the relevant

manager and helps to further embed risk management into the day to

processes. These opinions also help to inform the work priorities of Risk Management and

Insurance Services.

4.3 Risk Management links to the

Risk Management and Insurance Services continue to work alongside the Performance

Need Team to ensure that risk management is fully considered within the

performance management/monitoring and reporting

4.4 Risk Management links to

Risk Management continues to be one of

the corporate programme and project

To assist with application of risk principles

Programme and Project Risk Management, which now forms part of the

arrangements.

8


have been used as a good practice case study in the CIPFA publication ‘Effective

Risk Management links to Internal Audit – Limited Assurance Opinions


provided to the Risk Champions to ensure that the risks highlighted

by Internal Audit are placed on the relevant risk registers.


manager and helps to further embed risk management into the day to day

These opinions also help to inform the work priorities of Risk Management and

links to the Corporate Performance Management Framework

Risk Management and Insurance Services continue to work alongside the Performance

Team to ensure that risk management is fully considered within the

/monitoring and reporting framework.

Risk Management links to Programme/Project Management

continues to be one of the key mandatory standards to be applied within

corporate programme and project governance framework.

with application of risk principles, RMIS have developed a Practical Gu

Programme and Project Risk Management, which now forms part of these


have been used as a good practice case study in the CIPFA publication ‘Effective Internal

Limited Assurance Opinions


to ensure that the risks highlighted


day risk management

These opinions also help to inform the work priorities of Risk Management and

Performance Management Framework

Risk Management and Insurance Services continue to work alongside the Performance and

corporate

the key mandatory standards to be applied within

have developed a Practical Guide to

se corporate

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9

5. Risk Management and links to Insurance

Insurance claims statistics and insurance advice have a valuable part to play in the risk

management process:-

• They can be used to demonstrate the benefits of applying risk management

principles and raise awareness of both good and not so good processes, impacts

and controls operating throughout the Council with the provision of ‘real life

examples’;

• They are used to enable the setting of key performance indicators within operational

business plans e.g. Employer’s Liability claims, Highway claims;

• They highlight emerging trends and new risks to the Authority;

• Regular updates from the Insurance Brokers and the Insurers are also used to

identify new risks from, for example new legislation and ;

• Insurance advice provided by the Risk/Insurance Manager in consultation with the

insurance brokers and insurers ensures that there is adequate cover for insurable

risks within contracts/agreements/partnerships for example.

• Monthly progress reports provided to the Statutory Officers Group (SOG) on key

claims.

5.1 Claims experience of main policies (Liability/Property/Motor) including the risk

mitigation arrangements during 2012/13

Public Liability

In 2012/13 the Council received 710 new public liability claims. The highest volume of claims

arise from incidents occurring on the highways and in 2012/2013 (financial year), 680 new

highways claims were received, of these 494 (73%) related to potholes. Of the total

highways claims received in 2012/13, 362 have, to date, been finalised with 312 of those

successfully repudiated. This gives a current repudiation rate for 2012/13 of 86%. Claims

can be repudiated when the Council is able to evidence that it has fulfilled its legal

obligations under the Highways Act 1980.

Risk Management of Highways Liability Claims

• Risk Management and Insurance Services (RMIS) work closely with the highways teams

to achieve the high repudiation rate of 86%.

• During 2012/2013, three highways claims went to trial, all of which were successfully

defended. In addition, two other claims were discontinued by the claimant close to the

trial date due to our weight of evidence.

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10

• Claims statistics are provided on a regular basis to the Highways Senior Management

Team to enable corporate performance reporting and reporting to the SOG.

Risk Management for Service Areas

Risk Management information is communicated to the Service Areas via:-

• Claims statistics provided to relevant Director, Health and Safety Committee / Highways

Senior Management team; and

• Dissemination of relevant articles received from insurers/solicitors etc to appropriate

staff.

Risk Management of Employers Liability Claims

The Council does not receive a high number of Employers Liability claims. The successful

defence of these claims is dependent on being able to provide documentation to evidence

that suitable risk assessments and adequate training have been undertaken. RMIS has

highlighted and emphasised to Senior Managers and staff the importance of keeping

updated staff personnel records and undertaking suitable and adequate risk assessments.

Property

RMIS operate four Property policies to provide insurance for a wide range of perils for both

the Council properties and schools via the Traded Service.

Risk Management of Property Claims

RMIS works closely with Asset Management and Property Services (AMPS), schools and

the insurers to assist with managing property risks. Some examples of recent actions are;

• Solar Panels and Photo Voltaic Systems are becoming increasingly popular and we

issued an article to ensure that premises are aware of the need to inform RMIS of

their individual system and that they request the correct level of cover to insure them;

• When lead has been stolen it is replaced with hyflex (lead substitute);

• The Council’s property insurers undertake Loss Control Surveys which identify

property risks that need to be actioned within certain timelines. The implementation

of the required actions are monitored by RMIS;

• Our latest advice was as a result of a serious theft of oil, where schools have been

given the details required in order for us to insure oil and their containers, on their

behalf.

Big Community Offer – BCO/Leased Property Policy

Despite the BCO now being completed RMIS continue to work with AMPS in respect of the

insurance of the Council’s leased/tenanted buildings as per below:-

Page 98

• Facilitating the procurement of a specific buildings

tenant and mitigates the Council’s financial exposure

• Implementing a system to annually check tenants

protect the Council’s position.

Motor

89 claims relating to motor accidents involving GCC

received in the period of this report.

Risk Management of Motor

• Annual claims statistics are provided to the

• A supplementary Risk Management information

vehicles to assist with proactive

• A recent reminder has been sent

highlight our responsibility to record and maintain details of vehicles

the GCC motor policy and

5.2 Traded Services to Schools

RMIS do not only support the Council

Gloucestershire’s retained schools.

there is not an insurable risk to the Council).

effective with a large numbers of compliments being received from schools, which is

evidenced by the fact that 100% of retained

service during 2012/2013.

Risk Management for Schools

Risk Management information is communicated to schools via:

• The Traded Service e-bulletin

• Schoolsnet bulletin board

• What’s up Gov;

• Heads Up;

• Claims feedback and ;

• Attendance at the Bursars Group Meetings

At the annual Business Support Services Road Shows in January

‘Getting Ahead of the Claim’

made against the schools , the associated costs and

made to avoid future claims.

11

Facilitating the procurement of a specific buildings policy that meets the needs of the

tenant and mitigates the Council’s financial exposure;

Implementing a system to annually check tenants’ insurance policies for adequacy to

protect the Council’s position.

to motor accidents involving GCC and schools vehicles have been

received in the period of this report.

otor Claims

Annual claims statistics are provided to the relevant service areas;

A supplementary Risk Management information form is completed by the driver of the

proactive risk management initiatives;

has been sent to those loaning hiring or borrowing vehicles

our responsibility to record and maintain details of vehicles to be insured under

and who is using them.

Traded Services to Schools

do not only support the Council’s services, but are also a ‘buy back’ service to

chools. (RMIS do not offer a service to Academies

there is not an insurable risk to the Council). These services are deemed to be efficient and

large numbers of compliments being received from schools, which is

100% of retained schools within the County have

for Schools

Risk Management information is communicated to schools via:-

bulletin;

Schoolsnet bulletin board;

Attendance at the Bursars Group Meetings.

At the annual Business Support Services Road Shows in January, RMIS launched our new

‘Getting Ahead of the Claim’ initiative and illustrated examples of claims

made against the schools , the associated costs and how we can learn from the mistakes

policy that meets the needs of the

insurance policies for adequacy to

vehicles have been

form is completed by the driver of the

to those loaning hiring or borrowing vehicles to

to be insured under

, but are also a ‘buy back’ service to

Academies because

These services are deemed to be efficient and

large numbers of compliments being received from schools, which is

have purchased our

RMIS launched our new

initiative and illustrated examples of claims

how we can learn from the mistakes

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12

6. Future developments in 2013/2014

RMIS will continue to input into the review of the strategic risk profile, the development and

implementation of the Corporate Risk Management Policy Statement and Strategy and will

continue to implement various strategies designed to deliver a continuation of the positive

outcomes detailed in this, and previous reports. In the context of this, a number of future

developments are planned for 2013/2014, the key actions are outlined below.

6.1 Corporate Risk Management Guidance/Toolkits

During 2013/2014, the risk management guidance and associated toolkits will be refreshed

to ensure they reflect the requirements of the revised strategy.

6.2 Major change programme/projects

Risk Management and Insurance Services will continue to play a key role within the

corporate programme/project governance arrangements.

The key overarching role is that we will be required to continue to lead on the development

and subsequent implementation of the mandatory Risk Management Standard within this

governance structure, providing ongoing assurance as to its effectiveness.

6.3 Strategic Risk Register

To continue to support CoMT with the refresh of the Strategic Risk Register, to ensure it

reflects the Council’s current risk profile.

7. Conclusion

On the basis of the information set out in this report, it can be concluded that arrangements

for managing risk within the Council are sound.

Page 100

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013.

SR2.2

Ineffective B

udgeta

ry C

ontr

ol in

clu

din

g M

tC r

ealisation leadin

g

to a

majo

r overs

pend

Walk

er,

Jo

Hig

h 2

5M

odera

te 8

Modera

te 8

Low

4Low

4

SR2.3

Bre

akdow

n in T

reasury

Managem

ent

arr

angem

ent

leadin

g t

o a

sig

nific

ant

loss in investm

ent

bala

nces

Walk

er,

Jo

Hig

h 2

0M

odera

te 8

Low

4Low

4Low

4

Str

ate

gic

Ris

k 2

: Fin

ancia

l

Ref.

