Agenda and minutes

Regulation, Audit and Accounts Committee - Friday, 20th November, 2020 10.30 am

Venue: Virtual meeting with restricted public access

Contact: Adam Chisnall on 033 022 28314  Email:  adam.chisnall@westsussex.gov.uk

Media

Items
No. Item

19.

Declarations of Interest

Members and officers must declare any pecuniary or personalinterest in any business on the agenda. They should also make declarations at any stage such an interest becomes apparent during the meeting. Consideration should be given to leaving the meeting if the nature of the interest warrants it.  If in doubt please contact Democratic Services before the meeting.

Additional documents:

Minutes:

19.1     Cllr Sparkes declared a personal interest as the Executive Member for Resources at Worthing Borough Council where EY also provide external audit work.

19.2     Cllr Waight declared a personal interest as a Worthing Borough Council Member in relation to civil parking arrangements in the internal audit progress report.

20.

Minutes of the last meeting of the Committee pdf icon PDF 164 KB

The Committee is asked to agree the minutes of the meeting held on 25 September 2020 (attached, cream paper).

Additional documents:

Minutes:

20.1     Resolved – That the minutes of the meeting of the Committee held on 25 September 2020 be approved as a correct record and that they be signed by the Chairman.

21.

External Audit pdf icon PDF 3 MB

The Committee is asked to consider the Audit Results Reports for the West Sussex County Council and the West Sussex Pension Fund from the External Auditor EY.

Additional documents:

Minutes:

21.1   The Committee considered the Audit Results Reports for the West Sussex County Council and the West Sussex Pension Fund (copies appended to the signed minutes).

21.2   Mrs Thompson, EY, began by focussing on the West Sussex County Council report.  Work was mostly complete and any outstanding items were noted in the executive summary.  An opinion would be issued when the work was completed.  EY were anticipating issuing an unqualified opinion on the financial statements which would include an emphasis of matter paragraph covering uncertainties based on the valuation report.  The value for money conclusion was expected to have an except for qualification.

21.3   Simon Mathers, EY, explained that it had been a challenging year due to the impact of COVID-19 and passed on thanks to the County Council officers for their support with the audit.  The risk of management override had been investigated with particular focus on the recording of expenditure and capital spend.  EY were satisfied that there had not been any inappropriate usage.  The risk for Plant, Property, and Equipment (PPE) valuation had been inherently high due to the impact COVID-19 had on market volatility.  A caveat had been included from the external valuer which would be added as an emphasis of matter paragraph.  EY were happy with their testing of valuation processes and the approach taken by the County Council for cyclical valuations.  There were also high inherent risks for County Council disclosures for going concern and events after the balance sheet date.  The disclosures had undergone consultation and an emphasis of matter paragraph was not required.  Cashflow mechanisms had been analysed with the results showing that good arrangements were in place.  Work on officer remuneration disclosures had identified that recruitment and retention policies needed to be re-considered. An associated recommendation for improvement had been raised.

21.4   Mr Mathers spoke on Pension liabilities and how the statements had been adjusted for factors such as McCloud.  There had been asset valuation changes which had led to a £7.9m change in asset values.

21.5   Mr Mathers spoke on the Audit Differences section of the report and explained that the final version would be updated for PPE.

21.6   Mr Mathers discussed the two risks raised for Value for Money (VFM) assessments and explained that the report was not expected to fully cover a plan for COVID-19.  One risk concerned informed decision making linked to the inspections for Children’s Services and the Fire Service.  Good progress had been made, but the arrangements were not fully in place by the end of the year.  This resulted in the ‘except for’ qualification of the VFM conclusion.  The second risk related to sustainable resource deployment and considered whether the council would be able to continue to adapt its financial planning, monitoring and management arrangements to ensure it is able to continue to deploy the resources available to it sustainably over the medium term.   EY concluded that adequate arrangements have been in place throughout 2019/20.

21.7   The Committee made comments including those that follow.  ...  view the full minutes text for item 21.

22.

Financial Statements 2019/20 pdf icon PDF 155 KB

Report by the Director of Finance and Support Services.

The Committee is asked to approve the Statement of Accounts for 2019/20 for West Sussex County Council and the West Sussex Pension Fund, for signing by the Chairman of the Committee.

Additional documents:

Minutes:

22.1     The Committee considered a report by the Director of Finance and Support Services (copy appended to the signed minutes).

22.2     Mrs Chuter, Financial Reporting Manager, introduced the report and informed the Committee that an adjustment of £13.8m was now reflected in the statements for the version that would be signed by the Chairman of the Committee and the Director of Finance and Support Services.

22.3     The Committee made comments including those that follow.

    Commented that the West Sussex County Council’s vision section referred to the M25 and queried whether should be the M23.

    Questioned the statutory position for the repayment of debt. Mrs Chuter explained that this was the minimum revenue position within the management accounts which impacted the general fund but was not included within the statements.

    Sought clarity over the recording of pension liabilities. Mr McEwan explained that the actuarial gain in the comprehensive income and expenditure statement could be reconciled with the remeasurements in the LPGS and Fire Pension assets and liabilities, which are primarily attributable to revised actuary assumptions.

