to: all members of the audit & corporate professor steven ... · councillors: b axcell, d...

To: All Members of the Audit & Corporate Governance Committee Councillors: Chair – C Fitzsimmons Deputy Chair – G Friend B Axcell, J Joyce, D Keane, P Kennedy, J Kerr-Brown L Morgan, S Parish, M Smith. P Walker Audit and Corporate Governance Committee

Date: Thursday, 19 November 2015

Time: 18:30

Venue: Council Chamber, Town Hall, Sankey Street, Warrington, WA1 1UH

Contact Adam Kellock, Democratic Services Officer – Telephone: (01925) 442142,

Fax: (01925) 656278. Email: [email protected]

AGENDA

Part 1

Items during the consideration of which the meeting is expected to be open to members of the public (including the press) subject to any statutory right of exclusion. 1 Apologies

To record any apologies received.

2 Code of Conduct - Declarations of Interest

Relevant Authorities (Disclosable Pecuniary Interests) Regulation 2012 Members are reminded of their responsibility to declare any disclosable pecuniary or non-pecuniary interest which they have in any item of business on the agenda no later than when the item is reached.

3 Minutes

To confirm the Minutes of the meeting of 24 September 2015 as a correct record.

5 - 10

Professor Steven Broomhead Chief Executive

Town Hall Sankey Street

Warrington WA1 1UH

1

mailto:[email protected]

4 Combined UK Parliamentary and Local Elections 2015

Report of the Returning Officer.

11 - 18

5 Review of Polling Districts and Polling Places 2016

Report of the Solicitor to the Council and Assistant Director Corporate Governance.

19 - 24

6 Information Governance Update

Report of the Assistant Director of Performance and Partnerships.

25 - 38

7 Anti-Fraud, Bribery and Corruption

Report of the Chief Internal Auditor.

39 - 48

8 Internal Audit Quality Assurance and Improvement

Programme

Report of the Chief Internal Auditor

49 - 86

9 Collaborative working with Salford Internal Audit Team


87 - 94

10 Internal Audit Quarterly Performance Report to 6 November

2015


95 - 114

11 2015/16 Treasury Management Practices Statement

Report of the Director of Finance and Information Services.

115 - 162

12 2015-16 Mid Year Treasury Review


163 - 186

13 Review of Minimum Revenue Provision


187 - 194

14 Write off of unrecoverable Council Tax debt


195 - 198

2

Part 2

Items of a “confidential or other special nature” during which it is likely that the meeting will not be open to the public and press as there would be a disclosure of exempt information as defined in Section 100I of the Local Government Act 1972. Nil.

If you would like this information provided in another language or format,

including large print, Braille, audio or British Sign Language, please call 01925

443322 or ask at the reception desk in Contact Warrington, Horsemarket Street,

Warrington

15 Write off of unrecoverable debt


199 - 208

16 Annual Audit Letter

Report of Grant Thornton, External Auditor.

209 - 218

17 External Audit Update Report

Report of Grant Thornton, External Auditor.

219 - 234

18 Work Programme 2015/16

Report of the Audit and Corporate Governance Committee.

235 - 238

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Agenda Item 3

AUDIT AND CORPORATE GOVERNANCE COMMITTEE

24 SEPTEMBER 2015

Present: Councillor C Fitzsimmons (Chairman) Councillors: B Axcell, D Keane, P Kennedy, J Kerr-Brown, L Morgan, S Parish and

P Walker. Also present: R Baker (External Auditors, Grant Thornton), T Date (Solicitor to the

Council), J Gleave (Chief Internal Auditor), L Green (Director of Finance and Information Services), S Halewood (Chief Accountant), A Kellock (Democratic Services Officer), D Mather (Corporate Finance Manager), T Whitfield (Risk and Resilience Manager) and G Winstanley (External Auditors, Grant Thornton)

ACG 14 Apologies Apologies were received from Councillors G Friend, J Joyce and M Smith ACG 15 Code of Conduct – Declarations of Interest There were no declarations of interest made. ACG 16 Minutes Decision: That the minutes of the meeting of 25 June 2015 be approved as a correct record and signed by the Chair subject to it being noted that Councillors Keane and Morgan were absent from the meeting as they were in attendance at another committee. ACG 17 Local Government Boundary Commission for England (The Commission) – Electoral Review of Warrington Borough Council The Solicitor to the Council provided an update report with regards to the review of the electoral wards within Warrington. The committee noted that the Council delivered a submission to the Commission in July and the Commission had responded with a set of recommendations that would be out for public consultation until the middle of October. Briefing sessions for Councillors on the Commission’s recommendations had been held. The Committee was informed that Council officers would not be submitting a formal response to the recommendations on behalf of the Council as Councillors were encouraged to submit their own proposals directly to the Commission as part of the public consultation. Clarification was provided and confirmed that the Commission was required to act within its own framework and Councillors were encouraged to make any representations within the 3 key statutory requirements.

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Agenda Item 3

In response to a query, the Solicitor to the Council outlined the processes that would need to be carried out following the end of the public consultation period. Decisions:

a) That the Chief Executive be authorised to submit a proposal consistent with the principles set out in the draft proposal.

ACG 18 Regulation of Investigatory Powers Act 2000 – Review of the Council’s Policy and Guidance Documents The Committee received a brief update on the Regulation of Investigatory Powers Act 2000 (RIPA) and the changes that had taken place of the previous few years, most notably which included the requirement of judicial authorisation from a Magistrate before such powers could be used by the Council. This had led to a reduction in the use of RIPA nationally. It was confirmed that the main area within the Council which used the act was the benefits service but proportionality was considered key when applying for its use. Councillors noted the importance of maintenance, training and inspections in order to keep processes up to date to reduce the associated risks. ACG 19 Ombudsman Complaints Summary of Decisions 2014/15 The Solicitor to the Council delivered the report which summarised the Ombudsman

complaints received during 2014/15. The findings of the report showed that 44

complaints had been received during 2014/15 which was a decrease from the levels

received in 2013/14.

The report also broke down the figures into department specific complaints which

showed that Adult Social Care received the largest number of complaints, as was the

case in 2013/14 with Education and CYP and Benefits and Council Tax receiving the

next highest amount. It was noted that the number of complaints for each

department had reduced from the levels in 2013/14.

Appendix 3 of the report provided a more detail regarding the specifics of each case

received in a redacted form. Appendix 4 of the report was the Ombudsman’s overall

report on Local Government Complaints which set out the complaint numbers for all

Local Authorities. It was noted that Warrington compared favourably to other

comparable Local Authorities and received a relatively low number of complaints.

The department specific complaint levels were also considered to be consistent with

national levels. Overall the Committee expressed its satisfaction that the number of

complaints and investigations had fallen from the previous year and had fallen

across all departments.

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Agenda Item 3

ACG 20 Annual Report of the Audit and Corporate Governance Committee 2014/15 The Chair delivered the committees annual report for the 2014/15 municipal year which outlined the committee’s activities during the year. ACG 21 Annual Risk Management Report 2014/15 The Risk and Resilience Manager delivered the Risk Management Annual Report for 2014/15. The committee was informed that the Senior Management Team received the risk management report quarterly with the Executive Board and Audit and Corporate Governance Committee receiving it 6 monthly. The Senior Management Team considered the risk register performance and the risk evaluations quarterly and also received the annual report on organisation resilience which ensured that critical services continued in the event of business difficulties. The Business Continuity plan for 2015-2017 was attached at appendix 1 of the report and it was confirmed that plan had been developed over the previous year and would be sent to the Executive Board for approval on 12 October 2015. ACG 22 Internal Audit Quarterly Performance Report Quarterly Internal Audit Performance Report for the period from June to September 2015 was presented by the Chief Internal Auditor with the work carried out during that period being outlined. The majority of the work carried out was part of the 2015/16 audit plan with some carry over of work from the 2014/15 plan. The Internal Audit team had also been assisting Grant Thornton with their work on the Statement of Accounts during the quarter. As the committee had been informed previously, a collaborative working arrangement with Salford City Council had been put in place and it was hoped that this would continue after an initial 6 month trial with collaborative work continuing with other Cheshire Local Authorities. In response to a query regarding audit work for free schools it was confirmed that there were no requirements for the Local Authority to carry out audits for free schools but there was an agreement in place with Grant Thornton for the accounts to be signed off. ACG 23 2015/16 Treasury Management Monitoring Report The Corporate Finance Manager delivered the quarterly Treasury Management Report for the period to the end of August 2015 which included an update and feedback on the bond issued by the Council. With regards to the bond issue, the Council had received particularly good feedback with the bond estimated to save £12m over traditional borrowing methods over the life of the bond.

7

Agenda Item 3

Overall the treasury budget had delivered a £2m underspend as a result of better than expected investment returns. The underspend would be put back into the budget to facilitate any future deficits in the budget. The committee was also informed that the Council had not been involved in any bad Lobo loans which had affected a number of other Local Authorities. It was agreed that the prospectus for the bond issue be circulated to members of the committee for their information. ACG 24 External Audit Findings Report Robin Baker and Gareth Winstanley from Grant Thornton presented the external audit findings report combined with the value for money report. The report outlined the conclusions and findings of audit work based on the 2014/15 plan as well as outlining the audit opinion on the 2014/15 Statement of Accounts. The committee was informed that Grant Thornton returned an unqualified opinion on the Statement of Accounts and praise was given to the accounts team for the work they had carried out. The external audit opinion also noted that the Council had sound financial governance and arrangements in place with the Council delivering the required savings for the year and presenting a slight underspend. This was characterised by positive examples of prioritising resources and looking at new delivery models. Governance arrangements around capital schemes in particular the Bridge Street redevelopment were also considered to be sound. The committee was also reminded of the financial challenges expected going forward with an estimated £48m in savings required over the next 4 years and the committee was reminded to be mindful of the risks associated with such savings. ACG 25 External Audit Value for Money Report The committee considered this item in conjunction with the previous item on the External Audit Findings Report. ACG 26 Annual Governance Statement 2014/15 The Chief Internal Auditor presented the Annual Governance Statement for 2014/15. The committee had considered a draft version of the report at its meeting in June 2015 and the minor changes made since then were highlighted at paragraph 3.1 of the report. Discussion took place with regards to Council ownership of outside bodies and the threshold at which such outside bodies would be included within the statement of accounts. ACG 27 2014/15 Statement of Accounts The final Statement of Accounts for 2014/15 was presented by the Assistant Director of Finance and Information Services. The committee was presented with the draft Statement of Accounts in June 2015 and the final version included amendments highlighted at that meeting along with corrections noted by the external auditors.

8

Agenda Item 3

The Assistant Director of Finance and Information Services along with the committee wished to express their thanks to the finance team for their work in developing the accounts. ACG 28 Responses to Grant Thornton Questions on processes to prevent and detect fraud The responses from the Director of Finance and Information Services and the Chair of the Audit and Corporate Governance Committee to questions from the external auditors regarding processes to prevent and detect fraud were presented to the committee. The external auditors informed the committee that they were satisfied with the responses provided by both the Assistant Director and Chair. ACG 29 Letter of Representation The Assistant Director of Finance and Information Services presented the standard letter of representation which was due to be submitted to the external auditors. The external auditors informed the committee that they were satisfied with the letter and its contents. ACG 30 Work Programme Decision: That the committee approves the work programme

Signed: …………………………..

Date: …………………………..

9

Agenda Item 4

WARRINGTON BOROUGH COUNCIL AUDIT AND CORPORATE GOVERNANCE COMMITTEE – 19 November 2015 Report of the: Returning Officer, Professor Steven Broomhead Report Author: Alison McDonald, Electoral Services Manager Contact Details: Email:

[email protected]

Tele: 01925 442041

Ward Members:

All

TITLE OF REPORT: Combined UK Parliamentary and Local Elections 2015 1. PURPOSE OF THE REPORT 1.1 The purpose of the report is to provide a summary of the combined UK

Parliamentary and Local Elections held on the 7 May 2015 in Warrington for consideration by the Committee.

. 2. CONDUCT OF THE COMBINED ELECTIONS IN WARRINGTON 2.1 The 2015 UK Parliamentary general election was the first held under

the Fixed-term Parliaments Act, which meant that the date of the elections had been known since autumn 2011. In several hundred local authority areas in England, including Warrington, the poll for the UK Parliamentary election was also combined with other polls. In addition this was the first election run on the new Individual Electoral Registration system. The report focuses on the main aspects surrounding the election process.

2.2 The Electoral Commission (EC) have produced a report on the

administration of the 7th May elections. This concluded that despite the changes and complexity of the polls the May 2015 elections were successfully delivered. Their research undertake with the public demonstrated that the UK enjoys well-run elections with high levels of voter satisfaction and confidence. This reinforces the importance of the work of Returning Officers and their staff in delivering a high quality service to voters generally. The high levels of satisfaction provide a good foundation for delivery of next year’s elections which will again present significant challenges in Warrington with the all-out local and parish elections being held at the same time as the Police and Crime Commissioner Elections.

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Agenda Item 4

3. Planning & Risk Management

3.1 Warrington Borough Council’s elections process was once again closely managed via the Elections Project Board which brought together expertise from a range of officers across the council and was chaired by the Returning Officer (Chief Executive). The Elections Project Board met initially on a monthly basis from December 2014, and more frequently during the months of March to May 2015.

3.2 In addition to the two parliamentary constituencies of Warrington North

and Warrington South, the local elections covering 19 of the 22 wards, three parish ward by elections were also delivered.

3.3 Warrington has continued to build on relations with sub regional groups

such as Merseyside Electoral Administrators Team (MEAT) and Cheshire authorities. The Electoral Services Manager is also Vice-Chair of the North West Branch of the Association of Electoral Administrators and meets regularly with other sub regional leads to consider key electoral issues and share good practice

4. Postal Votes

4.1 The number of people wishing to vote by post increased this year as

expected for a Parliamentary election. For the elections held on7 May 2015 a total of 28296 combined postal vote packs were issued to voters which is 18% of the electorate, a 2% increase on last year. This is comparative to the national average. Warrington achieved an average return of 86% which amounts to an increase of 17% on the 2014 elections.

4.2 The number of packs received at the close of poll from polling stations

and the Royal Mail sweep resulted in 1074 postal packs. This represents an increase five times higher than in 2014 for the final opening session which was at the close of poll.

4.3 This year the final opening session was held in a separate room within

the count venue and reduced the time spent transporting ballot packs back to the Town Hall and return of the opened votes back to the count venue. The final opening session concluded at 1.30 a.m.

4.4 The number of postal ballot packs rejected this year was 361 – 58 were

incomplete and 303 were rejected. The rejections were due to the mis-match of the date of birth or signature against the master document held on the system. A total of 303 rejection notices were issued to voters following the election.

4.5 Following changes to the Code of Conduct for political parties and

candidates in relation to postal votes there were no significant issues relating to last minute postal vote applications or large scale postal vote mailing by parties in the run up to the 7 May 2015.

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Agenda Item 4

5. Individual Electoral Registration (IER) 5.1 The elections held on 7th May were the first to be held since the

introduction of IER across England, Scotland and Wales, this change had a massive impact on the delivery of the elections for all administrators.

5.2 Whilst IER has brought improvements to the accuracy and

completeness of the electoral register and allows individuals to register online. There were issues that impacted on the staff there a number of delays in the online verification of electors from the DWP on a number of days in the lead up to the election and the deadline for receiving applications is 12 working days from election day however there is no time set in legislation therefore the deadline was set at midnight on the 20th April.

5.3 The ability to apply online and the publicity campaigns ran by the

Electoral Commission resulted in a large volume of duplicate electoral entries and there were higher levels of late registrations which is the norm for a parliamentary election but these took resources away from working on other aspects of the election resulting in the electoral services staff working much longer hours than in previous years.

6. Staffing 6.1 Polling Stations

In anticipation of the increased turnout for the elections the number of polling stations was increased to 132 across the Borough this year, 122 of these stations had combined elections covering the Parliamentary and Local elections. 3 stations also had an additional election for the parish held on the same day. There were no Borough elections in the wards of Poulton South, Westbrook and Hatton, Stretton & Walton. All stations opened on time. The arrangements with the councils Highways section worked well in relation to the delivery of the temporary ramps and the setup of the two mobile units.

6.2 Details of turnout are included in the table below.

ELECTION TURNOUT (%)

Warrington North 63.27

Warrington South 70.25

Appleton 77.25

Bewsey and Whitecross 50.28

Birchwood 64.35

Burtonwood & Winwick 65.47

Culcheth,Glazebury and Croft 72.30

Fairfield and Howley 51.23

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Agenda Item 4

Grappenhall & Thelwall 76.26

Great Sankey North 72.36

Great Sankey South 68.38

Latchford East 56.25

Latchford West 64.94

Lymm 75.66

Orford 55.13

Penketh & Cuerdley 74

Poplars & Hulme 53.79

Poulton North 62.33

Rixton & Woolston 68.26

Stockton Heath 76.05

Whittle Hall 69.03

Croft Parish Council – Southworth 71.08

Stockton Heath Parish Council – Lumb Brook

75.17

Stockton Heath Parish Council – St Thomas Ward

74.52

6.3 Polling Buildings There were no reported issues with any of the buildings used as polling

stations this year however as a result of the Borough Wide Boundary Review currently being conducted a full review of polling districts and polling stations will be undertaken in preparation for the May 2016 elections.

7. The Count

7.1 The Birchwood venue was once again deemed a success for all involved in the Counts with excellent parking and very good facilities. The Management at Birchwood responded to the issues identified in previous years and the refreshments and café was well resourced throughout the whole period.

7.2 The ballot box receipting was a smooth operation with all ballot boxes

being received by 11.30 p.m. on Election Day

7.3 Legislation requires that the counting of votes for a UK Parliamentary election must commence within four hours of the close of poll (ie by 2.00a.m.) to meet this requirement the mini count process was used to count the parliamentary election votes allowing the votes to be counted within the wards.

7.4 Legislation1 changed in 2015 to enable the counting of votes at

parliamentary elections in England and Wales to start before the verification was completed for any other election with which it was

1 The Representation of the People (Combination of Polls)(England and Wales)(Amendment)

Regulations 2015.

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Agenda Item 4

combined adopting the mini count (ward based verification) process made it easier to move into the Parliamentary Count to meet the 4 hour rule whilst still maintaining control of the verification of other polls. The mini count system provided a greater degree of accuracy and eliminates the potential need to recount. This in itself was a success and quickened the process

7.6 In order to provide a complete service to members the statutory forms

are provided at the Count for successful candidates to sign immediately after the declaration of result. This negates the need for members to attend the Town Hall. In addition the induction date and the Annual Council meeting date are circulated in the information pack to candidates prior to the election.

7.7 Feedback on the verification and count has been generally positive

with comments such as the process felt controlled and efficient. There were some negative comments regarding the length of time it took to declare the results however it is important that the result is accurate and this remains the main focus of the team.

8. Looking ahead to 2016 8.1 Each year delivery of elections brings new challenges and pressures

and the 2016 elections will be no exception. May 2016 will require delivery of all out borough and parish elections and the Police and Crime Commissioner election.

8.2 The Elections Project Board is already holding planning meetings to

ensure successful delivery against a back drop of local authority austerity measures.

8.3 Once the Boundary Commission publishes its final recommendations

on the new Ward Boundaries in December 2015 officers will work to identify new polling districts and polling station with a view to final recommendations being considered by full Council in February/March 2016. The timescale for this significant piece of work is extremely tight and the public and member consultation will need to take place over the Christmas period. Whilst we recognise that this is not ideal a small cross party working group will be established and they will be encouraged to fully engage with all their fellow councillors to ensure that all representations are considered. However this review will be an opportunity to bring some uniformity to polling districts.

9.0 Conclusion

8.1 Performance monitoring in respect of the elections was undertaken on

a real time basis at key stages of the election. The real time assessment was required in order to provide the Electoral Commission

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Agenda Item 4

with the assurance that the Returning Officer was administering the poll in accordance with legislation.

8.2 Warrington met and achieved all the deadlines imposed and submitted

the real time assessments on time. The Electoral Commission has confirmed that Warrington achieved the standard of performance in relation to the delivery of the elections.

8.3 That the work undertaken by officers in achieving successful delivery of

the elections was immense and the work expected in 2016 is expected to be more complex and challenging.

9. CONFIDENTIAL OR EXEMPT 9.1 Not confidential. 10. FINANCIAL CONSIDERATIONS

10.1 Funding of £ 103,583 is provided for the delivery of the Local Elections

within the Councils budget. 10.2 When there are combined elections (e.g. a general election or

European Elections) as in 2015 the Returning Officer is allocated funding to recover the costs associated with delivery of the Parliamentary elections. The elections claims to reimburse costs for the Warrington North and Warrington South Constituencies have been submitted for the sums of £82,234.19 and £96,853.24 respectively. Both claims have been approved and settled by the Claims Unit.

10.3 Parish Councils will be responsible for the costs associated with

delivery of their elections. Each of the two parish councils have been advised of their costs - £6147.83 and have been offered payment terms of up to four years.

11. RISK ASSESSMENT 11.1 A full detailed risk assessment and business continuity plan is

undertaken prior to all elections to ensure that they are effectively managed. All plans were also required to be submitted to the Electoral Commission as part of the performance monitoring process. The Elections Project is monitored on a regular basis by the Elections Project Board which is chaired by the Returning Officer (Chief Executive) and involves senior council officers and officers from the wider elections team.

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Agenda Item 4

12. EQUALITY AND DIVERSITY/EQUALITY IMPACT ASSESSMENT 12.1 A full equality impact assessment has been completed for Electoral

Services and work is currently being undertaken on implementation of the identified improvements.

13. CONSULTATION

13.1 Formal Feedback on the election process has been obtained from

candidates, agents, all staff and the suppliers involved in the election process. Informal feedback was also received on the day of the count and subsequently. The overall feedback on the elections process has been very positive and the Electoral Services Manager is keen to continue to build on the success of previous elections.

14. REASONS FOR RECOMMENDATIONS 14.1 To keep members informed of progress with the Electoral Services

process, in relation to the management of the 2015 elections. 15. RECOMMENDATION 15.1 That the report be noted 16. BACKGROUND PAPERS

Report by the Electoral Commission – The May 2015 UK elections published July 2015

Contacts for Background Papers:

Name E-mail Telephone

Alison McDonald

[email protected] 01925 442041

11. Clearance Details

Name Consulted Date Consulted Yes No

Relevant Executive Board Member

n/a

Assistant Chief Executive Katherine Fairclough

14/10/15

Relevant Assistant Director Timothy Date 14/10/15

Section 151 Officer Lynton Green 14/10/15

Solicitor to the Council

Timothy Date 14/10/15

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Agenda Item 5

WARRINGTON BOROUGH COUNCIL AUDIT AND CORPORATE GOVERNANCE COMMITTEE 19 November 2015 Report of the: Solicitor to the Council and Assistant Director Corporate

Governance Report Author: Timothy Date Contact Details: Email Address:

[email protected] Telephone: 01925 442150

Ward Members:

TITLE OF REPORT: REVIEW OF POLLING DISTRICTS AND POLLING PLACES 2016 1. PURPOSE 1.1 The Local Government Boundary Commission for England will publish its final

recommendations for warding patterns on the 1 December 2015. 1.2 This report seeks approval to establish a cross party working group of

members to contribute to a review of Polling Districts and Polling Places which will result as a consequence of the Commissions work.

2. CONFIDENTIAL OR EXEMPT 2.1 Not confidential 3. INTRODUCTION AND BACKGROUND 3.1 Local authorities are required to divide their area into Polling Districts for the

purposes of elections, to designate Polling Places for these Polling Districts, and to keep these under review.

3.2 The Electoral Administration Act 2006 introduced a statutory duty for local

authorities to carry out a review of their parliamentary Polling Districts and Polling Places by 31st December 2007; and at least every four years thereafter. The last statutory review took place in 2014. This current ‘mid-term’ review is necessary as a consequence of the recommendations being published by the Commission.

3.3 A Polling District is the area created by the division of a constituency, ward

or division into smaller parts within which Polling Place can be determined which is convenient to electors.

3.4 A Polling Place is the building or area in which Polling Stations will be

selected by the Returning Officer.

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Agenda Item 5

3.5 The Polling Station is the room or building where the poll takes place which

is chosen by the Returning Officer for the election.

3.6 It is considered good practice (and one which has been previously adhered to in Warrington) to involve members in a working group to draft up proposals for consideration by full council. It is considered that the working group would be best made up of members of the Audit and Governance Committee as their remit includes the work of Electoral Services. The Group would consider the existing arrangements and consider any representations received and options for changes to either polling district boundaries or polling places. The Group will be supported by officers from the Solicitor to the Council (Electoral, Democratic and Member Services and legal).

4. THE REVIEW PROCESS

4.1 The Review has three stages:

The Preliminary Stage 4.1.1 The first stage of the process involves giving notice of the Review. It is

intended that this will be published immediately after this meeting of the Audit and Corporate Governance Committee has taken place. The formal commencement of the review will take place once the recommendations of the Commission have been received following publication on 1 December 2015.

The Proposal Stage

4.1.2 The Authority must devise a proposal for the new Polling District and Polling

Place arrangements. There is no requirement to change any existing arrangements; however, any change or decision to make no change must be supported by a reason.

4.1.3 In practical terms, it is ideal to identify good quality Polling Stations first so that

these can be used to build Polling Places and then Polling Districts. Details of the existing polling stations are available to assist both the authority in drawing up its proposals and the Returning Officer in commenting on the proposals.

4.1.4 In making a decision on the proposals, there are two key factors which must be addressed:

the reasonable requirements of the electors

the accessibility for disabled persons to the probable Polling Stations within the Polling Place.

The Consultation Stage

4.1.5 Key Stakeholders and all interested parties will be invited to make

representations. The consultation stage is for representations and comments on the local authority proposals for Polling Districts and Places. There are two parts to this:

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Agenda Item 5

A compulsory submission from the Returning Officer

Submissions from other persons and bodies 4.2 Following the consultation stage, the Authority, must make its final decisions

on the review, taking into account all the representations received. 4.3 The last full review was undertaken in 2014. Since that time, polling stations

have been under constant review following elections by the Returning Officer. If any changes were deemed necessary, Ward Members were consulted and any changes implemented.

4.4 The function of carrying out this review rests with full Council under the

Constitution. It is proposed therefore that the final proposals will be submitted to full Council at an extraordinary meeting on 8 February 2016.

4.5 The proposed timetable is set out in Appendix A.

5. FINANCIAL CONSIDERATIONS 5.1 Any financial costs incurred will be met from existing revenue budgets. 6. RISK ASSESSMENT 6.1 Establishing a Working Group of the Audit and Governance Committee to

assist on conducting the Review is considered the most effective way for the Review to be conducted, and will ensure that representations received can be fully considered. The approach will also ensure flexibility to meet as and when required to consider the proposals.

7. EQUALITY AND DIVERSITY / EQUALITY IMPACT ASSESSMENT 7.1 A full equality impact assessment has been completed for Electoral Services

and work is currently being undertaken on implementation of the identified improvements.

8. CONSULTATION 8.1 This report will enable the commencement of the consultation stage of this

review. 9. REASONS FOR RECOMMENDATION 9.1 To enable the effective review of Polling Districts and Polling Places as a

consequence of the recommendations to be published by the Commission on the 1 December 2015.

9.2 Establishing a Working Group of the Audit and Governance Committee to

assist on conducting the Review is considered the most effective way for the Review to be conducted, and will ensure that representations received can be fully considered.

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Agenda Item 5

10. RECOMMENDATION

10.1 That the Audit and Corporate Governance Committee approves -

(1) the publication of the notice of the Polling Districts and Polling Places Review on 20 November 2015; and

(2) the appointment of a Working Group of Members to help facilitate the

Review of Polling Districts and Polling Places. 11. BACKGROUND PAPERS Contacts for Background Papers:


Alison McDonald [email protected]

01925 442041

14. Clearance Details: Name Consulted Date

Approved Yes No

Chair of Audit and Corporate Governance Councillor Fitzsimmons

SMT Steven Broomhead

Relevant Executive Director Katherine Fairclough

Solicitor to the Council Timothy Date

S151 Officer Lynton Green

Relevant Assistant Director Timothy Date

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Agenda Item 5

APPENDIX A

Polling District Review 2015 Timetable

Friday 20 November 2015

Publish notice of review at Town Hall and a one conspicuous place (Contact Warrington) and on the website.

Monday 1 December 2015

Local Government Boundary Commission issue recommendations for warding patterns in Warrington

Tuesday 2 to Friday 18 December 2015

Working Group to draw up draft proposals and publish.

Monday 21 December 2015 to Friday 1 January 2016

Public consultation – receipt of comments and observations

Monday 4 January to Friday 8 January 2016

Assessments/Evaluation of representations and proposals received and finalise proposals.

Tuesday 12 January

Publish Agenda and Papers for Audit and Corporate Governance Committee

Wednesday 20th January 2016

Task Group Report to Audit and Corporate Governance Committee to agree recommendations to Full Council

Monday 8 February 2016

Extraordinary Meeting of Full Council to agree recommendations.

Tuesday 9 February 2016

Re-publish Register of Electors if alterations are made to polling districts as part of the review.

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Agenda Item 6

WARRINGTON BOROUGH COUNCIL AUDIT AND CORPORATE GOVERNANCE COMMITTEE

19 November 2015

Report of the: Assistance Director, Partnerships and Performance

Director of Finance and Information Systems

Report Author: Dann Amanda Juggins, Business Partner, Performance,

Policy and Information Governance

Contact Details: Email Address:

[email protected]

[email protected]

Telephone:

01925 44 3207

01925 44 2405

Ward Members:

All

TITLE OF REPORT: INFORMATION GOVERNANCE UPDATE

1. PURPOSE OF THE REPORT

1.1 This report provides the Audit and Corporate Governance Committee with an overview of the information governance and management arrangements for the council. It provides the committee with:

An update on the significant improvements made over the last two years and priorities moving forward

Key information governance roles and responsibilities within the council

An overview of risk areas and planned activity to minimise risks

Breach incident overview

2. INTRODUCTION AND BACKGROUND

2.1 All public bodies must comply with the Data Protection Act through embedding and

maintaining good information governance arrangements throughout the organisation. Robust information governance supports the council in delivering high quality services and providing assurance and confidence that personal, confidential or sensitive information is handled legally, securely, effectively and efficiently.

2.2 Information governance ensures information and data is:

Held securely and confidentially

Obtained fairly and efficiently

Recorded accurately and reliably

Used effectively and ethically

Shared appropriately and lawfully

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2.3 Over the last two years the council has dedicated resource to ensuring it has the structures, controls, management arrangements, policies and procedure in place to meet these requirements and ensure compliant with the Data Protection Act. In November 2013 management arrangements for information governance were reviewed and there was a shift in officer responsibility. The Director of Finance and Information Services took up the role of Senior Information Risk Owner (SIRO) with the Deputy SIRO role and overall responsibility for information governance sitting within Partnerships and Performance. In May 2014 an Information Governance Manager was recruited. Section 3 of this report provides details of the key information governance roles and responsibilities for Warrington Borough Council.

2.4 Information governance is an increasing challenge for local authorities due to

technological developments, legislative requirements, partnership arrangements and central government requirements. It is important that the council has in place arrangements to create, maintain, retrieve and dispose of its information in an appropriate way.

2.5 The council has an Information Governance Charter (see Appendix 1) which

provides clarity, a vision and a framework for the long term delivery of high standards of information governance.

3. INFORMATION GOVERNANCE ROLES AND RESPONSIBILITIES

3.1 There are a number of key information governance roles which are highlighted as best practice or a legal requirement by the Local Government Data Handling Guidelines and relevant legislation:

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3.2 The Information Governance Charter provides more detail for each role. All council employees have a responsibility to process information in accordance with the Data Protection Act and to adhere to the policies, procedures and guidance that are laid down by the Council for information governance and security.

3.3 A Data Protection audit was undertaken by internal audit in 2014. The overall audit opinion rated the Council as ‘Substantial Assurance’. It is recognised that there are some areas of improvement which had been highlighted as areas for improvement for the Information Governance Group and Senior Information Risk Owner (SIRO).

4. INFORMATION GOVERNANCE PRIORITIES

4.1 Recent information governance priorities have focused on ensuring the council has key policies and procedures in place, all employees are aware of and are adhering to them.

4.2 Over the last year the Information Governance Team have reviewed, revised and/or developed the following:

Corporate CCTV Policy

Privacy Policy

Breach Toolkit

Information Governance Charter

Data Sharing Framework and review of data sharing agreements

Identification of information assets and owners

Training programmes for all staff and occupations.

4.3 Over the next year the work of the team and the Information Governance Group will focus on:

Data retention and records management policy and procedures

Refresh of the Data Protection Policy

Information Assets Register

Training for all staff and Members

Communication and awareness raising of data protection compliance

Data sharing

4.4 Each year in March the council has to complete a self-assessment via the Department of Health Information Governance Toolkit. The toolkit assesses how we process and handle health and social care information. The purpose of the assessment is to enable organisations to measure their compliance against the law and central guidance and to see whether information is handled correctly and

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protected from unauthorised access, loss, damage and destruction. Once the self-assessment is completed it is checked by external auditors and challenged if appropriate. The council complies with this assessment

5. INFORMATION GOVERNANCE RISKS

5.1 The Information Governance Group and SIRO regularly assess and address key information governance risks and plan activity to minimise them. Key risks currently identified are:

a) Key information assets not identified

Action: Information asset register has been created and shared with identified Information Asset Owners (IAOs). IAO events are scheduled throughout the year and support is offered to IAOs to complete the register

b) Information Asset Owners unaware of their role and responsibilities

Action: Information Asset Owner (IAO) training sessions have taken place. IAOs have been identified. IAO ‘trusted forum’ sessions have taken place to share experiences and issues.

c) Senior management and Members do not understand information risks

and as a result staff are also not aware

Action: Regular briefings, reports training events to the Senior Information Risk Owner, SMT, DMTs, Committees. Training provided to all and regular communications messages disseminated.

d) All staff not understanding the data breach process and the importance of

reporting data breaches

Action: Breach incident toolkit including process is available for all to view and refer to. Breach representatives are briefed and are using the process. Regular communications regarding breaches and the consequences are circulated.

e) Lack of consistency in processes for managing information including

sending physically and electronically

Action: Regular briefings, training and awareness raising takes place. Different communications channels are used to get key messages out. Walk-in sessions for staff to learn, ask questions and raise any concerns are scheduled throughout the year. Close working with ICT Information Security Team.

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f) Lack of Information Governance training for new starters and refresher

training

Action: The current training provided to staff has been reviewed and amended. A new e-learning training package is being developed and will be rolled out. Specific tailored training is provided on request or to priory areas and is mandatory following an information breach.

6. DATA PROTECTION BREACHES

6.1 The council is legally required under the Data Protection Act 1998 to ensure the security and confidentiality of data processed on behalf of the public and employees. Every care must be taken to protect personal or sensitive personal data of both our employees and customers and to avoid a data protection breach. In the event of data being lost or shared inappropriately, it is vital that appropriate action is taken as soon as possible. The council has a breach management toolkit which support the council’s in reducing and mitigating any data breaches or losses.

6.2 This toolkit has been designed for the following reasons:-

To provide a standard for the effective reporting of breaches in line with the Information Commissioners Office (ICO) requirements

To ensure a standard of data collection in case of a further investigation both internally and externally

To be a first point of call to provide guidance to all staff in the event of a breach covering external, internal, near misses or external to the Council breaches

To be a self-contained toolkit with all the required documents together in one place

6.3 The toolkit aims to ensure that there is a standardised management approach to the identification, recording and investigation of potential breaches. The toolkit categorises potential breach as follows:

external (covering anything that is sent outside of the council in any format or any data breach/loss/theft that occurs outside of council offices)

internal (any incidents that happen within council buildings or stays within the council post or email system,

near misses (where information has stayed within the council and has not contained any personal or sensitive personal information, e.g. an email with a person’s name but no other details)

received in error (external breaches where the Council receives data in error from another organisation)

breach of confidentiality (where there has been unauthorised access to sensitive or sensitive personal data , this could be from having incorrect

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permissions for you to view a calendar and seeing attached documents or seeing something sensitive left on a printer for another team.)

6.4 External breaches are assessed against the Health and Social Care Information Centre Serious Incident Requiring Investigation (SIRI) toolkit to determine if the incident is reportable to the Information Commissioners Office.

6.5 In 2014 two incidents were deemed reportable and the Information Commissioners Office (ICO) completed an investigation. The ICO decided not to take any formal enforcement action on either of these occasions and were satisfied that our processes, investigation of the incidents and correction action were sufficient. They did provide some recommendations for actioning:

Removable devices (such as USB sticks) containing personal data should not be kept with cash or other valuables as it increases the likelihood of theft.

The use of personal USB sticks should not be allowed – staff should always use those issued by council’s ICT department.

Ensure Data Protection Act training is mandatory across the council, that it is refreshed annually and that compliance is monitored.

Ensure that the renewed Data Protection Act policy is implemented across the council with compliance monitored and non-compliance addressed accordingly.

Ensure staff are aware of relevant Data Protection Act policies and the consequences of not adhering to them.

6.6 In the period between April and September 2015, there were 25 reported incidents put through the Council’s formal breach logging and review process. Of these, 12 were categorised as ‘external’, 9 ‘internal’, 3 ‘near misses’ and 1 ‘third party’ breach. None of the incidents were scored high enough to trigger formal reporting to either the information Commissioners Office (ICO) or to the Health and Social Care Information Centre (HSCIC).