Ris

kO

wner

Inhere

nt

Ris

kResid

ual Ris

k Q

112/1

3Resid

ual Ris

k Q

212/1

3Resid

ual Ris

k Q

312/1

3Resid

ual Ris

k Q

412/1

3D

irection o

f Tra

vel

Mitig

ating A

ctions w

here

the R

esid

ual Ris

k is H

igh

SR3.1

Non a

lignm

ent

of th

e I

CT s

trate

gy w

ith t

he b

usin

ess im

pacts

on

investm

ent

decis

ions a

nd V

FM

, pie

cem

eal IS

/IT d

evelo

pm

ents

, a

failure

to e

xplo

it I

T o

pport

unitie

s,

and incom

patible

solu

tions.

Jones,

Pete

rM

odera

te 1

2Low

6Low

6Low

6Low

6

SR3.2

Non a

lignm

ent

of th

e P

ropert

y A

sset

Managem

ent

Str

ate

gy w

ith

the b

usin

ess im

pacting o

n p

oor

investm

ent

decis

ions a

nd

impaired a

bility t

o o

pera

te a

nd d

eliver

serv

ices.

Jones,

Pete

rM

odera

te 9

Low

6Low

6Low

6Low

6

Str

ate

gic

Ris

k 3

: In

frastr

uctu

re

Ref.

Ris

kO

wner

Inhere

nt

Ris

kResid

ual Ris

k Q

1

12/1

3

Resid

ual Ris

k Q

2

12/1

3

Resid

ual Ris

k Q

3

12/1

3

Resid

ual Ris

k Q

4

12/1

3

Direction o

f

Tra

vel

Mitig

ating A

ctions w

here

the R

esid

ual Ris

k is H

igh

SR4.1

Failure

to d

eliver

expecte

d b

enefits

/outc

om

es f

rom

the R

esid

ual

waste

pro

ject

Walk

er,

Jo

Hig

h 2

5H

igh 2

0H

igh 2

0H

igh 2

0H

igh 2

0

Work

in p

rogre

ss t

o r

evie

w t

his

hig

h level ri

sk.

The

contr

acto

r is

revie

win

g is o

ption t

o a

ppeal th

e p

lannin

g

decis

ion b

y t

he W

PA t

o r

efu

se t

he a

pplication for

the

Javelin P

ark

Energ

y fro

m W

aste

facility.

Str

ate

gic

Ris

k 4

: W

aste

Managem

ent

Ref.

Ris

kO

wner

Inhere

nt

Ris

kResid

ual Ris

k Q

1

12/1

3

Resid

ual Ris

k Q

2

12/1

3

Resid

ual Ris

k Q

3

12/1

3

Resid

ual Ris

k Q

4

12/1

3

Direction o

f

Tra

vel

Mitig

ating A

ctions w

here

the R

esid

ual Ris

k is H

igh

SR5.1

Failure

to m

anage t

he M

eeting t

he C

hallenge P

rogra

mm

e

effectively

, im

pacting o

n s

erv

ice o

utc

om

es,

custo

mer

satisfa

ction,

finance a

nd r

eputa

tion.

Jones,

Pete

rM

odera

te 1

2M

odera

te 8

Modera

te 8

Modera

te 8

Modera

te 8

SR5.2

Failure

to s

ecure

effective s

erv

ice d

elivery

, im

pacting o

n o

ur

ability t

o m

eet

sta

tuto

ry a

nd local re

quirem

ents

.Burn

s,

Jane

Hig

h 1

5M

odera

te 1

2M

odera

te 1

2M

odera

te 1

2M

odera

te 1

2

Str

ate

gic

Ris

k 5

: O

rganis

ational Change P

rogra

mm

es

Ref.

Ris

kO

wner

Inhere

nt

Ris

kResid

ual Ris

k Q

1

12/1

3

Resid

ual Ris

k Q

2

12/1

3

Resid

ual Ris

k Q

3

12/1

3

Resid

ual Ris

k Q

4

12/1

3

Direction o

f

Tra

vel

Mitig

ating A

ctions w

here

the R

esid

ual Ris

k is H

igh

SR6.1

Failure

to m

ain

tain

effective r

ela

tionship

s w

ith k

ey p

art

ners

and

org

anis

ations im

pacting o

n o

ur

ability t

o m

eet

sta

tuto

ry a

nd

local re

quirem

ents

.

Bungard

, Pete

Hig

h 2

0M

odera

te 1

0M

odera

te 1

0M

odera

te 1

0M

odera

te 1

0

Str

ate

gic

Ris

k 6

: Collabora

tive W

ork

ing

Ref.

Ris

kO

wner

Inhere

nt

Ris

kResid

ual Ris

k Q

112/1

3Resid

ual Ris

k Q

212/1

3Resid

ual Ris

k Q

312/1

3Resid

ual Ris

k Q

412/1

3D

irection o

f Tra

vel

Mitig

ating A

ctions w

here

the R

esid

ual Ris

k is H

igh

SR7.1

Failure

to p

rote

ct

vuln

era

ble

adults in G

louceste

rshire fro

m

abuse n

egle

ct

in s

ituations t

hat

pote

ntially c

ould

have b

een

pre

dic

ted a

nd p

revente

d.

Willc

ox,

Marg

are

tH

igh 2

0M

odera

te 1

0M

odera

te 1

0M

odera

te 1

0M

odera

te 1

0

SR7.2

Ris

k o

f syste

m,

pro

cesses a

nd (

GCC)

serv

ices failin

g t

o r

espond

appro

priate

ly t

o r

educe t

he r

isk o

f childre

n b

ein

g s

eriously

harm

ed o

r kille

d.

Ure

n,

Lin

da

Hig

h 2

0H

igh 1

5H

igh 1

5H

igh 1

5H

igh 1

5W

ork

in p

rogre

ss t

o r

evie

w t

his

hig

h level ri

sk a

nd t

o

identify

curr

ent

mitig

ating a

ctions.

SR7.3

Poor

inspection r

esults lead t

o p

oor

outc

om

es f

or

vuln

era

ble

childre

n a

nd y

oung p

eople

, im

pacting o

n a

bility t

o m

eet

sta

tuto

ry r

equirem

ents

, re

puta

tion a

nd inte

rvention.

Ure

n,

Lin

da

Modera

te 1

2M

odera

te 8

Modera

te 8

Modera

te 8

Modera

te 8

SR7.4

Educational outc

om

es f

or

vuln

era

ble

gro

ups o

f CYP w

ors

en a

nd

gap w

idens b

ecause o

f Schools

and A

cadem

ies n

ot

meeting t

heir

responsib

ilitie

s t

o v

uln

era

ble

gro

ups a

nd t

he L

A n

ot

cle

ar

about

it's

role

in S

chools

and A

cadem

ies

Grills,

JoH

igh 1

6M

odera

te 1

2M

odera

te 1

2M

odera

te 1

2M

odera

te 1

2

Str

ate

gic

Ris

k 7

: Safe

guard

ing C

hildre

n &

Young P

eople

and A

dults

Ref.

Ris

kO

wner

Inhere

nt

Ris

kResid

ual Ris

k Q

112/1

3Resid

ual Ris

k Q

212/1

3Resid

ual Ris

k Q

312/1

3Resid

ual Ris

k Q

412/1

3D

irection o

f Tra

vel

Mitig

ating A

ctions w

here

the R

esid

ual Ris

k is H

igh

Page 101

SR8.1

Work

forc

e s

kills

and c

apacity g

aps/c

hallenges im

pacting o

n

reduced p

erf

orm

ance,

incre

ased s

ickness a

nd s

taff t

urn

over

and

the r

eduction in t

he q

uality

of

serv

ice p

rovis

ion

Wynn,

Dilys

Hig

h 2

0M

odera

te 1

0M

odera

te 1

0M

odera

te 1

0M

odera

te 1

0

SR8.2

Poor

em

plo

yee r

ela

tions c

ause a

dis

ruption t

o s

erv

ices,

lost

pro

ductivity a

nd incre

ased c

osts

Wynn,

Dilys

Hig

h 1

5M

odera

te 1

0Low

5Low

5M

odera

te 1

0In

cre

ase lik

elihood for

industr

ial action in s

chools

secto

r, b

ased o

n n

ational action p

ay a

nd c

onditio

ns.

At

this

sta

ge n

o o

ther

gro

ups e

g G

reen b

ook a

ffecte

d

Str

ate

gic

Ris

k 8

: W

ork

forc

e P

lannin

g &

Em

plo

yee R

ela

tions

Ref.

Ris

kO

wner

Inhere

nt

Ris

kResid

ual Ris

k Q

1

12/1

3

Resid

ual Ris

k Q

2

12/1

3

Resid

ual Ris

k Q

3

12/1

3

Resid

ual Ris

k Q

4

12/1

3

Direction o

f

Tra

vel

Mitig

ating A

ctions w

here

the R

esid

ual Ris

k is H

igh

SR9.1

Failure

to b

e s

uffic

iently p

repare

d for

our

health r

esponsib

ilitie

s

and d

eliver

inte

gra

ted a

ppro

aches w

ith h

ealth p

art

ners

resultin

g

in lost

financia

l opport

unity,

bre

ach o

f sta

tuto

ry d

uties,

poor

health,

pro

tection a

nd h

ealth im

pro

vem

ent

pro

vis

ion,

and

wid

enin

g h

ealth inequalities.

Aro

ra,

Shona

Modera

te 1

2Low

6Low

6Low

6Low

6

Str

ate

gic

Ris

k 9

: Public H

ealth

Ref.

