Agenda and minutes

A nomination for the position of Chairman was received in respect of Councillor D. J. Nicholl. On being put to the vote it was

RESOLVED that Councillor D. J. Nicholl be elected Chairman of the Committee for the 2023-24 municipal year.

A nomination for the position of Vice Chairman was received in respect of Councillor H. D. N. Rone-Clarke. On being put to the vote it was

RESOLVED that Councillor H. D. N. Rone-Clarke be elected Vice Chairman of the Committee for the 2023-24 municipal year.

Apologies for absence were received from Councillor D. G. Stewart with Councillor E. M. S. Gray in attendance as named substitute.

To invite Councillors to declare any Disclosable Pecuniary interests or Other Disclosable Interests they may have in items on the agenda, and to confirm the nature of those interests.

There were no declarations of interest nor of any whipping arrangements.

The minutes of the meeting of the Audit, Standards and Governance Committee held on 9^th March 2023 were submitted for Members’ consideration.

RESOLVED that the minutes of the Audit, Standards and Governance Committee meeting held on 9^th March 2023 be approved as a correct record.

The Head of Legal, Democratic and Property Services presented the Monitoring Officer’s report and highlighted that in response to a Parish Council complaint in respect of social media activity the training programme for Members had been updated. Specific training on social media use and conduct had been arranged with a police force inspector. This training was to take place either in June or July with the precise date to be confirmed.

With regards to Independent Person arrangements, it was reported that the Council was considering an option to recruit an Independent Person by joining the existing retained pool of Independent Persons that was set up by six other authorities in Worcestershire working together in 2012. The Council would incur a small fee if a decision was made to proceed with this option. Members requested that detail be provided in respect of the exact fee this option would incur.

More information on the proposal to recruitment the Independent Person would be submitted to a future meeting of the Committee but in the interim the current Independent Person, Mr. Mel Nock, would continue in the role of Independent Person to cover the transition to new arrangements (expected to come into effect by autumn 2023). It was also proposed that services of Mr. Nock be retained for a further term of four years in respect of his role as a support to the Monitoring Officer in the management of Member to Member complaints.

It was commented in response to a Member question that the current Independent Person, Mr. Nock, had provided a great deal of support to the Monitoring Officer, in terms of providing a valued perspective on complaints and allowing many complaints to be resolved without recourse to formal hearings. It was added that Mr. Nock’s assistance would continue to be needed as most complaints received by the Monitoring Officer were Member to Member complaints (including Parish Councils complaints).

RESOLVED that the Monitoring Officer’s report be noted.

The General Dispensation Report was presented for Members’ consideration and it was explained that the purpose of this report was to provide members with an opportunity to consider and agree a number of general dispensations for all Councillors.

It was noted that as the first Committee meeting of the municipal year was taking place earlier in the year than normally, there was not enough time to discuss and consider with Members any individual dispensations they might wish to apply for. As a result a separate report on individual member dispensations would be brought to the next meeting of this Committee.

A query was raised with regards to the granting of a dispensation to Members of the Committee (who also sat on the Artrix Holding Trust) on matters relating to Artrix. It was the view of the Monitoring Officer that at this point it would be preferable to discuss this matter with each Committee Member who sat on the Artrix Holding Trust individually. It was highlighted that any matters relating to the affairs of Artrix were the remit of the Artrix Holding Trust. However, some matters relating to Artrix more generally might also need to be referred to at meetings of other committees. Nevertheless, Members would normally need to apply for any specific dispensations of such nature individually.