7. CONFIDENTIAL OR EXEMPT

7.1 The report and its contents are not confidential.

8. FINANCIAL CONSIDERATIONS 8.1 Effective information governance arrangement and controls prevent the council

from fines imposed by the Information Commissioner as a result of failure to comply with the Data Protection Act. Through identification of areas where controls can be strengthened the risks are reduced.

8. RISK ASSESSMENT

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8.1 The council must ensure it has appropriate information governance arrangements and controls in place to reduce the risk of data loss and misuse thus resulting in potential fines. These controls ensure the organisation meets the requirement sof the Data Protection Act.

7. EQUALITY AND DIVERSITY/EQUALITY IMPACT ASSESSMENT

7.1 There are no specific equalities issues in relation to the content of this report.

8. CONSULTATION

8.1 There are no specific consultation requirements in relations to the contents of this report.

9. REASONS FOR RECOMMENDATIONS

9.1 To ensure that the Council maintains an effective information governance framework to ensure it has appropriate internal control and manages the key risks.

10. RECOMMENDATIONS

10.1 That the Audit and Corporate Governance Committee considers, comments on and notes this report as part of its monitoring role.

11. BACKGROUND PAPERS Information Governance Charter (Appendix 1) Breach Toolkit



Amanda Juggins [email protected] 01925 44

3207

Sarah Gallear [email protected] 01925 44

2405

12. CLEARANCE DETAILS

Name Consulted Date

Consulted Yes No

Director of Finance and

Information Systems

Lynton Green * 04/11/15

Assistant Director

Partnerships and

Performance

Kathryn Griffiths * 04/11/15

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Appendix 1

Information Governance Charter

2014-17

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Document Control Information Users of this document are responsible for familiarising themselves with the latest version on a regular basis. You should be aware that a physical copy might not be the latest available version. The latest version, which supersedes all previous versions, can be found at http://wired.

Document Ref: IG20140722-001 Version: 1.3

Prot. Marking: OFFICIAL Status: FINAL

Effective from: TBC Review Date: TBC

Prepared by: Sarah Gallear Date: 22nd

July 2014

Approved by: IGG Date: 2nd

December 2014

Issued by: Sarah Gallear Date: 4th December 2014

Change Forecast: Reviewed every two years

Change History

Version Date Summary of Changes

1.0 22/07/2014 Draft for review

1.1 23/09/2014 Changes undertaken after feedback

1.2 17/11/2014 Changes undertaken after feedback from legal

1.3 25/11/2014 Changes undertaken after feedback from IGG

The intellectual property contained within this document is the property of Warrington Borough Council and may not be reproduced in any format.

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Contents

1. Introduction ................................................................................................................. 11

2. Strategic objectives ..................................................................................................... 11

3. Legislative Requirements ............................................................................................ 11

4. Roles & Responsibilities .............................................................................................. 12

4.1 Accounting Officer ............................................................................................. 12

4.2 Senior Information Risk Owner (SIRO) & Deputy SIRO .................................. 12

4.3 Operational Lead & Information Governance Manager ................................... 13

4.4 Information Governance Group ........................................................................ 13

4.5 Caldicott Guardian ............................................................................................. 13

4.6 Managers ............................................................................................................. 13

4.7 Information Asset Owners ................................................................................. 13

4.8 Data Protection Officer ...................................................................................... 13

4.9 All employees ...................................................................................................... 14

5. Information Governance Aims:- .................................................................................. 14

6. Further Information ..................................................................................................... 14

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Introduction This charter recognises the high standards expected of all public bodies to comply with legislation such as the Data Protection Act as well embedding and maintaining good information governance throughout the organisation in a rapidly changing and challenging environment. Robust information governance supports the Council in delivering high quality services and providing assurance and confidence that personal, confidential or sensitive information is handled legally, securely, effectively and efficiently. Information governance ensures information is:

Held securely and confidentially

Obtained fairly and efficiently

Recorded accurately and reliably

Used effectively and ethically

Shared appropriately and lawfully

An information governance charter provides clarity, vision and a framework for the long term delivery of high quality information governance

Strategic objectives These are the overarching information governance goals of the council from which the council's information governance improvement programme priorities and objectives are derived.

To improve appropriate access to information

To ensure efficient and effective management of information

To provide staff and Members with the appropriate skills and competencies in dealing with information

To encourage and facilitate appropriate information sharing across the council and with stakeholders

To ensure the councils information security is robust

To ensure the councils workforce is adequately trained

To promote the use of information with citizens

Legislative Requirements There are laws which require us to provide information within given time scales, to make information more accessible and to guard people's rights. In order to comply we must ensure we manage our information effectively, taking into account these new legal requirements. Below is a list of recent legislation which affects some or all services and are drivers for information governance:

Data Protection Act 1998

Human Rights Act 1998

Freedom of Information Act 2000

Environmental Information Regulations 2004

Intellectual property Rights (Copyright)

Local Government Acts 1972 – 2003

Electronic Communications Act 2000

Regulation of Investigatory Powers Act 2000

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Misuse of Computers Act 1990

Consumer Protection Regulations 2000

The Electronic Commerce Directive

Re-use of Public Sector Information Regulations 2005

Inspire Regulations 2009

Local Authority (Executive Arrangements) Meetings and Access to Information (England) Regulations 2012

The Openness of Local Government Bodies Regulations 2014

Telecommunications (Lawful Business Practice ) (Interception of Communications) Regulations 2000

Privacy and Electronic Communication 9EC Directive) Regulations 2003 as amended

European Commission Regulation 611/2013

Roles & Responsibilities

Accounting Officer

The Chief Executive has overall responsibility for having controls in place and ensuring information risks are managed.

Senior Information Risk Owner (SIRO) & Deputy SIRO

The Senior Information Risk Owner leads the organisation’s response on information risk. This role is laid down in the Guidelines on Local Government Data Handling. The Senior Information Risk Owner (SIRO) is responsible for ensuring that information governance is embedded into the organisation to ensure that the potential risks to corporate information and records are mitigated.

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Operational Lead for IG & Information Governance Manager

The operational lead and information governance manager support the SIRO in the setting and implementation of information governance and management within the Authority.

ICT Governance & Security Architect The ICT Governance & Security Architect has responsibility for providing regular information security risk assurance reports to the SIRO and Information Governance Group.

Information Governance Group

In both the Guidelines on Local Government Data Handling and the information Governance toolkit there is a recommendation for an Information Governance Group. The council’s information Governance Group is responsible for ensuring coherence, clarity and consistency in the way information is governed in the Council. This includes monitoring information governance across the Council

Corporate Governance Group

The Corporate Governance Group has the overarching responsibility on behalf of the Audit and Corporate Governance Committee and the full Council to provide adequate and effective challenge and scrutiny to the Strategic Management Team (SMT) in respect of the governance and risk management arrangements of the Council. One of the aims of the group is to oversee the Information Governance Group and their progress against the information governance objectives and action plan.

Caldicott Guardian A Caldicott Guardian is a senior person responsible for protecting the confidentiality of patient and service-user information and enabling appropriate information-sharing. The Guardian plays a key role in ensuring that NHS, Councils with Social Services Responsibilities and partner organisations satisfy the highest practical standards for handling patient identifiable information.

Managers

Managers are responsible for ensuring that staff under their direction and control are aware of the policies, procedure and guidance laid down on Information Governance and for checking that those staff understand and appropriately apply policies, procedures and guidance in respect of Information Governance in carrying out their day to day work.

Information Asset Owners

The Information Asset Owner (IAO) is a mandated role, and the individual appointed is responsible for ensuring that specific information assets are handled and managed appropriately. This means making sure that information assets are properly protected and that their value to the organisation is fully exploited

Data Protection Officer

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The corporate data protection officer is responsible for assessing all aspects of protecting sensitive personal data in line with the Data Protection Act 1998.

All employees

It is the responsibility of all staff to process information in accordance with the Data Protection Act 1998 and to adhere to the policies, procedures and guidance that are laid down by the Council for information governance and security.

Information Governance Aims:-

Through good information governance, the council aims to:-

Strengthen existing information governance policy and practice and establish new policy and practice to conform to legislation, and other standards

Assess its own performance against compliance frameworks such as the Information Governance Toolkit and develop and implement action plans for improvement

Work to instil an information governance culture in the Council through the provision of clear advice that helps staff understand and apply information governance standards and principles

Ensure all staff routinely receive information governance training, tailored to their needs

Ensure there are robust procedures for investigating information governance incidents, take appropriate action and act on lessons learned

Ensure service developments or modifications and new processes or systems, including software and hardware developments are reviewed to ensure they meet information governance standards

Ensure information asset owners are identified and take responsibility for systems, software, information, knowledge and IT assets

Ensure personal information is appropriately identified, used and shared, including where necessary, the effective use of pseudonymisation and information sharing agreements

Ensure clear advice is given to service users, about how their personal information is recorded, handled and shared by the Council

Reduce the risk of legal action and monetary penalties

Further Information For any information governance queries please contact:- The Information Governance Team Performance, Policy and Information Governance Resources and Strategic Commissioning Directorate Tel: 01925 442405 Email: [email protected] For any information breaches, please report these via [email protected]

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WARRINGTON BOROUGH COUNCIL AUDIT AND CORPORATE GOVERNANCE COMMITTEE 19 NOVEMBER 2015 Report of the: Director of Finance and Information Services Report Author: Simon Bleckly, Audit Manager Contact Details: Email Address:


Ward Members:

All

TITLE OF REPORT: ANTI-FRAUD, BRIBERY AND CORRUPTION UPDATE 1. PURPOSE OF THE REPORT

1.1 The purpose of this report is to:

Provide members of the Committee with an update of the work being done by the Council to minimise the risk of fraud, bribery and corruption.

Provide assurance that the council’s assets are being safeguarded and that resources are directed to legitimate areas of activity.

Highlight any significant investigations or current fraud risks affecting the Council.


2.1 Not confidential. 3. BACKGROUND AND KEY ISSUES

3.1 It is estimated that fraud costs local government over £2 billion each year. The Council has a zero tolerance approach to fraud and work is carried out across a number of departments to identify, investigate and prevent fraud. The Audit and Corporate Governance Committee receives two reports a year summarising this work and highlighting any significant fraud risks faced by the Council.

The National Picture on Fraud

3.2 With the abolition of the Audit Commission, there is now no national body that has the statutory power to require local authorities to provide information on incidences of fraud, bribery and corruption. Two bodies, the CIPFA Counter Fraud Centre (CFC) and The European Institute for Combatting Corruption and Fraud (EICCAF), ran surveys covering 2014-15. The CFC has yet to report its findings: the EICCAF recently published theirs, based upon returns from 60% of English Councils, with the results extrapolated to provide comparison with previous years’ figures. The main findings from the report are as follows:

The number of detected cases fell by more than 18 per cent to over

84,000 while their value increased by more than 11 per cent to greater than £207 million.

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The number of detected cases of housing benefit and council tax benefit fraud fell by more than half to just over 27,000 while their value fell by almost 17 per cent to nearly £23.5 million. This decline was expected as this workload transfers to DWP and cases are investigated by the new Single Fraud Investigation Service.

The number of detected cases of non-benefit (corporate) fraud decreased by greater than 8 per cent to more than 57,000, while their value increased by greater than 63 per cent to more than £97 million.

Right to Buy (RTB) and No Recourse to Public Funds (NRPF) have emerged as significant areas of fraud risk for councils. RTB detected fraud cases more than doubled to 411, while their value increased by nearly 145 per cent to more than £30 million. Relatively few councils pro-actively targeted NRPF fraud in 2014/15 yet there were still 444 cases detected with a value of more than £7 million, mainly in London.

Regional and local fraud detection results suggest an emerging divergence in the capacity, capability and commitment of some councils to play an effective part in the fight against fraud. The majority of Corporate Counter Fraud Units are located in London and detect the greatest amount of fraud, proportionate to total council spend.

3.3 The table below summarises the reported fraud losses nationally, for

the past two years, and for Warrington in 2014-15.

National 13-14

National 14-15

Warrington 14-15

Total number of cases

104,132 84,608 480

Total value of cases

£188m £207m £770k

Housing and Council Tax benefits

£129m £110m £639k

Council Tax discounts

£17m £18m £85k

Other frauds £42m £78m £46k

3.4 As with previous years, the number and value of cases reported by Warrington is low compared to national figures. There are a number of possible explanations for this:

Audit reviews and other assessments indicate that there are effective arrangements in place to detect and deter fraud in the payment of Housing and Council Tax benefits and Council Tax Support.

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Other areas identified as fraud risks nationally have also been demonstrated to have appropriate measures in place. For example: no cash payments are made under the Local Welfare Support scheme; regular checks are carried out to compare Direct Payments recipients with death lists; schools are regularly briefed on potential scams and other fraud risks.

Corporate Counter Fraud Unit

3.5 Approval has been given to establish a Corporate Counter Fraud Unit, in response to the transfer of responsibility for the investigation of Housing Benefit and Council Tax Benefit to the DWP’s Single Fraud Investigation Service (SFIS). There is still a need for the Council to investigate potential frauds in council tax support, council tax discount and business rates systems, as these remain attractive targets for fraudsters.

3.6 The creation of the Unit also presents an opportunity to develop capacity to investigate other suspected frauds against the Council, in areas such as blue badges, social care (including direct payments) and insurance. It is intended that the Unit will more than cover its costs through recovery of overpayments arising from fraud or error.

4. SUMMARY OF RECENT ANTI-FRAUD WORK AND INVESTIGATIONS CARRIED OUT

Policies and procedures

4.1 The Council is currently participating in a whistleblowing project in conjunction with Public Concern at Work (PCAW), the national whistleblowing charity. Phase Two of the review is in progress, which includes a staff survey to assess the effectiveness of the current policy. Results from this will be used to inform any future changes to Council policy and procedures.

4.2 Internal Audit are currently working with Licensing, Business Rates and the Crime and Disorder Reduction Partnership to identify ways of sharing information to disrupt organised crime and other illicit activity in relation to local businesses. As part of this project, we will be reviewing the Council’s Anti-Money Laundering Policy to ensure that it remains fit for purpose: one likely outcome will be more training and awareness-raising for relevant staff.

4.3 We have carried out an initial self-assessment against the new CIPFA Code of Practice on Managing the Risk of Fraud and Corruption (which was presented to Committee in June 2015). The assessment tool used generated a score of 70% compliance with the Code, which is classed as a “good level of performance”.

4.4 The main areas for improvement were identified as follows:

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There should be a more regular review of fraud risks to the council’s principal activities and staff should be given specific training and guidance on how to identify and assess fraud risks in their service areas. Fraud risks should also be reported more regularly to senior managers.

The Council should set out a clear view on its desired resilience to fraud and show how this supports the achievement of its corporate objectives and its commitment to a zero tolerance approach to fraud, bribery and corruption.

The Council’s current Anti-Fraud, Bribery and Corruption Policy and Statement do not contain enough specific detail (e.g. actions to reduce the risk of fraud, action owners and performance measures, sanctions and procedures for the recovery of losses) to meet the criteria set in the Code for an Anti-fraud Strategy.

4.5 These improvement actions will form a key part of the implementation

plan for the new Corporate Counter Fraud Unit. A new Strategy will therefore be drafted and presented to the Audit and Corporate Governance Committee before the end of the current financial year.

Internal Audit Anti-fraud plan work

4.6 Progress on the work being carried out as part of the Internal Audit Anti-fraud, Bribery and Corruption Plan is as follows: National Fraud Initiative (NFI)

4.7 The results of the most recent NFI data matching exercise were issued in January 2015. The datasets included were:

Payroll

Pensions

Insurance

Private supported care home residents

Transport passes and permits (including blue badges, concessionary travel and residents’ parking)

Creditors

Direct payments

4.8 To date, over 2,700 matches have been investigated. The table below compares the results to previous years’ exercises and indicates that the reduced level of fraud and error achieved in the 2012-13 exercise has been maintained.

2014-15 (to date)

2012-13 2010-11

Number of frauds identified

5 5 15

Number of errors identified

3 10 58

Overpayments identified (£)

18,582 14,058 70,626

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Amount recovered / in recovery (£)

17,842 6,618 68,986

(Note: the main NFI exercise is carried out every two years)

4.9 The Council Tax / Electoral Register matches are now required annually: the data for the 2015/16 exercise will be submitted before the end of February 2016, with the matches being immediately available for investigation. Responsibility for managing NFI has now transferred from the Audit Commission to the Cabinet Office; we will be meeting with them in December to discuss ways of improving the effectiveness of the investigation of matches. Training and Awareness Raising

4.10 Our recent focus has been to deliver fraud awareness training to services across the Families and Wellbeing Directorate: this is nearly complete and our next priority will be teams in Environment and Regeneration. We are also looking at extending the offer to community groups.

4.11 Our fraud awareness work is badged under the “Spot It, Stop It” logo,

and has been supported by articles in Your Voice and Inside Track and blogs on Winnie, the Council’s Intranet. Further publicity is planned, for example posters, joint awareness-raising campaigns with neighbouring authorities), participation in International Fraud Awareness Week. Successful prosecutions (for example for Benefit Fraud) continue to be publicised in local media.

4.12 A new fraud e-learning module has recently been created and it is hoped to launch this soon. We also have a whistleblowing e-learning package supplied by Public Concern at work, to complement the fraud module. Counter Fraud Fund

4.13 Warrington Borough Council was successful in two bids to the government’s Counter Fraud Fund in November 2014:

“Who’s Home” - testing the degree of public sector tenancy fraud in Warrington. The project has now been running for some 7 months – analysis has identified 3 suspect tenancies with a further two still under investigation. This is significantly lower than national estimates but does offer reassurance the sector in Warrington is largely free of tenancy fraud. However, the project has also uncovered 23 cases of suspected benefit fraud. These cases are currently under investigation.

“Fighting Fraud in Cheshire” – a joint project with Cheshire West and Chester, Cheshire East and Halton Councils to investigate procurement and insurance fraud. This has not yet identified tangible savings directly, but a number of workstreams have been developed which we anticipate will deliver savings, including: a

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good practice checklist for the assessment of new insurance claims; data matching activities for both insurance and procurement; and identification of control weaknesses in procurement arrangements. Analysis of procurement spend has identified anomalies for further investigation and has also supported the work of procurement units in identifying areas of Council spend which are not currently captured by formal procurement arrangements.

4.14 The councils involved in “Fighting Fraud in Cheshire” are also working

with the Competition & Markets Authority on a national “bid rigging” pilot project. This is assessing whether local government tendering and contracting data can be analysed to identify warning signs of firms colluding to artificially limit competition in the procurement process. The initial results are due in November.

Unplanned and Responsive work

Significant Investigations 4.15 Internal Audit have been involved in two investigations in the year to

date, in accordance with the procedure set out in the Council’s Fraud Response Plan:

Internal Audit and other Council officers continue to be involved in an ongoing case that is currently being investigated by the police and which remains confidential for operational reasons. Owing to the complexity of the case, the police investigation is likely to carry on into 2016.

The Office of the Public Guardian has issued a report into client finances at Warrington, following on from concerns raised by a previous Internal Audit review. A meeting is to be held with representatives from the OPG in November and the actions from the report will be addressed.

4.16 In the current financial year, Internal Audit have received four

whistleblowing referrals through the reporting line:

Two were anonymous allegations about working practices at schools: these were passed to the Advisory service to inform their monitoring arrangements.

One referral was an allegation about working practices and health and safety issues at a school canteen. This matter has been investigated by the Catering Service and no evidence has been found to support the allegations.

One anonymous referral was an allegation of inappropriate behaviour by a member of staff at a private residential establishment. This was passed to the Safeguarding Team, but unfortunately there was insufficient detail in the allegation to enable the member of staff or even the establishment to be identified.

4.17 A further referral was made via the whistleblowing procedure at one of

the Council’s care providers. The allegation was that residents were

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being charged for goods and services out of their personal funds that should have been provided by the establishment as part of their contract with the Council. The provider requested Internal Audit support to demonstrate openness and accountability in the investigation of the allegation. The review identified no evidence of systematic financial abuse, but a lack of clarity in the provider’s procedures had generated a lack of consistency in how some items were paid for. Clients were reimbursed for any cases where the goods and services should have been paid for by the provider. Benefits & Exchequer Services update

4.18 2014-15 saw the Council’s Benefit Fraud team undertake 480 investigations into suspected benefit fraud. Of this some 118 resulted in the issuing of a sanction – either a caution or administrative penalty with a further 32 being prosecuted.

4.19 The Benefit fraud team is migrating to DWP in March 2016. One of the last Councils to transfer their benefit fraud service, this is part of the DWP’s move to create a Single Fraud Investigation Service (SFIS). All investigations after March into alleged Housing Benefit fraud will be undertaken remotely by DWP investigation teams.

4.20 Last year’s report discussed the introduction of the Council’s Local

Welfare Support Scheme. Whilst the scheme remains cashless and subject to thorough assessment the team are still finding claims where the requested item is already owned or not required by the applicant. In 2014-15 the team identified and saved £46k from 163 suspect claims.

4.21 Investigations undertaken during the current financial year have required RIPA authorisations on nine occasions. Trading Standards update

4.22 In quarters 1 and 2 of 2015-16 the Service received 2,057 complaints across a broad range of trading standards related matters. Of these, 496 required investigation by an officer for alleged criminal offences and a further 70 requests for assistance were received from other law enforcement agencies.

4.23 One of the key areas of work for the Investigation and Enforcement Team is to reduce the impact of frauds and scams on consumers and businesses in Warrington. The average loss per scam victim is calculated to be £4,650 by the National Fraud Intelligence Bureaux. The Service received 267 scam related complaints in the first two quarters of 2015/16 with reported consumer losses of £14,756.

4.24 As previously reported the investigators have been working closely with the National Trading Standards Board ‘Scams Hub’ and leading postal agencies to identify victims of prize draws or foreign lottery scams. As a

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Agenda Item 7

result of this work our investigators have offered direct support to 199 local residents who have been victims of postal scams. The investigators ran a successful Scams Awareness month in July around the ‘Don’t be hushed, Don’t Be Rushed’ theme in the local paper, across our social media platforms and at community events.

4.25 There still remains a high level of scams circulating around slimming products; computer repair/virus scams and tax refunds. The team continues to issues ‘Scam Alerts’ via our social media channels and traditional press to warn residents of the latest scams circulating. All scam reports are now being mapped to assist with establishing any patterns to help understand which communities are being targeted, for which scam and at what time of year. Understanding the wider victim profile will assist with enforcement actions and target harden approaches with victims.

4.26 The service has handled 36 incidents relating to doorstep crime, principally relating to roofing/guttering repairs; tarmac/paving; and gardeners/tree surgeons with our residents incurring losses of £14,756. The reduction in reported incidents is principally down to a change in intelligence sharing protocols from Cheshire Police coupled with the increased use of roadside check days by officers targeting these rogue traders.

4.27 Consumer complaints related to the second-hand car market are increasing with 340 matters reported in the first two quarters. In response, officers are now engaged in several large scale investigations and are working closely with VOSA’s vehicle examiners to ensure unroadworthy vehicles are not being sold to consumers. Officers continue to support legally-operating traders, while adopting a robust enforcement stance against those who continue to breach consumer rights and sell poor quality vehicles.

4.28 Our iCAN consumer alert system, Twitter and Facebook pages are used to send out early warnings and advice to the public about scams affecting local residents. The Service now has 1,354 followers on our Twitter page, an increase of over 200 followers in the last six months. Our messages are regularly re-tweeted by our followers to a much wider audience.

4.29 The service continues to receive complaints in relation to the illegal supply of counterfeit and illicit goods. Our focus remains on curbing the supply of illicit tobacco and alcohol through our intelligence sharing and joint enforcement approach with partner agencies.

4.30 The Financial Investigation Unit (FIU) is continuing to provide cross-boundary investigation services to other local authorities and who do not have their own in house accredited financial investigators under the Proceeds of Crime Act.

46

Agenda Item 7

5. CONCLUSION 5.1 Anti-fraud work carried out by the Council provides a significant source

of assurance to the Audit and Corporate Governance committee that measures are in place to protect the Council’s assets. This in turn will enable members to comply with International Auditing Standards and will inform the debate at the end of the year on the compilation of the Council’s Annual Governance Statement.

5.2 This report has provided members with an overview of the proactive

and reactive anti-fraud work carried out in the current year to date. 6. FINANCIAL CONSIDERATIONS

6.1 Effective anti-fraud procedures can have a positive impact on the

Council’s financial position, through recovery of overpayments or financial penalties imposed on fraudsters. These outcomes are quantified and reported back to the Audit and Corporate Governance Committee. The new Counter Fraud Unit will have a remit to be at least cost neutral.

7. RISK ASSESSMENT 7.1 The risk of asset misappropriation applies to virtually all Council

services. A fraud risk assessment has been carried out by Internal Audit and used to inform the resources applied to anti-fraud work. Significant fraud risks identified during the year would be considered for inclusion in the Council’s Annual Governance Statement.


8.1 All reactive and proactive anti-fraud work is carried out within the

policies and guidelines set out by the Council or the relevant services involved. This minimises the risk that this work could be seen to be prejudicial to specific individuals or groups.

9. CONSULTATION

N/A

10. REASONS FOR RECOMMENDATIONS 10.1 To ensure that members have an appropriate level of assurance on the

anti-fraud work being carried out, its outcomes for the Council and the national context for fraud risks.

11. RECOMMENDATIONS

47

Agenda Item 7

11.1 That the Audit and Corporate Governance Committee considers,

comments on and notes this report as part of its monitoring role. 12. BACKGROUND PAPERS

Audit Services internal working papers “Code of Practice on Managing the Risk of Fraud and Corruption” (CIPFA

2014) “Protecting the English Public Purse 2015” (The European Institute for

Combatting Corruption and Fraud 2015) Fraudscape: UK Fraud Trends” (CIFAS 2015)



Simon Bleckly Audit Manager





Cllr Bowden Sent for information 12/11/2015

SMT

Deputy Chief Executive Katherine Fairclough

4/11/2015

Director of Finance and Information Services

Lynton Green 4/11/2015

Solicitor to the Council Timothy Date 4/11/2015

48


Agenda Item 8

WARRINGTON BOROUGH COUNCIL AUDIT AND CORPORATE GOVERNANCE COMMITTEE 19 NOVEMBER 2015 Report of the: Director of Finance & Information Services Report Author: Jean Gleave, Chief Internal Auditor Contact Details: Email Address:


Ward Members:

All

TITLE OF REPORT: INTERNAL AUDIT QUALITY ASSURANCE AND IMPROVEMENT PROGRAMME

1. PURPOSE OF THE REPORT 1.1 The purpose of this report is to inform the Audit and Corporate

Governance Committee of the development of a Quality Assurance and Improvement Programme (QAIP) for Internal Audit. The QAIP is designed to provide assurance that Internal Audit performs its work in accordance with the Public Sector Internal Audit Standards (PSIAS). The QAIP is attached at appendix 1 to this report.

2. CONFIDENTIAL OR EXEMPT 2.1 Not confidential. 3. BACKGROUND 3.1 The PSIAS require the formal documenting of a Quality Assurance and

Improvement Programme (QAIP) for the Internal Audit function. This covers all aspects of the Internal Audit activity and enables compliance with all aspects of the PSIAS to be evaluated.

3.2 The QAIP allows for the assessment of the efficiency and effectiveness of the Internal Audit activity and identifies opportunities for improvement. This is through both internal and external assessments. The requirement for an external assessment of the Internal Audit activity is at least once in every 5 years.

3.3 The results of the QAIP must be reported to senior management and the Audit and Corporate Governance Committee on an annual basis. This may be provided within internal audit’s annual report and opinion.

4. FINANCIAL CONSIDERATIONS 4.1 An effective internal audit service can have a positive impact on the

Council’s financial position. Through identification of areas where controls can be strengthened, losses can be prevented and value for money improved.

49

Agenda Item 8

2

5. RISK ASSESSMENT 5.1 A key requirement in producing the Annual Governance Statement is to

be able to place reliance on the Opinion and Annual Report of the Chief Internal Auditor. The opinion is based upon the work performed by the Internal Audit team and an effective internal audit team that complies with the requirements of the Public Sector Internal Audit Standards will result in a robust assessment of the Council’s system of internal control.


6.1 The work required to deliver the Audit Services plan is identified

through a regular risk assessment process. This is carried out using an established methodology that is designed to show that all potential audit areas are considered fairly. The Equality Impact Assessment for Audit has been reviewed and updated.

7. CONSULTATION 7.1 N/A

8. REASONS FOR RECOMMENDATIONS 8.1 To ensure that the Council maintains the continued provision of an

effective internal audit function.

9. RECOMMENDATION 9.1 That the Audit and Corporate Governance Committee considers

comments on and approves the Internal Audit Quality Assurance and Improvement programme and the process for the external assessment of the service.

50

Agenda Item 8

3

10. BACKGROUND PAPERS Internal Audit manual

Public Sector Internal Audit Standards

CONTACT FOR BACKGROUND PAPERS:


Jean Gleave Chief Internal Auditor





Cllr Bowden Sent for information

11/11/15

SMT


9/11/15



Solicitor to the Council Timothy Date (sent to Paul Clisby)

9/11/15

51


Appendix 1

Internal Audit Manual QP05 Quality Assurance and Improvement Programme

Version: 1.1 Prepared by: Gary Simpson

Principal Auditor

Effective from: November 2015 Approved by: Jean Gleave

Chief Internal Auditor

53

WBC Internal Audit Manual QP05 – Quality Assurance and Improvement Programme

1

Contents

Introduction

Purpose of the QAIP 2

Internal Assessments

On-going Reviews 3

Periodic Reviews 3

External Assessments

Frequency of External Assessment 4

Scope of External Assessment 4

Review of the QAIP

QAIP Review Process 4

Appendices

A Key Performance Indicators

B Action Plan – Internal Assessment

C External Assessment

D External Assessment Memorandum of Understanding

54


2

1 Introduction 1.1 Purpose of the QAIP

Internal Audit’s Quality Assurance and Improvement Program (QAIP) is designed to provide reasonable assurance to the various stakeholders of the Internal Audit activity that Internal Audit:

Performs its work in accordance with its Charter, which is consistent with The

Institute of Internal Auditors International Standards for the Professional

Practice of Internal Auditing (Standards), Definition of Internal Auditing and

Code of Ethics

Operates in an effective and efficient manner

Is perceived by stakeholders as adding value and improving Internal Audit’s

operations

Internal Audit’s QAIP covers all aspects of the Internal Audit activity in accordance

with the PSIAS Standard 1300 (Quality Assurance and Improvement Programme),

including:

Monitoring the Internal Audit activity to ensure it operates in an effective and

efficient manner

Ensuring compliance with the PSIAS’ Definition of Internal Auditing and Code of

Ethics

Helping the Internal Audit activity add value and improve organisational

operations

Undertaking both periodic and on-going internal assessments

Commissioning an external assessment at least once every five years, the

results of which are communicated to the Audit & Corporate Governance

Committee and to the Senior Management Team in accordance with the

Standards

The Chief Internal Auditor is ultimately responsible for the QAIP, which covers all

types of Internal Audit activities, including consulting.

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3

2 Internal Assessments

In accordance with PSIAS Standard 1300, internal assessments are undertaken through both on-going and periodic reviews.

2.1 On-going Reviews

Continual assessments are conducted through:

Management supervision of all audit activities and structured, documented review of all audit working papers

Audit Quality Procedures used for each engagement to ensure consistency, quality and compliance with appropriate planning, fieldwork and reporting standards

Review of all draft and final reports by the Audit Manager and/or Chief Internal Auditor in accordance with the Report Issuing Protocol – see the Internal Audit Manual Winnie page for a copy of the protocol (ref P01)

Feedback from audit clients obtained through post-audit feedback forms at the end of each audit – see the Internal Audit Manual Winnie page for a copy of the survey template (ref T07)

Regular progress meetings: o between the Chief Internal Auditor and Audit Manager o between the Audit Manager and Principal Auditors o team briefings

2.2 Periodic Reviews

Periodic assessments are designed to assess conformance with Internal Audit’s Charter, the PSIAS’ Definition of Internal Auditing, the Code of Ethics, and the efficiency and effectiveness of the Internal Audit function in meeting the needs of its various stakeholders. Periodic assessments are conducted through:

Monitoring of internal performance targets and quarterly performance monitoring reports to the Audit & Corporate Governance Committee

Periodic audit survey to all Heads of Service

Annual risk assessments, in accordance with the Internal Audit Strategy, for the purpose of annual audit planning

Annual review of the effectiveness of Internal Audit, undertaken by the Chief Internal Auditor

Annual review of compliance against the requirements of this Quality Assurance & Improvement Programme, undertaken by the Chief Internal Auditor, the results of which are reported to Senior Management Team and the Audit & Corporate Governance Committee

Feedback from the Deputy Chief Executive and the Chair of the Audit & Corporate Governance Committee to inform the 360 degree appraisal of the Chief Internal Auditor, in accordance with Standard 1100

Periodic file reviews and appraisal process to identify individual training and development needs

56

https://intranet.wla.int/RASC/Internal%20Audit/Manual




4

Annual review of performance and development of all Internal Audit staff in accordance with the Council’s PRD process

Results of internal assessments will be reported to the Audit & Corporate Governance Committee. The Chief Internal Auditor will implement appropriate follow-up to any identified actions to ensure continual improvement of the service. Any significant areas of non-compliance with the PSIAS that are identified through internal assessment will be reported in the Chief Internal Auditor’s Annual Report and used to inform the Annual Governance Statement (AGS).

3 External Assessments External assessments will appraise and express an opinion about internal audit’s

conformance with the PSIAS, Definition of Internal Auditing and Code of Ethics and include recommendations for improvement, as appropriate.

3.1 Frequency of External Assessment An external assessment will be conducted at least every five years, in accordance with the PSIAS. Appointment of the External Assessor and scope of the external assessment will be approved by the Audit & Corporate Governance Committee.

3.2 Scope of External Assessment

The external assessment will consist of broad scope of coverage that includes the following elements of Internal Audit activity:

Conformance with the Standards, Definition of Internal Auditing, the Code of Ethics and internal audit’s Charter; plans; policies; procedures; practices; and any applicable legislative and regulatory requirements

Integration of the Internal Audit activity into the Council’s governance framework, including the audit relationship between and among the key groups involved in the process

Tools and techniques used by Internal Audit

The mix of knowledge, experiences, and disciplines within the staff, including staff focus on process improvement delivered through this Quality Assurance and Improvement programme

A determination whether Internal Audit adds value and improves the Council’s operations

Results of external assessments will be provided to the Audit & Corporate

Governance Committee. The external assessment report will be accompanied by an

action plan in response to significant comments and recommendations identified. Any

significant areas of non-compliance will be reported in the Annual Report of the Head

of Internal Audit and in the Council’s Annual Governance Statement (AGS).

4 Review of the QAIP

4.1 QAIP Review Process

This document will be appropriately updated following any changes to the PSIAS or

Internal Audit’s operating environment.

It will be reviewed, as a minimum, on an annual basis.

57


5

Appendix A

Internal Audit Key Performance Indicators 2015/16

Detailed below are Key Performance Indicators that we should be measured against when

delivering our Internal Audit Service:

Performance Plan delivered in accordance with agreed timescales (Measure: 80% of plan delivered in financial year, 90% compared to

planned by the time of the HOIA) Reportable PI

Draft report issued in accordance with timescales agreed within the individual Terms of Reference

(Measure: 80% of draft reports issued within timescales)

Timely issue of the final report following receipt of management responses (Measure: 80% of final reports issued within 25 working days of the completion of the fieldwork) Reportable PI

The Head of Internal Audit Opinion is issued in accordance with the

agreed timescale. (Measure: Met or not met) Compliance with Public Sector Internal Audit Standards (Measure:100% compliance) Reportable PI

Contribution Strengthening of the control framework (Measure 1: Percentage of critical, high and medium priority

recommendations agreed – target > 95%)

(Measure 2: Percentage of critical, high and medium priority recommendations implemented (or in progress) – target > 85%)

Reportable PI

Council sees a positive contribution from Audit Services (Measure: Feedback on client satisfaction survey in relation to

satisfaction with the quality, accuracy and usefulness of the audit output - 90% Overall satisfaction rate) Reportable PI

Audit and Corporate Governance Committee members (and attendees) see a positive contribution from Audit Services

(Measure: Feedback on committee self assessment) External Audit opinion on Internal Audit (Measure: no adverse comments in management Letter)

58


PUBLIC SECTOR INTERNAL AUDIT STANDARDS: Action Plan Partial / Non Compliance – June 2015 Appendix B

Ref PARTIAL COMPLIANCE Required Action Timescale/ Responsibility

Comment/Outcome

STANDARDS

3. ATTRIBUTE STANDARDS

3.1: 1000 Purpose, Authority and Responsibility

1130 Impairment to Independence or Objectivity

Action Point 1 Are assignments for ongoing assurance engagements and other audit responsibilities rotated periodically within the internal audit team?

Continue to monitor responsibilities allocated to staff to achieve balance of using skills and experience and periodic rotation

CAE

March 2016

Review in planning audit work for 2016/17

3.2: 1200 Proficiency and Due Professional Care

1210 Proficiency

Action Point 2 Do internal auditors have sufficient knowledge of key information technology risks and controls?

Specialist skills are commissioned from Salford Internal Audit Service ICT Audit team

CAE

March 2016

59



Comment/Outcome

3.4: 1300 Quality Assurance and Improvement Programme

1312 External Assessments

Action Point 3 Has the CAE agreed the scope of the external assessment with an appropriate sponsor, such as the chair of the audit committee, the CFO or the chief executive?

Develop QAIP and include agreed scope of the external assessment for approval by the Audit & Corporate Governance Committee

CAE

November 2015

Action Point 4 Has the CAE agreed the scope of the external assessment with the external assessor or assessment team?

