To: Audit & Corporate Governance Committee …...To: Audit & Corporate Governance Committee...

To: Audit & Corporate Governance Committee

Councillors:

C Fitzsimmons (Chair), C Froggatt (Deputy), B Axcell, D Bennett, K Buckley, J Hart, D Keane, I Marks, L Morgan S Parish, M Smith Audit and Corporate Governance Committee

Date: Thursday, 22 June 2017

Time: 18:30

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

Contact – Adam Kellock, Democratic Services Officer, Tel: 01925 442144,

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 20 April 2017 as a correct

record.

5 - 10

Professor Steven Broomhead Chief Executive

Town Hall Sankey Street

Warrington WA1 1UH

1

4 Annual Report of the Audit and Corporate Governance Committee -

2016-17

Report of the Chair of the Audit and Corporate Governance

Committee.

11 - 26

5 Standards Sub Committee Membership

Report of the Head of Legal and Democratic Services and Monitoring

Officer.

27 - 30

6 Annual Report of the Officer Governance Group and Implementation

of Annual Governance Statement Action Plan (2015-16) Items

Report of the Director of Corporate Governance.

31 - 36

7 Code of Corporate Governance


37 - 66

8 Annual Report and Head of Internal Audit Opinion on the System of

Internal Control

Report of the Chief Internal Auditor.

67 - 94

9 Annual Governance Statement 2016-17


95 - 122

10 Strategic Risk Environment at Quarter 4 - 2016-17


123 - 140

11 Write Off of Unrecoverable Debt


141 - 146

12 Write Off of Unrecoverable Council Tax Debt


147 - 150

13 2016-17 Treasury Management Outturn Report

Details

151 - 176

14 Anti-Fraud, Bribery and Corruption Annual Report - 2016-17


177 - 200

15 Proposed Amendment to the Financial Procedure Rules


201 - 202

16 External Audit Update 203 - 212

2

Part 2

Nil.

Report of the External Auditors, Grant Thornton.

17 Work Programme 2017-18

Report of the Chair of the Audit and Corporate Governance

Committee.

213 - 216

3

AUDIT AND CORPORATE GOVERNANCE COMMITTEE 20 April 2017

Present: Councillor C Fitzsimmons (Chairman) Councillors: B Axcell, D Bennett, K Buckley, C Froggatt, J Hart, D Keane, L Morgan, S Parish, M

Smith Also present: Robin Baker (Grant Thornton), Paul Clisby (Legal Services Manager), J Gleave

(Chief Internal Auditor) and Claire Harris (Head of Accountancy). ACG 77 Apologies There were apologies for absence received from Councillor I Marks. ACG 78 Code of Conduct – Declarations of Interest There were no declarations of interest made. ACG 79 Minutes The minutes of the meeting held on 23 March 2017 were presented to the committee. Decision:

That the minutes of the meeting of 23 March 2017 be approved as a correct record and signed by the Chair.

ACG 80 Office of Surveillance Commissioner Regulation of Investigatory Powers Act 2000 The Legal Services Manager delivered the report which provided an update on the Regulation of Investigatory Powers Act 2000 (RIPA) and the findings of the latest inspection from the regulator which was attached as an appendix to the report. In terms of covert surveillance none had been carried out over the last 12 months. Such surveillance had previously been carried out on a fairly regular basis but this had almost ceased since the responsibility for investigating cases of suspected benefit fraud were passed to the Department for Work and Pensions. Some officers within the fraud team had the potential to use RIPA authorisations in relation to their investigations of Council Tax fraud but this had not yet taken place as the amounts associated with any investigations were relatively low due to the incidents taking place over a short period of time. Despite the fact that RIPA was being used less within the authority the inspector was keen to see that processes were still being carried out properly and that the correct procedures were

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in place to ensure that any authorisation would be done correctly as and when required. It was important that key officers maintained an awareness of RIPA and when it was to be used going forward. Particular mention was given to social media as it presented a new issue that would need to be considered. It was noted that ad hoc checking of a public social media account did not require an authorisation but a sustained campaign of monitoring would require such an authorisation. The inspector was happy with the activities and the policies of the Council and provided some recommendations relating to the policy having some practical examples within it to guide officers, particularly in relation to social media. It was also recommendation that more training was provided to relevant officers and that information be disseminated more widely across the authority. Decision That the Committee:

a) Approves and adopts the Policy and Oversight changes already made and listed at section 4.2 of the report;

b) Notes the recommendations contained in the OSC Report from the inspection visit on 19 January 2017; and

c) Approves the Action Plan setting out steps to address the issues raised in the 2017 report.

ACG 81 Final Internal Audit Plan 1 April 2017 to 31 March 2018 The Chief Internal Auditor presented the final Internal Audit Plan for the financial year 2017/18. The draft plan was presented to the committee at its last meeting on 23 March 2017 and the plan had then been finalised in consultation with the Senior Management Team. The work that had gone into the development of the plan was outlined and it was also noted that there was enough flexibility in the plan to ensure that issues could be looked at as and when they came up. An update was provided with regards to the continued collaborative work with Salford Council that had been formalised and it was noted that there were 5.5 full time equivalent officers in place to carry out the plan. Resources had been reduced down over previous years but there were additional opportunities to share resources both with Salford Council and the Cheshire Authorities with work on the IT audit being carried out with the support of Salford Council IT audit team and contract audit work being supported by Cheshire West and Chester Council. The plan took into account the corporate strategy for 2015-18 and was largely based on the pledges set out within the strategy and work would be carried out to look at the associated risks.

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Work would continue to be coordinated with external audit as well as the governance and risk management groups internally within the Council to ensure that a wide ranging and comprehensive assurance could be given. Members discussed the final plan as well specific details with regards to contracts and procurement as well as the auditing of major capital projects. Decision That the committee approves the Annual Internal Audit Plan for 2017/18. ACG 82 Internal Audit Quarterly Performance Report to 7 April 2017 The regular performance report for the quarter to 7 April 2017 was presented by the Chief Internal Auditor and the committee was informed that work was continuing in order to finish as much as possible prior to the annual report being brought to the next meeting of the committee. Since the last progress report six final reports had been issued and a further four reports were at the draft stage. Additional work had been carried out in the quarter around the counter fraud programme as well as work being carried out to look at a backlog of work regarding Council Tax. Grant audits had been looked at as an area where income could be generated as conversations were taking place with the Cheshire and Warrington LEP with regards to work on certain grant audits. Along with this the national fraud initiative and data matching had been carried out. Work had been reprioritised within quarter 4 due to sickness absence and the need to carry out work on the financial systems audit in order to assist the external auditors in carrying out their annual audit of the accounts. Any outstanding critical or high priority recommendations had been pulled out separately and were sent to senior managers to ensure that they were being resolved but it was noted that there were not many outstanding critical or high recommendations. 72% of the plan had been completed at quarter 4 against at target of 80% completion for the quarter and 85% completion by the end of the year. The revised target for completion by the end of the year was 75% due to limited resources throughout the year. It was agreed that despite not hitting the target percentage completion good quality audit work had been carried out during the year. An update was provided at appendix A with regards to the audit of the better care fund which was being carried out jointly with the audit team from the CCG. It was agreed that there was a real financial incentive to kick start the integration agenda and that the fund was a key aspect of this. It was considered that the pooling of budgets was only the basis for

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integration and that further work was required in order for improvements to be made by 2020. Decision That the committee notes the report. ACG 83 Review of the Effectiveness of Internal Audit and Compliance with the Public Sector Internal Audit Standards The Chief Internal Auditor presented the findings of the external assessment of the effectiveness of internal audit which was carried out through a peer review process in collaboration with audit teams across the North West of England. The committee had previously been consulted on this process and had supported the peer review approach to the external assessment. The assessment for Warrington was carried out in early 2017 with officers from Wigan and Bury carrying out the process. Officers from Warrington would be reciprocating in carrying out an assessment for another North West Council. The conclusion from the external review was that the internal audit service complies with the required standards. A number of points were raised within the action plan to be taken forward and included a revised Internal Audit Charter which would be brought to the next meeting of the committee for approval. There were seven recommendations contained within the review which were seen as attainable and which were all being addressed as required. The annual self-assessment of the committee carried out by members with the support of officers would be carried out in the coming weeks and would be reported to the next meeting of the committee. Decision That the committee notes the report from the external assessment and the accompanying action plan. ACG 84 External Audit Update Report The standard external audit progress report was presented to the committee who were informed that work continued towards the 2016/17 audit plan that was presented at the last meeting. The external auditors continued to work closely with officers in the finance team with regards to the early work on the financial statements and the value for money conclusion with the work on track to be completed on time. Sufficient resources were in place for the

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audit of the accounts to take place in June and July with a report being brought to the committee on the substantive audit at its meeting in on 27 July. An update was provided with regards to off payroll working and changes around the responsibilities for off payroll and arrangements and subsequent tax issues. In terms of the overall financial climate it was noted that issues surrounding Brexit meant that financial clarity was a long way off being achieved and the markets would likely remain volatile for a considerable time to come with the Council having to plan accordingly. Decision That the committee notes the report. ACG 85 External Audit Fee The annual external audit fee letter for the financial year 2017/18 was presented to the committee. The audit fee for the year stood at £127,000 and was in line with the scales set by PSA LTD. 2017/18 would be the last year under the existing contractual arrangements as the new procurement process to appoint external auditors was in place and would be making the appointments for the 2018/19 financial year. At previous meetings the committee had considered the procurement process and agreed to support the public sector body lead approach to the appointment. The contract was currently out for tender with results on the appointments expected to be confirmed by the end of June 2017/ Decision That the committee approves the audit fee for 2017/18. ACG 86 Work Programme 2016/17 The Work Programme for the 2016/17 municipal year was presented to and approved by the Committee.

Signed: …………………………..

Date: …………………………..

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WARRINGTON BOROUGH COUNCIL AUDIT AND CORPORATE GOVERNANCE COMMITTEE 22 JUNE 2017 Report of the: Chair of the Audit and Corporate Governance Committee Report Author: Adam Kellock, Democratic Services Officer Contact Details: Email Address:

[email protected] Telephone: 01925 442144

Ward Members:

All

TITLE OF REPORT: ANNUAL REPORT OF THE AUDIT AND CORPORATE GOVERNANCE COMMITTEE 1. PURPOSE OF THE REPORT 1.1 To provide members with an overview of the work carried out by the Audit and

Corporate Governance Committee during the 2016/17 municipal year.

2. CONFIDENTIAL OR EXEMPT 2.1 This report is not confidential or exempt. 3. BACKGROUND 3.1 As a matter of good practice in accordance with CIPFA guidelines, the Audit and

Corporate Governance Committee produces an annual report which provides an overview of the work that it has carried out during the previous municipal year.

4. ANNUAL REPORT OF THE AUDIT AND CORPORATE GOVERNANCE COMMITTEE

2016/17 4.1 The annual report of the 2016/17 municipal year is attached to this report at

Appendix A. 5. AUDIT AND CORPORATE GOVERNANCE COMMITTEE TERMS OF REFERENCE 5.1 It is considered a matter of good governance for the committee to review its terms of

reference at the start of each municipal year. 5.2 The terms of reference are attached to the annual report at Appendix B and the

committee is invited to review them to determine if they are fit for purpose. 5.3 If the committee wishes to further review the terms of reference the Constitution

Sub Committee will be invited to vary out a review and reports back to the committee at a future meeting.

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6. FINANCIAL CONSIDERATIONS

6.1 There are no additional resource implications arising from this report.

7. RISK ASSESSMENT 7.1 Receiving an annual report is part of the process of ensuring that the Council

maintains an effective corporate governance framework. 8. EQUALITY AND DIVERSITY/EQUALITY IMPACT ASSESSMENT

8.1 There are no specific equalities issues in relation to the content of this

report. 9. CONSULTATION 9.1 N/A 10. REASONS FOR RECOMMENDATIONS 10.1 To ensure that the Council maintains an effective corporate governance framework. 11. RECOMMENDATION 11.1 That the Committee notes the Annual Report for the 2016/17 municipal year; 11.2 That the Committee reviews the Terms of Reference. 12. BACKGROUND PAPERS

CONTACTS FOR BACKGROUND PAPERS:

Name E-mail Telephone

Adam Kellock Democratic Services Officer

[email protected] 01925 442144

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mailto:[email protected]

Appendix A

ANNUAL REPORT OF THE

AUDIT AND CORPORATE GOVERNANCE COMMITTEE for the period

23 May 2016 to 22 May 2017

FOREWORD & INTRODUCTION BY THE CHAIRMAN

I am pleased to be able to introduce the sixth Audit and Corporate Governance Committee Annual Report which covers the municipal year 2016/17. Warrington Council established a Governance Committee in 2007 and in 2010 this was renamed the Audit and Corporate Governance Committee to better reflect the responsibilities of the Committee. A sub-committee was also established to deal specifically with issues surrounding the Council’s constitutional arrangements. This report aims to summarise the work and achievements of the Audit and Corporate Governance Committee during 2016/17. The production of such a report is recommended as good practice by the National Audit Office. The Committee’s main purpose is to provide assurances on governance and risk management arrangements, internal control and financial management. This is achieved by considering reports from internal and external sources, and making recommendations to the Council for action to address any deficiencies. The Committee’s Work Programme has continued to grow steadily. There has been a high level of continuity in committee membership over the past couple of years and with this expertise and knowledge of finance and audit matters. In 2013/14 the Constitutional Sub-Committee became a committee in its own right and was asked to contribute to a number of changes in the way that the Council operated internally and across Cheshire. Although the stand-alone Constitution Committee reported directly to full Council its work was linked to the Audit and Corporate Governance Committee through its members being taken from the Audit and Corporate Governance Committee. Details of the key reports considered by the Committee are listed within this report. I would like to thank all the members that served on this Committee in 2016/17. Councillor C Fitzsimmons Chair 2016/17 Municipal year

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Appendix A

2016/17 Annual Report of the Audit and Corporate Governance Committee Contents 1. Role of the Audit Committee 2. Composition of the Audit and Corporate Governance Committee

3. Constitutional Committee 4. Effectiveness of Audit and Corporate Governance Committee

5. Audit and Corporate Governance Committee Training 6. Meetings held during the year 7. Internal Control, Governance and Risk Management Systems 8. External Audit 9. Internal Audit

10. Key Reports Presented to the Audit and Corporate Governance Committee

11. Other Matters and Looking Ahead

12. Conclusion

Appendices

A. Terms of Reference of the Audit and Corporate Governance Committee and the Constitutional Committee

B. Work Programme 2016/17 and reports considered by the Audit and Corporate Governance Committee

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Appendix A

1. ROLE OF THE AUDIT AND CORPORATE GOVERNANCE COMMITTEE 1.1 The Audit and Corporate Governance Committee operated during the year in

accordance with the Terms of Reference agreed by the Council. These can be found at Appendix A.

1.2 As part of the self-assessment exercise undertaken in February 2016, the Committee

identified areas where development is needed and reviewed the Terms of Reference of the Committee in line with the model terms of reference issued by the Chartered Institute of Public Finance & Accountancy (CIPFA).

2. COMPOSITION OF THE AUDIT AND CORPORATE GOVERNANCE COMMITTEE 2.1 Council Committees are established on a political proportionality basis, as far as

practicable, in line with the political composition of the Council. The Council Constitution allowed for political parties to make temporary substitutions to committees. The membership of the Audit and Corporate Governance Committee, as agreed by full Council was as follows:

Party Number of members

Councillor Name

Conservative

1 K Buckley

Labour 8 D Bennet, C Fitzsimmons (Chair), C Froggatt (Deputy Chair), J Hart, D Keane, L Morgan, S Parish and M Smith

Liberal Democrat

2 B Axcell and I Marks

2.2 Standing invitations to attend Audit and Corporate Governance Committee meetings

were extended to the Chief Executive; Deputy Chief Executive; Director of Finance & Information Services; Monitoring Officer; Internal Audit; and External Audit.

3. CONSTITUTIONAL SUB-COMMITTEE 3.1 The Constitutional Sub-Committee considered a variety of amendments to the

Constitution as outlined below:

Carried out an annual review of the Constitution;

Confirmed the arrangements for the establishment of the Health Scrutiny Committee;

Updated the Council’s Petition Scheme.

4. EFFECTIVENESS OF THE AUDIT AND CORPORATE GOVERNANCE COMMITTEE

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Appendix A

4.1 The Committee had been active during the year in carrying out its duty in providing

the Council with assurance that effective internal control arrangements were in place. 4.2 Specifically the Committee has:

Reviewed the Strategic Risk Register and contributed to the development of the register;

Reviewed the write off of unrecoverable debts;

Reviewed Ombudsman Complaints;

Considered regular updated with regards to treasury management;

Considered the controls in place with regards to anti-fraud measures. 4.3 The standard self-assessment and evaluation of the effectiveness of the Committee

was not able to be completed at a workshop on 6 April 2017 and would subsequently be completed by nominated Councillors B Axcell, K Buckley and C Froggatt during the 2017/18 municipal year with the support of the Chief Internal Auditor and the Head of Legal and Democratic Services (Monitoring Officer).

5. AUDIT AND CORPORATE GOVERNANCE COMMITTEE TRAINING 5.1 Training on the role of the Audit & Corporate Governance Committee was provided

for new members at the meeting in June 2016 by Internal Audit. 5.2 To assist with the Committee’s understanding of the context of fraud nationally the

Audit Manager presented an update at the meeting in …

6. MEETINGS HELD DURING THE YEAR

During the year 7 meetings were held and the following Member attendance was recorded

Councillor/Date 30/06/16 22/09/16 17/11/16 19/01/17 09/02/17 23/03/17 20//04/17

B Axcell X

D Bennett X X X

K Buckley X

C Fitzsimmons

C Froggatt

J Hart

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Appendix A

D Keane

I Marks

L Morgan X

S Parish

M Smith X

A full list of the reports presented to the Members at these meetings can be found at Appendix B to this report.

7. INTERNAL CONTROL, GOVERNANCE AND RISK MANAGEMENT SYSTEMS

7.1 At each meeting the Committee has considered reports from its Internal and External Auditors and has also received regular updates on the robustness of governance and risk management arrangements from the Deputy Chief Executive, the Director of Finance & Information Services and the Assistant Director Partnerships & Performance.

7.2 Specifically, the Audit Committee has gained assurance on the effectiveness of the

strategic risk register; financial performance; the processes for governance and the framework of assurance; and counter fraud arrangements.

7.3 The Council’s Annual Governance Statement incorporating the Statement on Internal Control was considered and was recommended to the Council for approval.

8. EXTERNAL AUDIT 8.1 The Committee has reviewed the work and findings of External Audit by:

discussing and agreeing the nature and scope of the Annual Plan;

considering the extent of its co-ordination with, and reliance on, Internal Audit;

receiving and considering reports derived from the Annual Plan; and

receiving and considering the annual audit letter before its submission to the full Council.

8.2 The Audit and Corporate Governance Committee has also met in private with

External Audit to allow discussion of matters in the absence of executive officers. This is in line with best practice and CIPFA guidance. Guidance recommends that the Committee should have the opportunity to meet with both External Audit and Internal Audit independent of the presence of those officers with whom the auditor must retain a working relationship. The Chair of the Committee also meets privately with the external auditor periodically to discuss matters.

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Appendix A

9. INTERNAL AUDIT 9.1 The Committee has reviewed and considered the work and findings of the Council’s

Internal Auditors by:

discussing and agreeing the nature and scope of the Annual Plan;

receiving and considering regular Progress Reports from the Chief Internal Auditor;

receiving and considering reports derived from the Annual Plan

receiving the Chief Internal Auditor’s annual opinion on the system of internal control, governance and risk management which gave the opinion of substantial assurance.

9.2 The Committee also met in private with Internal Audit so as to allow discussion of

matters in the absence of executive officers.

9.3 For both Internal and External Audit reports, the Committee ensured that management actions agreed in response to reported weaknesses, had either been implemented or that there had been adequate explanation for delay or non-implementation.

10. OTHER MATTERS AND LOOKING AHEAD 10.1 The financial climate remained very challenging, and efficiency and value for money

would be high on the agenda making the role of the Committee and its oversight even more important in the year ahead.

10.2 The Audit & Corporate Governance Committee are the body charged by the Council

with the scrutiny of treasury management. The Committee receive quarterly treasury management monitoring reports, recommend the Annual Treasury Management Strategy, Treasury Outturn Report and Treasury Management Mid- Year Review to full Council. The Community also received training in treasury management through the year.

10.3 The Treasury Management Board consisting of several members of the Audit &

Corporate Governance Committee and other leading members also meet quarterly to receive detailed updates on all treasury activity both current and planned.

11. CONCLUSION

The Committee is of the opinion that this annual report is consistent with the Annual Governance Statement, Head of Internal Audit Opinion and the External Audit VFM review and there are no matters that the Committee is aware of at this time that have not been disclosed appropriately.

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Appendix A

Chair Audit and Corporate Governance Committee

June 2017

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Appendix B

Audit and Corporate Governance Committee Terms of Reference

a) To discharge the responsibilities set out in the Accounts and Audit Regulations 2011 and the CIPFA guidance for Audit Committees 2013; b) to monitor and review the Council’s Code of Corporate Governance and receive reports from the officer Governance Group; to undertake, as appropriate, an assessment of wider governance issues, including the Constitution and the administration and conduct of the Council’s business with reference to the Council’s obligations as a Best Value authority and report to Council as necessary; c) to oversee, monitor and review the Finance Procedure Rules and Contract Procedure rules and report to Council as necessary; d) to monitor and review the Council’s audit functions and requirements in relation to both internal and external audit; e) to agree, monitor and review the Council’s Risk Management Strategy and to ensure that effective Risk Management is embedded throughout the Council; f) to consider the Council’s framework of assurance and ensure that it adequately addresses the risks and priorities of the Council; g) to ensure the Council has in place appropriate policies and processes to safeguard the Council’s resources, and their use including arrangements to ensure public protection, value for money and appropriate mechanisms for anti-fraud bribery and corruption; h) to monitor and review the Section 151 Officer (the Council’s Director of Finance & Information Services) and his/her appointed Deputies in the performance of their duties and responsibilities; i) to approve the Council’s Statement of Accounts and Annual Governance Statement as authorised by the full Council and as required under the relevant Account and Audit Regulations; j) to approve the Council’s Council Tax base each year; k) to monitor, review and make recommendations to full Council on the Council’s response to any matters or proposals in relation to local government boundaries, including electoral wards, the conduct of elections and the discharge of Local Authority functions; and l) to approve the Council’s National Non Domestic Rates form 1 (NNDR1) each year.

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Appendix B

Constitutional Sub Committee of Audit and Corporate Governance Committee - Terms of Reference

To make recommendations to the Audit and Corporate Governance Committee upon the development and maintenance of, and amendments to, the Council’s Constitution.

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Appendix C

Agenda Item/Report Section 30/06/16 22/09/16 17/11/16 19/01/17 09/02/17 23/03/17 20/04/17

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



training requirements

Legal & Audit

within

self

assessme

nt

Ombudsman Complaints

2015/2016Legal

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

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Appendix C


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

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Appendix C


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

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Appendix C


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

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WARRINGTON BOROUGH COUNCIL AUDIT AND CORPORATE GOVERNANCE COMMITTEE 22 JUNE 2017 Report of the: Head of Legal and Democratic Services and Monitoring Officer –

Matthew Cumberbatch Report Author: Adam Kellock, Democratic Services Officer Contact Details: Email Address:


Ward Members:

All

TITLE OF REPORT: MEMBERSHIP OF THE STANDARDS SUB COMMITTEE 1. PURPOSE OF THE REPORT 1.1 For the Audit and Corporate Governance Committee to confirm the membership of

the Standards Sub Committee for the 2017/18 municipal year.

2. CONFIDENTIAL OR EXEMPT 2.1 This report is not confidential or exempt. 3. BACKGROUND 3.1 The Council’s Standards Committee had previously operated in its present form as a

stand along committee since 2011 in response to the Localism Act 2011 which replaced the previous Standards Regime in England and resulted in significant changes to the way in which standards complaints would be dealt with.

3.2 The Constitution Sub Committee reviewed the status of the Standards Committee at

its meeting on 27 April 2017 and determined that given the changes brought about by the Localism Act 2011 that the Standards Committee should become a sub-committee of the Audit and Corporate Governance Committee in order to improve efficiency to reflect the practical changes following the Localism Act 2011. This change was approved at the Annual Meeting of Full Council on 22 May 2017.

3.3 The Terms of Reference for the Standards Committee have remained unchanged and

its role shall remain the same whilst operating as a sub-committee of the Audit and Corporate Governance Committee.

4. MEMBERSHIP OF THE STANDARDS SUB COMMITTEE

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4.1 The committee is invited to nominate five Councillors to sit on the Standards Sub Committee. In line with the existing political proportionality calculations and the political make-up of the previous Standards Committee the committee is invited to make its appointments based on the below party breakdown:

Labour x 3

Liberal Democrat x 1

Conservative x 1 4.2 Further to the above membership the committee also has three co-opted Parish

Council members. A standing invitation to attend the committee and observe proceedings is also attended to the two Independent Persons.



6. RISK ASSESSMENT 6.1 The Council is not required to maintain a Standards Committee but it is considered

good practice to operate such a body in line with the Council’s exisiting political proportionality to ensure good governance.

7. EQUALITY AND DIVERSITY/EQUALITY IMPACT ASSESSMENT


report. 8. CONSULTATION 8.1 N/A 9. REASONS FOR RECOMMENDATIONS 9.1 To confirm the membership of the Standards Sub Committee for the year 2017/18. 10. RECOMMENDATION 10.1 That the Committee nominates five Councillors based on the political proportionality

set out in paragraph 4.1 to serve on the Standards Sub Committee for the 2017/18 municipal year.

11. BACKGROUND PAPERS


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Adam Kellock Democratic Services Officer


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WARRINGTON BOROUGH COUNCIL AUDIT AND CORPORATE GOVERNANCE COMMITTEE 22 JUNE 2017 Report of the: Director of Corporate Services Report Author: Director of Corporate Services Contact Details: Email Address:


Ward Members:

All

TITLE OF REPORT: ANNUAL REPORT OF THE OFFICER GOVERNANCE GROUP AND IMPLEMENTATION OF ANNUAL GOVERNANCE STATEMENT ACTION PLAN (2015/16) ITEMS 1. PURPOSE OF THE REPORT 1.1 The purpose of the report is to brief the Audit and Corporate Governance Committee

on the work undertaken by the Officer Governance Group in relation to corporate governance for the year 2016/17. The report also details the progress against the actions from the 2015/16 Annual Governance Statement.

1.2 The report provides information that will allow members:

to receive assurance that the Governance Group provides adequate and effective challenge and scrutiny in respect of the governance and risk management arrangements of the Council;

to consider and approve the Council’s Annual Governance Statement with a full understanding of the risks the Council faces and what it is doing to reduce these risks; and

to demonstrate that those charged with governance have a full understanding of management’s processes with regard to governance and risk management arrangements and internal control.

2. CONFIDENTIAL OR EXEMPT 2.1 Not confidential. 3. CODE OF CORPORATE GOVERNANCE 3.1 The Audit and Corporate Governance Committee reviewed a revised local Code of

Corporate Governance in June 2017 that is consistent with the principles of the CIPFA/SOLACE Framework 2016: Delivering Good Governance in Local Government. The Officer Governance Group operates in accordance with these principles.

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4. WORK UNDERTAKEN Terms or Reference/ Sub Groups 4.1 The Group met four times during 2016/17 in advance of Audit and Corporate

Governance Committee meetings and received updates from the Corporate Risk and Business Continuity group, the Information Governance group and other assurance providers in accordance with the framework of assurance.

Corporate Governance Improvement Planning 4.2 The Group’s improvement action plan included points raised from the 2015/16

Annual Governance Statement. The actions noted were monitored by the Group during 2016/17. The Group reviewed improvement actions noted during the review of the Code of Corporate Governance and work will continue in 2017/18 to ensure that robust governance arrangements are ‘embedded’ into the culture of the organisation. Any further areas for improvement will also be incorporated into the Group’s improvement action plan.

Assurance Gathering 4.3 The Group identified the sources of assurance that they wished to receive to ensure

that the Annual Governance Statement for 2016/17 was justified. Agenda items provided a brief commentary and flagged emerging issues and hot topics. Any emerging issues were assessed for inclusion in the Group’s improvement action plan.

5 ANNUAL GOVERNANCE STATEMENT 2015/16 IMPROVEMENT ACTIONS 5.1 Monitoring of the recommendations in the 2015/16 Annual Governance Statement

was undertaken by way of inclusion in the Officer Governance Group action plan. Actions have been updated as appropriate from information provided by senior officers. Progress against any ongoing items continues to be monitored

Improved programme governance arrangements for major regeneration schemes

5.2 Work continues to develop improved arrangements. Financial regulations have been updated and the role and remit of the Capital Investment Planning Group (CIPG) has been reviewed. The revised role for the Group includes ensuring the scheduling of key reports and decisions and reporting of progress against schemes to each CIPG meeting.

Monitoring of loans to RSLs and other Corporate Loans

5.3 A dedicated officer has been permanently appointed to monitor the activity of the organisations we have provided loans to, to ensure we can demonstrate that they continue to be sustainable. The Corporate Loans Group receives regular updates on continuing loans drawdown and new loans and discuss the risks associated with offering loans. The loans monitoring officer (Qualified Senior Accountant) is a member of the Corporate Loans Group. There is regular reporting to Treasury Management Board. Internal Audit follow up work noted satisfactory progress in the implementation of agreed actions.

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Information Governance 5.4 The Information Governance Team continues to be involved in a number of

communications and awareness sessions and deliver bi-monthly ‘Introduction to Information Governance’ training sessions to supplement the eLearning content. Education and training has been delivered to staff as part of the New to Management course. During 2016/17, two information data breaches were reported to the Information Commissioners Office (ICO). The ICO reported that they were satisfied with the actions that the authority had taken in the two cases.

Client Finances

5.5 The Office of Public Guardian carried out an external inspection and concluded its report into client finances; in March 2017 they issued their findings which indicated ‘a demonstrable improvement in the service’. Further follow up work will be performed by internal audit in 2017/18 before the next planned visit from the Office of Public Guardian.

6.0 IMPROVEMENT ACTION PLAN and FOCUS FOR 2017/18

6.1 It is proposed that the areas in section 5 will continue to be monitored by the Group in 2017/18. Further areas for improvement include:

High standards of conduct & personal behaviour of members and staff A review of declarations of gifts and hospitality is to be undertaken by the Monitoring officer and internal Audit during 2017/18. Develop Health & Social Care Integration Internal Audit work during 2016/17 noted the following: The key national requirements for the Better Care Fund have been complied with – the required minimum amount has been pooled to progress integrated services across a number of service areas. However, a number of operational aspects of joint working appear to have regressed. The Health & Wellbeing Board have identified key areas for further development and have agreed that integration would be progressed and that an Accountable Care Organisation for Warrington would be developed.

Further areas include:

Continued review of workforce and management capacity risks.

Strategic development and transformation of services.

Further development of standard documented procedures and training to assist staff in financial controls.


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7.1 Effective governance and risk management procedures have a positive impact on the Council’s financial position and facilitate sound decision making.

8. RISK ASSESSMENT 8.1 The Council must ensure that it has appropriate corporate governance arrangements

in place in order to maintain a sound system of internal control. A key requirement for the Audit and Corporate Governance Committee in order for the Committee to meet its Terms of Reference is to monitor and review the Council’s Corporate Governance arrangements.


9.1 The work carried out by the Group is identified through review of risks on the

strategic risk register and a regular risk assessment process. This is carried out using an established methodology that is designed to show that all potential areas are considered fairly.

10. CONSULTATION N/A 11. REASONS FOR RECOMMENDATIONS 11.1 To ensure that members have an appropriate level of assurance of

the governance work being carried out and its outcomes for the Council. 11.2 To ensure that the members of the Audit and Corporate Governance Committee are able to fulfil their obligations under the CIPFA/SOLACE framework. 11.3 To assist the Council in meeting its statutory requirement to review the effectiveness

of its systems of internal control and prepare an annual governance statement (section 6 of The Accounts and Audit Regulations 2015).

