friday meeting room 1&2 meeting room 1&2 ---- shire hall
TRANSCRIPT
AUDIT AND GOVERNANCEAUDIT AND GOVERNANCEAUDIT AND GOVERNANCEAUDIT AND GOVERNANCE
COMMITTEECOMMITTEECOMMITTEECOMMITTEE
10.00 am10.00 am10.00 am10.00 am
FRIDAYFRIDAYFRIDAYFRIDAY
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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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
That the recommendation be agreed
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 recommendation be agreed
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
Between 3 to 6 months 11.7 9.0
Between 6 to 12 months 0.0 36.2
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
Bonds issued by multilateral development banks
(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
Bonds issued by multilateral development banks
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
10 years and within 20 years 100 0 51.400 15.7 Yes
20 years and within 30 years 100 0 38.967 11.9 Yes
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23
30 years and within 40 years 100 0 85.260 26.0 Yes
40 years and within 50 years 100 0 30.000 9.1 Yes
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
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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
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internalaudit
ANNUAL REPORT ON
INTERNAL AUDIT ACTIVITY
2012/2013
Gloucestershire County Council
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(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
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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.
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6
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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
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
Auth
ority
Wid
eC
om
plia
nce w
ith k
ey b
usin
ess p
olic
ies -
Pro
cure
ment
(Liq
uid
Logic
)H
igh
Fin
al R
eport
Issued
Adequate
Adequate
27/0
9/2
012
Auth
ority
Wid
eC
ontr
act
Aw
ard
and M
onitoring -
Pro
pert
y A
gency F
ram
ew
ork
Agre
em
ent
Hig
hF
inal R
eport
Issued
Lim
ited
Lim
ited
24/0
1/2
013
Auth
ority
Wid
eD
evelo
per
Contr
ibutions
Hig
hF
inal R
eport
Issued
Adequate
Lim
ited
28/0
6/2
013
Auth
ority
Wid
eC
om
plia
nce w
ith k
ey b
usin
ess p
olic
ies -
Info
rmation M
anagem
ent
Hig
hF
inal R
eport
Issued
Adequate
Adequate
24/0
1/2
013
Auth
ority
Wid
eD
ata
Pro
tection A
dvic
e f
ollo
win
g D
ata
Bre
ach
Hig
hF
inal R
eport
Issued
Not
Applic
able
Not
Applic
able
28/0
6/2
013
New
Activity
Auth
ority
Wid
eC
ode o
f C
onduct
for
Em
plo
yees
Hig
hC
arr
ied F
orw
ard
to 1
3/1
4
Auth
ority
Wid
eC
orp
ora
te G
overn
ance -
Cots
wold
Wate
r P
ark
Hig
hF
inal R
eport
Issued
Not
Applic
able
Not
Applic
able
28/0
6/2
013
New
Activity
Auth
ority
Wid
eC
ontr
act
Aw
ard
(C
hild
ren's
Centr
es)
Hig
hF
inal R
eport
Issued
Substa
ntial
Adequate
28/0
6/2
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
g a
nd T
ransitio
nS
ickness A
bsence p
olic
yM
ediu
mC
arr
ied F
orw
ard
to 1
3/1
4
ICT
Info
rmation M
anagem
ent
Share
d S
erv
ices
Hig
hF
inal R
eport
Issued
Substa
ntial
Adequate
29/0
6/2
012
Bro
ught
Forw
ard
fro
m 2
011/1
2
ICT
ICT
Dis
aste
r R
ecovery
& B
usin
ess C
ontinuity
Hig
hD
raft
Report
Issued
ICT
Soft
ware
Lic
encin
g M
anagem
ent
Com
plia
nce
Hig
hD
raft
Report
Issued
ICT