Develop QAIP and include agreed scope of the external assessment with the external assessor or assessment team.

CAE

November 2015

Action Point 5 Has the assessor or assessment team demonstrated competence in both areas of professional practice of internal auditing and the external assessment process?

Ensure MOU for external assessment includes the assessor or assessment team demonstrating competence in both areas of professional practice of internal auditing and the external assessment process.

CAE

March 2016

Action Point 6 How has the CAE used his or her professional judgement to decide whether the assessor or assessment team demonstrates sufficient competence to carry out the external assessment?

CAE to sign MOU for external assessment with understanding that the assessor or

CAE

March 2016

60



Comment/Outcome

assessment team demonstrates sufficient competence to carry out the external assessment.

Action Point 7 Does the assessor or assessment team have any real or apparent conflicts of interest with the organisation?

CAE to sign MOU for external assessment with understanding that the assessor or assessment team has no real or apparent conflicts of interest with the organisation.

CAE

March 2016

1320 Reporting on the Quality Assurance and Improvement Programme

Action Point 8 Has the CAE reported the results of the QAIP to senior management and the board?

Results of the QAIP to be reported to senior management and the Audit & Corporate Governance Committee.

CAE

April 2016

Action Point 9 Has the CAE included the results of the QAIP and progress against any improvement plans in the annual report?

Results of the QAIP and progress against any improvement plans to be included in the annual report.

CAE

April 2016

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Comment/Outcome

4. PERFORMANCE STANDARDS

4.1 2000 Managing the Internal Audit Activity

2050 Co-ordination

Action Point 10 Has the CAE carried out an assurance mapping exercise as part of identifying and determining the approach to using other sources of assurance?

Develop assurance map to inform planning for 2016/17

CAE

March 2016

Action Point 11 Does the CAE share information and coordinate activities with other internal and external providers of assurance and consulting services?

Develop assurance map to inform CAE of other providers of assurance and consultancy services

CAE

March 2016

Consider further co-ordination of work. Currently co-ordinate within the Council with the partnerships and performance team and also with the External Auditors.

62


Ref NON-COMPLIANCE Required Action Timescale/ Responsibility

Comment/Outcome

STANDARDS

3. ATTRIBUTE STANDARDS

3.2: 1100 Independence and Objectivity

1110 Organisational Independence

Action Point 12 Does the CAE confirm to the board, at least annually, that the internal audit activity is organisationally independent?

e) The Board approves decisions relating to the appointment and removal of the CAE

Confirmed with Chair - Audit & Corporate Governance Committee that the Committee does not require to be involved in the approval of decisions in relation to the appointment and removal of the CAE.

N/A

Action Point 13 Does the chief executive or equivalent undertake, countersign, contribute feedback to or review the performance appraisal of the CAE?

Feedback for the 360 degree appraisal obtained from the Deputy Chief Executive

N/A

63


Ref NON-COMPLIANCE Required Action Timescale/ Responsibility

Comment/Outcome

1130 Impairment to Independence or Objectivity

1310 Requirements of the Quality Assurance and Improvement Programme

1312 External Assessments

Action Point 14 Does the assessor or assessment team have any real or apparent conflicts of interest with the organisation? This may include, but is not limited to, being a part of or under the control of the organisation to which the internal audit activity belongs.

This will be addressed as part of the MOU for the external assessment

CAE

March 2016

4. PERFORMANCE STANDARDS

2400 Communicating Results

2430 Overall Opinion

Action Point 15 Do internal auditors report that engagements are ‘conducted in conformance with the PSIAS’ only if the results of the QAIP support such a statement?

To be included in the annual report and future reports when the external assessment iscomplete

CAE

Upon completion of the external assessment

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Appendix C

External Assessment – PSIAS Standard 1312

The PSIAS require that external assessments must be conducted at least once every five years by a qualified, independent assessor or assessment team from outside the organisation. The chief audit executive must discuss with the board (Audit & Corporate Governance Committee):

the form of external assessments;

the qualifications and independence of the external assessor or assessment team, including any potential conflict of interest; and

the need for more frequent external assessments. External assessments can be in the form of a full external assessment, or a self assessment with independent validation. A qualified assessor or assessment team demonstrates competence in two areas:

the professional practice of internal auditing; and

the external assessment process. Competence can be demonstrated through a mixture of experience and theoretical learning. Experience gained in organisations of similar size, complexity, sector or industry and technical issues is more valuable than less relevant experience. In the case of an assessment team, not all members of the team need to have all the competencies; it is the team as a whole that is qualified. The Chief Audit Executive uses professional judgment when assessing whether an assessor or assessment team demonstrates sufficient competence to be qualified. An independent assessor or assessment team means not having either a real or an apparent conflict of interest and not being a part of, or under the control of, the organisation to which the internal audit activity belongs. The North West Group of Chief Audit Executives has developed a methodology for external assessment and peer review that will be supported by a memorandum of understanding (see Appendix D) for all the Local Authorities taking part in the process. It is intended that all participant Local Authorities will be subject to an independent external assessment before the end of the 2017/18 financial year. The methodology is based upon the Checklist for Assessing Conformance with the PSIAS and the Local Government Application Note developed by CIPFA. The assessment is based upon each participant Internal Audit team having completed the self assessment against the PSIAS/LGAN checklist and will provide independent validation of the self assessment. The assessment will also include interviews with key stakeholders along with a questionnaire to obtain views on the internal audit service. The report from the external assessment will be provided to the CAE for distribution to the Audit & Corporate Governance Committee and the Senior Management Team. Progress against any improvement plans, agreed following the external assessment, will be reported in the annual report.

65


Appendix D

North West Chief Audit Executives’ Group

Peer Review

Memorandum of Understanding

Version 5.0, 24 July 2015

66


Introduction

The Public Sector Internal Audit Standards (PSIAS) require that an external assessment of an

organisation’s internal audit function is carried out once every five years by a qualified, independent

assessor or assessment team from outside of the organisation. External assessments can be in the

form of a full external assessment, or a self-assessment with independent external validation.

During 2014/15 the North West Chief Audit Executives’ Group (NWCAE) has been exploring a ‘peer

review’ process to be developed, managed and operated by the constituent authorities to meet this

requirement. This process addresses the requirement of a ‘self-assessment with independent

external validation’.

This Memorandum of Understanding (MoU) sets out the broad basis and methodology upon which

the constituent authorities agree to participate in the scheme and how the activity will be carried

out.

Constituent Authorities

The constituent authorities comprise those that make up the membership of the NWCAE Group, less

those that have explicitly ‘opted out’. A full list of participating authorities is included at Appendix 1.

It is the responsibility of the Head of Internal Audit (or equivalent) from each authority to seek

approval for participation and communicate the purpose and methodology of the peer review

process to ‘those charged with governance’ at their authority. This will in all likelihood include: Chief

Finance Officer/Section 151; Chief Executive and/or Corporate Management Team; Chair of and/or

Audit & Governance (or equivalent) Committee.

Duration of the Memorandum of Understanding

This MoU will run from 1 July 2015 to 31 March 2018, the end of the first five year period since the

introduction of the PSIAS and by when each authority’s internal audit section should have had their

first external review. This MoU and process will be subject to formal review and updated in line with

any developments or changes in the PSIAS.

Governance

Overall governance of the process, methodology and delivery of the peer review process will be the

responsibility of the NWCAE Group. The Group has, for the development and piloting of the process,

delegated responsibility to a Peer Review Sub-Group made up of the heads of audit from the

following local authorities:

Rochdale BC

Stockport MBC

Cheshire East BC

Wirral MBC

Warrington BC

Cheshire West & Chester BC

67


For the pilot period, anticipated to be between 20 July and 31 December 2015, the sub-group will

provide two teams, each from a different three authorities, one will take the role of review team and

the other will take the role of moderation team.

Cost

There is no direct cost for participating in this process. However, it should be made clear that

agreement to participate does require a ‘time’ commitment and that ‘time’ as a reviewer,

moderator or authority under review cannot be claimed and/or recharged. It will be for the NWCAE

Group (or its delegated group/individuals) to ensure that the ‘time burden’ is evenly spread with

each participating authority taking its share.

Methodology

This MoU sets out a broad methodology for self-assessment with independent validation and is set

out covering the three main stages of review: pre-review; on-site review; post-review. Accepting

that improvement actions may have been implemented since the closure of any audit year, the

review will focus on audit activity during the period covered in the latest Head of Internal Audit

Annual Report & Opinion. For example, reviews commencing after 1 July 2015 will cover the audit

year 1 April 2014 to 31 March 2015.

1. Pre-review

The authority to be reviewed, the review team and the moderation team will be selected and agreed

by the NWCAE Group (or its nominated sub-Group). For the pilot period the review and moderation

teams will be made up of three heads of audit each. This will be reviewed as part of the pilot

process.

An appropriate ‘lead in’ time, of not less than 4 weeks, will be allowed prior to any on-site review.

For the agreed pilot period, the Peer Review sub-Group will undertake the Review and Moderation

roles. The authorities who have volunteered to be reviewed as part of the pilot are: Blackburn with

Darwen and Blackpool.

Each authority will be required to complete and share its self-evaluation of the Internal Audit service

together with any relevant supporting evidence/documentation in advance of on-site review

commencement. The NWCAE Group has agreed that the self-assessment will use the CIPFA Local

Government Application Note (LGAN) questionnaire. Typically, supporting evidence will include the

Internal Audit Plan & Charter, The Head of Internal Audit Annual Report & Opinion, Quality

Assurance & Improvement Programme and examples of final audit reports.

To support the on-site review, a customer survey form will be issued to key personnel within the

authority being reviewed. A copy of the questionnaire is attached at Appendix 2 and this will be

issued during the ‘lead in’ period to the following:

Chief Executive

Chief Finance Officer/Section 151

Monitoring Officer

Chair of Audit & Governance Committee (or equivalent)

68


Corporate Management Team (or equivalent)

Members of the Internal Audit Team

A sample of auditees

The Head of Internal Audit from the Authority being reviewed will act as the key point of contact and

will be responsible for communication, within their own authority, of the purpose and timing of the

review, the provision of documentation and the facilitation of on-site activity.

2. On-site Review

The review itself will comprise a combination of ‘desktop’ and ‘actual on-site’ review. The review

cannot reasonably consider all elements of the LGAN self-assessment and the review team must use

the ‘desktop’ period to determine strengths, weaknesses and subsequent key lines of enquiry in

order that the review itself is risk-based, timely and adds real value. Each authority will be assessed

against the four broad themes of: Purpose and Positioning; Structure and Resources; Audit

Execution; and Impact.

The focus of the four themes is as follows:

Purpose and positioning – Does the internal audit service have the appropriate status,

clarity of role and independence to fulfil its professional remit?

Structure and resources – Does the internal audit service have the appropriate structure

and resources to deliver the expected service?

Audit execution – Does the internal audit service have the processes to deliver an effective

and efficient internal audit service?

Impact – Has the internal audit service had a positive impact on the governance, risk and

control environment within the organisation?

The key considerations under each theme together with an alignment against each theme of the

self-assessment checklist are detailed in Table 1 below.

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Table 1: Alignment of the model with the core areas of the Self-Assessment checklist

Purpose & Positioning Structure & Resources Audit Execution Impact

Remit

Reporting lines

Independence

Risk based plan

Integration with other assurance providers

Competencies to deliver IA remit

Technical training & development

Resourcing

Performance management

Knowledge management

Management of the IA function

Engagement planning

Engagement delivery

Reporting

Standing and reputation of internal audit

Impact on organisational delivery

Impact on governance, risk, and control

Core Headings within the Self-Assessment Model

Code of ethics

1000 Purpose, Authority and Responsibility

1100 Independence and Objectivity

1110 Organisational independence

1111 Direct interaction with the Board

1120 Individual objectivity

1130 Impairment to independence or objectivity

2010 Planning

2020 Communication and approval

Code of ethics

1200 Proficiency and Due Professional Care

1210 Proficiency

1220 Due professional care

1230 Continuing professional development

2030 Resource management

1300 Quality Assurance and Improvement Programme

1311 Internal assessments

1320 Reporting on the QAIP

2000 Managing the Internal Audit Activity

2010 Planning

2040 Policies and procedures

2100 Nature of Work

2120 Risk management

2200 Engagement Planning

70


Purpose & Positioning Structure & Resources Audit Execution Impact

2030 Resource management

2050 Co-ordination

2060 Reporting to Senior Management and the Board

2100 Nature of Work

2110 Governance

2120 Risk management

2130 Control

2210 Engagement objectives

2220 Engagement scope

2230 Engagement resource allocation

2240 Engagement work programme

2300 Performing the Engagement

2310 Identifying information

2320 Analysis and evaluation

2330 Documenting information

2340 Engagement supervision

2400 Communicating the Results

2410 Criteria for communicating

2420 Quality of communications

2440 Disseminating results

2450 Overall opinion

2500 Monitoring Progress

2600 Communicating the Acceptance of Risks

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The Review team will offer a ‘true and fair’ judgement and it is proposed that each Authority will be

appraised as Conforms, Partially Conforms or Does Not Conform against each thematic area of the

LGAN, from which an aggregation of the four themed scores will give an overall Authority score.

Conforms – indicates that the internal audit service complies with all fundamental elements of

the PSIAS and the majority of individual statements of good practice in all material respects

Partially Conforms – indicates that the internal audit service falls short of achieving some

elements of good practice but is aware of the areas for development or opportunities for

improvement in delivering effective internal audit

Does Not Conform – indicates that the internal audit service is not aware of, is not making

efforts to comply with, or is failing to achieve many or all of the objectives and good practice

statements. Such deficiencies would usually have a significant negative impact on the internal

audit service’s effectiveness and its potential to add value to the organisation and would also

represent significant opportunities for change.

3. Post Review

A summary report detailing key findings, suggested areas for improvement and the theme and overall

scores will be prepared by the review team and submitted for moderation. The purpose of the

moderation will be to ensure that the review approaches are consistent, that assessments are

evidence based, even handed and fair. A suggested methodology for moderation is included at

Appendix 3.

Upon completion, a summary report will be issued, as draft, to the Authority under review. A

suggested format for the report, with example content, is included at Appendix 4. This stage in the

process allows that Authority to correct any factual inaccuracies and, with appropriate evidence, to

challenge any of the key findings. Final reports will be issued to the Head of Internal Audit following

Peer Review sub-Group’s consideration of revisions and/or challenge.

It is for the Head of Internal Audit from the Authority under review to determine the most appropriate

means of communicating the results of the review to their officers and members. They can consider

inviting a member(s) of the review team to present the findings at an appropriate meeting.

Benchmarking

One of the key benefits of undertaking external validation in this way, means that each participating

authority can be part of and share benchmarking data. This will highlight risks, identify best practice

and enable each authority to learn from constituent North West colleagues.

Assumed consent to participate in the sharing and benchmarking of summary reports, key findings and

scores, across the NWCAE Group, is taken with each authority’s agreement to participate in this peer

review process. Authorities will have the option to ‘opt out’ of benchmarking activity, however this

must be made explicitly clear at the signing of this MoU.

72


Communication of an authority’s individual scores and report wider than the NWCAE Group is at the

sole discretion of that authority’s Head of Internal Audit.

On-Going Review

This MoU, under the ownership of the NWCAE Group, will be subject to regular review and as a result

may be subject to change. The impact of any changes will be considered as part of the moderation

process.

73


Appendix 1

Participating Authorities

Blackburn with Darwen BC

Blackpool BC

Bury MBC

Cheshire East BC

Cheshire West & Chester BC

Halton BC

Knowsley MBC

Lancashire CC

Merseytravel

Oldham MBC

Rochdale MBC

Salford City Council

Sefton MBC

St Helens MBC

Stockport MBC

Tameside MBC

Trafford MBC

Warrington BC

Wigan MBC

Wirral MBC

74


Appendix 2

NWCAE PSIAS PEER REVIEW

Customer Survey – Internal Audit

The Internal Audit service is currently undergoing a peer review in order to meet its requirement under

the Public Sector Internal Audit Standards (PSIAS) that an external assessment of the function is carried

once every five years by a qualified, independent assessor or assessment team from outside the

organisation.

Colleagues from Name of reviewing councils will carry out the review and as part of the process are

required to evaluate the impact of the internal audit service on the governance, risk and control

environment within the Council.

As a key stakeholder, we would like to seek your views on the internal audit service.

We would very much appreciate it if you could take a few minutes to complete this questionnaire.

AG

REE

PA

RTI

ALL

Y

AG

REE

DO

NO

T

AG

REE

NO

T

AP

PLI

CA

BLE

/

DO

N’T

KN

OW

Standing and Reputation of Internal Audit

The internal audit service is seen as

a key strategic partner throughout

the organisation

Senior managers understand and

fully support the work of internal

audit

Internal audit is valued throughout

the organisation

The internal audit service is

delivered with professionalism at all

times

Impact on Organisational Delivery

The internal audit service responds

quickly to changes within the

organisation

The internal audit service has the

75


AG

REE

PA

RTI

ALL

Y

AG

REE

DO

NO

T

AG

REE

NO

T

AP

PLI

CA

BLE

/

DO

N’T

KN

OW

necessary resources and access to

information to enable it to fulfil its

mandate.

The internal audit service ensures

that recommendations made are

commercial and practicable in

relation to the risks identified

There have not been any significant

control breakdowns or surprises in

areas that have been positively

assured by the internal audit service

Has the internal Audit service had a positive impact on Governance, Risk and Control?

The internal audit service includes

consideration of all risk areas in its

work programme

Internal audit advice has a positive

impact on the governance, risk, and

the system of control of the

organisation

Internal audit activity has enhanced

organisation-wide understanding of

governance, risk, and control

The internal audit service asks

challenging and incisive questions

that stimulate debate and

improvements in key risk areas

The internal audit service raises

significant control issues at an

appropriate level in the

organisation

The organisation accepts and uses

the business knowledge of internal

auditors to help improve business

processes and meet strategic

76


AG

REE

PA

RTI

ALL

Y

AG

REE

DO

NO

T

AG

REE

NO

T

AP

PLI

CA

BLE

/

DO

N’T

KN

OW

objectives

Internal audit activity influences

positive change and continuous

improvement to business

processes, bottom line results and

accountability within the

organisation

Internal audit activity promotes

appropriate ethics and values

within the organisation

Please use this space to provide any further comments

Thank you for completing this questionnaire.

Please return to Name and e-mail address for return

The deadline for response is XXXXX.

77


Appendix 3

Moderation Process

The PSIAS lead group has emphasised the need for external peer reviews to be based on the consistent

application of the methodology it has developed. To this end, it has put in place a systematic

moderation review mechanism.

The PSIAS outcome for each Local Authority will be subject to a quality assurance internal review

involving the peer review team and the internal audit team under review. There will then be a

moderation meeting between the PSIAS peer review team for the individual Local Authority peer

review and the regional PSIAS review team. This process is designed to ensure consistency between

the individual peer review teams across the region.

Throughout the process – these Quality Control Moderation (QMC) meetings will take place on a

regular basis. The regional team will discuss previous peer reviews and other ongoing peer reviews in

the region, together with any feedback it receives from other regions carrying out PSIAS peer reviews.

78


Appendix 4

XXXXX COUNCIL

PEER REVIEW OF INTERNAL AUDIT AGAINST THE UK PUBLIC SECTOR INTERNAL AUDIT STANDARDS

CARRIED OUT BY

xxx xxx

REPORT DATE:

79


Xxxxx Council

Peer Review of Internal Audit against the UK Public Sector Internal Audit Standards

1 Introduction 1.1 All principal local authorities and other relevant bodies subject to the Accounts and

Audit (England) Regulations 2015 (amended), the Accounts and Audit (Wales) regulations 2005, section 95 of the Local Government (Scotland) Act 1973 and the Amendment to the Local Government (Accounts and Audit) Regulations (Northern Ireland) 2006 must make provision for internal audit in accordance with the Public Sector Internal Audit Standards (PSIAS) as well as the (CIPFA) Local Government Application Note.

1.2 A professional, independent and objective internal audit service is one of the key elements of good governance in local government.

1.3 The PSIAS require that an external assessment of an organisation’s internal audit function is carried out once every five years by a qualified, independent assessor or assessment team from outside of the organisation. External assessments can be in the form of a full external assessment, or a self-assessment with independent external validation.

1.4 The North West Chief Audit Executives’ Group (NWCAE) has established a ‘peer-review’ process that is managed and operated by the constituent authorities. This process addresses the requirement of external assessment by ‘self-assessment with independent external validation’ and this report presents the summary findings of the review carried out on behalf of XX Council.

1.5 “An independent assessor or assessment team means not having either a real or an

apparent conflict of interest and not being a part of, or under the control of, the organisation to which the internal audit activity belongs.” This review has been carried out by the Heads of Internal Audit at xxxxxxx. Their ‘pen pictures’, outlining background experience and qualifications, are included at Appendix 1.

2 Approach/Methodology

2.1 The NWCAE Group has agreed a detailed Memorandum of Understanding (MoU) that

outlines the broad methodology for the conduct of this review. A copy of the MoU is available upon request. However, in summary, the key elements of the process are:

The peer review is undertaken in three stages: pre-review; on-site review; post-review. And covers audit activity during the period covered in the latest Head of Internal Audit Annual Report & Opinion. For example, reviews commencing after 1 July 2015 will cover the audit year 1 April 2014 to 31 March 2015.

80


Each authority is required to complete and share its self-evaluation of the Internal

Audit service together with any relevant supporting evidence/documentation in

advance of on-site review commencement. The NWCAE Group has agreed that the

self-assessment will use the CIPFA Local Government Application Note (LGAN)

questionnaire. Typically, supporting evidence will include the Internal Audit Plan &

Charter, The Head of Internal Audit Annual Report & Opinion, Quality Assurance &

Improvement Programme and examples of final audit reports.

To support the on-site review, a customer survey form will be issued to key

personnel within the authority being reviewed.

The review itself comprises a combination of ‘desktop’ and ‘actual on-site’ review.

The review cannot reasonably consider all elements of the LGAN self-assessment

and the review team must use the ‘desktop’ period to determine strengths,

weaknesses and subsequent key lines of enquiry in order that the review itself is

risk-based, timely and adds real value. Each authority will be assessed against the

four broad themes of: Purpose and Positioning; Structure and Resources; Audit

Execution; and Impact.

Upon conclusion, the Review team offers a ‘true and fair’ judgement and it is

proposed that each Authority will be appraised as Conforms, Partially Conforms or

Does Not Conform against each thematic area of the LGAN, from which an

aggregation of the four themed scores gives an overall Authority score.

3 Summary Findings

3.1 Following a detailed moderation process, the review team has concluded the following

judgements:

Area of Focus Judgement

Purpose & Positioning

Structure & Resources

Audit Execution

Impact

Overall Judgement Conforms/Partially Conforms/Does Not

Conform

81


Assessment against the individual elements of each area of focus is included in the

table at Appendix 2.

3.2 Significant Observations (i.e leading to a ‘does not conform’ judgement)

Insert narrative against one or more of the ‘Areas of Focus’ as appropriate

3.3 Minor Observations (i.e areas for improvement/development, minor elements of non-conformance, gaps in ‘good practice’ statement) Insert narrative against one or more of the ‘Areas of Focus’ as appropriate

82


Appendix 1

Review Team

Insert ‘pen pictures’ for the three members of the review team

83


Detailed Assessment Appendix 2

Do

es n

ot

con

form

Par

tial

ly

con

form

s

con

form

s

Comments

Purpose & positioning

Remit X See 3.1 and 3.2 above

Reporting lines X

Independence X

Other assurance providers X See 3.4 above

Risk based plan X

Structure & resources

Competencies X

Technical training & development

X

Resourcing X See 3.3 above

Performance management X

Knowledge management X

Audit execution

Management of the IA function

X

Engagement planning X

Engagement delivery X

Reporting X

Do

no

t

agre

e

Par

tial

ly

agre

e

Fully

agre

e

Comments

Impact

Standing and reputation of internal audit

X See 3.5 above

Impact on organisational delivery

X

Impact on Governance, Risk, and Control

X

Conforms X Partially Conforms Does Not Conform

84


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Agenda Item 9

WARRINGTON BOROUGH COUNCIL AUDIT AND CORPORATE GOVERNANCE COMMITTEE 19 NOVEMBER 2015 Report of the: Director of Finance & Information Services Report Author: Jean Gleave, Chief Internal Auditor Contact Details: Email Address:


Ward Members:

All

TITLE OF REPORT: COLLABORATIVE WORKING WITH SALFORD INTERNAL AUDIT TEAM

1. PURPOSE OF THE REPORT 1.1 The purpose of this report is to inform the Audit and Corporate

Governance Committee of the progress of the collaboration with Salford City Council for internal audit work. The collaboration aims to address resource shortages and budget constraints, and to share skills effectively in the two internal audit teams; it will support the two Councils achieve their efficiency and financial targets.

2. CONFIDENTIAL OR EXEMPT 2.1 Not confidential. 3. BACKGROUND 3.1 The Chief Internal Auditor (CIA) reported to the Audit & Corporate

Governance Committee in April 2015 on the proposed collaboration with Salford City Council for internal audit work. The collaboration aims to ensure the adequacy and effectiveness of the Council’s internal audit service to ensure that resources can be maintained and the Committee can continue to place reliance upon the service.

3.2 Following a senior management restructure in Salford, the Chief

Financial Officer (CFO) has now been appointed permanently to the role of the Director of Finance & Corporate Business. The Salford City Council Head of Internal Audit is also deputy Section 151 officer with managerial responsibility for the wider finance team as well as Insurance. This has continued to increase the pressures on the Director of Finance & Corporate Business and the Deputy S151. The collaboration has provided management support to the internal audit team in Salford and has allowed the Deputy S151 to provide more resource to financial management support.

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Agenda Item 9

2

4. ARRANGEMENTS IN SALFORD & WARRINGTON – TRIAL PERIOD Operational Arrangements 4.1 The CIA from Warrington Council has been working with the Salford

internal audit team for two days per week from the beginning of May 2015. Days have been scheduled based on working requirements and the CIA has worked within the Salford office each week. This has allowed opportunity to get to know the team and the Local Authority.

4.2 The CIA spends the remaining 3 days per week with the Warrington internal audit team. Time in meetings has been reduced in Warrington, where possible, and the Audit Manager and all members of the internal audit team in Warrington have provided ongoing support to the arrangement. Sharing Resources and Best Practice

4.4 A number of areas have been identified where resources and knowledge can be shared between the two teams:

A joint review of the council tax system is in progress with a principal auditor from the Warrington internal audit team. This will allow for any areas of good practice to be shared across the two organisations and will provide for sharing of ideas and working practices.

The CIA has arranged for a joint review to be undertaken with NHS Salford CCG internal audit team (Mersey Internal Audit Agency) of the Integrated Care System commissioning governance arrangements. The joint review will ensure shared intelligence and co-ordinated and joined up working to avoid duplication and deliver efficient and effective use of resources, ensuring best outcomes for the two organisations.

Joint working with the CCG’s auditors has been undertaken by the Warrington team during 2014/15 and is continuing in 2015/16. Learning from these reviews will be shared with the Salford internal audit team and staff involved in the Warrington joint reviews will be available to assist as required.

The schools audit programmes have been subject to review and comparison by staff involved in the schools’ reviews from the two teams. Areas of good practice have been shared and the audit programme has been revised to ensure relevant areas are covered in an efficient and effective way.

Terms of reference for reviews, test schedules and reports are being shared between the two teams as appropriate. This provides a resource and information pool as staff approach new areas of work.

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Agenda Item 9

3

Policies and protocols are being shared from the two organisations, for example counter fraud policies and approach to whistle-blowing reports.

Salford Team Profile and Customer Feedback

4.5 Initial meetings were held with senior managers in Salford as an introduction and to obtain views on planned internal audit work for 2015/16. It is the intention of the CIA to maintain contact and attend senior management meetings to provide a regular update to the senior management teams in each service area. The CIA has attended meetings with Salford managers and staff and external clients as necessary, in order to progress reviews and provide support to audit staff.

Opportunities and Benefits 4.6 A joint meeting of the two teams was held on 22 July 2015. The aim of

the joint meeting was to provide an opportunity for the two teams to get together and to get to know each other. The meeting also covered current and future arrangements for the joint working.

Objectives of the meeting:

Explore the working arrangements in more detail

Consider Strengths and Weaknesses in the arrangement

Consider Opportunities and Threats in the arrangement

Consider any required changes

Consider sharing of information and possible sharing of resources

A SWOT Analysis was produced from the joint meeting and is attached at Appendix A to this report for information. There was a general agreement between the teams that there were a number of strengths and opportunities afforded by the collaboration. It was noted that a number of the weaknesses and threats are present for each team whether working alone or in collaboration with others.

5.0 TRIAL PERIOD – SUCCESSES AND DEVELOPMENTS 5.1 Effective internal audit is a vital part of the governance structures of

both Councils and as such the Director of Finance & Corporate Business at Salford Council proposed to the Salford Audit & Accounts Committee, at their meeting in October 2015, that the trial period be extended to continue to ensure that the benefits are being achieved for both Councils and to develop a longer term formal agreement. The Audit & Accounts Committee agreed that they wished to approve the continuation of the internal audit collaboration to the end of April 2016 and approve the exploration in the next 6 months of a potential model to formalise the agreement.

89

Agenda Item 9

4

5.2 In the short term arrangement both Councils will continue to pay for the resources that are being “shared”:

Salford payment to Warrington for second 6 months £14,250

Warrington payment to Salford City Council for ½ year IT Audit work £3,500

Net income for the remainder of the year £10,750

5.3 In line with the internal audit Charter, the CIA will ensure that Salford staff, deployed on the Warrington internal audit plan of work, are fully qualified and trained.

5.4 The agreement is to be set out in a Memorandum of Understanding

agreed by both parties. Assessment of the collaboration will be undertaken during the next 6 months to develop a model to formalise the agreement on a long term basis.

6. RISKS IN THE COLLABORATION 6.1 A key requirement for the Audit and Corporate Governance Committee

in order for the Committee to meet its Terms of Reference is to assess the adequacy of the internal audit service.

6.2 The CIA will maintain independence of operational responsibilities for

the two Councils in the collaborative arrangement. However, there will be a resource reduction of the CIA at Warrington for the agreed 2 days per week spent in Salford.

6.3 The secondment will mean that attendance at some operational

meetings will need to be reviewed. An assessment of the attendance of the CIA and Audit Manager at operational meetings continues to be assessed and prioritised. Attendance at the key groups in Warrington such as the officer Governance Group will need to be maintained by the CIA to ensure the continued required coverage in order to contribute to the framework of assurance.

7. CONCLUSION

7.1 The internal audit collaborative working arrangement is proposed as a

partnership between the two organisations, working together to achieve a common vision with clear aims and objectives. If successful it is envisaged that this arrangement will increase efficiencies and provide an effective internal audit service for both Councils.

7.2 The extension of the collaboration is proposed in order to assess the

risk of moving into a more long term arrangement and to ensure a robust Internal Audit service is maintained.

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Agenda Item 9

5

7.3 The arrangement will reflect that a strong internal audit team in each of

the Councils is very important as the basis for robust assurance at a local level. Each Council will want to ensure that controls are maintained in difficult times as they transform services. The Public Sector Internal Audit Standards (PSIAS) introduced from 1 April 2013 are designed to create consistency for the practice of internal audit across the public sector and establish the basis for its quality assurance. The CIA has developed and will maintain a Quality Assurance and Improvement Programme to enable the internal audit activity across the two teams to be assessed against the standards.

8. FINANCIAL CONSIDERATIONS 8.1 The collaboration will make better use of existing resources and allow

the two teams the capacity to address resource shortages, budget constraints and share skills effectively.

9. RISK ASSESSMENT See section 6 10. EQUALITY AND DIVERSITY/EQUALITY IMPACT ASSESSMENT

10.1 The Equality Impact Assessment for internal audit will be reviewed and

updated in light of the proposed collaborative working.

11. CONSULTATION 11.1 Discussions have been held at Directorate management team

meetings and Senior Management Team meeting to gain input from senior management.

12. REASONS FOR RECOMMENDATIONS 12.1 To ensure that the Council maintains an effective adequately resourced

internal audit service.

13. RECOMMENDATION 13.1 That the Audit and Corporate Governance Committee considers

comments on and approves the continuation of an internal audit collaboration with Salford Council to the end of April 2016 and approve the exploration in the next 6 months of a potential model to formalise the agreement.

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Agenda Item 9

6

14. BACKGROUND PAPERS Internal Audit working papers

Internal Audit Charter

CONTACT FOR BACKGROUND PAPERS:








11/11/15

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9/11/15




9/11/15

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Appendix A

7

Salford and Warrington Joint Team Meeting Wednesday 22 July 2015

SWOT Analysis - Collaborative Working

STRENGTHS WEAKNESSES

Experienced, well qualified staff Strong skill sets / Skills mix Specialisms and professional qualifications Depth of knowledge of Internal Audit/LAs Committed teams / Strong resilient teams Specialist skills – eg. IT audit / fraud More security Forward thinking and Innovative ways of auditing Data Sharing (WBC) Efficiencies in management Profile of Internal Audit Support from senior management Learning & Development Networking, both within the region and nationally, e.g. involvement with the regional groups, training and links with national organisations.

Lack of resilience Different agendas / Differing ideas / approaches / ways of working Different structures Potential duplication Potential resistance to change Skill sets – lack of specialist skills in some areas eg contract audit Data Sharing (SCC) Security / sensitive data Audit systems – different systems in use / audit systems are weak Client relationships – lack of organisational knowledge by new staff Uncertainty for the future Delays in issuing reports / reporting processes Possible time lost in travel between offices / extra travel costs Prioritisation of work / Unplanned work / investigations Planning / arranging meetings

OPPORTUNITIES THREATS

Increase resilience Exchange ideas / share knowledge Share experience / share skills Share specialist skills eg. IT audit / fraud Share best practice Efficiencies and effectiveness Commercial opportunities – grow client base/increase external work Learn new skills / opportunities for staff Feed into audit plans Challenge each other

External IA providers / Outsourcing / Amalgamation Cuts in LA funding / Ongoing austerity and cuts Cuts due to merger of the 2 teams / Efficiencies Conflicting priorities (staff drawn off onto other work) Inconsistent management approach Different ways of working Different political set up / Political agenda Lack of Member support Managing change / processes / terms and conditions / logistics Commissioning Stretched resources Regional devolution

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Agenda Item 10

WARRINGTON BOROUGH COUNCIL AUDIT AND CORPORATE GOVERNANCE COMMITTEE 19 NOVEMBER 2015 Report of the: Director of Finance and Information Services Report Author: Jean Gleave, Chief Internal Auditor Contact Details: Email Address:


Ward Members:

All

TITLE OF REPORT: INTERNAL AUDIT QUARTERLY PERFORMANCE REPORT TO 6 NOVEMBER 2015 1. PURPOSE OF THE REPORT 1.1 The purpose of the report, attached as Appendix 1, is to brief the Audit

and Corporate Governance Committee on the progress being made against the Internal Audit work programme for the year 2015/16. It covers the period from 14 September 2015 to 6 November 2015.

2. CONFIDENTIAL OR EXEMPT Not confidential.

3. FINANCIAL CONSIDERATIONS

3.1 Effective internal controls and an effective internal audit service can

have a positive impact on the Council’s financial position. Through identification of areas where controls can be strengthened, losses can be prevented and value for money improved.

4. RISK ASSESSMENT 4.1 A key requirement in producing the Annual Governance Statement is to

be able to place reliance on the Opinion and Annual Report of the Chief Internal Auditor. The Strategic and Directorate risk registers will be reviewed quarterly to ensure that they reflect the issues raised from the Internal Audit workplan. This process will also be used to ensure that the Audit workplan reflects any changing risks identified by services.


5.1 The work required to deliver the Audit Services plan is identified

through a regular risk assessment process. This is carried out using an established methodology that is designed to show that all potential audit areas are considered fairly. The Equality Impact Assessment for Audit has been reviewed and updated.

6. CONSULTATION 95

Agenda Item 10

N/A

7. REASONS FOR RECOMMENDATIONS 7.1 To ensure that the Council maintains an effective framework of internal

control and manages its key risks and to ensure the continued provision of an effective internal audit function.

8. RECOMMENDATION 8.1 That the Audit and Corporate Governance Committee considers,

comments on and notes this report as part of its monitoring role. 9. BACKGROUND PAPERS

Internal Audit working papers and reports

CONTACTS FOR BACKGROUND PAPERS:








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Agenda Item 10 Appendix 1

Internal Audit Service

INTERNAL AUDIT PROGRESS REPORT

November 2015

Internal Audit 5th Floor Quattro New Town House Buttermarket Street Warrington WA1 2NH

97

Agenda Item 10 Appendix 1

CONTENTS

Section Page 1. Management Summary 1 2. Reports Issued 2 3. Progress against 2015/16 plan 4 4. Follow up of previously agreed

recommendations 10

5. Key Performance Indicators 12

Appendix A – Report Summaries – Limited / Minimal assurance opinions Appendix B – Report Summaries – Follow up of High Priority Recommendations

Appendix C –Reporting Definitions

98

Internal Audit Progress Report November 2015

1

1. MANAGEMENT SUMMARY

Introduction

The purpose of this report is to brief the Audit and Corporate Governance Committee on the progress being made against our planned work for the year 2015/16. It covers the period up to 6 November 2015. Summary of audit activity We have issued 6 final reports and memos since the previous meeting of the Committee and 4 reports are at draft stage. Detail of the reports issued is provided in Section 2 with summaries for reports that carry limited or minimal assurance opinions included at Appendix A. Additional work by Internal Audit during this period has included work on the counter fraud programme and we have completed a fraud awareness e-learning module for completion by all staff. We have also received a whistleblowing training module from Public Concern at Work (PCAW). We have worked with the Communications team to launch these modules as part of a wider fraud awareness campaign – “Spot It. Stop It”. We are also looking to work with other authorities in the area on a wider publicity campaign to coincide with International Fraud Awareness Week in November. To support this, we are also offering fraud awareness training sessions to management teams and other staff meetings. We have launched this in Families and Wellbeing and have had a number of requests to provide the session. This will enable us to deliver the message to front line staff, who are best placed to identify and raise concerns at an early stage. To date we have delivered training to the Leadership Development Forum; RaSC EMT; the Transportation, Engineering and Operations EMT; HR managers; ICT Managers; and Families and Wellbeing teams. We have continued with the collaborative working arrangement with Salford Council and continue to meet with the Cheshire Local Authorities to share resources and provide mutual support. The contracts auditor from Cheshire West & Chester internal audit team is currently providing audit work on the Bridge Street review and Salford Council’s IT audit team are currently planning IT audit work. We are again working with the internal auditors at Warrington Clinical Commissioning Group to do joint work on health & social care transformation and the Better Care Fund.