    Asked if pension liabilities reduce, does the release move to unusable reserves. Mr McEwan confirmed this was correct due to legislation which dictates that the amount charged to the taxpayer is linked to contribution rates set by the triennial pension fund valuations.  The IAS19 adjustment to pension liabilities is mitigated via unusable reserves to ensure the general fund is not directly impacted.

    Queried if the risks in the document were listed in order. Mrs Chuter confirmed that the risks were not in a particular order.

    Sought clarity over the level of debt in the statements. Mr McEwan explained that not all of the liabilities on the balance sheet should be considered as repayable debt.  In addition to Public Works Loan Board debt, short term trade creditors are classified as liabilities but form part of general cashflow management.  PFI commitments are also classified as liabilities for balance sheet purposes, but will be written down through the payment of the unitary charge in accordance with contractual arrangements.  Some capital grants and contributions are also classed as liabilities until used, however there was no expectation to repay them.  Cllr Hunt, Cabinet Member for Finance, confirmed that the balance sheet showed £1.25bn assets were held which exceeded all recorded debts.

    Queried the financial impact of COVID-19 and if an alternative solution would be to consider a long term repayment approach. Cllr Hunt explained the importance of focussing on the current timeframe.  The Reset and Reboot plan included an economic recovery plan which had a four to five year approach.  The plan should hold the County Council in good stead for the future.

22.4     Resolved – That the Committee approves the Statement of Accounts for 2019/20 for West Sussex County Council and the West Sussex Pension Fund, for signing (electronically) by the Chairman of the Committee.

23.

Annual Governance Statement 2019/20 pdf icon PDF 141 KB

Report by the Director of Law and Assurance.

The Committee is asked to recommend the draft Statement and Action Plan for adoption through the signatures of the Leader of the Council and the Chief Executive.

Additional documents:

Minutes:

23.1     The Committee considered a report by the Director of Law and Assurance (copy appended to the signed minutes).

23.2     Mr Gauntlett, Senior Advisor in Democratic Services, introduced the report and explained that the Committee had previously seen drafts of the statement and their comments had been taken on board for the current version.  The statement was measured against CIPFA and SOLACE guidance.  There were some outstanding actions due to the impact of COVID-19 so any uncompleted actions would be rolled into the next plan.

23.3     Mr Kershaw, Director of Law and Assurance, confirmed that the statement was a backwards look that was supposed to close in April.  Officers had however worked to bring elements of the document up to date.

23.4     The Committee made comments including those that follow.

    Welcomed the changes to the document following previous comments from the Committee.

    Queried the renewing of the West Sussex Plan and the Total Performance Monitor (TPM). Mr Kershaw explained that the report covered the actions taken with regard to the stability of the leadership team.  The actions for the West Sussex Plan and TPM were in year measures.  Once the reset plan is agreed, the impact for the TPM would be considered.

    Sought clarity over the review undertaken for County Local Committees (CLC). Mr Kershaw explained that the report referred to a historic review undertaken in February.  Currently CLCs had been suspended due to lockdown arrangements.

    Queried the timeliness of the statement. Mr Kershaw explained that there was a degree of delay with the statement which had been increased this year.  The Committee regularly reviewed drafts of the statement in order to maintain oversight.  Mr Gauntlett confirmed that the action plan came to most meetings of the Committee which would be expected to continue.

    Asked if there would be an attempt to get the statement back onto a normal schedule following the delay. Mr Kershaw explained that the statement traditionally aligned with the signing of the accounts, but there was no requirement for this.  There could be opportunity next year to split the reports and have the statement meet the July deadline.

23.5     Resolved – That the Committee recommend that the draft Statement and Action Plan be approved and proceed for the signatures of the Leader of the Council and the Chief Executive.

24.

Treasury Management Compliance Report -Second Quarter 2020/21 pdf icon PDF 160 KB

Report by the Director of Finance and Support Services.

 

The Committee is asked to review and comment on the Treasury Management Compliance Report.

Additional documents:

Minutes:

24.1     The Committee considered a report by the Director of Finance and Support Services (copy appended to the signed minutes).

24.2     Mrs Chuter introduced the report and informed the Committee that there had been no breaches for the quarter.

24.3     The Committee queried the investment in Croydon Council. Mrs Chuter confirmed that £10m was held and that the limit was £25m.  There was no risk considered for this investment.

24.4     Resolved – That the report be noted.

25.

Internal Audit Progress Report pdf icon PDF 133 KB

Report by the Director of Finance and Support Services, and the Head of Southern Internal Audit Partnership.

The Committee is asked to note the Internal Audit Progress Report (October 2020).

Additional documents:

Minutes:

25.1     The Committee considered a report by the Director of Finance and Support Services, and the Head of Southern Internal Audit Partnership (copy appended to the signed minutes).

25.2     Mr Pitman, Head of Southern Internal Audit Partnership, introduced the report and explained that catchup was still underway to make up for the loss of quarter one, however confidence was expressed that there was required capacity to meet commitments.  There had been an increase in some management actions and a reduction of overdue actions.  The Committee had previously commented on the lack of comments in the annex, which were now fully populated.