ICT
Str
ate
gy
Hig
hF
inal R
eport
Issued
Adequate
Adequate
28/0
6/2
013
ICT
Govern
ance A
rrangem
ents
(G
CC
- C
apita)
Hig
hF
inal R
eport
Issued
Adequate
Adequate
28/0
6/2
013
ICT
Incid
ent
- P
roble
m -
Change M
anagem
ent
Mediu
mF
inal R
eport
Issued
Substa
ntial
Substa
ntial
28/0
6/2
013
ICT
Docum
ent
Managem
ent
Syste
mM
ediu
mC
ancelle
dM
anagem
ent
revie
w u
ndert
aken -
audit n
o longer
ICT
Early Y
ears
Paym
ent
Syste
mM
ediu
mC
arr
ied F
orw
ard
to 1
3/1
4
ICT
Virtu
alis
ation
Mediu
mF
inal R
eport
Issued
Substa
ntial
Substa
ntial
28/0
6/2
013
ICT
ICT
Security
- L
ogin
ID
sM
ediu
mC
arr
ied F
orw
ard
to 1
3/1
4
ICT
ICT
Security
- A
sset
Regis
ter
Mediu
mIn
clu
ded in a
bove a
udit
Com
bin
ed w
ith I
CT
Security
- L
ogin
ID
Inte
rnal A
udit C
ert
ific
ation
Local C
apital B
lock F
undin
g (
Inte
gra
ted T
ransport
and H
ighw
ay M
ain
tenance)
Hig
hF
inal R
eport
Issued
Not
Applic
able
Not
Applic
able
27/0
9/2
012
Inte
rnal A
udit C
ert
ific
ation
Form
er
LS
C f
undin
g 2
011-1
2H
igh
Fin
al R
eport
Issued
Not
Applic
able
Not
Applic
able
29/0
6/2
012
Inte
rnal A
udit C
ert
ific
ation
Fire a
nd R
escue A
uth
orities
Hig
hF
inal R
eport
Issued
Not
Applic
able
Not
Applic
able
27/0
9/2
012
Inte
rnal A
udit C
ert
ific
ation
Gro
win
g P
laces F
und
Hig
hF
inal R
eport
Issued
Not
Applic
able
Not
Applic
able
24/0
1/2
013
New
Activity
Inte
rnal A
udit C
ert
ific
ation
Monitoring A
rrangem
ents
for
the r
eceip
t of
Govern
ment
Gra
nts
Hig
hF
inal R
eport
Issued
Adequate
Adequate
29/0
6/2
012
Bro
ught
Forw
ard
fro
m 2
011/1
2
Inte
rnal A
udit C
ert
ific
ation
Local E
nte
rprise P
art
ners
hip
s (
LE
P)
Capacity F
und
Hig
hF
inal R
eport
Issued
Substa
ntial
Adequate
28/0
6/2
013
New
Activity
Inte
rnal A
udit C
ert
ific
ation
Local E
nte
rprise P
art
ners
hip
s (
LE
P)
Reta
il E
xem
pla
rH
igh
Fin
al R
eport
Issued
Substa
ntial
Substa
ntial
28/0
6/2
013
New
Activity
Inte
rnal A
udit C
ert
ific
ation
Form
er
LS
C f
undin
g 2
012-1
3H
igh
Fin
al R
eport
Issued
Not
Applic
able
Not
Applic
able
Gra
nt
sig
n o
ff
Inte
rnal A
udit C
ert
ific
ation
Tro
uble
d F
am
ilies G
rant
Mediu
mO
ngoin
gIA
keepin
g a
watc
hin
g b
rief
- no p
ara
gra
ph r
q
Fra
ud
Fra
ud investigation-
dete
ction
Hig
hA
udit in P
rogre
ss
Not
Applic
able
Not
Applic
able
Ple
ase s
ee m
ain
body o
f re
port
Fra
ud
National F
raud I
nitia
tive
Hig
hA
udit in P
rogre
ss
Not
Applic
able
Not
Applic
able
Ple
ase s
ee m
ain
body o
f re
port
Fra
ud
Fra
ud R
isk M
anagem
ent
Hig
hA
udit in P
rogre
ss
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.
Risk Assurance - Adequate
Control Assurance - Limited
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
Control Assurance - Limited
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.
Risk Assurance - Adequate
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
Service Area: Communities & Infrastructure
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.
Risk Assurance - Adequate
Control Assurance - Adequate
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.
Risk Assurance - Adequate
Control Assurance - Adequate
27
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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.
Service Area: Communities & Infrastructure
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.
Risk Assurance - Substantial
Control Assurance - Adequate
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.