Ris

kO

wner

Inhere

nt

Ris

kResid

ual Ris

k Q

1

12/1

3

Resid

ual Ris

k Q

2

12/1

3

Resid

ual Ris

k Q

3

12/1

3

Resid

ual Ris

k Q

4

12/1

3

Direction o

f

Tra

vel

Mitig

ating A

ctions w

here

the R

esid

ual Ris

k is H

igh

SR10.1

Inability o

f th

e C

ouncil o

r a k

ey p

art

ner

to e

ffectively

respond t

o

an incid

ent

or

event

that

results in c

om

munity d

isru

ption a

nd

failure

to r

etu

rn t

o n

orm

al, w

ithin

required t

imescale

s.

Hall,

Jon

Hig

h 1

5M

odera

te 9

Modera

te 9

Modera

te 9

Modera

te 9

SR10.2

Inability o

f th

e C

ouncil o

r a k

ey p

art

ner

to e

ffectively

respond t

o

an incid

ent

or

event

that

results in s

ignific

ant

serv

ice d

isru

ption

and failure

to r

etu

rn t

o b

usin

ess a

s n

orm

al, w

ithin

required

tim

escale

s.

Hall,

Jon

Modera

te 1

2Low

6Low

6Low

6Low

6

Str

ate

gic

Ris

k 1

0:

Em

erg

ency R

esponse &

Busin

ess C

ontinuity T

hre

ats

Ref.

Ris

kO

wner

Inhere

nt

Ris

kResid

ual Ris

k Q

112/1

3Resid

ual Ris

k Q

212/1

3Resid

ual Ris

k Q

312/1

3Resid

ual Ris

k Q

412/1

3D

irection o

f Tra

vel

Mitig

ating A

ctions w

here

the R

esid

ual Ris

k is H

igh

SR11.1

Failure

to p

rote

ct

the c

onfidentiality

, in

tegrity

and a

vailability o

f

info

rmation r

esultin

g in ineffic

ient/

ineffective s

erv

ice d

elivery

by

GCC a

nd its

part

ners

, serv

ice inte

rruption,

harm

to indiv

iduals

,

reputa

tional dam

age,

legal action o

r fines

Burn

s,

Jane

Hig

h 2

0M

odera

te 1

2M

odera

te 1

2M

odera

te 1

2M

odera

te 1

2

Str

ate

gic

Ris

k 1

1:

Info

rmation G

overn

ance

Ris

kO

wner

Inhere

nt

Ris

kResid

ual Ris

k

Q1 1

2/1

3

Resid

ual Ris

k Q

2

12/1

3

Resid

ual Ris

k Q

3

12/1

3

Resid

ual Ris

k Q

4

12/1

3

Direction o

f

Tra

vel

Mitig

ating A

ctions w

here

the R

esid

ual Ris

k is H

igh

SR12.1

Failure

of G

CC/G

louceste

rshire t

o a

dapt

to a

more

vola

tile

clim

ate

, w

ith r

isin

g t

em

pera

ture

s,

continually h

igh a

nd

incre

asin

g e

nerg

y p

rices a

nd t

he incre

asin

g n

eed t

o r

educe

carb

on e

mis

sio

ns.

Rig

lar,

Nig

el

Hig

h 2

5H

igh 1

5H

igh 1

5M

odera

te 1

0M

odera

te 1

0

Str

ate

gic

Ris

k 1

2:

Clim

ate

Change

Ref.

Ris

kO

wner

Inhere

nt

Ris

kResid

ual Ris

k Q

112/1

3Resid

ual Ris

k Q

212/1

3Resid

ual Ris

k Q

312/1

3Resid

ual Ris

k Q

412/1

3D

irection o

f Tra

vel

Mitig

ating A

ctions w

here

the R

esid

ual Ris

k is H

igh

SR13.1

The a

llocate

d W

elfare

Refo

rm b

udget

not

adequate

for

the level

of dem

and

Ure

n,

Lin

da

Hig

h 2

0M

odera

te 9

Str

ate

gic

Ris

k 1

3:

Welfare

Refo

rm F

und

Ref.

Ris

kO

wner

Inhere

nt

Ris

kResid

ual Ris

k Q

412/1

3M

itig

ating A

ctions w

here

the R

esid

ual Ris

k is H

igh

Page 102

Auditing Standards Communication with the

Audit Committee

Gloucestershire County Council & Gloucestershire Pension Fund Audit year ending 31 March 2013 20 June 2013

Agenda Item 8

Page 103

Introduction 1

Fraud Risk Assessment 2

Law and Regulation 5

Going concern 7

Related Parties 9

Accounting Estimates 10

Appendices

Appendix 1 Accounting Estimates 11

Contents

Page 104

© 2013 Grant Thornton UK LLP. All rights reserved. 1

The purpose of this report is to ensure there is effective two-way communication between the Council's Audit Committee, who are 'those charged with governance' and the external auditor.

As your external auditors for both the Council and the Pension Fund we have a responsibility under professional auditing standards to ensure there is effective communication with the Audit Committee. This means developing a good working relationship with Committee members, while maintaining our independence and objectivity. If this relationship works well it helps us obtain information relevant to our audit and helps Audit Committee members to fulfil their financial reporting responsibilities. The overall outcome is to reduce the risk of material misstatement.

In planning and performing our audit of the Council's and the Pension Fund's financial statements we need to understand how the Audit Committee, supported by the Council's management, meets its responsibilities in the following areas.

Fraud

Law and regulation

Going Concern

Related parties

Accounting for estimates

This report summarises the Audit Committee, management's and the external auditor's responsibilities in each of these areas, as explained in the International Standards on Auditing (UK and Ireland) (ISAs). Our primary responsibility is to consider the risk of material misstatement.

Each section of the report includes a series of questions that management have responded to. Responses cover arrangements for both the Council and Pension Fund.

We would like to ask the Audit Committee to consider these responses and confirm that it is satisfied with the arrangements in place.

Introduction

Page 105


The ISAs define fraud as:

"An intentional act by one or more individuals among management, those charged with governance, employees, or third parties, involving the use of deception to obtain an unjust or illegal advantage."

[ISA (UK&I) 240, paragraph 11]

The primary responsibility to prevent and detect fraud is with the Audit Committee and the Council's management. To do this:

officers need to ensure there is a strong emphasis on fraud prevention and deterrence, with a commitment to honest and ethical behaviour; and

the Audit Committee oversight needs to include the consideration of the potential for the override of controls and inappropriate influence over the financial reporting process.

As your auditors our overall responsibility is for obtaining reasonable assurance that the Council's financial statements are free from material misstatement due to either fraud or error. We are required to maintain professional scepticism throughout the audit, which means considering the potential for the intentional manipulation of the financial statements.

We are also required to carry out a fraud risk assessment to inform our audit approach. This includes considering the following:

how management assesses the risk of material misstatement in the financial statements due to fraud

officers' response to assessed fraud risk, including any identified specific risks

investigations into data matches identified through the National Fraud Initiative and subsequent outcomes

how officers communicate the processes for assessing and responding to fraud risk to the Audit Committee

how officers communicate its views on ethical behaviour to the Audit Committee

how the Audit Committee exercises oversight of officers' fraud risk assessment and response processes and the internal controls to mitigate these risks

what knowledge the Audit Committee has of actual, alleged or suspected fraud.

Table 1 below sets out how officers have responded to our fraud risk assessment.

.

Fraud Risk Assessment

Page 106


Table 1: Fraud Risk Assessment

Question Management response

1. misstatement in both the Council's and Pension Fund financial statements due to fraud? Is this consistent with the feedback from your risk management processes?

LOW residual risk due to current controls and likelihood assessment considering past history and Internal Audit reports Yes

2. Are you aware of any instances of fraud, either within the Council as a whole or within specific departments since 1 April 2012?

All are reported within the internal audit monitoring reports to the Audit and Governance Committee which are available on the GCC website.

3. Do you suspect fraud may be occurring, either within the Council or within specific departments? - Have you identified any specific fraud risks? - Do you have any concerns there are areas that are at

risk of fraud? - Are there particular locations within the Council

where fraud is more likely to occur?

High risk/complex areas are audited more frequently (Risk Based Internal Auditing RBIA Principles applied), for example payroll, pensions and creditor payments.

Fraud Risk Assessment currently being undertaken by Internal Audit/Risk Management

Areas where cash is received are the highest risk areas in terms of frequency of fraud, albeit relatively low levels of losses.

4. Are you satisfied that the overall control environment, including:

- the process for reviewing the system of internal control;

- internal controls, including segregation of duties; exist and work effectively?

- If not where are the risk areas? - What other controls are in place to help prevent,

deter or detect fraud?

Yes, see overall summary in the AGS.

Key controls in major systems are examined by internal audit annually (RBIA)

RBIA used also when formulating the Internal Audit Plan which is reported in detail to the Audit and Governance Committee.

Management assurance as part of the Risk Management framework, Fraud risk is one of the key categories of risk to be considered when delivering outcomes/objectives

Financial Management/Monitoring

Code of Conduct/Anti Fraud and Corruption and Whistleblowing Policy

5. How do you communicate to employees about your views on business practices and ethical behaviour?

- How do you encourage staff to report their concerns about fraud?

- What concerns are staff expected to report about fraud?

Per Code of Conduct which includes whistleblowing policy and confidential reporting procedure

Anti Fraud and Corruption Policy and Strategy

Examples of concerns are set out in these documents.

Page 107



6. From a fraud and corruption perspective, what are considered to be high-risk posts? - How are the risks relating to these posts identified,

assessed and managed?