25.3     The Committee made comments including those that follow.

    Queried the approach to remote working and if it had changed the scope of any audit work. Mr Pitman explained that technology allowed the operating model to change which enabled audit work to continue.  County Council officers were commended for how they had supported internal audit. 

    Sought clarity on the monthly reconciliation for outstanding Civil Parking Arrangement actions and if agency agreements were not being complied with by district and borough councils. Mr Pitman agreed to look into the matter and provide a response back to the Committee.  The Committee asked that the Director of Law and Assurance should be included in the response to ensure that appropriate action could be taken if required.

     Asked for details on the process for choosing which items were to be deferred.  Mr Pitman explained that the process was fluid and that there was liaison with officers.  The items needed to remain on the radar, but given the current circumstances it was appropriate to defer them.

    Queried the revised due dates in the report. Mr Pitman reported that dates were changed by the service and that detailed narratives to explain the changes could be provided on request.  The Committee could also request that service officers attend a meeting to talk to their actions and due dates.  Additional detail could be added to future reports where lower level actions had significant changes to due dates.  The Committee felt it would be appropriate to ask the Acting Head of IT to attend the next meeting to discuss the actions for Disaster Recovery Planning.

25.4     Resolved – That the Committee note the Internal Audit Progress Report.

26.

External Quality Assessment of Southern Internal Audit Partnership pdf icon PDF 133 KB

Report by the Director of Finance and Support Services, and the Head of Southern Internal Audit Partnership.

The Committee is asked to note the External Quality Assessment Report.

Additional documents:

Minutes:

26.1     The Committee considered a report by the Director of Finance and Support Services, and the Head of Southern Internal Audit Partnership (copy appended to the signed minutes).

26.2     Mr Pitman introduced the report which concerned the outcome of the recent external quality assessment of the Southern Internal Audit Partnership.  The report was positive and showed conformity against all aspects.

26.3     The Committee made comments including those that follow.

    Praised the report which showed that good systems were in place and noted that improvements in Internal Audit had been observed.

    Queried Opportunity B in the report which concerned data analytics and asked if this would be progressed. Mr Pitman explained that data and strategy arrangements were set across the whole partnership and that the effectiveness of this would be considered across each organisation.  There were elements that Mr Pitman was keen to drive forwards.

    Sought comments on Opportunity A for the elapsed time on internal audit engagements. Mr Pitman explained that action plans for all organisations would be looked at to dissect any audit reviews that exceeded three months and understand the reasons.  If delays were linked to the Partnership then mitigations would be worked on.  If delays were from the client then conversations would be had to improve processes.  This work was underway with actions looking to be proposed in the new year which could be presented to the Committee.

    Raised Opportunity F for periodic planning and queried if churn within the organisation had impacted audit processes. Mr Pitman explained that speed of change had been increased due to COVID-19.  The planning approach for each quarter included liaison meetings to assist with the audit work.

    Asked if the Reset and Reboot plan was being considered. Mr Pitman confirmed that this was a significant part of the organisation and would sit high on audit plans.  Recovery was an existing topic within the audit plan and it was expected that the Reset and Reboot plan would be considered within this.

26.4     Resolved – That the Committee notes the External Quality Assessment Report.

27.

Quarterly Review of the Corporate Risk Register pdf icon PDF 183 KB

Report by the Director of Finance and Support Services.

The Committee is asked to review the information detailed in the report, the current Corporate Risk Register and provide comment as necessary

Additional documents:

Minutes:

27.1       The Committee considered a report by the Director of Finance and Support Services (copy appended to the signed minutes).

27.2       Mr Pake, Corporate Risk and Business Planning Manager, introduced the report and highlighted that risks 66 and 68 had reduced due to the mitigating actions that had been undertaken.

27.3       The Committee made comments including those that follow.

    Queried the Children’s Trust (CR67) risk reducing to its tolerable level. Mr Pake reported that the risk had been mitigated down to a target level of 10 and resolved to provide details to the Committee on the actions that had led to this.  Ms Eberhart confirmed that initiatives had been recognised in the risk register as part of the workforce programme.

    Raised concerns that the current scoring system did not exceed a score of 25 and so a further increase in risk would not be recognised. Mr Pake reported that the strategy and associated governance (i.e. assessment criteria, possible inclusion of direction of travel etc) would be reviewed in next year as part of the annual review and submitted to the Committee for consideration.

    Asked if the Risk Register was compared with other local authorities. Mr Pake confirmed that he regularly meets with other authority risk managers to discuss concerns and horizon scanning activity.  Authorities have different risks with different contexts so direct comparisons could not always be made, however it was a valuable process in providing assurance/assessment of the current risk profile. Service leads regularly engage with partners to discuss mutual concerns and mitigating actions.

27.4       Resolved – That the Committee note the Corporate Risk Register.

28.

Date of Next Meeting

The next meeting of the Committee will be held on 18 January 2021.

Additional documents:

Minutes:

28.1     The Committee noted that its next scheduled meeting would be held on 18 January 2021.