12. RECOMMENDATIONS 12.1 That the Audit and Corporate Governance Committee considers and notes this report

as part of its monitoring role. 13. BACKGROUND PAPERS

CIPFA/SOLACE 2016 revised Framework: Delivering Good Governance in Local Government.

Code of Corporate Governance April 2017

Governance Group papers and action plans. Contacts for Background Papers:

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Jean Gleave Chief Internal Auditor


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WARRINGTON BOROUGH COUNCIL AUDIT AND CORPORATE GOVERNANCE COMMITTEE 22 JUNE 2017 Report of the: Director of Corporate Services Report Author: Jean Gleave, Chief Internal Auditor Contact Details: Email Address:


Ward Members:

All

TITLE OF REPORT: CODE OF CORPORATE GOVERNANCE 1. PURPOSE OF THE REPORT 1.1 The purpose of this report is to present the updated Code of Corporate Governance

for comment and approval by the Committee. The updated Code of Corporate Governance is attached at Appendix A to this report. The Chartered Institute of Public Finance & Accountancy (CIPFA), and the Society of Local Authority Chief Executives & Senior Managers (SOLACE) Joint Working Group issued Delivering Good Governance in Local Government: Framework and accompanying guidance note in 2007.

1.2 The CIPFA/SOLACE Framework was updated in 2016; the refreshed framework

focuses on outcomes and sustainability and defines the principles that should underpin the governance of each organisation.

1.3 The Council adopted a local Code of Corporate Governance in May 2008, revised in

each of the subsequent years, to comply with the good practice guidelines and to discharge their accountability for the proper conduct of business.

2. BACKGROUND

2.1 The core and sub-principles set out in the Framework are aimed at helping local

authorities to develop and maintain their own codes of governance. The Framework emphasises the importance of good governance to the wider outcomes of good management, good performance, and good public engagement. It puts high standards of conduct and leadership at the heart of good governance, placing responsibility on Members and officers to demonstrate leadership by behaving in ways that exemplify high standards of conduct, and so set the tone for the rest of the organisation.

2.2 The Framework urges local authorities to test their structures against these principles

by:

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Reviewing their existing governance arrangements against the Framework.

Developing and maintaining an up to date local code of governance including arrangements for ensuring its ongoing application and effectiveness.

Reporting publicly on compliance with the Code on an annual basis and how they have monitored the effectiveness of their governance arrangements in the year, and on any planned changes.

2.3 The Code supports the Council’s Annual Governance Statement (AGS) that is

published each year to accompany the accounts. The revised framework emphasises that the “principles should be applied in a way that demonstrates the spirit and ethos of good governance which cannot be achieved by rules and procedures alone. Shared values that are integrated into the culture of an organisation, and are reflected in behavior and policy, are hallmarks of good governance”.

3. CONFIDENTIAL OR EXEMPT Not confidential.


4.1 Effective corporate governance procedures can have a positive impact on the

Council’s financial position by robust control of financial affairs. 5. RISK ASSESSMENT

5.1 A key requirement for the Audit and Corporate Governance Committee in order for

the Committee to meet its Terms of Reference is to develop, maintain, monitor and review the Council’s Code of Corporate Governance. The Committee should undertake, as appropriate, an assessment of wider governance issues, including the Constitution and the administration and conduct of the Council’s business and report to Council as necessary.


6.1 The Code of Corporate Governance applies to all Members and officers of the

Council, there are no specific equalities issues in relation to the content of this report.

7. CONSULTATION

7.1 The updated Code of Corporate Governance was discussed at the Resources and

Strategic Commissioning Directorate meeting on 10 May 2017 and at the Senior Management Team (SMT) meeting on 30 May 2017.

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8. REASONS FOR RECOMMENDATIONS 8.1 To ensure that the Council maintains an effective corporate governance framework. 8.2 To assist the Council in meeting its statutory requirement to review the effectiveness

of its systems of internal control and prepare an annual governance statement (section 6 of The Accounts and Audit Regulations 2015).

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

updated Code of Corporate Governance.


CIPFA / SOLACE Delivering Good Governance in Local Government: Framework 2016. CIPFA Statement on the Role of the Chief Financial Officer (CFO) in Local Government (2010). CIPFA Statement on the Role of the Chief Internal Auditor in Local Government (2010).





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CCOODDEE OOFF CCOORRPPOORRAATTEE

GGOOVVEERRNNAANNCCEE

Drafted by: Director of Corporate Services

Approved by Audit and Corporate Governance Committee:

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Code of Corporate Governance May 2017

This Code of Corporate Governance is available online at https://www.warrington.gov.uk/info/201098/budget_and_spending/35/annual_financial_reports If you require a LARGE PRINT VERSION OF THIS CODE or would like further information please contact Director of Corporate Services on 01925 443925 or write to Director of Corporate Services Town Hall, Sankey Street, Warrington. WA1 1UH or email [email protected]

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Code of Corporate Governance May 2017

Page

1. What is Corporate Governance 1 2. Key Roles of Local Authorities 2 3. The Governance Framework and the 2

Core Principles of Good Governance 4. Demonstrating Compliance with the Core and Supporting 3

Principles 5. Responsibilities 4

6. Reporting 5 7. Communication and Training 5

Appendix 1 Delivering Excellent Governance in Warrington Borough Council

CONTENTS

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Code of Corporate Governance May 2017 Page 1

1. What is Corporate Governance? Corporate Governance is the term used to describe how the Council manages its affairs and its relationship with the Community of Warrington “the arrangements put in place to ensure that the intended outcomes for stakeholders are defined and achieved” (The International Framework). Corporate Governance is the way in which the Council ensures the delivery of high quality services to all taxpayers and citizens. It is about how the Council ensures that it is doing the right things, in the right way, for the right people, in a timely, inclusive, open, honest and accountable manner. The International Framework also states that:

“To deliver good governance in the public sector, both governing bodies and individuals working for public sector entities must try to achieve their entity’s objectives while acting in the public interest at all times. Acting in the public interest implies primary consideration of the benefits for society, which should result in positive outcomes for service users and other stakeholders.” The Chartered Institute of Public Finance & Accountancy (CIPFA), and the Society of Local Authority Chief Executives & Senior Managers (SOLACE) have produced revised guidance on delivering good governance. “Delivering Good Governance in Local Government” was published in 2016 and notes “The preparation and publication of an Annual Governance Statement in accordance with Delivering Good Governance in Local Government; Framework (2016) would fulfil the statutory requirements for a local authority to conduct a review at least once in each financial year of the effectiveness of its system of internal control and to include a statement reporting on the review with its Statement of Accounts.” This document sets out the principles of good governance identified by CIPFA and SOLACE, and identifies the internal controls that the Council has developed in order to ensure good governance.

Warrington Borough Council Vision

“Growing a Strong Warrington”

Our strategic vision is for Residents, Businesses

and the Council with Partners to work together to make Warrington a place where everyone can

thrive

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2. Key Roles of Local Authorities Warrington Borough Council, as a public organisation, is committed to ensuring the highest possible standards of governance in order to fulfil its vision:

To deliver the vision the Council currently delivers a wide range of services which involve working in partnership with others at a local and a regional level, often under contractual arrangements, many of which involve considerable levels of funding. The Council continues to develop robust governance arrangements for all of its partnership arrangements.

Warrington Borough Council is committed to fulfilling its vision. To enable us to deliver on this vision we will make best use of the resources and assets available to us and our local communities to improve the quality of life for the people of Warrington. Our commitment, and how we will achieve these aims, is set down in this Code of Corporate Governance. Openness, inclusion, integrity and accountability are fundamental principles by which the Council operates.

3. The Governance Framework and the Core Principles of Good Governance In order to demonstrate the fulfillment of its commitment the Council operates a governance framework. The governance framework sets out how the Council is operating in order to demonstrate compliance, ongoing improvement, its commitment to maintaining the highest ethical standards and levels of governance and also to prepare for the compilation of the Annual Governance Statement (AGS). The Council has based its governance framework on the CIPFA/SOLACE guidance 2016 ‘Delivering Good Governance in Local Government’. The framework sets out 7 core principles for good governance. The diagram below, re-produced from the CIPFA/SOLACE guidance 2016 ‘Delivering Good Governance in Local Government’, illustrates the seven principles of good governance and how they relate to one another.

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4. Demonstrating Compliance that we deliver on the Principles of Good Governance Maintain a local code of corporate governance Appendix A of this document sets out in detail how the Council will support these principles and demonstrates how it will meet the specific requirements of the framework. Following the annual review of corporate governance this document will be updated to ensure it provides an accurate statement of the Council’s current position in relation to governance standards.

Review of the Council’s Corporate Governance

The Council will arrange for regular, at least annual, independent reviews of its corporate governance arrangements to be carried out by Internal Audit to ensure continuing compliance with best practice.

In addition the Council will ensure that there is an ongoing process of self assessment of governance standards and improvement planning.

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Following each review and self assessment the Council will ensure that an improvement action plan is produced, or an existing one updated, in order to address any significant weaknesses identified and ensure continuous improvement in the system of corporate governance.

Report publicly on compliance with governance arrangements in the Annual Governance Statement

The Council will produce an Annual Governance Statement (AGS). This will accompany the Council’s Annual Statement of Accounts. It will state what arrangements the council has in place to ensure the effectiveness of its governance framework and the degree to which the Council has followed its stated governance principles.

The AGS will also highlight any areas the Council considers to require significant improvement and outline the actions planned to address them.

The annual corporate governance review and self-assessment results will provide sources of assurance used to inform the compilation of the AGS. Other sources of assurance include the risk management and performance management systems, Internal Audit reporting and external inspection regimes.

The Audit and Corporate Governance Committee will review the robustness of the AGS. The Chief Executive and the Leader of the Council are required to sign off the AGS.

5. Responsibilities Every Council officer and member has a responsibility to ensure their personal conduct and the organisation’s governance arrangements are always of the highest standard possible. Senior managers have a responsibility for reviewing governance standards in their areas of responsibility annually and for providing documented assurance of their adequacy, and for identifying and implementing any necessary improvement actions. Improvement actions should be reflected in the appropriate business plans. The Director of Finance and Information Services has a responsibility to ensure that the Council makes arrangements for the proper administration of its financial affairs. The Chief Executive and Leader will ensure that an annual review is completed of corporate governance arrangements and give assurances on their adequacy in the AGS which will accompany the Statement of Accounts. The Audit and Corporate Governance Committee will ensure that the Code of Corporate Governance is reviewed regularly to reflect ongoing developments and planned improvements to the framework and authorise any amendments.

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6. Reporting The annual review of corporate governance will be reported to the Audit and Corporate Governance Committee. The main points of this review will be summarised in the published AGS.

7. Communication and Training The Corporate Governance Code will be published and accessible to all Council employees and members. Induction training will make reference to corporate governance arrangements. Key officers and Councillors will receive ongoing training and awareness raising to ensure changes in the code are communicated. The Corporate Governance Code will be reported publicly to citizens and service users with a copy available on the authority’s website. The AGS will be reported publicly, with a copy made available via the website.

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APPENDIX 1

DELIVERING EXCELLENT

GOVERNANCE IN WARRINGTON BOROUGH

COUNCIL

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CORE PRINCIPLE A

Behaving with integrity, demonstrating strong commitment to ethical values, and respecting the rule of law.

Supporting Principle How We Demonstrate Compliance 1.1 Behaving with Integrity

We ensure that members and officers behave with integrity and lead a culture where acting in the public interest is visibly and consistently demonstrated thereby protecting the reputation of the Council by the following:

Member and officer Code of Conduct

Member/officer protocols

Member/officer declarations of interest

Related parties disclosure in statement of accounts

Member development programme sets out expectations of Members

Effective Standards Committee

Effective Scrutiny Committee supported by robust evidence and data analysis

Work programmes established and links from Scrutiny Committee to the Policy Committees, quarterly meetings with chairs of committees

Leadership Development Forum sets out expectations of senior officers

Performance appraisal for officers

Anti-fraud, bribery and corruption policy

Revised whistleblowing procedure following the introduction of the Bribery Act 2010 and review by Public Concern at Work (PCAW) the whistleblowing charity

Further awareness raising during 2016/17 regarding anti fraud bribery and corruption requirements and whistleblowing procedure

Dedicated hotline in place. https://www.warrington.gov.uk/info/201114/publications_and_strategies/965/whistleblowing – 20k http://www.warrington.gov.uk/info/200355/budget_and_spending/1781/anti_fraud_bribery_and_corruption_statement_and_policy

We ensure that members take the lead in establishing specific standard operating principles or values for the organisation and its staff and that they are communicated and understood. These should build on the Seven Principles of Public Life (the Nolan Principles ) by:

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https://www.warrington.gov.uk/info/201114/publications_and_strategies/965/whistleblowing%20–%2020

http://www.warrington.gov.uk/info/200355/budget_and_spending/1781/anti_fraud_bribery_and_corruption_statement_and_policy

http://www.warrington.gov.uk/info/200355/budget_and_spending/1781/anti_fraud_bribery_and_corruption_statement_and_policy


Members’ Code of Conduct and through maintenance of the statutory interests register

Related parties disclosure in statement of accounts

Operating the Council’s Standard’s Committee to provide oversight of the conduct of elected members and to keep the Code of Conduct under review

Adopting the Council’s constitution each year at full Council We demonstrate, communicate and embed the standard operating principles or values through the policies and processes outlined above which are reviewed on a regular basis to ensure that they are operating effectively. Relevant policies include:

Dignity at work policy and grievance procedure

ICT acceptable use policy

Freedom of Information procedure

Equality and Diversity values

1.2 Demonstrating strong commitment

to ethical values

We seek to establish, monitor and maintain the organisation’s ethical standards and performance by:

Council strategy sets out Warrington Council’s values

The Policy Committees develop annual workplans in line with the policy framework

The operation of the Standard’s Committee

Complaints procedures and investigation of complaints

Register of gifts hospitality and member / officer interests

Regular reports to Council

1.3 Respecting the rule of law

The Council has appointed a Head of Legal Services who acts as the Monitoring Officer who has rights of access to all meetings and documents. Legal Services advises on decisions as appropriate. Legal advice and appropriate training offered to all Directorates.

The Senior Management Team consults the Monitoring Officer to ensure that all the Council’s decisions accord with the law and with the Council’s Constitution.

Internal Audit independently and critically evaluates the council’s internal control framework and, where necessary, makes recommendations for improvement and the introduction of best practice. Internal Audit has direct access and reporting lines to all senior management including the Chair of the Audit and Corporate Governance Committee; Chief Executive; Monitoring Officer; and the S151 Officer. Internal Audit report on its activity to the Audit and Corporate Governance Committee, providing an

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annual opinion on the overall adequacy and effectiveness of the council’s internal control environment.

The Council’s External Auditors are Grant Thornton. They produce an Annual Audit letter which is presented to the Audit Committee and published on the Council’s website. The letter communicates key messages to the Council and external stakeholders, including members of the public and is published on the Council’s website alongside the Annual Report and Accounts. All issues and recommendations raised in the Audit letter are formally responded to along with a responsible officer and a deadline for completion.

Council’s Constitution

Public protection across the Borough via our regulatory, licensing and enforcement activities

Standards Committee has clear terms of reference and can report to the Council when necessary

Statutory safeguarding boards in place for Adults and Children’s services

Council’s complaints and feedback procedure and policy in place

Regular complaints monitoring

Annual complaints reports published Adults and Children’s services

Ombudsman complaints procedure in place

Review of administration of the Council’s approach to issues raised by the Ombudsman

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CORE PRINCIPLE B

Ensuring openness and comprehensive stakeholder engagement

Supporting Principle How We Demonstrate Compliance 2.1 Openness

The Council has an effective Scrutiny Committee supported by robust evidence and data analysis

Policy Committees established, work programmes established and links from Scrutiny Committee to the Policy Committees, quarterly meetings with chairs of committee

The Council complies with the Local Government Transparency Code 2015

The Council operates a Publication Scheme under the Freedom of Information Act. The Scheme reinforces the Council’s commitment to openness and transparency. Where information is not published through the scheme the Council deals with requests for information on a timely basis and provides advice and assistance as required. The Publication Scheme is available on the Council’s website

Annual Statement of Accounts published in September 2016, work continues to make the statement more user friendly to stakeholders

Local Accounts published for adult social care and children’s services

The Council has a Forward Plan which contains the key decisions that the Council proposes to make, this is published every month

Decision-making protocols record of decisions and supporting materials are published on the Internet

2.2 Engaging comprehensively with other organisations that the Council needs to work with to improve services and outcomes

The Council participates in the following joint arrangements:

The Council participates in the Stronger Communities Board.

The Council supports significant private sector development and investment as well leading major council regeneration projects in order to support the growth

The Chief Executive attends the performance investment committee of the Cheshire and Warrington Enterprise Partnership

Concordat for Health and Wellbeing in Warrington - all partners have signed up to Health and Wellbeing Strategy which sets out vision and principles of joint working

Strong focus on integrated working with Health: Jointly funded Assistant Director post and an Integrated Commissioning Unit

Health and Wellbeing Board, the Integrated Commissioning Governance Board and

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the Health Summit all work together through a Whole Systems Transformation Programme

Joint working arrangements eg. Better Care Fund (BCF) supported by legal and financial agreements as appropriate

Formal partnerships are set out in contractual frameworks and have appropriate legal agreements in place eg. S75 agreements

Terms of reference for Boards sets out the duties of the Board in relation to the joint working arrangements

Work of the statutory safeguarding boards for Adults and Children’s services

http://www.warrington.gov.uk/info/200721/community_support_and_advice/506/warrington_partnership

2.3Engaging with individual citizens and service users effectively

The Council’s Customer Strategy has been refreshed 2016-2020 and sets out a vision for easy to use services that are designed with input from customers, that deliver improved value for money for the Council and encourage greater independence and self service. https://www.warrington.gov.uk/info/201114/publications_and_strategies/2027/customer_strategy The Customer Strategy sets out our Customer priorities to:

Improve online services

Make services more reliable and easy to use

Make it easier to contact the Council

Be clear about our services The Council has in place:

Strategic partnership agreement

Stakeholders’ forums

Development of neighbourhood forums

Equality and Diversity policy https://www.warrington.gov.uk/info/201081/the_council/830/equality_and_diversity

The Council ensures that arrangements are in place to enable the authority to engage with all sections of the community effectively:

Young people’s voices

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https://www.warrington.gov.uk/info/201114/publications_and_strategies/2027/customer_strategy

https://www.warrington.gov.uk/info/201114/publications_and_strategies/2027/customer_strategy

https://www.warrington.gov.uk/info/201081/the_council/830/equality_and_diversity


Corporate Engagement Network

A joint strategic needs assessment (JSNA) was developed by the Council, the Health & Wellbeing Board and GP consortia

JSNA considered in commissioning functions

Warrington Health and Wellbeing Board and Warrington Partnership Board have prepared “Warrington Strategy for Wellbeing - a joint health and wellbeing strategy” (JHWS), coordinating intentions from the NHS, social care, public health, and other health, determinants such as housing, education, environment and economy.

Public protection across the Borough via our regulatory, licensing and enforcement activities

Conduct a range of surveys – client surveys and engagement, staff surveys and engagement, Residents survey

Equality impact assessments

Equality objectives for 2016-2020 including 2 objectives:

- help to Improve Life Chances by reviewing the collective impact of national and

local policy decisions and how they impact on people most affected by social and

health Inequalities; and

- ensure a united Warrington by working with residents and partners in the public

and voluntary sectors to assess the equality impact of council decisions and

Strategies.

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CORE PRINCIPLE C

Defining outcomes in terms of sustainable economic, social, and environmental benefits

Supporting Principle How We Demonstrate Compliance 3.1 Defining outcomes

The Council strategy sets out the vision and key priorities for the Council over a 3 year period:

Council Strategy refreshed for 2015-18 informed by development of strategic commissioning intentions

Council Strategy supported by Directorate Plans and Change Projects

Warrington Strategy for Wellbeing refreshed for 2015-18 The vision and outcomes are a basis for corporate and service planning and upderpin

development of Council strategies and plans The Warrington Local Plan Core Strategy was adopted by Warrington Borough

Council on 21 July 2014 and the Strategy and subsequent changes are available to view online.

The Council takes a leading role in planning the future economic and transportation fortunes of the region and sub-region, working with our neighbours in Manchester and Liverpool and as part of the Cheshire and Warrington Enterprise Partnership, the Atlantic gateway and the Northern Powerhouse

The Council drives economic growth and regeneration in Warrington through our Warrington Means Business programme

Strategic commissioning priorities are linked to resource allocation as part of Outcomes Based Budgeting (OBB), proposals are considered and challenged throughout the year as they arise. http://www.warrington.gov.uk/directory/37/the_councils_major_policies_and_strategies/category/778

3.2 Sustainable economic, social and environmental benefits

The Council undertakes review and development on an annual basis of:

Corporate strategy delivery

Directorate and Business Plans

Medium Term Financial Plan (MTFP)

Performance Management framework Annual residents’ survey

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http://www.warrington.gov.uk/directory/37/the_councils_major_policies_and_strategies/category/778

http://www.warrington.gov.uk/directory/37/the_councils_major_policies_and_strategies/category/778


The Council’s Budget and Outcomes Based Budgeting (OBB) framework underpins our decision making. All Council decisions are required to comply with the budget and Outcomes Based Budgeting framework:

The MTFP is reviewed as an ongoing process as part of Outcomes Based Budgeting where proposals are considered and challenged throughout the year as they arise.

The MTFP is approved by the Executive Board and Full Council including the Annual Budget

Monthly and quarterly finance and performance monitoring takes place and is reported to members on a quarterly basis

Assumptions are reviewed quarterly and are reviewed formally on an annual basis. The Council includes consideration of Social Value in all of its commissioning and

procurement

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CORE PRINCIPLE D

Determining the interventions necessary to optimize the achievement of the intended outcomes

Supporting Principle How We Demonstrate Compliance 4.1 Determining interventions

The Council prepares annual reports that provide for a composite review of organisational performance: The Council produces:

Annual Scrutiny Report

Annual financial statements

Corporate Plan

Budget Consultation

ASC local accounts We prepare regular Corporate Performance and Resource Report with quarterly updates to determine, plan and optimise the achievement of intended outcomes. Call-in of decisions is a key element of the Council’s scrutiny process. This process brings rigour to decision making and helps to ensure that full consideration has been given to the options available.

4.2 Planning interventions

The Council’s Constitution and the record of decisions and supporting materials; this is reviewed at least annually.

Revised Constitution approved by annual Council in May 2016.

The roles of Members and Officers as set down in the Constitution.

The scheme of delegation. Fully embedded scheme of delegated decisions and financial delegation reviewed regularly with mechanisms in place to maintain up to date information.

Review and development on an annual basis of: o Corporate strategy delivery o Directorate and Business Plans o Medium Term Financial Plan (MTFP) o Performance Management framework o Annual residents’ survey

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o Risks

4.3 Optimizing achievement of intended outcomes

The MTFP is reviewed as an ongoing process as part of Outcomes Based Budgeting (OBB) where proposals are considered and challenged throughout the year as they arise.



Assumptions are reviewed quarterly and are reviewed formally on an annual basis

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CORE PRINCIPLE E

Developing the entity’s capacity, including the capability of its leadership and the individuals within it

Supporting Principle How We Demonstrate Compliance 5.1 Developing the entity’s capacity

We maintain staff development materials and programmes and publish them via the intranet with the aim of ensuring that the Council has a flexible and skilled workforce that can deliver its services and develop them in the future.

The Council has a constitution in place that sets out how the Council operates, how decisions are made and the procedures that are followed. The Constitution contains details of the respective roles and responsibilities of elected members, named officer roles and all employed by the Council. It also outlines protocols for Member/officer relationships.

The Council Constitution also contains a Code of Conduct for Members.

The Council has a Medium Term Financial Plan which provides a focus on both Revenue expenditure (day-to-day running costs of providing services) and Capital expenditure (long-term investment in infrastructure, like schools and roads), as well as setting out the Council's overall Financial Strategy.

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5.2 Developing the entity’s leadership

Members’ induction scheme

Member Development Programme including programme of training

Member Development Plan reflects requirements of a modern councillor including: o the ability to scrutinise and challenge o the ability to recognise when outside advice is required o advice on how to act as an ambassador for the community o leadership & influencing skills o officer personal reviews and leadership programme

Specific training for specialist committees such as Audit & Corporate Governance Committee / Planning / Corporate Parenting

5.3 Developing the capability of individuals within the entity

Induction programme for officers and Members including new focused ‘Welcome to Warrington’ course for all employees and new induction process on WINNIE

Officers training and professional qualifications to support decision making Training courses/information for officers and Members

Officer performance review process (PR&D); induction; training & development

Learning and development prospectus

E-Learning package in place with training programmes added on rolling basis

Workforce Talent and Skills Strategy including apprentice and graduate recruitment

Workforce Planning & Organisational Development support

Citizenship/Local Democracy/Youth Parliament Work

Monitoring Officer provides bespoke training / advice

Director of Corporate Services/Deputy Section 151 officer provide bespoke training / advice

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CORE PRINCIPLE F

Managing risks and performance through robust internal control and strong public financial management

Supporting Principle How We Demonstrate Compliance 6.1 Managing risk

The Council’s Risk Management Strategy sets out the council’s approach to risk management

A policy and process has been developed as a guide to officers and members to identify, assess and treat current and emerging risks to service objectives

The Audit and Corporate Governance Committee has responsibility for overseeing the effectiveness of the council’s risk management arrangements and will request further information on any areas of concern. The Committee receive monitoring reports twice a year

The Council has a Strategic Risk Register which is reviewed on a quarterly basis and monitored by Senior Management Team; Corporate Governance Group; the Executive Board; and the Audit and Corporate Governance Committee

Directorate level risk reports in place and reviewed quarterly

Major projects risk registers in place and reviewed regularly

6.2 Managing performance

There is a robust and effective authority wide performance framework which links strategic and service level business targets using a consistent methodology to deliver the corporate priorities

A Corporate Information Assurance and Data Quality Strategy is in place

Performance against the Corporate Strategy and key Corporate indicators is reported to Senior Management Team (SMT) and the Executive Board on a quarterly basis

Financial reports to Executive Board demonstrate achievement of efficiency savings each quarter

This is a key responsibility of the Director of Corportae Services in reporting through to the Executive Board and full Council on value for money

Each Directorate is supported by a specific finance team that provides financial advice and guidance to facilitate decision making

https://www.warrington.gov.uk/site/scripts/google_results.php?q=budget+and+spending

Clear and concise reports to Members

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https://www.warrington.gov.uk/site/scripts/google_results.php?q=budget+and+spending


Budget forecasting tool implemented Budget reports are produced for budget holders which include current and forecast

performance against budget and a risk assessment to the achievement of savings targets. Overall performance is reported by the Executive Lead Member for Resources and the Director of Corporate Services to the Senior Management Team and Executive Board.

All OBB proposals subject to scrutiny by the Spotlight Panel which included the full Executive Board and SMT

Contract Procedure Rules and Financial Procedure Rules are set out in the Constitution. These are reviewed regularly.

6.3 Robust internal control

Audit and Corporate Governance Committee has clear terms of reference, an effective membership as evidenced by the annual self assessment against the CIPFA guidance and receives appropriate training

The Audit and Corporate Governance Committee meets on a regular basis to consider and challenge a range of reports around the internal control, risk and governance environment of the Council

Director of Corporate Services and the Chief Internal Auditor have direct access to the Audit and Corporate Governance committee and external audit

The officer Governance Group meets 3 times per year and reports to Audit and Corporate Governance Committee on risk and governance issues

The Council has an Anti-Fraud, Corruption and Bribery Policy and a Whistleblowing Policy in place. These are reviewed on a regular basis. The policies are used to advise officers and members of the council’s approach to the serious issues of fraud and corruption. The Council operates a zero tolerance approach to fraud.

The annual Internal Audit planning process includes a specific fraud risk assessment to ensure that all current fraud risk areas are considered for inclusion in the Annual Internal Audit Plan

The Chief Internal Auditor produces an annual report and opinion on internal control, governance and risk management. The internal audit service conforms with the Public Sector Internal Audit standards.

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The Internal Audit Manager produces an Annual Fraud Report which outlines the key activities and findings from the previous year

6.4 Managing Data

The Director of Corporate Services is the Council’s Senior Information Risk Owner (SIRO); the Assistant Director Partnerships and Performance is deputy SIRO; and a dedicated information governance manager is in place.

The Information Governance Group (a collaborative group with representation across all directorates and key areas of WBC) monitors the required actions to address information governance risks.

The council has an information governance team that has agreed protocols in place for data sharing and protection across the council eg. Information Governance charter, data protection policy, key data protection procedures, data sharing protocols.

The information governance team monitor and challenge potential data breaches and ensure that effective controls are put in place to minimise the risk of any re-occurrence.

6.5 Strong public financial management

The MTFP is reviewed as an ongoing process as part of Outcomes Based Budgeting (OBB) where proposals are considered and challenged throughout the year as they arise.



Assumptions are reviewed quarterly and are reviewed formally on an annual basis

The Council is committed to being transparent and open about its financial affairs. Details of all council expenditure over £500 are published on the council’s website.

Authorisation levels are in place for orders/invoice approval and operate in conjunction with financial regulations

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CORE PRINCIPLE G

Implementing good practices in transparency, reporting, and audit to deliver effective accountability

Supporting Principle How We Demonstrate Compliance 7.1 Implementing good practice in

transparency

Use of the website

Provision of information to residents

Our External Auditors produce an Annual Audit Letter. This letter highlights key issues and findings from the external audit and is published alongside the Annual Report and Accounts. For all the findings and recommendations made in the Annual Report, a response is made by the Council and a responsible officer assigned to deliver the finding along with a deadline.

Equality and Diversity values

7.2 Implementing good practices in reporting

External Audit annual VFM conclusion presented to Audit & Corporate Governance Committee in September and published on the website.

Annual Statement of Accounts published in September 2016, work continues to make the statement more user friendly to stakeholders.

An annual report is published in September. This provides for a composite review of organisational performance in one document.

Local Accounts published for adult social care and children’s services. 7.3 Assurance and effective

accountability

External Audit Service – the Council’s External Auditors are Grant Thornton. They produce an Annual Audit letter which is presented to the Audit & Corporate

Governance Committee and published on the Council’s website.

Internal Audit independently and critically evaluates the Council’s internal control framework and, where necessary, makes recommendations for improvement and the introduction of best practice. Internal Audit has direct access and reporting lines to senior management including the Chair of the Audit & Corporate Governance Committee; Chief Executive; S151 officer; and Monitoring Officer. Internal Audit produce an annual report which includes an opinion on the overall adequacy and effectiveness of the Council’s internal control environment. The Audit & Corporate Governance Committee meets regularly to receive reports from both internal and external auditors. The Committee produces an annual report on the work of the Committee.

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WARRINGTON BOROUGH COUNCIL AUDIT AND CORPORATE GOVERNANCE COMMITTEE 22 JUNE 2017 Report of the: Chief Internal Auditor Report Author: Jean Gleave, Chief Internal Auditor Contact Details: Email Address:


Ward Members:

All

TITLE OF REPORT: ANNUAL REPORT AND HEAD OF INTERNAL AUDIT OPINION ON THE SYSTEM OF INTERNAL CONTROL 1. PURPOSE OF THE REPORT 1.1 This report presents the annual report from the Chief Internal Auditor for the work

performed by internal audit during 2016/17. In accordance with the Public Sector Internal Audit Standards (PSIAS) I am required to provide an opinion, based upon the work I have performed, on the overall adequacy and effectiveness of the organisation’s governance, risk management, and control processes (i.e. the organisation’s system of internal control).

2. CONFIDENTIAL OR EXEMPT 2.1 Not confidential. 3. BACKGROUND 3.1 The internal audit plan for 2016/17 is based on risks contained in the Strategic risk

register and the Directorate risk registers. The work aims to provide assurance to the Executive Directors on systems and controls in place that assist the Directorates in meeting their objectives. The work allows the Chief Internal Auditor to form an overall opinion on the Governance and Risk Management arrangements in the Council and the effectiveness of the Council’s internal control systems. The opinion is then used to support the Council’s Annual Governance Statement.