Work has also included: - grant audit testing – complex families; and - NFI fraud data matching – review of matches.

99


2

Follow ups We have performed detailed follow up work on reports that we issued in 2014/15. A summary of progress made in implementing our previous recommendations is included in Section 4. 2. REPORTS ISSUED

Since the previous meeting of the Committee 6 reports and memos have been issued as final and a further 4 reports are currently in draft. Final Reports issued:

Public Health Services

Twiss Green CPS

Council Tax Empty Properties and Second Homes Chapelford PS

Pothole fund – grant claim signed

Birchwood Pinchpoint – grant claim signed

The following reports are currently in draft awaiting management responses:

Asset Maintenance and Street Works - Street Lighting

Investigations and Enforcement The following reports are currently in draft and subject to IA management review:

Estates & Valuation - Acquisitions & Disposals

NDR Business Rate Reliefs

We anticipate being able to present the above draft reports as final reports to the next meeting

100


3

3. PROGRESS AGAINST 2015/16 PLAN

On 21 April 2015 the Audit and Corporate Governance Committee agreed the Internal Audit plan for the year. The table below provides details of the approved plan, when reviews are planned and actually undertaken.

Directorate Subject Planned

Fieldwork Start

Actual Fieldwork

Start

Final Report Issued

Assurance Opinion Comments

AW Risk Management/ Business Continuity

14/11/2014 24/11/2014 16/9/2015 Substantial/Limited

R&SC Financial Impact Assessment

05/05/2015 05/05/2015 Audit in progress

R&SC Accounts Payable 24/02/2015 24/02/2015 03/09/2015 Substantial

ERGE Waste Services 01/08/2014 01/08/2014 28/05/2015 Substantial

ERGE Estates & Valuation - Acquisitions & Disposals

22/05/2015 04/06/2015 Report in draft

F&W Public Health Services 24/04/2015 22/05/2015 13/10/2015 Substantial

AW Authority Wide Governance

01/04/2015 01/04/2015

AUTHORITY WIDE

AW Strategic Risk Management

AW Information Governance – FoI/SAR

Dec 2015 TOR agreed with Audit Manager

AW

Management Information/PIs/Data Quality

Incorporated with F&W Governance Arrangements and Adult Care Management reviews. 26/10/15 - Planning commenced - scoping meeting held with Service Managers

101


4


Fieldwork Start

Actual Fieldwork

Start

Final Report Issued


RESOURCES AND STRATEGIC COMMISSIONING: FINANCIAL SYSTEMS

R&SC Fixed Asset Register & Capital Accounting

Q1 05/05/2015 Audit commenced but postponed at request of Finance

R&SC Final Accounts Work - Payroll Substantive Testing

Q1 16/04/2015 - - Substantive Testing complete and walk through carried out by External Audit. Memo issued 29/09

R&SC Payments to Staff/Payroll

Q1 16/05/2015 Audit in progress

R&SC Related Parties Testing Q1 15/04/2015 - - Memo issued

R&SC Council Tax Empty Properties and Second Homes

07/09/2015 07/09/2015 02/11/2015 Substantial

R&SC NDR Business Rate Reliefs

07/09/2015 07/09/2015 File reviewed. Report being drafted

R&SC Accounts Payable Q3

R&SC Cash and Bank Q3

R&SC Insurance Q4

R&SC Financial Accounting System

Q4

R&SC Budgetary Control Q4

R&SC Grants Audits:

R&SC Grants - Complex Dependency Programme

Q2 20/06/2015

R&SC Grants - Birchwood Pinchpoint

Q2 and Q4

27/07/2015 30/07/2015 Grant claim signed

102


5


Fieldwork Start

Actual Fieldwork

Start

Final Report Issued


R&SC Grants - Pot Holes 15/09/2015 15/09/2015

RESOURCES AND STRATEGIC COMMISSIONING: KEY BUSINESS SYSTEMS

R&SC Integrated Commissioning

Q2 28/09/2015 Fieldwork commenced re Integrated H&SC joint review with MIAA

R&SC Better Care Fund Q1 Q2

01/04/2015 25/09/2015

Apr 15 - BCF Follow Up undertaken Fieldwork commenced and TOR issued re BCF joint review with MIAA

R&SC Training and Development

Q2

R&SC Electoral Registration

Q2

R&SC Business Planning & Business Improvement

Q3 Planning commenced

R&SC Contract Management and Monitoring

Q3 Aug 15 Sep 15 - Review of Warrington Community Living contract – report issued

R&SC Major Capital Loans Q4 01/04/2015 04/09/2015

Corporate Loans Group attendance Review of approval & monitoring arrangements - fieldwork complete and draft report in progress

R&SC Exchequer System

Q4

R&SC ICT


103


6


Fieldwork Start

Actual Fieldwork

Start

Final Report Issued


FAMILIES AND WELLBEING

F&W Adult Services Contract Management & Monitoring

Q2 08/07/2015

F&W Integrated Services for Children With Additional Needs

Q2 28/08/2015

F&W Children in Need/Care Q3 Incorporated with Integrated Services for Children With Additional Needs review

F&W Governance Arrangements

Q3

Incorporated with AW Management Information/PIs/Data Quality and F&W Adult Care Management reviews 26/10/15 - Planning commenced - scoping meeting held with Service Managers

F&W Adult Care Management

Q3

Incorporated with AW Management Information/PIs/Data Quality and F&W Governance Arrangements reviews 26/10/15 - Planning commenced - scoping meeting held with Service Managers

F&W Child and Family Support

Q3

F&W Childrens Centres Q3 Planning in progress

F&W Safeguarding & looked after children

Q4

F&W Public Health Services Q4

F&W DAAT Q4

F&W Adult Safeguarding and Monitoring

Q4

104


7


Fieldwork Start

Actual Fieldwork

Start

Final Report Issued


F&W Complex Families Each 1/4 28/04/2015 PBR Claim to April 15 signed off. Advisory meetings held

F&W Carefirst/Mosaic Social Care Recording & Management System

Ongoing 01/04/2015

F&W Care Arrangers & CareFinancials

Q4 Audit postponed until 2016/17 as agreed with F&W management due to pending system and process changes within Mosaic

ECONOMIC REGENERATION, GROWTH AND ENVIRONMENT

ERGE Building Maintenance Q1 06/05/2015 11/08/2015 Substantial

ERGE Asset Maintenance and Street Works - Street Lighting

Q1 07/05/2015 6/11/15 Draft report issued

ERGE Planning Policy Q1 30/04/2015 Ongoing review

ERGE Budget Monitoring / Transformation/Trading & Income Generation


ERGE Investigations and Enforcement

Q2 01/07/2015 Draft report issued

ERGE Licensing Q2 Planning commenced. Request to postpone pending peer review

ERGE Walton Hall Q2 21/09/2015

105


8


Fieldwork Start

Actual Fieldwork

Start

Final Report Issued


ERGE Asset Maintenance and Street Works - Highways Maintenance

Q3

ERGE Traffic Management, Road Safety & Highways Adoptions

Q4

ERGE Specialist Transport Services

Q4

ERGE Building Cleaning Planning commenced

ERGE Regeneration Schemes

Review of Bridge Street scheme - planning commenced

ERGE Capital Projects Review of Warrington Waterfront – planning commenced

CHILDREN AND YOUNG PEOPLE – SCHOOLS AUDITS

F&W ICT Governance in schools

c/f 14/15 Nov 14 May 15 Limited

F&W School - Hollins Green St Helens

23/06/2015 23/06/2015 22/07/2015 Substantial

F&W School - Penketh South CPS

16/05/2015 16/06/2015 18/08/2015 Substantial

F&W School - Twiss Green CPS

09/06/2015 09/06/2015 02/10/2015 Substantial

F&W School - Chapelford Village PS

30/09/2015 30/09/2015 20/10/2015 Substantial

F&W School - St Josephs CPS

07/10/2015 07/10/2015 Substantial

F&W School - Grappenhall St Wilfred

106


9


Fieldwork Start

Actual Fieldwork

Start

Final Report Issued


F&W School - The Cobbs Infant School

F&W School - Broomfields JS

F&W School - Bruche CPS

F&W School - Cherry Tree PS

F&W School - Thelwall CJS

F&W School - Sir Thomas Boteler

107


10

4. FOLLOW UP OF PREVIOUSLY AGREED RECOMMENDATIONS The following tables summarise follow up work, and the performance of the Council’s management in implementing agreed recommendations.

Report

Ref.

Audit Title

No of Recommenda

tions

Recommendations Implemented or

Superseded

Recommendations Outstanding

Date Due

Comments

C/H

M L

C/H

M

C/H

M

062/2013/001

Walton Hall Games in Parks

1 19 0 1 12 - 7 Jul 13

Follow up review undertaken. Review indicated that a number of agreed actions were still outstanding. The management at Walton Hall are working with the finance manager to address the issues and are re-structuring the team later in the year. Further internal audit follow up review now in progress and further work scheduled in 2015/16.

054/2013/001

Client Finances

7 4 1 1 3 6 1 Apr 14 Follow up work completed in May and July 2014. Continuous updates provided by management to date. 5 of the 6 o/s high priority recommendations have been implemented in part.

011/2014/003

Regeneration Schemes

6 1 0 6 1 0 0 Mar 14 All recommendations noted as implemented. Further follow up to be undertaken in the 2015/16 review

051/2014/002

Data Protection

1 8 0 1 0 0 8 Mar 15 High priority recommendation implemented. Further request for confirmation on medium recommendations sent.

108


11

085/2015/001

Housing Services

1 2 0 Sep 15 Follow up in progress

Walton Hall Golf Course

2 11 1 Sep 15 Follow up in progress

RIPA 1 2 0 Oct 15 Follow up in progress

Information Governance – Data Breaches

0 7 4 Oct 15 Follow up in progress

Contracts Payments 1 8 1 Dec 15 Follow up not yet due

Waste Services 0 2 0 Dec 15 Follow up not yet due

S106 moneys 7 16 4 Jan 16 Follow up not yet due

Accounts Payable 0 9 0 Apr 16 Follow up not yet due

Building Maintenance 0 5 5 Apr 16 Follow up not yet due

109


12

5. KEY PERFORMANCE INDICATORS The table below details the key Performance Indicators (PIs) for Audit Services for the period to 6 November 2015 compared to the targets. To date summaries of the post audit feedback forms indicate an overall satisfaction rate of 98.9% with the audit service, with 95.7% of respondents noting that they were ‘very satisfied‘ with the service provided. A review by the Chief Internal Auditor against the Public Sector Internal Audit Standards has been completed and indicates 95% compliance with the standards, with the main area of non compliance being the external assessment process.

Ref Indicator

Target Achieved Quarter 1

Achieved Quarter 2

Achieved Quarter 3

Achieved Quarter 4

% of audit plan completed

10% Q1 11% 32%

% of critical high and medium recommendations implemented within agreed timescales

85% 86.5% 84%

FIN022 Final reports issued within 25 working days of completion of fieldwork

80% 70% 64.3%

Reasons Three reports were outside 25 days: 2 - delays in management responses. 1 - delay in report issue and delay in receiving responses.

Of 14 reports issued 9 were within the target and 5 were outside 25 days

110


13

Appendix A

REPORT SUMMARIES – LIMITED (MARGINAL) / MINIMAL ASSURANCE OPINIONS

None Issued

111


14

Appendix B FOLLOW UP OF HIGH PRIORITY RECOMMENDATIONS

054/2013/001 - Client Finances

AGREED ACTION RESPONSIBLE

OFFICER

PLANNED DATE OF ACTION (MONTH

END)

COMMENTS OR FURTHER ACTION REQUIRED

Recommendations implemented in the following areas: - Written procedures, recording of safe

contents/keys and empty property checks

Partial progress as at Mar 15 and/or further work required to ensure implementation in the following areas: - Bankline system, pre-paid cards, senior

management checks, deceased clients, Civica supporting documentation for income/expenditure transactions posted to client accounts.

Executive Director F&W Director of Finance & IS

Mar 14 Follow up work undertaken in May and July 14 and verbal update from management to date. Client Finances team moved location to the Council’s Finance Team and additional support has been extended. Significant additional piece of work undertaken by IA to reconcile Sage and Softbox accounts. Further detailed work to be summarised. OPG visits in progress.

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15

Appendix C

Overall Audit Opinion/Recommendation Definitions

We have four categories by which we classify our overall audit opinion and our opinion of the individual key control areas.

High Assurance

Key controls are being applied consistently and effectively. This means that the key risks in the terms of reference are being properly managed and our review did not identify any weaknesses that would impact on the achievement of the key system, function or process objectives.

Substantial Assurance

Key controls exist but there is some inconsistency in their application and some of the key risks in the terms of reference may need attention. The likely impact of these weaknesses on the achievement of the key system, function or process objectives is not expected to be significant.

Limited Assurance

A number of key controls do not exist and/or are not applied consistently or effectively. This means that a number of the key risks in the terms of reference need attention. These weaknesses in the design and/or operation of key controls could impact upon achievement of key system, function or process objectives.

Minimal Assurance

A significant number of key controls do not exist and/or there are major omissions in the application of key controls. This means that a significant number of risks in the terms of reference are not being managed properly, which may put the achievement of the Council’s objectives at risk.

Recommendation Risk Ratings

Each of the issues identified have been categorised according to risk as follows:

Critical

A top priority owing to a control weakness that has or could have a significant impact on the achievement of key system, function, or process objectives, and also the Council’s objectives.

High

An important issue owing to a control weakness that has or could have a significant impact on the achievement of key system, function, or process objectives.

Medium

A control weakness that has or could have an impact on the achievement of the key system, function or process objectives. An issue, which, if addressed, would contribute towards raising the standard of internal control.

Low

A minor issue which does not impact upon the achievement of key system, function or process objectives. However implementation of the recommendation would improve overall control or help to reduce a minor level of non-compliance with an existing control process.

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Agenda Item 11

WARRINGTON BOROUGH COUNCIL AUDIT AND CORPORATE GOVERNANCE COMMITTEE

19 November 2015

Report of the: Chief Finance Officer

Report Author: Dann Danny Mather, Corporate Finance Manager

Contact Details: Email Address:

[email protected]

Telephone:

01925 442344

Ward Members:

All

TITLE OF REPORT: 2015/16 TREASURY MANAGEMENT PRACTICES STATEMENT


1.1 This report presents the Council’s Treasury Management Practices Statement (rules under which treasury management operates). With the introduction of the CIPFA 2009 Treasury Code (revised 2011) the Treasury Management Practices Statement needs to be presented to the Audit and Corporate Governance Committee on an annual basis for noting. Prior to the introduction of this code the Treasury Management Practices Statement did not need to be presented to Members on an annual basis and was an internal management control document which was subject to audit review.

2. BACKGROUND

2.1 It is a requirement of the CIPFA 2011 Treasury Code that the Council’s Treasury Management Practices (TMPs) be reported to the Audit and Corporate Governance Committee on an annual basis. The Council’s TMPs are attached at Appendix 1.

2.2 The following set of TMPs has been adopted as recommended in the CIPFA

Treasury Management in the Public Services – Code of Practice:

TMP 1 Treasury Risk Management

TMP2 Performance measurement

TMP3 Decision-making and analysis

TMP4 Approved instruments, methods and techniques

TMP5 Organisation, clarity and segregation of responsibilities and dealing arrangements

TMP6 Reporting requirements and management information arrangements

TMP7 Budgeting, accounting and audit arrangements

TMP8 Cash and cash flow management

TMP9 Money Laundering

TMP10 Training and qualifications

TMP11 Use of external service providers

TMP12 Corporate Governance

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Agenda Item 11

2.3 A set of schedules have been produced to detail the systems and routines to be employed and the records to be maintained for each of the TMPs and these are attached as appendix 1 to this report.

3. CHANGES TO THE COUNCIL’S TREASURY MANAGEMENT PRACTICES

STATEMENT (TMPS)

3.2 Since the Council’s TMPS was previously reported to members on 21 March 2013 the following changes have been made:

1. Page 3 – 5 Counterparty list updated to reflect the latest position

2. Page 6 point 9 amended to include commercial loans

3. Page 6 point 11 updated for non- credit rated investments.

4. Page 12 point 1.6.5 amended to further clarify the role of the Section 151 Officer

5. Page 21 point (iii) inserted to further clarify the role of the Section 151 Officer

6. Page 30 section inserted to clarify the process around Corporate Loans

7. Page 21 point 5.1 updated to further clarify roles

8. Point N page 23 added to clarify the role of the Section 151 Officer with regards to non-specified investments.

9. Point P page 23 added to clarify the role of the Section 151 Officer in monitoring corporate loans

4. MEMBER TRAINING

4.1 Members attention is drawn to page 37 of the TMPS which clarifies the responsibility of members with regards to member treasury management training.


Not confidential.


N/A

7. RISK ASSESSMENT

7.1 A full risk assessment has been undertaken. The Council’s TMPs have been formulated after undertaking a full risk assessment for each TMPs area.


8.1 The Finance Service undertakes an Equality Impact Assessment (EIA) in its wider functions. Service changes that emerge from proposals contained in the treasury management practice statements are subject to EI Assessments.

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Agenda Item 11

9. CONSULTATION

N/A


10.1 To ensure the Council compiles with the 2011 revised CIPFA Treasury Management Code of Practice and DCLG Investment Guidance.

11. RECOMMENDATIONS

11.1 That members note the report.

12. BACKGROUND PAPERS

Treasury Management working papers



Danny Mather Corporate Finance Manager


13. CLEARANCE DETAILS

Name Consulted Date

Consulted Yes No

SMB


Chief Finance Officer Lynton Green 10/11/15

Solicitor to the Council Timothy Date 10/11/15

117

Agenda Item 11

Appendix 1

Warrington Borough Council

TREASURY MANAGEMENT

PRACTICES

118

Agenda Item 11

TREASURY MANAGEMENT PRACTICES – SCHEDULES

This section contains the schedules which set out the details of how the Treasury Management Practices (TMPSs) are put into effect by the organisation. Page TMP 1 Risk management 2 TMP 2 Performance measurement 15 TMP 3 Decision-making and analysis 17 TMP 4 Approved instruments, methods and techniques 18 TMP 5 Organisation, clarity and segregation of responsibilities 20 and dealing arrangements

TMP 6 Reporting requirements and management information 27 arrangements TMP 7 Budgeting, accounting and audit regulations 30 TMP 8 Cash and cash flow management 31 TMP 9 Money Laundering 32 TMP 10 Training and qualifications 34 TMP 11 Use of external service providers 35 TMP 12 Corporate Governance 37

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Agenda Item 11

TMP1 RISK MANAGEMENT

The Section 151 Officer will design, implement and monitor all arrangements for the identification, management and control of Treasury Management risk, will report at least annually on the adequacy/suitability thereof, and will report, as a matter of urgency, the circumstances of any actual or likely difficulty in achieving the organisation’s objectives in this respect, all in accordance with the procedures set out in TMP6 Reporting requirements and management information arrangements. In respect of each of the following risks, the arrangements which seek to ensure compliance with these objectives are set out in the schedule to this document.

1.1 CREDIT AND COUNTERPARTY RISK MANAGEMENT

Credit and counter-party risk is 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. The Council recognises its prime responsibility as a holder of public funds; to always put first the security of the principal of the sums which it invests. Consequently, it will optimise returns commensurate with the management of the associated risk.

This Council regards a key objective of its Treasury Management activities to be the security of the principal sums it invests. Accordingly, it will ensure that its counterparty lists and limits reflect a prudent attitude towards organisations with which funds may be deposited, and will limit its investment activities to the instruments, methods and techniques referred to in TMP4 Approved Instruments Methods and Techniques and listed in the schedule to this document. It also recognises the need to have, and will therefore maintain, a formal counterparty policy in respect of those organisations from which it may borrow, or with whom it may enter into other financing arrangements.

1.1.1 POLICY ON THE USE OF CREDIT RISK ANALYSIS TECHNIQUES

1. The Council will use credit criteria in order to select creditworthy counterparties for placing investments with.

2. Credit ratings will be used as supplied from all three rating agencies – Fitch, Moodys and Standard & Poors.

3. Treasury Management Consultants will provide regular updates of changes to all ratings relevant to the council.

4. The Section 151 Officer will formulate suitable criteria for assessing and monitoring the credit risk of investment counterparties and shall construct a lending list comprising maturity periods, type, group, sector, country and counterparty limits.

This organisation will use the Sector creditworthiness service based on using colours determined by minimum combinations of ratings to derive maturity limits as follow:-

o Yellow – 5 years* o Purple - 2 years o Blue - 1 year (only applies to nationalised/semi nationalised UK Banks) o Orange - 1 year o Red - 6 months o Green - 3 months o No Colour - not to be used

*This category has been added for AAA rated Government debt or its equivalent.

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Agenda Item 11

In addition a credit default swap overlay is used as a further safeguard to give early warning of potential creditworthiness problems which may only belatedly lead to actual changes in credit ratings.

5. Credit ratings for individual counterparties can change at any time. The Section 151 Officer is responsible for applying approved credit rating criteria for selecting approved counterparties. Treasury management staff will add or delete counterparties to/from the approved counterparty list in line with the policy on criteria for selection of counterparties.

6. This organisation will not rely solely on credit ratings in order to select and monitor the creditworthiness of counterparties. In addition to credit ratings it will therefore use other sources of information including:

The quality financial press

Market data

Information on government support for banks and

The credit ratings of that government support

7. Investments in Property Funds that do not have a credit rating will be based on the Section 151 Officer’s prudence judgement following an evaluation of the funds.

8. Maximum maturity periods and amounts to be placed in different types of investment instrument are as follows:

Specified Investments (Maturities up to one year) and counterparty limits

All such investments will be sterling denominated, with maturities up to maximum of 1 year, meeting the minimum ‘high’ rating criteria where applicable.

All investments with maturities up to maximum 1 year, high credit criteria:

Minimum ‘High’

Credit Criteria

Maximum

Limit

Maximum

Maturity

Period

Debt Management Agency Deposit Facility

UK sovereign rating £20m 1 year

Term deposits – local authorities and other public institutions


Term deposits with nationalised banks and building societies

Minimum ‘High’

Credit Criteria

Maximum

Limit

Maximum

Maturity

Period

UK part nationalised banks UK sovereign rating £20m 1 year

Banks part nationalised by high credit rated (sovereign rating) countries – non UK*

Sovereign rating A £10m 1 year

*The countries approved for investing with their banks: Canada, Denmark, Finland, France, Germany, Luxembourg, Netherlands, Norway, Singapore, Sweden, Switzerland, UK, Australia, Belgium, Hong Kong, USA.

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Agenda Item 11

Other instruments

Minimum ‘High’

Credit Criteria

Maximum Limit Maximum

Maturity

Period

Collateralised deposit UK sovereign rating £5m 1 year

Certificates of deposits issued by banks and building societies


UK Government Gilts UK sovereign rating £5m 1 year

Bonds issued by multilateral development banks

Long term AA £5m 1 year

Treasury Bills UK sovereign rating £5m 1 year

Collective Investment Schemes structures as Open Ended Investment Companies

(OEICs)

Government Liquidity Funds Long term AA £5m 1 year

Money Market Funds Variable NAV Long Term AA

£20m per fund 1 year

Money Market Funds Stable NAV Long Term AA

£20m per fund 1 year

Enhanced Cash Funds Long Term AA £5m 1 year

Bonds Funds Long Term AA £5m 1 year

Gilt Funds Long Term AA £5m 1 year

Non-Specified Investments (maturities over one year)

A maximum of 80% may be held in aggregate in non-specified investments.

Term deposits with nationalised banks and building societies:

Minimum ‘High’

Credit Criteria

Maximum

Limit

Maximum

Maturity

Period

UK part nationalised banks UK sovereign rating £20m 5 year

Banks part nationalised by high credit rated (sovereign rating) countries – non UK*

Sovereign rating A £20m 5 year

Maturities of any period:

Fixed term deposits with variable rate and variable maturities:

Minimum ‘High’

Credit Criteria

Maximum

Limit

Maximum

Maturity

Period

Structured deposits In accordance with Capita’s Credit Worthiness Criteria

£5m 5 years

Building Societies term deposits with unrated counterparties : any maturity

The top twenty building societies by total assets with a minimum asset size of £1bn and the following credit rating Fitch (or its equivalent):

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Agenda Item 11

Long term rating AA-, short term rating F1

£5m 5 years

Non rated £1m 1 year

Challenger Banks term deposits with unrated counterparties : any maturity

The non-rated bank must have a minimum asset level of £200m,

£5m 1 year

Municipal Bonds UK sovereign rating £5m 5 years

Commercial paper Short-term F2, Long term A

£5m 5 years

Corporate Bonds Corporate Bond Funds / Gilt Funds

Short-term F2, Long term A

£5m 5 years

Floating Rate Notes Long term A £5m 5 years

Covered Bonds Long term AA- £5m 10 years

Un-rated bonds Long term B- £5m 10 years

Churches, Charities and Local Authorities (CCLA) Property Fund

£20m 10 years

Maturities in excess of 1 year

Minimum ‘High’

Credit Criteria

Maximum

Limit

Maximum

Maturity

Period

Term deposits – local authorities and other public institutions

£5m 5 years

Term deposits – banks and building societies

£5m 5 years

Certificates of deposits issued by banks and building societies

UK sovereign rating £5m 5 years

UK Government Gilts UK sovereign rating £5m 5 years

Bonds issued by multilateral development banks

AA £5m 5 years

Corporate bonds Short term F2 Long Term A-

£5m per bond 5 years

Green Energy Bonds Internal Due Diligence

£5m per bond 5 years

Collateralised Term Deposit Local Authority £5m 5 years

Sovereign bond issues (i.e. other than the UK government)

AA £5m 5 years

Property Bonds £5m per bond 5 years

Live Wire Community Energy £5m 20 years

Empower Community Energy £10m 1 year

Property Funds £10m per fund 5 years

Collective Investment Schemes structured as Open Ended Investment Companies

(OEICs)

Bond Funds AA £5m 5 years

Gilt Funds AA £5m 5 years

Green Energy / Renewable Energy Funds

Internal Due Diligence

£10m 5 years

The maturity period will follow the Capita Credit Rating recommendations.

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Agenda Item 11

9. Loans to Registered Providers (RP) and Corporate Loans fall outside the limits. The Council will carry out a full independent due diligence report before granting any loans to Registered Providers and Corporate Loans. All loans facilities entered into will be approved by the Executive Board.

10. Diversification: this organisation will avoid concentrations of lending and borrowing by adopting a policy of diversification.

11. Investments will made with counterparties that do not have a credit rating in their own right, after a full due diligence exercise is carried out and signed off by the Section 151 Officer. All non credit rated investments will be included in the Council’s Treasury Management Strategy and discussed with the Treasury Management Board and the Audit & Corporate Governance Committee.

12. The Credit & Counterparty limits will be approved by Full Council and included in the yearly Treasury Management Strategy. Any in year updates will be approved by the Audit & Corporate Governance Committee.

1.2 LIQUIDITY RISK MANAGEMENT

This is the risk that cash will not be available when it is needed, that ineffective management of liquidity creates additional unbudgeted costs, and that the Council’s service objectives will be thereby compromised.

This Council will ensure it has adequate though not excessive cash resources, borrowing arrangements, overdraft or standby facilities to enable it at all times to have the level of funds available to it which are necessary for the achievement of its service objectives. The Council will only borrow in advance of need where there is a clear business case for doing so and will only do so for the current capital programme or to finance future debt maturities.

1.2.1 AMOUNTS OF APPROVED MINIMUM CASH BALANCES AND SHORT-TERM

INVESTMENTS The Treasury Management section shall seek to minimise the balance held in the Council’s main bank accounts at the close of each working day. Borrowing or lending shall be arranged in order to achieve this aim.

DETAILS OF: Standby facilities

At the end of each financial day any unexpected surplus funds are transferred to the one of several Deposit Accounts which is then available if the group bank account becomes overdrawn.

Bank overdraft arrangements

A £500,000 overdraft at 1% over base rate has been agreed as part of the banking services contract. The overdraft is assessed on a group basis for the Council’s accounts.

Short-term borrowing facilities

The Council accesses temporary loans through approved brokers on the London money market. The borrowing limit for short term debt is 20% of the authorised limit for external debt.

Insurance/guarantee facilities

There are no specific insurance or guarantee facilities as the above arrangements are regarded as being adequate to cover all unforeseen occurrences. Special payments

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Agenda Item 11

Give details of requirements for notice to be given to the treasury manager for all special payments above £100,000.

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Agenda Item 11

1.3 INTEREST RATE RISK MANAGEMENT

The risk that fluctuations in the levels of interest rates create an unexpected or unbudgeted burden on the Council’s finances, against which the Council has failed to protect itself adequately.

This Council will manage its exposure to fluctuations in interest rates with a view to containing its interest costs, or securing its interest revenues, in accordance with the amounts provided in its budgetary arrangements as amended in accordance with TMP6 Reporting requirements and management information arrangements. It will achieve this by the prudent use of its approved financing and investment instruments, methods and techniques, primarily to create stability and certainty of costs and revenues, but at the same time retaining a sufficient degree of flexibility to take advantage of unexpected, potentially advantageous changes in the level or structure of interest rates. This should be the

subject to the consideration and, if required, approval of any policy or budgetary implications.

1.3.1 FIXED / VARIABLE INTEREST RATE EXPOSURE LIMIT

The Treasury Management section ensures that the borrowing stays within the variable and fixed rate boundaries shown below. This is in order to reduce the risk from sudden movements in interest rates.

Fixed/Variable Debt Limits

Upper Limit

%

Lower Limit

%

Limit for Variable Rate Debt 40 0

Limit for Fixed Rate Debt 100 60

1.3.2 POLICIES CONCERNING THE USE OF INSTRUMENTS FOR INTEREST RATE

MANAGEMENT

a) Forward dealing. At the discretion of the Chief Financial Officer; having consideration to cash flow and if

advantageous rates are secured. This will only involve transactions being undertaken up to a maximum of 12 months in advance.

b) Callable deposits (fixed investment for up to 3 years at borrower’s option). The Council will use callable deposits as part as of its Annual Investment Strategy

(AIS). These will be classed as Non-Specified investments and the credit criteria and maximum periods are detailed in the current AIS.

c) LOBOS (borrowing under lender’s option/borrower’s option). Use of LOBOs is considered as part of the annual borrowing strategy and will need to

be approved by the Chief Financial Officer. d) Local Authorities’ Property Fund (LAPF)

The LAPF was established by local authorities and is managed on their behalf to provide local government with a way of gaining diversified access to UK commercial property investment.

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Agenda Item 11

1.4 EXCHANGE RATE RISK MANAGEMENT

The risk that fluctuations in foreign exchange rates create an unexpected or unbudgeted burden on the Council’s finances, against which the Council has failed to protect itself adequately. It will manage its exposure to fluctuations in exchange rates so as to minimise any detrimental impact on its budgeted income/expenditure levels.

1.5 REFINANCING RISK MANAGEMENT

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 refinancing, both capital and current (revenue), and/or that the terms are inconsistent with prevailing market conditions at the time. This Council will ensure that its borrowing, private financing and partnership arrangements are negotiated, structured and documented, and the maturity profile of the monies so raised are managed, with a view to obtaining offer terms for renewal or refinancing, if required, which are competitive and as favourable to the organisation as can reasonably be achieved in the light of market conditions prevailing at the time. It will actively manage its relationships with its counterparties in these transactions in such a manner as to secure this objective, and will avoid overreliance on any one source of funding if this might jeopardise achievement of the above.

1.5.1 DEBT/OTHER CAPITAL FINANCING, MATURITY PROFILING, POLICIES AND

PRACTICES

The Council will establish through its Prudential Indicators the amount of debt maturing in any year/period as detailed below:

Maturity Structure of Council Borrowing

Upper

Limit

%

Lower

Limit

%

Under 12 months 25 0

12 months and within 24 months 25 0

24 months and within 5 years 35 0

5 years and 10 years 30 0

10 years and above 100 40

Any debt rescheduling will be considered when the difference between the refinancing rate and the redemption rate is most advantageous and the situation will be continually monitored in order to take advantage of any perceived anomalies in the yield curve. The reasons for any rescheduling to take place will include:

a) the generation of cash savings at minimum risk; b) to reduce the average interest rate;

c) to amend the maturity profile and /or the balance of volatility of the debt portfolio.

The approval of the Chief Financial Officer is required for any debt rescheduling and prior approval to any action should be evidenced.

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Agenda Item 11

1.5.2 PROJECTED CAPITAL INVESTMENT REQUIREMENTS

The Section 151 Officer will prepare a three year plan for capital expenditure for the Council. The capital plan will be used to prepare a three year revenue budget for all forms of financing charges.

England and Wales Under the new capital financing system, the definition of capital expenditure and long term liabilities used in the Code will follow recommended accounting practice (SORP).

1.5.3 POLICY CONCERNING LIMITS ON AFFORDABILITY AND REVENUE CONSEQUENCES

OF CAPITAL FINANCING.

In considering the affordability of its capital plans, the Council will consider all the resources currently available/estimated for the future together with the totality of its capital plans, revenue income and revenue expenditure forecasts for the forthcoming year and the two following years and the impact these will have on council tax. It will also take into account affordability in the longer term beyond this three year period. (Note: paragraph 30 of the Prudential Code gives examples of matters relevant to the consideration of affordability, although this is not an exhaustive list.)

The Council will use the definitions provided in the Prudential Code for borrowing (64), capital expenditure (65), capital financing requirement (67), debt (67), financing costs (68), investments (69), net borrowing (70), net revenue stream (71), and other long term liabilities (72).

1.6 LEGAL AND REGULATORY RISK MANAGEMENT

Legal and regulatory risk is the risk that either the Council, or a third party which it is dealing within its Treasury Management activities, acts outside of its legal powers or regulatory requirements and the Council incurs a loss accordingly. This Council will ensure that all of its Treasury Management activities comply with its statutory powers and regulatory requirements. It will demonstrate such compliance, if required to do so, to all parties with whom it deals in such activities. In framing its credit and counterparty policy under TMP1 [1] credit and counterparty risk management, it will ensure that there is evidence of counterparties’ powers, authority and compliance in respect of the transactions they may effect with the Council, particularly with regard to duty of care and fees charged. The Council recognises that future legislative or regulatory changes may impact on its Treasury Management activities and, so far as it is reasonably able to do so, will seek to minimise the risk of these impacting adversely on the organisation.

1.6.1 REFERENCES TO RELEVANT STATUTES AND REGULATIONS The Treasury Management activities of the Council shall comply fully with legal statute, guidance, Codes of Practice and the regulations of the Council. These are:

Local Government Act 2003

S.I. 2003 No.2938 Local Government Act 2003 (Commencement No.1 and Transitional Provisions and Savings) Order 2003 13.11.03

S.I. 2003 No.3146 Local Authorities (Capital Finance and Accounting) (England) Regulations 2003 and associated commentary 10.12.03

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S.I. 2004 No.533 Local Authorities (Capital Finance) (Consequential, Transitional and Savings Provisions) Order 2004 8.3.04

S.I. 2004 No.534 Local Authorities (Capital Finance and Accounting) (Amendment) (England) Regulations 2004 8.3.04

Guidance on Investments ODPM 12.3.2004

Local Authorities (Capital Finance and Accounting) (Amendment) (England) Regulations 2006 Statutory Instrument No. 521

S.I. 2007 no. 573 Local Authorities (Capital Finance and Accounting) (Amendment) (England) Regulations 2007

Local Government and Public Involvement in Health Act 2007 s238(2) – power to issue guidance; to be used re: MRP

S.I. 2008 no. 414 (Capital Finance and Accounting) (Amendment) (England) Regulations 2008

S.I. 2009 no. 321 (Capital Finance and Accounting) (Amendment) (England) Regulations 2009

S.I. 2009 no. 2272 The Local Authorities (Capital Finance And Accounting) (England) (Amendment) (No.2) Regulations 2009

S.I. 2009 no. 3093 The Local Government Pension Fund Scheme (Management and Investment of Funds) Regulations 2009

Guidance on Housing Capital Receipts Pooling ODPM 23.3.2004

Requirement to set a balanced budget - Local Government Finance Act 1992 section 32 for billing authorities and section 43 for major precepting authorities.

Local Government Finance Act 1988 section 114 – duty on the responsible officer to issue a report if the Council is likely to get into a financially unviable position.