Service Area: Communities & Infrastructure
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.
Risk Assurance - Substantial
Control Assurance - Adequate
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.
Service Area: Communities and Infrastructure
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.
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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.
Service Area: Communities and Infrastructure
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).
Risk Assurance – Substantial
Control Assurance – Adequate
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.
Risk Assurance - Substantial
Control Assurance - Adequate
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.
Risk Assurance - Adequate
Control Assurance - Adequate
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.
Risk Assurance - Substantial
Control Assurance - Adequate
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.
Service Area: Enabling & Transition
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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Risk Assurance - Adequate
Control Assurance – Adequate
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.
Service Area: Enabling & Transition
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.
Risk Assurance - Substantial
Control Assurance - Adequate
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.
Risk Assurance - Adequate
Control Assurance - Adequate
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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.
Service Area: Adult Services
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.
Risk Assurance – Substantial
Control Assurance – Adequate
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.
Service Area: Adult Services
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.
Risk Assurance - Substantial
Control Assurance - Adequate
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.
Risk Assurance - Substantial
Control Assurance - Adequate
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.
Risk Assurance - Substantial
Control Assurance - Adequate
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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.
Service Area: Children and Families
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.
Risk Assurance - Adequate
Control Assurance - Adequate
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.
Service Area: Children and Families
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
Control 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.
Risk Assurance - Adequate
Control Assurance – Adequate
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.
Risk Assurance - Substantial
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.
Risk Assurance - Substantial
Control Assurance – Substantial
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Appendix 2
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
Service Area: Communities & Infrastructure
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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Appendix 2
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.
Service Area: Children and Families
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.
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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.
Service Area: Adults
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.
Service Area: Adults
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.
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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.
Risk Assurance - Substantial
Control Assurance - Adequate
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.
Risk Assurance - Substantial
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.
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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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riskmanagement
ANNUAL REPORT ON
RISK MANAGEMENT
ACTIVITY 2012/2013
Gloucestershire County Council
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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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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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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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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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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.
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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
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
Risk Management links to Internal Audit – Limited Assurance Opinions
Where limited assurance opinions are given on audits deemed to be of strategic importance,
provided 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
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
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 Internal
Limited Assurance Opinions
Where limited assurance opinions are given on audits deemed to be of strategic importance,
to ensure that the risks highlighted
The monitoring of the implementation of the recommendations is then owned by the relevant
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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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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• 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:-
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• 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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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
Str
ate
gic
Ris
k R
eg
iste
r S
um
ma
ry
SR1.1
Failure
in c
orp
ora
te g
overn
ance w
hic
h leads t
o s
erv
ice,
financia
l or
reputa
tional dam
age o
r fa
ilure
.Bungard
, Pete
Hig
h 1
5M
odera
te 8
Modera
te 8
Modera
te 8
Modera
te 8
SR1.2
Failure
to e
ffectively
unders
tand,
info
rm,
consult o
r engage
custo
mers
, re
sultin
g in d
issatisfa
ction,
criticis
m o
r challenge.
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
: Corp
ora
te G
overn
ance
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
SR2.1
Reductions &
changes in fundin
g (
Local G
overn
ment
Resourc
es
Revie
w,
Localisation o
f Council T
ax B
enefit,
Slo
w E
conom
ic
Recovery
, Academ
ies,
NH
S f
undin
g,
Localism
Act,
Adults
Dem
and L
ead B
udgets
) im
pacts
on t
he a
bility t
o d
eliver
core
serv
ices.
Walk
er,
Jo
Hig
h 2
0H
igh 1
5H
igh 2
0H
igh 2
0H
igh 2
0
Sig
nific
ant
reductions in fundin
g a
nnounced in t
he
finance s
ett
lem
ent
for
2013/1
4 &
2014/1
5.
Despite
these a
bala
nced a
nd a
chie
vable
budget
for
2013/1
4
was a
gre
ed b
y C
ouncil in F
ebura
ry 2
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
© 2013 Grant Thornton UK LLP. All rights reserved. 2
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
© 2013 Grant Thornton UK LLP. All rights reserved. 3
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.
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Question Management response
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.