Senior Finance Managers generally fill the high risk posts, especially those with certification responsibilities. These are managed as part of general management arrangements. Fidelity Guarantee Insurance Policy protects the council against employee fraud risks. The Insurer requires annual confirmation of the effectiveness of employee recruitment checks and financial systems and processes. Also named officers are provided re high risk posts. This information is gained via Internal Audit and the Risk Management and Insurance Services Framework.

7. Are you aware of any related party relationships or transactions within the Council's or Pension Fund accounts that could give rise to instances of fraud? - How do you mitigate the risks associated with fraud

related to related party relationships and transactions?

No. Full disclosure of related party relationships is obtained annually from all members and senior officers

Policy has been endorsed to include an indemnity for the computer fraud risk of the ICT external provider.

8. What arrangements are in place to report fraud issues to Audit Committee?

Quarterly Internal Audit progress reports and an Annual Report on Internal Audit activity to Audit and Governance Committee. Also 1 to 1 meetings with the Chair of the Audit and Governance Committee if required.

Page 108


Auditing standards (ISA 250) require us to consider the impact that law and regulation and litigation may have on the Council's financial statements. The factors that may result in particular risks of material misstatement due to fraud or error are:

the operational regulatory framework - this covers the legislation that governs the operations of the Council

the financial reporting framework - according to the requirements of International Financial Reporting Standards, the Code of Accounting for Local Authorities in England and relevant Directions

taxation considerations - for example compliance with Value Added Tax and Income Tax regulations

government policies that otherwise impact on the Council's business

other external factors

litigation and claims against the Council.

Where we become aware of information about a possible instance of non-compliance we need to gain an understanding of it to evaluate the possible effect on the financial statements.

The Auditing Standards (ISAs) also require us to make enquiries of management and the Audit Committee about the arrangements in place to comply with law and regulation. To help with this, management have responded to the following questions.

Table 2: Law and Regulation


1. How does management gain assurance that all relevant laws and regulations have been complied with?

Internal Audit (RBIA) compliance with legislation reviews Management assurance via the performance/risk management monitoring and reporting arrangements.

Assurances received for, and set out in, the AGS. Regular attendance at technical updates with CIPFA to ensure all changes to standards noted and acted on. Reports from the Monitoring Officer where applicable. Regular Statutory Officers meetings.

2. How is the Audit Committee provided with assurance that all relevant laws and regulations have been complied with?

Annual Governance Statement Internal and External Audit reports Risk Management reports Reports from the Monitoring Officer as applicable.

Law and Regulation

Page 109



3. Have there been any instances of noncompliance with law and regulation since 1 April 2012?

No, not to date.

4. Is there any actual or potential litigation or claims that would affect the Council's of Pension Fund's financial statements ?

None to date

Page 110


Going concern is a fundamental principle in the preparation of financial statements. Under the going concern assumption, a council is viewed as continuing in operation for the foreseeable future with no necessity of liquidation or ceasing trading. Accordingly, a councils assets and liabilities are recorded on the basis that assets will be realised and liabilities discharged in the normal course of business. A key consideration of going concern is that the Council has the cash resources and reserves to meet its obligations as they fall due in the foreseeable future.

The Auditing Standards (ISAs) also require us to make enquiries of management and the Audit Committee about the going concern assumption. To help with this, management have responded to the following questions.

Table 3 Going concern

Question

Management response

1. How does management gain assurance that the entity is a going concern for the Council and the Pension Fund?

Re the County Council from the regular budget monitoring reports, the annual accounts and MTFS. Detailed cashflow monitoring is undertaken within Finance. Aged debt reports are produced and circulated to appropriate staff for action. An actuarial valuation of the Pension Fund including a review of employer contributions takes place every 3 years to ensure funding levels are appropriate.

2. Are the financial assumptions (e.g., future levels of income and expenditure) consistent with the Council's Business Plan and Pension Fund projections and the financial information provided to the Council throughout the year? Are there any current adverse financial indicators including negative cash flow?

MTFS sets out funding assumptions and is formulated in the context of financial settlements and prudent forecasts where settlements have not been announced.

Strategy Statement is in line with the assumptions and projections used by the actuary.

There are no current adverse financial indicators

Going concern

Page 111


Table 3 Going concern

Question

Management response

3. Are the implications of statutory or policy changes appropriately reflected in the Business Plans, financial forecasts and report on going concern for both the Council and Pension Fund?

Any changes to standards will be reflected in the MTFS and/or the regular financial reports to Cabinet and Scrutiny. Briefing documents would be produced for the Audit and Governance Committee if relevant.

Yes the LGPS scheme changes due in 2014 will be reflected in the assumptions used by the actuary in the 2013 Triennial Valuation of the Pension Fund

4. Does the Council have sufficient staff in post, with the appropriate skills and experience, particularly at senior manager level, to ensure the delivery of the

and Pension Fund objectives? If not, what action is being taken to obtain those skills?

A new operating model has been implemented within GCC and sufficient senior staff with appropriate skills appointed. The CIPFA Knowledge & Skill framework for the Pension Fund is used and the relevant staff are required to receive the relevant training.

5. Have there been any significant issues raised with the Audit Committee during the year which could cast doubts on the assumptions made? (Examples include adverse comments raised by internal and external audit regarding financial performance or significant weaknesses in systems of financial control).

No

Page 112


For local government bodies, the Code of Practice on Local Authority Accounting in the United Kingdom (the Code) requires compliance with IAS 24: Related party disclosures. The Code identifies the following as related parties to local government bodies:

entities that directly, or indirectly through one or more intermediaries, control, or are controlled by the Council (i.e. subsidiaries)

associates and joint ventures

an entity that has an interest in the Council that gives it significant influence over the Council

key officers, and close members of the family of key officers

post-employment benefit plan (pension fund) for the benefit of employees of the Council, or of any entity that is a related party of the Council.

The Code notes that, in considering materiality, regard should be had to the definition of materiality, which requires materiality to be judged from the viewpoint of both the Council and the related party.

Accounting standards (ISA 550) requires us to review your procedures for identifying related party transactions and obtaining an understanding of the controls that you have established to identify such transactions. We will carry out testing to ensure that the related party transaction disclosures made in the financial statements are complete and accurate.

Table 3: Related Parties


1. Who are the Council's and Pension Fund's related parties?

Re CC, Members and Senior Officers. GFirst, Police, Health Bodies where joint working arrangements exist, Atkins Re the Pension Fund, members and staff advising the Pension Committee.

2. What are the controls in place to identify, account for, and disclose, related party transactions and relationships?

Re GCC, annual declarations. At year end a detailed review is undertaken for all service areas to identify significant related parties, including an assessment of any entities that could be significantly influenced by the council Details of key staff are provided in the Annual

Related Parties

Page 113


Local Government bodies need to apply appropriate estimates in the preparation of their financial statements. ISA (UK&I) 540 sets out requirements for auditing accounting estimates. The objective is to gain evidence that the accounting estimates are reasonable and the related disclosures are adequate.

Under this standard we have to identify and assess the risks of material misstatement for accounting estimates by understanding how the Council identifies the transactions, events and conditions that may give rise to the need for an accounting estimate.

Accounting estimates are used when it is not possible to measure precisely a figure in the accounts. We need to be aware of all estimates that the Council are using as part of their accounts preparation; these are detailed in appendix 1 to this report.

The audit procedures we conduct on the accounting estimate will demonstrate that:

the estimate is reasonable; and

estimates have been calculated consistently with other accounting estimates within the financial statements.

Accounting Estimates

Page 114

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Tab

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Esti

mate

M

eth

od

/mo

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ake t

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sti

mate

Co

ntr

ols

used

to

iden

tify

esti

ma

tes

Wh

eth

er

Man

ag

em

en

t

have u

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an

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Un

derl

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g a

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tio

ns:

-

Asses

sm

en

t o

f d

eg

ree

of

un

cert

ain

ty

-

Co

nsid

era

tio

n o

f

alt

ern

ati

ve e

sti

mate

s

Has t

here

bee

n

a c

han

ge i

n

acco

un

tin

g

meth

od

in

year?

Co

un

cil -

Pro

per

ty

pla

nt

&

equip

men

t (P

PE

) va

luat

ion

s

Val

uat

ion

s ar

e m

ade

by

the

Inte

rnal

Val

uat

ion

T

eam

in li

ne

wit

h R

ICS

guid

ance

. A

rev

aluat

ion

of

asse

ts

is c

arri

ed o

ut o

n a

5

year

cyc

lical

bas

is.

Fin

ance

tea

m n

oti

fies

th

e V

aluer

s o

f th

e p

rogr

am o

f va

luat

ion

s an

d a

ny

con

dit

ion

s th

at

may

imp

act

on

th

at

valu

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n.

Inte

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Val

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ion

d

epar

tmen

t

Val

uat

ion

s ar

e m

ade

in-l

ine

wit

h R

ICS

guid

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wit

h

relia

nce

on

an

exp

ert.

No

T

he

Co

un

cil v

aluat

ion

te

am a

re a

sked

to

co

nsi

der

wh

eth

er t

her

e h

as b

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an

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rmen

ts o

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in

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r. T

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a y

ear

end

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ent

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Val

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Val

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relia

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on

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exp

ert.

No

Ap

pen

dix

1 A

cco

un

tin

g E

stim

ates

Page 115

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Esti

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Man

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Un

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-

Co

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Has t

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Co

un

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imat

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ful

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(U

EL

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f P

PE

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al V

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5 ye

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ICS

guid

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. D

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IA

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Th

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the

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the

Val

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o

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IS

A 1

6

Inte

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Val

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d

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Th

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s ab

out

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and

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No

Co

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Pen

sio

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IAS

19)

Rel

ian

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Mem

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Pen

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atio

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to m

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No

Page 116

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Rel

ian

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Th

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Page 117

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Page 119

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.