Allocation of financing costs to the HRA (housing authorities) – annual determination by Secretary of State

Definition of HRA capital expenditure - Local Government and Housing Act 1989 section 74 (1)

CIPFA Treasury Management Codes of Practice and Guidance Notes 2009,

CIPFA Prudential Code for Capital Finance in Local Authorities revised 2009

CIPFA Guide for Chief Financial Officers on Treasury Management in Local Authorities 1996

CIPFA Standard of Professional Practice on Treasury Management 2002

CIPFA Standard of Professional Practice on Continuous professional Development 2005

CIPFA Standard of Professional Practice on Ethics 2006

The Good Governance Standard for Public Services 2004

LAAP Bulletins

SORP – Code of Practice on Local Authority Accounting in the United Kingdom: A Statement of recommended Practice

PWLB circulars on Lending Policy

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The Non Investment Products Code (NIPS) - (formerly known as The London Code of Conduct) for principals and broking firms in the wholesale markets.

Financial Services Authority’s Code of Market Conduct

The Council’s Standing Orders relating to Contracts

The Council’s Financial Regulations

The Council’s Scheme of Delegated Functions

1.6.2 PROCEDURES FOR EVIDENCING THE COUNCIL’S POWERS/AUTHORITIES TO

COUNTERPARTIES

The Council’s powers to borrow and invest are contained in legislation.

England and Wales Investing: Local Government Act 2003, section 12 Borrowing: Local Government Act 2003, section 1

In addition, it will make available on request the following: -

the document which sets which officers are the authorised signatories.

Required Information on Counterparties Lending shall only be made to counterparties on the Approved Lending list. This

list has been compiled using advice from the Council’s treasury advisers based upon credit ratings supplied by Fitch, Moodys and Standard & Poors.

1.6.3 STATEMENT ON THE COUNCIL’S POLITICAL RISKS AND MANAGEMENT OF SAME

The Section 151 Officer shall take appropriate action with the Council, the Chief Executive and the Leader of the Council to respond to and manage appropriately political risks such as change of majority group, leadership in the Council, change of Government etc.

1.6.4 MONITORING OFFICER

The monitoring officer is the Solicitor to the Council; the duty of this officer is to ensure that the treasury management activities of the Council are lawful.

1.6.5. SECTION 151 OFFICER

The Director of Finance & Information Services is the Section 151 Officer; the duty of this officer is to ensure that the financial affairs of the Council are conducted in a prudent manner and to make a report to the Council if he has concerns as to the financial prudence of its actions or its expected financial position. The Section 151 Officer is responsible for implementing all aspects of the Council’s Treasury Management Strategy agreed yearly by Full Council and is the responsible officer for treasury management.

1.7 FRAUD, ERROR AND CORRUPTION AND CONTINGENCY RISK MANAGEMENT

There is the risk that an Council 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

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effective contingency management arrangements to these ends. It includes the area of risk commonly referred to as operational risk.

The Council will ensure that it has identified the circumstances which may expose it to the risk of loss through fraud, error, corruption or other eventualities in its Treasury Management dealings. Accordingly, it will employ suitable systems and procedures, and will maintain effective contingency management arrangements, to these ends. The Council will therefore:- a) seek to ensure an adequate division of responsibilities and maintenance at all

times of an adequate level of internal check which minimises such risks b) Fully document all its Treasury Management activities so that there can be no

possible confusion as to what proper procedures are c) Staff will not be allowed to take up Treasury Management activities until they have

had proper training in procedures and are then subject to an adequate and appropriate level of supervision

d) Records will be maintained of all Treasury Management transactions so that there is a full audit trail and evidence of the appropriate checks being carried out

1.7.1 DETAILS OF SYSTEMS AND PROCEDURES TO BE FOLLOWED, INCLUDING

INTERNET SERVICES

The Council will ensure that it has identified the circumstances which may expose it to the risk of loss through fraud, error, corruption or other eventualities in its Treasury Management dealings. Accordingly, it will employ suitable systems and procedures, and will maintain effective contingency management arrangements, to these ends. To reduce the risk of fraud in its dealing with other bodies, Treasury Management officers shall deal only with certain corporations and public bodies, and through recognised brokers, each regulated by legislation and code. All major systems are restricted to nominated personnel and are only accessible by them using unique passwords and pin numbers. Staff which are permitted to use these major systems are further controlled by the level of access allowed to them i.e. input / authorisation.

For financial transactions to be carried out through the banking system and which are controlled by personnel working for the Council, various limits for each transaction have been set up to prevent any fraudulent activities occurring.

All Treasury Management activities include requirements for checking and authorisation, and adhere to the principle of division of duties. Details can be found in TMP5: Organisation, Clarity and Segregation of Responsibilities, and Dealing Arrangements.

Treasury Management shall not be conducted via internet dealing. In the event of a change in this policy (to be authorised by the Chief Financial Officer), the risk will be assessed and appropriate procedures developed.

Authority

The Scheme of Delegation to Officers sets out the delegation of duties to officers. All loans and investments are negotiated by the responsible officer or authorised

persons. Loan procedures are defined in the Council’s Financial Regulations.

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Investment and borrowing transactions

A detailed register of all loans and investments is maintained in the Logotech system. A written acknowledgement of each deal is sent promptly to the lending or borrowing

institution where transactions are done directly with the organisation. Written confirmation is received and checked against the dealer’s records for the

transaction. Any discrepancies are immediately reported to the Corporate Finance Manager for

resolution. All transactions placed through brokers are confirmed by a broker note showing

details of the loan arranged. Written confirmation is received and checked against the dealer’s records for the transaction. Any discrepancies are immediately reported to the Corporate Finance Manager for resolution.

Contract notes for transactions carried out by the external fund manager(s) will be received as executed and maintained.

Regularity and security

Lending is only made to institutions on the Approved List of Counterparties. The Logotech system prompts the Senior Accountant (Treasury) that money

borrowed or lent is due to be repaid. All loans raised and repayments made go directly to and from the bank account of

approved counterparties. Counterparty limits are set for every institution that the Council invests with. Brokers have a list of named officials authorised to agree deals. There is a separation of duties in the section between dealers and the checking and

authorization of all deals. The Council’s bank holds a list of Council officials who are authorised signatories for

treasury management transactions. No member of the treasury management team is an authorised signatory. Payments can only be authorised in a formal letter by an authorised signatory, the list

of signatories having previously been agreed with the current provider of our banking services.

The Logotech system can only be accessed by a password. There is adequate insurance cover for employees involved in loans management and

accounting. Capital and interest withdrawals and capital injections in respect of monies managed

by external fund managers can only be carried out in writing by the authorised signatories to the fund management agreement and notified to the fund manager(s).

Checks

The bank reconciliation is carried out monthly from the bank statement to the financial ledger.

The Logotech system balances are proved to the balance sheet ledger codes at the end of each month and at the financial year end.

A debt charge/investment income listing is produced every month when a review is undertaken against the budget for interest earnings and debt costs.

We have complied with the requirements of SORP (pre 1st April 2010 FRS 26) and

IFRS Code (post 1st April 2010 IAS 39) and will account for the fund as Fair Value through Profit or Loss. As a result, all gains and losses and interest (accrued and received) will be taken to the Income and Expenditure Account

Calculations

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The calculation of repayment of principal and interest notified by the lender or borrower is checked for accuracy against the amount calculated by the Logotech system.

The Logotech system automatically calculates periodic interest payments of PWLB and other long term loans. This is used to check the amount paid to lenders.

Average weighted capital loans fund interest rates and debt management expenses are calculated monthly using information from the financial ledger and the Logotech system.

These interest and expense rates are then used to calculate the principal, interest and debt management expense charges to the Loans Fund and the Housing Revenue Account recharge.

1.7.2 EMERGENCY AND CONTINGENCY PLANNING ARRANGEMENTS

Arrangements for staff cover are set out in TMP5: Organisation, Clarity and Segregation of Responsibilities and Dealing Arrangements.

In the event of the failure of the Logotech system, Treasury Management officers shall follow the documented manual back-up procedures/ electronic notes also on shared drive. These also include requirements for checking and authorisation, and adhere to the principle of division of duties. All members of the Treasury Management team are familiar with this plan and new members will be briefed on it.

1.7.3 INSURANCE COVER DETAILS

Fidelity insurance The Council has ‘Fidelity’ insurance cover with AIG (Europe) Ltd. This covers the loss of cash by fraud or dishonesty of employees. This cover is limited to £5m for any one event with an excess of £10,000 for any one event.

Professional Indemnity Insurance The Council also has a ‘Professional Indemnity’ insurance policy with AIG (Europe) Ltd which covers loss to the Council from the actions and advice of its officers which are negligent and without due care.

Business Interruption The Council also has a ‘Business Interruption’ cover as part of its property insurance with AIG (Europe) Ltd.

1.8 MARKET RISK MANAGEMENT

Market risk is the risk that, through adverse market fluctuations in the value of the principal sums a Council borrows and invests, its stated Treasury Management policies and objectives are compromised, against which effects it has failed to protect itself adequately. The Council will seek to ensure that its stated Treasury Management policies and objectives will not be compromised by adverse market fluctuations in the value of the principal sums it invests, and will accordingly seek to protect it from the effects of such fluctuations.

1.8.1 DETAILS OF APPROVED PROCEDURES AND LIMITS FOR CONTROLLING EXPOSURE

TO INVESTMENTS WHERE CAPITAL VALUE MAY FLUCTUATE (GILTS, CDS, etc.)

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Treasury Management officers shall not invest in instruments whose capital value may fluctuate. In the event of a change in this policy (to be authorised by the Chief Financial Officer), the risk will be assessed and appropriate procedures developed.

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TMP 2 PERFORMANCE MEASUREMENTS

2.1 EVALUATION AND REVIEW OF TREASURY MANAGEMENT DECISIONS

The Council has a number of approaches to evaluating treasury management decisions: a. monthly reviews carried out by the treasury management team b. reviews with our treasury management consultants c. annual review after the end of the year as reported to full council d. half yearly monitoring reports to committee / full council e. comparative reviews f. strategic, scrutiny and efficiency value for money reviews

2.1.1 PERIODIC REVIEWS DURING THE FINANCIAL YEAR

The Corporate Finance Manager holds a treasury management review meeting with the Section 151 Officer every three months to review actual activity against the Treasury Management Strategy Statement and cash flow forecasts. This will include: a) Total debt (both on-and off balance sheet) including average rate and maturity

profile b) Total investments including average rate and maturity profile and changes to the

above from the previous review and against the TMSS.

2.1.2 REVIEWS WITH OUR TREASURY MANAGEMENT CONSULTANTS

The treasury management team holds reviews with our consultants every 3 months to review the performance of the investment and debt portfolios.

2.1.3 ANNUAL REVIEW AFTER THE END OF THE FINANCIAL YEAR

An Annual Treasury Report is submitted to the Council each year after the close of the financial year which reviews the performance of the Council’s Treasury Management operations. This report contains the following:

a. total debt and investments at the beginning and close of the financial year and

average interest rates b. borrowing strategy for the year compared to actual strategy c. investment strategy for the year compared to actual strategy d. explanations for variance between original strategies and actual e. debt rescheduling done in the year f. actual borrowing and investment rates available through the year g. comparison of return on investments to the investment benchmark h. compliance with Prudential and Treasury Indicators i. other

2.1.4 COMPARATIVE REVIEWS

When data becomes available, comparative reviews are undertaken to see how the performance of the authority on debt and investments compares to other authorities with similar size portfolios (but allowing for the fact that Prudential and Treasury Indicators are locally set). Data used will be sourced from:

CIPFA Treasury Management statistics published each year for the last complete

financial year CIPFA Benchmarking Club

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Capita Benchmarking Club

2.2 BENCHMARKS AND CALCULATION METHODOLOGY

2.2.1 DEBT MANAGEMENT Treasury Management officers shall produce and monitor indicators based on the following benchmarks:

Average rate on all external debt Average rate on external debt borrowed in previous financial year Average rate on internal borrowing Average period to maturity of external debt Average period to maturity of new loans in previous year

2.2.2 INVESTMENT The performance of investment earnings will be measured against 7 day London Interbank Bid (LIBID)

2.3 POLICY CONCERNING METHODS FOR TESTING VALUE FOR MONEY IN TREASURY

MANAGEMENT

2.3.1 FREQUENCY AND PROCESSES FOR TENDERING Treasury Management tenders will follow standard Council practice as set down in the Financial Regulations.

2.3.2 BANKING SERVICES The Council’s banking arrangements are to be subject to competitive tender every 3 years unless it is considered that there will be changes in the volume of transactions in the foreseeable future which renders a shorter period appropriate.

2.3.3 MONEY-BROKING SERVICES The Council will use money broking services in order to make deposits or to borrow, and will establish charges for all services prior to using them. An approved list of brokers will be established which takes account of both prices and quality of services.

2.3.4 CONSULTANTS/ADVISERS SERVICES The Council’s policy is to appoint full time professional Treasury Management consultants to provide impartial advice and add value to the Treasury Management function. See TMP11 Use of External Service Providers for further details.

2.3.5 POLICY ON EXTERNAL MANAGERS

(OTHER THAN RELATING TO SUPERANNUATION FUNDS) The Council’s policy is not to appoint external investment fund managers.

2.3.6 CHESHIRE FIRE SERVICE CONTRACT The Council will provide details on a yearly basis of their performance on behalf of the Authorities in comparison to other members of the Greater Manchester Treasury Managers Group and CIPFA Treasury Management Club. The contractor will agree on a yearly basis with the authorities a benchmarking target for the consolidated rate of interest paid on the debt portfolio and the consolidated rate of interest earned on the investment portfolio. Quarterly actual will be reported to the Authorities against these benchmarks.

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TMP 3 DECISION-MAKING AND ANALYSIS

3.1 FUNDING, BORROWING, LENDING AND NEW INSTRUMENTS/TECHNIQUES

3.1.1 RECORDS TO BE KEPT The Treasury section has a computerised Logotech system in which all investment and loan transactions are recorded. Full details of the system are covered in the user manual and help on line function. The following records will be retained.

Daily cash balance forecasts

Brokers’ confirmations for investment and temporary borrowing transactions

Confirmations from borrowing / lending institutions where deals are done directly

PWLB loan confirmations

Certificates for market loans, local bonds and other loans

3.1.2 PROCESSES TO BE PURSUED

Cash flow analysis

Debt and investment maturity analysis

Ledger reconciliation

Review of opportunities for debt restructuring

Review of borrowing requirement to finance capital expenditure (and other forms of financing where those offer best value)

Performance information (e.g. monitoring of actual against budget for debt charges, interest earned, debt management; also monitoring of average pool rate, investment returns, etc.)

3.1.3 ISSUES TO BE ADDRESSED a) In respect of every Treasury Management decision made the Council will:

Above all be clear about the nature and extent of the risks to which the Council may become exposed

Be certain about the legality of the decision reached and the nature of the transaction, and that the authority to proceed has been obtained

Be content that the documentation is adequate both to deliver the Council’s objectives, protect the Council’s interests and to deliver good housekeeping

Ensure that counterparties are judged satisfactory in the context of the Council’s creditworthiness policies, and that limits have not been exceeded

Be content that the terms of any transactions have been fully checked against the market, and have been found to be competitive.

b) In respect of borrowing and other funding decisions, the Council will:

Consider the ongoing revenue liabilities created, and the implications for the Council’s future plans and budget

Evaluate economic and market factors to form a view on future interest rates so as to determine the manner and timing of decisions to borrow

Consider the merits and demerits of alternative forms of funding, including funding from revenue, leasing and private partnerships to minimize costs and risks

Consider the alternative interest rate bases available, the most appropriate periods to fund and repayment profiles to use and, if relevant, the opportunities for foreign currency funding.

c) In respect of investment decisions, the Council will:

Consider the optimum period, in the light of cash flow availability and prevailing market conditions

Consider the alternative investment products and techniques available, especially the implications of using any which may expose the Council to changes in the value of its capital.

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TMP 4 APPROVED INSTRUMENTS, METHODS AND TECHNIQUES

4.1 APPROVED ACTIVITIES OF THE TREASURY MANAGEMENT OPERATION

Borrowing

Lending

Debt repayment and rescheduling

Consideration, approval and use of new financial instruments and Treasury Management techniques

Managing the underlying risk associated with the Council’s capital financing and surplus funds activities

Managing cash flow

Banking activities

Leasing

4.2 APPROVED INSTRUMENTS FOR INVESTMENTS

Deposits with banks, building societies, money market funds or local authorities, which fit the criteria detailed in TMP1.

4.3 APPROVED TECHNIQUES

Forward dealing

LOBOs – lenders option, borrower’s option borrowing instrument

The use of structured products such as callable deposits

4.4 APPROVED METHODS AND SOURCES OF RAISING CAPITAL FINANCE

Finance will only be raised in accordance with the Local Government Act 2003, and within this limit the Council has a number of approved methods and sources of raising capital finance. These are:

On Balance Sheet Fixed Variable PWLB EIB Market (long-term) Market (temporary) Market (LOBOs) Overdraft Negotiable Bonds Internal (capital receipts & revenue balances) Leasing (not operating leases) Deferred Purchase

Other Methods of Financing Government and EC Capital Grants Lottery monies PFI/PPP Operating leases

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Borrowing will only be done in Sterling. All forms of funding will be considered dependent on the prevailing economic climate, regulations and local considerations. The Section 151 Officer has power (through the scheme of delegation) to take the most appropriate form of borrowing from approved sources.

4.5 LIMITS

Limits on the value of borrowing and investment through different instruments are set up in TMP1 Treasury Risk Management

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TMP 5 ORGANISATION, CLARITY AND SEGREGATION OF

RESPONSIBILITIES AND DEALING ARRANGEMENTS

5.1 LIMITS TO RESPONSIBILITIES / DISCRETION AT COUNCIL/EXECUTIVE LEVELS

GENERAL The Council considers it essential, for the purposes of the effective control and monitoring of its Treasury Management activities, the reduction of the risk of fraud or error, and for the pursuit of optimum performance, that these activities are structured and managed in a fully integrated manner, and that the responsibilities of Treasury Management is always clear. The principle on which this will be based is a clear distinction between those charged with setting Treasury Management policies and those charged with implementing and controlling these policies, particularly with regard to the execution and transmission of funds, the recording and administering of Treasury Management decisions, and the audit and review of the Treasury Management function. If and when this organisation intends, as a result of lack of resources or other circumstances, to depart from these principles, the responsible officer will ensure that the reasons are properly reported in accordance with TMP6 Reporting requirements and management information arrangements, and the implications properly considered and evaluated. The Section 151 Officer will ensure that there are clear written statements of the responsibilities for each post engaged in Treasury Management, and the arrangements for absence cover. The present arrangements are detailed in the schedule to this document. The Section 151 Officer will ensure there is proper documentation for all deals and transactions, and that procedures exist for the effective transmission of funds. The present arrangements are detailed in the schedule to this document. The delegations to the Section 151 Officer in respect of Treasury Management are set out in the schedule to this document. The Section 151 Officer will fulfil all such responsibilities in accordance with the organisation’s policy statement and TMP’s and, if a CIPFA member, the Standard of Professional Practice on Treasury Management.

(i) Full council

approval of annual strategy

monitoring of mid-year review

monitoring of yearly Treasury Outturn Report

(ii) Audit and Corporate Governance Committee

body appointed by Council for the scrutiny of Treasury Management

Recommend the Council’s Annual Treasury Management Strategy to Full Coucill

approval of amendments to the organisation’s adopted clauses, treasury management policy and treasury management practices

receiving and reviewing regular monitoring reports and acting on recommendations .

(iii) Treasury Management Board

review developments in treasury and capital financing that the Council are considering implementing

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(iv) Executive Board / Leader of the Council

Will be required to make a decision if required by a 3rd party and will follow the process

of the Council’s Constitution.

5.2 PRINCIPLES AND PRACTICES CONCERNING SEGREGATION OF DUTIES

Segregation of duties must apply to the following tasks

Dealing

Negotiation and approval of deal.

Receipt and checking of broker’s confirmation note against loans diary.

Reconciliation of cash control account.

Bank reconciliation

Accounting Entry Production of transfer note.

Processing of accounting entry

Authorisation/Payment of Deal Approval of payment.

5.3 STATEMENT OF DUTIES/RESPONSIBILITIES OF EACH TREASURY POST

5.3.1 SECTION 151 OFFICER The responsible officer is the person charged with professional responsibility for the Treasury Management function and in this Council is the Director of Finance & Information Systems. This person will carry out the following duties: -

a) recommending clauses, treasury management policy/practices for approval, reviewing the same regularly, and monitoring compliance

b) submitting regular treasury management policy reports c) submitting budgets and budget variations d) receiving and reviewing management information reports e) reviewing the performance of the treasury management function f) ensuring the adequacy of treasury management resources and skills, and the

effective division of responsibilities within the treasury management function g) ensuring the adequacy of internal audit, and liaising with external audit h) recommending the appointment of external service providers. i) The responsible officer has delegated powers through this policy to take the

most appropriate form of borrowing from the approved sources, and to make the most appropriate form of investments in approved instruments.

j) The responsible officer may delegate his power to borrow and invest to members of his staff. The Senior Accountant (Treasury), the Corporate Finance Manager or the Finance Advisors must conduct all dealing transactions, or staff authorised by the responsible officer to act as temporary cover for leave/sickness. All transactions must be authorised by at least two of the named officers above.

k) The responsible officer will ensure that Treasury Management Policy is adhered to, and if not will bring the matter to the attention of elected members as soon as possible.

l) Prior to entering into any capital financing, lending or investment transaction, it is

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the responsibility of the responsible officer to be satisfied, by reference to the Council’s legal department and external advisors as appropriate, that the proposed transaction does not breach any statute, external regulation or the Council’s Financial Regulations

m) It is also the responsibility of the responsible officer to ensure that the Council complies with the requirements of The Non Investment Products Code (formerly known as The London Code of Conduct) for principals and broking firms in the wholesale markets.

n) Reviewing all due diligence with regards to non-specified investments. Approving non specified investment counterparties and approving all non-specified investments before they are actioned.

o) Making in year changes to the Treasury Management Strategy that must be reported to the next meeting of the Audit & Corporate Governance Committee.

p) Ensure proper procedures are in place for the monitoring of corporate loans .

5.3.2 CHIEF EXECUITVE

The Chief Executive will become the responsible officer in the absence of the Section 151 Officer responsible for the strategic management of the treasury function. Preparing the Treasury Strategy and outturn report and reviewing the TMPS. Reviewing weekly treasury deals, authorising daily deals within delegated authority limits and reporting treasury activity to members and the Section 151 Officer on a regular basis.

5.3.3 SENIOR ACCOUNTANT (TREASURY)

The responsibilities of this post will be: -

a) execution of transactions b) adherence to agreed policies and practices on a day-to-day basis c) maintaining relationships with counterparties and external service providers d) supervising treasury management staff e) monitoring performance on a day-to-day basis f) submitting management information reports to the responsible officer g) identifying and recommending opportunities for improved practices

5.3.4 FINANCE ADVISOR To cover all the duties carried out by Senior Accountant (Treasury) in their absence.

5.3.5 CHIEF ACCOUNTANT / FINANCE MANAGERS The authorisation of loan repayments and other CHAPS payments are carried out by Chief Accountant or specially designated Finance Managers from the Accountancy team. In case of their absence manual CHAPS forms can be electronically authorised by the Chief Financial Officer.

5.3.6 THE MONITORING OFFICER – SOLICITOR TO THE COUNCIL The responsibilities of this post will be: - a) Ensuring compliance by the responsible officer with the treasury management

policy statement and treasury management practices and that they comply with the law.

b) Being satisfied that any proposal to vary treasury policy or practice complies with law or any code of practice.

c) Giving advice to the responsible officer when advice is sought

5.3.7 INTERNAL AUDIT The responsibilities of Internal Audit will be: -

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a) Reviewing compliance with approved policy and treasury management practices. b) Reviewing division of duties and operational practice. c) Assessing value for money from treasury activities. d) Undertaking probity audit of treasury function.

5.4 ABSENCE COVER ARRANGEMENTS

Daily money-market dealing is to be carried out by the Senior Accountant (Treasury), or in his/her absence, the Finance Advisor, who endeavour to plan leave so that their absence is not concurrent. In the absence of both members of the Treasury team, cover will be provided by the Finance Advisor of Financial Planning. In case of the absence of the Section 151 Officer, Chief Accountant and the designated Finance Managers or system failure, manual CHAPS payments can be authorised by Section 151 Officer or Corporate Finance Manager, and must be faxed to the bank.

5.5 DEALING PROCEDURES & LIMITS

1. SHORT-TERM, TEMPORARY BORROWING (less than 365 days)

The Senior Accountant (Treasury) (or in his/her absence the Finance Advisor) will identify the need to borrow short-term and will prepare a proposal for the Corporate Finance Manager or the Finance Manager (Projects) to review identifying:

The amount of proposed short-term borrowing, the timing of and duration of the proposed borrowing

The reasons for the proposed borrowing and whether the cash flow forecast identified this need to borrow

The proposed borrowing is consistent with prudential indicators within the Treasury Management strategy.

The Corporate Finance Manager or the Finance Manager (Projects) will review the proposal and:

Confirm the need to borrow and that the proposal conforms to prudential indicators agreed by full Council

Authorise a proposal up to 20% of the allowed limit for short-term borrowing in value for a period of up to 3 months

Refer any short-term borrowing proposal that is either greater than 20% of the allowed limit or longer than a period of 3 months or takes the Council's total short-term borrowing above £5m to the Section 151 Officer.

Once authorisation has been received, the Senior Accountant (Treasury) (or in his/her absence the Finance Advisor) will process the transaction and confirm and provide evidence to the authoriser that the transaction has been completed.

2. LONG TERM BORROWING (over 364 days)

The Senior Accountant (Treasury) (or in his/her absence the Finance Advisor) will prepare a proposal for the Corporate Finance Manager (or in his absence the Finance Manager (Projects)) to review identifying:-

The amount of proposed long-term borrowing, the timing of and duration of the proposed borrowing

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The reasons for the proposed borrowing and the underlying cash flow need to borrow

The market conditions that make this the right time to borrow long-term

The proposed borrowing is consistent with prudential indicators within the Treasury Management strategy

The Corporate Finance Manager (or in his absence the Finance Manager (Projects)) will review the proposal and:

Confirm the need to borrow and that the proposal conforms to prudential indicators agreed by full Council

Reject the proposal or recommend the proposal's approval to the Section 151 Officer (or in his absence the Strategic Director of Corporate Services)

The Section 151 Officer will review and either authorise or reject the proposal.

Once authorisation has been received, the Senior Accountant (Treasury) (or in his/her absence the Finance Advisor) will process the transaction and confirm and provide evidence to the

authoriser that the transaction has been completed.

3. LENDING / INVESTMENT

The Senior Accountant (Treasury) (or in his/her absence the Finance Advisor) will prepare a proposal for the Corporate Finance Manager (or in his absence the Finance Manager (Projects)) to review identifying:

The amount of proposed lending / investment, the timing of and duration of the proposed lending / investment

The reasons for the proposed lending / investment and the cash flow forecast implications of this lending / investment

The proposed lending / investment is consistent with the Treasury Management strategy

The proposed lender meets the credit ratings set by the Council.

The Corporate Finance Manager (or in his absence the Finance Manager (Projects)) will review the proposal and:

Confirm the need to lend / invest and that the proposal conforms to prudential indicators agreed by full Council

Confirm the credit ratings of the lender is consistent with the ratings limits set by the Council

Confirm that cash flow forecast deficits are covered by new income or maturing investments during the loan period

Authorise a proposal up to a value of £10m

All investment above £10m needs the authorisation of the Section 151 Officer.

Once authorisation has been received, the Senior Accountant (Treasury) (or in his/her absence the Finance Advisor) will process the transaction and arrange for payment from the Council's bank account to be authorised by one of the following:-

Lynton Green, Dave Burrows, Dave Jenkins, Joan Northey; James Campbell.

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The above payment authorisers have the responsibility before authorising of confirming:-

The lending proposal has been correctly authorised in line with the above procedures

The bank account details and transaction value are correct and match the authorised proposal

Lending is within the Counterparty limit

Once payment has been made, the Senior Accountant (Treasury) (or in his/her absence the Finance Advisor) will confirm and provide evidence to the proposal authoriser that the transaction has been completed.

To maintain a separation of duties, the Corporate Finance Manager or any member of the Financial Planning Team will not have permission to make payments from any of the Council's bank accounts.

5.6 CHESHIRE FIRE SERVICE

No lending or borrowing will take place between the Council and Cheshire Fire Service.

The Council requires telephone/e-mail authorisation from the authority that a deal relates to before any treasury deal can be set up and e-mail authorisation before it can be processed.

5.7 LIST OF APPROVED BROKERS

Approved Brokers are: Sterling International Brokers Ltd Martin Brokers (UK) plc Tullet Prebon Tradition

Brokers are regulated by the Financial Services Authority (FSA) and also governed by the London Code of Conduct. The Finance Manager (Financial Planning & Reporting) or Head of Financial Planning may add properly registered brokers to the approved list as seen fit.

5.8 POLICY ON BROKERS’ SERVICES

It is this Council’s policy to use the broker that can provide the best rate, and subsequently provide the best value for the Council.

5.9 POLICY ON TAPING OF CONVERSATIONS

It is not this Council’s policy to tape brokers’ conversations.

5.10 DIRECT DEALING PRACTICES

The Council will consider dealing direct with counterparties if it is appropriate and the Council believes that better terms will be available. At present, most deals are arranged through brokers. There are certain types of accounts and facilities, however, where direct dealing is required, as follows;

Business Reserve Accounts: Call Accounts: Money Market Funds.

5.11 SETTLEMENT TRANSMISSION PROCEDURES

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There are four steps to this process.

1) Completing of Payment Requisition form or investment proforma 2) Entering payment on to Natwest Bankline System 3) Authorisation of payments 4) Sending payments

Investments shall be entered, authorised and sent using the Natwest Bankline System. Step 1) is completed by Treasury Management team and should be signed by an authorised signatory, using Logotech printouts as backing paperwork Step 2) is conducted by the Treasury Management team and 3) and 4) are carried out by designated users, as details above.

5.12 DOCUMENTATION REQUIREMENTS

Confirmation from the Brokers / Counterparties are checked against Logotech system and filed. Each Treasury Management transaction is recorded in the Loans Ledger, which is then authorised by a designated signatory and a confirmation letter is sent to the Counterparty.

5.13 ARRANGEMENTS CONCERNING THE MANAGEMENT OF THIRD-PARTY FUNDS

The Council holds a number of trust funds. The cash in respect of these funds is held in the Council’s bank account but transactions are separately coded. Interest is given on credit balances at the average rate for internal balances for the year.

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TMP 6 REPORTING REQUIREMENTS AND MANAGEMENT

INFORMATION ARRANGMENTS

6.1 ANNUAL PROGRAMME OF REPORTING

a) Annual reporting requirements before the start of the year: -

(i) review of the organisation’s approved clauses, treasury management policy statement and practices

(ii) strategy report on proposed treasury management activities for the year comprising of the Treasury management strategy statement, Annual Investment Strategy and Minimum Revenue Provision Policy Statement

b) Mid-year review

c) Annual review report after the end of the year

6.2 ANNUAL TREASURY MANAGEMENT STRATEGY STATEMENT

1. The Treasury Management Strategy Statement sets out the specific expected treasury activities for the forthcoming financial year. This strategy will be submitted to the Audit and Corporate Governance Committee and then to the Full Council for approval before the commencement of each financial year.

2. The formulation of the annual Treasury Management Strategy Statement involves determining the appropriate borrowing and investment decisions in the light of the anticipated movement in both fixed and shorter -term variable interest rates. For instance, this Council may decide to postpone borrowing if fixed interest rates are expected to fall, or borrow early if fixed interest rates are expected to rise.

3. The Treasury Management Strategy Statement is concerned with the following elements:

a) Prudential and Treasury Indicators b) current Treasury portfolio position c) borrowing requirement d) prospects for interest rates e) borrowing strategy f) policy on borrowing in advance of need g) debt rescheduling h) investment strategy i) creditworthiness policy j) policy on the use of external service providers k) any extraordinary treasury issue l) the MRP strategy

4. The Treasury Management Strategy Statement will establish the expected move in interest rates against alternatives (using all available information such as published interest rate forecasts where applicable), and highlight sensitivities to different scenarios.

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6.3 THE ANNUAL INVESTMENT STRATEGY STATEMENT

At the same time as the Council receives the Treasury Management Strategy Statement it will also receive a report on the Annual Investment Strategy which will set out the following: -

a) The Council’s risk appetite in respect of security, liquidity and optimum performance b) The definition of high credit quality to determine what are specified investments as

distinct from non-specified investments c) Which specified and non-specified instruments the Council will use d) Whether they will be used by the in house team, external managers or both (if

applicable) e) The Council’s policy on the use of credit ratings and other credit risk analysis

techniques to determine creditworthy counterparties for its approved lending list f) Which credit rating agencies the Council will use g) How the Council will deal with changes in ratings, rating watches and rating outlooks h) Limits for individual counterparties and group limits i) Country limits j) Levels of cash balances k) Interest rate outlook l) Budget for investment earnings m) Use of a cash fund manager (if applicable) n) Policy on the use of external service providers

6.4 THE ANNUAL MINIMUM REVENUE PROVISION STATEMENT

This statement will set out how the Council will make revenue provision for repayment of its borrowing using the four options for so doing and will be submitted at the same time as the Annual Treasury Management Strategy Statement.

6.5 POLICY ON PRUDENTIAL AND TREASURY INDICATORS

1. The Council approves before the beginning of each financial year a number of treasury limits which are set through Prudential and Treasury Indicators.

2. The Section 151 Officer is responsible for incorporating these limits into the Annual Treasury Management Strategy Statement, and for ensuring compliance with the limits. Should it prove necessary to amend these limits, the responsible officer shall submit the changes for approval to the full Council

6.6 MID YEAR REVIEW

The Council will review its treasury management activities and strategy on a six monthly basis. This review will consider the following: a) activities undertaken b) variations (if any) from agreed policies/practices c) interim performance report d) regular monitoring e) the monitoring of treasury management indicators for local authorities.

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6.7 ANNUAL REVIEW REPORT ON TREASURY MANAGEMENT ACTIVITY

An annual report will be presented to the to the Audit and Corporate Governance Committee and then to the Full Council at the earliest practicable meeting after the end of the financial year, but in any case by the end of September. This report will include the following: -

a) transactions executed and their revenue (current) effects b) report on risk implications of decisions taken and transactions executed c) compliance report on agreed policies and practices, and on statutory/regulatory

requirements d) performance report e) report on compliance with CIPFA Code recommendations f) monitoring of treasury management indicators

6.8 MANAGEMENT INFORMATION REPORTS

Management information reports will be prepared every month by the Senior Accountant (Treasury) and will be presented to Finance Manager (Financial Planning & Reporting) and Corporate Finance Manager for review and then the Section 151 Officer.

These reports will contain the following information:

a) a summary of transactions executed and their revenue (current effects); b) measurements of performance including effect on loan charges/investment income; c) the degree of compliance with original strategy and explanation of variances; d) non-compliance with Prudential limits or other treasury management limits.

6.9 CHESHIRE FIRE SERVICE CONTRACT

The Treasury Management Strategy (including Prudential Indicators & Investment Strategy) will be prepared yearly as part of the budget setting process by the Council and agreed with the Authority. The Council will then operate within the dictates of the strategy. The Authority must provide the Council with copies of the Treasury Management Prudential Indicators and Annual Investment Strategy before the commencement of each financial year.

The Council will provide the following regular reports to the Authority on the activities undertaken on their behalf and include as appropriate the performance indicators.

Monthly report on the investments/borrowings undertaken in the previous month should be

with each Authority within a working week of the month end

Quarterly and outturn reports to Members should be with each Authority 10 working days before the closure of the agenda to allow time for queries to be resolved (timetable to be provided by the Authorities)

6.10 CORPORATE LOANS

6.11 All Corporate Loans will be treated as capital expenditure and underpinned by the

Council’s Financial Procedure rules. The flow chart below shows the procedure for agreeing a loan:

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Loan Proposal Received

Discussed with S151 Officer and Portfolio Holder

Loan Proposal Rejected Loan Proposal Accepted

Applicant Informed Independent Due Diligence Exercise Undertaken and

Deal Structured

Proposed Deal Reported to:

1. Corporate Loans Group

2. TMB 3. DMT 4. CIPG 5. SMT

Executive Board Approve the Loan Deal

Loan Contract Signed

Contract Monitored

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6.12 The Corporate Loans Group is responsible for implementing the loan proposal, challenging loan proposals and scrutinising the monitoring of the loans on an ongoing basis. The group is made up of senior officers from Finance, Estates, Legal, Procurement, Internal Audit and Housing and reports into the loans programme project sponsor the Section 151 Officer.

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TMP 7 BUDGETING, ACCOUNTING AND AUDIT ARRANGEMENTS

7.1 STATUTORY/REGULATORY REQUIREMENTS

The accounts are drawn up in accordance with the Code of Practice on Local Authority Accounting in Great Britain that is recognised by statute as representing proper accounting practices. The Council has also adopted in full the principles set out in CIPFA’s ‘Treasury Management in the Public Services - Code of Practice’ (the ‘CIPFA Code’), together with those of its specific recommendations that are relevant to this Council’s Treasury Management activities.

7.2 ACCOUNTING PRACTICES AND STANDARDS

Due regard is given to the Statements of Recommended Practice and Accounting Standards as they apply to Local Authorities in Great Britain.