RESOLVED that:-

1)    the Audit, Standards and Governance Committee grant a dispensation under Section 33 (2) of the Localism Act 2011 to allow Members to address Council and Committees in circumstances where a member of the public may elect to speak;

2)     subject to the caveat set out in paragraph 3.6 of this report in relation to setting the Council’s Budget, the Audit, Standards and Committee grants dispensations under Section 33 (2) of the Localism Act 2011 to allow all Members to participate in and vote at Council and Committee meetings when considering the setting of:

a) the Budget;

b) Council Tax;

c) Members' Allowances; and

d) Non-Domestic Rates – Discretionary Rate Relief Policy and Guidance affecting properties within the District;

3)    it be noted that all dispensations granted by the Committee take effect on receipt of a written request from Members for such a dispensation and where Members may have a Disclosable Pecuniary Interest in the matter under consideration, which would otherwise preclude such participation and voting; and

4)    it be noted that the dispensations referred to at resolutions (1) and (2) will remain valid until the first meeting of the Audit, Standards and Governance Committee following the next District Council Elections in 2027 unless amended by the Committee prior to that date.

The Committee received the Annual Update Report on the Regulation of Investigatory Powers Act 2000 (RIPA). It was reported that traditionally this power was used by service areas such as trading standards and benefits. However, the need for exercising power under RIPA had always been low and had further reduced in recent times. It was also noted that the Council would seek to exercise its power under RIPA only in cases of serious crime risk in any case.

RESOLVED that:

(1)  the Council’s RIPA Policy (version 8.2) be endorsed; and

(2)  the update on RIPA activity as described in this report be noted.

The External Auditors from Grant Thornton presented a report on progress in delivering the external audit function for the Council and provided a wider audit sector update.

It was recapped that a draft version of the Council’s 2020-21 financial statements was presented to Members of the Committee in December 2022, however, the Council’s Section 151 Officer had not signed off these statements to date and thus financial statements for 2020-21 had not yet been submitted to the External Auditor. It was acknowledged that this was due to the Section 151 Officer awaiting the conclusion of the External Auditor’s work on opening balances before signing the draft 2020-21 financial statements.

The External Auditor reported that testing had been performed on the data migration event from the Council’s legacy financial ledger, eFinancials, to the new financial ledger supplied by TechnologyOne. Testing involved the selection of 25 transactions from the eFinancials reports to the TechnologyOne system and 25 transactions from the equivalent TechnologyOne transactional reports to the eFinancials system and checking that they had been migrated appropriately. No issues had been identified during this testing.

It was explained by the External Auditor, however, that the number of transactions tested represented a negligible volume of total transactions processed in the data migration event and the External Auditor had been unable to gain sufficient assurance on the basis of this testing that the whole data migration event was performed correctly. Furthermore, random anomalies had been identified by Council’s finance officers in their own work on data migration.

As a result automated solutions for gaining assurance over the transferred data through testing back-ups taken from the eFinancials system were currently considered as this would provide a much broader coverage of data than could be tested manually. The Interim Director of Finance commented that enquiries had been made with the legacy financial ledger provider, eFinancials, about re-gaining access to transactional reports from that system. This would necessitate a contract extension.

It was noted that 31^st May 2023 was the statutory deadline for local authorities to submit the draft 2022-23 financial statements to their external auditors. The Council was significantly behind in terms of completion of its Accounts audits, and the Committee was reminded the Council was issued with statutory recommendations under Section 24 of the Local Audit and Accountability Act 2014 primarily for non-delivery of its 2020-21 Statement of Accounts.

The External Auditor reported on their Value for Money responsibilities and in doing so noted that an Interim Auditor’s Annual Report for the 2020-21 financial year was provided to the Committee in November 2022, and it was anticipated that a joint Interim Auditor’s Annual Report for financial years 2021-22 and 2022-23 would be issued later in the year.

It was reported that there was a likelihood of external audit fee variation due to the impact of delays in financial reporting and the impact of the Section 24 Notice being issued to the Council. The original fee proposed for 2020-21 audit work of Bromsgrove  ...  view the full minutes text for item 9/23

The Interim Director of Finance and Section 151 Officer presented the Quarterly Risk Update and in doing so highlighted that this was now the fourth cycle of reviewing Corporate and Departmental Risks since the original baselining of risks in April 2022. It was also the fourth management report on risk presented to the Committee since the original baselining of risks.