3.2 Reports issued during 2016/17 carry an overall assurance opinion that has formed the basis of the Head of Internal Audit Opinion at the end of the financial year. The opinion also takes into account consultancy work undertaken during the year; high priority findings from such reviews contribute to the overall opinion that is reported. Reports carrying an overall ‘Limited’ or ‘Minimal’ assurance opinion are reported to the Audit and Corporate Governance Committee as part of the internal audit progress report, along with any high priority recommendations that are outstanding.

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3.3 The annual report is attached at Appendix A, and the detailed programme of work

achieved compared with the approved plan is detailed in Appendix 1 to the attached annual report. Definitions of assurance are noted at Appendix 2 to the attached annual report.


4.1 Effective internal controls can have a positive impact on the Council’s financial position.

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 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.


6.1 The work required to deliver the internal audit 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

N/A

8. REASONS FOR RECOMMENDATIONS 8.1 To ensure that the Council maintains an effective framework of corporate

governance and system of internal control. 8.2 To assist the Council in meeting its statutory requirement to review the effectiveness

of its systems of internal control and prepare an annual governance statement (section 6 of The Accounts and Audit Regulations 2015) as referred to in paragraph 4 of this report.

9. RECOMMENDATION

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9.1 That the Audit and Corporate Governance Committee considers and comments upon the internal audit annual report as part of its monitoring role.


Internal Audit working papers





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Appendix A

Internal Audit Service

ANNUAL REPORT AND HEAD OF INTERNAL AUDIT

OPINION ON THE SYSTEM OF INTERNAL CONTROL FOR

THE YEAR ENDED 31 MARCH 2017

JUNE 2017

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

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CONTENTS

Section

Page

1

2

3

4

Introduction

Head of Audit Opinion

Audit Outcomes 2016/17

Effectiveness of Internal Audit

1

2

6

10

Appendices

1

2

Progress Against 2016/17 Audit Plan

Overall Audit Opinion Definitions

14

20

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1 HIA Opinion 2016-17

1. Introduction

1.1 United Kingdom Public Sector Internal audit Standards (PSIAS) The Public Sector Internal Audit Standards (PSIAS) note that a professional, independent and objective internal audit service is one of the key elements of good governance, as recognised throughout the UK public sector. The role of the Head of Internal Audit, in accordance with the PSIAS, is to provide an annual opinion, based upon (and limited to) the work performed, on the overall adequacy and effectiveness of the organisation’s governance, risk management, and control processes (i.e. the organisation’s system of internal control). This is achieved through a risk based plan of work, agreed with management and approved by the Audit and Corporate Governance Committee, which should provide a reasonable level of assurance, subject to the inherent limitations described in this report. Internal audit reviews have been conducted in conformance with the PSIAS. The CIPFA Statement on the role of the Head of Internal Audit (HIA) in Local Government issued during 2010 noted that the Head of Internal Audit in a local authority plays a critical role in delivering the authority’s strategic objectives by:

championing best practice in governance, objectively assessing the adequacy of governance and management of existing risks, commenting on responses to emerging risks and proposed developments; and

giving an objective and evidence based opinion on all aspects of governance, risk management and internal control.

1.2 Roles and Responsibilities

The Council is accountable collectively for maintaining a sound system of internal control and is responsible for putting in place arrangements for gaining assurance about the effectiveness of that overall system. The Annual Governance Statement (AGS) is an annual statement by the Council setting out:

how the responsibilities of the Council are discharged with regard to maintaining a sound system of internal control that supports the achievement of policies, aims and objectives;

the purpose of the governance arrangements as evidenced by a description of the risk management and review processes; and

the conduct and results of the review of the effectiveness of the system of internal control, including any disclosures of significant control failures, together with assurances that actions are or will be taken where appropriate to address issues arising.

The Council’s framework of assurance should bring together all of the evidence required to support the Annual Governance Statement.

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The opinion does not imply that internal audit have reviewed all risks and assurances relating to the Council. The purpose of the opinion is to contribute to the assurances available to the Council which underpin the Council’s own assessment of the effectiveness of the organisation’s governance arrangements and system of internal control. My opinion is one component that the Council takes into account in compiling its Annual Governance Statement. In particular, apart from the overall opinion, where ‘Limited’ or ‘Minimal’ assurance opinions have been issued against individual audits, or where critical or high priority recommendations have been made in consultancy reviews, then the Council should assess whether or not the sources of those opinions / recommendations necessitate the need for a disclosure of a significant issue. The definition of a significant issue is contained within guidance on the Annual Governance Statement.

2. Head of Internal Audit Opinion

My overall opinion is that:

Substantial assurance can be given that there is a generally sound system of internal control, designed to meet the Council’s objectives, and that controls are generally being applied consistently. However, some weakness in the design and/or inconsistent application of controls, put the achievement of particular objectives at risk.

2.1 Basis of the Opinion The basis for forming my opinion is as follows:

an assessment of the design and operation of the Code of Corporate Governance and underpinning processes;

an assessment of the risk management arrangements and the framework of assurance; and

an assessment of the range of individual opinions arising from risk based audit assignments, contained within the internal audit risk based plan that have been reported throughout the year. This assessment has taken account of the relative materiality of these areas and management’s progress in respect of addressing control weaknesses.

2.2 Corporate Governance Code of Corporate Governance A revised Code of Corporate Governance was approved by the Audit and Corporate Governance Committee in June 2017 which reflected the guidance issued by CIPFA/SOLACE in April 2016. A self assessment against the code was undertaken during 2016/17 by members of the Resources & Strategic Commissioning Directorate management team and the revised Code was reviewed by the Strategic Management Team (SMT) in June 2017. An

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assessment against the Code of Corporate Governance was undertaken by internal audit. Overall design of controls was seen to be satisfactory and there is a comprehensive action plan in place, maintained by the officer Governance Group, to address required action to improve governance processes. This will be carried forward and included in the workplan for the Group for 2017/18. Capital Schemes Governance The work performed by internal audit during 2016/17 on the governance and risk management arrangements in place for the major capital schemes once again identified a number of areas where the Council could continue to make improvements in the governance arrangements for major projects. The Council has a number of schemes underway to deliver regeneration and whilst governance arrangements have been developed for individual schemes there is still a requirement to ensure adequate escalation of potential risk areas and strategic oversight of all schemes. The review of the Time Square scheme indicated that there was a well-designed governance framework with experienced senior personnel heading up and supporting the workstreams and the Programme Board. Whilst some work has been undertaken to address the recommendations from the 2014/15 internal audit review, a number of the recommendations were repeated again in the report. In particular in relation to regular reporting to members and SMT; appropriate risk escalation; and robust contract monitoring of the company providing development management services. The recommendations highlighted areas where further action is needed to ensure that the governance framework embeds best practice for a scheme of this importance. A review of the Great Sankey Hub, requested by the Chief Executive, indicated that communication protocols from Programme Board to the Council was limited and that they failed to adequately and promptly report the changing financial situation of the scheme. Senior Management Team reviewed the governance arrangements during 2016/17 and agreed recommendations to refine and strengthen the governance and reporting arrangements of the supporting Boards and groups involved. Further work will be undertaken by internal audit in 2017/18 to assess how the new arrangements become embedded. Fundamental Financial Systems The internal audit plan included reviews of the fundamental financial systems in 2016/17 along with detailed testing to support the work of External Audit in their review of the Statement of Accounts. A number of the audit reviews and other work carried out in 2016-17 noted the impact from budget cuts and restructures. Common issues noted included:

increased management spans of control reduce the resource available for implementing effective oversight and review processes;

staff turnaround (including staff taking on new areas of responsibility) increases the risk that existing control procedures become less effective; in some cases, staff do

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not have adequate experience or knowledge of the systems they now have to administer or manage;

resource pressures make it more difficult to maintain up to date policies and procedures and to train new staff, which can have a knock-on effect on the efficiency of the service; and

the risk of “false economies” occurring increases; for example where services reduce the number of administrative staff and then lack the resource to issue invoices and collect all income due, or to monitor the delivery of a contract.

The risk of the issues noted above needs to be taken into account when managers consider proposals for restructuring services or delivering cost savings. Payroll Substantive testing in relation to 2015/2016 transactions was undertaken by Internal Audit to support the work of External Audit in their review of the Statement of Accounts. Testing was undertaken to confirm the existence of employees, that all employees had received the correct amount of pay and that costs had been correctly coded in the Financial System. Testing was also undertaken to ensure that temporary elements of pay agreed to supporting claims, had been appropriately authorised and were in accordance with approved rates. No material errors were identified. Assistance has also been provided to External Audit in relation to the 2016/2017 payroll substantive testing. ICT Governance Internal audit have continued to work with ICT managers during 2016/17 to map assurances for all system areas. ICT audit work was commissioned from Salford IT audit team and work was completed on controls in place to protect against cybercrime and on the ISO 270001 process. A ‘high’ level of assurance was provided for both of these reviews. Information Governance Information governance has been a continued key focus of the officer Governance Group and the Information Governance Group during 2016/17. The Chief Internal Auditor attends regular meetings with the Senior Information Risk Owner (SIRO) and Deputy SIRO to assess progress. The Information Governance team conducted a review against the Information Governance toolkit in March 2017 and noted 75% compliance at level 2. 2.3 Risk Management Arrangements During 2016/17 the responsibility for maintaining and developing the Council’s risk management framework transferred to the Chief Internal Auditor. To support this, a new role of Insurance, Risk and Counter Fraud advisor was created; this role operates independently of the internal audit team. In line with the revised PSIAS 2017 it is important that safeguards are implemented with regard to any potential impairment of objectivity of the internal audit activity. A review was undertaken during 2016/17 by the audit manager. The internal audit review identified that the strategic risk register was presented to the Strategic Management Team on a quarterly basis during 2016/17 in addition to Executive Board at quarters 2 & 4. The

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strategic risk register was also presented to the Audit & Corporate Governance Committee in June 2016 and January 2017 for their assessment of required assurance on key risks. The strategic risk register is populated with risks to the achievement of the Council’s corporate objectives and all risks are categorised and allocated to a responsible Executive Director; the strategic risk register was refreshed by Senior Management Team during the year to clarify risks and associated responsibilities for management of risks. Whilst arrangements are in place to report regularly to appropriate management and members it must be ensured that risks are being identified and managed at an appropriate level which includes effective arrangements for escalation, challenge and oversight. As the Council becomes more commercial / entrepreneurial it has never been more important to ensure that risk management is not just a governance exercise, but supports decision making at the appropriate time. Key findings from the review included the following requirements:

there should be appropriate mechanisms in place to ensure the effective communication of strategic and directorate risks throughout the Council, and escalation of project and programme risks on to directorate / strategic registers, where appropriate;

SMT and Executive Board reports, and papers to other decision-making bodies, should explain clearly how proposed actions will affect the Council’s risk exposure, with specific reference to strategic or directorate risks, where relevant; and

further risk management training should be provided to assist in the understanding of strategic risk and risk appetite.

Framework of Assurance The Chief Internal Auditor provides support to the officer Governance Group who met regularly during 2016/17, using the comprehensive framework of assurance to demonstrate how assurance is provided to the Audit and Corporate Governance Committee and the Strategic Management Team. A forward workplan is in place which requires regular assurances to be provided to the Group on the risks in the strategic risk register. The Group maintains a comprehensive action plan to monitor required improvements identified in the Annual Governance Statement 2015/16 and to ensure continuous improvements of the governance arrangements in place. 2.4 Risk Based Assignments This element of the opinion is based on an assessment of the range of individual opinions arising from risk based audit assignments, contained within the internal audit plan that have been reported throughout the year. On 21st April 2016 the annual internal audit plan was agreed by the Audit and Corporate Governance Committee; during the year any necessary changes to the plan were reported to, and agreed by, the Committee. This assessment has taken account of the relative materiality of these areas and management’s progress in respect of addressing control weaknesses. The outcomes section of this report and Appendix 1 gives fuller details of:

performance against 2016/17 plan;

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unplanned work undertaken;

key points arising where our overall assurance opinion was ’substantial’ however recommendations were made to improve controls further;

key points arising where our overall assurance opinion was ‘limited’ or ‘minimal’; and

follow up work undertaken. Arising from the agreed plan of work a total of 21 reports and 4 memos have been issued. All of the work undertaken contributes to my overall opinion on the control environment; 17 of the reports issued contained a formal assurance opinion as noted in the graph below (includes 1 report with a split opinion). The assurance levels show a broader spread when compared to 2015/16. Half the number of reports contained an overall ‘substantial’ assurance although ‘high’ assurance was issued in 4 reports. One more report contained a ‘limited’ assurance opinion and one contained a ‘minimal’ assurance opinion. This indicates a slightly reduced control environment in comparison to 2015/16. Reports that contain a ‘limited’ and ‘minimal’ assurance opinion relate, in the main, to areas where management have requested reviews. These are areas where controls have been known to be at risk and managers have sought out independent assurance and confirmation of their assessment of controls. Internal audit work in a number of areas and in particular in those areas where a ‘limited’ assurance opinion was provided continues to indicate the pressures on the organisation as resources reduce and experienced staff leave their posts. It is the view of internal audit that clear policies and documented procedures, including key checks, need to be in place to support staff in the changing environment.

3. Audit Outcomes 2016/17

3.1 Assurances Issued During 2016/17

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My opinion has taken account of the relative materiality of areas reviewed and management’s progress in respect of addressing control weaknesses. Appendix 1 provides full detail of reports issued and notes the reports with a ‘high’ or ‘substantial’ assurance opinion. Whilst all audit outcomes have contributed to the overall opinion, the following reviews and their outcomes are considered particularly relevant in determining my overall opinion. The schedules below note key points arising for those reports containing ‘Limited’ or ‘Minimal’ assurance. In all cases management action to address reported weaknesses was agreed.

Overall Limited Assurance

Report Subject Key Actions Agreed

Time Square Action was agreed to high priority recommendations as follows:

SMT/CIPG to be provided with update reports on a quarterly basis, outlining the financial position and the management actions relating to key risks.

Programme Manager to liaise with ERGE Business Manager and the Corporate Risk Management team to design and implement an appropriate programme risk escalation model.

Resource assessment paper to be produced for SMT outlining Time

Square issues along with planned requirements for developing schemes.

Review of the Time Square financial model.

Health & Social Care - Better Care Fund (BCF)

Action was agreed to high priority recommendations as follows:

Clear audit trail and recording of decisions.

Formal reporting to Health & Wellbeing Board.

Re-introduction of a high level BCF Joint Risk Log.

Monitoring of delivery at programme level.

Internal Audit will undertake further work in 2017/18 to verify implementation of the agreed actions and to reflect how this has led to improved arrangements.

Walton Hall Action was agreed to high priority recommendations as follows:

Further staff training.

Central record for recording payments.

Improved charging records.

Facilities Cleaning - payroll

1 high risk recommendation reported relating to payroll amendment forms and adequacy of checks on processing. Monthly checks were implemented using the establishment list and prepayment report in conjunction with Finance and Payroll. 8 medium priority recommendations agreed to review the systems and controls in place surrounding payroll.

Fleet & Depot No high risk recommendations were made, key areas for improvement

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Services included the need to enhance controls over expenditure and income, and the need to carry out monitoring of transactions at a sufficient level of detail in order to enhance the effective control of budgets.

Overall Minimal Assurance

Report Subject Key Actions Agreed

Great Sankey Hub

Actions had been put into place as follows:

Changes to the Council project management provision and improved governance arrangements, oversight and reporting for the project.

Appropriate understanding of risk ownership and planned mitigating actions for associated project risks that impact the Council’s own risk profile.

3.2 Follow up procedure and work performed Internal audit maintained the follow up procedure whereby a summary of recommendations made for each report is provided for the Audit and Corporate Governance Committee. This includes:

the number of recommendations made for each report across Critical, High, Medium and Low categories;

the number of recommendations implemented by the due date; and

the number of recommendations not implemented by the due date with reasons.

Where there is a failure to implement agreed critical or high priority recommendations by the due date, without any justification for not doing so, a formal process of notification to the Director of Finance & information Services is made followed by referral to the Audit and Corporate Governance Committee. Central Client Finances Follow up work undertaken in May 2016 on the internal audit review of the central arrangements and processes for managing clients' finances identified improvements to address system weaknesses. A number of recommendations had been implemented and the follow up work confirmed that significant progress has been made in addressing those recommendations which had been outstanding earlier in the year. The Office of Public Guardian carried out an external inspection and concluded its report into client finances; in March 2017 they issued their findings which indicated ‘a demonstrable improvement in the service’. Further follow up work will be performed by internal audit in 2017/18 before the next planned visit from the Office of Public Guardian. Corporate Loans Internal audit attended regular meetings of the Corporate Loans group during 2016/17 and reviewed all committee papers and due diligence reports relating to new loans approved

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during the year. Following the issue of our final audit report in January 2016 which contained a ‘substantial’ assurance opinion it was agreed that given the value and high profile nature of these transactions internal audit would undertake follow up work during 2016-17 to ensure that progress had been made against the agreed five recommendations. Further testing undertaken during September 2016 and April 2017 provided assurance that all actions had been addressed. Detailed follow up work was also undertaken on reports that contained a ‘limited’ assurance opinion from the 2015-16 internal audit work including Walton Hall; Planning Enforcement; Children’s Centres; and Estates & Valuation - Acquisitions & Disposals. 3.3 Additional Work during 2016/17 Mosaic Internal audit has continued to provide advice and support to the project as a member of the Project Board for the new social care system Mosaic. Additional work has been undertaken alongside our Salford IT Audit colleagues with a specific focus on key project risks and governance arrangements going forward. Support has now extended to regular meetings with the Project Manager to monitor and review the key risks and to provide advice where necessary via regular attendance at Mosaic Finance Group meetings.

Counter Fraud Work and Investigations A Corporate Counter Fraud Unit was established at the beginning of 2016-17 in response to the transfer of responsibility for the investigation of Housing Benefit to the DWP’s Single Fraud Investigation Service (SFIS). The Unit investigates potential frauds in council tax support and single person discount systems, as these remain attractive targets for fraudsters. The creation of the Unit has also presented an opportunity to develop capacity to investigate other suspected frauds against the Council, in areas such as blue badges, social care (including direct payments), business rates and insurances. A fraud risk assessment has been carried out to identify and prioritise a work programme, which includes both proactive and reactive elements. Effective intelligence sharing arrangements are in place with key partners, such as DWP, the Police and Housing Associations, which improve the Council’s capacity to identify existing and emerging fraud risks. The Council has carried out a self-assessment of its counter fraud arrangements against the CIPFA Code of Practice on Managing the Risk of Fraud and Corruption. This resulted in a “Good” level of performance, which means that the Council has effective arrangements and is taking positive action to manage its fraud risks. There were no significant frauds affecting the Council in 2016-17 that required disclosure to the external auditors. Work will continue in 2017-18 to improve information sharing arrangements with partners, to extend the range of proactive counter fraud work, and to raise awareness of fraud risks amongst Council staff, key stakeholders and the public. Schools Work A programme of schools audits was undertaken with visits to six schools which resulted in two ‘high’, three ‘substantial’ and one ’limited’ assurance opinion. A separate annual report

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has been produced for the schools work. Resource has been allocated in 2017-18 to maintain the coverage of schools’ audits and to review schools as they transfer to academy status. Planning of schools’ reviews has been undertaken in conjunction with the Assistant Director of Universal Services, Families and Wellbeing on a risk assessed basis. Grant Work Work continued during 2016/17 in signing off grant allocations. Grant sign off has been undertaken in the following areas: complex families; modern foreign languages grants; collaborative fund (teaching schools); Centre Park Link; M62 Jn8; and Warrington West Station. External grant work has also been undertaken for the Cheshire Local Enterprise Partnership in relation to the Business Growth Hub. Other Work The internal audit team’s resources have been applied in several other respects:

support to the Audit and Corporate Governance Committee and the officer Governance Group;

collation of evidence and co-ordination of the preparation of the 2016/17 Annual Governance Statement;

attendance at the Capital Investment Planning group;

attendance at the Strategic Procurement Panel meetings;

attendance at the Corporate Loans group;

attendance at regular meetings with the Director of Finance & Information Services and the Assistant Director Partnerships and Performance;

maintenance of the specimen signatory list;

provision of ad-hoc advice;

external work for LiveWire and Culture Warrington, Salford Council; Lymm Parish council; and

ad hoc external work.

4. Effectiveness of Internal Audit 4.1 Public Sector Internal Audit Standards (PSIAS) The PSIAS require an external assessment of the service at least once every five years by a qualified, independent assessor or assessment team from outside the organisation. The North West Chief Audit Executives’ Group established a ‘peer review’ process, managed and operated by the constituent authorities to address this requirement. An external assessment of the service was undertaken by independent assessors during January 2017. The assessors validated the self-assessment of the internal audit service that had been completed using the checklist attached to the PSIAS local government application note. The external assessment noted that the service ‘conforms’ with the PSIAS. The report from the external assessment and action plan noting required improvements was presented to Audit &

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Corporate Governance committee in March 2016. The Audit & Corporate Governance Committee will continue to be appraised of progress. 4.2 Quality Assurance & Improvement Programme 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; and

is perceived by stakeholders as adding value and improving Internal Audit’s operations.

For 2016/17 the internal audit service continued to set challenging targets for all of its key measures, but particularly ‘plan delivery’ and ‘implementation of recommendations’. These two indicators form part of the overall directorate performance reporting information which is reported to SMT. The table below details the key performance measures relating to Internal Audit and actual performance for 2016/17:

Ref Indicator

Target %

Achievement %

FIN025 % of audit plan completed (to date of annual report)

90 73

% of critical high and medium recommendations implemented within agreed timescales

85 82

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

80 65

% satisfaction with the audit service 90 97

% compliance Public Sector Internal Audit Standards

100 External assessment noted that the service

‘conforms’ to the PSIAS

Completion of the audit plan for 2016/17: Further work has been completed up to the date of this report, giving a total completion of 73% against the target of 90% to the date of the issue of the annual report, including the work that is currently being finalised. 13% has been carried forward into 2016/17. A number of the planned days were used in investigations or to provide advice. The total days planned were used on the counter fraud plan. Post audit feedback forms: for 2016/17 summaries of the forms indicate an overall satisfaction rate of 96.6% with the audit service, with 87.5% of respondents noting that they were ‘very satisfied‘with the service provided. This is slightly down on the 2015/16 figures

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of 98% and 93% respectively. Verbal feedback has indicated that managers value the support and help that the internal audit team provide. Final reports issued within 25 working days of completion of fieldwork: 21 reports were issued with 15 within the target and 6 reports outside target of 25 days. The majority were delays in obtaining management responses to the reports, however two were subject to delay at the management review stage. There is a need to take into account the type and complexity of the reviews and reports with a ‘limited’ assurance opinion are subject to detailed discussions to agree action. This is an area that the team will continue to focus upon during 2017/18. The CIPFA benchmarking results that we received for 2016-17 compared the service to 24 other unitary authorities that responded to the survey. The main results on cost effectiveness of the service are as follows:

Warrington

UA Average Warrington Rank (out of 24)

Audit days per £m turnover 2.7 2.4 7/24

Chargeable days per auditor 189 179 7/24

Cost per day 318 305 10/24

This demonstrates that we are slightly above average on cost per day and rank towards the higher end of the respondent authorities in terms of productivity. Whilst average costs per auditor is slightly higher compared to the group average, and the cost is mainly made up of staff costs, other overhead costs are higher than the group average. 4.3 Internal Audit Developments Internal audit continue to look to expand the audit service by providing services to prospective Academy schools and other organisations. We have developed marketing material and continue to update the Audit site on the Council’s intranet. During 2016/17 the collaborative arrangement with the internal audit team at Salford City Council was formalised and the Chief Internal Auditor was appointed Head of Internal Audit at Salford Council. The Chief Internal Auditor splits time equally between the two Authorities and 0.5 WTE resource is provided by a principal auditor from the Warrington team to cover a vacancy in the Salford team. The collaboration aims to address resource shortages and share skills effectively in the two internal audit teams and will support the two Councils achieve their efficiency and financial targets. The aim of the collaborative working is to make best use of resources, generate income and continue to deliver a cost effective, value added service. Gaps in IT audit have been addressed during 2016/17 by purchasing days from the Salford IT audit team. We have continued to develop shared working arrangements with other neighbouring Local Authorities: Cheshire East; Cheshire West and Chester; and Halton to address capacity requirements. We have again purchased contract audit work from the Cheshire West and Chester contracts auditor during 2016/17.

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The new Corporate Counter Fraud Unit was established as a joint team with Salford Council. The joint Unit is resourced by staff from both Councils and currently comprises four staff, all of whom are experienced and qualified former benefits investigators. The Unit is led by the Audit Manager at Warrington, with support from a Principal Auditor at Salford. The remit of the Unit is to undertake both proactive and reactive counter fraud work, and address all fraud risks facing the council, both internally and externally. 4.4 Working with External Audit We have liaised during the year with External Audit to ensure that we avoid unnecessary duplication and use resources to the best effect. Close links with External Audit have been evidenced by:

provision of our plan to them for comment;

sharing of our reports and working papers; and

local progress meetings on a regular basis.

4.5 Working with Partner Organisations’ Audit teams Our review of governance arrangements for health and social care integration, and the further review of the Better Care Fund, incorporated joint working with the CCG’s internal auditors, Mersey Internal Audit Agency. This was to support the integrated nature of this area across Health and Social Care. This approach also ensured that the findings and recommendations reflected both Health and Council responsibilities for delivery of the Better Care Fund project and facilitated appropriate reporting lines. Further joint work with MIAA has been planned in this area for 2017/18. 4.6 Other Assurances Internal audit have continued to map other assurances received by the Council. We have taken into account any external reviews and we also map the assurances received with regard to ICT. As part of the planning process for 2017/18 we mapped the assurance coverage provided by internal audit to the risks in the Council’s Strategic Risk Register. 4.7 Working relationships Internal audit have continued to enjoy positive working relationships with staff at all levels of the Council. We would like to thank all staff for their assistance in the completion of our audit work during the year. Internal audit have continued to work closely with the Performance team over the last year to contribute to the Council’s framework of assurance.

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June 2017 14 HIA Opinion 2016-17

Appendix 1

Progress Against 2016/17 Audit Plan

Subject Planned

Start Quarter

Actual Fieldwork

Start

Draft Report Issued

Final Report Issued

Assurance Opinion

Comments

2015/16 Work Issued in 2016/17

Accounts Payable 15/16 26/01/2016 21/03/2016 08/04/2016 Substantial

Facilities Cleaning 13/09/2016 16/11/2016 13/04/2017 Limited

Performance & Management Info Reporting, Data Quality & Care Management Recording

11/01/2016 20/07/2016 26/08/2016 Substantial

Walton Hall 21/09/2015 03/03/2016 23/03/2016 Limited

Corporate Governance - Authority Wide

Authority Wide Governance Q1 - - - Substantial

Attendance and support to Governance Group meetings; Review of Code of Corporate Governance; Collation of Annual Governance statement and supporting self-assessments; Review of revised capital governance arrangements.

Strategic Risk Management Q2 12/09/2016 - - Substantial Review performed by audit manager to provide assurance to S151 of the arrangements in place.

Information Governance s29/s35 Q2 04/10/2016 - - - Audit in progress - fieldwork delayed due to staffing changes in Information Governance team.

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Management Information/PIs/Data Quality

Q4 30/06/2016 - - -

In progress. It was agreed that this review would focus on the Economic Regeneration, Growth & Environment Directorate and has been picked up in a number of service reviews. Memo being drafted.

Fundamental Financial Systems

Integrated Health & Social Care Better Care Fund

Q2 08/09/2016 19/01/2017 07/02/2017 Limited

Financial Accounting System Q4 - - - c/f to 17-18 c/f to 17-18

Budgetary Control Q4 30/03/2017 - - - Work in progress.

Fixed Asset Register & Capital Accounting

Q3 18/01/2017 - - -

Advice issued re the proposed charges to accounting for the Highways Network Asset. Further work postponed due to the decision by CIPFA not to implement the proposed changes.

Benefits - Discretionary Housing Payments

Q1 18/04/2016 09/06/2016 27/06/2016 Substantial

Accounts Payable Q4 - - - Terms of Reference sent out. Fieldwork due to start.

Accounts Receivable Q3 23/01/2017 15/03/2017 30/03/2017 High

Payments to Staff - Travelling & Subsistence

Q2 17/01/2017 - - - Report being drafted.

Cash and Bank c/f 15-16 Q4 22/03/2017 - - - Fieldwork in progress.

Related Parties testing Q1 n/a n/a n/a - Testing carried out by Accountancy.

Grants Audits Q1 11/05/2016 n/a n/a - Growth Hub; Centre Park Link; M62 Jn8; Warrington West Station; Modern Foreign Languages; Teaching Schools.

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Investigations n/a 09/05/2016 - - n/a Memo Includes investigation relating to flexible working / mileage claims.

Detailed testing to support External Audit work

Q1 12/04/2016 14/07/2016 12/09/2016 n/a Memo

Resources & Strategic Commissioning - Key Business Systems

Training and Development c/f 15-16 Q4 c/f to 17/18

Electoral Registration c/f 15-16 Q4 08/12/2016 27/01/2017 01/02/2017 High

Customer Contact Centre Q4 - - - - Postponed due to plans to replace current customer relationship management system.

Health & Safety Q4 - - - - c/f into strategic audit plan to be included in 18/19 plan of work.

Salary Sacrifice Schemes Q3 - - - -

Agreed that this review will be replaced with a review of Payroll Leavers. Agreed that review of Payroll Leavers would be postponed following work undertaken by Human Resources.

ICT - Cyber Security Q2 13/06/2016 05/09/2016 21/02/2017 High

ICT - ISO 27001 Q2 13/06/2016 05/09/2016 21/02/2017 High

Major Capital Loans - Consultancy Q2 17/04/2017 04/05/2017 04/05/2017 n/a Memo

Initial follow up work undertaken and memo issued Sept 2016 Further follow up work completed in April 2017. All recommendations now implemented.

Economic Regeneration, Growth and Environment - Key Business Systems

Budget Monitoring/Transformation Q1 05/05/2016 - - - Meetings held / Advisory role. Work now postponed pending restructure.

Trading & Income Generation Q4 - - - - Capital Delivery Team - Growth Co - advice

Regulatory Services Q4 c/f 17/18

Fleet & Depot Services Q2 19/08/2016 12/01/2017 12/04/2017 Limited

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Parks & Street Services Q2 12/01/2017 - - - Report being drafted.

Property & Estate Management (follow-up of 14/15 Acquisitions and Disposals)

Q2 07/06/2016 n/a 28/06/2016 n/a Memo Follow up work complete and memo issued.

Community Recycling Centres Q4 18/01/2017 27/04/2017 18/05/2017 Substantial

Regeneration Schemes c/f 15-16 Q2 04/08/2016 04/10/2016 14/12/2016 Substantial/

Limited

Capital Projects - Great Sankey Hub n/a 25/04/2017 03/05/2017 22/05/2017 Minimal Additional work requested by Chief Executive.

Capital Projects Q2 - - - - Input to Capital Governance review.

Families & Wellbeing - Key Business Systems

Direct Payments Q3 17/01/2017 - - - Investigation of referrals and work with the service to improve controls. Ongoing c/f to 17/18 plan.

Commissioning & Contracting Q2 24/01/2017 - - - In progress: includes findings from Children with Additional Needs review and covers areas in the scope of the Care Arrangers review.

School Support n/a - - - - Ongoing work

Safeguarding & Looked After Children - Children in care agency placements c/f 15-16

Q3 - - - - F&W DMT 22.02.17: Undertake work in 2017/18 under Children in Care review - Head of Service updating procedures.

Adoption Services WWISH c/f 15-16 Q4 - - - -

F&W DMT 22.02.17: Head of Service commented re Adoption service moving to regional agency - leave for 2016/17. Cheshire West & Chester to lead on governance - Audit Manager to check re assurance arrangements with Cheshire West going forward.

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Fostering Service Q4 - - - - F&W DMT 22.02.17: Head of Service commented re Fostering shared service - leave for 2016/17 and check assurance arrangements going forward.