7.3 SAMPLE BUDGETS / ACCOUNTS / PRUDENTIAL INDICATORS

The Section 151 Officer will prepare a three year medium term financial plan with Prudential Indicators for Treasury Management which will incorporate the budget for the forthcoming year and provisional estimates for the following two years. This will bring together all the costs involved in running the function, together with associated income. The Section 151 Officer will exercise effective controls over this budget and monitoring of performance against Prudential Indicators, and will report upon and recommend any changes required in accordance with TMP6.

7.4 LIST OF INFORMATION REQUIREMENTS OF EXTERNAL AUDITORS

Treasury Management functions are subject to audit by the Council’s external auditors, the Audit Commission, on an annual basis. These audits may also be carried out by members of the Council’s Internal Audit Department. Auditors are entitled to ask for evidence in order to form an opinion on the Authority’s accounts. To that end, Treasury Management officers shall answer any audit questions and make available any and all documents relating to Treasury Management activities.

Reconciliation of loans outstanding in the financial ledger to Treasury Management records

Maturity analysis of loans outstanding Certificates for new long term loans taken out in the year Reconciliation of loan interest, discounts received and premiums paid to financial ledger

by loan type Calculation of loans fund interest and debt management expenses Details of interest rates applied to internal investments Calculation of interest on working balances Interest accrual calculation Principal and interest charges reports from the Logo Tech Analysis of any deferred charges Calculation of loans fund creditors and debtors Annual Treasury Report Treasury Management Strategy Statement and Prudential and Treasury Indicators Review of observance of limits set by Prudential and Treasury Indicators Calculation of the Minimum Revenue Provision

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External fund manager(s) valuations including investment income schedules and movement in capital values

Monthly budget monitoring reports.

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TMP 8 CASH AND CASH FLOW MANAGEMENT

8.1 ARRANGEMENTS FOR PREPARING/SUBMITTING CASH FLOW STATEMENTS

Cash flow projections are prepared annually, monthly and daily. The annual and monthly cash flow projections are prepared from the previous years’ cash flow records, adjusted for known changes in levels of income and expenditure and also changes in payments and receipts dates. These details are supplemented on an ongoing basis by information received of new or revised amounts to be paid or received as and when they are known.

8.2 BANK STATEMENTS PROCEDURES

The Council receives daily bank statements and a daily download of data from its bank. A formal bank reconciliation is undertaken on a monthly basis by the Cash Income Team.

8.3 PAYMENT SCHEDULING AND AGREED TERMS OF TRADE WITH CREDITORS

Our policy is to pay creditors within 28 days of the invoice date and this effectively schedules the payments.

8.4 ARRANGEMENTS FOR MONITORING DEBTORS / CREDITORS LEVELS

On a quarterly basis, as part of Balance Sheet Monitoring, a report is produced detailing the levels of creditors and debtors, which is used to assist in updating the cash flow models. The creditor team currently report to the Treasury Management team the level of creditors to be paid in the payment run, this helps cash flow management on a weekly basis.

8.5 PROCEDURES FOR BANKING OF FUNDS

The Treasury Team have schedules detailing income from Council Tax, NNDR and Government Grants. These are used to manage cash flow on a monthly basis.

The Cashiers notify the Senior Accountant (Treasury) each morning of cash and cheques banked the previous day so that the figures can be taken into account in the daily cash flow.

The Capital Project Managers or Capital Team is instructed to inform Treasury Management staff when a significant payment is expected to be received.

8.6 PRACTICES CONCERNING PREPAYMENTS TO OBTAIN BENEFITS

The Council has no formal arrangement in place. Where such opportunities arise, the prepayment would be sought and authorised by the Section 151 Officer.

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TMP 9 MONEY LAUNDERING

9.1 PROCEEDS OF CRIME ACT 2002

Money laundering has the objective of concealing the origin of money generated through criminal activity. Legislation has given a higher profile to the need to report suspicions of money laundering. The Proceeds of Crime Act (POCA) 2002 established the main offences relating to money laundering. In summary, these are:

concealing, disguising, converting, transferring or removing criminal property from England and Wales, from Scotland or from Northern Ireland

being concerned in an arrangement which a person knows or suspects facilitates the acquisition, retention, use or control of criminal property

acquiring, using or possessing criminal property.

These apply to all persons in the UK in a personal and professional capacity. Any person involved in any known or suspected money-laundering activity in the UK risks a criminal conviction. Other offences under the POCA include:

failure to disclose money-laundering offences

tipping off a suspect, either directly or indirectly

doing something that might prejudice an investigation – for example, falsifying a document.

9.2 THE TERRORISM ACT 2000

This act made it an offence of money laundering to become concerned in an arrangement relating to the retention or control of property likely to be used for the purposes of terrorism, or resulting from acts of terrorism. All individuals and businesses in the UK have an obligation to report knowledge, reasonable grounds for belief or suspicion about the proceeds from, or finance likely to be used for, terrorism or its laundering, where it relates to information that comes to them in the course of their business or employment.

9.3 THE MONEY LAUNDERING REGULATIONS 2007

Organisations pursuing relevant business (especially those in the financial services industry regulated by the FSA) are required to appoint a nominated officer and implement internal reporting procedures; train relevant staff in the subject; establish internal procedures with respect to money laundering; obtain, verify and maintain evidence and records of the identity of new clients and transactions undertaken and report their suspicions. In December 2007 the UK Government published the Money Laundering Regulations 2007, which replaced the Money Laundering Regulations 2003.

9.4 LOCAL AUTHORITIES Public service organisations and their staff are subject to the full provisions of the Terrorism Act 2000 and may commit most of the principal offences under the POCA, but are not legally obliged to apply the provisions of the Money Laundering Regulations 2007. However, as responsible public bodies, they should employ policies and procedures which reflect the essence of the UK’s anti-terrorist financing, and anti-money laundering, regimes. Accordingly this Council will do the following: -

a) evaluate the prospect of laundered monies being handled by them b) determine the appropriate safeguards to be put in place

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c) require every person engaged in treasury management to make themselves aware of their personal and legal responsibilities for money laundering awareness

d) make all its staff aware of their responsibilities under POCA e) to appoint a member of staff to whom they can report any suspicions. This person is the

Chief Internal Auditor. f) in order to ensure compliance is appropriately managed, this Council will require senior

management to give appropriate oversight, analysis and assessment of the risks of clients and work/product types, systems for monitoring compliance with procedures and methods of communicating procedures and other information to personnel.

g) The officer responsible for the creation and monitoring the implementation of a corporate anti money laundering policy and procedures is the Monitoring Officer and it shall be a requirement that all services and departments implement this corporate policy and procedures.

9.5 PROCEDURES FOR ESTABLISHING IDENTITY / AUTHENTICITY OF LENDERS

It is not a requirement under POCA for local authorities to require identification from every person or organisation it deals with. However, in respect of treasury management transactions, there is a need for due diligence and this will be effected by following the procedures below. The Council does not accept loans from individuals. All loans are obtained from the PWLB, other local authorities or from authorised institutions under the Financial Services and Markets Act 2000. When repaying loans, the procedures in 9.6 will be followed to check the bank details of the recipient.

9.6 METHODOLOGIES TO IDENTIFY DEPOSIT TAKERS

In the course of its Treasury activities, the Council will only lend money to or invest with those counterparties that are on its approved lending list. These will be local authorities, the PWLB, Bank of England and authorised deposit takers under the Financial Services and Markets Act 2000. The FSA register can be accessed through their website on www.fsa.gov.uk.

All transactions will be carried out by CHAPS for making deposits or repaying loans.

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TMP 10 TRAINING AND QUALIFICATIONS

The Council recognises that relevant individuals will need appropriate levels of training in treasury management due to its increasing complexity. There are two categories of relevant individuals: - a) Treasury management staff employed by the Council b) Members charged with governance of the treasury management function All treasury management staff should receive appropriate training relevant to the requirements of their duties at the appropriate time. The Council operates a Professional Development Review system which identifies the training requirements of individual members of staff engaged on treasury related activities. Additionally, training may also be provided on the job and it will be the responsibility of the Corporate Finance Manager to ensure that all staff under his / her authority receives the level of training appropriate to their duties. This will also apply to those staff that from time to time covers for absences from the treasury management team. Yearly Treasury Management Training courses will be arranged for members

10.1 DETAILS OF APPROVED TRAINING COURSES Treasury Management staff will go on courses provided by:

a) Brokers b) Treasury Management Consultants c) CIPFA d) Any other courses considered to be suitable

10.2 RECORDS OF TRAINING RECEIVED BY TREASURY STAFF

The Corporate Finance Manager will maintain records on all staff and the training they receive

10.3 APPROVED QUALIFICATIONS FOR TREASURY STAFF

Approved qualifications are:

a) AAT b) CIPFA (or other CCAB) c) ACT ITM-PF

10.4 STATEMENT OF PROFESSIONAL PRACTICE (SOPP)

a) Where the Section 151 Officer is a member of CIPFA, there is a professional need for the

CFO to be seen to be committed to professional responsibilities through both personal compliance and by ensuring that relevant staff are appropriately trained.

b) Other staff involved in Treasury Management activities who are members of CIPFA must also comply with the SOPP.

10.5 MEMBER’S TRAINING RECORDS

Records will be kept of all training in treasury management provided to members.

10.6 MEMBER’S CHARGED WITH GOVERNANCE

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Members charged with diligence also have a personal responsibility to ensure that they have the appropriate skills and training for their role.

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TMP 11 THE USE OF EXTERNAL SERVICE PROVIDERS

11.1 DETAILS OF CONTRACTS WITH SERVICE PROVIDERS, INCLUDING BANKERS,

BROKERS, CONSULTANTS, ADVISERS

This Council will employ the services of other organisations to assist it in the field of treasury management. In particular, it will use external consultants to provide specialist advice in this ever more complex area. However, it will ensure that it fully understands what services are being provided and that they meet the needs of this organisation, especially in terms of being objective and free from conflicts of interest. It will also ensure that the skills of the in house treasury management team are maintained to a high enough level whereby they can provide appropriate challenge to external advice and can avoid undue reliance on such advice. Treasury management staff and their senior management will therefore be required to allocate appropriate levels of time to using the following sources of information so that they are able to develop suitable levels of understanding to carry out their duties, especially in challenge and avoiding undue reliance.

The quality financial press

Market data

Information on government support for banks an

The credit ratings of that government support

11.1.1 BANKING SERVICES a) Name of supplier of service is the National Westminster Bank b) The branch address is: Warrington Branch

23 Sankey Street Warrington WA1 1XH

Tel: 0845 366 0618

c) Contract commenced October 2013 and runs until October 2016. d) Cost of service is variable depending on schedule of tariffs and volumes e) Payments due Quarterly

11.1.2 MONEY BROKING SERVICES The Council will use money brokers for temporary borrowing and investment and long term borrowing. It will seek to give an even spread of business amongst the approved brokers. Approved Brokers are:

a) Sterling International Brokers Ltd b) Martin Brokers (UK) plc c) Tullet Prebon d) Tradition

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11.1.3 CONSULTANTS’/ADVISERS’ SERVICES

Treasury Consultancy Services The Council will seek to take expert advice on interest rate forecasts, annual Treasury Management strategy, timing for borrowing and lending, debt rescheduling, use of various borrowing and investment instruments, how to select credit worthy counterparties to put on its approved lending list etc. The performance of consultants will be reviewed by the Chief Financial Officer annually to check whether performance has met expectations.

a) Name of supplier of service is Sector Treasury Services Limited. Their address is: 17 Rochester Row

London SW1P 1QT Tel: 0870 1916800

b) Contract commenced 2015 and currently runs for 1 year. c) Cost of service is £13,500 per year.

11.1.4 CREDIT RATING AGENCY

The Council receives a credit rating service through its treasury management consultants, the costs of which is included in the consultant’s annual fee.

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TMP 12 CORPORATE GOVERNANCE

12.1 LIST OF DOCUMENTS TO BE MADE AVAILABLE FOR PUBLIC INSPECTION

The Council is committed to the principle of openness and transparency in its Treasury Management function and in all of its functions. It has adopted the CIPFA Code of Practice on Treasury Management and implemented key recommendations on developing Treasury Management Practices, formulating a Treasury Management Policy Statement and implementing the other principles of the Code. The following documents are available for public inspection: -

Treasury Management Policy Statement Treasury Management Strategy Statement Annual Investment Strategy Minimum Revenue provision policy statement Annual Treasury Review Report Treasury Management monitoring reports (e.g. half yearly) Annual accounts and financial instruments disclosure notes Annual budget 3 Year Capital Plan Minutes of Council / Cabinet / committee meetings Schedule of all external funds managed by the Council on behalf of others and the basis of attributing interest earned and costs of these investments.

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WARRINGTON BOROUGH COUNCIL AUDIT AND CORPORATE GOVERNANCE COMMITTEE 19 November 2015

Report of the: Chief Finance Officer Report Author: Danny Mather, Corporate Finance Manager Contact Details: Email Address:


Ward Members:

All

TITLE OF REPORT: 2015/16 MID YEAR TREASURY REVIEW


1.1 To comply with the Chartered Institute of Public Finance and Accountancy’s

(CIPFA) Code of Practice (Code) on Treasury Management (revised 2009) which was adopted by this Council on 1st March 2010, there is a requirement that a half yearly report on the performance of the Council’s treasury management operation be reported to Full Council and it will be reported on the 7th December 2015. This report is also being presented to the Audit and Corporate Governance Committee as they are the body charged with the scrutiny of Treasury Management by the Council.

1.2 This report provides an update on the first six months of the year which is the

requirement of the CIPFA Code. A glossary of treasury terms can also be found at Appendix 1.

2. BACKGROUND 2.1 This mid-year report has been prepared in compliance with CIPFA’s Code of

Practice, and covers the following:

An economic update for the first six months of 2015/16 A review of the Treasury Management Strategy Statement and Annual

Investment Strategy The Council’s capital expenditure (prudential indicators) A review of the Council’s investment portfolio for 2015/16 A review of the Council’s borrowing strategy for 2015/16 A review of any debt rescheduling undertaken during 2015/16 A review of compliance with Treasury and Prudential Limits for 2015/16

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3. ECONOMIC UPDATE

United Kingdom Economy 3.1 UK Gross Domestic Product (GDP) growth rates in 2013 of 2.2% and 2.9% in

2014 were the strongest growth rates of any G7 country; the 2014 growth rate was also the strongest UK rate since 2006 and the 2015 growth rate is likely to be a leading rate in the G7 again, possibly being equal to that of the US. However, quarter 1 of 2015 was weak at +0.4% (+2.9% y/y) though there was a rebound in quarter 2 to +0.7% (+2.4% y/y). Growth is expected to weaken to about +0.5% in quarter 3 as the economy faces headwinds for exporters from the appreciation of Sterling against the Euro and weak growth in the European Union (EU), China and emerging markets, plus the dampening effect of the Government’s continuing austerity programme, although the pace of reductions was eased in the May Budget.

3.2 Despite these headwinds, the Bank of England’s August Inflation Report had included a forecast for growth to remain around 2.4%-2.8% over the next three years, driven mainly by strong consumer demand as the squeeze on the disposable incomes of consumers has been reversed by a recovery in wage inflation at the same time that CPI inflation has fallen to, or near to, zero over the last quarter. Investment expenditure is also expected to support growth. However, since the report was issued, the Purchasing Manager’s Index (PMI), for services on 5 October would indicate a further decline in the growth rate of only +0.3% in Q4, which would be the lowest rate since the end of 2012. In addition, worldwide economic statistics and UK consumer and business confidence have distinctly weakened so it would therefore not be a surprise if the next Inflation Report in November were to cut those forecasts in August.

3.3 However, since the report was issued, the Purchasing Manager’s Index (PMI), for services on 5 October would indicate a further decline in the growth rate to only +0.3% in Q4, which would be the lowest rate since the end of 2012. In addition, worldwide economic statistics and UK consumer and business confidence have distinctly weakened so it would therefore not be a surprise if the next Inflation Report in November were to cut those forecasts in August.

3.4 The August Bank of England Inflation Report forecast was notably subdued in respect of inflation which was forecast to barely back up to the 2% target within the 2-3 year time horizon. However, with the price of oil taking a fresh downward direction and Iran expected to soon re-join the world oil market after the impending lifting of sanctions, there could be several more months of low inflation still to come, especially as world commodity prices have generally been depressed by the Chinese economic downturn.

3.5 There are therefore considerable risks around whether inflation will rise in the near future as strongly as had previously been expected; this will make it more difficult for the central banks of both the US and the UK to raise rates as soon as was being forecast until recently, especially given the recent major concerns around the slowdown in Chinese growth, the knock on impact on the earning of emerging countries from falling oil and commodity prices, and the volatility in

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equity and bond markets in 2015 so far, which could potentially spill over to impact the real economies rather than just financial markets. United States of America Economy

3.6 The American economy made a strong comeback after a weak first quarter’s growth at +0.6% (annualised), to grow by no less than 3.9% in quarter 2 of 2015. While there had been confident expectations during the summer that the Fed, could start increasing rates at its meeting on 17 September, or if not by the end of 2015, the recent downbeat news about Chinese and Japanese growth and the knock on impact on emerging countries that are major suppliers of commodities, was cited as the main reason for the Fed’s decision to pull back from making that start. The non-farm payrolls figures for September and revised August issued on 2 October, were disappointingly weak and confirmed concerns that US growth is likely to weaken. This has pushed back expectations of a first rate increase from 2015 to 2016. Eurozone Economy

3.7 In the Eurozone (EU), the European Central Bank (ECB) released €1.1 trillion programme of quantitative easing to buy up high credit quality government and other debt of selected Eurozone (EZ) countries. This programme of €60bn of monthly purchases started in March 2015 and it is intended to run initially to September 2016. This already appears to have had a positive effect in helping a recovery in consumer and business confidence and a start to a significant improvement in economic growth. GDP growth rose to 0.5% in quarter 1 2015 (1.0% y/y) but came in at +0.4% (+1.5% y/y) in quarter 2 and looks as if it may maintain this pace in quarter 3. However, the recent downbeat Chinese and Japanese news has raised questions as to whether the ECB will need to boost is Quantitative Easing (QE) programme if it is to succeed in significantly improving growth in the EZ and getting inflation up from the current level of around zero to the target of 2%. Interest rate forecasts

3.8 The Council’s treasury advisor, Capita Asset Services, has provided the following forecast:

Bank rate Public Works Loan Board Borrowing Rates

5 Year 10 Year 25 Year 50 Year

Forecast TMSS Current TMSS Current TMSS Current TMSS Current TMSS Current

Dec-15 0.75% 0.50% 2.50% 2.40% 3.00% 3.80% 3.60% 3.80% 3.60%

Mar-16 0.75% 0.50% 2.60% 2.50% 3.20% 4.00% 3.80% 4.00% 3.80%

Jun-16 1.00% 0.75% 2.80% 2.60% 3.30% 4.20% 3.90% 4.20% 3.90%

Sep-16 1.00% 0.75% 2.90% 2.80% 3.40% 4.30% 4.00% 4.30% 4.00%

Dec-16 1.25% 1.00% 3.00% 2.90% 3.50% 4.40% 4.10% 4.40% 4.10%

Mar-17 1.25% 1.00% 3.20% 3.00% 3.70% 4.50% 4.20% 4.50% 4.20%

Jun-17 1.50% 1.25% 3.30% 3.10% 3.80% 4.60% 4.30% 4.60% 4.30%

Sep-17 1.75% 1.50% 3.40% 3.20% 3.90% 4.70% 4.40% 4.70% 4.40%

Dec-17 1.75% 1.50% 3.50% 3.30% 4.00% 4.70% 4.50% 4.70% 4.50%

Mar-18 2.00% 1.75% 3.60% 3.40% 4.10% 4.80% 4.60% 4.80% 4.60%

TMSS – Treasury Management Strategy Statement

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3.9 Capita Asset Services undertook a review of its interest rate forecasts on 11 August shortly after the quarterly Bank of England Inflation Report. Later in August, fears around the slowdown in China and Japan caused major volatility in equities and bonds and sparked a flight from equities into safe havens like gilts and caused PWLB rates to fall below the above forecasts for quarter 4 2015. However, there is much volatility in rates as news ebbs and flows in negative or positive ways and news in September in respect of Volkswagen, and other corporates, has compounded downward pressure on equity prices. This latest forecast includes a first increase in Bank Rate in quarter 2 of 2016.

3.10 Despite market turbulence since August causing a sharp downturn in PWLB rates, the overall trend in the longer term will be for gilt yields and PWLB rates to rise when economic recovery is firmly established accompanied by rising inflation and consequent increases in Bank Rate, and the eventual unwinding of QE. Increasing investor confidence in eventual world economic recovery is also likely to compound this effect as recovery will encourage investors to switch from bonds to equities.

3.11 The overall balance of risks to economic recovery in the UK is currently evenly balanced. Only time will tell just how long this current period of strong economic growth will last; it also remains exposed to vulnerabilities in a number of key areas.

3.12 The disappointing US non-farm payrolls figures and UK PMI services figures at the beginning of October have served to reinforce a trend of increasing concerns that growth is likely to be significantly weaker than had previously been expected. This, therefore, has markedly increased concerns, both in the US and UK, that growth is only being achieved by monetary policy being highly aggressive with central rates at near zero and huge QE in place. In turn, this is also causing an increasing debate as to how realistic it will be for central banks to start on reversing such aggressive monetary policy until such time as strong growth rates are more firmly established and confidence increases that inflation is going to get back to around 2% within a 2-3 year time horizon. Market expectations in October for the first Bank Rate increase have therefore shifted back sharply into the second half of 2016.

3.13 Downside risks to current forecasts for UK gilt yields and PWLB rates currently include:

Geopolitical risk in Eastern Europe, the Middle East and Asia, increasing safe haven flows

UK economic growth turns significantly weaker than currently anticipated

Weak growth or recession in the UK’s main trading partners – the EU, US and China

A resurgence of the Eurozone sovereign debt crisis

Recapitalisation of European banks requiring more government financial support

Emerging country economies, currencies and corporates destabilised by falling commodity prices and / or the start of Fed. Rate increases, causing a flight to safe havens.

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3.14 The potential for upside risks to current forecasts for UK gilt yields and PWLB

rates, especially for longer term PWLB rates include:

Uncertainty around the risk of a UK exit from the EU

The ECB severely disappointing financial markets with a programme of asset purchases which proves insufficient to significantly stimulate growth in the EZ

The commencement by the US Federal Reserve of increases in the Fed. Funds rate causing a fundamental reassessment by investors of the relative risks of holding bonds as opposed to equities and leading to a major flight from bonds to equities

UK inflation returning to significantly higher levels than in the wider EU and US, causing an increase in the inflation premium inherent to gilt yields.

4. TREASURY MANAGEMENT STRATEGY STATEMENT AND ANNUAL INVESTMENT STRATEGY UPDATE

4.1 The Council’s Treasury Management Strategy Statement (TMSS) for 2015/16

was approved by the Full Council on 2nd March 2015. The Council’s Annual Investment Strategy, which is incorporated in the TMSS, outlines the Council’s investment priorities as follows:

Security of capital

Liquidity

4.2 The Council will also aim to achieve the optimum return (yield) on investments commensurate with the proper levels of security and liquidity. In the current economic climate it is considered appropriate to keep investments short term up to a year with the exception of the Local Authority Mortgage Scheme (LAMS), Charities, Churches and Local Authorities (CCLA) Property Fund and Green Energy investments.

4.3 In terms of borrowing the Council’s Medium Term Financial Plan (MTFP) had a

forecast figure for 2015/16 for borrowing of £261.199m to fund the capital programme. The policy to borrow this money was when the best interest rate position existed during the year and was also dependent on the phasing of the capital programme and progress made on many challenging invest to save schemes.

4.4 Investments and borrowing during the first six months of the year have been in

line with the strategy, and there have been no deviations from the strategy. Further details of the Council’s investment and debt portfolio can be seen in section 5 and 6 below.

4.5 As outlined in Section 3 above, there is still considerable uncertainty and volatility in the financial and banking market, both globally and in the UK. In this context, it is considered that the strategy approved on 2nd March 2015 is still fit for purpose in the current economic climate.

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5. THE COUNCIL’S CAPITAL POSITION (PRUDENTIAL INDICATORS)

5.1 This part of the report is structure to update:

The Council’s capital expenditure plans;

How these plans are being financed;

The impact of the changes in the capital expenditure plans on the prudential indicators and the underlying need to borrow; and

Compliance with the limits in place for borrowing activity.

5.2 Prudential Indicator for Capital Expenditure – this table shows the revised estimates for capital expenditure and the changes since the capital programme was agreed at the Budget.

5.3 Changes to the Financing of the Capital Programme – The table below draws together the main strategy elements of the capital expenditure plans. It highlights the original supported and unsupported elements of the capital programme, and the expected financing arrangements of this capital expenditure. The borrowing element of the table increased the underlying indebtedness of the Council by way of the Capital Financing Requirement (CFR), although this will be reduced in part by revenue charges for the repayment of debt (the Minimum Revenue Provision). This direct borrowing need may also be supplemented by maturing debt and other treasury requirements.

Capital Expenditure by Service 2015/16 Original

Estimate £m

2015/16 Q1

Position £m

2015/16 Q2

Position £m

Families & Wellbeing 17.846 19.915 18.776

Resources & Strategic Commissioning 4.803 5.488 4.781

Economic Regeneration Growth & Environment

45.747 40.126 38.911

Invest to Save Programme 220.759 239.490 162.541

Total Capital Expenditure 289.155 305.019 225.009

Capital Expenditure by Service 2015/16 Original

Estimate £m

2015/16 Q1

Position £m

2015/16 Q2

Position £m

Total Capital Expenditure 289.155 305.019 225.009

Financed by:

Capital Grants and Reserves 19.640 19.254 19.254

Capital Receipts 3.835 4.272 4.272

Revenue Funding 0.171 1.904 1.904

External Funding 4.310 4.316 4.316

Total Financing 27.956 29.746 29.746

Borrowing Requirement 261.199 275.273 195.263

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5.4 Changes to the Prudential Indicators for the Capital Financing Requirement (CF), External Debt and the Operational Boundary – the table below shows the CFR, which is the underlying external need to incur borrowing for a capital purpose. It also shows the expected debt position over the period, which is termed the Operational Boundary

5.5 Limits to Borrowing Activity – the first key control over the treasury activity is a prudential indicator to ensure that over the medium term net borrowing (borrowings less investments) will only be for capital purposes. Gross external borrowing should not, except in the short term, exceed the total of CFR in the preceding year plus the estimates of any additional CFR for 2015/16 and next two financial years. This allows some flexibility for limited early borrowing for future years. The Council has approved a policy for borrowing in advance of need which will be adhered to if this proves prudent.

There are no difficulties envisaged for the current or future years in complying with this prudential indicator.

2015/16 Original Estimate £m

2015/16 Current Position

£m

Prudential Indicator – Capital Financing Requirement

Net movement in CFR 262.442 190.116

Prudential Indicator – the Operational Boundary for external debt

Borrowing 481.002 391.572

Other long term Liabilities* 4.328 4.328

Total debt (year-end position) 485.330 395.900

* On balance sheet PFI schemes and finance leases, etc.

2015/16 Original

Estimate £m

2015/16 Q2 Current

Position £m

Borrowing 471.002 391.572



CFR (year-end position) 525.249 436.394

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5.6 Authorised Limit – a further prudential indicator controls the overall level of borrowing. This is the Authorised Limit which represents the limit beyond which borrowing is prohibited, and needs to be set and revised by Members. It reflects the level of borrowing which, while not desired, could be afforded in the short term, but is not sustainable in the longer term. It is the expected maximum borrowing need with some headroom for unexpected movements. This is the statutory limit determined under section 3(1) of the Local Government Act 2003.

6. INVESTMENT PORTFOLIO 2015/16

6.1 In accordance with the CIPFA Code, it is the Council’s priority to ensure security of capital and liquidity, and to obtain an appropriate level of return which is consistent with the Council’s risk appetite. As set out in Section 3, it is a very difficult investment market with the level of interest rates commonly seen in previous decades as rates are very low and in line with the 0.5% bank rate. The continuing potential for a re-emergence of a Eurozone sovereign debt crisis, and its impact on banks, prompts a low risk and short term strategy. Given this risk environment, investment returns are likely to remain low.

6.2 The Council held £84m of investments as at 30 September 2015 and the investment portfolio yield for the first six months of the year is 3.89%.

6.3 The table below shows the breakdown of the Council’s investment returns compared to Capita’s benchmark, by length of investment.

Benchmark Benchmark

Return Council

Performance

7 day 0.36% 0.50%

3 month 0.45% -

6 month 0.60% -

12 month 0.90% 1.75%

2015/16 Original

Estimate £m

2015/16 Current Position

£m

Borrowing 471.002 391.572



CFR (year-end position) 525.249 436.394

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The table below shows the breakdown of the investments compared to CIPFA’s benchmark, by type of investment.

Investment Type Benchmark Return Q2

Council Performance

Fixed Investment (up to 30 days) 0.43% n/a

Fixed Investment (31-90 days) 0.46% n/a

Fixed Investment (91-364 days) 0.74% 1.54%

Fixed Investment (1-5 years) 1.68% 7.00%

Fixed Investments (over 5 years) n/a 5.64%

Callable & Structured Products 2.35% 2.76% (LAMS)

Notice Accounts 0.56% 0.53%

Money Market Funds 0.45% n/a

6.4 The Council outperforms the benchmarks on all but the notice accounts due to using a low paying interest account for compliance to the Council’s counterparty policy.

6.5 The Council’s investments as at 30th September 2015 was £84m, a breakdown of

which is given below:

Fixed Investments Start Maturity Interest

Counter Party Date Date Rate Principal

CCLA 30/04/13 30/04/23 5.640 12,365,077

Aldermore Challenger Bank 18/07/14 18/07/15 1.450 0

Sainsbury Challenger Bank 22/07/14 21/07/15 1.500 0

Rockfire Capital Global: Solar Bonds 11/09/14 11/09/19 7.000 2,000,000




Aldermore Challenger Bank 27/08/15 26/08/16 1.750 5,000,000

Total Investments 29,365,077

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Overnight Deposits Balance Balance Movement Yearly Avg

Counter Party 31/03/2015 30/09/2015 Interest Rate

£ £ £ %

Santander (A&L) 7,660,000 9,999,970 2,339,970 0.80%

Bank of Scotland 0 10,004,062 10,004,062 0.39%

Yorkshire Bank 0 0 0 -

Nat West (Select Liquidity) 1,878,000 5,720,000 3,842,000 0.21%

Handelsbanken 0 0 0 0.35%

Legal and General MMF 0 0 0 -

Prime Rate MMF 0 8,950,000 8,950,000 0.47%

Standard Life (Ignis) MMF 0 20,000,000 20,000,000 0.49%

Deutsche MMF 0 0 0 -

CCLA MMF 25,000 25,000 0 0.38%

9,563,000 54,699,032 45,136,032 0.50%

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6.6 The Council has reclassified the Local Authority Mortgage Scheme as a long

term debtor in the Council’s final accounts when previously they had been reported as investments. The details are shown below:

Local Authority Mortgage Scheme

Balance 31 March

2015

Balance 30 Sept

2015

Movement during

year

£ £ £

Lloyds/TSB 2,000,000 2,000,000 0.0

Leeds Bank 500,000 500,000 0.0

Lloyds/TSB 1,000,000 1,000,000 0.0

Lloyds/TSB 2,000,000 2,000,000 0.0

Total Local Authority Mortgage Scheme

5,500,000 5,500,000

0.0

6.7 The Council also classifies the loans to registered social landlords as long term

debtors in the Council’s accounts. The details are shown below as at 30th September 2015:

Long Term Debtors - RSL Start Maturity Original Balance Outstanding Movement

Counter Party Date Date Drawdown 31 /03/015 Principal in Year

Warrington Housing Association 13/08/10 11/08/35 1,000,000 900,681 888,155 (12,526)

Golden Gates Housing Trust 27/02/12 27/02/37 1,819,243 1,700,683 1,679,143 (21,540)

Warrington Housing Association 07/06/12 07/06/37 3,000,000 2,809,633 2,772,426 (37,207)

Warrington Borough Transport 26/03/13 21/03/18 250,000 150,000 125,000 (25,000)

Warrington Borough Transport 03/04/13 03/04/18 400,000 240,000 200,000 (40,000)

Muir Housing Association 22/04/14 22/04/39 2,000,000 1,960,901 1,940,552 (20,349)

Helena Housing Group 04/08/14 04/08/39 15,000,000 14,845,699 14,687,556 (158,143)

Wulvern Housing Group 04/08/14 04/08/39 10,000,000 10,000,000 10,000,000 0

Your Housing Group 28/11/14 28/11/39 3,000,000 2,983,683 2,950,484 (33,199)

One Warrington Limted (OWL) 19/12/14 17/12/21 1,775,091 1,775,091 1,775,090 (1)

One Warrington Limted (OWL) 23/01/15 23/01/22 2,096,612 2,096,612 2,096,612 0

One Warrington Limted (OWL) 06/03/15 04/03/22 334,415 334,415 334,415 0

One Warrington Limted (OWL) 02/04/15 01/04/22 686,314 0 686,314 686,314

One Warrington Limted (OWL) 01/05/15 02/05/22 1,030,671 0 1,030,671 1,030,671



Muir Housing Association 02/07/15 02/07/40 1,000,000 0 994,510 994,510

One Warrington Limted (OWL) 19/08/15 19/08/22 1,000,000 0 920,154 920,154

44,824,989 39,797,397 43,513,725 3,716,328

6.8 Investment Counterparty Criteria – The current investment counterparty criteria selection approved in the TMSS is meeting the requirement of the treasury management function. The main rating agencies (Fitch, Moody’s and Standard & Poor’s) have, through much of the financial crisis, provided some institutions with a ratings “uplift” due to implied levels of sovereign support. Commencing in 2015, in response to the evolving regulatory regime, all three agencies have begun removing these “uplifts” with the timing of the process determined by regulatory progress at the national level. The process has been part of a wider reassessment of methodologies by each of the rating agencies. In addition to the removal of implied support, new methodologies are now taking into account additional factors, such as regulatory capital levels. In some cases, these factors have “netted” each other off, to leave underlying ratings either unchanged or little changed.

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6.9 In keeping with the agencies’ new methodologies, the credit element of our credit assessment process now focuses solely on the Short and Long Term ratings of an institution. While this is the same process that has always been used by Standard & Poor’s, this has been a change to the use of Fitch and Moody’s ratings. It is important to stress that the other key elements to our process, namely the assessment of Rating Watch and Outlook information as well as the Credit Default Swap (CDS) overlay have not been changed.

6.10 The evolving regulatory environment, in tandem with the rating agencies’ new methodologies also means that sovereign ratings are now of lesser importance in the assessment process. Where through the crisis, clients typically assigned the highest sovereign rating to their criteria the new regulatory environment is attempting to break the link between sovereign support and domestic financial institutions. While this authority understands the changes that have taken place, it will continue to specify a minimum sovereign rating of high. This is in relation to the fact that the underlying domestic and where appropriate, international, economic and wider political and social background will still have an influence on the ratings of a financial institution.

6.11 It is important to stress that these rating agency changes do not reflect any changes in the underlying status or credit quality of the institution, merely a reassessment of their methodologies in light of enacted and future expected changes to the regulatory environment in which financial institutions operate. While some banks have received lower credit ratings as a result of these changes, this does not mean that they are suddenly less credit worthy than they were formerly. Rather, in the majority of cases, this mainly reflects the fact that implied sovereign government support has effectively been withdrawn from banks. They are now expected to have sufficiently strong balance sheets to be able to withstand foreseeable adverse financial circumstances without government support. In fact, in many cases, the balance sheets of banks are now much more robust than they were before the 2008 financial crisis when they had higher ratings than now. However, this is not universally applicable, leaving some entities with modestly lower ratings than they had through much of the “support” phase of the financial crisis.

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7. BORROWING 7.1 The Council’s 2015/16 MTFP contained a forecasted borrowing figure to fund the

capital programme of £261.199m. Following a review of the capital programme this figure as at quarter 1 is £275.273m. It is expected in line with this strategy that borrowing to fund the capital programme will take place in the final quarter of the year.

