New Approach to Auditing Best Value
North Lanarkshire Council · 16 February 2023
Back to Audit and Scrutiny Panel — 16 February 2023 and its agenda
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North Lanarkshire Council Report Audit and Scrutiny Panel Does this report require to be approved? ☐ Yes ☒ No Ref KH/SL Date 16/02/23 New approach to auditing Best Value From Katrina Hassell, Chief Officer (Business and Digital) E-mail HassellK@northlan.gov.uk Telephone 07903 096 121 Executive Summary Members of the Audit and Scrutiny Panel are well versed in the Best Value duty which requires the council to ensure arrangements are in place to secure continuous improvement in performance for all the functions and activities undertaken to deliver services and improve outcomes. Since implementation of the duty, all local authorities in Scotland have been subject to ongoing national and local audit processes to ensure they continue to be able to demonstrate Best Value in practice. The latest national audit programme concluded in 2022 and a new approach is being rolled out from 2022/23 onwards in line with the five-year external audit appointments. The new approach moves to more frequent arrangements that integrate the process for auditing Best Value within each individual council’s external auditors Annual Audit Report (AAR) activity. This means that the council will, in effect, undergo an annual assessment in terms of particular aspects of Best Value in order to provide the Accounts Commission with the relevant assurances in terms of the performance of the council and the quality of services to the public. Although the specific details of the external auditors annual audit plan have still to be finalised by the incoming Audit Scotland audit team, information from the Accounts Commission’s workplan to 2024 along with presentations made by Audit Scotland in a national forum in November 2022 provide a broad overview in this respect. This report provides members of the Audit and Scrutiny Panel with an overview of the new national approach to auditing Best Value, based on information available at the current time. While Best Value has a focus on good governance and managing resources effectively, in practice it is about so much more - it’s about improving the functions and activities the council undertakes to deliver the best possible outcomes and services that improve the everyday lives of local people. Elected Members therefore have a key role to play to ensure the council continues to demonstrate Best Value in practice and, as members of the Audit and Scrutiny Panel are charged with oversight of the governance of the council, this report aims to help Panel members fulfil that role.
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1. Background 1.1 Members of the Audit and Scrutiny Panel will recall the report in November 2022 which presented the updated Strategic Self Evaluation Framework and rolling Review Programme up to 2023. This Framework provides the council with a structured programme of self-evaluation which underpins the Best Value duty to secure continuous improvement in performance for all the functions and activities undertaken to deliver services and improve outcomes. 1.2 As the council is required to demonstrate Best Value in practice - and is regularly audited by both internal and external auditors on many aspects of Best Value - the assessment criteria within the Strategic Self-Evaluation Framework aligns to the seven Best Value themes (noted below) and the national guidance which was updated in March 2020: 1. Vision and leadership. 2. Governance and accountability. 3. Effective use of resources. 4. Partnerships and collaborative working. 5. Working with communities. 6. Sustainability. 7. Fairness and equality. 1.3 As the Panel will recall, the council was in year three of the five-year national Best Value audit programme which concluded with publication of a positive Best Value Assurance Report (BVAR) for North Lanarkshire in May 2019. Due to the impact of the pandemic, this national programme was extended from five to six years and all 32 councils have now undergone the BVAR review process. 1.4 A new national approach to auditing Best Value now comes into effect as part of the external auditor appointments for the five-year term from 2022/23. Following these appointments Audit Scotland were retained as the council’s external auditor for the next five-year term (from December 2022). The new approach will not see a repeat of the national BVAR audit process for all 32 councils, rather the focus moves to more frequent and ongoing arrangements that integrate the process for auditing Best Value within each individual council’s external auditors Annual Audit Report (AAR) activity. 1.5 This means that the council will, in effect, undergo an annual assessment in terms of particular aspects of Best Value in order to provide the Accounts Commission - the Recommendations It is recommended that the Audit and Scrutiny Panel: (1) Are aware of the new national approach to auditing Best Value and the implications for the council in this respect, and (2) Endorse their role on the Panel (in line with the Scheme of Administration) in terms of ensuring the council continues to secure Best Value in practice in line with the statutory duty. The Plan for North Lanarkshire Priority All priorities Ambition statement All ambition statements