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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
Question Management response
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
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Question Management response
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
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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
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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
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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
Question Management response
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
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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
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Tab
le 5
Esti
mate
M
eth
od
/mo
del u
sed
to m
ake t
he e
sti
mate
Co
ntr
ols
used
to
iden
tify
esti
ma
tes
Wh
eth
er
Man
ag
em
en
t
have u
sed
an
exp
ert
Un
derl
yin
g a
ssu
mp
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
atio
n.
Inte
rnal
Val
uat
ion
d
epar
tmen
t
Val
uat
ion
s ar
e m
ade
in-l
ine
wit
h R
ICS
guid
ance
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
een
an
y im
pai
rmen
ts o
f as
sets
in
yea
r. T
his
is a
a y
ear
end
ass
essm
ent
for
imp
airm
ent.
Val
uer
s re
view
ass
ets
hel
d a
nd
dis
cuss
wit
h
fin
ance
an
y kn
ow
n
even
ts in
yea
r w
hic
h
may
hav
e im
pac
ted
on
th
e va
lue.
Inte
rnal
Val
uat
ion
d
epar
tmen
t V
aluat
ion
s ar
e m
ade
in-l
ine
wit
h R
ICS
guid
ance
wit
h
relia
nce
on
an
exp
ert.
No
Ap
pen
dix
1 A
cco
un
tin
g E
stim
ates
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Esti
mate
M
eth
od
/mo
del u
sed
to m
ake t
he e
sti
mate
Co
ntr
ols
used
to
iden
tify
esti
ma
tes
Wh
eth
er
Man
ag
em
en
t
have u
sed
an
exp
ert
Un
derl
yin
g a
ssu
mp
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 -
Est
imat
ed
rem
ain
ing
use
ful
eco
no
mic
life
(U
EL
) o
f P
PE
& D
epre
ciat
ion
Th
e re
mai
nin
g U
EL
of
an a
sset
is c
alcu
late
d b
y th
e In
tern
al V
aluer
ev
ery
5 ye
ars
follo
win
g th
e R
ICS
guid
ance
. D
epre
ciat
ion
is t
hen
ca
lcula
ted
on
a s
trai
ght
line
bas
is in
lin
e w
ith
IA
S 16
Th
e C
oun
cil u
ses
the
info
rmat
ion
pro
vid
ed
by
the
Val
uer
fo
r U
EL
o
f as
sets
an
d t
hen
use
s th
e st
and
ard
str
aigh
t lin
e d
epre
ciat
ion
fo
rmula
sugg
este
d in
IS
A 1
6
Inte
rnal
Val
uat
ion
d
epar
tmen
t.
Th
e m
eth
od
mak
es s
om
e as
sum
pti
on
s ab
out
asse
t liv
es
and
ho
w a
sset
are
bei
ng
use
d, w
hic
h b
y th
eir
nat
ure
con
tain
a d
egre
e o
f un
cert
ain
ty b
ecau
se o
f th
e lo
ng
per
iod
of
tim
e b
ein
g co
nsi
der
ed.
No
Co
un
cil -
Pen
sio
n (
IAS
19)
Rel
ian
ce o
n
info
rmat
ion
pro
vid
ed
by
actu
ary
abo
ut
assu
mp
tio
ns
on
p
op
ula
tio
n a
nd f
utu
re
eco
no
mic
gro
wth
.
Mem
ber
s an
d
con
trib
utio
n r
ates
are
kn
ow
n a
nd
sh
ared
wit
h
actu
ary.
Act
uar
y use
s p
op
ula
tio
n a
nd
eco
no
mic
dat
a to
mak
e es
tim
ates
of
futu
re
liab
iliti
es a
nd
ass
ets
Pen
sio
n A
ctuar
y T
her
e is
a d
egre
e o
f es
tim
atio
n u
nce
rtai
nty
as
pro
ject
ion
of
asse
ts a
nd
lia
bili
ties
are
ove
r a
very
lon
g te
rm. H
ow
ever
act
uar
y use
s m
ost
up
to
dat
e in
form
atio
n
to m
ake
thei
r as
sum
pti
on
s.