It was reported that there were 13 Corporate Risks, including a risk related to the Cost of Living Crisis. Since last reporting, a new Corporate Risk had been included which related to the replacement of the Council’s existing Customer interface, which was also linked to significant budgetary savings in the 2025/26 financial year.

There were now 51 Departmental Risks of which 1 was a red risk related to Revenues - Performance Indicator data which was not deemed robust as it could not be system generated. It was reported that it was unlikely the number of risks could be further reduced as these were now mostly linked to compliance. In addition, the Worcestershire Regulatory Service (WRS) Risks, reported to its board on a quarterly basis, were included at Appendix B. The significant risk for WRS centred around finance and contracts with other local authorities.

It was reported that cyber security presented probably the greatest risk for the Council and the local authority sector at large. The sector was particularly affected by cyber-attacks and Officers commented that there were now less insurers willing to offer cyber insurance services. It was reported that this was considered by the Audit, Governance and Standards Committee at Redditch Borough Council (Minute No. 25 – Quarterly Risk Update) with a motion agreed by that Committee recommending that the Local Government Association (LGA) facilitate a process to assist the local government sector with the deficiency in the cyber security insurance market.

It was reported that Councils needed to have two-factor authentication for accessing Council systems as a requirement to obtain cyber insurance. This was in place for Bromsgrove District Council. Additionally, other measures were taken to improve cyber security at the Council including a mandatory cyber security training for all staff and periodic phishing tests undertaken across the organisation.

Following the presentation, a number of questions were asked to which the following answers were provided:

·       It was stated that Artificial Intelligence (AI) solutions were being considered by the Council in areas such as customer interface and preparation of job descriptions, as part of work on replacing the current customer access portal. Parts of customer interfaces were already automated. It was noted that the Council needed to be fully assured of the safety of any technologies such as AI before any implementation could be undertaken.

·       It was reported that the Council’s financial ledger system was hosted on a cloud by TechnologyOne, the supplier, which meant it was possible for the company to access the Council’s data, in case of, for example, performing IT maintenance work on the system. This access was, however, bound by contractual agreements and protected  ...  view the full minutes text for item 10/23

Members were informed that the Accounting Policies Report before the Committee provided details of the financial governance framework under which the Council operated and the legislative reporting requirements for reporting to central government in respect of financial compliance.

One of the legislative reporting requirements the Council had not met was the

delivery of the 2020/21 Statement of Accounts. As such, the Council was issued with a Section 24 Statement.

The Committee was informed that a requirement was now in place for the Council to publish any spending that exceeds £500 on a monthly basis.

It was reported that 83 staff members attended the 2022-23 Budget Manager Closure training at the end of March which represented a positive level of engagement in the budget process from the organisation.

It was noted that the Council’s 2023/24 Budget was approved in February. Budgets were now loaded and a draft budget book was being prepared to assist in Members understanding the Budget. In terms of the budget process, Members were informed that a provisional outturn report would be presented to Cabinet at its July meeting.

In terms of the Council’s financial system, TechnologyOne, it was reiterated that Bromsgrove and Redditch were the only authorities in the UK using the company’s cash receipting solution. It was further reported that an upgrade to the TechnologyOne system would be taking place from version 2023B to 2023A.

Following the Financial Compliance Report presentation, Members asked a number of questions to which the following responses were provided:

·       It was highlighted that the Council developed the bespoke financial system solution for the Council jointly with TechnologyOne, including the cash receipting solution, and that the company partly refunded the Council in the fall of 2021.

·       The cash receipting solution originally operated under 1 back office but a problem developed as there were 3 separate entities (Bromsgrove District Council, Redditch Borough Council, Rubicon Leisure) to which transactions needed to be assigned. It was reported that there were now 3 separate back offices in place on the system.

·       It was noted that the Council decided not to implement the HR/payroll part of the TechnologyOne Enterprise Resource Management (ERP).