DAAT c/f 15-16 Q4 21/09/2016 01/12/2016 13/12/2016 Substantial

Neighbourhood Services n/a - - - - Taken out of plan due to work being undertaken by Business Improvement team.

Contract Management & Monitoring Q4 - - - - c/f to 17/18

Adult Safeguarding Quality Assurance Q3 - - - -

F&W DMT 22.02.17: Head of Service has no concerns in this area. Resources for this review redirected to unplanned Adult Social Care Direct Payments counter fraud/investigations work.

Safeguarding & Monitoring Q4 - - - - c/f to 2017/18 - debt management & recovery processes re client care contributions (following Mosaic implementation).

Care Arrangers & Care Financials c/f 15-16

Q4 - - - -

Work undertaken during 2016-17 - advice via Mosaic project support. Full review of new processes in 2017/18 following Mosaic implementation.

Complex Families n/a 01/01/2016 - - - Payment By Results claims for May, June, Aug, Sept, Oct, Nov, Dec 2016 & Jan, Feb, March 2017 signed off.

Carefirst/Mosaic - Consultancy n/a 01/04/2016 - - - Ongoing consultancy work and support to project implementation.

Families & Wellbeing - Schools

Schools - Evelyn Street PS Q2 15/07/2016 18/08/2016 18/04/2017 Substantial

Schools - Alderman Bolton Community PS

Q2 04/07/2016 18/08/2016 20/10/2016 Limited

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Schools - Warrington St Ann's CE PS Q3 - - - - Will be re-assessed with 17/18 schools work planning.

Schools - Grappenhall Heyes Community PS

Q3 - - - - Will be re-assessed with 17/18 schools work planning.

Schools - Great Sankey PS Q3 - - - - Will be re-assessed with 17/18 schools work planning.

Schools - Locking Stumps Community PS


Schools - Penketh PS Q1 27/06/2016 15/07/2016 19/07/2016 High

Schools - St Elphin's (Fairfield) CE Voluntary Aided PS


Schools - St Margaret's CE Voluntary Aided PS


Schools - St Philips (Westbrook) CE Aided PS

Q4 29/11/2016 19/12/2016 18/01/2017 Substantial

Schools - New Horizons School Q4 - - - - Will be re-assessed with 17/18 schools work planning.

Schools - Cardinal Newman Catholic HS


Schools - St Gregory's Catholic HS Q3 - - - - Will be re-assessed with 17/18 schools work planning.

Other Outputs

Value for money - feasibilty studies - - - - - Review of work in progress complete.

Value for money - consultancy spends n/a - - - - Postponed due to similar work being undertaken by Procurement.

Value for money - collaborative arrangements

Q4 - - - - Some planning commenced but audit then postponed.

Use of IDEA to interrogate payments Q3 28/11/2016 23/01/2017 - n/a Memo Assessment of compliance with Contract Procedure Rules.

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Appendix 2

Overall Audit Opinion Definitions

We have four categories by which we classify our overall audit opinion and our opinion of the individual key control areas. These are defined as follows:

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.

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WARRINGTON BOROUGH COUNCIL AUDIT AND CORPORATE GOVERNANCE COMMITTEE 22 JUNE 2017 Report of the: Director of Corporate Services Report Author: Jean Gleave, Chief Internal Auditor Contact Details: Email Address:


Ward Members:

All

TITLE OF REPORT: ANNUAL GOVERNANCE STATEMENT 2016/17 1. PURPOSE OF THE REPORT 1.1 The purpose of the report attached at Appendix A is to present the draft Annual

Governance Statement for 2016/17. The Annual Governance Statement supports the Council’s Statement of Accounts and outlines how it manages its affairs to deliver high quality services and ensure that public money is spent effectively.

2. CONFIDENTIAL OR EXEMPT 2.1 Not confidential. 3. BACKGROUND 3.1 The requirement to produce an Annual Governance Statement is a statutory

responsibility (Accounts and Audit Regulations 2015). The Accounts and Audit Regulations revised in 2015 note that the AGS should ‘accompany’ the statement of accounts. The AGS has been reviewed together with the summary to the accounts to ensure that the two documents do not duplicate information.

3.2 The Audit & Corporate Governance Committee reviewed a revised local Code of Corporate Governance on 22 June 2017 that is consistent with the principles of the CIPFA/SOLACE Framework 2007: Delivering Good Governance in Local Government, and the revised Framework issued in April 2016.

3.3 The Framework requires local authorities to prepare a governance statement in order

to report publicly on the extent to which they comply with their own code of governance on an annual basis, including how they have monitored the effectiveness of their governance arrangements in the year, and on any planned changes in the coming period. The guidance notes that the AGS should “provide a meaningful but brief communication regarding the review of governance that has taken place. It

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should be focused on outcomes and value for money and relate to the Authority’s vision for the area”.

4. APPROACH TAKEN TO PRODUCE THE 2016-17 ANNUAL GOVERNANCE STATEMENT

4.1 The officer Governance group approved a self assessment process for review by each

Directorate of their governance arrangements. Each Directorate Management Team was asked to complete and score the assessment and return to the Chief Internal Auditor for review and collation. Self assessment documents have been returned by all Directorates and discussions have been held at Directorate Management Team meetings to go through the output. Internal Audit have assessed the returns and provided challenge, as necessary, to the scoring in the returns.

4.2 Discussions have been held with Directorate leads around the process of using the

self assessment documents to provide ongoing assurance to the Directorate Management Team meetings. Internal Audit have also reviewed the revised code of corporate governance and are satisfied that the assessment process is robust and the Code sets out a reasonable position of the governance arrangements in place.

4.3 During 2016/17 the officer Governance Group used the map of sources of assurance

to ensure that the Annual Governance Statement is fully supported. This is shown in a diagram at appendix 3 of the statement. The group maintains a comprehensive improvement action plan that incorporates any improvement actions identified. Any areas for improvement will be included in the officer Governance group action plan for 2017/18.

4.4 The Strategic Management Team at their meeting on 30 May 2017 reviewed the

draft Annual Governance Statement and considered any areas that should be classified as ‘significant governance improvement areas.’ The recommendations in the report were agreed and the areas have been highlighted as governance developments and included in section 5 of the attached statement.



6. RISK ASSESSMENT 6.1 The Annual Governance Statement provides information to the public on how the

Council is managing its risks. 7. EQUALITY AND DIVERSITY/EQUALITY IMPACT ASSESSMENT


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report. 8. CONSULTATION

N/A 9. REASONS FOR RECOMMENDATIONS 9.1 To ensure that the Council maintains an effective framework of corporate

governance. 9.2 To assist the Council in meeting its statutory requirement to review the effectiveness

of its systems of internal control and prepare an annual governance statement (section 6 of The Accounts and Audit Regulations 2015) as referred to in paragraph 3 of this report.

10. RECOMMENDATION 10.1 That the Audit and Corporate Governance Committee reviews and approves the

Council’s Annual Governance Statement for 2016/17, attached at Appendix A. 11. BACKGROUND PAPERS

Delivering Good Governance in Local Government: Framework – issued by CIPFA / SOLACE 2016

The Role of the Chief Finance Officer in Local Government – CIPFA 2010 Internal Audit working papers Directorate governance self assessments





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Appendix A

AANNNNUUAALL GGOOVVEERRNNAANNCCEE

SSTTAATTEEMMEENNTT

22001166--22001177

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CONTENTS

Page

1. Corporate Governance 1

2. The Annual Governance Statement 2

3. The Governance Framework 2

4. Review of Effectiveness 4

5. Significant Governance Issues 5

6. Future Developments 7

7. Conclusion 7

Appendix 1 Assessment of Effectiveness

Appendix 2 Actions from 2015-2016 Annual Governance Statement Appendix 3 Framework of Assurance

CONTENTS

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Appendix A

1 Annual Governance Statement 2016 - 2017

1. Corporate Governance Corporate Governance is about how the Council ensures that it is doing the right things, in the right way, for the right people, in a timely, inclusive, open, honest and accountable manner. Good governance ensures that the Council provides for effective leadership and management in the use of public money; ensures the delivery of high quality services to all taxpayers and citizens; and achieves the desired outcomes for service users and communities. Warrington Borough Council acknowledges its responsibility for ensuring that there is a sound system of governance. The Council has developed a Local Code of Corporate Governance that defines the principles that underpin the governance of the organisation. The Code can be accessed on the Council’s website at: http://www.warrington.gov.uk/info/200355/budget_and_ spending/35/governance statements_and_reports or can be obtained by writing to the Council’s Director of Finance & Information Services. The principles upon which it is based are summarised in this Statement.

Warrington Borough Council Vision

“Growing a Strong Warrington”

Our strategic vision is for Residents, Businesses and the Council

with Partners to work together to make Warrington a place where everyone can thrive

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http://www.warrington.gov.uk/info/200355/budget_and_%20spending/35/governance%20statements_and_reports

Annual Governance Statement 2016 - 2017b 2

2. The Annual Governance Statement The Accounts & Audit (England) Regulations 2015 require the Council to prepare and publish an annual governance statement. This is a public document that reports on the extent to which the Council complies with its own code of corporate governance. The Annual Governance Statement explains how the Council makes decisions; manages its resources in line with the Council’s priorities; and achieves the required outcomes for service users and communities. In the Annual Governance Statement the Council:

Acknowledges its responsibility for ensuring that there is a sound system of governance

Summarises the key elements of the governance framework and the roles of those responsible for the development and maintenance of the governance environment

Describes how the Council has monitored and evaluated the effectiveness of its governance arrangements in the year, and on any planned changes in the coming period (appendix 1)

Provides details of how the Council has responded to any issue(s) identified in last year’s governance statement (appendix 2)

Reports on any significant governance issues identified from this review and provides a commitment to addressing them

3. The Governance Framework

Scope of Responsibility: Warrington Borough Council is responsible for ensuring that:

Business is conducted in accordance with the law and proper standards

Public money is safeguarded, properly accounted for and used economically, efficiently and effectively

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Annual Governance Statement 2016 - 2017b 3

The Council also has a duty under the Local Government Act 1999 to make arrangements to secure continuous improvement in the way in which its functions are exercised, having regard to a combination of economy, efficiency and effectiveness. In discharging this overall responsibility, the Council is responsible for putting in place proper arrangements for the governance of its affairs, facilitating the effective exercise of its functions, which includes arrangements for the management of risk. Purpose of the Governance Framework: The Council’s governance framework comprises the systems, processes, cultures and values by which the Council is directed and controlled and activities through which it accounts to, engages with and leads the community. It enables the Council to monitor the achievement of its objectives and to consider whether those objectives have led to the delivery of appropriate services and value for money. The framework aims to ensure that in conducting its business the Council:

Operates in a lawful, open, inclusive and honest manner

Makes sure that public money is safeguarded, properly accounted for and used economically, efficiently and effectively

Has effective arrangements for the management of risk

Secures continuous improvements in the way that it operates

The Governance Framework:

The governance framework sets out how the Council is operating in order to demonstrate compliance, ongoing improvement, its commitment to maintaining the highest ethical standards and levels of governance. The governance framework has been in place at Warrington Borough Council for the year ended 31 March 2017 and up to the date of approval of the statement of accounts. The Council has based its governance framework on the CIPFA/SOLACE guidance 2016 ‘Delivering Good Governance in Local Government’. The framework sets out seven core principles for good governance. Appendix 1 provides a summary of key elements of the Council’s governance framework and how they relate to the seven principles.

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Appendix A

Annual Governance Statement May 2017

4. Review of Effectiveness

Warrington Borough Council has responsibility for conducting, at least annually, a review of the effectiveness of its governance framework including the system of internal control. The review of effectiveness is informed by the work of the Senior Management Team who have responsibility for the development and maintenance of the governance environment, the Chief Internal Auditor’s annual report and also by comments made by the external auditors and other review agencies and inspectorates. In May 2017 a full review against the Code of Corporate Governance was carried out. This review was undertaken by Senior Management Team and overseen by the Council’s Director of Finance & Information Services. This draft Governance Statement has been reviewed by the Senior Management Team; Director of Finance & Information Services; the Monitoring Officer; and the Chief Internal Auditor before being presented to the Audit & Corporate Governance Committee for approval.

The Council relies on the following sources of assurance in order to maintain and review the effectiveness of the system of governance:

Member scrutiny – Standards Committee; Overview and Scrutiny function; Executive Board; Audit and Corporate Governance Committee.

Management - The Senior Management Team has responsibility for developing the Risk Management Strategy and processes, including the communications and reporting structure for strategic risk.

Management - Executive Directors and Assistant Directors have responsibility for the development and maintenance of the governance environment and provide formal assurance to Directorate Management Teams by their responses to the assurance statement questionnaires. The process of self-assessment for 2016/17 has been subject to review and challenge at Directorate Management Team meetings and evidence to support the assessment collated. Where gaps have been identified, action plans have been, or are in the process of being, prepared.

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Annual Governance Statement 2016 - 2017 5

Internal Audit – Internal Audit Services examine the effectiveness of the Council’s internal controls. Based upon the work undertaken during 2016/17 the Chief Internal Auditor provided the Council with an overall ‘substantial’ assurance opinion on the arrangements for gaining assurance through the governance framework and on the controls reviewed as part of the internal audit work.

Internal Review – the Governance Group maintains a comprehensive action plan to ensure continuous improvement of the governance arrangements are in place.

External Audit - The Council’s appointed auditors Grant Thornton issued their Annual Findings Report 2015/16 in September 2016 which contained an unqualified opinion on the financial statements. Grant Thornton also gave an unqualified value for money conclusion on the Council’s arrangements to secure economy efficiency and effectiveness in its use of resources

External Review – review and any findings and feedback from external inspectorates.

The results of the annual review of the effectiveness of the key elements of the Council’s governance processes during 2016-17 are set out in the table in Appendix 1.

5. Significant Governance Issues Significant governance issues at the current time are as follows: Council Transformation - A programme for transformation of services across the Council is being developed. There are severe financial risks attached to non-delivery of transformation of services through demand management, commercialisation and digitalisation. Budget/Savings Programme - Government funding is progressively decreasing to virtually zero and the Council will need to continue to make efficiency savings. To support this, the Council has progressed with outcome based budgeting for 2016-17. Other methods of funding such as retention of business rates, invest to save and generation of income are being explored. The generation of income and cost avoidance projects focus heavily in the Council’s financial plan. Sound financial and governance processes are required in the new ways of funding.

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Information Governance and Cyber Risks - Ongoing development of the information governance framework for the Council, supported by an implementation and improvement plan, is a key focus area of the Senior Information Risk Officer and the Information Governance Group. The Council reported two breaches to the Information Commissioner’s Office during 2016/17 however the results of the review indicated that the Information Commissioner was satisfied with the action that the Council had taken. Cyber attack is recognised as a key risk to the Council. We believe that the steps we are taking will further enhance our governance arrangements and are satisfied that these steps will continue to improve the processes in place in line with compliance requirements such as the new European Data Protection Regulations. Project Governance - The Council is committed to high standards of governance and has continued to develop robust governance and risk management arrangements for schemes to deliver regeneration, and innovative invest to save schemes. It has been recognised by officers that robust programme management arrangements are needed and work continues to develop improved programme governance including: improved monitoring arrangements; improved management information; improved reporting arrangements; and appropriate risk escalation. Health & Social Care - The Health & Wellbeing Board have identified key areas for further development. Members of the Board agreed, at their November 2016 meeting, to the plan for a pilot Warrington System Leadership Development Programme. At the December 2016 meeting Board members agreed that integration would be progressed and that an Accountable Care Organisation for Warrington would be developed.

Appendix 2 sets out the governance issues that the Council raised as part of the 2015-16 Annual Governance statement. A description of the issue along with details of the actions undertaken to date, and any further actions required to manage the issue is also given. Progress will continue to be monitored by the Governance Group during 2017-18, and reported to the Audit & Corporate Governance Committee.

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6. Future Developments Strategic Development - The changing nature of the Council’s business means that partnership working and complex contracts for delivery of services continue to increase. It is recognised that as such arrangements develop, then robust financial management and monitoring of the arrangements needs to be in place. Workforce - consideration of the impact of Brexit and the potential loss of staff in services provided directly by the Council or in services provided by partners.

7. Conclusion

The review of the Council’s governance arrangements for 2016/17 has been undertaken in order to produce this statement. The review highlighted a number of governance issues that require attention and action is being planned and/or taken as noted in the statement. These actions have been combined with additional work being undertaken by the officer Governance Group to form a comprehensive improvement plan.

With the exception of the internal control issues that we have outlined in this statement, our review confirms that the Council has a generally sound system of internal controls that supports the achievement of its policies, aims and objectives and that those control issues have been or are being addressed. Signed: Signed: ……………………….. ………………………. Councillor Fitzsimmons Councillor O’Neill Chair of the Audit and Corporate Leader of the Council Governance Committee Date:… …………… Date:

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Signed: Signed: ……………………….. ………………………. Matthew Cumberbatch Steven Broomhead Monitoring Officer Chief Executive Date:……………… Date:…………..

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Appendix 1


CORE PRINCIPLE A Behaving with integrity, demonstrating strong commitment to ethical values, and respecting the rule of law.

Supporting Principles Assessment of the effectiveness of key elements of the Council’s governance processes during 2016-17

Behaving with Integrity Demonstrating strong commitment to ethical values Respecting the rule of law

The Council has a robust Constitution in place that sets out how the Council operates, how decisions are made and the procedures that are followed to ensure that these are efficient, proportionate, transparent and accountable. The current version of the Constitution was agreed at full Council in May 2017. The Constitution contains the Code of Conduct for staff and members. A revised Code of Conduct for Councillors was approved by the Standards Committee and submitted to Annual Council for adoption in May 2016. It is proposed to enhance the role of the Independent Persons who support the work of the Standards Committee. The Code of Conduct for employees was reviewed early in 2017 and a section was added to provide advice and guidance to employees who may be approached in the course of their duties to be the executor or beneficiary of a service user’s will and to make it clear that this is not permitted. An additional appendix was also added to provide detailed advice and guidance around gifts and hospitality. Registers of gifts & hospitality and member & officer interests were maintained. Individual member’s interests are published on the Council’s website. An Annual Fraud Report has been produced by the Internal Audit manager which demonstrates the work that the Council has undertaken in the year to investigate instances of fraud and whistleblowing allegations and to highlight the proactive levels of work being undertaken. This was presented to the Audit & Corporate Governance Committee in June 2017. The Monitoring Officer’s functions include maintenance of the Constitution, supporting the Standards Committee and ensuring lawfulness of decision making. The Legal Service is accredited and annually assessed against national governance and performance criteria as part of the Law Society ‘Lexcel’ standard. The Director of Finance & Information Services is the Council’s Senior Information Risk Owner. The Customer Complaints and Feedback Policy has been refreshed as part of the Customer Strategy.

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Appendix 1


Every contract that the Council enters into adheres to the Public Procurement Regulations and requires high standards of transparency and ethics.

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Appendix 1


CORE PRINCIPLE B Ensuring openness and comprehensive stakeholder engagement


Openness Engaging comprehensively with other organisations that the Council needs to work with to improve services and outcomes Engaging with individual citizens and service users effectively citizens

The Council strategy 2015-2018 sets out the vision and key priorities for the Council over a 3 year period. The strategy is informed by development of strategic commissioning intentions. The Council is part of the Stronger Communities Board; there are a range of sub groups and boards that support this. These include the Community Safety Partnership, the Delivering Wellbeing in Bewsey and Dallam Programme Board, and the Homelessness Priority Action Group. Warrington Partnership Board and the Health and Wellbeing Board jointly agreed the Warrington Strategy for Wellbeing; the strategy provides the overarching vision and priorities for Warrington and is used to direct strategic decisions across all partner organisations in the borough. The Council works with a number of other key partners to deliver services including: Warrington Clinical Commissioning Group; Warrington Borough Transport; LiveWire / Culture Warrington; and Torus Housing Group. Warrington’s Safeguarding Children Board and Safeguarding Adults Board are responsible for ensuring that local safeguarding arrangements are effective and that partners act together to help and protect children and adults at risk of abuse of neglect.

The Council has developed an engagement process with residents though its ‘Growing a Strong Warrington’ programme (including communications & digital strategies) and conducts an annual residents’ survey. The Council has a Customer Strategy, charter and standards in place. The Customer Strategy 2016-2020 is central to ensuring our customers are at the heart of delivering our vision of ‘Growing a Strong Warrington’. It helps ensure that service provision is designed and delivered to meet local needs and that service improvements are customer-led and outcome focused. The Council’s strategic plans are communicated to the community through a number of media events. Regular forms of communications such as briefings and reports are issued. All of the Council’s major plans and strategies are published and available for download on the website/intranet. The Council has a robust process for responding to Freedom of Information requests that are received. As part of the Open Data transparency agenda the Council has also published items of expenditure over £500 online.

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Appendix 1


We are committed to ensuring that equality and diversity is at the heart of our organisation and responds to the needs of all our customers and communities. These values are set out in our new equality objectives for 2016-2020. We are required by the Equality Act 2010 to publish these at least every four years. We developed these objectives by undertaking a public online consultation, talking to our partners and staff and researching emerging national and local equality trends and needs.

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Appendix 1


CORE PRINCIPLE C Defining outcomes in terms of sustainable economic, social, and environmental benefits


Defining outcomes Sustainable economic, social and environmental benefits

The Council Strategy is supported by Directorate Plans and Change Projects. The Corporate strategy is refreshed each year and is linked to the Council’s Medium Term Financial Plan; this ensures that our plans are realistic in the context of the continued funding constraints placed on the Council. A refreshed joint Health and Wellbeing Strategy for Warrington was developed following extensive consultation with all key stakeholders. The Integrated Commissioning Team led on the development of the refreshed strategy with support from colleagues in the Council and the Clinical Commissioning Group.

Outcomes Based Budgeting (OBB) is a continuous Member led process overseen by the Council’s Senior management Team. The Council’s Budget and Outcomes Based Budgeting framework underpins our decision making. All Council decisions are required to comply with the budget and Outcomes Based Budgeting framework. Warrington & Co brings together the private and public sector to promote economic development and physical regeneration in Warrington, under the guidance of a private sector-led board. The Managing Director is a Council officer and Warrington & Co’s main function is to steer and monitor the implementation of the regeneration framework, as well as providing a forum for all the key agencies involved in regeneration in the town, both public and private sector, to co-ordinate their activities. The Board includes 2 elected members of the Council; the Council’s Chief Executive is Chair of the Board in a personal capacity. Improvements continued to be made to the financial and project monitoring systems surrounding the whole capital programme during 2016/17. The role of the officer Capital Investment Planning Group has been refreshed to enhance the governance arrangements.

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Appendix 1


CORE PRINCIPLE D Determining the interventions necessary to optimise the achievement of the intended outcomes


Determining interventions Planning interventions Optimising achievement of intended outcomes

The Council’s Constitution includes details of the role and responsibilities of the full Council; the Executive Board; Committees; Chief Officers; and the rules under which they operate. The Council’s Constitution provides the framework for the decision making process. The Council operates an Overview and Scrutiny function. Members can “call in” decisions that have been made but not yet implemented, to enable them to consider whether the decision has been taken in accordance with the Council’s decision making principles. The four Policy Committees monitor and scrutinise the performance and decision making of the authority. The Council fully complies with all elements of the CIPFA Treasury Management code to ensure effective governance arrangements are in place for its treasury management operations. The Audit & Corporate Governance committee are the body charged with the scrutiny of Treasury Management. The Council have also set up a Treasury Management Board consisting of lead members of the Audit & Corporate Governance Committee to provide further scrutiny around the Council’s Treasury Management activities. The Council seeks to obtain value for money which is supported through effective commissioning and procurement arrangements, a robust procurement strategy, business plans and scrutiny of decision making. Outcomes Based Budgeting reviews continued in 2016/17 to determine whether the outcomes of delivery areas provide value for money. Warrington’s Performance Management framework ensures that progress against key plans and strategies is monitored routinely in order that timely action can be taken to address any performance issues. A Performance Management Framework is in place across the Council supported by a Corporate Information Assurance and Data Quality Strategy.

Quarterly monitoring takes place at Directorate Performance Boards / Management Teams and formal performance reports are submitted on a quarterly basis to the Strategic Management Team; Executive Board; and Organisation Improvement and Development Policy Committee who use performance data to help determine their work programme and challenge performance. Quarterly performance reports are also available for the public to view on the Council’s website. Work

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Appendix 1


continues to ensure that robust management information supports informed decision making.

CORE PRINCIPLE E Developing the entity’s capacity, including the capability of its leadership and the individuals within it


Developing the entity’s capacity Developing the entity’s leadership Developing the capability of individuals within the entity

A corporate Member’s induction programme is in place with ongoing training for Members. The Council has a Leadership Development Forum which incorporates quarterly meetings held by the Chief Executive for Strategic Directors, Assistant Directors and Heads of Service on key relevant strategic topics. They offer an opportunity for the Council’s leaders to come together to innovate, inspire and engage in an informal, creative and supportive environment. The risk around Management Capacity has been captured on the Strategic Risk Register and is regularly reviewed by Senior Management Team. An e-learning package is being rolled out to all staff. A review of the appraisal process was undertaken in 2016/17 and SMT have agreed a new approach to managing individual performance/development needs for employees, which will be rolled out in 2017. The Council has a recruitment and retention policy and strategy. A new HR strategy is currently under development, and will be launched in 2017, which links directly to the corporate priorities. Staff appraisal processes are in place and new learning and development priorities have been set out. A planned programme of internal courses is provided to the organisation in addition to external provision commissioned as required in order to ensure that all employees are equipped to carry out their roles and to ensure compliance with regulatory and statutory requirements. A review is to be undertaken during 2017 to determine which courses will be mandated for staff according to job role.

The Council has an established joint consultation framework with its recognised Trade Unions and this provides a sound basis for effective debate, discussion and full consultation on the introduction of new operational policies and the review and refresh of existing policies.

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Appendix 1


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Appendix 1


CORE PRINCIPLE F Managing risks and performance through robust internal control and strong public financial management


Managing risk Managing performance Robust internal control Managing Data Strong public financial management

The Council has a comprehensive framework for the management of risk and has a risk management strategy, policy and guidance document in place. A Strategic Risk Register is in place and is updated quarterly and reports are provided to the Senior Management Team and Executive Board quarterly.

Strategic risks are also reported to Audit & Corporate Governance Committee. Senior Management

Team undertook a full review of the Strategic Risk Register during 2016-17 to ensure that new and emerging risks were included.

The Council has a well established Audit & Corporate Governance Committee which met regularly

during 2016-17. The Committee has clearly defined terms of reference and responsibilities for the oversight of internal control, governance, risk management and the approval of the Council’s Annual Accounts. The Audit & Corporate Governance Committee oversees the work of Internal and External Audit, and promotes and maintains high standards in relation to the operation of the Council’s Code of Corporate Governance. The Committee ensures that an adequate risk management framework and associated control environment is in place and that the Council’s financial and non-financial performance is properly monitored. In line with CIPFA best practice guidance, the Committee performs an annual self-assessment of their own effectiveness and acts on recommendations identified; the Committee Chair also produces an annual report to full Council of the work performed by the Committee during the year.

The Council maintains a Chief Internal Auditor and an Internal Audit section which complies with the Standards set out in the UK Public Sector Internal Audit Standards. Internal Audit examine the effectiveness of the Council’s internal controls. Based on evidence from planned audits and any special investigations, the Chief Internal Auditor reports to each meeting of the Audit & Corporate Governance Committee on any major weaknesses that have been identified and highlights where improvements are considered necessary.

The Senior Management Team is responsible for ensuring that it establishes and maintains effective systems of internal control, complying with legislation, the Council’s Constitution, Standing Orders and Financial Regulations.

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Appendix 1


CORE PRINCIPLE G Implementing good practices in transparency, reporting, and audit to deliver effective accountability

Supporting Principles

Assessment of the effectiveness of key elements of the Council’s governance processes during 2016-17

Implementing good practice in transparency Implementing good practices in reporting Assurance and effective accountability

The Council makes as much information as possible available on its website. Support is also available to those residents who cannot access the internet. The Council publishes its Annual Report and statement of accounts on the website. The Council’s external auditors Grant Thornton issued their Annual Findings Report 2015/16 in September 2016 which contained an unqualified opinion on the financial statements. Grant Thornton also gave an unqualified value for money conclusion on the Council’s arrangements to secure economy efficiency and effectiveness in its use of resources The Senior Management Team is responsible for responding to recommendations made by Internal Audit, External Audit and other Inspectorates such as CQC and OFSTED. Where necessary and appropriate they will take advice from Legal Services. Progress made against the issues identified in the 2015-16 Annual Governance Statement action plan has been monitored by the Governance Group. A whistleblowing procedure is in place in the Council together with a separate schools’ procedure. The procedure supports the Council in its obligations in respect of the Bribery Act 2010. The Council’s anti fraud, bribery and corruption statement and policy incorporates the requirements of the Bribery Act and is updated regularly. Regular reports are provided to the Audit & Corporate Governance committee on the work undertaken in the Council to combat fraud and corruption.

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Appendix 2


The table below sets out the progress made against the significant governance issues identified in the 2015-2016 Annual Governance Statement.

Improvement Action Action Undertaken

Improve programme governance arrangements for major regeneration schemes Governance arrangements in place around the granting and monitoring of loans to registered housing providers continue to be monitored and reported.

Work continues to develop improved arrangements. During 2016/17 the role and remit of the Capital Investment Planning Group was reviewed. Financial regulations were updated to reflect the revised arrangements. Progress against major schemes is to be reported to Capital Investment Planning Group on a regular basis and summary progress and key risks will be escalated to senior management team meetings. Ongoing monitoring is in place. Written operational procedures are in place, loan documentation is retained and loan monitoring records are completed.

The government directive for all schools to become Academies by 2020, or have plans to do so by 2022, is recognised. Work to continue with schools to address the associated issues, ensuring that the drive for continued school improvement is maintained.

Operational Plan evaluated for effectiveness and revised to reflect the changing educational landscape. The operation of the Warrington Education Board reviewed so that it continues to strengthen, effectively supporting and challenging schools and settings.

The Council has a duty of care to protect vulnerable adults in the community from financial abuse and to provide support to those who no longer have capacity to manage their own finances in cases where there is no alternative (ie. family, friends).

The Office of Public Guardian carried out an external inspection and concluded its report into client finances; the actions from the report were addressed. As a result of the report from the Office of Public Guardian, a new Visiting Officer post was established to monitor the operation of the finances primarily of the Court of Protection clients, and also the Appointeeship clients. Office of Public Guardian undertook an assurance visit and in March 2017 issued their findings which indicated ‘a demonstrable improvement in the service’.

The Council is committed to high standards of information governance and has made significant progress in developing the information governance framework particularly the elements of data breach reporting; data protection; consistency across all areas of the council; and staff training and awareness.

Work continues to develop the training programme for staff and to ensure that elements of the training are mandatory for all staff, and that the programme includes both new and refresher training.

Partnership working and complex contracts for delivery of services continue to increase and it is recognised that as

Work continues to ensure that robust contract management processes are in place throughout the Council.

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Appendix 2


such arrangements develop, then robust management and monitoring processes are required.

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Appendix 3


Annual Governance Statement Assurance Framework 2016-17

Full Council Key documents

Code of Corporate Governance

Corporate Strategy and service planning processes

Constitution

Finance and Contract Regulations

Risk management policy

Policies, procedures, codes of conduct, scheme of

delegation

Anti Fraud, corruption and bribery policies

Whistle blowing procedure

Audit and Corporate Governance

Committee

Governance Group

Responsible for evaluating

assurances and supporting evidence

and drafting the Annual Governance

Statement

Review of the effectiveness

of the system of Internal

Control

(Required by the Accounts

and Audit Regulations

20015)

Council and Directorate

Policies, Business Plans and

Risk Registers

SMT

Safeguarding

and Quality

Assurance

Boards

Operational

Leads/

Programme

Boards/

Partnerships

Partner

External

Inspections eg

OFSTED,

CSCI,

FMSIS, CQC

Financial

Control

Assurance

(S151

Officer)

Legal and

Regulatory

Assurance

(Monitoring

Officer)

Member

Assurance

Standards

Committee

Corporate

Risk/Business

Continuity/EP

Information

Governance

Group

Internal

Audit

External

Audit

Anti Fraud/

Corruption

and Bribery

Ongoing assurance on adequacy and effectiveness of controls over key risks

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WARRINGTON BOROUGH COUNCIL AUDIT AND CORPORATE GOVERNANCE COMMITTEE – 22 JUNE 2017 Report of: Lynton Green, Director of Corporate Services

Report Author: Jean Gleave, Chief Internal Auditor

Contact Details: Email Address: [email protected]

Telephone: 01925 442354

Ward Members: ALL

TITLE OF REPORT:

STRATEGIC RISK ENVIRONMENT AT QUARTER 4, 2016/17

1. PURPOSE 1.1 The report provides an overview of the Council’s strategic risk environment for the

last six months of the financial year 2016/17. It also outlines planned arrangements for 2017/18.