Page 120

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Page 121

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we

bsite

ww

w.g

rant-

thorn

ton

.co

.uk, w

here

we

have

a

section d

edic

ate

d to o

ur

work

in t

he p

ublic

secto

r. H

ere

you c

an d

ow

nlo

ad c

opie

s o

f our

public

ations

'L

oca

l G

ove

rnm

ent G

ove

rna

nce R

evie

w 2

01

3', 'T

ow

ard

s a

tip

pin

g p

oin

t?',

-'T

he m

igra

tion

of p

ub

lic s

erv

ice

s',

-'T

he d

eve

lopin

g in

tern

al a

ud

it a

ge

nd

a',

-'P

repa

ring

fo

r th

e fu

ture

',

-'S

urv

ivin

g t

he s

torm

: h

ow

re

sili

ent a

re lo

cal a

uth

oritie

s?'

If y

ou w

ould

lik

e f

urt

her

info

rma

tio

n o

n a

ny ite

ms in

th

is b

riefin

g, o

r w

ould

lik

e t

o r

eg

iste

r w

ith

Gra

nt T

horn

ton

to

re

ceiv

e r

eg

ula

r e

ma

il u

pd

ate

s

on issu

es th

at a

re o

f in

tere

st to

yo

u, p

lease

co

nta

ct e

ith

er

yo

ur

En

ga

ge

me

nt L

ea

d o

r A

udit M

ana

ge

r.

Liz

Ca

ve

En

ga

ge

me

nt L

ea

d T

011

73

057

885

M 0

77

80

45

61

28

liz

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ave

@u

k.g

t.co

m

Pe

ter

Ba

rbe

r A

udit M

ana

ge

r T

011

73

0

57

897

M 0

78

80

45

61

22

p

ete

r.a

.barb

er@

uk.g

t.co

m

Page 122

© 2

013

Gra

nt T

horn

ton

UK

LLP

DR

AF

T 5 5

Pro

gre

ss a

t 20 J

un

e 2013

Wo

rk

Pla

nn

ed

date

C

om

ple

te?

C

om

me

nts

2012-1

3 A

cco

un

ts A

ud

it P

lan

We

are

re

qu

ire

d to

issu

e a

deta

iled a

ccou

nts

aud

it

pla

n t

o th

e C

oun

ty C

oun

cil

se

ttin

g o

ut o

ur

pro

po

sed

app

roa

ch

in

ord

er

to g

ive

an

opin

ion o

n t

he C

oun

ty

Council'

s 2

012-1

3 fin

ancia

l sta

tem

ents

.

12 A

pril 2

01

3

Ye

s

We

pre

se

nte

d o

ur

201

2/1

3 A

udit P

lan f

or

both

Glo

uce

ste

rsh

ire

Co

un

ty C

oun

cil

and

Glo

uce

ste

rsh

ire

Pe

nsio

n F

un

d t

o th

e A

pril 2

01

3 A

udit a

nd

Go

ve

rna

nce C

om

mitte

e.

Inte

rim

acc

ou

nts

au

dit

Ou

r in

terim

fie

ldw

ork

vis

it in

clu

de

s:

upd

atin

g o

ur

revie

w o

f th

e C

oun

ty C

oun

cil'

s c

ontr

ol

enviro

nm

ent

upd

atin

g o

ur

und

ers

tand

ing

of fin

an

cia

l syste

ms

revie

w o

f In

tern

al A

udit r

epo

rts o

n c

ore

fin

an

cia

l

syste

ms

early w

ork

on e

me

rgin

g a

ccou

ntin

g issu

es

early s

ubsta

ntive testing

pro

po

sed

Va

lue f

or

Mo

ne

y c

onclu

sio

n.

25 M

arc

h 2

01

3

Ye

s

Glo

uc

es

ters

hir

e C

ou

nty

Co

un

cil

We

co

mp

lete

d th

e in

itia

l risk a

ssessm

ents

fo

r th

e

opin

ion a

nd

Va

lue f

or

Mo

ne

y c

onclu

sio

n a

nd

our

on

-

site

in

terim

vis

it.

Th

ere

are

no issu

es w

e n

ee

d to

bring

to

yo

ur

att

entio

n a

t th

is s

tag

e.

Glo

uc

es

ters

hir

e P

en

sio

n F

un

d

We

co

mp

lete

d th

e in

itia

l risk a

ssessm

ents

fo

r th

e

opin

ion.

Th

ere

are

no issu

es w

e n

ee

d to

bring

to

yo

ur

att

entio

n a

t th

is s

tag

e.

2012-1

3 f

inal a

cc

ou

nts

au

dit

Inclu

din

g:

aud

it o

f th

e 2

01

2-1

3 f

inan

cia

l sta

tem

ents

pro

po

sed

opin

ion o

n th

e C

oun

ty C

oun

cil'

s a

ccou

nts

pro

po

sed

Va

lue f

or

Mo

ne

y c

onclu

sio

n.

Au

gu

st 2

01

3

No

We

have

ag

reed

with

yo

ur

fin

an

ce s

taff

our

wo

rkin

g

pap

er

req

uire

me

nts

to

su

pp

ort

yo

ur

dra

ft fin

an

cia

l

sta

tem

ents

fo

r b

oth

th

e m

ain

aud

it a

nd

th

at o

f th

e

Pe

nsio

n F

un

d.

We

will

co

mm

ence

our

on

-site

post-

sta

tem

ents

wo

rk

on th

e 1

5 J

uly

201

3 f

or

the P

ensio

n F

un

d a

ud

it a

nd

22 J

uly

201

3 f

or

the C

oun

cil

aud

it.

Page 123

© 2

013

Gra

nt T

horn

ton

UK

LLP

DR

AF

T 6 6

Pro

gre

ss a

t 20 J

un

e 2013

Wo

rk

Pla

nn

ed

date

C

om

ple

te?

C

om

me

nts

Va

lue

fo

r M

on

ey (

VfM

) c

on

clu

sio

n

Th

e s

co

pe

of o

ur

wo

rk to

in

form

th

e 2

01

2/1

3 V

fM

co

nclu

sio

n c

om

prise

s:

A r

isk a

ssessm

ent

Brin

gin

g fo

rwa

rd k

now

ledg

e f

rom

last ye

ar

Re

vie

win

g k

ey d

ocu

me

nts

Dis

cu

ssio

n w

ith

off

ice

rs

Au

gu

st 2

01

3

No

Ou

r w

ork

on th

e C

oun

cil'

s V

FM

co

nclu

sio

n w

ill b

e

focusse

d o

n th

e tw

o c

rite

ria s

pecifie

d b

y t

he A

udit

Co

mm

issio

n i.e

.

-T

he o

rga

nis

ation

has p

rop

er

arr

ang

em

en

ts in

pla

ce f

or

se

curin

g fin

an

cia

l re

sili

ence

; a

nd

-T

he o

rganis

ation h

as p

roper

arr

ang

em

ents

for

ch

alle

ng

ing

how

it se

cure

s e

con

om

y, e

ffic

iency

and

eff

ective

ne

ss.

We

will

pro

vid

e a

re

po

rt s

ett

ing

out th

e fin

din

gs fro

m

our

wo

rk o

n th

e F

inan

cia

l R

esili

ence

crite

ria.

We

are

not re

qu

ire

d to

issu

e a

VF

M c

onclu

sio

n f

or

the P

ensio

n F

un

d

Oth

er

are

as o

f w

ork

Ce

rtific

ation

of cla

ims a

nd

re

turn

s

Septe

mber

2013

No

We e

xpect to

com

ple

te this

work

in S

epte

mber

2013

Page 124

© 2

013

Gra

nt T

horn

ton

UK

LLP

DR

AF

T 7 7

Em

ergi

ng

issu

es a

nd d

evel

op

men

ts

Ac

co

un

tin

g a

nd

au

dit

is

su

es

Imp

lic

ati

on

s o

f th

e L

oc

al G

ove

rnm

en

t F

ina

nc

e A

ct

201

2

Th

e L

oca

l G

ove

rnm

ent F

inan

ce A

ct 2

01

2 h

as n

ow

bee

n g

ive

n R

oya

l A

sse

nt.

Th

e A

ct h

as a

me

nd

me

nts

in t

wo

are

as o

f lo

cal g

ove

rnm

en

t

fin

an

ce:

redu

ction

sch

em

es.

a s

hare

to

ce

ntr

al

go

ve

rnm

ent a

nd

pro

po

rtio

na

te s

hare

s to

th

eir p

rece

pting

bod

ies.

In D

ecem

ber

201

2, C

IPF

A issu

ed

a c

onsu

lta

tion o

n p

rop

osed

am

en

dm

en

ts to

th

e 2

01

3/1

4 C

ode

of P

ractice o

n L

oca

l A

uth

ority

Acco

un

ting

in t

he U

nite

d K

ing

dom

fo

r th

e im

plic

ation

s o

f b

usin

ess r

ate

s r

ete

ntio

n s

ch

em

es. I

n s

um

ma

ry, th

e c

han

ge

s a

re to

accou

nt fo

r b

usin

ess

rate

s in

a s

imila

r w

ay t

o c

oun

cil

tax. T

he C

om

pre

he

nsiv

e I

ncom

e a

nd

Exp

en

ditu

re S

tate

me

nt w

ill n

ee

d to

sh

ow

am

ou

nts

co

llectib

le b

y

each

auth

ority

. D

ebto

rs/c

redito

rs w

ill b

e r

ecog

nis

ed w

hen

th

ese

am

ou

nts

do n

ot m

atc

h th

e a

ctu

al a

mo

un

ts p

aid

by e

ach

bill

ing

auth

ority

ove

r to

pre

ce

pto

rs a

nd

go

ve

rnm

ent. T

he C

olle

ction

Fun

d a

dju

stm

ent a

ccou

nt w

ill b

e u

sed

fo

r a

ccou

ntin

g fo

r th

e d

iffe

rence

s. T

op-u

ps a

nd

tariff

s a

nd

th

e s

afe

ty n

et a

nd

le

vy w

ill b

e r

ecog

nis

ed a

s g

rant in

com

e o

r e

xp

en

ditu

re.