·       In terms of lessons learned, it was explained that a Bromsgrove Audit Task Group was set up in response to the Council being issued with a Section 24 Statement and this Group had made a number of recommendations to address the failures identified with the ERP system implementation and to improve the Council’s future project delivery. One of the Audit Task Group’s recommendations that had now been implemented was the creation of a permanent Project Management Office. This would support the delivery of a full range of projects undertaken by the Council.

·       Members questioned how residents could be reassured that the Council continued to deliver value for money and used its resources to the best effect, in the light of the Section 24 Statement issued to the Council in October 2022. Officers responded that the Council needed to be more proactive in  ...  view the full minutes text for item 11/23

The Head of Internal Audit Shared Service for Worcestershire Internal Audit Shared Service (WIASS) presented the 2022/23 Internal Audit Annual Report and Audit Opinion and in doing so noted that the Annual Report was an amalgamation of all Internal Audit Progress Report that the Committee received over the 2022/23 municipal year.

It was reported that the internal audit outcomes from reviews were shared on an ongoing basis with the External Auditors to assist them in gaining assurance around the Council’s processes. Audit follow-ups in areas of key risk or where insufficient assurance had been gained previously showed an overall positive trend with management and service areas concerned implementing any follow-up recommendations in a timely manner. There had been no exceptions that needed to be reported to the Committee during 2022/23.

It was noted that Appendix 1 to the report provided the overview of delivery of internal audit in the last year and it was reported that Debtors and Main Ledger received limited assurance and this was linked to issues with the cash receipting module of the new ledger system.

Appendix 2 provided the Annual Audit Opinion of the Head of Internal Audit Shared Service in his capacity as the Council’s Chief Internal Auditor. It was the opinion of the Internal Auditor that enough coverage in terms of internal audit had been provided in 2022-23 and that the implementation of the new finance system had created risk hotspots which were reported as being addressed by the Council.

Appendix 3 was the Internal Audit Charter of WIASS, which would be updated throughout the current municipal year, mainly around categorisation of assurance. Any proposed changes would be brought to Members of the Committee for consideration.

Following the report presentation, Members asked about the selection criteria for areas of internal audit. It was responded that a risk-based approach was adopted for selecting areas for internal audit. Discussions would also take place with management around which areas presented high risk for the Council. In the Council’s current situation there was also a focus on monitoring the situation around the Council’s financial ledger system until the Council was up-to-date with audits of its financial statements.

A question was raised about the meaning of internal audit acting as a ‘critical friend’ and it was clarified that this methodology sought to adopt a preventive approach to audit where issues identified were discussed with management and support and advice provided at an early stage to assist in providing remedial actions. Nevertheless, internal audit, through its risk-based audit and assurance work, remained independent of the Council with the aim of arriving at objective opinions on how the council operates.

RESOLVED that the 2022-23 Internal Audit Annual Report and Audit Opinion be noted.

The Head of Internal Audit Shared Service for Worcestershire Internal Audit Shared Service (WIASS) presented the draft Internal Audit Plan for 2023/24. It was explained that the coverage of the Plan had been based upon the Council’s risk priorities as per the Corporate and Departmental risk registers. Areas of large budgetary spend areas had also been considered, along with areas that had direct association to the Council Plan.

The Internal Audit Plan could be used for monitoring of the internal audit programme throughout the year and any changes to the Plan would be reported before the Committee. Progress against the Plan was to be reported on a quarterly basis.

A question was asked in respect of the meaning of the acronym NNDR and it was explained that it stood for National Non-Domestic Rates, otherwise Business Rates, which was a statutory tax levied by central government (and collected by local authorities) on non-domestic, commercial property.

RESOLVED that the 2023-24 Internal Audit Plan be approved.

The Chairman asked for nominations for the role of the Council’s Risk Champion for the municipal year 2023-24. A nomination was received in respect of Councillor B. M. McEldowney. On being put to the vote it was

RESOLVED that Councillor B. M. McEldowney be appointed as Risk Champion for the municipal year 2023-24.

The Committee Work Programme was submitted for Members’ consideration.

RESOLVED that the Audit, Standards and Governance Committee Work Programme be noted.