1.2 The information is presented to provide the Audit and Corporate Governance

Committee with assurance regarding the management of strategic risks and to facilitate the Committee’s review of these arrangements.

2. CONFIDENTIAL OR EXEMPT 2.1 The report is not confidential or exempt. 3. INTRODUCTION AND BACKGROUND 3.1 Strategic risks are those which have the potential to impact on the Council’s

achievement of its strategic objectives. The strategic risk register therefore provides an overview of the most important risks facing the Council. Detailed operational registers are maintained at service and directorate level.

3.2 Risks are rated according to an industry standard approach which considers both the

likelihood of the risk occurring, and the potential impact of its occurrence. Risks are assessed before and after the development of control strategies, which are designed to reduce risks to an acceptable level of tolerance.

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3.3 Risks are escalated to the strategic risk register where:

risk ratings remain over the agreed tolerance level, even after the application of agreed control strategies; or

risks are considered to require ongoing strategic oversight owing to the potential reputational and financial impact of those risks.

3.4 Regular review of risk registers should provide assurance that risks to the

achievement of Council pledges and key business objectives have been identified and assessed. Risk registers should also provide assurance that controls are in place to manage risks to an acceptable level of tolerance.

4. STRATEGIC RISK REGISTER FOR 2016/17 4.1 The strategic risk register at quarter 4 contains 15 risks and is provided as Appendix 1

to this report. At the time of the quarter 2 report to the Committee, the strategic risk register comprised 14 risks. Since then, the Senior Management Team (SMT) has added two risks relating to the Council’s public health responsibilities (referenced as SRR 20 and 21) and removed the generic risk relating to management of the Council’s capital schemes (SRR 6). Further information is provided below.

4.3 SRR 20 is concerned with risks affecting progress in implementing the Shared Care

Record in Warrington. Development of the business case was halted pending confirmation of financial responsibilities but is now progressing and a benefits realisation model is being developed. This will consider transactional benefits resulting from a reduction in paperwork as well as the key objective of improving public health outcomes for the citizens of Warrington.

4.4 SRR 21 is a nationally recognised risk relating to the potential impact of a pandemic

flu outbreak. At present the likelihood of this risk materialising is considered to be low, although the potential impact on public services could be severe, if insufficient response plans are in place. Resilience of the health and social care system will be a focus throughout 2017, with detailed planning and testing taking place across schools, care homes, GP practices and providers of social care.

4.5 Directorates will continue to have responsibility for identifying, assessing and

managing risks associated with capital schemes. The Capital Investment Planning Group will conduct regular reviews of significant risks and will advise where risks should be escalated to SMT and the Executive Board for strategic review. Project specific risks relating to the Council’s major capital schemes may therefore be brought to the strategic risk register at any time.

4.6 Other than these movements, there have been no significant changes in the Council’s

strategic risk environment for 2016/17. Going forwards, SMT has considered whether it is necessary to provide regular updates for risks which although significant, are generally stable. These considerations have fed into proposals for the management and reporting of risks for 2017/18.

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5. STRATEGIC RISK REGISTER FOR 2017/18 5.1 In February and May 2017, SMT held workshops to review and refresh the strategic

risk register. Periodic reviews of this nature are good practice, providing an opportunity for senior managers to focus on the Council pledges and key business objectives in the context of local and national developments. Senior managers considered emerging risks which could impact the achievement of those pledges and objectives and re-evaluated the risks that have previously been identified.

5.2 The outputs of those workshops have undergone further review by the Corporate

Governance Group, Directorate Management Teams (DMTs) and SMT. Part of the review has considered how best to structure and report the register going forward, given that the full register may be too cumbersome to be managed effectively at a strategic level. Two proposals have been agreed in principle:

to identify for strategic review, those risks which require cross-directorate consideration, with directorate or service level risks being managed by the appropriate DMT; and

for reporting purposes at both SMT and DMTs, to focus on those risks which require active review and management, with other risks being reported for information and management purposes.

5.3 In addition to updating the Council’s strategic risk environment, revisions to the way

in which risk information is reported are proposed, to facilitate strategic focus on high scoring and more volatile risks. The proposals are:

to adopt a streamlined format for the risk register, which allows risk owners to document existing treatment or control arrangements and contingency plans, and then to provide updates only where additional treatments or controls are considered necessary to mitigate the risk; and

to introduce the concept of a heat map report, to facilitate easy identification of high scoring risks.

5.4 The proposed format of the risk register and the heat map report are provided at

Appendices 2 and 3. Members will note that the new risk register is not fully populated and work is ongoing to identify existing controls and areas where further controls may be required. The initial risk scores provided by SMT will be reviewed and updated once this process is complete, and a fully populated register will be reported to the Executive Board later this year.

5.5 As part of the review process described above, senior managers have added risks to

the register associated with a major incident (12) and a cyber incident (15). These risks were identified prior to recent events and do not reflect any increased risks to the Council or to Warrington. Members will be aware that our business continuity arrangements have been reviewed and strengthened in recent years. We will however continue to keep these arrangements under review and use the risk

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management process to consider whether any further measures should be introduced.

6. FINANCIAL CONSIDERATIONS 6.1 Where there are high-level financial implications associated with particular risks,

these are identified in the risk register. For example, a breach of the data protection regulations resulting from a failure in information governance arrangements (2016/17 SRR 10) could result in the Council being fined by the Information Commissioner’s Office.

7. RISK ASSESSMENT 7.1 The Council must ensure that it has appropriate risk management arrangements in

place in order to manage its risks and maintain a sound system of internal control. 8. EQUALITY AND DIVERSITY / EQUALITY IMPACT ASSESSMENT 8.1 There are no specific equalities issues in relation to the content of this report. 9. CONSULTATION 9.1 N/A 10. REASONS FOR RECOMMENDATION 10.1 To ensure that the Council maintains an effective framework of internal control and

continues to manage its key risks, and to ensure the continued review of the Council’s strategic risks.

11. RECOMMENDATION 11.1 The Audit and Corporate Governance Committee is recommended to:

Review and comment on the Council’s strategic risk environment at quarter 4 of 2016/17 and the proposed risk register for 2017/18

Review and comment on the proposed reporting arrangements for 2017/18, including the revised format of the strategic risk register and the risk heat map


The Strategic Risk Register

Risk Management Reports to SMT and Executive Board

Minutes of the Corporate Governance Group Contacts for Background Papers:


Alison Weir [email protected] 01925 442613

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Insurance, Risk and Counter Fraud Advisor

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APPENDIX 1

Ris

k N

um

be

r

Ris

k O

wn

er

Ris

k le

ad

O

ffic

er

Risk Description

(provide a clear description of

what the risk is to the

organisation)

Risk Impact

(clarify the potential impact of

the risk on the organisation

should it occur)

Da

te id

en

tifi

ed

(da

te w

he

n f

irs

t

pla

ce

d o

n t

he

SR

R)

Up

-to

-da

te c

on

tro

l

str

ate

gy

in

pla

ce

?

Ori

gin

al S

co

re

Pre

vio

us

Qu

art

er

Re

sid

ua

l S

co

re

Cu

rre

nt

Qu

art

er

Re

sid

ua

l S

co

re

DO

T b

etw

ee

n

late

st

2 q

ua

rte

r

Risk Performance (Insert comments to explain /

support risk position)

(Please note supporting commentary is required for

all risks)

TO PROTECT THE MOST VULNERABLE Q3 2016/17 Q4 2016/17

1

Executive

Director

Families and

Wellbeing

SK/SP

Failure to transform current provision

of social care services in

order to manage demand through

whole system change and integration

with health, enabling the

council to meet growing demand within

available resources

Financial risks include the need to

set appropriate fee levels otherwise

residents who pay a top up may

exhaust their resources which

results in the Council being

responsible for more high cost

placements. Self funders may run

through their assets faster and

become the Council's funding

responsibility earlier. Fees need to

be set at a level that is sufficient for

providers to meet CQC essential

standards. Insufficient beds at

framework fee levels may result in

the Council having to spot purchase

at increased rates.

Fe

b-1

4

Yes

20 15 15 1 No change from last quarter

3

Executive

Director

Families and

Wellbeing

SP/FW/SK

Reduced capacity for prevention

leading to potential increased high

cost demand and poorer outcomes for

vulnerable people

Reduced capacity to offer

preventative services. Potential

reduction in performance across the

directorate in terms of outcomes for

vulnerable people and against

inspection and regulatory

frameworks. Reputational impact

and increased financial pressures of

high cost critical interventions.

Ju

l-1

3

Yes


5

Executive

Director

Families and

Wellbeing

DMT

Changes in national policy and

legislation (e.g. children and families

act, better care fund, care bill) lead to

increasing demands for services and

increased statutory requirements

Increased pressures on capacity

and budgets.

Oct-

13

Yes


17

Executive

Director

Families and

Wellbeing

SP/FWFailure of safeguarding arrangements

for vulnerable adults and children

Avoidable death or significant harm

of vulnerable adult or child.

Reputational damage to officers,

members and council as a whole.

Litigation leading to criminal

charges and/or liability costs. Lack

of confidence. External

scrutiny/interventions including

special measures.

No

v-1

3

Yes


WBC STRATEGIC RISK REGISTER 2016-17 QUARTER 4 REPORTING PERIOD

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APPENDIX 1

Ris

k N

um

be

r

Ris

k O

wn

er

Ris

k le

ad

O

ffic

er

Risk Description



organisation)

Risk Impact



should it occur)

Da

te id

en

tifi

ed

(da

te w

he

n f

irs

t

pla

ce

d o

n t

he

SR

R)

Up

-to

-da

te c

on

tro

l

str

ate

gy

in

pla

ce

?

Ori

gin

al S

co

re

Pre

vio

us

Qu

art

er

Re

sid

ua

l S

co

re

Cu

rre

nt

Qu

art

er

Re

sid

ua

l S

co

re

DO

T b

etw

ee

n

late

st

2 q

ua

rte

r




all risks)


19

Executive

Director

Families and

Wellbeing

HS

Fragmentation of the local schools

system (Warrington family of schools)

as a consequence of schools forming

Multi Academy Trusts.

This will potentially work against the

collaborative approach to driving

improvement in educational

performance that has been a key

feature of the system up to this point

and has delivered strong

performance, particularly in the

primary sector.

Ju

l-1

5

Yes

12 10 10 1

Agreement with schools to develop new arrangemnets for

school improvement that all schools can sign-up to which is

underpinned by very effective school to school, Multi

Academy Trust (MAT) to school and MAT to MAT support

and challenge as appropriate. Proposed arrangements

(developed by schools) will be presented to all schools at the

Executive Directors briefing in April in order that schools

understand how school improvement will be driven forward

in the future and it is hoped that all schools will be willing to

sign-up to the new arrangements. Local Authority support for

maintained schools will still be available but the focus will be

targeted on attainment and progression of vulnerable and

disadvantaged groups and support for SEND. Tthe resource

available will work hand in glove with a universal offer

available via the school system. The effectiveness of the

arrangements will be monitored by the Warrington Educaton

Board and the Warrington Inclusion Hub, which will also

need to be reviewed to reflect the new relationship between

the LA and schools.

6

Executive

Director

Economic

Regeneration,

Growth &

Environment

AF/LG

Ability to deliver within timescale and

budget the major capital programmes

detailed in the Council’s capital

programme to ensure effective of

oversight of delivery of the intended

outcomes, within budget, ensuring

good governance and risk

management

The risk impact will consider non-

delivery of a project due to (but not

limited to) the following issues;

Finance & Budget, Appropriate

Partners (Builders) & Skills,

Economic Climate, Government

Legislation

No

v-1

3

Yes

16 0 0

After consideration, SMT has agreed that project risks will be

managed by lead directorates but significant matters will be

brought to the Capital Investment Planning Group for review

and potential escalation to the Strategic Risk Register. This

generic risk has therefore been removed from the Register,

but project specific risks relating to the Council's major

capital programmes may be brought to the Register at any

time.

7Director of

Corporate

Services

LG/KG

Failure to reduce community level

inequalities in quality of life through the

Closing the Gap ambition

Continuation of high cost investment

into most deprived community areas

through key partnership based

response services such as child and

family services, adult social care,

community safety, and public health.

Reputational risk if projects for local

people are not delivered as

planned. Reduction in ability to

influence partner activity and

investment decisions.

Fe

b'1

0

Yes

25 16 16 1

Review of neighbourhood boards has resulted in

continuation of central area board and grants, but withdrawal

from other areas. This recognises the geographical pattern

of inequalities within the borough. Delivering Wellbeing in

Bewsey and Dallam programme has now closed, although a

delivery plan still remains and is being overseen by the

Executive Director for Families and Wellbeing. Concern for

homelessness continues due to a combination of national

housing shortage and governmental policy decisions. An

increase in emergency provision is underway. The

Homelessness PAG will shortly report to the Council and to

Warrington Partnership on recommendations following its

work two years on from the Homelessness Commission.

20

Executive

Director

Families and

Wellbeing

MAALack of progress on Warrington

Shared Care record

Failure to realise system resilience

and quality patient care across

organisational boundaries. Failure

of information governance across

NHS and LA boundaries

Ja

n-1

7

0 16 16 12 $

Full business case is now being developed and providers

shortlisted. Benefits realisation model being developed.

Transactional benefits to paperwork costs as well as better

outcomes

GROW A STRONG ECONOMY

BUILDING STRONG ACTIVE AND RESILIENT COMMUNITIES

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APPENDIX 1

Ris

k N

um

be

r

Ris

k O

wn

er

Ris

k le

ad

O

ffic

er

Risk Description



organisation)

Risk Impact



should it occur)

Da

te id

en

tifi

ed

(da

te w

he

n f

irs

t

pla

ce

d o

n t

he

SR

R)

Up

-to

-da

te c

on

tro

l

str

ate

gy

in

pla

ce

?

Ori

gin

al S

co

re

Pre

vio

us

Qu

art

er

Re

sid

ua

l S

co

re

Cu

rre

nt

Qu

art

er

Re

sid

ua

l S

co

re

DO

T b

etw

ee

n

late

st

2 q

ua

rte

r




all risks)


21

Executive

Director

Families and

Wellbeing

MAA

Pandemic flu decimates staff capacity

and resilience in all organisations –

risk noted by Warrington Health

Protection Forum

Failure of health and social care

system resilience during the

pandemic waves; e.g. 25% staff off

work at any one time. Schools may

or may not close depending on

headteacher’s discretion

Ja

n-1

7

0 10 10 10 1

Insufficient local plans at this time as noted by the Health

Protection Forum - Detailed planning and testing to take

place with schools, care homes, GP practices and social

care (this will be a focus for system resilience in 2017).

8Director of

Corporate

Services

LG

Unstable financial position in the

medium to long term.

Unexpected budgetary pressures

occur as a result of savings not

achieved or budget overspends due

to ineffective use of management

information; loss of income from

business rates; service challenge

process not robust; changes in the

economic climate and legislative

framework; ineffective governance

arrangements or failure to act

transparently; failure to embrace

innovation; resulting in a reduction

to service delivery, workforce

reduction or a drawdown of

reserves or a combination of all

three

Ju

n-1

3

Ye

s

25 20 20 1

The Authority continues to operate in a challenging financial

environment, balancing growth ambitions with financial

constraints. The Outcomes Based Budgeting process

oversees a four year rollling budget process. The current

outlook shows a balanced budget across the four years from

2017/18 but this requires a further £30m of savings to be

achieved across the four year period with £8.8m savings

identified for delivery with the financial year 2017/18.

9Director of

Corporate

Services

LG

Exploration / Introduction of alternative

service delivery models increases

market competition resulting in

potential income reduction if internal

services are not considered the

provider of choice

Increased financial pressures

potentially reducing other Council

Services in order to make savings.

Potential reduction in the size of the

workforce if providers procure from

alternative suppliers

Oct-

11

Ye

s

12 16 16 1

The information provided in quarter 3 remains pertinent to

this risk. The issue of Education Services Grant has been

the subject of a paper to Senior Management Team during

quarter 3 to ensure a full awareness of the issue. This

pressure is also flagged within the outcomes based

budgeting process.

The risks associated with schools not buying back services

remains as previously stated, a full update to this risk will be

provided in quarter 1 of 2017/18.

10Director of

Corporate

Services

LGThe Council will incur a failure of its

Information assurance.

Information breaches/ security.

Inappropriate data sharing. Potential

to be fined by ICO.

Data/information of poor quality

used to inform decisions; and

perhaps result in poor decision

making. Inability to use

data/intelligence to inform resource

allocation, in turn negatively

impacting on outcomes.

Ap

r-1

4

Ye

s

25 15 12 $

The information governance team has successfully recruited

an information governance officer and as a result has been

able to offer more support corporately. Strategically the IG

team are reviewing the corporate process for handling

subject access requests, working on a number of multi

agency sharing agreements and have started to review the

requirements of the General Data Protection Act which will

replace the Data Protection Act in May 2018

ORGANISATION DEVELOPMENT AND IMPROVEMENT

Item 10

131

APPENDIX 1

Ris

k N

um

be

r

Ris

k O

wn

er

Ris

k le

ad

O

ffic

er

Risk Description



organisation)

Risk Impact



should it occur)

Da

te id

en

tifi

ed

(da

te w

he

n f

irs

t

pla

ce

d o

n t

he

SR

R)

Up

-to

-da

te c

on

tro

l

str

ate

gy

in

pla

ce

?

Ori

gin

al S

co

re

Pre

vio

us

Qu

art

er

Re

sid

ua

l S

co

re

Cu

rre

nt

Qu

art

er

Re

sid

ua

l S

co

re

DO

T b

etw

ee

n

late

st

2 q

ua

rte

r




all risks)


13 Chief Executive GH/JHLack of organisational capacity to

deliver Council pledges

The delay or non completion of

significant council projects due to a

lack of appropriate resources either

in directly delivering the project or in

providing professional support

(Legal, Business Improvement,

Finance, IT, HR etc.) to those

projects

Au

g-1

3

No 12 12 12 1

The risk is monitored on an ongoing basis. The new Council

priorities are beig monitored at SMT where any delays in

progress and associated resource issues will be considered.

SMT regularly discuss the resources required in delivering

individual projects, particularly at initiatiation stage

15

Executive

Director

Families and

Wellbeing

SK/SR

Failure to fully realise the benefits of

intelligent outcome-based

commissioning to ensure provider

vibrancy, value for money and

improved services for citizens

Under resourcing or poor

configuration of commissioning

services may affect ability to ensure

VFM and sustainability across

commissioned services and ability

to suitably commission services in

line with the Council's adopted

commissioning framework.

Au

g-1

3

No 16 12 12 1 No change from last quarter

16Director of

Corporate

Services

MC

Strategic decisions are not taken on

the best information available. An

absence of full risk appraisal in

relevant reports particularly to

Executive.

The unintended consequences of

decisions made on imperfect

information. Ja

n-1

4

No 15 15 15 1

For Executive Board reports, the Council has a structured

set of procedures to ensure such decisions are taken with

the best possible information available. These procedures

include: the publication of a Forward Plan, consideration of

draft reports at Directorate Management Teams and

Strategic Management Team and the pre-Executive agenda

meeting (usually two weeks in advance of the Executive

meeting itself).

18 Chief Executive GH

Lack of management capacity

resulting in non-compliance with

council policy and procedures which

leads to a failure in corporate

governance and poor outcomes

A failure in governance, financial

mismanagement, risk to staff, health

and safety, fraud, to poor audit

results, loss of reputation

? 12 12 12 1

Senior Management Review has been completed and

appointment to vacant posts will be completed by May.

Directors are currently considering their wider management

capacity along with the Chief Executive

RISK PROPOSED FOR REMOVAL AT END OF Q4

Item 10

132

Existing Treatment / Controls Planned Treatment / Controls Contingency Plans

(arrangements you already have in place to

reduce the likelihood and/or impact of the

potential risk)

(arrangements you plan to put in place to


potential risk)

(arrangements which can be put into place if

the risk was to materialise now)

1

SR

Ste

ve

Pe

dd

ie &

Fio

na

Wa

dd

ing

ton The Council is unable to manage the demand for

social care services.

12 3 4 121

2

SR

Ste

ve

Pe

dd

ie &

Sim

on

Ke

nto

n The local social care market, particularly services

for adults, becomes unstable.

16 4 4 161

3

SR

Ste

ve

Pe

dd

ie &

Fio

na

Wa

dd

ing

ton A failure in safeguarding services results in the

death of, or significant injury to, a vulnerable adult

or child.

12 3 4 121

4

SR

Ste

ve

Pe

dd

ie, F

ion

a

Wa

dd

ing

ton

& H

ilary

Sm

ith The Council or one of its key providers, receives a

significantly adverse inspection judgement from

the Care Quality Commission or Ofsted.

12 3 4 121

5

SR

Hila

ry S

mith Warrington experiences a significant drop in

educational performance as a result of educational

reforms.

9 3 3 91

Control StrategyRisk AssessmentReference / Ownership

Imp

ac

t

Cu

rre

nt

Qu

art

erl

y S

co

re

Dir

ec

tio

n o

f

Tra

ve

l

Risk Description

Ris

k N

um

be

r

Str

ate

gic

Le

ad

Le

ad

Off

ice

r

Pre

vio

us

Qu

art

erl

y S

co

re

Lik

elih

oo

d

Item 10

133




potential risk)



potential risk)




Imp

ac

t

Cu

rre

nt

Qu

art

erl

y S

co

re

Dir

ec

tio

n o

f

Tra

ve

l

Risk Description

Ris

k N

um

be

r

Str

ate

gic

Le

ad

Le

ad

Off

ice

r

Pre

vio

us

Qu

art

erl

y S

co

re

Lik

elih

oo

d

6

MA

A

Da

ve

Co

wle

y Forthcoming legislative changes place additional

demands on the Council to manage

homelessness.

20 5 4 201

Warrington Homelessness Strategy and Housing

Strategy.

Refresh of provision and resources towards

quality.

7

MA

A

MA

A / S

teve

Pa

rk The Council, working with its partners, is unable to

reduce health inequalities across Warrington.

12 3 4 121

Warrington Health in Business Programme.

Warrington Wellbeing hub.

Warrington Wellbeing collaborative clusters.

Employer pledge and health in business

programme. Inclusive growth programme.

8

SR

Sim

on

Ke

nto

n Warrington experiences a significant failure in the

health and social care system as a consequence

of demand pressures on key providers.

16 4 4 161

9

MA

A

Th

ere

sa

Wh

itfield

/ M

ah

a

Sa

ee

d Warrington experiences a Pandemic Flu outbreak. 20 4 5 201

Business Continuity Plans and Flu pandemic plans

(refresh due)

Review the flu pandemic plans and ultimate test of

business continuity (pandemic flu exercise for

Warrington health and social care, and schools).

Item 10

134




potential risk)



potential risk)




Imp

ac

t

Cu

rre

nt

Qu

art

erl

y S

co

re

Dir

ec

tio

n o

f

Tra

ve

l

Risk Description

Ris

k N

um

be

r

Str

ate

gic

Le

ad

Le

ad

Off

ice

r

Pre

vio

us

Qu

art

erl

y S

co

re

Lik

elih

oo

d

10

AF Warrington experiences a significant downturn in

the economy.

12 3 4 121

11

AF The Council receives legal challenges to the Local

Plan.

20 4 5 201

12

AF

Th

ere

sa

Wh

itfield Warrington experiences a major incident. 16 4 4 16

1

13

AF The Council's flagship regeneration project, Time

Square, is not delivered to time, budget or

specification.

16 4 4 161

14

AF Livewire Warrington does not deliver the Great

Sankey Hub project in accordance with the

agreement with the Council.

16 4 4 161

Item 10

135




potential risk)



potential risk)




Imp

ac

t

Cu

rre

nt

Qu

art

erl

y S

co

re

Dir

ec

tio

n o

f

Tra

ve

l

Risk Description

Ris

k N

um

be

r

Str

ate

gic

Le

ad

Le

ad

Off

ice

r

Pre

vio

us

Qu

art

erl

y S

co

re

Lik

elih

oo

d

15

LG

Da

vid

Wild The Council experiences a major cyber incident. 16 4 4 16

1Business Continuity and Data Recovery Plans. Cyber Security Development Programme 2017/18.

Cyber Insurance.

Business Continuity and Data Recovery Plans.

16

LG

Sa

rah

Ga

llea

r The Council experiences a significant breach of

information governance.

12 3 4 121

17

LG

Th

ere

sa

Wh

itfield The Council experiences a significant breach of

health and safety requirements.

12 3 4 121

18

LG The Council's financial position becomes unstable

because of a failure to deliver the planned

transformation programme (demand management,

commercialisation and digitalisation).

15 3 5 151

19

GH The Council is unable to maintain a sufficiently

skilled and stable workforce. To include specific

consideration of the impact of Brexit and the

potential loss of staff in services either directly

provided by the Council or where there is a close

level of interaction/inter-dependence with the

Council, such as health care or construction.

12 3 4 121

20

MC The Council faces legal challenge because of a

failure to provide services or manage

organisational change in accordance with

requirements or new legislation/regulation.

12 3 4 121

21

MC The Council experiences a failure in its corporate

governance arrangements. To include

consideration of partnership governance and

contract management arrangements, governing

the Council's relationships with key partners and

suppliers.

16 4 4 161

Item 10

136

Warrington Borough Council Strategic Risk/Heat Map

SEV

ERE

SER

IOU

S M

OD

ERA

TE

MIN

OR

TR

IVIA

L

RARE UNLIKELY POSSIBLE PROBABLE ALMOST CERTAIN

x

x x x x x x x x x x

x x

x x x x x x

x

x

Item 10

137


SEV

ERE

(5)

SER

IOU

S (4

) M

OD

ERA

TE (

3)

POSSIBLE (3) PROBABLE (4) ALMOST CERTAIN (5)

COUNCIL WIDE COUNCIL WIDE VULNERABLE PEOPLE VULNERABLE PEOPLE

ECONOMY ECONOMY COMMUNITIES COMMUNITIES PLACE PLACE

PANDEMIC FLU OUTBREAK

(9)


(9)

HOMELESSNESS (6)

HOMELESSNESS (6)

LOCAL PLAN (11)

LOCAL PLAN (11)

SOCIAL CARE MARKET (2)


HEALTH & SOCIAL CARE SYSTEM

(8)


(8)

MAJOR INCIDENT

(12)

MAJOR INCIDENT

(12)

CYBER INCIDENT

(15)

CYBER INCIDENT

(15)

CORPORATE GOVERNANCE

(21)


(21)

FINANCIAL POSITION

(18)

FINANCIAL POSITION

(18)

INEQUALITIES (7)

INEQUALITIES (7)

SOCIAL CARE DEMAND (1) SOCIAL CARE DEMAND (1)

ADVERSE INSPECTION (4)


SAFEGUARDING (3)

SAFEGUARDING (3)

ECONOMY (10)

ECONOMY (10)

LEGAL CHALLENGE

(20)

LEGAL CHALLENGE

(20)

HEALTH & SAFETY BREACH

(17)


(17)

SKILLED & STABLE

WORKFORCE (19)

SKILLED & STABLE

WORKFORCE (19)

INFORMATION BREACH

(16)

INFORMATION BREACH

(16)

EDUCATIONAL PERFORMANCE

(5)


(5)

SANKEY HUB (14)

SANKEY HUB (14)

TIME SQUARE

(13)

TIME SQUARE

(13)

Item 10

138


SEV

ERE

SER

IOU

S M

OD

ERA

TE

POSSIBLE PROBABLE ALMOST CERTAIN

COUNCIL WIDE COUNCIL WIDE VULNERABLE PEOPLE VULNERABLE PEOPLE

ECONOMY ECONOMY COMMUNITIES COMMUNITIES PLACE PLACE


(9)


(9)

HOMELESSNESS (6)

HOMELESSNESS (6)

LOCAL PLAN (11)

LOCAL PLAN (11)




(8)


(8)

MAJOR INCIDENT

(12)

MAJOR INCIDENT

(12)

CYBER INCIDENT

(15)

CYBER INCIDENT

(15)


(21)


(21)

FINANCIAL POSITION

(18)

FINANCIAL POSITION

(18)

INEQUALITIES (7)

INEQUALITIES (7)

SOCIAL CARE DEMAND (1) SOCIAL CARE DEMAND (1)



SAFEGUARDING (3)

SAFEGUARDING (3)

ECONOMY (10)

ECONOMY (10)

LEGAL CHALLENGE

(20)

LEGAL CHALLENGE

(20)


(17)


(17)

SKILLED & STABLE

WORKFORCE (19)

SKILLED & STABLE

WORKFORCE (19)

INFORMATION BREACH

(16)

INFORMATION BREACH

(16)


(5)


(5)

SANKEY HUB (14)

SANKEY HUB (14)

TIME SQUARE

(13)

TIME SQUARE

(13)

Item 10

139

Item 10

140

WARRINGTON BOROUGH COUNCIL AUDIT AND CORPORATE GOVERNANCE COMMITTEE – 22 June 2017 Report of the:

Director of Corporate Services

Report Author: Mark Watkins Exchequer Manager, Benefits & Exchequer Services


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 first half of the last financial year were reported to Members at the January 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

Item 11

141

without trace, a Company has been dissolved or gone into liquidation or the debt is no longer economically viable to pursue.

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 Corporate 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 Oct 16 – March 2017 4.1 Miscellaneous Income:

Date Submitted

Debtor Type No Of Debts

Net Value VAT Total Value Authorising

Officer Date Of

Approval Date Of

Write Off

26/10/2016 Social Services - Steve Peddie 8

£ 7,285.17

£ - £

7,285.17 Lynton Green 24/11/2016 25/11/2016

26/10/2016 General Sundry Debts

10 £

1,144.17 £

81.83 £

1,226.00 Lynton Green 24/11/2016 25/11/2016

25/11/2016 Small Balances

4 £

1.07 £ -

£ 1.07

Gemma Woodfield

25/11/2016 25/11/2016


49 £

171,152.45 £

134.33 £

171,286.78 Lynton Green 16/12/2016 21/12/2016

16/12/2016 Social Services - Steve Peddie 1 £11,875.00 £ - £11,875.00 Lynton Green 16/12/2016 21/12/2016

21/02/2017 Social Services - Frank Pacey

6 £

2,262.38 £ -

£ 2,262.38

Lynton Green 24/02/2017 27/02/2017


8 £

16.06 £ -

£ 16.06

Gemma Woodfield

21/12/2016 21/12/2016

15/01/2017 Walton Hall - Neil Simpson 18

£ 9,076.77

£ 339.31

£ 9,416.08

Lynton Green 23/01/2017 24/01/2017

15/01/2017

Quality Assurance and Safeguarding - Ann Towey

4 £

200.00 £ -

£ 200.00

Lynton Green 23/01/2017 24/01/2017

15/01/2017 Ground Rents - Stewart Brown 7

£ 3,749.98

£ - £

3,749.98 Lynton Green 23/01/2017 24/01/2017


£ 474.48

£ - £

474.48 Lynton Green 23/01/2017 24/01/2017


23 £ 4,755.81

£ 217.33

£ 4,973.14

Lynton Green 23/01/2017 24/01/2017


8 £

41.90 £ -

£ 41.90

Gemma Woodfield

24/01/2017 24/01/2017

21/02/2017 Environment Services - Dave Cotterill 25

£ 16,994.09

£ 2,651.29

£ 19,645.38

Lynton Green 24/02/2017 27/02/2017

Item 11

142


95 £

148,870.39 £

2,435.49 £

151,305.88 Lynton Green 24/02/2017 27/02/2017

15/03/2017 Social Services - Frank Pacey 8

£ 2,082.70

£ - £

2,082.70 Lynton Green 20/03/2017 23/03/2017


£ 64,138.24

£ - £

64,138.24 Lynton Green 24/02/2017 27/02/2017

21/02/2017 Regulatory Services - Dave Watson 15

£ 3,306.72

£ 1,065.16

£ 4,371.88

Lynton Green 24/02/2017 27/02/2017

21/02/2017

Highway Asset Maintenance and Street Works - Dave Vasey

10 £ 6,325.85

£ 298.20

£ 6,624.05

Lynton Green 24/02/2017 27/02/2017


9 £

9.10 £ -

£ 9.10

Gemma Woodfield

21/02/2017 21/02/2017


£ 4,543.89

£ - £

4,543.89 Lynton Green 20/03/2017 23/03/2017

15/03/2017 Social Services - Frank Pacey 31

£ 4,675.88

£ - £

4,675.88 Lynton Green 20/03/2017 23/03/2017


2 £

1,643.04 £

328.60 £

1,971.64 Lynton Green 20/03/2017 23/03/2017

15/03/2017

Trade, Recycling, & Bulky Waste - Lisa Doran

19 £

1,516.86 £ -

£ 1,516.86

Lynton Green 20/03/2017 23/03/2017


4 £

17.87 £ -

£ 17.87

Gemma Woodfield

23/03/2017 23/03/2017

Grand Total 437

£ 466,159.87

£ 7,551.54

£ 473,711.41

4.2 Social Care Debt As can be seen in the Miscellaneous Income schedule at 4.1 we have continued to work

closely with the senior management team to pro-actively identify those cases that we have no option than to write off.