Indiv

idua

l a

uth

oritie

s in

a p

oo

l w

ill n

ee

d to

accou

nt

for

their s

hare

of in

com

e a

nd

exp

en

ditu

re d

eb

tors

/cre

dito

rs a

s s

tip

ula

ted

in

any a

gre

em

ent m

ade

by in

div

idua

l a

uth

oritie

s in

th

e p

oo

l.

Challe

ng

e q

uestions:

Do

yo

u k

now

yo

ur

ke

y r

isks?

Ha

ve

off

ice

rs e

nsu

red

th

e fin

an

cia

l im

pact is

fe

d in

to m

ediu

m te

rm fin

an

cia

l p

lans?

Ha

ve

off

ice

rs u

nd

ert

ake

n m

ode

llin

g o

f fu

ture

busin

ess r

ate

s g

row

th?

Ha

ve

off

ice

rs g

ive

n d

ue

co

nsid

era

tion

to

poo

ling

?

Ha

ve

off

ice

rs c

onsid

ere

d th

e p

ossib

le im

pact o

n c

oun

cil

tax c

olle

ction

ra

tes if th

ey d

o r

edu

ce b

en

efit e

ntitle

me

nt in

lin

e w

ith

th

e fu

nd

ing

redu

ction

?

Ha

ve

off

ice

rs r

evie

we

d t

he p

rop

osed

am

en

dm

en

ts to

th

e 2

01

3/1

4 C

ode

an

d a

ssesse

d th

e p

ote

ntia

l im

pact?

A C

ouncil

response to these q

uestions is p

rovid

ed o

n s

lide 8

.

Page 125

© 2

013

Gra

nt T

horn

ton

UK

LLP

DR

AF

T 8 8

Em

ergi

ng

issu

es a

nd d

evel

op

men

ts

Ac

co

un

tin

g a

nd

au

dit

is

su

es

Imp

lic

ati

on

s o

f th

e L

oc

al G

ove

rnm

en

t F

ina

nc

e A

ct

201

2

Re

sp

on

se

fro

m t

he C

ou

ncil

Ch

alle

ng

e q

uestio

ns:

Th

e F

inan

ce A

ct h

as b

ee

n c

are

fully

co

nsid

ere

d, w

ith

exte

nsiv

e f

und

ing

/fin

an

cia

l a

na

lysis

and

mo

de

llin

g b

ein

g u

nd

ert

ake

n. A

pa

rt o

f th

is

pro

ce

ss e

nsu

red

cle

ar

iden

tifica

tion

of ke

y fa

cto

rs a

nd

ris

ks in

he

ren

t w

ith

in t

he n

ew

fu

nd

ing

re

gim

e.

MT

FS

.

A p

erm

ane

nt jo

int-

wo

rkin

g g

roup

has b

ee

n e

sta

blis

hed

with

dis

tric

ts to

co

nsid

er

all

issu

es r

ela

ting

to

lo

calis

ation

of co

un

cil

tax b

en

efits

and

ra

tes r

ete

ntio

n a

nd

exte

nsiv

e m

ode

llin

g h

as b

ee

n u

nd

ert

ake

n.

Ye

s, a

ll G

louce

ste

rsh

ire

auth

oritie

s h

ave

fo

rme

d a

poo

l fo

r 2

01

3/1

4.

d

o r

edu

ce b

en

efit e

ntitle

me

nt in

lin

e w

ith

th

e fu

nd

ing

re

du

ction

?

Th

e jo

int-

wo

rkin

g g

roup

with

dis

tric

ts h

ave

co

nsid

ere

d a

nd

sce

na

rio te

ste

d v

ariou

s o

ptio

ns b

efo

re a

do

ptin

g th

eir in

div

idua

l sch

em

es fo

r

201

3/1

4. W

ork

is o

n-g

oin

g r

eg

ard

ing

th

e b

en

efit o

f ch

an

gin

g th

e s

ch

em

es in

th

e fu

ture

, in

pa

rtic

ula

r lo

okin

g a

t th

e im

pact o

n c

olle

ction

rate

s.

th

e p

ote

ntia

l im

pact?

As p

art

of th

e o

ve

rall

bud

ge

t se

ttin

g a

nd

MT

FS

pro

ce

ss th

e p

rop

osed

am

en

dm

en

ts to

th

e C

ode

ha

ve

be

en c

onsid

ere

d.

Ge

ne

ral R

espo

nse

:

Th

e a

uth

ority

has c

are

fully

co

nsid

ere

d th

e im

plic

ation

s o

f th

e L

G F

inan

ce A

ct 2

01

2, in

clu

din

g t

he lo

calis

ation

of C

oun

cil

Ta

x b

en

efits

and

Ra

tes R

ete

ntio

n S

ch

em

e. E

xte

nsiv

e f

inan

cia

l a

na

lysis

and

mo

de

llin

g h

as b

ee

n u

nd

ert

ake

n to

ensu

re a

re

alis

tic, ro

bu

st a

nd

re

sili

ent

201

3/1

4 M

TF

S t

hat ca

n b

e d

eliv

ere

d w

ith

in m

ana

ge

ab

le a

nd

id

en

tifie

d r

isks. O

n-g

oin

g jo

int-

wo

rkin

g w

ith

th

e d

istr

ict co

un

cils

will

ensu

re

robust and c

halle

ng

ing

monitoring

of th

e s

ituation g

oin

g forw

ard

.

Page 126

© 2

013

Gra

nt T

horn

ton

UK

LLP

DR

AF

T 9 9

Em

ergi

ng

issu

es a

nd d

evel

op

men

ts

Ac

co

un

tin

g a

nd

au

dit

is

su

es

As

se

ts t

ran

sfe

rrin

g t

o a

ca

de

my s

ch

oo

ls

Th

ere

is o

ng

oin

g d

eb

ate

as to

wh

eth

er

assets

re

lating

to

sch

oo

ls t

hat h

ave

be

en g

rante

d a

cad

em

y s

tatu

s s

hou

ld b

e:

imp

aire

d to

nil

at th

e d

ate

of th

e g

rantin

g o

f a

tra

nsfe

r o

rde

r o

n t

he b

asis

th

at th

e a

ssets

will

be d

isp

ose

d o

f fo

r n

il va

lue

or

not im

paire

d a

s th

e a

ssets

are

still

bein

g u

sed

and

so

sh

ou

ld b

e s

how

n a

t th

e b

ala

nce

sh

ee

t d

ate

at fu

ll e

xis

tin

g u

se v

alu

e.

Ou

r vie

w is t

hat th

is is a

ma

tte

r fo

r ju

dg

em

en

t a

nd

th

e f

inan

cia

l sta

tem

ents

sh

ou

ld s

et o

ut cle

arly:

the p

olic

y f

ollo

we

d b

y t

he a

uth

ority

deta

ils o

f m

ate

ria

l a

ssets

th

at a

re to

be tra

nsfe

rre

d o

ut o

f lo

cal a

uth

ority

co

ntr

ol.

Wh

ere

an a

cad

em

y s

ch

oo

l's a

ssets

are

su

bje

ct to

a P

FI a

rra

ng

em

en

t, th

e a

uth

ority

ma

y h

ave

a p

ote

ntia

l o

ne

rou

s c

ontr

act w

here

th

ere

is

a s

hort

fall

in f

und

ing

ie

. w

here

an

auth

ority

has a

PF

I co

ntr

actu

al a

gre

em

ent to

pay o

ut m

ore

th

an

it e

xp

ects

to

re

ceiv

e b

ack in

PF

I cre

dits

and

re

imb

urs

em

en

t fr

om

an a

cad

em

y. If

an a

uth

ority

is f

acin

g a

sh

ort

fall

betw

een

its

co

ntr

actu

al o

blig

ation

s a

nd

th

e a

mo

un

ts it

exp

ects

to

receiv

e t

o fu

nd

th

ese

oblig

ation

s, th

e a

uth

ority

sh

ou

ld c

on

sid

er

wh

eth

er

the c

ontr

act is

one

rou

s. In

co

nsid

erin

g w

heth

er

or

no

t th

ere

is a

n

one

rou

s c

ontr

act, th

e a

uth

ority

wo

uld

nee

d to

co

nsid

er

the s

erv

ice

it re

ceiv

es.

Ch

alle

ng

e q

uestio

ns:

Ha

ve

yo

ur

off

ice

rs c

onsid

ere

d h

ow

to

accou

nt fo

r a

ssets

re

lating

to

sch

oo

ls th

at h

ave

be

en g

rante

d a

cad

em

y s

tatu

s?

Ha

ve

yo

ur

off

ice

rs c

onsid

ere

d w

heth

er

or

not th

ere

is a

n o

ne

rou

s c

ontr

act fo

r P

FI co

ntr

acts

re

lating

to

acad

em

y s

ch

oo

ls?

Ha

ve

yo

ur

off

ice

rs d

iscu

ssed

th

ese

issu

es w

ith

exte

rna

l a

ud

it?