The current portfolio as at the 30th September 2015 of PWLB loans market and temporary loans was £262.6m, a breakdown of which is shown below:

Public Works Loan Board Start Maturity Interest Principal

Counter Party Date Date Rate % £

PWLB 25/09/97 23/03/23 6.625 277,737

PWLB 22/02/07 30/09/56 4.350 222,189

PWLB 15/01/10 15/01/35 4.530 438,824

PWLB 13/08/10 13/08/35 3.940 49,095

PWLB 22/10/10 22/10/15 1.870 111,095

PWLB 26/11/10 30/09/55 5.260 555,473

PWLB 20/06/11 20/06/16 3.020 2,000,000

PWLB 27/02/12 27/02/37 3.760 1,654,490

PWLB 11/06/12 11/06/37 3.260 2,754,400

PWLB 24/04/14 24/04/39 3.940 1,951,839

PWLB 04/08/14 04/08/39 3.800 14,631,797

PWLB 15/09/14 15/09/39 3.950 10,000,000

PWLB 28/11/14 28/11/39 3.140 2,960,054

PWLB 02/07/15 02/07/40 3.210 1,000,000

38,606,993Total Outstanding

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Money Market Start Maturity Interest Principal


DEPFA BANK PLC* 21/04/97 21/10/66 5.800 5,000,000

BAYERISHCE LANDESBANK* 27/03/02 27/03/42 4.980 5,000,000

EURAPAISCHE HYPOTHEKEN* 02/04/02 02/04/42 5.000 5,000,000

EURO HYPO* 26/04/02 28/04/42 4.990 15,000,000

DEPFA BANK PLC* 01/04/03 01/04/43 4.223 5,000,000

DEPFA ACS BANK* 01/04/03 01/04/43 4.304 10,000,000

DEXIA FINANCE PUBLIC BANK* 24/11/05 24/11/65 3.820 10,000,000

BARCLAYS BANK* 03/04/06 05/04/66 3.810 5,000,000

BARCLAYS BANK* 20/01/06 20/01/66 3.960 10,000,000

BARCLAYS BANK* 26/07/07 26/07/77 4.180 25,000,000

DEXIA FINANCE PUBLIC BANK* 16/08/06 17/08/76 4.230 13,500,000

London Borough of Newham 31/10/13 31/10/17 1.850 5,000,000

London Borough of Bromley 31/10/13 31/10/16 1.450 5,000,000

London Borough of Barnet 15/04/14 15/10/15 1.000 5,000,000

Hampshire CC 19/11/13 18/11/16 1.300 4,000,000

Hampshire Police & Crime 19/11/13 18/11/16 1.300 1,000,000

Hampshire CC 13/12/13 12/12/18 2.350 5,000,000

Milton Keynes 24/11/14 25/11/19 2.000 5,000,000

Hertfordshire CC 26/11/14 25/11/16 1.070 5,000,000

Oxfordshire CC 21/07/15 21/07/17 0.850 5,000,000

Oxfordshire CC 21/07/15 20/07/18 1.200 5,000,000

Bond Peabody1 TradeRisks 25/08/15 25/08/55 0.846 50,000,000

Bonds 01/04/08 01/04/50 5.000 12,275

203,512,275

* LOBOs (Lenders Option Borrowers Option)

Total Outstanding

Temporary Loans Start Maturity Interest Principal


Parish Council Loans Various 31/03/16 0.500 189,947

Derbyshire CC 09/01/15 08/01/16 0.700 5,000,000

Gwent Police & Crime Commissioner 21/01/15 20/01/16 0.600 3,000,000

Gwent Police & Crime Commissioner 22/01/15 21/01/16 0.620 2,000,000

Nexus Newcastle City Council 30/01/15 29/01/16 0.620 3,000,000

Stevenage BC 03/02/15 02/02/16 0.610 2,000,000

Bath Council 01/04/15 30/03/16 0.520 3,300,000

Hynburn 10/04/15 08/04/16 0.500 1,000,000

Hynburn 17/04/15 15/04/16 0.500 1,000,000

20,489,947Total Outstanding

Public Works Loan Board Start Maturity Interest Principal


PWLB 25/09/97 23/03/23 6.625 277,737

PWLB 22/02/07 30/09/56 4.350 222,189

PWLB 13/01/10 13/01/14 2.680 305,510

PWLB 13/01/10 13/01/15 3.120 266,627

PWLB 15/01/10 15/01/35 4.530 438,824

PWLB 13/08/10 13/08/35 3.940 51,373

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PWLB 22/10/10 22/10/15 1.870 111,095

PWLB 26/11/10 30/09/55 5.260 555,473

PWLB 20/06/11 20/06/16 3.020 2,000,000

PWLB 27/02/12 27/02/37 3.760 1,751,256

PWLB 11/06/12 11/06/37 3.260 2,920,766

Total Outstanding 8,900,849

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8. Lenders Option Borrowers Option

8.1 There have been recent reports in the media about long term Lobo borrowing arrangements entered into by the Councils to fund long term capital investments which form part of the Councils capital programmes.

8.2 This covers a wide range of investments into a number of different types of

assets and includes buildings, schools, roads, heritage assets, leisure centres, libraries etc. The Council’s long term borrowing is in effect similar to a mortgage in that it is a long term borrowing commitment to finance the provision of an asset today but to pay for it over the life of the asset. Also similar to a mortgage, it is taken out at the prevailing rates at the time when it is needed, the rate is fixed for a period and, just like a mortgage, the rate can look high in hindsight a number of years later if market conditions change.

8.3 The Council’s level of long term borrowing activity is governed under the

Government's Prudential Code. The Council produces an annual Treasury Strategy as part of complying with this code that is approved by full Council each year, which sets out how the Council carries out its Treasury Management activity, including how it manages its long term borrowing. The Council also carries a Aa2 credit rating (the second highest that can be awarded) that is a reflection that it manages its financial affairs, including its long term borrowing, in a proper manner

8.4 The Council’s current long term borrowing position is a position that has built up

over many years. The Council has tried to develop a balanced portfolio over the years that gives the Council and the tax payer in Warrington the best deal available but tries to manage the risk of increases in interest rates.

What are LOBO’s and what are the risks?

8.5 Lobo’s or Lender Option Borrower Options are long term borrowing, usually 50-

60 years on a fixed rate. At certain intervals the Lender has the option to formally apply to change the rate (the Lenders option), this is inevitably only going to happen if rates are increasing and they wish to increase the fixed rate. The Borrower then has the option of either agreeing the increase or repaying the debt in whole. The risk to borrowers is that the lender proposes an increase in rates, in particular a significant increase, and they have no option but to agree to the increase and could be left paying a very high interest rate.

8.6 The Council’s exposure to this risk has been mitigated by a number of actions:-

The Council has spread the risk by having 11 Lobo’s with 6 different lenders over a number of years.

The Council’s portfolio of Lobos is structured so that the call dates (the date a lender can exercise their option to review rates) are staggered with the next call date on each Lobo falling at different times and at different frequencies. Therefore the Council is not exposed to all Lenders wanting

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Agenda Item 12

to exercise their option at a similar time or to short term fluctuations in the financial markets.

The Council has investments of a significant element of which is very short term and could be called upon to provide significant funding very quickly if it did need to repay a Lobo.

The Council also has access to the PWLB to take out new borrowing to refinance the repayment of any Lobo’s if unacceptable rate increases were being requested.

The Council has worked hard to obtain its Aa2 credit rating that will also allow it to have access to the best rates available in the wider market if it did need to refinance any Lobo.

8.7 Therefore given all these factors it is unlikely the Council would need to renew a Lobo if the terms were unfavourable.

8.8 The Council is currently benefitting from slightly lower interest rates on its

standard Lobo’s than what was available from PWLB at the time the Lobo was taken out and has mitigated the risk if any lender exercises an option to increase rates to an unacceptable level.

8.9 The Council’s Lobo’s carry an average rate of interest 4.4%. 8.10 The major criticisms being levied against Councils is against those with ‘floater

lobo loans’ (loans that increase in interest when interest rates fall) which now attract a high rate of interest. The Council has never had any ‘floater loans’. Also many treasury advisors are being accused of recommending Lobos to their clients then earning a large commission on the deal. Warrington did not employ any treasury advisors when its Lobo’s deals were taken out.

9. DEBT RESCHEDULING

9.1 Debt rescheduling opportunities have been limited in the current economic

climate and consequent structure of interest rates. No debt rescheduling was undertaken during the first six months of 2015/16.

10. COMPLIANCE WITH TREASURY AND PRUDENTIAL LIMIT 10.1 It is a statutory duty for the Council to determine and keep under review the

“Affordable Borrowing Limits”. The Council’s approved Treasury and Prudential Indicators (affordability limits) are outlined in the approved Treasury Management Strategy Statement (TMSS).

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10.2 During the financial year to date the Council has operated within the treasury

limits and prudential indicators set out in the Council’s TMSS and in compliance with the Council's Treasury Management Practices (TMP). The main prudential and treasury indicators are shown in the table below:

Prudential Indicator 2015/16 2015/16

Indicator Q2 Forecast

£m £m

Capital Expenditure 296.7 225.0

In Year Borrowing Requirement Actual

Authorised limit for external debt 582.1 262.6

Operational boundary for external debt 485.3 262.6

Gross Borrowing 475.3 262.6

Investments -49.5

Net Borrowing 475.3 213.1

Capital Financing Requirement (CFR) 525.2 436.4

Ratio of financing costs to net revenue stream 8.5 8.5 Incremental impact of capital investment decisions: a) Increase in council tax (band change) per annum 52.1 -32.82

Limit of fixed interest rates based on net debt 100% 100%

Limit of variable interest rates based on net debt 40% 40%

Principal sums invested > 364 days 30% 24%

Maturity structure of borrowing limits:

Under 12 months 25% 10.6%

12 months to 2 years 25% 7.6%

2 years to 5 years 35% 7.6%

5 years to 10 years 30% 0.1%

10 years and above 100% 74.1%

11. YEAR END FORECAST POSITION

11.1 The Council is forecasting a £2m underspend position on the Loans &

Investments budget at the year end, based on the figures at the end of September 2015.

12. TREASURY DEVELOPMENTS

12.1 Loans to Registered Providers – during the period the Council continued to expand its Loans to Registered Providers Scheme. In line with the Council’s 2015/16 Capital Programme agreed by Full Council in March 2015, loans to Cheshire Peaks & Plains and St Vincent’s Housing were agreed in October 2015. A further loan is being discussed with another Registered Provider and a future report will go to the Executive Board for approval if the deal progresses.

12.2 Omega – a further facility was approved by the Executive Board in July of £4m to

fund infrastructure works in relation to the new Barrow Hall Primary School Development.

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12.3 The remainder of the £7.5m facility was taken in October and a repayment of £1,225,634 was repaid in October 2015, leaving a balance outstanding of £6,274,366.

12.4 Bond Issue – in line with the Council’s 2015/16 Treasury Management Strategy

agreed by full Council on 2nd March 2015 the Council issued a £150m City Bond in August 2015. The bond is structured that the Council have initially drawn down £50m of the bond with the option to draw down the further £100m if the Council wishes to do so in the future. The bond is forecast to generate a saving to the Council in the region of £12m in borrowing costs including £1m in the current financial year.

12.5 Due to a last minute technical legal request by the bond issuing lawyers the bond

had to be agreed by the leader of the Council. This approval was in line with the Council’s constitution, the opposition party leaders and the Chair of the Scrutiny Committee. The Audit & Corporate Governance Committee, Treasury Management Board and Executive Board had also been fully informed about the bond issue.

12.4 Local Authority Property Fund – The Council’s investment in the Churches,

Charities and Local Authority (CCLA) Property Fund is a unit trust fund that invests in commercial and industrial property in the UK. The fund continues to perform will and is currently yielding an investment return of 6.55%. The initial £10m investment has increased in value by £2.365m during the past two years.

12.5 Treasury Management Board - The Treasury Management Board is a body of

leading Councillors that receives and debates details of the risks and opportunities of treasury management and related capital programme developments. There have been a number of meetings in the period.

12.6 Challenger Banks – in line with the Council’s 2015/16 Treasury Management

Strategy the Council has invested £5m with Aldermore Bank during the financial year.

12.7 Green Energy Bonds – during the period the Council invested a further £10m in

green energy bonds. The Treasury Management Board and Audit and Corporate Governance Committee have been updated on an ongoing basis of the investments. At their meeting of 25 September 2015 the Audit and Corporate Governance Committee approved the addition of Empower Community Energy and Livewire Community Energy to the Council’s list of counterparties.

12.8 Local Government Association (LGA) Municipal Bond Agency (MBA) – the LGA have set up an agency (Local Capital Finance Company (LCFC)) whereby low or high levels of bond finance could be obtained by Local Authorities as an alternative option to the PWLB. The LGA and 48 councils have signed up to become investors in the company, with the Council investing £200k in the bond agency. The first bond is expected in 2016.

12.9 Contract Monitoring – the Council has set up an effective contract monitoring system to monitor its loan contracts on an ongoing basis. This will be subject to a full audit review in 2015/16

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13.1 Not confidential.


14.1 Due to the nature of the report, the financial implications are contained throughout the report.

14.2 In order to achieve a balanced budget, the authority relies upon generating

maximum interest from its investments whilst minimising the exposure to risk. In order to achieve this, investments are only placed with institutions which are included on the investment counterparty list. Investment durations do not exceed those as advised by Capita credit ratings which are associated with the specific institutions.

14.3 Where the authority is required to borrow to meet the needs of the authority,

officers will evaluate market information on timings and options in order to ensure the best deal for the Council.

15. RISK ASSESSMENT

15.1 A full risk assessment has been undertaken. The Council’s annual Treasury Management Strategy Statement details the financial risks facing the Council’s treasury portfolio over the coming year.


16.1 The Finance Service undertakes equality impact assessment (EIA) in its wider functions. Service changes that emerge from proposals contained in the TMSS are subject to equality impact assessments.

17. CONSULTATION

N/A

18. CONCLUSION

18.1 All treasury activity for the first half of the year was carried out in full compliance with the Council’s Treasury Management Strategy Statement which was approved by Full Council on 2nd March 2015.


19.1 To ensure the Council compiles with the 2009 revised CIPFA Treasury Management Code of Practice.

20. RECOMMENDATIONS

20.1 That the committee note the report.

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Agenda Item 12

21. BACKGROUND PAPERS

Treasury working papers



Danny Mather Corporate Finance Manager


Clearance Details


SMB


Chief Finance Officer Lynton Green 9.11.15

Solicitor to the Council Timothy Date

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Agenda Item 12

Appendix 1

GLOSSARY OF TERMS

Basis Point (BP) 1/100th of 1%, i.e. 0.01%

Base Rate Minimum lending rate of a bank or financial institution in the UK

Benchmark A measure against which the investment policy or performance of a fund manager can be compared.

Bill of Exchange A financial instrument financing trade.

Callable Deposit A deposit placed with a bank or building society at a set rate for a set amount of time. However, the borrower has the right to repay the funds on pre agreed dates, before maturity. This decision is based on how market rates have moved since the deal was agreed. If rates have fallen the likelihood of the deposit being repaid rises, as cheaper money can be found by the borrower.

Cash Fund Management

Fund management is the management of an investment portfolio of cash on behalf of a private client or an institution, the receipts and distribution of dividends and interest, and all other administrative work in connection with the portfolio.

Certificate of Deposit Evidence of a deposit with a specified bank or building society repayable on a fixed date. They are negotiable instruments and have a secondary market; therefore the holder of a CD is able to sell it to a third party before the maturity of the CD.

Commercial Paper Short-term obligations with maturities ranging from 2 to 270 days issued by banks, corporations and other borrowers. Such instruments are unsecured and usually discounted, although some may be interest bearing.

Corporate Bond Strictly speaking, corporate bonds are those issued by companies. However, the term is used to cover all bonds other than those issued by governments in their own currencies and includes issues by companies, supranational organisations and government agencies.

Counterparty Another (or the other) party to an agreement or other market contract (e.g. lender/borrower/writer of a swap/etc.)

CDS Credit Default Swap – a swap designed to transfer the credit exposure of fixed income products between parties. The buyer of a credit swap receives credit protection, whereas the seller of the swap guarantees the credit worthiness of the product. By doing this, the risk of default is transferred from the holder of the fixed income security to the seller of the swap.

CFR Capital Financing Requirement

CIPFA Chartered Institute of Public Finance and Accountancy

CLG Department for Communities and Local Government

CPI Consumer Price Index – calculated by collecting and comparing prices of a set basket of goods and services as bought by a typical consumer, at regular intervals over time. The CPI covers some items that are not in the RPI, such as unit trust and stockbrokers fees, university accommodation fees and foreign students’ university tuition fees.

DCLG Department of Communities and Local Government

Derivative A contract whose value is based on the performance of an underlying financial asset, index or other investment, e.g. an option is a derivative because its value changes in relation to the performance of an underlying stock.

DMADF Deposit Account offered by the Debt Management Office, guaranteed by the UK government.

ECB European Central Bank – sets the central interest rates in the EMU area. The ECB determines the targets itself for its interest rate setting policy; this is to keep inflation within a band of 0 to 2%. It does not accept that monetary policy is to be used to manage fluctuations in unemployment and growth caused by the business cycle.

EMU European Monetary Union

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Equity A share in a company with limited liability. It generally enables the holder to share in the profitability of the company through dividend payments and capital gain.

EU European Union

Fed. Federal Reserve Bank of America – sets the central rates in the USA

Floating Rate Notes Bonds on which the rate of interest is established periodically with reference to short-term interest rates

Forward Deal The act of agreeing today to deposit funds with an institution for an agreed time limit, on an agreed future date, at an agreed rate.

Forward Deposits Same as forward dealing (above).

FSA Financial Services Authority – body responsible for overseeing financial services.

Fiscal Policy The Government policy on taxation and welfare payments.

GDP Gross Domestic Product

GF General Fund

Gilt Registered British government securities giving the investor an absolute commitment from the government to honour the debt that those securities represent.

Gilt Funds Pooled fund investing in bonds guaranteed by the UK government.

Government MMF MMFs that invest solely in government securities, or reverse repurchase agreements backed by Government Securities.

HM Treasury Her Majesty’s Treasury

HRA Housing Revenue Account

IFRS International Financial Reporting Standards

LIBID London Interbank Bid Rate – LIBID is calculated through a survey of London banks to determine the interest rate which they are willing to borrow large Eurocurrency deposits.

LOBO’s Lenders Option Borrowers Option loans

Money Market Fund (MMF)

A well rated, highly diversified pooled investment vehicle whose assets mainly comprise of short term instruments. It is very similar to a unit trust, however in a MMF.

Monetary Policy committee (MPC)

Government body that sets the bank rate (commonly referred to as being base rate). Their primary target is to keep inflation within plus or minus 1% of a central target of 2.5% in two years time from the date of the monthly meeting of the Committee. Their secondary target is to support the Government in maintaining high and stable levels of growth and employment.

MRP Minimum Revenue Provision

MTFP Medium Term Financial Plan

Open Ended Investment Companies

A well diversified pooled investment vehicle, with a single purchase price, rather than a bid/offer spread.

Other Bond Funds Pooled funds investing in a wide range of bonds.

PFI Private Finance Initiative

PWLB Public Works Loan Board

QE Quantitative Easing

Reverse Gilt Repo This is a transaction as seen from the point of view of the party which is buying the gilts. In this case, one party buys gilts from the other and, at the same time and as part of the same transaction, commits to resell equivalent gilts on a specified future date, or at call, at a specified price.

Retail Price Index (RPI)

Measurement of the monthly change in the average level of prices at the retail level weighted by the average expenditure pattern of the average person.

RPIX As RPI but excluding mortgage interest rate movements.

RPIY As RPI but excluding mortgage interest rate movements and changes in prices caused by changes in taxation.

Sovereign Issues (Ex UK Gilts)

Bonds issued or guaranteed by nation states, but excluding UK government bonds.

Supranational Bonds Bonds issued by supranational bodies, e.g. European investment bank. These bonds – also known as Multilateral Development Bank bonds – are

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Agenda Item 12

generally AAA rated and behave similarly to gilts, but pay a higher yield (“spread”) given their relative illiquidity when compared with gilts.

SORP Statement of Recommended Practice

S151 Section 151 Officer

Term Deposit A deposit held in a financial institution for a fixed term at a fixed rate.

Treasury Bill Treasury bills are short term debt instruments issued by the UK or other governments. They provide a return to the investor by virtue of being issued at a discount to their final redemption value.

UBS Union Bank of Switzerland

US United States

WARoR Weighted Average Rate of Return is the average annualised rate of return weighted by the principal amount in each rate.

WAM Weighted Average Time to Maturity is the average time, in days, till the portfolio matures, weighted by principal amount.

WATT Weighted Average Total Time is the average time, in days, that deposits are lent out for, weighted by principal amount.

WA Risk Weighted Average Credit Risk Number. Each institution is assigned a colour corresponding to a suggested duration using Sector’s Suggested Credit Methodology.

Model WARoR Model Weighted Average Rate of Return is the WARoR that the model produces by taking into account the risks inherent in the portfolio.

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WARRINGTON BOROUGH COUNCIL AUDIT AND CORPORATE GOVERNANCE COMMITTEE - Date 19 November 2015 Report of the: Director of Finance and Information Services Report Author: Danny Mather Contact Details: [email protected] Ward Members:

All

REVIEW OF MINIMUM REVENUE PROVISION (MRP) 1. PURPOSE 1.1 To seek approval of the Audit & Corporate Governance Committee to make three

changes to the Council’s Minimum Revenue Provision Policy Statement, which will lead to a more prudent approach in repaying the Council’s debt.

2. CONFIDENTIAL OR EXEMPT 2.1 The report is not confidential and exempt. 3. BACKGROUND 3.1 During the past year the Council have done a detailed piece of work to review the

Council’s MRP position with the aim of making it more prudent. This work as resulted in a proposal to change the calculation of the Council’s MRP in the following three areas:

1. Use of Capital Receipts 2. Repaying pre 2007/8 debt over a 50 year period 3. Change to the Calculation of item A

3.2 The above proposed changes will not only lead to a more prudent MRP

repayment profile for Council Tax payers, but offers the opportunity of a £16m+ saving to the Council.

3.3 The Council’s Treasury Advisors Capita has advised on these changes and fully

verifies the logic of them. A paper on the proposal has been shared with the Council’s Auditors Grant Thornton who has indicated that they are unlikely to challenge the proposal. Several other Council’s in England & Wales have already implemented options 1 & 3.

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4. OVERVIEW OF MRP 4.1 Local authorities are required to set aside ‘prudent’ revenue provision for debt

repayment (MRP) where they have used borrowing or credit arrangements to finance capital expenditure. Statutory Guidance covering Minimum Revenue Provision (published February 2012 by the Department for Communities and Local Government) sets out various options and boundaries for calculating prudent provision. The key principle is that the Local Authorities (Capital Finance and Accounting) (England) (Amendment) Regulations 2008 requires each authority to 'determine for the current financial year an amount of minimum revenue provision which it considers to be prudent.’

4.2 The guidance requires authorities to publish an annual MRP policy statement

outlining how prudent provision is to be made. The guidance sets out various options for calculating prudent MRP but does not rule out alternative approaches that are not specifically mentioned. It is up to each Council to determine what a prudent level of provision is to be valid; the policy statement must be approved by the Council Meeting. The Council’s policy statement is approved by the Audit & Corporate Governance Committee and full Council annually as part of the annual budget setting process.

5. USE OF CAPITAL RECEIPTS 5.1 The Council has not in the past made any voluntary set-aside of capital receipts

to redeem debt. Traditionally under pre-2007/08 MRP rules, setting aside capital

receipts to redeem debt would simply have reduced the balance on which the

annual 4% was charged. However since 2007/08 this is no longer an absolute

rule, and any amounts set aside from capital receipts can be taken into account

as the Council believes to be appropriate when setting the level of its annual

MRP, provided that a prudent provision still results.

5.2 The Council therefore proposes that it will apply capital receipts to redeem debt.

5.3 In the context of MRP, capital receipts have consistently been capable of use in a

manner which may be designed to achieve a benefit in terms of MRP liability.

The Council are proposing adopting the option of using Capital Receipts to repay

debt via an adjustment to the MRP charge.

5.4 The Council believe it is prudent to adopt this option because it is allowable within

the current regulation (The ability to use capital receipts for this purpose is

governed by Regulation 23 of the 2003 Regulations). The Council only borrows

for Capital Expenditure so it is logical that a capital receipt can be used to offset

its MRP liability to repay debt.

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6. REPAYING PRE 2007/8 DEBT OVER A 50 YEAR PERIOD

6.1 Like many authorities the Council has continued to apply the previous regulatory Approach, calculating MRP at 4% of the reducing balance on General Fund capital expenditure incurred prior to 2007/08 which was funded by borrowing (£78.5m). The Council would like to repay this debt off over 50 years (average life of Council assets).

6.2 The table in appendix 1 provides an analysis of the debt repayment profiles and

savings from the current methodology to the proposed new methodology.

6.3 The Council are also proposing making a one off retrospectively adjustment in the

accounts for the over provision of MRP since 2007/8 with regards to option B.

The Council agreed this principle with the Audit Commission in agreeing its

Golden Square MRP adjustments several years ago and other Councils have

adopted this approach

6.4 A shorter repayment period than 50 years would lead to higher annual revenue charges and the present value of repayments would also be higher. In any case, 50 years represents the maximum repayment period as the Council retains the right to accelerate repayments in future years if resources permit.

6.5 The Council are proposing moving to a 50 year MRP repayment period due to the

following prudent reasons:

The 4% calculation is applied on a reducing balance basis. This means the

‘debt’ that the 4% is applied to is never fully extinguished. Appendix 1

shows that under this method £10.6m of debt is still outstanding

The Council’s average asset life is 41 years thus if we go back to 2004 we

consider 50 years to be prudent. Revaluations also tend to increase the life

of assets. The Head of Estates also verifies the 50 year life assessment

For the majority of the last parliament, the ‘needs’ based formula for

allocating resources through the annual local government finance

settlement has been frozen. Subsequent reductions in local government

funding have also seen significant reductions in central government

support through revenue support grant. This has severed the link between

the regulatory method of calculating MRP and the associated funding

provided through the local government finance settlement.

Repaying the debt over 50 years results in the debt being fully

extinguished after year 50 as can be seen in appendix 1

Repaying the debt over 50 years results in a Net present Value saving to

the Council of £3.1m over the 50 year repayment period

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Linking MRP to the average useful life of an asset is in keeping with the general principle of achieving a prudent approach set out in the DCLG guidance which is that the profile of MRP charges should reflect the economic benefit the Council gets from using the asset to deliver services over its useful life. This ensures that Council Tax payers are being charged each year in line with asset usage and prevents current taxpayers meeting the cost of future usage or future tax payers being burdened with “debt” relating to assets that are no longer in use.

There is increasing acceptance that MRP should more properly be linked to the average useful life of the assets involved and the current regulatory approach (a percentage basis) does not reflect this view. Currently, each year 4% of the outstanding (reducing) balance is provided for out of the revenue budget as MRP which means the debt will be finally repaid many years into the future (in the Council’s case this is 450+ years).

The table in appendix 1 shows that the Council if they adopt a 50 year repayment profile would have overpaid MRP of £9.3m since 2008/9. So it is logical that a retrospective adjustment is made for this to benefit current taxpayers who have funded this over payment. This principle was also used by the Council previously when making the Golden Square MRP adjustment several years ago. The use of a retrospective adjustment was also deemed prudent by the Council’s previous auditors the Audit Commission.

7. ITEM A CHANGE

7.1 On the 1st April 2004 when the prudential code came in complicated changes

were made to the capital finance system. In order to reconcile the old and new

systems of capital financing a calculated adjustment was made based on

guidance at the time. This adjustment was known as Item A. This was a debt

figure that is stripped out of the debt repayment calculation and is in effect an

amount of debt that will never be repaid. For the Council the Item A figure was

calculated at £33.9m.

7.2 During 2015 the Council commissioned an independent study of the calculation of

the Council’s Item A calculation by Capita Treasury Services (Council’s Treasury

advisors). Due to a number of accountancy changes to the accounts Capita

Treasury Services have calculated a new revised Item A figure for the Council of

£35.6m. Using the revised figure this results in a yearly saving to the Council of

£65.8k and if charge retrospectively a one off saving to the Council of £678k.

7.3 This would appear a prudent option for the Council to adopt because the current

calculation of Item A is incorrect. In terms of the retrospective charge current

taxpayers have since 2007/8 been overcharged by £678k on MRP and it would

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be logical that they should gain the benefit for the corresponding adjustment. The

Council have the previous agreement of the Audit Commission that retrospective

charges are prudent and the precedent also exists from other Councils.

8. FINANCIAL IMPLICATIONS 8.1 The Council currently have £3.2m of capital receipt reserves and are forecast to

receive another £3.5m in capital receipts over the next two years. Thus potentially £6.7m of receipts are available to offset against the MRP charge. However £4.1m of these reserves are already allocated to fund the capital programme. Thus there are £2.6m on unallocated receipts available to offset the Council’s MRP charge. The option also exists to use the £4.1m of allocated receipts and replace this element by borrowing but this would also incur additional borrowing costs.

8.2 The table in appendix 1 shows the repayment profile of the current methodology

and the proposed repayment profile. The repayment profile shows that there are savings to current taxpayers up to 2025/26 then the payments increase progressively up to 2057/58. In the final year of repayment (2057/58), the revenue cost compared to the regulatory method is expected to peak at around £1.145m per annum. In present value terms however, this additional cost is equivalent to just £254k per annum The NPV savings under the 50 year repayment option are £3.1m and the debt is fully repaid after 50 years. Under the current repayment methodology £10.2m is still outstanding at the end of the 50 year period. A retrospective one off saving of £9.3m also exists under the 50 year debt repayment option.

8.3 The adoption of the Item A change will result in an ongoing saving of £67k and a

one of retrospective saving of £678k. 8.4 The adoption of all of these options would generate a saving opportunity of

£15.8m to the 2016/17 MTFP. For prudence reasons and to avoid recording a negative MRP in the Council’s accounts it is recommended that this be allocated over a three to four year period.

9. RISK ASSESSMENT 9.1 Incorporated into the risk assessment process of the Council’s Treasury

Management Strategy.

10. EQUALITY AND DIVERSITY / EQUALITY IMPACT ASSESSMENT 10.1 There are no specific Equality and Diversity Impact Issues as a result of the

report. Where relevant the implementation of new developments includes Equality Impact Assessments as part of the normal process.

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11. CONSULTATION 11.1 The Council’s Treasury Management Board was briefed on this issue at their

meeting of 4th November 2015. 12. REASONS FOR RECOMMENDATION 12.1 To ensure that a prudent policy is adopted for the calculation of the Council’s

MRP. 13. RECOMMENDATION

13.1 That the Audit and Corporate Governance Committee:

1. Approve the adoption of the use of capital receipts, repayment of debt over 50 years and the change to the calculation of Item A, for incorporation into the Council’s MRP Policy Statement.

14. BACKGROUND PAPERS 14.1 None Contacts for Background Papers:


Danny Mather [email protected] 01925 442344


Approved Yes No

Chair of Audit and Corporate Governance 10.11.15

Relevant Executive Director


S151 Officer 6.11.15

Relevant Assistant Director

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Appendix 1

Proposed Change to Minimum Revenue Provision Annual Savings and Costs

Year

Current

MRP

Charge

Proposed

MRP

Charge Saving/ (Cost)

Net Present Value 43,534,221 40,401,390 3,132,831

2008/09 3,140,440 1,570,220 1,570,220

2009/10 3,014,822 1,570,220 1,444,602

2010/11 2,894,230 1,570,220 1,324,010

2011/12 2,778,460 1,570,220 1,208,240

2012/13 2,667,322 1,570,220 1,097,102

2013/14 2,560,629 1,570,220 990,409

2014/15 2,458,204 1,570,220 887,984

2015/16 2,359,876 1,570,220 789,656

2016/17 2,265,481 1,570,220 695,261

2017/18 2,174,861 1,570,220 604,641

2018/19 2,087,867 1,570,220 517,647

2019/20 2,004,352 1,570,220 434,132

2020/21 1,924,178 1,570,220 353,958

2021/22 1,847,211 1,570,220 276,991

2022/23 1,773,323 1,570,220 203,103

2023/24 1,702,390 1,570,220 132,170

2024/25 1,634,294 1,570,220 64,074

2025/26 1,568,922 1,570,220 -1,298

2026/27 1,506,165 1,570,220 -64,055

2027/28 1,445,919 1,570,220 -124,301

2028/29 1,388,082 1,570,220 -182,138

2029/30 1,332,559 1,570,220 -237,661

2030/31 1,279,256 1,570,220 -290,964

2031/32 1,228,086 1,570,220 -342,134

2032/33 1,178,963 1,570,220 -391,257

2033/34 1,131,804 1,570,220 -438,416

2034/35 1,086,532 1,570,220 -483,688

2035/36 1,043,071 1,570,220 -527,149

2036/37 1,001,348 1,570,220 -568,872

2037/38 961,294 1,570,220 -608,926

2038/39 922,842 1,570,220 -647,378

2039/40 885,929 1,570,220 -684,291

2040/41 850,491 1,570,220 -719,729

2041/42 816,472 1,570,220 -753,748

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Agenda Item 13

Year

Current

MRP

Charge

Proposed

MRP

Charge Saving/ (Cost)

2042/43 783,813 1,570,220 -786,407

2043/44 752,460 1,570,220 -817,760

2044/45 722,362 1,570,220 -847,858

2045/46 693,468 1,570,220 -876,752

2046/47 665,729 1,570,220 -904,491

2047/48 639,100 1,570,220 -931,120

2048/49 613,536 1,570,220 -956,684

2049/50 588,994 1,570,220 -981,226

2050/51 565,434 1,570,220 -1,004,786

2051/52 542,817 1,570,220 -1,027,403

2052/53 521,104 1,570,220 -1,049,116

2053/54 500,260 1,570,220 -1,069,960

2054/55 480,250 1,570,220 -1,089,970

2055/56 461,040 1,570,220 -1,109,180

2056/57 442,598 1,570,220 -1,127,622

2057/58 424,894 1,570,220 -1,145,326

TOTAL MRP 68,313,536 78,511,000 -10,197,464

Current

MRP

Charge

Proposed

MRP

Charge

Debt Outstanding after 50 Years £10,622,358 £0

MRP Paid over 50 Years £68,313,536 £78,511,000

Savings £0 £3,132,831

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WARRINGTON BOROUGH COUNCIL AUDIT AND CORPORATE GOVERNANCE COMMITTEE – Date 19

th November 2015

Report of the:


Report Author: Mark Watkins Exchequer Manager, Benefits & Exchequer Services

Contact Details: Email Address: [email protected]

Telephone: 01925 442232

Ward Members:

N/A

TITLE OF REPORT: WRITE OFF OF UNRECOVERABLE COUNCIL TAX DEBT

1. PURPOSE 1.1 To advise Members of the amount of unrecoverable council tax debt required to

be written off. 2. CONFIDENTIAL OR EXEMPT 2.1 The paper contains no information that is deemed confidential or exempt. 3. INTRODUCTION AND BACKGROUND 3.1 The Benefits & Exchequer Service is responsible for the billing, collection and

recovery of Council Tax. On an annual basis this equates to £92m. Collection performance remains extremely good. In 2014-15 collection was 97.1%.

3.2 All Council Tax debt is considered recoverable and the Service makes all

necessary efforts to collect Council Tax due. However, there will be limited circumstances when it is appropriate to either write off the debt, or consider the write off of monies owed to the Council. Some of this is covered by statute or an instruction by the courts (remission) and other areas will be considered by local management in accordance with agreed policy.

3.3 Where such circumstances occur, and all avenues of recovery have been

exhausted, the debts are referred to the Director of Finance and Information Services with a recommendation of writing off the debt. The Director of Finance and Information Services (under authority delegated to the Section 151 Officer for the Council), will authorise the debts for write off as appropriate.

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Agenda Item 14

3.4 Members will be re-assured the Council follows set legislation and guidance when

billing for Council Tax. The collection process is highlighted below:

o Serve a demand notice (bill) o Serve an instalment reminder notice and/or a second reminder notice. o Serve a final notice o Make a complaint to Magistrates and issue a summons to attend a Liability Order

Hearing. o Make an application for a Liability Order before the Magistrates o Serve a notice of Liability Order and request for information as to income details. o Attach to Earnings or Benefit where income details are known. o Where income details are not known, pass the Liability Order to an Enforcement

Agent to obtain payment or to take control of goods for possible sale. o Recycle the case to a second Enforcement Agent if the first is unsuccessful.

If arrears are in excess of £3,000 the case is passed to the Court Officer who will:

o Visit the taxpayer at their home. o As a last resort consider prosecution in the Magistrates Court for failing to provide

requested information with regards to income. o Consider applying for a Charging Order where the arrears are in excess of

£1,000 and the taxpayer is the home owner. o Consider a petition for bankruptcy where the arrears are in excess of £3,000 and

the taxpayer has likely assets in excess of £20,000 (usually a home owner). o Finally serve a pre-committal letter on the taxpayer informing the Council may

consider committal proceedings against them to recover the arrears.

It is only when the above steps have been followed and all options investigated that the debt is considered for writing off.

4. COUNCIL TAX DEBT NOMINATED TO BE WRITTEN OFF DURING THE

CURRENT FINANCIAL YEAR 4.1 As advised in the Governance report in December 2014 Officers are continuing

their ongoing review of aged debt. This has resulted in the amounts at point 4.4 below being recommended for write off.

4.2 Future years will see the Committee asked to endorse further write off sums as

the Service undertakes reviews of each subsequent year to those listed below. 4.3 Whilst the sums appear significant it is important to note collection was 99% and

the Council collected some £344m of council tax during this period.

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Agenda Item 14

4.4 Yearly amounts written off

Financial Year Grand Total

2004-05 £265,244.58

2005-06 £247,223.54

2006-07 £320,087.20

2007-08 £333,107.16

2008-09 £205,639.28

Grand Total £1,371,301.76

5. RECOMMENDATION 5.1 Members are asked to note

a) The debt approved for write-off under delegated procedure by the Director of Finance and Information Services.

6. BACKGROUND PAPERS No background papers


Approved Yes No

Relevant Potfolio Holder Cllr Russ Bowden

SMB




Relevant Director Lynton Green

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Agenda Item 15

WARRINGTON BOROUGH COUNCIL AUDIT AND CORPORATE GOVERNANCE COMMITTEE – Date 19

th November 2015

Report of the:


Report Author: Mark Watkins Exchequer Manager, Benefits & Exchequer Services

Contact Details: Email Address: [email protected]

Telephone: 01925 442232

Ward Members:

N/A

TITLE OF REPORT: WRITE OFF OF UNRECOVERABLE DEBT

1. PURPOSE 1.1 To advise Members of the amount of unrecoverable debt required to be written

off during the past six months. The write-offs for the second half of the last financial year were reported to Members at the April Committee.