We have also worked closely with our in house legal team who have now set up an arrangement with an external specialist legal team to assist with the pursuit of more complex debts e.g. where houses held in foreign territories.

We can also confirm that as has been covered in the media recently we do hold charges against properties for incurred and ongoing social care debts.

4.3 Housing Benefit Overpayments:

Council Tenants £10,280.11

Private Tenants £34,220.89

Discretionary Housing Payment £267.81

Item 11

143

Total £44,768.81

4.4 National Non Domestic Rates (NNDR) Total Invoices 123 Total Written Off - £487,034.36

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 Debt

Grand Total

Environment Services - Dave Cotterill £92.00 £51.48 £19,501.90 £19,645.38

General Sundry Debts £2,561.41 £29,045.26 £50,604.14 £45,355.67 £35,695.21 £15,347.67 £152,154.08 £330,763.44

Ground Rents - Stewart Brown

£3,749.98 £3,749.98

Highway Asset Maintenance and Street Works - Dave Vasey

£832.87 £956.32 £4,834.86 £6,624.05

Quality Assurance and Safeguarding - Ann Towey £150.00 £50.00 £200.00

Regulatory Services - Dave Watson

£2,918.45 £215.58 £1,237.85 £4,371.88

Small Balance Write Offs £1.01 £0.69 £7.40 £9.10

Small Balance Write Offs £6.94 £8.95 £0.06 £0.11 £16.06

Small Balances £27.44 £5.01 £9.31 £9.08 £10.00 £60.84

Social Services - Frank Pacey £6,045.67 £1,967.36 £401.08 £341.69 £92.92 £172.24 £9,020.96

Social Services - Steve Peddie £21,045.83 £5,528.86 £14,419.78 £26,516.22 £12,628.30 £524.00 £7,653.79 £88,316.78

Trade, Recycling, & Bulky Waste - Lisa Doran £176.90 £685.54 £654.42 £1,516.86

Walton Hall - Neil Simpson £114.00 £257.50 £423.50 £8,621.08 £9,416.08

Grand Total £33,438.28 £36,733.03 £66,483.31 £74,009.85 £52,341.31 £16,692.07 £194,013.56 £473,711.41

Item 11

144

5.3 Housing Benefit Overpayments

Housing Benefit Overpayments

Total 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

Council Tenants £10,280.11 £0.00 £0.00 £0.00 £0.00 £0.00 £10,280.11

Private Tenants £34,220.89 £1,149.48 £5,405.73 £3,611.09 £5,284.80 £9,696.79 £9,073.00

Discretionary Housing Payment

£267.81 £17.83 £19.40 £172.43 £0.00 £58.15 £0.00

Total £44,768.81 £1,167.31 £5,425.13 £3,783.52 £5,284.80 £9,754.94 £19,353.11

6. RECOMMENDATION

6.1 Members are asked to note

a) The debt approved for write-off under delegated procedure by the Director of Corporate Services.

7. BACKGROUND PAPERS No background papers

Item 11

145

Item 11

146

WARRINGTON BOROUGH COUNCIL AUDIT AND CORPORATE GOVERNANCE COMMITTEE – 22 JUNE 2017 Report of the:

Director of Corporate Services

Report Author: Mark Watkins Exchequer Manager, Benefits & Exchequer Services


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 2016-17 collection was 97.36%.

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 Corporate Services with a recommendation of writing off the debt. The Director of Corporate Services (under authority delegated to

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the Section 151 Officer for the Council), will authorise the debts for write off as appropriate.

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 £5,000 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 will 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 4.3 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 its ongoing reviews of each year.

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4.3 Yearly amounts written off

Financial Year

2000-01

£78.06

2001-02

£251.18

2002-03

£948.63

2003-04

£8,833.44

2004-05

£10,585.68

2005-06

£16,657.61

2006-07

£16,479.00

2007-08

£35,221.64

2008-09

£134,175.57

2009-10

£105,055.62

2010-11

£130,235.85

Grand Total £458,522.28 5. RECOMMENDATION 5.1 Members are asked to note

a) The debt approved for write-off under delegated procedure by the Director of Corporate Services.

6. BACKGROUND PAPERS No background papers

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WARRINGTON BOROUGH COUNCIL AUDIT AND CORPORATE GOVERNANCE COMMITTEE 22 JUNE 2017

Report of the: Director Corporate Services Report Author: Danny Mather, Head of Corporate Finance Contact Details: Email Address:


Ward Members:

All

TITLE OF REPORT: 2016/17 TREASURY MANAGEMENT OUTTURN REPORT

1. PURPOSE OF THE REPORT

1.1 Warrington Borough Council is required through regulations issued under the Local

Government Act 2003 to produce an annual treasury report reviewing treasury management activities and the actual prudential and treasury indicators for 2016/17. This report meets the requirements of both the CIPFA Code of Practice on Treasury Management (the Code) and the CIPFA Prudential Code for Capital Finance in Local Authorities (the Prudential Code).

2. BACKGROUND 2.1 During 2016/17 the minimum reporting requirements were that the full Council

should receive the following reports:

An annual treasury strategy in advance of the year (Council February 2016)

A mid-year (minimum) treasury update report (Council December 2016)

An annual report following the year describing the activity compared to the strategy (this report)

2.2 The Audit & Corporate Governance Committee provides a scrutiny function for treasury management and has received quarterly treasury management update reports. This report will also be presented to the Council at their meeting of 4 September 2017 for approval.

2.3 Changes in the regulatory environment place a much greater onus on elected members for the review and scrutiny of treasury management policy and activities. This report is important in that respect, as it provides details of the outturn position for treasury activities and highlights compliance with Warrington’s policies previously approved by elected members.

2.4 This Council confirms that it has complied with the requirement under the Code to give prior scrutiny to all of the above treasury management report by the Audit and

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Corporate Governance Committee before they were reported to the full Council. Member training on treasury management issues was undertaken during the year on 15 November 2016 in order to support members’ scrutiny role.

3. ANNUAL TRESURY REPORT 2016/17

3.1 This Annual Treasury Reports covers:

Capital activity during the year

Impact of this activity on the Council’s underlying indebtedness, (the Capital Financing Requirement)

The actual prudential and treasury indicators

Overall treasury position identifying how the Council has borrowed in relation to this indebtedness, and the impact on investment balances

Summary of interest rate movements in the year

Detailed debt activity and

Detailed investment activity

4. THE COUNCIL’S CAPITAL EXPENDITURE AND FINANCING 2016/17

4.1 The Council undertakes capital expenditure on long-term assets. These activities may

either be:

Financed immediately through the application of capital or revenue resources (capital receipts, capital grants, revenue contributions etc.), which has no resultant impact on the Council’s borrowing need; or

If insufficient financing is available, or a decision is taken not to apply resources, the capital expenditure will give rise to a borrowing need.

4.2 The actual capital expenditure forms one of the required prudential indicators. The

table below shows the actual capital expenditure and how this was financed:

2015/16 Actual

£000

2016/17 Estimate

£000

2016/17 Actual

£000

Capital Expenditure 84,465 542,845 115,040

Financed in year 29,515 31,888 31,984

Unfinanced Capital Expenditure 54,950 510,957 83,056

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5. THE COUNCIL’S OVERALL BORROWING NEED

5.1 The Council’s underlying need to borrow for capital expenditure is termed the Capital

Financing Requirement (CFR). This figure is a gauge of the Council’s indebtedness. The CFR results from the capital activity of the Council and resources used to pay for the capital spend. It represents the 2016/17 unfinanced capital expenditure and prior years’ net or unfinanced capital expenditure which has not yet been paid for by revenue or other resources.

5.2 Part of the Council’s treasury activities is to address the funding requirements for this borrowing need. Depending on the capital expenditure programme, the treasury service organises the Council’s cash position to ensure that sufficient cash is available to meet the capital plans and cash flow requirements. This may be sourced through borrowing from external bodies (such as the Government, through the Public Works Loan Board [PWLB] or the money markets), or utilising temporary cash resources within the Council.

5.3 Reducing the Capital Finance Requirement – the Council’s underlying borrowing need (CFR) is not allowed to rise indefinitely. Statutory controls are in place to ensure that capital assets are broadly charged to revenue over the life of the asset. The Council is required to make an annual revenue charge, called the Minimum Revenue Provision (MRP), to reduce the CFR. This is effectively a repayment of the borrowing need. This differs from the treasury management arrangements which ensure that cash is available to meet capital commitments. External debt can also be borrowed or repaid at any time, but this does not change the CFR.

5.4 The total CFR can also be reduced by:

The application of additional capital financing resources (such as unapplied capital receipts); or

Charging more than the statutory revenue charge (MRP) each year through a Voluntary Revenue Provision (VRP).

5.5 The Council’s 2016/17 MRP Policy (as required by CLG Guidance) was approved as

part of the Treasury Management Strategy Report for 2016/17 on 29 February 2016. The Audit & Corporate Governance Committee approved a report on changes to the way MRP is calculated at their meeting of 19 November 2015. These changes were incorporated into the Councils MRP Policy Statement and this was agreed by Full Council in agreeing the 2016/17 Treasury Management Strategy at their meeting in February 2016.

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5.6 The Council’s CFR for the year is shown below, and represents a key prudential

indicator. PFI and leasing schemes on the balance sheet, which increase the Council’s borrowing need. No borrowing is actually required against these schemes as a borrowing facility is included in the contract.

Capital Finance Requirement 2015/16 Actual

£000

2016/17 Budget

£000

2016/17 Actual

£000

Opening balance 249,880 336,282 304,831

Add unfinanced capital expenditure 55,210 510,957 83,323

Less MRP/VRP (260) (6,322) (269)

Closing balance 304,830 840,917 387,886

5.7 Borrowing activity is constrained by prudential indicators for net borrowing and the

CFR, and by the authorised limit.

5.8 Gross borrowing and the CFR – in order to ensure that borrowing levels are prudent over the medium term and only for a capital purpose, the Council should ensure that its gross external borrowing does not, except in the short term, exceed the total of the capital financing requirement in the preceding year (2016/17) plus the estimates of any additional capital financing requirement for the current (2017/18) and next two financial years. This essentially means that the Council is not borrowing to support revenue expenditure. This indicator allowed the Council some flexibility to borrow in advance of its immediate capital needs in 2016/17. The table below highlights the Council’s gross borrowing position against the CFR. The Council has complied with this prudential indicator.

2015/16 Actual

£000

2016/17 Budget

£000

2016/17 Actual

£000

Gross borrowing position as at 31 March 263,840 733,356 400,878

CFR 304,831 840,078 387,886

5.9 The authorised limit – the authorised limit is the “affordable borrowing limit”

required by section 3 of the Local Government Act 2003. Once this has been set, the Council does not have the power to borrow above this level. The table below demonstrates that during 2016/17 the Council has maintained gross borrowing within its authorised limit.

5.10 The operational boundary – the operational boundary is the expected borrowing position of the Council during the year. Periods where the actual position is either below or over the boundary is acceptable subject to the authorised limit not being breached.

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5.11 Actual financing costs as a proportion of net revenue stream – this indicator

identifies the trend in the cost of capital (borrowing and other long term obligation costs net of investment income) against the net revenue stream.

2015/16 Actual

£000

2016/17 Budget

£000

2016/17 Actual

£000

Authorised limit 268,072 928,215 405,110

Maximum gross borrowing 263,840 737,485 400,878

Operational boundary 268,072 747,485 405,110

Financing costs % net revenue stream 5.02 11.82 4.47

6 TREASURY POSITION AS AT 31 MARCH 2017

6.1 The Council’s debt and investment position is organised by the treasury management service in order to ensure adequate liquidity for revenue and capital activities, security for investments and to manage risks within all treasury management activities. Procedures and controls to achieve these objectives are well established both through member reporting and through officer activity detailed in the Council’s Treasury Management Practices.

6.2 Warrington’s debt and investment position at the beginning and the end of the year was as follows:

2015/16 Actual

£m

Rate / Return

%

Average Life Years

2016/17 Actual

£m

Rate / Return

%

Average Life Years

Fixed Rate Funding

- PWLB 38.1 3.7 21 175.2 3.1 20

- Market 158.5 3.1 21 143.5 2.9 26

- Temporary 17.0 0.6 1 32.2 0.6 1

Total Fixed 213.6 350.9

Variable Rate Fund

- PWLB 0 0

- Market 50.2 0.3 40 50.0 0.8 38

Total Debt 263.8 3.0 400.9 3.0

CFR 303.6 387.9

Over / (Under) Borrowing (39.8) 13.0

Investments

- Fixed Date 35.1 5.8 3 44.9 5.4 4

- Overnight 14.2 0.5 n/a 44.2 0.4 n/a

Total Investment 49.3 3.1 89.1 3.5

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6.3 An explanation of the movements between years is shown in the relevant section

(borrowing or investments).

6.4 The maturity structure of the debt portfolio was as follows:

Maturity Structure of Council Borrowing during 2016/17

2015/16 Actual

£m

Actual

%

Upper

Limit

%

2016/17 Actual

£m

2016/17 Actual

%

Under 12 months 34.2 12.9 25 52.2 13

1 year and within 2 years 20.0 7.6 25 10.0 2

2 years and within 5 years 15.0 5.7 35 15.0 4





40 years and above 68.7 26.0 100 88.5 22

Total Borrowing 263.8 100.0 400.9 100

Investments 2015/16 Actual

£000

2016/17 Actual

£000

Longer than 1 year 30,107 40,452

Under 1 year 5,000 4,500

Overnight Deposit 14,213 44,235

Total 49,321 89,187

7 THE STRATEGY FOR 2016/17

7.1 The expectation for interest rates within the strategy for 2016/17 anticipated low but

rising Bank Rate (starting in Q1 of 2017), and gradual rises in medium and longer term fixed borrowing rates during 2016/17. Variable or short-term rates were expected to be the cheaper form of borrowing over the period. Continued uncertainty in the aftermath of the 2008 financial crisis promoted a cautious approach, whereby investments would continue to be dominated by low counterparty risk considerations, resulting in relatively low returns compared to borrowing rates.

7.2 During 2016/17 there was major volatility in PWLB rates with rates falling during quarters 1 and 2 to reach historically very low levels in July and August, before rising significantly during quarter 3, and then partially easing back towards the end of the year.

7.3 Warrington’s policy for 2016/17 was to run down our short term investments, to avoid

the cost of holding higher levels of investments and minimise counterparty risks. Investments and borrowing during the year have been in line with the strategy and

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there have been no deviations. Where borrowing was necessary, this was taken mainly from the PWLB.

8 THE ECONOMY AND INTEREST RATES

8.1 As a result of the General Election on the 8th June, the Conservatives will look to form a

minority government although it is largely unclear as to how stable this government will be. Owing to this, discussions with regards to leadership and the UK’s stance on Brexit have yet again become key topics in the economy. Markets remained relatively calm in the immediate aftermath of the result, as Sterling fell to $1.27 against the dollar and the FTSE 100 reached close to 7,500.

8.2 Other major landmark events that had a significant influence on financial markets in the 2016-17 financial years were the UK EU referendum on 23 June and the election of President Trump in the USA on 9 November. The first event had an immediate impact in terms of market expectations of when the first increase in Bank Rate would happen, pushing it back from quarter 3 2018 to quarter 4 2019. At its 4 August meeting, the Monetary Policy Committee (MPC) cut Bank Rate from 0.5% to 0.25% and the Bank of England’s Inflation Report produced forecasts warning of a major shock to economic activity in the UK, which would cause economic growth to fall almost to zero in the second half of 2016. The MPC also warned that it would be considering cutting Bank Rate again towards the end of 2016 in order to support growth. In addition, it restarted quantitative easing with purchases of £60bn of gilts and £10bn of corporate bonds, and also introduced the Term Funding Scheme whereby potentially £100bn of cheap financing was made available to banks.

8.3 In the second half of 2016, the UK economy confounded the Bank’s pessimistic forecasts of August. After a disappointing quarter 1 of only +0.2% GDP growth, the three subsequent quarters of 2016 came in at +0.6%, +0.5% and +0.7% to produce an annual growth for 2016 overall, compared to 2015, of no less than 1.8%, which was very nearly the fastest rate of growth of any of the G7 countries. Needless to say, this meant that the MPC did not cut Bank Rate again after August but, since then, inflation has risen rapidly due to the effects of the sharp devaluation of sterling after the referendum. By the end of March 2017, sterling was 17% down against the dollar but had not fallen as far against the euro. In February 2017, the latest CPI inflation figure had risen to 2.3%, above the MPC’s inflation target of 2%. However, the MPC’s view was that it would look through near term supply side driven inflation, (i.e. not raise Bank Rate), caused by sterling’s devaluation, despite forecasting that inflation would reach nearly 3% during 2017 and 2018. This outlook, however, is dependent on domestically generated inflation, (i.e. wage inflation), continuing to remain subdued despite the fact that unemployment is at historically very low levels and is on a downward trend. Market expectations for the first increase in Bank Rate move forward to quarter 3 2018 by the end of March 2017 in response to increasing concerns around inflation.

8.4 USA – quarterly growth in the US has been very volatile during 2016 but a strong performance since mid-2016, and strongly rising inflation, prompted the Fed into

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raising rates in December 2016 and March 2017. The US is the first major western country to start on a progressive upswing in rates. Overall growth in 2016 was 1.6%.

8.5 EU – the EU is furthest away from an upswing in rates; the European Central Bank

(ECB) has cut rates into negative territory, provided huge tranches of cheap financing and been doing major quantitative easing purchases of debt during 2016-17 in order to boost growth from consistently weak levels, and to get inflation up from near zero towards it target of 2%. These purchases have resulted in depressed bond yield in the EU, but, towards the end of 2016, yields rose, probably due at least in part to rising political concerns around the positive prospects for populist parties and impending general elections in 2017 in the Netherlands, France and Germany. The action taken by the ECB has resulted in economic growth improving significantly in the Eurozone to an overall figure of 1.7% for 2016, with Germany achieving a rate of 1.9% as the fastest growing G7 country.

8.6 On the other hand, President Trump’s election and promise of fiscal stimulus, which

are likely to increase growth and inflationary pressures in the US, have resulted in Treasury yields rising sharply since his election. Gilt yields in the UK have been caught between these two influences and the result is that the gap in yield between US treasuries and UK gilts has widened sharply during 2016/17 due to market perceptions that the UK is still likely to be two years behind the US in starting on an upswing in rates despite a track record of four years of strong growth.

8.7 Japan – struggled to stimulate consistent significant growth with GDP averaging only

1.0% in 2016 with current indications pointing to a similar figure for 2017. It is also struggling to get inflation up to its target of 2%; only achieving an average of -0.1% in 2016, despite huge monetary and fiscal stimulus, through this is currently expected to increase to around 1% in 2017. It is also making little progress on fundamental reform of the economy.

8.8 China and emerging market countries – at the start of 2016, there were considerable

fears that China’s economic growth could be heading towards a hard landing, which could then destabilise some emerging market countries particularly exposed to Chinese economic slowdown and / or to the effects of a major reduction in revenue from low oil prices. These fears have largely subsided and oil prices have partially recovered so, overall, world growth prospects have improved during the year.

8.9 Equity markets- the result of the referendum, and the consequent devaluation of

sterling, boosted the shares of many FTSE 100 companies which had major earning which were not denominated in sterling. The overall trend since then has been steeply upwards and received further momentum after Donal Trump was elected President as he had promised a major fiscal stimulus to boost the US economy and growth rate.

9 BORROWING OUTTURN FOR 2016/17

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9.1 During 2016-17, PWLB rates fell from April to June and then gaining fresh downward impetus after the referendum and Bank Rate cut, before staging a partial recovery through to December and then falling slightly through to the end of March.

9.2 The Council’s 2016/17 Medium Term Financial Plan (MTFP) contained a forecasted borrowing figure to fund the capital programme of £510.957m. New borrowing of £212m occurred in year from PWLB (£140m) and a number of local authorities (£72m). There has been repayment of a number of loans of £74m (PWLB £2m, Market £15m, temporary local authority (£57m), parish councils (£100k)) and annuity loans to the PWLB (£982k). There has been some slippage in the capital programme, loan facilities being setup with the Registered Providers and limited drawdown on the facilities. The Council has also internally borrowed due to the low interest rates for investments.

9.3 Temporary borrowing increased (by net £15m) in the main from a number of local authorities to fund the capital programme. The Council did not borrow for any cash flow shortfall during 2016/17. Some parish councils invest their funds with the Council and the Council records these transactions as loans and over the financial year there has been a net increase of £20k in the borrowing with parish councils.

9.4 The net movement in loans for each category of borrowing is detailed below: Lender Balance

2015/16 £000

Net Movement£0

00

Balance 2016/17

£000

Type Interest Rate %

Public Works Loan Board 38,158

PWLB Annuity Repay * 11 (982) Fixed Various

PWLB 498708 (2,000) Fixed 3.02

PWLB Annuity 4,000 Fixed 2.86


PWLB Maturity 20,000 Fixed 2.50



PWLB EIP 500 Fixed 2.44
















Total PWLB 137,018 175,176

Market Loans 208,512

London Borough Bromley (5,000) Fixed 1.45

Hampshire CC (4,000) Fixed 1.30

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Hampshire Police & Crime (1,000) Fixed 1.30

Hertfordshire CC (5,000) Fixed 1.07

Total Market Loan (15,000) 193,512

Temporary Loans 17,170

Hyndburn Council 0 Fixed 0.50&0.60

Hyndburn Council 0 Fixed 0.50&0.60

West Yorkshire PCC (5,000) Fixed 0.65

Sheffield City Region (5,000) Fixed 0.68

Christchurch BC (2,000) Fixed 0.59

Hartlepool BC (3,000) Fixed 0.60

London Borough of Brent 0 Fixed 0.57

PCC West Yorkshire 0 Fixed 0.58

Leicester City Council 0 Fixed 0.60

London Borough of Ealing 0 Fixed 0.55

Leicester City Council 0 Fixed 0.60

London Borough of Brent 0 Fixed 0.58

Middlesbrough Council 0 Fixed 0.55

London Borough of Wandsworth 10,000 Fixed 0.45

Crawley BC 3,000 Fixed 0.45

North Yorkshire CC 10,000 Fixed 0.47

Guildford BC 5,000 Fixed 0.45

Pendle 2,000 Fixed 0.42

Parish Councils 20 Variable 0.500

Temporary Loans 15,020 32,190

Total Borrowing 263,840 137,038 400,878

9.5 Warrington’s debt portfolio split between PWLB debt, money market debt and temporary debt at 31 March 2017 is given in the tables below:

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Public Works Loan Board Start Maturity Interest Principal

Counter Party Date Date Rate % £

PWLB - Maturity 25/09/97 23/03/23 6.625 277,737

PWLB - Maturity 22/02/07 30/09/56 4.350 222,189

PWLB - Maturity 15/01/10 15/01/35 4.530 438,824

PWLB - Annuity 13/08/10 13/08/35 3.940 45,843

PWLB - Maturity 26/11/10 30/09/55 5.260 555,473

PWLB - Maturity 20/06/11 20/06/16 3.020 0

PWLB - Annuity 27/02/12 27/02/37 3.760 1,577,035

PWLB - Annuity 11/06/12 11/06/37 3.260 2,622,372

PWLB - Annuity 24/04/14 24/04/39 3.940 1,875,980

PWLB - Annuity 04/08/14 04/08/39 3.800 14,052,841

PWLB - Maturity 15/09/14 15/09/39 3.940 10,000,000

PWLB - Annuity 28/11/14 28/11/39 3.140 2,836,412

PWLB - Annuity 02/07/15 02/07/40 3.210 959,795

PWLB - Annuity 29/04/16 29/04/41 2.860 3,944,673

PWLB - Annuity 13/06/16 13/06/41 2.450 1,970,770

PWLB - Maturity 29/06/16 28/04/66 2.500 20,000,000

PWLB - Annuity 29/06/16 27/06/41 2.260 9,850,109

PWLB - Annuity 19/07/16 19/07/41 2.030 3,445,919

PWLB - Equal Instalment Payment 11/01/17 11/01/42 2.440 500,000

PWLB - Annuity 07/03/17 07/03/22 1.260 10,000,000

PWLB - Annuity 08/03/17 08/03/23 1.370 10,000,000

PWLB - Annuity 08/03/17 08/03/25 1.660 10,000,000

PWLB - Annuity 08/03/17 08/03/26 1.790 10,000,000

PWLB - Annuity 08/03/17 08/03/27 1.910 5,000,000

PWLB - Annuity 08/03/17 08/03/28 2.020 5,000,000

PWLB - Annuity 08/03/17 08/03/29 2.120 5,000,000

PWLB - Annuity 08/03/17 08/03/30 2.210 5,000,000

PWLB - Annuity 08/03/17 08/03/31 2.290 5,000,000

PWLB - Annuity 08/03/17 08/03/32 2.360 5,000,000

PWLB - Annuity 08/03/17 08/03/33 2.430 5,000,000

PWLB - Annuity 08/03/17 08/03/34 2.480 5,000,000

PWLB - Annuity 08/03/17 08/03/35 2.520 5,000,000

PWLB - Annuity 08/03/17 08/03/36 2.560 5,000,000

PWLB - Annuity 08/03/17 08/03/24 1.510 10,000,000

175,175,973Total 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

*COMMERZBANK (prev EURAPAISCHE HYPOTHEKEN)02/04/02 02/04/42 5.000 5,000,000

*COMMERZBANK (prev 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 0

Hampshire CC 19/11/13 18/11/16 1.300 0

Hampshire Police & Crime 19/11/13 18/11/16 1.300 0

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 0

Oxfordshire CC 22/07/15 21/07/17 0.850 5,000,000

Oxfordshire CC 22/07/15 20/07/18 1.200 5,000,000

Prudential Bond : Variable Rate Linked to CPI 25/08/15 25/08/55 0.846 50,000,000

Charnwood BC 24/02/16 24/02/18 0.900 2,000,000

London Borough of Wandsworth 26/02/16 26/02/18 0.980 5,000,000

Sheffield City Region 18/03/16 16/03/18 0.950 3,000,000

Bonds 01/04/08 01/04/50 0.500 12,275

193,512,275

* LOBOs (Lenders Option Borrowers Option)

Total Outstanding

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Council’s LOBO Portfolio

9.6 A great deal of national interest has been generated on Local Government LOBO loans following a documentary in 2015 and a Parliamentary enquiry. Lender Option Borrower Options (LOBO’s) 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. The Council’s exposure to this risk has been mitigated by a number of actions.

9.7 Barclays Bank has changed three LOBO loans to fixed rate loans and initial discussions

have taken place to evaluate an option to repay the £40m loans. 10 INVESTMENT OUTTURN 2016/17

10.1 After the EU referendum, Bank Rate was cut from 0.5% to 0.25% on 4 August and

remained at that level for the rest of the year. Market expectations as to the timing of the start of monetary tightening started the year at quarter 3 2018, but then

Temporary Loans Start Maturity Interest Principal


Parish Council Loans Various 31/03/16 0.500 189,947

Hyndburn Borough Council 10/04/15 08/04/16 0.500 0

Hyndburn Borough Council 17/04/15 15/04/16 0.500 0

West Yorkshire Police & Crime Commission07/03/16 01/03/17 0.650 0

Sheffield City Region 21/03/16 20/03/17 0.680 0

Christchurch Borough Council 21/03/16 20/03/17 0.590 0

Hartlepool Borough Council 22/03/16 21/03/17 0.600 0

Hyndburn Borough Council 08/04/16 07/04/17 0.600 1,000,000

Hyndburn Borough Council 15/04/16 13/04/17 0.600 1,000,000

London Borough of Brent 24/05/16 06/03/17 0.570 0

PCC West Yorkshire 24/05/16 24/03/17 0.580 0

Leicester City Council 24/05/16 30/03/17 0.600 0

London Borough of Ealing 15/06/16 15/03/17 0.550 0

Leicester City Council 16/06/16 30/03/17 0.600 0

London Borough of Brent 20/06/16 20/03/17 0.580 0

Middlesbrough Council 23/06/16 22/03/17 0.550 0

Wandsworth London Borough 08/12/16 07/12/17 0.450 10,000,000

Crawley Borough Council 29/11/16 28/11/17 0.450 3,000,000

North Yorkshire CC 25/11/16 24/11/17 0.470 10,000,000

Guildford Borough Council 02/12/16 01/12/17 0.450 5,000,000

Islington London Borough 24/11/17 23/11/18 0.650 0

Pendle 25/11/16 24/11/17 0.420 2,000,000

0 00/01/00 00/01/00 0.000 0

Total Outstanding 32,189,947

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moved back to around the end of 2019 in early August before finishing the year back at quarter 3 2018. Deposit rates continued into the start of 2016/17 at previous depressed levels but then fell during the first two quarters and fell even further after the 4 August MPC meeting resulted in a large tranche of cheap financing being made available to the banking sector by the Bank of England. Rates made a weak recovery toward the end of 2016 but then fell to fresh lows in March 2017.

10.2 Investment Policy - Warrington’s investment policy is governed by Communities and Local Government (CLF) guidance, which has been implemented in the annual investment strategy approved by the Council in February 2016. This policy sets out the approach for choosing investment counterparties, and is based on three main credit rating agencies, supplemented by additional market data (such as rating outlooks, credit default swaps, bank share prices, etc.).

10.3 The investment activity during the year conformed to the approved strategy, and the Council had no liquidity difficulties.