No
oth
er a
lter
nat
ive
esti
mat
ion t
ech
niq
ues
hav
e b
een
iden
tifi
ed.
No
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Esti
mate
M
eth
od
/mo
del u
sed
to m
ake t
he e
sti
mate
Co
ntr
ols
used
to
iden
tify
esti
ma
tes
Wh
eth
er
Man
ag
em
en
t
have u
sed
an
exp
ert
Un
derl
yin
g a
ssu
mp
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?
Pen
sio
n F
un
d
In
vest
men
t re
turn
s
Secu
riti
es t
o b
e va
lued
o
n a
Fai
r V
alue
Bas
is
ther
efo
re a
sset
s, w
her
e th
ere
is a
n a
ctiv
e an
d
read
ily a
vaila
ble
mar
ket
pri
ce, a
re v
alued
at
the
bid
(se
llin
g) p
rice
an
d
liab
iliti
es o
n a
n o
ffer
(b
uyi
ng)
pri
ce b
asis
. W
her
e as
sets
do
no
t ac
tive
ly t
rad
e th
rough
es
tab
lish
ed e
xch
ange
m
ech
anis
ms
a p
rice
is
ob
tain
ed f
rom
th
e m
anag
er o
f th
e in
vest
men
t as
set.
Est
imat
es a
re b
ased
on
kn
ow
n in
vest
men
ts
hel
d a
t th
e ye
ar e
nd
.
Rel
ian
ce o
n t
he
info
rmat
ion
pro
vid
ed
by
inve
stm
ent
man
ager
s
Th
ere
is a
n in
her
ent
risk
in
calc
ula
tin
g fa
ir v
alue
of
inve
stm
ents
at
a po
int
in
tim
e, h
ow
ever
th
e SO
RP
se
ts o
ut
the
app
roac
h a
nd
th
e es
tim
ates
are
mad
e b
y th
e m
anag
emen
t ex
per
ts
No
Page 117
ww
w.g
ran
t-th
orn
ton
.co
.uk
©
201
3 G
ran
t T
ho
rnto
n U
K L
LP
. All
righ
ts r
eser
ved
. "G
ran
t T
ho
rnto
n"
mea
ns
Gra
nt
Th
orn
ton
UK
LL
P, a
lim
ited
lia
bili
ty p
artn
ersh
ip.
Gra
nt
Th
orn
ton
UK
LL
P is
a m
emb
er f
irm
wit
hin
Gra
nt
Th
orn
ton
In
tern
atio
nal
Ltd
('G
ran
t T
ho
rnto
n
Inte
rnat
ion
al').
Gra
nt
Th
orn
ton
In
tern
atio
nal
an
d t
he
mem
ber
fir
ms
are
no
t a
wo
rld
wid
e p
artn
ersh
ip.
Serv
ices
are
del
iver
ed b
y th
e m
emb
er f
irm
s in
dep
end
entl
y.
Th
is p
ub
licat
ion
has
bee
n p
rep
ared
on
ly a
s a
guid
e. N
o r
esp
on
sib
ility
can
be
acce
pte
d b
y us
for
loss
o
ccas
ion
ed t
o a
ny
per
son
act
ing
or
refr
ain
ing
fro
m a
ctin
g as
a r
esult
of
an
y m
ater
ial i
n t
his
pu
blic
atio
n.
Page 118
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013
Gra
nt T
horn
ton
UK
LLP
DR
AF
T
Th
is v
ersi
on
of
the
rep
ort
is a
dra
ft.
Its
con
ten
ts a
nd
su
bje
ct
mat
ter
rem
ain
un
der
revi
ew a
nd
its
con
ten
ts
may
ch
ang
e an
d b
e
exp
and
ed a
s p
art
of
the
fin
alis
atio
n o
f th
e re
po
rt.
Th
is v
ersi
on
of
the
rep
ort
is a
dra
ft.
Its
con
ten
ts a
nd
su
bje
ct
mat
ter
rem
ain
un
der
revi
ew a
nd
its
con
ten
ts
may
ch
ang
e an
d b
e
exp
and
ed a
s p
art
of
the
fin
alis
atio
n o
f th
e re
po
rt.