1.2 To advise Members of the age profile of the debts written off. 2. CONFIDENTIAL OR EXEMPT 2.1 The paper contains no information that is deemed confidential or exempt. 3. INTRODUCTION AND BACKGROUND 3.1 The Benefits & Exchequer Service is responsible for the billing, collection and

recovery of the majority of the Council’s income. On an annual basis, this includes £92m in Council Tax, £109m in Business Rates, £54m in miscellaneous income and £2m in Housing Benefit overpayments.

3.2 Collection performance remains extremely good; however, there are occasions

where we are unable to pursue an outstanding debt any further. This could occur for a number of reasons, e.g. the person owing the debt has passed away, has left the Borough without trace, a Company has been dissolved or gone into liquidation or the debt is no longer economically viable to pursue.

199

Agenda Item 15

3.3 Where such circumstances occur, and all avenues of recovery have been

exhausted, the debts are referred to the Director of Finance and Information Services on a periodic basis, with a recommendation to write off the debt. These referrals are undertaken with the approval of an Assistant Director from the Directorate where the debt originated. The Director of Finance and Information Services (under authority delegated to the Section 151 Officer for the Council), then authorises the debts for write off as appropriate.

4. DEBT WRITTEN OFF DURING THE CURRENT FINANCIAL YEAR Period Covered April – September 2015 4.1 Miscellaneous Income:

REVENUES AND BENEFITS

2015-2016

WRITE OFF CONTROL

Date

SubmittedDebtor Type

No Of

Debts Net Value VAT Total Value

Authorising

Officer

Date Of

Approval

Date Of

Write Off

17/04/2015 PDC Training - P Owen 9 876.50£ -£ 876.50£ Lynton Green 30/04/2015 01/05/2015

17/04/2015 Walton Hall - N Simpson 12 3,822.37£ 170.56£ 3,992.93£ Lynton Green 30/04/2015 01/05/2015

17/04/2015 General Sundry Debts 49 44,500.98£ 1,069.21£ 45,570.19£ Lynton Green 30/04/2015 01/05/2015

19/05/2015 Highways - D Vasey 44 44,809.68£ 862.37£ 45,675.05£ Lynton Green 19/05/2015 22/05/2015

19/05/2015 Social Services - Steve Peddie 29 15,236.84£ -£ 15,236.84£ Lynton Green 19/05/2015 22/05/2015

19/05/2015 General Sundry Debts 12 4,493.86£ -£ 4,493.86£ Lynton Green 19/05/2015 22/05/2015

19/05/2015 Social Services - Frank Pacey 15 3,901.05£ -£ 3,901.05£ Lynton Green 19/05/2015 22/05/2015

19/05/2015 Bulky Waste - Lisa Doran 23 461.67£ -£ 461.67£ Lynton Green 19/05/2015 22/05/2015

22/05/2015 Small Balances 9 37.28£ -£ 37.28£ Gemma Woodfield 22/05/2015 22/05/2015


29/06/2015 Licensing - Dave Watson 11 1,985.00£ -£ 1,985.00£ Lynton Green 29/06/2015 01/07/2015



29/06/2015 General Sundry Debts 3 2,809.54£ -£ 2,809.54£ Lynton Green 29/06/2015 03/07/2015

27/07/2015 Westy Sure Start - Angela Conway 4 1,881.25£ -£ 1,881.25£ Shaer Halewood 29/07/2015 04/08/2015

27/07/2015 School Meals - Garry Bradbury 28 1,152.18£ -£ 1,152.18£ Shaer Halewood 29/07/2015 04/08/2015

27/07/2015 General Sundry Debts 4 367.50£ -£ 367.50£ Shaer Halewood 29/07/2015 04/08/2015

27/07/2015 Social Services - Steve Peddie 34 22,222.67£ -£ 22,222.67£ Shaer Halewood 29/07/2015 04/08/2015


19/08/2015 General Sundry Debts 18 7,975.69£ 280.66£ 8,256.35£ Lynton Green 19/08/2015 21/08/2015


19/08/2015 Pest Control - Kathy Sephton 21 969.33£ 189.43£ 1,158.76£ Lynton Green 19/08/2015 21/08/2015

19/08/2015 Trade Refuse & Recycling - Lisa Doran 39 7,157.10£ 461.62£ 7,618.71£ Lynton Green 19/08/2015 21/08/2015

19/08/2015 Parr Hall & Leisure - Steph Duerden 8 2,571.00£ 237.62£ 2,808.62£ Lynton Green 19/08/2015 21/08/2015



21/09/2015 Social Services - Frank Pacey 5 573.22£ -£ 573.22£ Lynton Green 05/10/2015 06/10/2015


21/09/2015 General Sundry Debts 2 350.00£ -£ 350.00£ Lynton Green 05/10/2015 06/10/2015


Grand Total 499 242,120.89£ 3,271.47£ 245,395.35£

200

Agenda Item 15

4.2 Housing Benefit Overpayments:

Housing Benefit Council Tenant £3,775.91

Housing Benefit Private Tenant £23,507.77

Discretionary Housing Benefit Payment £211.25

TOTAL WRITTEN OFF £27,494.93

4.3 National Non Domestic Rates (NNDR) Total Invoices 433 Total Written Off £1,358,608.65

5. AGE PROFILE OF DEBTS WRITTEN OFF 5.1 Following a request from a previous meeting a report is now provided showing

the age of the debt being written off. This is included as Appendix 1. A summary analysis is included for information. 5.2 Miscellaneous Income:

Debtor Type

Less Than A

Year Old

Debt

1 - 2 Year Old

Debt

2 - 3 Year Old

Debt

3 - 4 Year Old

Debt

4 - 5 Year Old

Debt

5 - 6 Year Old

Debt

Over 6 Years

Old DebtGrand Total

Bulky Waste - Li sa Doran £20.00 £395.00 £46.67 £461.67

Genera l Sundry Debts £2,351.00 £4,399.13 £7,441.64 £4,398.70 £12,845.70 £9,245.22 £21,166.05 £61,847.44

Highways - D Vasey £9,955.63 £756.83 £380.34 £342.44 £34,239.81 £45,675.05

Licens ing - Dave Watson £295.00 £360.00 £70.00 £180.00 £540.00 £360.00 £180.00 £1,985.00

Parr Hal l Leisure - S Duerden £1,356.60 £1,406.77 £45.25 £2,808.62

PDC Tra ining - P Owen £480.00 £50.00 £346.50 £876.50

Pest Control - Kathy Sephton £290.23 £251.40 £452.55 £50.70 £23.50 £90.38 £1,158.76

School Meals - Garry Bradbury £209.76 £432.90 £240.62 £268.90 £1,152.18

Smal l Ba lances £119.94 £43.52 £163.46

Socia l Services - Frank Pacey £5,006.86 £1,984.99 £97.86 £1,206.69 £125.52 £1,181.44 £9,603.36

Socia l Services - Steve Peddie £27,514.69 £24,744.12 £34,814.42 £6,089.57 £13,007.62 £106,170.42

Trade Refuse - Li sa Doran £1,042.94 £443.40 £1,543.83 £1,451.12 £2,155.91 £981.51 £7,618.71

Walton Hal l - N Simpson £482.90 £1,020.00 £48.00 £742.99 £1,699.04 £3,992.93

Westy Sure Start - A Conway £1,881.25 £1,881.25

Grand Total £35,307.49 £43,908.22 £43,598.29 £17,484.77 £16,963.25 £13,314.48 £74,818.85 £245,395.35

201

Agenda Item 15

5.3 Housing Benefit Overpayments

Housing Benefit Overpayments

Less than 1

Year Old

Debt

1-2 Year

Old Debt

2-3 Year

Old Debt

2-3 Year

Old Debt

4-5 Year

Old Debt

Over 6

Year Old

Debt

Total

Counci l Tenants £0.00 £0.00 £1,122.50 £0.00 £0.00 £2,653.41 £3,775.91

Private Tenants £1,770.59 £4,117.89 £2,760.70 £2,648.25 £734.86 £11,475.48 £23,507.77

Discres ionery Hous ing Payment £32.24 £127.23 £51.78 £0.00 £0.00 £0.00 £211.25

Total £1,802.83 £4,245.12 £3,934.98 £2,648.25 £734.86 £14,128.89 £27,494.93

5.4 National Non Domestic rates (NNDR)

Debtor Type

Less Than

A Year

Old Debt

1 - 2 Year

Old Debt

2 - 3 Year

Old Debt

3 - 4 Year

Old Debt

4 - 5 Year

Old Debt

5 - 6 Year

Old Debt

Over 6

Years Old

Debt

Grand Total

National Non Domestic rates NNDR £0.00 £70,897.87 £366,106.95 £522,195.72 £245,224.88 £59,703.13 £94,480.10 £1,358,608.65 6. RECOMMENDATION

6.1 Members are asked to note

a) The debt approved for write-off under delegated procedure by the Director of Finance and Information Services.

7. BACKGROUND PAPERS No background papers


Approved Yes No

Relevant Potfolio Holder Cllr Russ Bowden

SMB




Relevant Director Lynton Green

202

APPENDIX 1

Period Covered April 2015 to September 2015

Total Volume of Debt per Service Area

Debtor TypeTotal Of

Invoces No

£0.00 -

£99.99

£100.00 to

£199.99

£200.00 to

£499.99

£500.00 to

£999.99

£1,000.00 to

£1,999.99

£2,000.00

to

£4,999.99

£5,000.00

to

£9,999.99

£10,000.00

to

£19,999.99

£20,000.00

to

£49,999.99

Bulky Waste - Lisa Doran 23 23

General Sundry Debts 88 15 13 8 29 20 3

Highways - D Vasey 44 1 10 12 10 7 3 1

Licensing - Dave Watson 11 1 9 1

Parr Hall & Leisure - Steph Duerden 8 2 5 1

PDC Training - P Owen 9 5 3 1

Pest Control - Kathy Sephton 21 20 1

School Meals - Garry Bradbury 28 25 3

Small Balances 30 30

Social Services - Frank Pacey 39 14 2 17 6

Social Services - Steve Peddie 143 3 2 48 81 3 4 1 1

Trade Refuse & Recycling - Lisa Doran 39 18 10 3 8

Walton Hall - N Simpson 12 5 2 2 2 1

Westy Sure Start Nursery - Angela Conway 4 1 2 1

Grand Total 499 163 55 99 137 32 10 0 1 2

203

Volume of Invoices vs Age of Debt

Row Labels Grand Total£0.00 -

£99.99

£100.00 to

£199.99

£200.00 to

£499.99

£500.00 to

£999.99

£1,000.00 to

£1,999.99

£2,000.00

to

£5,000.00

to

£10,000.00

to

£20,000.00

to

Less Than A Year Old Debt 66 23 3 14 23 1 1 1

1 - 2 Year Old Debt 160 74 11 33 38 4

2 - 3 Year Old Debt 63 26 5 7 17 2 5 1

3 - 4 Year Old Debt 55 21 7 13 10 4

4 - 5 Year Old Debt 27 3 8 3 8 4 1

5 - 6 Year Old Debt 31 9 9 1 8 4

6 - 7 Year Old Debt 30 4 5 4 12 5

7 - 8 Year Old Debt 25 2 2 2 11 8

8 - 9 Year Old Debt 21 1 4 7 7 2

9 - 10 Year Old Debt 21 1 15 3 1 1

Grand Total 499 163 55 99 137 32 10 0 1 2

204

Sum Value of Debt Writtten of Vs Age of Debt

Row Labels Grand Total£0.00 -

£99.99

£100.00 to

£199.99

£200.00 to

£499.99

£500.00 to

£999.99

£1,000.00 to

£1,999.99

£2,000.00

to

£4,999.99

£5,000.00

to

£9,999.99

£10,000.00

to

£19,999.99

£20,000.00

to

£49,999.99Less Than A Year Old Debt £35,307.49 £355.66 £471.03 £4,526.88 £13,095.10 £1,262.52 £2,153.28 £13,443.02

1 - 2 Year Old Debt £43,908.22 £2,012.33 £1,511.93 £12,741.51 £22,331.07 £5,311.38

2 - 3 Year Old Debt £43,598.29 £1,407.55 £720.82 £3,075.74 £10,569.60 £2,698.00 £14,686.34 £10,440.24

3 - 4 Year Old Debt £17,484.77 £1,137.81 £1,056.24 £4,199.37 £6,002.61 £5,088.74

4 - 5 Year Old Debt £16,963.25 £178.70 £1,225.56 £1,217.44 £6,349.61 £5,750.00 £2,241.94

5 - 6 Year Old Debt £13,314.48 £322.01 £1,465.90 £246.84 £5,529.73 £5,750.00

6 - 7 Year Old Debt £16,445.39 £195.89 £694.39 £1,080.36 £7,354.32 £7,120.43

7 - 8 Year Old Debt £19,410.25 £115.00 £320.43 £735.18 £6,943.23 £11,296.41

8 - 9 Year Old Debt £13,949.95 £45.25 £585.46 £2,208.38 £4,836.92 £6,273.94

9 - 10 Year Old Debt £25,013.26 £154.00 £5,966.04 £2,505.18 £2,623.26 £13,764.78

Grand Total £245,395.35 £5,770.20 £8,205.76 £35,997.74 £85,517.37 £44,277.48 £27,978.76 £0.00 £10,440.24 £27,207.80

205

Total Volume of Debt Per Service Area

0 20 40 60 80 100 120 140 160

Bulky Waste - Lisa Doran

General Sundry Debts

Highways - D Vasey

Licensing - Dave Watson

Parr Hall & Leisure - Steph Duerden

PDC Training - P Owen

Pest Control - Kathy Sephton

School Meals - Garry Bradbury

Small Balances

Social Services - Frank Pacey

Social Services - Steve Peddie

Trade Refuse & Recycling - Lisa Doran

Walton Hall - N Simpson

Westy Sure Start Nursery - Angela…

206

Volume of Invoices vs Age of Debt

Sum Value of Debt Writtten of Vs Age of Debt

0 20 40 60 80 100 120 140 160 180

Less Than A Year Old Debt

1 - 2 Year Old Debt

2 - 3 Year Old Debt

3 - 4 Year Old Debt

4 - 5 Year Old Debt

5 - 6 Year Old Debt

6 - 7 Year Old Debt

7 - 8 Year Old Debt

8 - 9 Year Old Debt

9 - 10 Year Old Debt

£0.00

£5,000.00

£10,000.00

£15,000.00

£20,000.00

£25,000.00

£30,000.00

£35,000.00

£40,000.00

£45,000.00

£50,000.00

LessThan A

Year OldDebt

1 - 2 YearOld Debt

2 - 3 YearOld Debt

3 - 4 YearOld Debt

4 - 5 YearOld Debt

5 - 6 YearOld Debt

6 - 7 YearOld Debt

7 - 8 YearOld Debt

8 - 9 YearOld Debt

9 - 10Year Old

Debt

207

© 2015 Grant Thornton UK LLP | Annual Audit Letter 2014/15

The Annual Audit Letter

for Warrington Borough Council

Year ended 31 March 2015

Robin Baker

Director - Engagement Lead

T 0161 214 6399

E [email protected]

October 2015

Cover page

Gareth Winstanley

Manager

T 0161 234 6343

E [email protected]

Neil Krajewski

Assistant Manager

T 0161 234 6371

E [email protected]

209

© 2015 Grant Thornton UK LLP | Annual Audit Letter 2014/15 2

Contents

Section Page

1. Key messages 3-6

Appendices

A Key issues and recommendations 7

B Summary of reports and audit fees 8

Contents

210


Key messages

Overall review of

financial

statements

Our Annual Audit Letter summarises the key findings arising from the work that we have carried out at Warrington Borough Council ('the Council') for the year ended 31

March 2015.

The Letter is intended to communicate key messages to the Council and external stakeholders, including members of the public. Our annual work programme, which

includes nationally prescribed and locally determined work, has been undertaken in accordance with the Audit Plan that we issued in March 2015 and was conducted in

accordance with the Audit Commission's Code of Audit Practice, International Standards on Auditing (UK and Ireland) and other guidance issued by the Audit

Commission and Public Sector Audit Appointments Limited.

Financial statements audit (including

audit opinion)

We reported our findings arising from the audit of the financial statements in our Audit Findings Report on

24th September 2015 to the Audit and Corporate Governance Committee. The key messages reported were:

• the Council provided good quality working papers at the start of the audit and additional working papers

were provided when required;

• the audit has identified one material misstatements which management has agreed to amend. This relates to

the accounting requirements for IAS19 costs, and 6 other misstatements that has been corrected. We have

also agreed some amendments to improve the classification and disclosure of the notes to the accounts; and

• we identified one unadjusted misstatement which if amended would have increased gross expenditure by

£0.589m and two unadjusted disclosure errors.

We issued an unqualified opinion on the Council's 2014/15 financial statements on 28th September 2015,

meeting the deadline set by the Department for Communities and Local Government. Our opinion confirms

that the financial statements give a true and fair view of the Council's financial position and of the income and

expenditure recorded by the Council.

Going forward there are a number of changes to the accounting requirements for the 2015/16 accounts, which

the Council will need to start planning for early. Currently local authorities record the value of their transport

infrastructure assets at historical cost within their accounts. However, CIPFA, the body responsible for the

Code of Practice on Local Authority Accounting in the United Kingdom (the Accounting Code), considers

that current value is a more appropriate measurement base for local authority assets. CIPFA has therefore

211


Key messages

Overall review of

financial

statements

Financial statements audit (including

audit opinion)

decided that the measurement requirements of the Transport Code will be adopted in the Accounting Code

from 2016/17. Transport infrastructure assets will therefore be required to be measured on a depreciated

replacement cost basis from that point. This will require retrospective restatement of the 2015/16 statements

of account.

Legislation has now been passed to bring forward the deadlines for the preparation and audit of Local

Government financial statements from 2017/18 onwards. Although July 2018 is over 3 years away, local

authorities will have to make real changes in how they work to ensure they are 'match-fit' to achieve this

deadline. This will require leadership from members and senior management.

We are aware that the Council has already started to plan for the earlier deadline, however, there will be a need

for a much earlier closedown timetable and a change in approach to ensure the earlier deadline is met. There is

a need for regular engagement with the Audit and Corporate Governance Committee to provide members with

the necessary assurances that the Council is well placed to meet the earlier timescale.

Value for Money (VfM) conclusion We issued an unqualified VfM conclusion for 2014/15 on 28th September 2015.

The Council continues to demonstrate good financial performance despite the financial and demographic

pressures facing Local Government and has sound financial governance arrangements and financial controls in

place. The Council has delivered £76.8m savings by constantly challenging the way it delivers its services.

Looking ahead over the next four years the Council needs to achieve budgetary savings of £48.8m if it is to

achieve a balanced budget.

The Council engages well with stakeholders and local residents to ensure that its resources are being prioritised

in the areas that matter most. The Council understands its costs which enables it to make informed decisions

based on accurate information to drive its Corporate Strategy.

212


Key messages

Overall review of

financial

statements

Value for Money (VfM) conclusion As part of the Council's capital strategy, during 2014/15 it provided £33.75m worth of loans to registered

providers and other third parties and raised £50m as part of its recent bond issue. The Council is leading the

way to support its objectives, however, the extent of these activities does increase the Council's exposure to

risk and it remains important that the Council continues to assess the risks involved in its arrangements.

On the basis of our work, and having regard to the guidance on the specified criteria published by the Audit

Commission, we are satisfied that in all significant respects the Council put in place proper arrangements to

secure economy, efficiency and effectiveness in its use of resources for the year ending 31 March 2015.

The NAO has recently consulted on the approach to be adopted for the value for money conclusion for the

2015/16 audit. The outcome of the consultation is yet to be published. The consultation documents put

forward a changed definition for the 'proper arrangements' an authority should have in place to secure

economy, efficiency and effectiveness in its use of resources. We will be working closely with officers to

implement the changes and will summarise the changes in approach in our Audit Plan to be issued early in

2016.

Going forward the way local government operates will undoubtedly change, as highlighted within our latest

report on devolution. The report is intended as a practical guide for areas and partnerships making a case for

devolved powers or budgets.

We understand that the Council has recently submitted its proposals for devolution with Cheshire East,

Cheshire West & Chester and is currently awaiting feedback.

Our report on 'Making devolution work: A practical guide for local leaders' can be

downloaded from our website: http://www.grantthornton.co.uk/en/insights/making-devolution-work/

213

http://www.grantthornton.co.uk/en/insights/making-devolution-work/






Key messages continued

Overall review of

financial

statements

Certification of housing benefit grant claim We are currently auditing the Council's Housing Benefit Grant Claim. The Council has good arrangements in

place for submitting claims to be certified by us in line with the recognised deadlines. The claim is supported

by appropriate evidence and staff have responded promptly to any queries raised by us.

Whole of Government Accounts We reviewed the consolidation pack which the Council prepared to support the production of Whole of

Government Accounts. We reported that the Council's pack is consistent with the audited financial

statements, with the exception of a small number of inconsistencies that were primarily linked to the

functionality of the WGA electronic toolkit.

Audit fee Our fee for 2014/15 was £179,752.

Non audit related services We continue to work with and support the Council by delivering a number of non audit services. These have

included looking at a 2020 vision exploring finance and policy futures for local government, and undertaking

comfort work and review of the bond finance offer on Council's recent bond issue.

214


Appendix A: Key issues and recommendations

This appendix summarised the significant recommendations identified during the 2014/15 audit.

No. Issue and recommendation Priority Management response/ responsible office/ due date

1 The Council is leading the way to support its

objectives and is proactive in the way it seeks to

support the local economy and manage its finances.

However, the extent of these activities does

increase the Council's exposure to risk and it

remains important that the Council continues to

assess the risks involved in its arrangements.

Recommendation:

As the Council continues to explore innovative

ways of supporting the local economy and

managing its resources it is important that the

Council understands the risks associated with such

schemes and continues to carry out a long term

financial impact risk assessments.

Medium Agreed

Responsible office: Director of Finance and Information Services

Due date: On-going

215


Fees for audit services

Per Audit plan

£

Actual fees

£

Council audit 169,550 169,550

Grant certification on behalf of

Audit Commission

22,230 10,202*

Total audit fees 191,780 179,752

Appendix B: Reports issued and fees

We confirm below the fees charged for the audit and non-audit services.

Fees for other services

Service Fees £

Audit related services Nil

Non-audit related services

- Teachers Pension return

4,200

Reports issued

Report Date issued

Audit Plan March 2015

Audit Findings Report September 2015

Report on Value for Money September 2015

Annual Audit Letter October 2015

* There was an error in our original audit plan concerning the audit fees. The actual fees stated above

corrects that error

216

© 2015 Grant Thornton UK LLP | Annual Audit Letter 2014/15

© 2015 Grant Thornton UK LLP. All rights reserved.

'Grant Thornton' means Grant Thornton UK LLP, a limited liability partnership.

Grant Thornton is a member firm of Grant Thornton International Ltd (Grant Thornton International). References to 'Grant Thornton' are to the brand under which the Grant Thornton member firms operate and refer to one or more member firms, as the context requires. Grant Thornton International and the member firms are not a worldwide partnership. Services are delivered independently by member firms, which are not responsible for the services or activities of one another. Grant Thornton International does not provide services to clients.

grant-thornton.co.uk

Back page

217

© 2015 Grant Thornton UK LLP

Audit and Corporate Governance Committee

update report for Warrington Borough Council

Year ending 2015/16

November 2015

Robin Baker

Director

T 0161 214 6399

E [email protected]

Gareth J Winstanley

Audit Manager

T 0161 234 6343

E [email protected]

Neil Krajewski

Assistant Manager

T 0161 234 6371

E [email protected]

219

The contents of this report relate only to the matters which have come to our attention,

which we believe need to be reported to you as part of our audit process. It is not a

comprehensive record of all the relevant matters, which may be subject to change, and in

particular we cannot be held responsible to you for reporting all of the risks which may affect

your business or any weaknesses in your internal controls. This report has been prepared

solely for your benefit and should not be quoted in whole or in part without our prior written

consent. We do not accept any responsibility for any loss occasioned to any third party acting,

or refraining from acting on the basis of the content of this report, as this report was not

prepared for, nor intended for, any other purpose.

.

220

© 2015 Grant Thornton UK LLP 3 3

Contents

Section Page

Introduction 4

Progress at June 2015 5-7

Emerging issues and developments

Grant Thornton 8-9

Local government issues 10-12

Accounting and audit issues 13-14

221


Introduction

This paper provides the Audit Committee with a report on progress in delivering our responsibilities as your external auditors. The paper also

includes:

• a summary of emerging national issues and developments that may be relevant to you; and

• a number of challenge questions in respect of these emerging issues which the Committee may wish to consider.

Members of the Audit Committee can find further useful material on our website www.grant-thornton.co.uk, where we have a section dedicated

to our work in the public sector (http://www.grant-thornton.co.uk/en/Services/Public-Sector/). Here you can download copies of our publications

including:

• Making devolution work: A practical guide for local leaders

• Spreading their wings: Building a successful local authority trading company

• Easing the burden, our report on the impact of welfare reform on local government and social housing organisations

• All aboard? our local government governance review 2015

If you would like further information on any items in this briefing, or would like to register with Grant Thornton to receive regular email updates

on issues that are of interest to you, please contact either your Engagement Lead or Audit Manager.

222


Progress at 6th November 2015

Work Planned date Complete? Comments

2015-16 Accounts Audit Plan

We are required to issue a detailed accounts audit

plan to the Council setting out our proposed approach

in order to give an opinion on the Council's 2014-15

financial statements.

March 2016 Not yet

started

Interim accounts audit

Our interim fieldwork visit includes:

• updating our review of the Council's control

environment

• updating our understanding of financial systems

• review of Internal Audit reports on core financial

systems

• early work on emerging accounting issues

• early substantive testing

• proposed Value for Money conclusion.

January – March

2016

Not yet

started

2015-16 final accounts audit

Including:

• audit of the 2014-15 financial statements

• proposed opinion on the Council's accounts

• proposed Value for Money conclusion.

June – August

2016

Not yet

started

We will report the findings of our audit within our

audit findings report

223




Value for Money (VfM) conclusion

The scope of our work to inform the 2015/16 VfM

conclusion has been revised based on NAO guidance.

The areas of focus will be :

Informed decision making:

acting in the public interest, through demonstrating

and applying the principles and values of good

governance

understanding and using appropriate cost and

performance information to support informed

decision making and performance management

reliable and timely financial reporting that supports

the delivery of strategic priorities

managing risks effectively and maintaining a sound

system of internal control.

Sustainable resource development:

planning finances effectively to support the

sustainable delivery of strategic priorities and

maintain statutory functions

managing assets effectively to support the delivery of

strategic priorities

planning, organising and developing the workforce

effectively to deliver strategic priorities.

March – August

2016

Not yet

started

We will report the findings of our audit within our

audit findings report

224




Value for Money (VfM) conclusion

Working with partners and other third parties:

working with third parties effectively to deliver

strategic priorities

commissioning services effectively to support the

delivery of strategic priorities

procuring supplies and services effectively to support

the delivery of strategic priorities

225


Making devolution work: A practical guide for local leaders

Grant Thornton market insight

Our latest report on English devolution is intended as a practical guide for areas and partnerships making a case for devolved powers

or budgets.

The recent round of devolution proposals has generated a huge amount of interest and discussion and much progress has been

made in a short period of time. However, it is very unlikely that all proposals will be accepted and we believe that this the start of an

iterative process extending across the current Parliament and potentially beyond.

With research partner Localis we have spent recent months speaking to senior figures across local and central government to get

under the bonnet of devolution negotiations and understand best practice from both local and national perspectives. We have also

directly supported the development of devolution proposals. In our view there are some clear lessons to learn about how local

leaders can pitch successfully in the future.

In particular, our report seeks to help local leaders think through the fundamental questions involved:

• what can we do differently and better?

• what precise powers are needed and what economic geography will be most effective?

• what governance do we need to give confidence to central government?

The report 'Making devolution work: A practical guide for local leaders' can be

downloaded from our website:


Hard copies of our report are available from your Engagement Lead and Audit Manager

226







Knowing the Ropes – Audit Committee Effectiveness Review

Grant Thornton

This is our first cross-sector review of audit committee effectiveness

encompassing the corporate, not for profit and public sectors. It

provides insight into the ways in which audit committees can create an

effective role within an organisation’s governance structure and

understand how they are perceived more widely. It is available at

http://www.grantthornton.co.uk/en/insights/knowing-the-ropes--audit-

committee-effectiveness-review-2015/

The report is structured around four key issues:

• What is the status of the audit committee within the organisation?

• How should the audit committee be organised and operated?

• What skills and qualities are required in the audit committee

members?

• How should the effectiveness of the audit committee be evaluated?

It raises key questions that audit committees,

board members and senior management should

ask themselves to challenge the effectiveness

of their audit committee.

Our key messages are summarised opposite.

227

http://www.grantthornton.co.uk/en/insights/knowing-the-ropes--audit-committee-effectiveness-review-2015/
















George Osborne sets out plans for local government to gain new powers and

retain local taxes

Local government issues

The Chancellor unveiled the "devolution revolution" on 5 October involving major plans to devolve new powers from Whitehall to Local

Government. Local Government will now be able to retain 100 per cent of local taxes and business rates to spend on local government

services; the first time since 1990. This will bring about the abolition of uniform business rates, leaving local authorities with the power to

cut business rates in order to boost enterprise and economic activity within their areas. However, revenue support grants will begin to be

phased out and so local authorities will have to take on additional responsibility. Elected Mayors, with the support of local business

leaders in their LEPs, will have the ability to add a premium to business rates in order to fund infrastructure, however this will be capped at

2 per cent.

There has been a mixed reaction to this announcement. Some commentators believe that this will be disastrous for authorities which are

too small to be self-sufficient. For these authorities, the devolution of powers and loss of government grants will make them worse off. It

has also been argued that full devolution will potentially drive up council's debt as they look to borrow more to invest in business

development, and that this will fragment the creditworthiness of local government.

Challenge question

Have members:

• been briefed by on the Chancellor's "devolution revolution" announcement and its likely impact on the Council?

228


Councils must deliver local plans for new homes by 2017


The Prime Minister announced on 12 October that all local authorities must have plans for the development of new homes in their area by

2017, otherwise central government will ensure that plans are produced for them. This will help achieve government's ambition of 1 million

more new homes by 2020, as part of the newly announced Housing and Planning Bill.

The government has also announced a new £10 million Starter Homes fund, which all local authorities will be able to bid for. The Right to

Buy Scheme has been extended with a new agreement with Housing Associations and the National Housing Federation. The new

agreement will allow a further 1.3 million families the right to buy, whilst at the same time delivering thousands of new affordable homes

across the country. The proposal will increase home ownership and boost the overall housing supply. Housing Association tenants will

have the right to buy the property at a discounted rate and the government will compensate the Housing Associate for their loss.

Challenge question

Have members:

• been briefed by on the government's new homes announcements and their likely impact on the Council?

229


Improving efficiency of council tax collection


DCLG have published "Improving Efficiency for Council Tax Collection", calling for consultation on the proposals to facilitate

improvements in the collection and enforcement processes in business rates and council tax. The consultation is aimed specifically at

local authorities, as well as other government departments, businesses and any other interested parties. The consultation document

states that council tax collection rates in 2014-15 are generally high (at 97 per cent), however the government wishes to explore further

tools for use by local authorities and therefore seeks consultation from local authorities on DCLG's proposals. The consultation closes on

18 November.

The Government proposes to extend the data-sharing gateway which currently exists between HMRC and local authorities. Where a

liability order has been obtained, the council taxpayer will have 14 days to voluntarily share employment information with the council to

enable the council to make an attachment to earnings. If this does not happen, the Government proposes to allow HMRC to share

employment information with councils. This would help to avoid further court action, would provide quicker access to reliable information,

and would not impose any additional costs on the debtor. The principle of this data-sharing is already well-established for council

taxpayers covered by the Local Council Tax Support scheme, and it would make the powers applying to all council tax debtors consistent.

Based on the results of the Manchester/HMRC pilot, Manchester estimate that £2.5m of debt could potentially be recouped in their area

alone.

Challenge question

Have members:

• been briefed by on the government's council tax collection consultation and the Council's response to it?

230


Code of Audit Practice

National Audit Office

Under the Local Audit and Accountability Act 2014 the National Audit Office are responsible for setting the Code of Audit Practice which

prescribes how local auditors undertake their functions for public bodies, including local authorities.

The NAO have published the Code of Audit Practice which applies for the audit of the 2015/16 financial year onwards. This is available at

https://www.nao.org.uk/code-audit-practice/wp-content/uploads/sites/29/2015/03/Final-Code-of-Audit-Practice.pdf

The Code is principles based and will continue to require auditors to issue:

• Opinion on the financial statements

• Opinion on other matters

• Opinion on whether the Trust has made proper arrangements for securing economy, efficiency and effectiveness in its use of resources (the

"VFM conclusion".)

The NAO plan to supplement the new Code with detailed auditor guidance in specific areas. The published draft audit guidance for consultation

on the auditor's work on value for money arrangements in August 2015, which is due to be finalised in November 2015. The draft guidance

includes the following.

• Definition of the nature of the opinion to be given – i.e. a "reasonable assurance" opinion as defined by ISAE 300 (revised)

• Definitions of what could constitute "proper arrangements" for securing economy, efficiency and effectiveness in the use of resources

• Guidance on the approach to be followed by auditors in relation to risk assessment, with auditors only required to carry out detailed work in

areas where significant risks have been identified

• Evaluation criteria to be applied

• Reporting requirements.

Grant Thornton submitted a response to the consultation which closed on 30 September 2015. 231

















Grant Thornton and the Centre for Public Scrutiny

We have teamed up with the Centre for Public Scrutiny to produce a member training programme on governance. Elected members are

at the forefront of an era of unprecedented change, both within their own authority and increasingly as part of a wider local public sector

agenda. The rising challenge of funding reductions, the increase of alternative delivery models, wider collaboration with other

organisations and new devolution arrangements mean that there is a dramatic increase in the complexity of the governance landscape.

Members at local authorities – whether long-serving or newly elected – need the necessary support to develop their knowledge so that

they achieve the right balance in their dual role of providing good governance while reflecting the needs and concerns of constituents.

To create an effective and on-going learning environment, our development programme is based around workshops and on-going

coaching. The exact format and content is developed with you, by drawing from three broad modules to provide an affordable solution

that matches the culture and the specific development requirements of your members.

• Module 1 – supporting members to meet future challenges

• Module 2 – supporting members in governance roles

• Module 3 – supporting leaders, committee chairs and portfolio holders

The development programme can begin with a baseline needs assessment, or be built on your own

understanding of the situation.

Further details are available from your Engagement Lead and Audit Manager

Supporting members in governance

232

© 2015 Grant Thornton UK LLP

© 2015 Grant Thornton UK LLP. All rights reserved.

'Grant Thornton' means Grant Thornton UK LLP, a limited liability partnership.

Grant Thornton is a member firm of Grant Thornton International Ltd (Grant Thornton International). References to 'Grant Thornton' are to the brand under which the Grant Thornton member firms operate and refer to one or more member firms, as the context requires. Grant Thornton International and the member firms are not a worldwide partnership. Services are delivered independently by member firms, which are not responsible for the services or activities of one another. Grant Thornton International does not provide services to clients.

grant-thornton.co.uk

Back page

233

Agenda Item 18

Agenda Item/Report Section 25/06/15 24/09/15 19/11/15 20/01/16 17/02/16 23/03/16 20/04/16

TRAINING

INFORMAL MEETING

WITH IA/XA

Produce annual report of

the Audit and Corporate

Governance Committee (to

Full Council)

Chair

Review of effectiveness of

the Audit and Corporate

Governance Committee –

complete self assessment

Committee

Working Party

Review Audit and Corporate

Governance Committee

work programme

Democratic

Services

Review Audit and Corporate

Governance Committee

training requirements

Legal & Audit

within

self

assessme

nt

Ombudsman Complaints

2013/2014Legal

Election Fees and ChargesLegal

Review of the Audit and

Corporate Governance

Committee’s terms of

reference

Legal within

self

assessme

nt

Review (draft) Annual

Governance Statement

(AGS)

Governance

Group &CIA draft

Audit & Corporate Governance Committee

235

Agenda Item 18


Review reports from

Governance Group and

implementation of AGS

action plan items

Governance

Group &CIA

Review of strategic risk

registerDeputy Chief

Executive

Review annual Risk

Management report Deputy Chief

Executive

Review of Code of

Corporate GovernanceCIA & Legal

Review draft statement of

accountsFinance

Review of final statement of

accountsFinance

Management letter of

representationFinance

Write Offs of Irrecoverable

DebtFinance

Treasury management

strategyFinance

Treasury management

quarterly monitoring report

Finance

half year

report

Treasury management

practices statement

Finance

Annual Treasury Outturn

Report

Finance

Approval of National Non

Domestic Rates Form 1

Finance

Approve Council Tax base Finance

236

Agenda Item 18


Approve Accounting

Policies

Finance

Annual report of the Chief

Internal Auditor on the

system of internal control.

CIA

Review the effectiveness of

Internal Audit / compliance

with the Code of Practice

Committee

Review of External Audit Committee

Review annual internal audit

plan

CIAdraft final

Internal audit monitoring

reports including monitoring

of implementation of

recommendations

CIA

Review Anti-fraud bribery

and corruption strategy

CIA & Solicitor

Anti-Fraud, Bribery and

Corruption 6 monthly report

CIA

Regulation of Investigatory

Powers report & grant of

authorisations

Legal

through

training

Agree External Audit plan External Audit

Grant Thornton - agreement

of Fees

External Audit

237

Agenda Item 18


External Audit Update -

including responses to

Challenge Questions

External Audit &

Finance

update

only

Annual Findings Report External Audit

Annual Audit Letter External Audit

Certification of claims and

returns

External Audit

May Elections Report Returning Officer

238