There were no apologies.

There were no declarations of interest.

To approve the minutes of the meetings held on 6 September 2018 and 12 September 2018 and to receive information arising from them.

The minutes of the meetings on 6 September 2018 and 12 September 2018 were approved and signed.

Officers responded to matters arising raised by Members as follows:

4/18: 5 interviews have taken place with Members on the subject of organisational financial management – 3 since the last meeting of this Committee.  The feedback will be included in the January 2019 report.

5/18: The Senior Auditor post was advertised with a closing date of Monday 19 November 2018.

10/18: The Monitoring Officers have not managed to meet yet – the next possible date is 23 November 2018.  The government has issued a response to the Committee on Standards in Public Life’s report on Intimidation in Public Life which will be circulated to Members of the Committee.

2.05

Skanska have been invited by the Audit & Governance Committee to provide an update on the Highways Contract, including specific focus on the Skanworks system.  They will give a presentation at the meeting.

Owen Jenkins introduced the presentation outlining the history of the contract with Skanska to date and the remaining audit issues.  Simon White, Operations Director with Skanska updated Members on the latest situation with the SkanWorks software which is an important element in the financial control for the contract.

Members raised issues which were responded to as follows:

·         In monitoring quality, the feedback from councillors and the public is important in pinpointing problems.

·         Each piece of work must be registered on the system from a pothole to a major project but most records are for small works.

·         The problem with the software system is in demonstrating costs at a work-order level.  They are satisfied that the high-level costs are correct.

·         The base software system is used for a variety of businesses.  The problem is in handling the specific provisions of the OCC contract.

·         The next consideration of a contract extension will be in March 2019.

·         The issue causes a delay in payments to Skanska – on average about a three-month delay.  There is therefore likely to be around £9m due to Skanska at any given time.

·         Officers will circulate to Members rolling data on the delayed payments.

·         There is no danger of the problem causing serious financial problems for Skanska which is a global company but they are concerned about reputational damage and want to get the contract extensions.

·         OCC knows the general cost of works before they are ordered but the final payments are based on actual costs.

·         This type of contract is not that unusual.  Many are based on scheduled rates but there are criticisms of that system too.

Members acknowledged the good work on the ground and that the SkanWorks issues were clouding this.  It was agreed to receive an update again at the March 2019 meeting after the Internal Audit report.

2.45

Report by the Director, Capital, Investment & Delivery

In July, the Audit & Governance Committee considered a report on the implementation of the Carillion Recovery & Improvement Plan. The Plan includes four phases of work following the transition of the services from Carillion (phase 1) in February 2018. These include:

Phase 2 - Stabilisation - involving operational issues falling out of the transfer of staff and functions from Carillion

Phase 3 - Assessment of Carillion Legacy Issues - a more detailed assessment of completed and part completed projects, as well as audits of statutory and operational compliance

Phase 4 - Implementation – this includes the programme of work for the rectification of known defects, any work resulting from latent defects and the programme of maintenance, repairs and replacement identified from the asset surveys. 

This report outlines progress since July on phases 2 – 4 and the next steps for several strands of the project. For some areas, the work is now at the point where it is more helpfully delivered through the business-as-usual (BAU) arrangements, particularly with the new Assistant Directors now in post.

The Committee is recommended to:

a)            consider and comment on continuing progress in implementation of the Carillion Recovery & Improvement Plan;

b)           note that the costs relating to rectification will be considered within the council’s annual budget cycle and processes for 2019/2020.

Alexandra Bailey summarised the report and introduced a new member of her team dealing with the Carillion recovery Varinder Raulia.

Officers responded to matters raised by Members as follows:

·         The liquidators have a duty to secure the assets of Carillion.  They will tell OCC how much they think we owe Carillion and we will tell them how much Carillion owes us.  Officers are confident that the figure owed to OCC will be the higher one.

·         The team is examining the issue of latent defects – unknown future problems that would have been Carillion’s responsibility to fix.  Obtaining insurance externally does not appear to be an option so they are looking at what others have done with self-insurance.

·         Other Carillion clients have entered agreements with the liquidators to continue work but OCC had already agreed to exit Carillion contracts before the collapse.

·         Work has been undertaken to examine the situation with subcontractors.

·         The recovery team will have a broad-brush estimate of costs for the budget process at the end of the year.

·         The situation for local schools is being discussed at locality meetings.  The full list of projects can be recirculated to Members.

·         OCC has to do the costings itself to avoid conflicts of interest.

·         Some have unreasonable expectations regarding what the Council can do and officers would welcome Members’ help in dealing with that.

RESOLVED to:

a)           consider and comment on continuing progress in implementation of the Carillion Recovery & Improvement Plan;

b)           note that the costs relating to rectification will be considered within the Council’s annual budget cycle and processes for 2019/2020.

3.15

Report by the Director for Finance.