Aud
it a
nd
Gove
rnan
ce C
om
mit
tee
Up
dat
e
for
Glo
uce
ster
shir
e C
oun
ty C
oun
cil
Ye
ar
en
ded
31
Ma
rch
20
13
20
Ju
ne
20
13
Liz
Cave
Engagem
ent
Lead
T
01173 0
57 8
85
E
liz.a
.cave@
uk.g
t.com
Pete
r B
arb
er
Audit M
anager
T
+44 (
0)1
173 0
57 8
97
E
pete
r.a.b
arb
er@
uk.g
t.com
Pau
l B
en
field
In C
harg
e
T
0117 3
05 7
894
E
paul.m
.benfie
ld@
uk.g
t.com
Agenda Item 9
Page 119
Th
e co
nte
nts
of
this
rep
ort
rel
ate
on
ly t
o t
he
mat
ters
wh
ich
hav
e co
me
to o
ur
atte
nti
on
,
wh
ich
we
bel
ieve
nee
d t
o b
e re
po
rted
to
yo
u a
s p
art
of
our
aud
it p
roce
ss. I
t is
no
t a
com
pre
hen
sive
reco
rd o
f al
l th
e re
levan
t m
atte
rs, w
hic
h m
ay b
e su
bje
ct t
o c
han
ge, an
d in
par
ticu
lar
we
can
no
t b
e h
eld
res
po
nsi
ble
to
yo
u f
or
rep
ort
ing
all o
f th
e ri
sks
wh
ich
may
aff
ect
your
busi
nes
s o
r an
y w
eakn
esse
s in
yo
ur
inte
rnal
co
ntr
ols
. T
his
rep
ort
has
bee
n p
rep
ared
sole
ly f
or
your
ben
efit
an
d s
ho
uld
no
t b
e quo
ted
in
wh
ole
or
in p
art
wit
ho
ut
our
pri
or
wri
tten
con
sen
t. W
e d
o n
ot
acce
pt
any
resp
on
sib
ility
fo
r an
y lo
ss o
ccas
ion
ed t
o a
ny
thir
d p
arty
act
ing,
or
refr
ain
ing
fro
m a
ctin
g o
n t
he
bas
is o
f th
e co
nte
nt
of
this
rep
ort
, as
th
is r
epo
rt w
as n
ot
pre
par
ed f
or,
no
r in
ten
ded
fo
r, a
ny
oth
er p
urp
ose
.
.
Page 120
© 2
013
Gra
nt T
horn
ton
UK
LLP
DR
AF
T 3 3
Co
nte
nts
Se
cti
on
P
ag
e
Intr
oduction
4
Pro
gre
ss a
t 2
0 J
une 2
013
5
Em
erg
ing issu
es a
nd d
eve
lopm
ents
7
Page 121
© 2
013
Gra
nt T
horn
ton
UK
LLP
DR
AF
T 4 4
Intr
od
uct
ion
Th
is p
ap
er
pro
vid
es t
he A
udit a
nd
Go
ve
rna
nce
Co
mm
itte
e w
ith
a r
epo
rt o
n p
rog
ress in
de
live
ring
our
respo
nsib
ilitie
s a
s y
our
exte
rna
l a
ud
ito
rs.
Th
e p
ap
er
als
o in
clu
de
s:
a s
um
ma
ry o
f e
me
rgin
g n
atio
na
l is
su
es a
nd
deve
lopm
ents
th
at m
ay b
e r
ele
va
nt to
yo
u a
s a
Co
un
ty C
oun
cil
and
yo
ur
Pe
nsio
n F
un
d
inclu
de
s a
num
ber
of ch
alle
ng
e q
uestio
ns in
re
spe
ct o
f th
ese
em
erg
ing
issu
es w
hic
h t
he C
om
mitte
e m
ay w
ish
to
co
nsid
er.
Th
is r
epo
rt
inclu
de
s a
re
spo
nse
to
each
of th
ese
issu
es f
rom
th
e C
oun
cil.
Me
mb
ers
of th
e A
udit a
nd
Go
ve
rna
nce C
om
mitte
e c
an fin
d fu
rth
er
usefu
l m
ate
ria
l o
n o
ur
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
.a.c
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
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