A C

oun

cil

respo

nse

to

th

ese

qu

estio

ns is p

rovid

ed

on

slid

e 1

0.

Page 127

© 2

013

Gra

nt T

horn

ton

UK

LLP

DR

AF

T 10

10

Em

ergi

ng

issu

es a

nd d

evel

op

men

ts

Ac

co

un

tin

g a

nd

au

dit

is

su

es

As

se

ts t

ran

sfe

rrin

g t

o a

ca

de

my s

ch

oo

ls

Re

sp

on

se

fro

m t

he C

ou

ncil

Ha

ve

yo

ur

off

ice

rs c

onsid

ere

d h

ow

to

accou

nt fo

r a

ssets

re

lating

to

sch

oo

ls th

at h

ave

be

en g

rante

d a

cad

em

y s

tatu

s?

Th

e a

uth

ority

is c

lear

on th

e r

eq

uire

d a

ccou

ntin

g tre

atm

ents

(w

hic

h v

ary

accord

ing

to

sta

tus o

f sch

oo

l tr

ansfe

rrin

g)

due

to

the s

ign

ific

ant

num

ber

of a

cad

em

y s

ch

oo

ls in

Glo

uce

ste

rsh

ire

.

Ha

ve

yo

ur

off

ice

rs c

onsid

ere

d w

heth

er

or

not th

ere

is a

n o

ne

rou

s c

ontr

act fo

r P

FI co

ntr

acts

re

lating

to

acad

em

y s

ch

oo

ls?

Th

ere

is n

o s

ch

oo

l P

FI in

Glo

uce

ste

rsh

ire

.

Ha

ve

yo

ur

off

ice

rs d

iscu

ssed

th

ese

issu

es w

ith

exte

rna

l a

ud

it?

Ye

s, a

s p

art

of g

ene

ral d

iscu

ssio

ns o

n s

ch

oo

ls a

ccou

ntin

g tre

atm

ents

with

exte

rna

l a

ud

it.

Page 128

© 2

013

Gra

nt T

horn

ton

UK

LLP

DR

AF

T 11

11

Em

ergi

ng

issu

es a

nd d

evel

op

men

ts

Lo

cal

go

ve

rnm

en

t g

uid

an

ce

'Au

dit

ing

th

e A

cco

un

ts 2

01

1/1

2' re

po

rt

In D

ecem

ber,

th

e A

udit C

om

mis

sio

n p

ub

lish

ed

'A

uditin

g th

e A

cco

un

ts 2

01

1/1

2'. T

he r

epo

rt s

um

ma

rises th

e r

esults o

f a

ud

ito

rs' w

ork

on th

e

fin

an

cia

l sta

tem

ents

of b

oth

princip

al a

nd

sm

all

bod

ies. T

he k

ey f

indin

g in

th

e r

epo

rt is

th

at b

od

ies h

ave

im

pro

ve

d th

e q

ualit

y a

nd

tim

elin

ess o

f th

eir fin

an

cia

l re

po

rtin

g in

20

11/1

2.

Ch

alle

ng

e q

uestio

ns:

Have y

our

off

icers

identified the k

ey r

isks for

the a

uth

ority

in p

reparing

the 2

012/1

3 f

inancia

l sta

tem

ents

?

Ha

ve

yo

ur

off

ice

rs p

rod

uced

a r

obu

st a

nd

ade

qu

ate

ly r

esou

rce

d tim

eta

ble

fo

r th

e p

rod

uction

and

su

bm

issio

n o

f its 2

01

2/1

3 fin

an

cia

l

sta

tem

ents

?

Ha

s t

his

bee

n d

iscu

ssed

an

d a

gre

ed

with

th

e E

xte

rna

l A

udito

rs?

'Re

sp

on

se

s f

rom

th

e C

ou

ncil

A d

eta

iled c

losed

ow

n s

eq

uen

ce a

nd

tim

eta

ble

, w

hic

h c

learly id

en

tifie

s k

ey r

isks a

nd

pre

ssure

poin

ts, is

pre

pa

red

and

ag

reed

by t

he

Fin

an

ce M

ana

ge

me

nt T

eam

.

ancia

l

sta

tem

ents

?

As p

er

respo

nse

abo

ve

.

All

aspe

cts

of p

rod

ucin

g a

nd

aud

itin

g th

e a

ccou

nts

are

pla

nn

ed

an

d d

iscu

ssed

with

th

e e

xte

rna

l a

ud

ito

rs.

Page 129

© 2

013

Gra

nt T

horn

ton

UK

LLP

DR

AF

T 12

12

Em

ergi

ng

issu

es a

nd d

evel

op

men

ts

Ac

co

un

tin

g a

nd

au

dit

is

su

es

UK

Pu

bli

c S

ecto

r In

tern

al A

ud

it S

tan

dard

s

With

eff

ect fr

om

1 A

pril 2

01

3 a

ll p

ub

lic s

ecto

r b

od

ies h

ave

be

en r

eq

uire

d to

ado

pt th

e P

ublic

Se

cto

r In

tern

al A

uditin

g S

tand

ard

s (

PS

IAS

s).

PS

IAS

s h

ave

be

en d

eve

lope

d t

o c

reate

co

nsis

tent sta

nd

ard

s fo

r th

e p

ractice

of in

tern

al a

ud

it a

cro

ss th

e p

ub

lic s

ecto

r a

nd

esta

blis

h t

he

basis

fo

r its q

ualit

y a

ssura

nce

.

Th

e o

bje

ctive

s o

f th

e P

SIA

S a

re to

:

defin

e th

e n

atu

re o

f in

tern

al a

ud

itin

g w

ith

in t

he U

K p

ub

lic s

ecto

r

se

t b

asic

princip

les f

or

ca

rryin

g o

ut in

tern

al a

ud

it in

th

e U

K p

ub

lic s

ecto

r

esta

blis

h a

fra

me

wo

rk fo

r p

rovid

ing

in

tern

al a

ud

it s

erv

ice

s, w

hic

h a

dd

va

lue t

o th

e o

rga

nis

ation

, le

ad

ing

to

im

pro

ve

d o

rga

nis

atio

na

l

pro

ce

sse

s a

nd

ope

ratio

ns, a

nd

esta

blis

h th

e b

asis

fo

r th

e e

va

luatio

n o

f in

tern

al a

ud

it p

erf

orm

ance

and

to

drive

im

pro

ve

me

nt p

lann

ing

.

The k

ey c

hang

es fro

m e

xis

ting

sta

ndard

s a

re:

the in

tern

al a

ud

it c

hart

er

mu

st d

efin

e th

e r

ole

of in

tern

al a

ud

it in

an

y f

raud

-re

late

d w

ork

and

in

clu

de

arr

ang

em

ents

fo

r a

vo

idin

g c

onflic

ts

of in

tere

st if in

tern

al a

ud

it u

nd

ert

ake

s n

on

-aud

it a

ctivitie

s.

app

rova

l m

ust b

e s

oug

ht fr

om

th

e A

udit a

nd

Go

ve

rna

nce C

om

mitte

e fo

r a

ny s

ign

ific

ant a

dd

itio

na

l co

nsu

ltin

g s

erv

ice

s n

ot a

lre

ad

y

inclu

de

d in

th

e a

ud

it p

lan, p

rior

to a

ccep

ting

th

e e

ng

ag

em

en

t.

the c

hie

f a

ud

it e

xe

cutive

mu

st a

gre

e th

e s

co

pe

of e

xte

rna

l a

ssessm

ents

with

an

app

rop

riate

sp

on

sor,

eg

th

e A

cco

un

ting

/Acco

un

tab

le

Off

ice

r o

r ch

air o

f th

e A

udit a

nd

Go

ve

rna

nce c

om

mitte

e a

s w

ell

as w

ith

th

e e

xte

rna

l a

ssesso

r o

r a

ssessm

ent te

am

.

the c

hie

f a

ud

it e

xe

cutive

sh

ou

ld r

epo

rt th

e r

esults o

f th

e q

ualit

y a

nd

assura

nce

pro

gra

mm

e a

nd

pro

gre

ss a

ga

inst a

ny im

pro

ve

me

nt

pla

ns in

th

e a

nn

ua

l re

po

rt. T

he a

nn

ua

l re

po

rt m

ust in

corp

ora

te a

sta

tem

ent o

n c

onfo

rma

nce

with

th

e P

ublic

Se

cto

r In

tern

al A

ud

it

Sta

ndard

s.

Ch

alle

ng

e q

uestio

ns:

Are

pla

ns in

pla

ce t

o a

ssess y

our

inte

rnal a

ud

it f

unctio

n a

ga

inst th

e r

eq

uire

me

nts

of th

e P

SIA

S?

Ho

w c

an y

ou d

rive

mo

re o

rga

nis

ation

al va

lue f

rom

inte

rnal a

ud

it?

Do

yo

u h

ave

an

action

pla

n in

pla

ce t

o d

ea

l w

ith

any issu

es a

risin

g?

A C

oun

cil

respo

nse

to

th

ese

qu

estio

ns is p

rovid

ed

on

slid

e 1

3.