The Chartered Institute of Public Finance and Accountancy’s (CIPFA’s) Code of Practice on Treasury Management (Revised) 2011 recommends that members are informed of Treasury Management activities at least twice a year. This report ensures this authority is embracing Best Practice in accordance with CIPFA’s recommendations.

The Committee is RECOMMENDED to

a)                     note the report; and

b)                     recommend Cabinet to note the report and to RECOMMEND Cabinet to note the Council’s Mid-Term Treasury Management Review 2018/19.

Tim Chapple introduced the report covering April to September 2018.  He and Lorna Baxter responded to Members’ questions as follows:

·         OCC may be paying slightly higher interest rates than other councils but this is because all of the debt is historical whereas rates have been lower in recent years.

·         The Treasury Management team takes the advice of Arlingclose on board but makes its own decisions.

·         The Council is looking to increase exposure to external funds up to £100m with a balance across asset classes to limit volatility.

·         The Council had not previously increased external fund balances until more certainty around the level of core cash and S106 fund.  There is more confidence in that.

RESOLVED to:

a)           note the report; and

b)           recommend Cabinet to note the report and to RECOMMEND Cabinet to note the Council’s Mid-Term Treasury Management Review 2018/19.

3.30

Verbal update from the External Auditors, Ernst & Young.

Ruth Plucknett stated that there was little new to report as they were developing the audit plan which will come to the Committee at the January 2019 meeting.  She confirmed that interim work has been scheduled for March 2019 before the financial year end.

3.40

Report by the Director of Law and Governance

In October 2018, Cabinet agreed an implementation strategy for the Council’s new Operating Model that had itself been previously endorsed at the September Cabinet meeting.

The Performance Scrutiny and Audit and Governance Committees have taken an active role in the development of the Fit for the Future programme as the programme’s implementation and the functionality of the new Operating Model will have significant implications across the areas of responsibilities of both committees. Both committees are therefore expected to continue their roles of monitoring and of challenging performance, delivery, reporting and control. The October Cabinet report noted that the Committees may wish to consider how they are organised through the life-time of the programme, including the potential establishment of individual or joint sub-committees as the business of the Committees demands.

This report considers the requirements for new arrangements and proposes the establishment of a Joint Sub-Committee. This same report is being considered by the Performance Scrutiny on 8 November and Audit and Governance Committee on 14 November.

The Committee is RECOMMENDED to:

a)                  Agree to the establishment of a joint Sub-Committee of the Performance Scrutiny and Audit & Governance Committees as set out in paragraphs 18-20.

b)                 Agree to the terms of reference set out in Annex 1.

The Chairman stated that the proposed Joint Committee had been approved by the Performance Scrutiny Committee at its meeting on 6 September 2018.  If the Joint Sub-Committee is approved, both Chairman will discuss the membership with the Political Group Leaders.  Members of the Committee should notify him if they are interested in being on the Joint Sub-Committee.

Nick Graham responded to Members’ questions as follows:

·         January would be a realistic date for the inaugural meeting.

·         The Sub-Committee can report to either parent committee of both.

·         It can make recommendations to Cabinet through the normal scrutiny procedure.

·         Substitutes will be allowed.

·         It was agreed that in paragraph 15 of the report, the word “distinct” should be “district”.

RESOLVED to:

a)           Agree to the establishment of a joint Sub-Committee of the Performance Scrutiny and Audit & Governance Committees as set out in paragraphs 18-20.

b)           Agree to the terms of reference set out in Annex 1.

3.55

Report by the Monitoring Officer

At the Audit & Governance Committee on the 12 September, members asked for further clarity as to the role and purpose of the Joint Committees established by Full Council on the 11 September to facilitate the joint working arrangements with Cherwell District Council (CDC).

This report seeks to bring that clarity and to enable the Committee to approve the terms of reference for the Joint Committees.

The Committee is RECOMMENDED to:

a)                  Agree that the proposed Joint Personnel Committee be named ‘The Joint Shared Services and Personnel Committee’;

b)                 Approve the proposed terms of reference for the Joint Shared Services and Personnel Committee (as in Annex 1); and

c)                  Approve the proposed terms of reference for the Joint Appeals Committee (as In Annex 1).

Nick Graham introduced the report and stated that a Partnership Working Group was already in place examining joint working, business cases and risks.  He responded to Members’ questions as follows:

·         Having “dual-hatters” involved should be an advantage since they see both perspectives.

·         Services will already have KPIs and bringing services together will not change the KPIs.

·         The Committees will have to explore how it all works and it is expected that arrangements will evolve.

·         The Joint Appeals Committee will only deal with cases of senior staff who should not have a problem meeting with a large panel.

RESOLVED to:

a)                  agree that the proposed Joint Personnel Committee be named ‘The Joint Shared Services and Personnel Committee’;

b)                 approve the proposed terms of reference for the Joint Shared Services and Personnel Committee (as in Annex 1); and

c)                  approve the proposed terms of reference for the Joint Appeals Committee (as In Annex 1).