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public spending watchdog for local government in Scotland whose duty is to ensure that public money is spent properly, efficiently, and effectively - with the relevant assurances in terms of the performance of the council and the quality of services to the public. 1.6 The specific details of the external auditors annual audit plan have still to be finalised by the incoming Audit Scotland audit team, however the Accounts Commission’s workplan to 2024 along with presentations made by Audit Scotland in a national forum in November 2022 provide a broad overview in this respect. 1.7 This report provides members of the Audit and Scrutiny Panel with an overview of the new national approach to auditing Best Value from 2022/23, based on the information available at the current time. 2. Best Value audit approach in councils 2.1 Following work to produce all 32 councils’ Best Value Assurance Reports (BVARs) over the six year period from 2017 to 2022, the national audit process for Best Value is now fully integrated within the wider scope of the external auditors annual audit work (as noted in paragraph 1.4 above). 2.2 The requirements for external auditors in all areas of their audit work, including Best Value, are set out in the Code of Audit Practice. This is issued by Audit Scotland to define auditors’ objectives and responsibilities and it is a condition of each auditors’ appointment that they follow the Code. Supplementary guidance is also provided to assist external auditors in meeting the Best Value requirements of the Code; this promotes a consistent approach to the audit work across all 32 councils. External audit work from 2022/23 2.3 From 2022/23, the external auditors annual audit programme will have four strands: (1) Follow up work regarding the progress made in implementing recommendations arising from the previous audit plan, including recommendations from BVARs. (2) Annual reporting of service performance and reporting in line with the Accounts Commission’s statutory direction. (3) Coverage of Best Value thematic work. (4) Regular review of Annual Audit Reports (AARs) by the Accounts Commission. Each of these strands are set out in more detail in paragraphs 2.4 to 2.19 below. (1) Follow up work regarding the progress made in implementing recommendations arising from the previous audit plan, including recommendations from BVARs. 2.4 It is expected this will include audit work which follows up on the implementation of the recommendations made through (a) previous Annual Audit Reports (AARs), and (b) the council’s 2019 BVAR. This will not just report on the progress made in terms of implementing previous recommendations, but more importantly the impact of those improvement actions and what difference has been made for local people and communities. 2.5 Where the external auditors identify any risks in relation to any aspects of Best Value, these will be covered as part of the Annual Audit Report (AAR) process. The good practice statements supporting each of the Best Value themes (listed in paragraph 1.2 above) will form the basis for this proportionate / risk based element to the audit work.
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(2) Annual reporting of service performance and reporting in line with the Accounts Commission’s statutory direction. 2.6 The Accounts Commission’s statutory direction (set out in Appendix 1) places a requirement on councils to report a range of information in terms of (a) improving local services and outcomes, and (b) demonstrating Best Value. 2.7 It is therefore expected that audit work will include annual reporting of performance that demonstrates continuous improvement in delivering services and improving outcomes in line with the council’s strategic priorities (i.e. as set out in The Plan for North Lanarkshire). It is also expected that auditors will seek to gain assurances in terms of the alignment of these priorities within delivery plans and more specifically (for example) resource, financial, and workforce plans. 2.8 As well as reflecting on the council’s performance monitoring, management, and reporting arrangements and contents of performance reports, auditors will expect to see evidence of improvements identified / made as a result of performance falling below expected targets, and evidence of impact in terms of the difference that has been made for local people and communities. Auditors will continue to use Local Government Benchmarking Framework (LGBF) results for comparison purposes and will expect to see benchmarking activity that contributes to continuous improvement in performance. (3) Coverage of Best Value thematic work. 2.9 In addition to the external auditors annual audit plan, the Accounts Commission have asked auditors to cover specific Best Value thematic work across Scotland. In the past this type of work was carried out at varying times and in different ways, moving forward each theme will be audited at the same time and in the same way across all 32 councils in order to gather views from across Scotland and compare councils as at the same point in time. This aims to provide assurance on areas of risk / interest across Scotland as at a defined point in time. Leadership of the development of new local strategic priorities 2.10 Thematic audit work for 2022/23 will be centred on leadership of the development of new local strategic priorities, focusing specifically on the following: • Consideration of how the council has focused its priorities since the local government elections. Reflecting on current local government focus, i.e. Covid recovery, cost of living challenges, reducing inequalities, and climate change. • In recognition of finite resources, setting clear priorities and planning how to deliver on them as well as monitoring progress and performance. 2.11 From this thematic work auditors will publish a management report on the findings at each council and a summary will be included in the 2022/23 Annual Audit Report (AAR) - scheduled to be presented to the Audit and Scrutiny Panel in the autumn of 2023. 2.12 The Accounts Commission have yet to finalise how the intelligence gained from the Best Value thematic work will be reported nationally; at present it is currently planned to include this in the spring 2024 Local Government Overview report. Climate change 2.13 In addition, the Auditor General and Accounts Commission are developing a programme of work on climate change to include climate change specific national