Page 130

© 2

013

Gra

nt T

horn

ton

UK

LLP

DR

AF

T 13

13

Em

ergi

ng

issu

es a

nd d

evel

op

men

ts

Ac

co

un

tin

g a

nd

au

dit

is

su

es

UK

Pu

bli

c S

ecto

r In

tern

al A

ud

it S

tan

dard

s

Re

sp

on

se

fro

m t

he C

ou

ncil

Sin

ce 2

00

6, th

e C

IPF

A C

ode

of P

ractice fo

r In

tern

al A

udit h

as b

ee

n a

dvis

ed a

s th

e p

rop

er

pra

ctice

fo

r in

tern

al a

ud

it. H

ow

eve

r, a

co

llabo

ratio

n a

nn

ou

nce

d b

y t

he C

hart

ere

d In

stitu

te o

f In

tern

al A

udito

rs (

CII

A)

and

th

e C

hart

ere

d In

stitu

te P

ublic

Fin

an

ce a

nd

Acco

un

tan

cy

( CIP

FA

) in

Ma

y 2

01

1 h

as le

d t

o th

e d

eve

lopm

ent o

f a

new

se

t o

f In

tern

al A

udit S

tand

ard

s, n

am

ely

th

e P

ublic

Se

cto

r In

tern

al A

udit

Sta

nd

ard

s (

PS

IAS

).

Th

e n

ew

PS

IAS

have

be

en d

eve

lope

d t

o p

rovid

e a

co

nsis

tent sta

nd

ard

acro

ss th

e U

K p

ub

lic s

ecto

r a

nd

ap

plie

s t

o c

entr

al g

ove

rnm

ent,

local g

ove

rnm

ent a

nd

NH

S o

rga

nis

ation

s. F

ollo

win

g a

co

nsu

lta

tion

perio

d in

20

12, th

ese

new

sta

nd

ard

s h

ave

be

en c

om

pile

d a

nd

revie

we

d b

y t

he In

tern

al A

udit S

tand

ard

s A

dvis

ory

Bo

ard

(IA

SA

B)

wh

ich

co

mp

rise

d o

f re

pre

sen

tative

s fro

m th

e C

hart

ere

d In

stitu

te o

f

Inte

rnal A

udito

rs (

CII

A),

th

e C

hart

ere

d In

stitu

te o

f P

ublic

Fin

an

ce a

nd

Acco

un

tan

cy (

CIP

FA

), H

M T

reasu

ry, S

co

ttis

h G

ove

rnm

ent a

nd

oth

er

rele

va

nt sta

nd

ard

se

tte

rs. T

hese

new

sta

nd

ard

s, w

hic

h r

epla

ce th

e C

IPF

A C

ode

of P

ractice, b

eca

me

eff

ective

fro

m 1

Ap

ril 2

01

3 a

nd

have

four

key o

bje

ctives:

De

fin

e th

e n

atu

re o

f in

tern

al a

ud

itin

g w

ith

in t

he U

K p

ub

lic s

ecto

r;

Se

t b

asic

princip

les f

or

ca

rryin

g o

ut in

tern

al a

ud

it in

th

e U

K p

ub

lic s

ecto

r;

Esta

blis

h a

fra

me

wo

rk fo

r p

rovid

ing

in

tern

al a

ud

it s

erv

ice

s, w

hic

h a

dd

va

lue t

o th

e o

rga

nis

ation

, le

ad

ing

to

im

pro

ve

d o

rga

nis

atio

na

l

pro

ce

sse

s a

nd

ope

ratio

ns; a

nd

Esta

blis

h t

he b

asis

fo

r th

e e

va

luatio

n o

f in

tern

al a

ud

it p

erf

orm

ance

and

to

drive

im

pro

ve

me

nt p

lann

ing

.

Th

ese

sta

nd

ard

s a

re m

and

ato

ry a

nd

th

e C

hie

f In

tern

al A

udito

r w

ill b

e e

xp

ecte

d to

re

po

rt o

n c

onfo

rma

nce

in t

he 2

01

3/2

01

4 a

nn

ua

l re

po

rt.

As s

uch, th

e C

hie

f In

tern

al A

udito

r w

ill u

nd

ert

ake

a s

elf a

ssessm

ent a

ga

inst th

e P

SIA

S a

nd

re

vis

e t

he In

tern

al A

udit C

hart

er

(Te

rms o

f

Refe

rence)

and im

ple

ment any c

hang

es, as r

eq

uired.

As p

art

of o

ur

join

t w

ork

ing

arr

ang

em

en

ts w

ith

Wa

rwic

ksh

ire

Co

un

ty C

oun

cil,

th

e C

hie

f In

tern

al A

udito

rs w

ill c

om

pa

re r

espe

ctive

pro

ce

sse

s d

urin

g 2

01

3/4

.

Th

e r

evis

ed s

elf a

ssessm

ent, a

ction

pla

n, (s

um

ma

risin

g im

pro

ve

me

nt a

rea

s id

en

tifie

d)

and

re

vis

ed In

tern

al A

udit C

hart

er

(Te

rms o

f

Re

fere

nce

), to

be p

rese

nte

d to

th

e A

udit a

nd

Go

ve

rna

nce C

om

mitte

e fo

r A

ppro

va

l.

Page 131

© 2

013

Gra

nt T

horn

ton

UK

LLP

DR

AF

T 14

14

Em

ergi

ng

issu

es a

nd d

evel

op

men

ts

Lo

cal

go

ve

rnm

en

t g

uid

an

ce

Go

ve

rnan

ce

sta

tem

en

ts

Th

e N

ation

al A

udit O

ffic

e h

as p

ub

lish

ed

'F

act S

hee

t: G

ove

rna

nce S

tate

me

nts

: g

ood

pra

ctice

obse

rva

tion

s f

rom

our

aud

its' p

rovid

ing

:

or

Ch

alle

ng

e q

uestio

ns:

Ho

w d

o y

ou p

lan t

o m

ake

yo

ur

An

nu

al G

ove

rna

nce S

tate

me

nt b

e m

ore

tra

nsp

are

nt a

nd

re

leva

nt to

yo

ur

auth

ority

?

Ha

ve

yo

u u

sed

th

e c

halle

ng

e q

uestio

ns in

th

e fa

ct sh

ee

t to

help

info

rm y

our

revie

w o

f th

e A

nnu

al G

ove

rna

nce S

tate

me

nt?

Re

sp

on

se

fro

m t

he C

ou

ncil

Du

ring

2

01

3/1

4 a

deta

iled r

evie

w

of th

e n

ew

gu

idan

ce w

ill

be u

nd

ert

ake

n, w

ith

th

e s

ubse

qu

en

t d

eve

lopm

ent a

nd

im

ple

me

nta

tio

n o

f a

n

Op

en

ne

ss

an

d t

ran

sp

are

ncy o

n p

ers

on

al in

tere

sts

- A

gu

ide f

or

co

un

cil

lors

In M

arc

h, D

CL

G p

ub

lish

ed

'O

pen

ne

ss a

nd

tra

nsp

are

ncy o

n p

ers

ona

l in

tere

sts

- A

gu

ide f

or

co

un

cill

ors

'.

Th

is g

uid

e p

rovid

es g

uid

an

ce to

co

un

cill

ors

abo

ut h

ow

to

be o

pe

n a

nd

tra

nsp

are

nt a

bo

ut th

eir p

ers

ona

l in

tere

sts

now

th

at n

ew

sta

nd

ard

s

arr

ang

em

en

ts h

ave

be

en in

tro

du

ced

by t

he L

oca

lism

Act 2

01

1.

Ch

alle

ng

e q

uestio

n:

Wh

at h

as y

our

auth

ority

don

e to

im

pro

ve

aw

are

ne

ss o

f o

pe

nn

ess a

nd

tra

nsp

are

ncy r

eq

uire

me

nts

fo

r co

un

cill

ors

?

Resp

on

se f

rom

th

e C

ou

ncil

Glo

uce

ste

rsh

ire

Co

un

ty C

oun

cil

ele

ction

s o

n 2

nd

Ma

y 2

01

3 p

rovid

ed

an

opp

ort

unity to

in

form

ele

cte

d M

em

be

rs a

bo

ut o

pe

nn

ess a

nd

tra

nsp

are

ncy o

f p

ers

ona

l in

tere

sts

re

qu

ire

me

nts

. A

ll m

em

be

rs r

eceiv

ed a

briefin

g n

ote

on th

e n

ew

Co

de

of C

ond

uct in

th

eir e

lectio

n p

ack

D

CL

G

-site

, w

hic

h is a

ccessib

le t

o a

ll M

em

be

rs.

Page 132

© 2

013

Gra

nt T

horn

ton

UK

LLP

. A

ll rig

hts

rese

rved

.

'Gra

nt T

horn

ton'

mea

ns G

rant

Tho

rnto

n U

K L

LP,

a lim

ited

liabi

lity

part

ners

hip.

Gra

nt T

horn

ton

is a

mem

ber

firm

of

Gra

nt T

horn

ton

Inte

rnat

ion

al L

td

(Gra

nt T

horn

ton

Inte

rnat

iona

l). R

efer

ence

s to

'Gra

nt T

horn

ton'

are

to

the

bra

nd u

nder

whi

ch t

he G

rant

Tho

rnto

n m

embe

r fir

ms

oper

ate

and

refe

r to

one

or

mor

e m

embe

r fir

ms,

as

the

cont

ext

requ

ires.

G

rant

Tho

rnto

n In

tern

atio

nal

and

the

mem

ber

firm

s ar

e no

t a

wor

ldw

ide

part

ners

hip.

Ser

vice

s ar

e de

liver

ed i

ndep

ende

ntly

by

mem

ber

firm

s, w

hich

are

not

res

pons

ible

for

the

ser

vice

s or

act

iviti

es

of o

ne a

noth

er.

Gra

nt T

horn

ton

Inte

rnat

iona

l do

es n

ot p

rovi

de

serv

ices

to

clie

nts.

gra

nt-

tho

rnto

n.c

o.u

k

Page 133

friday meeting room 1&2 meeting room 1&2 ---- shire hall

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