Balance Sheet Resources 2015/16 £000

2016/17 £000

General Fund 1,064 1,402

Earmarked reserves 48,657 46,094

Capital Receipts Reserve 5,414 5,023

Capital Grants Unapplied Reserve 5,989 8,104

Total 61,124 60,623

10.4 Investments held by the Council – Warrington maintained an average balance of

£28m of investments through the year. These earned an average rate of 0.42%. There was an increase in the Council’s investment income during the year from a budgeted £0.634m to £2.828m mainly due to the high return from the Churches Charities and Local Authority Property (CCLA) fund investment and the various solar bond investments. Investments have increased by net £9.8m over the year mainly due to investments in solar bonds. The movement in investments during the financial years 2016/17 were:

Counterparty 2015/16 Actual

£000

2016/17 Actual

£000

Movement in 2016/17

£000

Year Avg. Interest

Rate %

CCLA 13,107 12,903 (204) 5.12

Various Solar Bonds (5) 17,000 31,500 14,500 5.60

Aldermore Challenger Bank 5,000 0 (5,000) 1.75

LiveWire Energy 0 301 301 4.00

LiveWire Energy 0 247 247 4.00

WBT Shares 888 888 0 0

Joint Venture 3,704 3,704 0 0

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Rugby League Shares 1,650 1,650 0 0

Municipal Bond Agency 200 200 0 0

Total Fixed 41,549 51,393 9,844 4.25

Overnight Deposits Counterparty

Balance

31 March 2016

£000

Balance

31 March 2017

£000

Movement in 2016/17

Year

£000

Yearly Average

Interest Rate %

Santander (A&L) 8,345 10,000 1,655 0.80

Bank of Scotland 1,035 0 (1,035) 0.31

Yorkshire Bank 0 0 0 -

Nat West 4,802 1,425 (3,377) 0.19

Handelsbanken 0 0 0 0.22

Legal & General MMF* 0 2,785 2,785 -

Prime Rate MMF* 0 10,000 10,000 0.32

Standard Life (Ignis) MMF* 0 20,000 20,000 0.35

Deutsche MMF* 0 0 0 -

CCLA MMF* 25 25 0 0.35

Total Overnight 14,207 44,235 30,028 0.42

*Money Market Fund

11 TREASURY OVERALL OUTTURN POSITION

11.1 For 2016/17 Warrington recorded an under spend on its treasury management activities of over £6m. This was mainly the result of a reduction of the interest paid as the Council funded its capital expenditure by internally borrowing rather than externally borrowing and borrowing short term to take advantage of the low interest environment, slippage on the capital programme, achieving greater than budgeted for investment returns and the Invest to Save programme making repayments, changes to the Council’s MRP Policy and the success of the Council’s bond issue.

12 PERFORMANCE MEASUREMENT

12.1 Benchmarking performance is critical in this key risk area due to the size of the funds involved. Warrington uses the CIPFA Benchmarking services as the main source of performance information and also Capita’s (the Council’s Treasury Advisors) benchmarks for short-term investments. Although a number of benchmarks are generated the key ones are the average rate of interest paid on our loan portfolio and the average rate of interest earned on our investments.

12.2 The average annual investment rate for Warrington is 3.4% compared to the CIPFA Benchmarking for a group of local authorities which is 1.00%. This is due to the good return received from the CCLA Property Fund, use of Challenger Banks and investing in green bonds.

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12.3 During 2016/17 as part of the Bond process the Council was reviewed and Moodys the Council maintained the credit rating of Aa2. Item 13

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TREASURY MANAGEMENT DEVELOPMENTS

12.4 Member training on treasury management was provided in November 2016 and further training will be arranged as necessary, to coincide with any new members joining the committee.

12.5 Local Authority Mortgage Scheme – came to an end in 2014/15. This is due to Lloyds withdrawing from the scheme due to supporting the Government’s Right to Buy Scheme. The Leeds Building Society also ended the scheme because they did not have a branch in Warrington which resulted in low take up of the scheme. It is, however, pleasing to note that Warrington issued over 200 mortgages to Warrington residents since inception in 2011.

12.6 For accountancy purposes the Council records a number of transactions as long term debtors. These transactions are classified as being a service investment, rather than a treasury management investment, and are therefore outside of the specified / non-specified investment categories. However to provide a comprehensive view on how cash balances have been used details of the Council’s Long Term Debtors are detailed below:

Counterparty 2015/16

Actual

£000

2016/17

Actual

£000

Movement in 2016/17

£000

Local Authority Mortgage Scheme (LAMS)

Lloyds LAMS 2,000 0 (2,000)

Leeds BS LAMS 500 500 0

Lloyds LAMS 1,000 1,000 0

Lloyds LAMS 2,000 2,000 0

Total LAMS 5,500 3,500 (2,000)

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12.7 Loans to Registered Providers - During 2016/17 the Council continued to expand its

Loans to Registered Provider Scheme. In line with the Council’s 2016/17 Capital Programme agreed by Full Council in February 2016 a number of drawdowns have been completed during the year from Muir, Equity, Wirral Methodist and One Warrington Ltd (OWL/Omega). Counterparty Facility

£

Balance

2015/16

£

Balance

2016/17

£

Net Movement in 2016/17

£

Registered Providers (RP)

Warrington Housing Assoc. 10,000,000 875,302 848,580 (26,722)

Warrington Housing Assoc. 2,734,376 2,655,669 (78,707)

Golden Gates Housing Trust 1,819,243 1,657,061 1,611,211 (45,850)

Muir Housing Group D1 30,000,000 1,919,651 1,876,133 (43,518)

Muir Housing Group D2 983,344 960,257 (23,087)

Muir Housing Group D3 3,906,179 3,906,179



Your Housing Group 10,000,000 2,916,519 2,846,219 (70,300)

Equity Housing Group 20,000,000 9,814,921 9,814,921

Helena Partnership Ltd 90,000,000 14,525,475 14,189,103 (336,372)

Wulvern Housing Group 60,000,000 10,000,000 10,000,000 0

Wirral Metropolitan Housing 3,000,000 495,000 495,000

Commercial Loans

Warrington Borough Transport 250,000 100,000 25,000 (75,000)

Warrington Borough Transport 400,000 160,000 40,000 (120,000)

Omega Warrington Ltd 7,500,000 4,074,743 3,024,986 (1,049,757)

Omega Warrington Ltd 5,400,000 1,652,927 3,253,748 1,600,821

Pending

Peaks & Plains Housing 25,000,000 0 0 0

St Vincent’s Housing 25,000,000 0 0 0

Total 288,369,234 41,599,399 60,941,203 19,341,805

12.8 Muir Group Housing – during the year the association took three drawdowns of £4m,

£2m and £3.5m from their £30m facility.

12.9 Equity Housing Association – during the year the association took their first drawdown of £10m from their £20m facility.

12.10 Wirral Methodist Housing Association – during the year the association took their first drawdown of £500k from their £3m facility.

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12.11 Omega – during the year there have not been any draw downs on the first facility,

there has been interest capitalised for the year (£281k) and one repayment (£1.331m).

12.12 A second facility was approved for £5.4m in December 2015 for the development of Barrow Hall Primary school. There have been nine drawdowns taken of (£2.531m), there has been interest capitalised for the year of (£216k) and there has been one repayment of £1.147m on the facility.

12.13 Contract Monitoring – the Council has set up an effective contract monitoring system to monitor its loan contracts on an ongoing basis. This was subject to a full internal audit review in 2015/16 of the loans system and the associated contract monitoring procedures. The audit awarded the system with a high substantial assurance rating.

12.14 Local Authority Property Fund – the Council’s original investment of £10m with the CCLA Property Fund has decreased this year and has been valued at the end of the financial year at £12.903m. This has proved a good investment for the Council. The initial £10m investment has increased by £2.903m in four years. The fund has also delivered a good dividend in the region of 5.12% for this financial year.

12.15 Solar Farm Investment – three solar bonds which were invested in April 2015 totalling £10m were sold in December 2016 (£4m, £3m and £3m) and the funds returned to the Council. A total of £29.5m has been invested during the year on four bonds (£5m (April), £10m, £10m, £4.5m (May)) with Rockfire Capital Ltd Solar Bond. An investment in the largest solar bond at Swindon worth £73m was completed between three Councils (Newham, Thurrock and Warrington) and another Council is due to invest in the future. The aim of the investment is to make our portfolio more ethical and to generate a high return to the Council.

12.16 Green Energy Bonds – the Council have completed two bonds with LiveWire Community Energy Ltd of £301k and £247k for five years.

12.17 Business Bank – in line with the 2016/17 TMSS there was a £30m allocation in the capital programme and initial policy directive from the Local Economy Policy Committee. The Executive Board at the January 2017 meeting approved and investment of £30m over a five year period to acquire 33% of share capital in a new challenger business bank known as Redwood Bank. The Council has worked with Redwood Bank to obtain a banking license and the bank is due to be mobilised during the summer of 2017.

12.18 UK Municipal Bond Agency PLC (UK MBA) (formerly Local Capital Finance Company Limited) - the LGA have set up an agency UK MBA, whereby low or high levels of bond finance can be obtained by Local Authorities as an alternative option to the PWLB.

12.19 The LGA and 48 councils have signed up to become investors in the company, with the Council investing £200k in the bond agency. The LGA has set up an agency under

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the name of UK Municipal Bond Agency as an independent body with its own governance structure. The body will be accountable to its council shareholders and the LGA. The first bond is expected in 2017/18. The Council are assessing the option of borrowing from the first bond. The 2016/17 Treasury Management Strategy recommended that the Council adopt the joint several guarantee of the agency (Councils will become liable if another Council does not repay its bond debt liabilities). This was endorsed by the Audit & Corporate Governance Committee meeting of February 2016.

12.20 Local Authority Fixed Income Fund – work continued in the period on the feasibility of the Council setting up an investment fund that other Councils can invest in. This fund has been incorporated into the 2016/17 Treasury Management Strategy.

12.21 Treasury Management Board – the board has been established to provide an opportunity for members to discuss the Council’s commercial loans programme and treasury developments in detail and has run for a couple of financial years. The board has met on a number of occasions during the year.

12.22 Cheshire Fire and Rescue Authority – renewed its treasury management contract with the Council until 2017/18.

12.23 Capita Treasury Services – the contract for this service was tendered and won again by Capita Treasury Services to commence from April 2015 to March 2018.

13 TEMPORARY BORROWING

13.1 Temporary borrowing is available to finance cash deficits. No temporary borrowing was taken to fund cash flow requirements.

14 PRUDENTIAL & TREASURY INDICATORS

14.1 During the financial year Warrington operated within the treasury limits and Prudential Indicators set out in Warrington’s Annual Treasury Management Strategy Statement (TMSS). The outturn for the Prudential Indicators is shown below:

Prudential Indicators

14.2 The Prudential Code requires the publication of seven prudential indicators. The

objective in considering affordability is that capital investment remains within sustainable limits particularly in relation to the impact on the Council Tax.

14.3 The Council has adopted the CIPFA Code of Practice for Treasury Management in the Public Services and is fully compliant with this indicator.

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14.4 Ratio of financing costs to net revenue stream - this indicator shows the proportion

of the revenue budget spent on capital financing costs:

Ratio of financing costs to net revenue stream

2015/16 Actual

%

2016/17 Budget

%

2016/17 Actual

%

Revenue Account 5.02 11.82 4.47

14.5 Capital Expenditure - this indicator shows actual capital expenditure that was

incurred in 2016/17:

Capital Expenditure 2015/16 Actual

£000

2016/17 Budget

£000

2016/17 Actual

£000

Revenue Account 84,465 542,845 115,040

14.6 Capital Finance Requirement (CFR) – The Council’s underlying need to borrow for

capital expenditure is termed the Capital Financing Requirement (CFR). This figure is a gauge of the Council’s indebtedness. The CFR results from the capital activity of the Council and resources used to pay for the capital spend. It represents the 2016/17 unfinanced capital expenditure and prior years’ net or unfinanced capital expenditure which has not yet been paid for by revenue or other resources.

14.7 The Council’s 2016/17 MRP Policy (as required by CLG Guidance) was approved as part of the Treasury Management Strategy Report for 2016/17 February 2016.

14.8 The Council’s CFR for the year is shown below, and represents a key prudential indicator. It includes PFI and leasing schemes on the balance sheet, which increase the Council’s borrowing need. No borrowing is actually required against these schemes as a borrowing facility is included in the contract (if applicable).

Capital Financing Requirement

2015/16 Actual

£000

2016/17 Budget

£000

2016/17 Actual

£000

Revenue Account 304,830 840,078 387,886

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14.9 Gross Borrowing and the CFR – in order to ensure that borrowing levels are prudent

over the medium term and only for a capital purpose, the Council should ensure that its gross external borrowing does not, except in the short term, exceed the total of the capital financing requirement in the preceding year (2015/16) plus the estimates of any additional capital financing requirement in the current year (2016/17) and next two financial years. This essentially means that the Council is not borrowing to support revenue expenditure. This indicator allowed the Council some flexibility to borrow in advance of its immediate capital needs in 2016/17. Borrowing activity is constrained by prudential indicators for net borrowing and the CFR, and by the authorised limit. The table below highlights the Council’s gross borrowing position against the CFR. The Council has complied with this prudential indicator:

Gross Borrowing Position 2015/16 Actual

£000

2016/17 Budget

£000

2016/17 Actual

£000

Brought forward 1 April 196,597 238,089 263,840

Carried forward 31 March 263,840 733,356 400,878

Gross Council Borrowing 67,243 495,267 137,038

14.10 It can be seen by comparing the 2016/17 Capital Financing Requirement figure of

£387.886m with the gross council borrowing figure of £400.878m, that Warrington has borrowed more than the capital expenditure but not the next two years capital expenditure.

14.11 Estimate of the incremental impact of new capital investment decisions for the

Band D Council Tax - this indicator is intended to show the effect on Council Tax of approving new capital expenditure in the Capital Programme.

Impact of capital investment decisions for Band D Council Tax

2015/16 Actual

£

2016/17 Budget

£

2016/17 Actual

£

Unsupported Borrowing 17.00 26.39 20.34

14.12 Treasury Management Indicators - there are six Treasury Management indicators

required under the code. In order to ensure long-term affordability, decisions have also to be prudent and sustainable in the long-term. The indicators are concerned with the Council’s borrowing and investment activities.

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14.13 Operational Boundary for External Debt - this indicator shows estimates of the

authority’s most likely level of borrowing each year. It includes long-term borrowing to fund capital and short-term borrowing to meet day to day variations in cash flow. The operational boundary is the expected borrowing position of the Council during the year. Periods where the actual position is either below or over the boundary is acceptable subject to the authorised limit not being breached.

Operational Boundary for External Debt

2015/16 Actual

£000

2016/17 Budget

£000

2016/17 Actual

£000

Borrowing 263,840 743,356 400,878

Other Long Term Liabilities 4,232 4,129 4,232

Total Operational Boundary 268,072 747,485 405,110

14.14 Authorised Limit for External Debt – the authorised limit is the “affordable

borrowing limit” required by section 3 of the local Government Act 2003. Once this has been set, the Council does not have the power to borrow above this level. This indicator is higher than the Operational Boundary to recognise that during the year it may be necessary to exceed the Operational Boundary in order to take advantage of interest rate movements or to accommodate unusual cash flow movements. The table below demonstrates that during 2016/17 the Council has maintained gross borrowing within its authorised limit.

Authorised Limit for External Debt

2015/16 Actual

£000

2016/17 Budget

£000

2016/17 Actual

£000

Borrowing 263,840 924,086 400,878

Other Long Term Liabilities 4,232 4,129 4,232

Total Operational Boundary 268,072 928,215 405,110

This indicator is the maximum limit the Council may borrow at any point in time in the year. If borrowing above this level were needed a report would go to Executive Board for authorisation to increase the limit.

14.15 Upper limit for borrowing at variable interest rate – this indicator shows the percentage of borrowing the authority can undertake at variable interest rates. The indicator restricts variable rate borrowing in order to reduce the risk from sudden movements in interest rates.

Upper Limit –

Variable Interest Rate Exposure

2015/16 Actual

%

2016/17 Budget

%

2016/17 Actual

%

Variable Interest Rates 40 40 13

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14.16 Fixed Interest Rate Exposure – this indicator shows the percentage of borrowing that

can be undertaken at a fixed interest rate. Up to 100% of borrowing can be at fixed interest rate but no less than 60% can be at fixed interest rates. Again, this indicator is set at levels to reduce the risk from interest rate movements.

Upper Limit –

Fixed Interest Rate Exposure

2015/16 Actual

%

2016/17 Budget

%

2016/17 Actual

%

Variable Interest Rates 100 100 87

14.17 Limits for principal sums invested for periods over 364 days – Warrington can invest

up to a maximum of £75m for a period in excess of 364 days with the maximum period for any one loan being three years. These limits are set with regard to the Council’s liquidity requirements and to reduce the need for early sale of an investment and are based on the availability of funds after each year-end.

14.18 Maturity structure of borrowing – this indicator restricts longer-term fixed interest exposure. The indicator shows both the upper and lower limits to the maturity structure of borrowing. The indicator is designed to be a control over Warrington having large concentrations of fixed interest rate debt needing to be replaced at any one time and thus being at risk of having to borrow large amounts when interest rates may be unfavourable.

Maturity Structure of Fixed Debt

2016/17 Upper Limit

%

2016/17 Lower Limit

%

2016/17 Actual

%

Under 12 months 25 0 13.0

12 months to 24 months 25 0 2.5

24 months to 5 years 35 0 3.7

5 years to 10 years 30 0 11.3

10 years and above 100 40 69.5

15 CONFIDENTIAL OR EXEMPT

15.1 Not confidential.

16 FINANCIAL CONSIDERATIONS

16.1 Not applicable.

17 RISK ASSESSMENT

17.1 A full risk assessment has been undertaken. Warrington annual Treasury

Management Strategy details the financial risk facing the Council’s treasury portfolio

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over the coming year. Treasury risk is also assessed on a daily basis by the treasury management team.

18 EQUALITY AND DIVERSITY/EQUALITY IMPACT ASSESSMENT

18.1 The Finance Service undertakes Equality Impact Assessment in its wider functions.

Service changes that emerge from proposals contained in the Treasury Management Strategy are subject to EI Assessments.

19 CONSULTATION

19.1 Not applicable.

20 CONCLUSION

20.1 All investments and borrowing activity has been undertaken in full compliance with

the Council’s approved Treasury Management Policy and Treasury Management Strategy. It is also pleasing to note that the return on the Council’s investment portfolio continues to out-perform industry benchmarks and the high Credit Rating awarded to the Council.

21 REASONS FOR RECOMMENDATIONS

21.1 To ensure the Council complies with the 2011 revised CIPFA Treasury Management

Code of Practice.

22 RECOMMENDATIONS

22.1 That members note the report.

23 BACKGROUND PAPERS

23.1 Treasury working papers. Contacts for Background Papers:


Danny Mather Corporate Finance Manager


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WARRINGTON BOROUGH COUNCIL AUDIT AND CORPORATE GOVERNANCE COMMITTEE 22 JUNE 2017 Report of the: Director of Corporate Services Report Author: Simon Bleckly, Audit Manager Contact Details: Email Address:


Ward Members:

All

TITLE OF REPORT: ANTI-FRAUD, BRIBERY AND CORRUPTION ANNUAL REPORT: 2016-17 1. PURPOSE OF THE REPORT

1.1 The purpose of this report attached at Appendix A is to present the work carried out

during the past year to minimise the risk of fraud, bribery and corruption occurring in the Council. This supports the requirements of the Accounts and Audit Regulations, which state that the Council must have measures in place “to enable the prevention and detection of inaccuracies and fraud.” In this context, we have taken fraud also to refer to cases of bribery and corruption.

1.2 The report sets out planned work for 2017-18, highlights some of the current areas of

fraud risk and provides a conclusion on the effectiveness of controls in place to minimise the risk of fraud occurring in the Council. The report also provides information on the work of the new Corporate Counter Fraud Unit and describes the joint working arrangements with Salford City Council.

2. CONFIDENTIAL OR EXEMPT 2.1 Not confidential. 3. FINANCIAL CONSIDERATIONS

3.1 Effective procedures to counter fraud, bribery and corruption 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 included in the report.

4. RISK ASSESSMENT 4.1 The risk of fraud, bribery or corruption occurring applies to virtually all Council

services. Internal Audit carry out an annual assessment of the risk of fraud occurring within the Council’s services. This is used to determine the scope of proactive anti-

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fraud work to be carried out by Internal Audit and the Corporate Counter Fraud Unit. The impact of any cases of fraud, bribery or corruption that do occur can be mitigated by this work and by effective implementation of the policies and procedures now in place within the Council.

4.2 This report summarises the work being carried out by Internal Audit, and by other

services within the Council, to manage these risks. 5. EQUALITY AND DIVERSITY/EQUALITY IMPACT ASSESSMENT


report. 6. CONSULTATION

N/A

7. REASONS FOR RECOMMENDATIONS 7.1 To assist the Council in meeting its statutory requirement to have measures in place

to enable the prevention and the detection of inaccuracies and fraud (section 4 of The Accounts and Audit Regulations 2015).

7.2 To ensure that members are kept up to date with the work carried out in this area

and are aware of the fraud, bribery and corruption risks that may affect the Council. 8. RECOMMENDATION 8.1 That the Audit and Corporate Governance Committee considers and comments upon

the annual fraud report as part of its monitoring role. 9. BACKGROUND PAPERS

Internal Audit working papers and reports “Fighting Fraud and Corruption Locally: The Local Government Counter Fraud and Corruption Strategy” - CIPFA (March 2016) CIFAS “Fraudscape” 2017 report (May 2017) National Anti-Fraud Network Bulletins CIPFA Code of Practice on Managing the Risk of Fraud and Corruption Guidance Notes (December 2014)

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Simon Bleckly Audit Manager

[email protected]

01925 442217

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Internal Audit Service

COUNTER FRAUD, BRIBERY AND CORRUPTION

ANNUAL REPORT: 2016/17

JUNE 2017

Internal Audit 5

th Floor Quattro

New Town House Buttermarket Street Warrington WA1 2NH http://w2kwebint/audit

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CONTENTS

Section Page

1. Purpose of the report 1

2. Policies and procedures 1

3. Planning to minimise the risk of fraud 2

4. Reporting and awareness raising 3

5. Work carried out in 2016-17 4

6. Future developments: the local government counter fraud and corruption

strategy and emerging risks 7

7. Conclusion 8

Counter Fraud, Bribery and Corruption Plan, 2017-18 Appendix A

Responses to Fighting Fraud and Corruption Locally: Recommendations for local authorities Appendix B

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1

1. Purpose of the report

1.1 The purpose of this report is to present the work carried out during the past year to minimise the risk of fraud, bribery and corruption occurring within and against the Council. This supports the requirements of the Accounts and Audit Regulations 2015, which state that the Council must have measures in place “to enable the prevention and detection of inaccuracies and fraud.” In this context, we have taken fraud also to refer to cases of bribery and corruption.

1.2 The report also sets out planned work for 2017-18 (Appendix A), highlights some of

the current and emerging areas of fraud risk and provides a conclusion on the effectiveness of the Council’s arrangements to minimise the risk of fraud.

2. Policies and procedures

2.1 Effective policies and procedures are essential to ensure that all officers and members are aware of their roles and responsibilities in identifying and managing the risk of fraud. We continue to review and update these on an ongoing basis. Work was carried out in 2016-17 in the following areas:

Whistleblowing Procedure 2.2 The procedure was reviewed in 2016-17, but no changes were considered

necessary. A one page guide that summarises the procedure and encourages staff to raise concerns was drafted and published in November. The schools whistleblowing procedure will be reviewed in 2017-18 to ensure that it reflects recent changes to safeguarding reporting guidelines. Anti-Fraud, Bribery and Corruption Statement and Policy

2.3 The Anti-Fraud and Corruption Statement and Policy was updated and approved by the Audit and Corporate Governance Committee in April 2014. No further amendments were considered necessary in 2016-17.

Anti-Money Laundering Procedure

2.4 A revised anti-money laundering procedure has been drafted and is currently being reviewed by the Council’s Legal and Trading Standards teams prior to issue. Formal training will be provided in 2017-18 to all staff who may be covered by anti-money laundering regulations. Guidance Relating to Surveillance under the Regulation of Investigatory Powers Act

2.5 In January 2017, the Office of the Surveillance Commissioner undertook an inspection of the Council’s policies and procedures regulating the conduct of any surveillance carried out under the Regulation of Investigatory Powers Act. The findings from this inspection were taken into account in updated guidance issued to staff with responsibility for carrying out investigations or conducting surveillance.

CIPFA Code of Practice on Managing the Risk of Fraud and Corruption

2.6 In 2014, CIPFA issued a new “Code of Practice on Managing the Risk of Fraud and Corruption”. Although the Code is not currently mandatory, it represents best practice and compliance with the Principles set out in the Code will enable the Council to demonstrate effective financial stewardship of public monies.

2.7 An internal assessment against the Code indicated 73% compliance with all areas of the Code, which was classed as a “Good” level of compliance (up from 70% last year). The main areas for improvement lie around continuing to develop more detailed assessment of fraud risk (including estimates of fraud loss) and the

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2

promotion of the counter fraud strategy more widely across the Council: these will be considered during 2017-18.

3. Planning to minimise the risk of fraud

3.1 The Internal Audit planning process includes a specific fraud risk assessment to ensure that all relevant risks are identified and to support the development of a programme of proactive anti-fraud work that minimises the risk of loss to the Council. Risks are identified from a number of sources, including:

CIPFA’s annual Counter Fraud and Corruption Tracker Survey

“Fighting Fraud and Corruption Locally 2016-19” – the local government counter fraud strategy

Intelligence gained from networking with other authorities via the North West Fraud Group, the Mersey Region Fraud Group and the Greater Manchester Fraud Investigators’ Group

Outcomes from previous Internal Audit reviews and investigations

Outcomes from the work of the Counter Fraud Unit

Feedback from managers on areas where they have identified control weaknesses that may increase the risk of fraud

3.2 The “top ten” key risks arising from this assessment are set out below. The scoring

methodology used identifies those areas where there would be the greatest impact on the council’s finances and / or reputation, were fraud to occur – this is used to direct the resources available for counter fraud work.

Council Tax Support / Single Person Discount – claiming benefits or discounts without entitlement; failing to notify of changes in circumstances

Client finances – abuse of funds by those manging clients’ monies where they lack capacity

Corruption – abuse of powers by officers or members for private gain

Direct payments – abuse of funds given directly to service users to purchase their own care

Procurement fraud – pre- and post-contract, including price fixing, claiming payments for goods / services not provided

Cyber fraud – the use of technology specifically to take advantage of system weaknesses for gain, including ransomware / malware attacks and hacking

Election fraud – including voter registration fraud and personation at polling stations

Business rates – claiming discounts and exemptions to which businesses are not entitled

Cash handling – theft of cash held by the council

External scams and frauds – including mandate fraud, phishing, executive impersonation

3.3 Cyber risk has recently been included in the Council’s Strategic Risk Register: this

includes cyber fraud within its scope. During 2017-18, further work will be carried out to review directorate and project risk registers to ensure that they have assessed relevant fraud risks.

3.4 The programme of work to address these risks is now largely delivered via the Corporate Counter Fraud Unit, with support from the Internal Audit team. The Unit is delivered as part of the joint working arrangements in place between Warrington and Salford City Council for audit and counter fraud services. It consists of four staff –

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two in Warrington and two in Salford – all of whom are experienced and qualified investigators. The Unit is led by the Audit Manager at Warrington.

3.5 The remit of the Unit is to undertake both proactive and reactive counter fraud work, and address all fraud risks facing the council, both internally and externally. The objectives for the Unit are:

to pick up work from the Benefits Fraud team that has not transferred to the Department of Work & Pensions (DWP), investigating potential Council Tax Support and Single Person Discount fraud and error;

to undertake proactive work in key fraud risk areas; and

to investigate areas for sharing data and working jointly with partners, including registered housing providers, DWP, Police and other councils.

3.6 The counter fraud work programme for Warrington for 2017-18 is set out in Appendix

A. This covers both the key tasks for the Counter Fraud Unit and the Internal Audit reviews that include elements of counter fraud assurance work.

4. Reporting and awareness raising

4.1 Internal Audit report to the Audit and Corporate Governance Committee twice a year on corporate fraud issues. Any ongoing investigations or major incidents are also included within the regular Internal Audit progress reports taken to the Directorate Management Teams, Senior Management Team and the Audit and Corporate Governance Committee.

4.2 The Council subscribes to the National Anti-Fraud Network (NAFN), which promotes

the sharing of information between Authorities and publishes regular bulletins on fraud cases and attempted scams. During 2016-17, 39 bulletins were issued and distributed to relevant staff and appropriate measures were taken to address the identified risks. We also receive and circulate intelligence from other organisations such as the National Fraud Intelligence Bureau and from neighbouring authorities. Schools are often targeted by fraudsters and extensive use is made of the “My School Services” site to push out alerts in a timely manner to this audience.

4.3 The most common threats of this nature faced by the Council are attempts to amend

bank details (mandate fraud) and impersonation of officials (e.g. bogus bailiffs, false tax refund notifications from HMRC, chief executive impersonation). Online extortion threats (including ransomware) have also become more common in the past 12 months. We are not aware of any cases where the Council fell victim to any of these frauds or scams in 2016-17.

4.4 As part of International Fraud Awareness Week in November 2016, a series of articles was published on the council’s intranet, covering areas such as whistleblowing, key fraud risks, identifying fraud behaviours and the National Fraud Initiative.

4.5 Fraud and whistleblowing e-learning packages have been created and are currently

being developed on the Council’s new e-learning platform. Training on bribery awareness has been developed as part of the procurement e-learning module. The programme of training planned for 2017-18 includes sessions on money laundering reporting and compliance with the Regulation of Investigatory Powers Act. We will continue to work closely with the Cheshire and Merseyside authorities to co-ordinate external publicity and awareness-raising across the region.

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5. Work carried out in 2016-17

5.1 This section details both the proactive and reactive work carried out across the council in relation to fraud, bribery and corruption during 2016-17. There were a number of new initiatives during the year to widen the scope of proactive work, which are detailed below. In all the cases, the service involved has contributed fully and positive outcomes have been achieved. Council Tax / Single Person Discount

5.2 This represents the largest area of work for the Counter Fraud Unit. In 2016-17, 132 referrals were investigated by the staff based in Warrington, resulting in the following outcomes:

Number of cases

Value

Council Tax Support

Overpayments recovered 59 £62,547

Financial penalties issued 37 £11,644

Notional savings made 36 £26,989

Council Tax Discounts and Exemptions (including Single Person Discount)

Overpayments recovered 22 £14,373

Civil penalties issued 11 £770

Notional savings made 11 £3,672

Legal costs

16

£8,365

TOTAL

£128,360

(Note: “Notional savings” represent an estimated amount of benefit / discount that a claimant could have continued to receive had the claim not been investigated. The amount is calculated using a nationally agreed formula.)

5.3 The Counter Fraud Unit was only fully staffed from November 2016 and there was still a backlog of cases at the end of 2016-17. The additional resource means that a greater number of cases will be investigated in 2017-18 and amounts recovered are expected to increase significantly. Full year costs for the Unit are £77,000, therefore there is a significant rate of return from the outcomes delivered on Council Tax / Single Person Discount alone. Right to Work

5.4 One of the cases investigated during the year has been referred to the DWP’s Central Criminal and Investigative Unit as it involved suspicions that a bogus company had been set up in order to provide false employment details to allow non-UK nationals access to benefits. This is currently being investigated by the DWP and the Police and has led to a potentially significant alleged organised fraud ring being uncovered.

National Fraud Initiative

5.5 The full NFI data matching exercise is carried out every two years. This covers: Council Tax benefits and Single Person Discounts; payroll; creditor payments;

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insurances; blue badges; personal budgets; parking permits; and licences. The matches for the full 2016-17 exercise were released in January 2017 and are currently being investigated. Outcomes from the exercise will be summarised in the next update report in November 2017. Insurances

5.6 The Council has been working with a firm of solicitors in relation to a suspected organised ring putting in bogus insurance claims. All of the claims to date have been successfully defended, and the case has provided useful intelligence to improve screening of future claims. The initial claim reserves on these cases totalled £136,000 – this represents a conservative estimate of the potential savings arising from this exercise.

Business Rates

5.7 The Counter Fraud Unit has worked with the Business Rates section to investigate suspected cases of Business Rates avoidance. This is a new area of proactive work: four referrals are currently being investigated to identify whether there is fraud, or an inappropriate use of existing regulations to obtain reliefs or exemptions.

5.8 The Business Rates section also works with our GM partners to challenge charitable

organisations who have sought relief on larger premises where the actual occupation and use by the charity is open to question. The section has also worked with Cheshire Police and the local Organised Crime Group supporting money laundering and HMRC fraud investigations.

5.9 The Council is currently working with other local authorities and the police on a

national investigation into a suspected organised fraud around applications for small business rate relief. The fraud affects the ratepayer rather than the local authority, but the Council has been able to provide information to assist the investigation.

5.10 The Counter Fraud staff at Salford are currently working with the CIPFA Counter

Fraud Centre and the Ordnance Survey on a data matching pilot to identify potential cases where businesses have not registered with the council to pay rates. If the pilot is successful, consideration will be given to using the service in Warrington.