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outputs that focus on key issues and challenges, as well as moving towards integrating climate change considerations into all aspects of audit work. 2.14 For 2022/23 audits, auditors are therefore required to provide answers to six questions (set out in Appendix 2) and report a summary of findings in their Annual Audit Report (AAR). Note these questions relate to all audited bodies, not just councils. (4) Regular review of Annual Audit Reports (AARs) by the Accounts Commission. 2.15 As noted in the paragraphs above, Best Value work in the councils from 2022/23 will be fully integrated with the external auditor’s annual audit plan and reported in Annual Audit Reports (AARs), this includes risk-based, follow up, and thematic Best Value work. AARs for each council will be reviewed by the Accounts Commission (under the cover of the s102 Controller of Audit report) at least once over the five-year appointment to provide the Commission with assurance on Best Value in each individual council. 2.16 This programme of Controller of Audit reports will cover all 32 councils over the period from October 2023 to August 2027; eight councils will be reported each year over the four years. Year one councils (reporting October 2023 to August 2024) are Falkirk, Moray, Clackmannanshire, Orkney Islands, South Ayrshire, Dumfries and Galloway, West Dunbartonshire, and City of Dundee. 2.17 Controller of Audit reports will cover each councils latest Annual Audit Report (AAR) and be a summary of the information and judgements reported. The Accounts Commission will consider the report and may report findings publicly or request a hearing (in extreme circumstances). 2.18 External auditors will undergo a clearance process with each council for the Controller of Audit reports. Thereafter these reports will be expected to be submitted to the relevant committee for Elected Member’s discussion and oversight. 2.19 The Commission will use their Annual Assurance and Risks Report (AARR) process to identify thematic work for the coverage by all auditors in the following year’s audit. The Annual Assurance and Risks Report (AARR) is the annual report from the Controller of Audit about the work undertaken by all council’s external auditors over the past year on the Commission's behalf. Best Value audit work in Integrated Joint Boards (IJBs) 2.20 In May 2022 the Accounts Commission took the decision not to proceed with the proposed rollout of Best Value in IJBs in light of the significant uncertainties in the IJB operating environment and the matters arising from developments around the National Care Service (NCS) for Scotland. There will therefore be no programme of Controller of Audit reports on individual IJBs. 2.21 The Accounts Commission did however agree that they would “continue to provide robust, independent oversight and public reporting at both national and local level on the current performance of IJBs”. As such, moving forward the Best Value focus will be on national reporting that uses individual IJBs as case studies where appropriate. 2.22 Auditors of IJBs are required to include commentary in their Annual Audit Reports (AARs) on how the IJB demonstrates that it is meeting its Best Value duties. Auditors are to report on the IJBs' own arrangements for doing this. It is therefore expected that IJBs will have their own framework in place to report self-assessments against the seven Best Value themes (listed in paragraph 1.2).
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2.23 From a North Lanarkshire perspective, a self-evaluation exercise was undertaken in 2022 to assess the effectiveness of current arrangements for the North Lanarkshire health and social care IJB and how well the Board meets its intended outcomes. The findings (reported to the Integration Joint Board - Performance, Finance, and Audit Committee in August 2022) were positive and served to reassure the new members of the IJB (both Elected Members and executive members) of the effectiveness of the current arrangements for the Board and its supporting governance, and set out the priorities for improvement in this respect. 2.24 There is no Best Value thematic work scheduled for IJBs. Detailed work by the external auditors is not required against each of the Best Value themes, however commentary is expected in the Annual Audit Reports (AARs) on wider scope audit work which covers specific aspects of Best Value (such as financial sustainability, governance, service performance, and leadership). 2.25 National performance reporting on health and social care continues through the Accounts commission forward work programme. Case studies on individual IJBs may be part of this. Next steps 2.26 The new national approach to auditing Best Value means the council will, in effect, undergo an annual assessment in terms of particular aspects of Best Value. Considering that the North Lanarkshire BVAR is over three years old (and pre-dates the pandemic), it is important to ensure the council continues to be able to demonstrate Best Value and evidence this in practice. As reported to the Audit and Scrutiny Panel in November 2022, it is therefore the intent of the council’s Corporate Management Team that a self-evaluation will be undertaken in 2023 that is in essence a Best Value follow up. 2.27 The follow up Best Value self-evaluation is incorporated into the Strategic Self- Evaluation Framework rolling Review Programme for 2022 to 2023 and an update in this respect will be reported to a future meeting of the Audit and Scrutiny Panel. 2.28 National developments in terms of the new approach to auditing Best Value, as well as feedback from other councils, will continue to be kept under review as the process evolves. 3. Measures of success 3.1 Measures of success include: • Regular oversight and monitoring of performance across the organisation to gain assurances in terms of governance and accountability. • Regular review and challenge processes to scrutinise the performance of the council to ensure effective use of resources and that resources are directed in accordance with agreed policy and according to priorities, while ensuring sound decision making and clear accountability for the use of resources in achieving improved outcomes for service users and the local community. • Performance monitoring, management, and reporting arrangements that support the demonstration of improved performance in local services and outcomes, and the delivery of Best Value. 4. Supporting documentation 4.1 Appendix 1: Accounts Commission statutory direction for performance reporting:
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2022/23 to 2024/25. Appendix 2: Auditing climate change in 2022/23. Katrina Hassell Chief Officer (Business and Digital) 5. Impacts 5.1 Public Sector Equality Duty and Fairer Scotland Duty Does the report contain information that has an impact as a result of the Public Sector Equality Duty and/or Fairer Scotland Duty? Yes ☐ No ☒ If Yes, please provide a brief summary of the impact? If Yes, has an assessment been carried out and published on the council’s website? https://www.northlanarkshire.gov.uk/your-community/equalities/equality- and-fairer-scotland-duty-impact-assessments Yes ☐ No ☐ 5.2 Financial impact Does the report contain any financial impacts? Yes ☐ No ☒ If Yes, have all relevant financial impacts have been discussed and agreed with Finance? Yes ☐ No ☐ If Yes, please provide a brief summary of the impact? 5.3 HR policy impact Does the report contain any HR policy or procedure impacts? Yes ☐ No ☒ If Yes, have all relevant HR impacts have been discussed and agreed with People Resources? Yes ☐ No ☐ If Yes, please provide a brief summary of the impact? 5.4 Legal impact Does the report contain any legal impacts (such as general legal matters, statutory considerations (including employment law considerations), or new legislation)? Yes ☒ No ☐ If Yes, have all relevant legal impacts have been discussed and agreed with Legal and Democratic? Yes ☒ No ☐ If Yes, please provide a brief summary of the impact? The Local Government in Scotland Act 2003 introduced the duty of Best Value; this requires that councils “make arrangements to secure continuous improvement in performance”. The Local Government Act 1992 established the role of the Statutory Direction to direct the “publication of information as to standards of performance”.
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5.5 Data protection impact Does the report / project / practice contain or involve the processing of personal data? Yes ☐ No ☒ If Yes, is the processing of this personal data likely to result in a high risk to the data subject? Yes ☐ No ☐ If Yes, has a Data Protection Impact Assessment (DPIA) been carried out and e- mailed to dataprotection@northlan.gov.uk Yes ☐ No ☐ 5.6 Technology / Digital impact Does the report contain information that has an impact on either technology, digital transformation, service redesign / business change processes, data management, or connectivity / broadband / Wi-Fi? Yes ☐ No ☒ If Yes, please provide a brief summary of the impact? Where the impact identifies a requirement for significant technology change, has an assessment been carried out (or is scheduled to be carried out) by the Enterprise Architecture Governance Group (EAGG)? Yes ☐ No ☐ 5.7 Environmental / Carbon impact Does the report / project / practice contain information that has an impact on any environmental or carbon matters? Yes ☐ No ☒ If Yes, please provide a brief summary of the impact? 5.8 Communications impact Does the report contain any information that has an impact on the council’s communications activities? Yes ☐ No ☒ If Yes, please provide a brief summary of the impact? 5.9 Risk impact Is there a risk impact? Yes ☐ No ☐ If Yes, please provide a brief summary of the key risks and potential impacts, highlighting where the risk(s) are assessed and recorded (e.g. Corporate or Service or Project Risk Registers), and how they are managed? Ensuring that members of the Audit and Scrutiny Panel are aware of their role and how this supports the council’s ability to achieve Best Value contributes to the mitigation of the risk on the Corporate Risk Register for governance, leadership, and decision making. 5.10 Armed Forces Covenant Duty Does the report require to take due regard of the Armed Forces Covenant Duty (i.e. does it relate to healthcare, housing, or education services for in-Service or ex- Service personnel, or their families, or widow(er)s)? Yes ☐ No ☒ If Yes, please provide a brief summary of the provision which has been made to ensure there has been appropriate consideration of the particular needs of the Armed Forces community to make sure that they do not face disadvantage compared to other citizens in the provision of public services.
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Appendix 1: Accounts Commission statutory direction for performance reporting: 2022/23 to 2024/25.
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Appendix 2: Auditing climate change The Auditor General and Accounts Commission are developing a programme of work on climate change to include climate change specific national outputs that focus on key issues and challenges, as well as moving towards integrating climate change considerations into all aspects of audit work. For 2022/23 audits, auditors are required to provide answers to the following questions and report a summary in their Annual Audit Report (AAR): 1. What targets has the body set for reducing emissions in its own organisation or in its local area? 2. Does the body have a climate change strategy or action plan which sets out how the body intends to achieve its targets? 3. How does the body monitor and report progress towards meeting its emission targets internally and publicly? 4. Has the body considered the impact of climate change on its financial statements? 5. What are the areas of the financial statements where climate change has, or is expected to have, a material impact? 6. Does the body include climate change in its narrative reporting which accompanies the financial statements and is it consistent with those financial statements?