4.25

Report by the Director of Law and Governance

This report seeks Audit & Governance’s support for a proposed amendment to the Constitution relating to senior management appointments to ensure that those appointments within Oxfordshire County Council are made efficiently whilst ensuring accountability. This would also avoid confusion that has arisen as to the definition of Chief Officers and Deputy Chief Officers. These terms have a statutory definition that impacts on the appointment process.

Currently, the terms or reference of the Remuneration Committee are that it has a role in appointing Directors with no distinction made between ‘Strategic Directors’ and any other ‘Directors’. This report proposes a distribution of responsibility that provides greater clarity. The choice of which posts should be appointed by the Remuneration Committee lies with the County Council itself and is not determined by regulations.

This matter is entirely separate from the arrangements being finalised by the Committee for handling any joint management appointments arising from the Oxfordshire-Cherwell Partnership. The scenarios in this report are solely those that the Council is required to have in place for its own appointments outside of that context.

The Committee is RECOMMENDED to

(a)                endorse the proposed changes to appointments in paragraphs 10 and 11;

(b)                ask Full Council to approve these changes accordingly including the necessary changes to the Pay Policy Statement; and

(c)                agree that the Monitoring Officer make the necessary textual amendments to the Constitution to give effect to Full Council’s decision.

Nick Graham introduced the report which outlined proposals to clarify which senior officers are appointed by the Remuneration Committee following the introduction of Strategic Directors.

Responding to Members’ questions, Nick Graham stated that new vacancies will continue to be advertised widely although interim appointments are often made to bridge the gap.  Strategic Directors are non-statutory positions but will still be appointed by the Remunerations Committee.

RESOLVED to

(a)             endorse the proposed changes to appointments in paragraphs 10 and 11;

(b)             ask Full Council to approve these changes accordingly including the necessary changes to the Pay Policy Statement; and

(c)             agree that the Monitoring Officer make the necessary textual amendments to the Constitution to give effect to Full Council’s decision.

4.10

Report by the Director for Finance.

This report presents a quarterly progress update of the Counter Fraud Strategy and Plan for 2018/19.  The plan supports the Council’s Anti-Fraud and Corruption Strategy by ensuring that the Council has in place proportionate and effective resources and controls to prevent and detect fraud as well as investigate those matters that do arise.

The committee is RECOMMENDED to comment and note the progress update regarding Counter Fraud Strategy and Plan for 2018/19.

Sarah Cox introduced the report and stated that it showed that the Council is serious about tackling fraud.  As a public report it cannot include confidential details on cases but those can be discussed at the Audit Working Group.

Members raised issues on the report and officers responded as follows:

·         Low-level cases are unlikely to go to court and are more likely to result in a repayment and caution.  One case subject to a current investigation may go to court.

·         With regard to whistleblowing referrals, some of these are passed to Senior Management or HR to investigate.  Internal Audit’s role is to oversee and monitor the outcomes.

·         There are current referrals in respect of direct payments which Internal Audit are reviewing with the Directorate, this has led to a wider piece of work to ensure that identification and referral reporting routes are clear.

·         The City Investigation Team is now managing the recording of referrals on the fraud log. All issues go to Internal Audit first and they triage which cases to refer to the City Council team.

·         Whistleblowing is encouraged – for example through articles on the Intranet – and whistle-blowers are treated confidentially and are well supported.

·         OCC does not use non-disclosure agreements.

RESOLVED to: comment and note the progress update regarding Counter Fraud Strategy and Plan for 2018/19.

4.40

This report presents the matters considered by the Audit Working Group Meeting of 24 October 2018.

The Committee is RECOMMENDED to note the report. 

Sarah Cox summarised the report and asked the Committee if they wished to replace Councillor Ian Corkin who was on the Audit Working Group but has now stood down from the main Committee.  It was suggested that the remaining three members with three substitutes were sufficient to ensure enough attendance.

It was agreed that the Chairman will discuss this with Councillor Charles Mathew after the meeting and that Councillor Jeannette Matelot is available to be a fourth substitute if required.

RESOLVED to note the report.

4.50

To review the Committee’s Work Programme

The following changes were agreed:

Additions to January 2019-

Financial Management Action Plan Update (Lorna Baxter)

Update on the Carillion Recovery Plan (Alexandra Bailey)

Review of effectiveness of internal audit (Glenn Watson)

Moved from January to March 2019-

Governance of the Housing and Growth Deal

Additions to March 2019-

Governance of Oxfordshire Local Enterprise Partnership

Highways Update (Owen Jenkins)

Section 117 Aftercare funding

Councillor Roz Smith asked that the Committee look at the partnership agreement with Oxford Direct Services at the March or May meeting.