Blue Badges

5.11 A blue badge amnesty was carried out in July 2016, with posters in Council buildings and supporting media publicity, and active enforcement commenced in August. Since then, there have been the following outcomes:

Two successful prosecutions for blue badge abuse (using someone else’s badge)

Eleven cases of a relative using a badge without the rightful owner being present – badges returned to owner with warning letter

Ten cases where a holder has been using an expired badge – warning letter issued

Five other cases where misuse or abuse could not be proven, but warning letters were issued to holders

Social Care

5.12 The Counter Fraud Unit has investigated two cases within social care: one in relation to alleged misuse of direct payments, the other in relation to non-payment of the client’s contribution towards the cost of residential care. Both cases are currently still

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under investigation. The Unit will be working closely with social care staff and the Income Recovery Team in 2017-18 to improve referral processes where there are concerns over potential fraud or non-payment of bills. Local Welfare Support

5.13 The Revenues and Benefits Team continue to utilise the Benefit visiting officers as a form of fraud prevention and deterrent. From 546 visits undertaken in 2016-17 the team saved £31,000 in items claimed but not required (primarily white goods). Related Party Transactions

5.14 The declarations of members’ and officers’ interests are reviewed each year, to support the production of the Council’s statement of accounts. This covers submission of declarations and testing of a sample of payments made to related parties to ensure that there are no conflicts of interest in the procurement and ordering processes. The work for the 2016-17 accounts identified no major issues with the declarations made.

5.15 The National Fraud Initiative exercise has recently provided matches between the council’s payroll and creditors systems, and Companies House data: these will be reviewed in 2017-18 to ensure that they reflect the entries in the registers of interests. IDEA Testing

5.16 Internal Audit’s data analysis software (IDEA) was used to analyse the Council’s Accounts Payable data in order to identify any potential control weaknesses, error or fraud. This work did not identify any significant fraud risks, but identified ways in which the data analysis could be used more extensively in future to identify potential issues with suppliers, which could be indicators of provider or procurement fraud.

Other work

5.17 An assessment of the controls in place to manage the risk of fraud is also made within internal audit reviews, where relevant. In 2016-17, this included:

Discretionary Housing Payments: this provides financial assistance to claimants receiving housing benefit and/or council tax benefit when additional help with housing costs is required. It is an area identified nationally as presenting a risk of fraud from bogus claims. The review provided a “Substantial” opinion on the effectiveness of the controls in place, with a small number of recommendations in relation to supporting documentation for claims.

Travel and Subsistence: the review included an assessment of controls in place to ensure that managers were only authorising valid claims. A number of recommendations were made to improve the level of information provided by claimants to enable managers to check claims against work programmes.

Grant audits: a number of grants were certified during the year, providing assurance that the funds were being spent on eligible expenditure. This included the following: Complex Dependency programme; Local Enterprise Partnership Growth Hub; Centre Park Link; M62 Junction 8; Warrington West Station; and Teaching Schools grant.

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Cash and banking: this review was still in progress at the year end – findings will be presented in the next update report in November.

Significant Investigations

5.18 There were four investigations in 2016-17 that were carried out in accordance with the procedure set out in the Council’s Fraud Response Plan:

Internal Audit supported an internal investigation into disclosure of confidential

information by an employee to a third party. No fraud was identified, but the employee received a formal written warning.

An investigation was carried out into allegations that an employee had claimed mileage for journeys that had not been carried out. The findings of the investigation have been passed to management for a decision on any further action to be taken.

An investigation is still in progress in relation to an allegation of missing monies

from one of the Council’s imprest accounts.

A number of low value payments made by phone were received by the Council, but could not be traced to the provision of any service. These were investigated and were found to be part of a “checker” card fraud, where fraudsters use councils’ payment systems to make low value payments in order to check whether stolen debit / credit card numbers are still active. The Council did not suffer any financial loss, and details of the incident were passed to Action Fraud (the police financial fraud reporting system).

5.19 Investigation of these cases used 36 days of Internal Audit resource, which was absorbed within the Contingency element of the Annual Audit Plan. The 2016-17 Internal Audit Plan also included an allocation of 60 days to cover proactive counter fraud work, which was used to support the delivery of the outcomes detailed in this section.

5.20 An investigation that had been ongoing since 2014-15 and had been referred to the police was closed in 2016-7, as the Crown Prosecution Service concluded that there was insufficient evidence to take the case to trial.

5.21 In 2016-17, Internal Audit received seven referrals via the whistleblowing reporting line: these were investigated according to the level of evidence provided in each referral.

6. Future developments: the local government counter fraud and corruption strategy and emerging risks

6.1 “Fighting Fraud and Corruption Locally” is the counter fraud and corruption strategy for local government. By using this strategy local authorities will:

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develop and maintain a culture in which fraud and corruption are understood to be unacceptable;

understand their fraud risk and prevent fraud more effectively;

use technology to improve their response;

share information and resources more effectively to prevent and detect fraud loss;

bring fraudsters to account more quickly and efficiently; and

improve the recovery of losses.

6.2 The strategy contains a checklist for each council to complete to demonstrate that it acknowledges its fraud risks, has plans in place to take action to minimise the risk, and reports outcomes to the corporate management team and those charged with governance. An initial assessment against the checklist was carried out in 2015-16 and included in last year’s annual report: this has been reviewed in 2016-17, and updated version is attached as Appendix B to this report. Responses are “RAG” rated according to the extent to which each question has been fully addressed by the Council’s current counter fraud arrangements. The ratings for 2015-16 have also been included to indicate where progress has been made in the past year. The remaining issues will be addressed as the work of the Counter Fraud Unit progresses in 2016-17.

6.3 The counter fraud planning process also includes an element of “horizon scanning”,

using intelligence to identify new or emerging risk areas and to ensure an appropriate response. This may include alerting relevant council services, carrying out further work to identify the risk in Warrington, or responding to specific incidents. The current list of emerging risks includes:

No recourse to public funds – potential abuse of the systems for providing support to those who are not entitled to claim welfare benefits or access other public services. This is now becoming an increasing issue in areas outside London.

School applications – parents providing an incorrect address in order to get a place for their child at the school of their choice. The risk increases as rising house prices make it more difficult for parents to move to be near to the school.

Use of fake documents (for example in job applications, license applications). The Immigration Act 2016 increased the penalties for organisations employing illegal workers without having carried out adequate checks on their status.

6.4 The Council will continue to develop its joint working arrangements with Salford City Council to ensure that there is an effective exchange of intelligence and best practice. This will improve the identification of fraud risks and the development of effective preventive and detective measures.

7. Conclusion

7.1 The wide range of the activities and incidents covered in this report highlights the extent to which fraud and error exist as risks to the achievement of the Council’s objectives and the degree to which these risks can change over time. There are programmes of work in place across the Council to identify and investigate fraud risks and there is effective communication between the services involved. The establishment of the Corporate Counter Fraud Unit has ensured that adequate resource is given to this work, and has increased the council’s capacity to carry out proactive as well as reactive counter fraud activity.

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7.2 Our conclusion is that the Council had effective measures in place during 2016-17 to enable the prevention and detection of inaccuracies and fraud. Work will continue in 2017-18 to ensure that the Council has all the necessary policies and procedures in place to create and promote an environment where fraud, bribery and corruption are not tolerated.

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APPENDIX A

Counter Fraud, Bribery and Corruption Plan, 2017-18

Counter Fraud Unit workplan

Investigate potential Council Tax benefits and Single Person Discount fraud and error. This will include investigation of matches arising from the 2016-17 NFI exercise.

Undertake proactive work in other fraud risk areas, including:

blue badge abuse and misuse;

procurement fraud;

business rates fraud;

social care fraud (including misuse of direct payments).

Investigate cases referred to the Unit via the whistleblowing reporting line or from management via the Fraud Response Plan.

Co-ordinate the investigation of matches arising from the National Fraud Initiative exercises and to follow up any matches that provide evidence of potential fraud. Feed back to the relevant services on the outcomes of any investigations and to provide advice where relevant to improve system controls or data quality.

Investigate areas for sharing data and working jointly with partners, including registered housing providers, DWP, Police and other councils. Review and develop information sharing agreements to ensure compliance with the Data Protection Act. Continue to develop referral processes so that all suspected cases of fraud are referred to the Unit.

Generate reports to senior managers and the Audit and Corporate Governance Committee on anti-fraud, bribery and corruption activity within the Council during the year.

Review and develop policies and procedures relating to fraud, bribery and corruption. In 2017-18 this will include development of a new corporate sanctions policy and reviews of the anti-money laundering policy and the schools’ whistleblowing procedure.

Increase awareness across the Council of fraud risks and effective mitigation strategies – via publicity, face to face training and social media.

Work with the Lancashire and Greater Manchester Fraud Investigators’ Group, the North West Fraud Group and the Mersey Region Fraud Group, sharing intelligence and best practice and delivering training.

Contribute to the CIPFA / Local Government Association project on developing Counter Fraud Standards for local government.

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Internal Audit reviews including counter fraud work Plan days

Payments to staff To review the Council’s procedures for making overtime payments, including controls to ensure that payments are only made for hours worked.

20

Procurement To review the Council’s procurement and contractor selection systems, ensuring that Contract Procedure Rules are adhered to and there are safeguards against bribery, corruption and favouritism in the process.

15

Client Finances To review the processes for assessing and monitoring clients’ contributions to the cost of their care.

15

Direct Payments To review the systems for monitoring and auditing payments made to service users to allow them to purchase their own care.

10

Total Internal Audit Days

60

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Responses to Fighting Fraud and Corruption Locally: Recommendations for local authorities

APPENDIX B

Ref Area RAG Rating 15-16

RAG Rating 16-17

Response

1 The local authority has made a proper assessment of its fraud and corruption risks, has an action plan to deal with them and regularly reports to its senior Board and its members.

G G Internal Audit carry out an annual evaluation of the council’s fraud risks, both internal and external. The key risks arising from this exercise are reported to senior managers and the A&CG Committee.

2 The local authority has undertaken an assessment against the risks in Protecting the Public Purse: Fighting Fraud Against Local Government (2014) and has also undertaken horizon scanning of future potential fraud and corruption risks.

G G

This assessment is reported to A&CG Committee as part of the annual counter fraud planning process. Intelligence is obtained from a wide range of sources to identify emerging risks. These include: Mersey and North West Fraud Groups, CIPFA Counter Fraud Centre, National Anti- Fraud Network, Action Fraud, National Fraud Intelligence Bureau.

3 There is an annual report to the audit committee, or equivalent detailed assessment, to compare against Fighting Fraud and Corruption Locally (FFCL) 2016 and this checklist.

G G This checklist is taken to A&CG Committee each June as part of the annual fraud report.

4 There is a counter fraud and corruption strategy applying to all aspects of the local authority’s business which has been communicated throughout the local authority and acknowledged by those charged with governance.

A A

The Anti-Fraud, Bribery and Corruption Policy and Statement is approved by A&CG each year; however, this is not strictly speaking a “strategy” as per the definition in the CIPFA Code of Practice. A review will be undertaken in 2017-18 to assess the value of creating a new strategy in this format. This is an action carried over from 2016-17.

5 The local authority has arrangements in place that are designed to promote and ensure probity and propriety in the conduct of its business.

G G

There are Officers’ and Members’ Codes of Conduct; Registers of Interests and Gifts and Hospitality; anti-bribery clauses in contracts; whistleblowing policies and procedures. Members and officers are regularly reminded of their responsibilities in these areas. The most recent NFI exercise has included matches of payroll and creditors to Companies House data – these will be investigated further as part of the 2017-18 workplan.

6 The risks of fraud and corruption are specifically considered in the local authority’s overall risk management process.

A A

Fraud and corruption risks may be identified as part of the RM process, but they are not classed as a separate category of risk, which may reduce the likelihood that they are considered in all cases. The fraud risk assessment will be taken to the Corporate Risk and Business Continuity Group in 2017-

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18 in order to raise the profile of fraud risks.


Response

7 Counter fraud staff are consulted to fraud-proof new policies, strategies and initiatives across departments and this is reported upon to committee.

A A

This happens, but on an ad hoc basis, at the request of relevant services. There is not the resource to do this for all changes in these areas. More extensive e-learning and publicity should help raise awareness of what managers need to do themselves.

8 Successful cases of proven fraud/corruption are routinely publicised to raise awareness.

A G Any successful prosecutions are publicised in the local media. In 2016-17, this included both Council Tax and Blue Badge prosecutions.

9 The local authority has put in place arrangements to prevent and detect fraud and corruption and a mechanism for ensuring that this is effective and is reported to committee.

G G The Corporate Counter Fraud Unit provides the resource for carrying out proactive counter fraud work. The work of the Unit is reported to A&CG Committee twice a year, as part of the Internal Audit Fraud report.

10 The local authority has put in place arrangements for monitoring compliance with standards of conduct across the local authority covering: – codes of conduct including behaviour for counter fraud, anti-

bribery and corruption – register of interests – register of gifts and hospitality.

G G

All of these are in place and are reviewed regularly and presented to A&CG Committee for approval.

11 The local authority undertakes recruitment vetting of staff prior to employment by risk assessing posts and undertaking the checks recommended in FFCL 2016 to prevent potentially dishonest employees from being appointed.

G G

Recruitment vetting is carried out as a standard part of the recruitment process. Posts requiring further pre-employment checks are identified accordingly on SAP.

12 Members and staff are aware of the need to make appropriate disclosures of gifts, hospitality and business. This is checked by auditors and reported to committee.

G G

Members and officers are regularly reminded of the need to complete the gifts and hospitality register where required. This area is reviewed periodically by Internal Audit as part of the Strategic Audit Plan: outcomes of reviews will be reported to A&CG Committee.

13 There is a programme of work to ensure a strong counter fraud culture across all departments and delivery agents led by counter fraud experts.

A A

In 2015-16 there was a programme of fraud awareness sessions that was offered to all services. The focus in 2016-17 has been on getting the Counter Fraud Unit up and running, therefore resource has not been available to provide face to face training. A revised offer will be made to

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services in 2017-18: this will be complemented by the new fraud awareness e-learning module. Consideration to be given as to how this message can also be communicated to suppliers and partners.


Response

14 There is an independent whistle-blowing policy which is monitored for take-up and can show that suspicions have been acted upon without internal pressure.

G G The policy is maintained by Internal Audit and referrals are investigated in line with the Audit Charter (which includes a commitment to independence and impartiality)

15 Contractors and third parties sign up to the whistle-blowing policy and there is evidence of this. There should be no discrimination against whistle-blowers.

A A

The policy includes reference to the fact that it applies to contractors / third parties, but there is no requirement for them to sign up to the policy. We consider that the current safeguards are adequate.

16 Fraud resources are assessed proportionately to the risk the local authority faces and are adequately resourced.

G G

The creation of the new Corporate Counter Fraud Unit in April 2016 gives the authority a dedicated resource for the first time at a corporate level. The level of resource will be reviewed during the year to assess its adequacy.

17 There is an annual fraud plan which is agreed by committee and reflects resources mapped to risks and arrangements for reporting outcomes. This plan covers all areas of the local authority’s business and includes activities undertaken by contractors and third parties or voluntary sector activities.

A G

A fraud plan is agreed annually by A&CG Committee. The plan is based on a fraud risk assessment that is regularly updated and includes both internal and external risks.

18 Statistics are kept and reported by the fraud team which cover all areas of activity and outcomes. A G

The new Incase fraud recording system implemented in 2016-17 has the facility to report on all activities and outcomes. The system is being refined to ensure that it captures relevant data to identify outcomes.

19 Fraud officers have unfettered access to premises and documents for the purposes of counter fraud investigation.

G G Access to internal documents covered by Internal Audit terms of reference.

20 There is a programme to publicise fraud and corruption cases internally and externally which is positive and endorsed by the council’s communication team.

A G A fraud Communications plan is now in place for the year that publicises positive outcomes and communicates initiatives to the public (e.g. the blue badge amnesty).

21 All allegations of fraud and corruption are risk assessed. G G

The corporate Fraud Response Plan sets out the process for risk assessing allegations in order to decide how to proceed with any investigation.

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22 The fraud and corruption response plan covers all areas of counter fraud work: – prevention – detection – investigation – sanctions and redress

A G

The work of the Counter Fraud Unit now covers all of these areas. A Corporate Sanctions Policy is currently being drafted that will formalise the approach to sanctions and redress. This will cover each major area of fraud risk and set out the relevant legislation, referral mechanisms, appropriate types of sanction and appeal procedures.


Response

23 The fraud response plan is linked to the audit plan and is communicated to senior management and members. G G

The two plans are reported to management and A&CG Committee at the same time and appropriately linked: for example, audit reviews that include fraud risks in their scope are referenced in the fraud plan.

24 Asset recovery and civil recovery is considered in all cases. A A

This is considered, where relevant, but a proper corporate sanctions policy needs to be created to formalise these as actions to be considered in all cases. This is currently being drafted.

25 There is a zero tolerance approach to fraud and corruption which is always reported to committee. G G

This is formalised in the Anti-Fraud, Bribery and Corruption Policy and Statement, which is reviewed and approved annually by Audit and Corporate Governance Committee.

26 There is a programme of proactive counter fraud work which covers risks identified in assessment. G G

The work of the Counter Fraud Unit is derived from the fraud risk assessment.

27 The fraud team works jointly with other enforcement agencies and encourages a corporate approach and co-location of enforcement activity. A G

The new Counter Fraud Unit is currently exploring ways of improving working relationships and the flow of intelligence with other enforcement functions (e.g. Parking Enforcement, Public Protection, Police), but this has not progressed as far as considering co-location. This is not considered a short-term objective.

28 The local authority shares data across its own departments and between other enforcement agencies.

A A

There is some data sharing between departments, and the recent Counter Fraud Fund project looked to set up data sharing agreements with the other Cheshire authorities in respect of procurement and insurances data. Data sharing takes place between the Council and Helena Housing in respect of Right to Buy applications. There is still significant scope to extend this further, but this depends heavily on the capacity of other bodies to develop these arrangements.

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29 Prevention measures and projects are undertaken using data analytics where possible.

R A

Data analytics are not currently used to scope and assess all preventative work, as there is not currently the data available to do this. We consider that this is an activity to be developed in the medium term as the Counter Fraud Unit gains more experience and insight into non-benefit fraud areas, and shares data with partners and neighbouring authorities. A pilot project using data analytics for business rates will be carried out in Salford in 2017-18 and lessons learnt from this will be applied in Warrington.


Response

30 The local authority actively takes part in the National Fraud Initiative (NFI) and promptly takes action arising from it.

G G

We actively take part in each NFI exercise. Resource from the new Counter Fraud Unit has been allocated to following up matches from the 2016 exercise and ensuring that they are being investigated effectively.

31 There are professionally trained and accredited staff for counter fraud work. If auditors undertake counter fraud work they too must be trained in this area.

G G Staff in the Counter Fraud Unit have the appropriate training and skills, in terms of investigation, surveillance, interviewing etc.

32 The counter fraud team has adequate knowledge in all areas of the local authority or is trained in these areas.

A A

The team has well-developed skills in certain areas, particularly in terms of benefits related fraud and has received training in other areas in 16-17 (e.g. Direct Payments, Procurement Fraud). Other areas are currently being developed through a programme of formal training and on the job learning. There are still areas where formal training has not yet been provided – these will be assessed as part of the PR&D process for staff.

33 The counter fraud team has access (through partnership/other local authorities/or funds to buy in) to specialist staff for: – surveillance – computer forensics – asset recovery and financial investigations.

G G

There are staff within the Council who are trained / qualified to do surveillance and asset recovery / financial investigations. There is no specialist resource for computer forensics, but the likelihood of needing this service is low: a decision would be made as part of any relevant investigation as to whether this resource should be procured externally.

34 Weaknesses revealed by instances of proven fraud and corruption are scrutinised carefully and fed back to departments to fraud proof systems.

G G If relevant, a controls report is issued after an investigation that identifies the control weaknesses that led to the fraud and the measures that should be taken to reduce the risk.

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WARRINGTON BOROUGH COUNCIL AUDIT AND CORPORATE GOVERNANCE COMMITTEE 22 JUNE 2017 Report of the: Director of Corporate Services Report Author: Deputy Section 151 Officer, Claire Harris Contact Details: Email Address:


Ward Members:

All

TITLE OF REPORT: PROPOSED AMENDMENT TO THE FINANCIAL PROCEDURE RULES 1. PURPOSE OF THE REPORT 1.1 For the Audit and Corporate Governance Committee to approve the below proposed

amendments to the Financial Procedure Rules.

2. CONFIDENTIAL OR EXEMPT 2.1 This report is not confidential or exempt. 3. PROPOSED AMENDMENT 3.1 The recent management restructure has reduced the number of senior posts within

the Corporate Services directorate. 3.2 As a result of this change, Head of Accountancy post has been deleted to be replaced

with Head of Finance which has a wider remit and is also the Deputy Section 151 Officer. This post reports directly into the Director of Corporate Services.

3.3 In terms of the Financial Procedure Rules a number of posts within the scheme of

delegation are referred to within the catchall of ‘Assistant Director.’ This group is currently defined within the Financial Procedures as Operational Directors, Managing Director Warrington & Co and Director of Public Health.

3.4 For clarity, it is proposed that the role of Deputy Section 151 Officer also be included

within this grouping. In the absence of the Section 151 Officer, this role assumes the full responsibilities of the role of Section 151 Officer.

3.5 The purpose of this note is to ensure that there is a formal recognition, for audit

purposes, that the level of authority held by the Deputy Section 151 Officer is equivalent to that of ‘Assistant Director’ as defined within the rules.

3.6 This proposal does not undermine any existing separation of duties and is fully

endorsed by the Director of Corporate Services.

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5. RISK ASSESSMENT 5.1 The Council is required to have an up to date set of Financial Procedure Rules. 6. EQUALITY AND DIVERSITY/EQUALITY IMPACT ASSESSMENT


report. 7. CONSULTATION 7.1 N/A 8. REASONS FOR RECOMMENDATIONS 8.1 To ensure that the Financial Procedure Rules are up to date. 9. RECOMMENDATION 9.1 That the Committee approves the proposed amendment to the Financial Procedure

Rules as outlined in paragraph 3.5.

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Audit and Corporate Governance

Committee Progress and Update

Report for Warrington Borough

CouncilJune 2017

Robin Baker

Director

T 0161 214 6399

E [email protected]

Gareth Winstanley

Manager

T 0161 234 6343

E [email protected]

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Audit and Governance Committee progress report and update – Warrington Borough Council

2© 2017 Grant Thornton UK LLP. All rights reserved.

Introduction

The paper also includes:

• a summary of emerging national issues and developments that may be relevant to

you, and

• includes a number of challenge questions in respect of these emerging issues which

the Committee may wish to consider (these are a tool to use, if helpful, rather than

formal questions requiring responses for audit purposes)

Members of the Audit and Corporate Governance 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. Here you can download copies of our publications.

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 Robin Baker or Gareth Winstanley.

This paper provides the Audit and Corporate Governance

Committee with a report on progress in delivering our

responsibilities as your external auditors.

Gareth WinstanleyEngagement ManagerT 0161 234 6343

M 07880 456 211

E [email protected]

Robin BakerEngagement LeadT 0161 214 6399

M 07880 456 159

E [email protected]

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http://www.grant-thornton.co.uk/



Progress at June 2017

2016/17 work

Expected

Date of

Completion Comments

Fee Letter We issued the 'Planned fee letter for 2016/17' in April 2016. April 2016

Accounts Audit PlanWe 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 2016-17 financial statements.

We also inform you of any subsequent changes to our audit approach.

March 2017 This was presented to the Audit and Corporate Governance Committee in March 2017.

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

January - March

2017

We undertook our interim audit work in two phases this year during January and March

and included our findings in our Audit Plan.

Progress against planOn track

Opinion and VfM conclusion

On track

Outputs delivered

On track

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Progress at June 2017

2016/17 work

Expected

Date of

Completion Comments

Final accounts auditIncluding:

• Audit of the 2016-17 financial statements

• Proposed opinion on the Council's accounts

Fieldwork June –

July 2017

Our final accounts audit work is currently on-going having received the draft accounts

on the 31st May. We will report our findings within our Audit Findings Report at the July

meeting.

Value for Money (VfM) conclusionThe scope of our work has changed and is set out in the final guidance issued by the National Audit Office in November 2015. The Code requires auditors to satisfy themselves that; "the Council has made proper arrangements for securing economy, efficiency and effectiveness in its use of resources".

The guidance confirmed the overall criterion as; "in all significant respects, the audited body had proper arrangements to ensure it took properly informed decisions and deployed resources to achieve planned and sustainable outcomes for taxpayers and local people".

The three sub criteria for assessment to be able to give a conclusion overall are:

• Informed decision making

• Sustainable resource deployment

• Working with partners and other third parties

February – June

2017

The results of our VfM audit work and the key messages arising were reported in our Audit Findings.

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Technical Matters

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Telling the story – Changes in 2016/17 CIPFA Code

CIPFA has been working on the 'Telling the Story' project, which aims to streamline the

financial statements and improve accessibility to the user. This has resulted in changes to

CIPFA's 2016/17 Code of Practice on Local Authority Accounting in the United

Kingdom ('the Code').

The main changes affect the presentation of the Comprehensive Income and Expenditure

Statement ('CIES'), the Movement in Reserves Statement ('MIRS') and segmental

reporting disclosures. A new Expenditure and Funding Analysis has been introduced.

The key changes are:

• the cost of services in the CIES is to be reported on basis of the local authority's

organisational structure rather than the Service Reporting Code of Practice

(SERCOP) headings

• an 'Expenditure & Funding Analysis' note to the financial statements provides a

reconciliation between the way local authorities are funded and the accounting

measures of financial performance in the CIES

• the changes will remove some of the complexities of the current segmental note

• other changes to streamline the current MIRS providing options to report Total

Comprehensive Income and Expenditure (previously shown as Surplus and Deficit

on the Provision of Services and Other Comprehensive Income and Expenditure

lines) and removal of earmarked reserves columns.

Other amendments have been made to the Code:

• changes to reporting by pension funds in relation to the format and fair value

disclosure requirements to reflect changes to the Pensions SORP

• other amendments and clarifications to reflect changes in the accounting standards.

Delivering Good Governance

In April, CIPFA and SOLACE published 'Delivering Good Governance in Local

Government: Framework (2016)' and this applies to annual governance statements

prepared for the 2016/17 financial year. The key focus of the framework is on

sustainability – economic, social and environmental – and the need to focus on the

longer term and the impact actions may have on future generations.

Local authorities should be:

• reviewing existing governance arrangements against the principles set out in

the Framework

• developing and maintaining an up-to-date local code of governance, including

arrangements for ensuring on-going effectiveness

• reporting publicly on compliance with their own code on an annual basis and

on how they have monitored the effectiveness of their governance

arrangements in the year and on planned changes.

The framework applies to all parts of local government and its partnerships and

should be applied using the spirit and ethos of the Framework rather than just rules

and procedures

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Grant Thornton

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209



The Income SpectrumHelping local authorities to achieve revenue and

strategic objectives to create vibrant economies

Local government is under immense financial pressure to

do more with less. The 2015/16 spending review is

forecast to result in a £13 billion funding hole by 2020/21

that requires councils to make savings of up to 29 per cent.

Despite this challenge, most councils continue to manage

their finances proficiently and have become lean and many

local authority chief financial officers (CFOs) are confident

they can continue to balance the books.

Income generation is increasingly an essential part of the

solution to providing sustainable local services, alongside

managing demand reduction and cost efficiency. Our

report gives local authorities the tools needed to maximise

their ability to do so.

Our latest report shares insights on this evolution process

and how and why local authorities are reviewing and

developing their approach to income generation.

The report draws on:

• learning from public and private sector stakeholders

• Grant Thornton’s own experience as an advisor to

local government

• analysis from the Grant Thornton/CIPFA CFO

Insights tool

• insight from roundtables we convened on the topic in

Leeds, Bristol and Exeter.

The key messages arising from the report are:

• councils are increasingly using income generation to diversify

their funding base and are commercialising in a variety of

ways. This ranges from fees and charges, asset management

and company spin-offs, through to treasury investments

• the ideal scenario is investing to earn with a financial and

social return. Councils are striving to generate income in a way

which achieves multiple strategic outcomes for the same

spend; examining options to balance budgets while

simultaneously boosting growth, supporting vulnerable

communities and protecting the environment.

• stronger commercialisation offers real potential for councils to

meet revenue and strategic challenges for 2020 onwards.

While there are examples of good practice and innovation, this

opportunity is not being fully exploited across the sector due

to an absence of a holistic and integrated approach to

corporate strategy development.

Questions to help ensure

success

• Have all your options to

maximise use of revenue

and assets been explored?

• Do you understand what

your strengths are and what

you are less good at

compared to the market

place?

• How does each department

and service compare on net

income and cost recovery

against neighbours and

peers?

• Is it clear how generating

income delivers both a

financial and social return

that is aligned to your local

political priorities?

• Are governance processes

robust enough to scrutinise

business case proposals for

new income generation?

Grant Thornton report

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‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms

provide assurance, tax and advisory services to their clients and/or refers to one or

more member firms, as the context requires.

Grant Thornton UK LLP is a member firm of Grant Thornton International Ltd

(GTIL).GTIL and the member firms are not a worldwide partnership. GTIL and each

member firm is a separate legal entity. Services are delivered by the member firms.

GTIL does not provide services to clients. GTIL and its member firms are not agents

of, and do not obligate, one another and are not liable for one another’s acts or

omissions.

grantthornton.co.uk

© 2017 Grant Thornton UK LLP. All rights reserved | Draft

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TRAINING üINFORMAL MEETING WITH

IA/XAü

Produce annual report of the

Audit and Corporate

Governance Committee (to

Full Council)

Chair

ü

Review of effectiveness of the

Audit and Corporate

Governance Committee –

complete self assessment

Committee

Working Partyü


Governance Committee work

programme

Democratic

Services ü ü ü ü ü ü ü



training requirements

Legal & Audit

ü üwithin self

assessment

Ombudsman Complaints

2017/18Legal

ü

Election Fees and Charges Legal

Review of the Audit and

Corporate Governance

Committee’s terms of

reference

Legal

üwithin self

assessment

Review (draft) Annual

Governance Statement (AGS)

Governance Group

&CIA üdraft ü

Audit & Corporate Governance Committee Work

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Review reports from

Governance Group and

implementation of AGS action

plan items

Governance Group

&CIAü ü

Review of strategic risk

registerCIA

ü ü

Review annual Risk

Management report CIA

ü

Review of Code of Corporate

GovernanceCIA & Legal

ü

Review of final statement of

accountsFinance

ü

Management letter of

representationFinance

ü

Write Offs of Irrecoverable

DebtFinance

ü ü

Treasury management

strategyFinance

ü

Treasury management

quarterly monitoring report

Finance

ü ü half

year reportü

Treasury management

practices statement

Financeü

Annual Treasury Outturn

Report

Financeü

Approval of National Non

Domestic Rates Form 1

Financeü

Approve Council Tax base Finance üApprove Accounting Policies Finance

ü

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Annual report of the Chief

Internal Auditor on the system

of internal control.

CIA

ü

Review the effectiveness of

Internal Audit / compliance

with the Code of Practice

Committee

ü

Review of External Audit Committee

Review annual internal audit

plan

CIAü draft ü final

Internal audit monitoring

reports including monitoring

of implementation of

recommendations

CIA

ü ü ü ü

Review Anti-fraud bribery and

corruption strategy

CIA & Solicitorü

Anti-Fraud, Bribery and

Corruption 6 monthly report

CIAü ü

Regulation of Investigatory

Powers report & grant of

authorisations

Legalü through

training

Agree External Audit plan External Audit üGrant Thornton - agreement

of Fees

External Auditü

External Audit Update -

including responses to

Challenge Questions

External Audit &

Finance ü update

only ü ü ü

Annual Findings Report External Audit üAnnual Audit Letter External Audit ü

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Certification of claims and

returns

External Auditü

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To: Audit & Corporate Governance Committee …...To: Audit & Corporate Governance Committee...

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