22-02 - Climate Change
Perth and Kinross Council · 25 March 2024
Back to Audit and Risk Committee — 25 March 2024 and its agenda
Text extracted from the council's PDF. Layout and reading order may differ from the original.
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(Report No. 24/98) Internal Audit Report All Services 22-02 Climate Change February 2024 Final Report Legal and Governance Corporate and Democratic Services Perth & Kinross Council Council Offices 2 High Street Perth PH1 5PH
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20-02 Climate Change Contents by Section 1. Introduction 2. Executive Summary 3. Audit Background Information 4. Scope and Limitations 5. Assessment of the Control Environment 6. Summary of Findings 7. Conclusions 8. Acknowledgement 9. Action Implementation & Follow Up 10. Management Action Plan 11. Authorisation 12. Distribution 13. Assessment Definitions
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1. Introduction 1.1 The audit of climate change was undertaken as part of the Internal Audit Plan for 2022/23, which was approved by the Audit Committee on 28 June 2022. 1.2 The indicative scope for the audit was to provide support, advice and challenge to the strategic arrangements in place to fulfil the Council’s climate change duties. 1.3 This audit is linked to Strategic Risk 2: The actions and decisions of the Council fail to affect the behavioural and cultural change required to mitigate the causes of and reduce the impact of climate change in Perth and Kinross. 2. Executive Summary 2.1 The audit has found that reasonable assurance can be placed on controls overall in relation to the limited sphere of influence the Council has regarding climate change. 2.2 Areas of good practice have been highlighted in Section 5 of this report, and there are 5 actions arising from the findings in Section 6. An action plan is included at Section 10. Once these actions are completed, Internal Audit should be able to place substantial assurance on the arrangements in place. 3. Audit Background Information 3.1 The Council’s key risks were reported to the Audit & Risk Committee in June 2024. The Strategic Risk Register. classifies Climate Change as a Priority 1 risk (Risk SR02). A Priority 1 risk is where ‘Risk remains extreme even after all identified controls and treatments have been applied. There are significant risks, which may have a serious impact on the Council and the achievement of its objectives if not managed. Immediate management action needs to be taken to reduce the level of risk.’ Given this priority, the Chief Internal Auditor has decided to include a review of this this in the Internal Audit work for 2022/23. The Register details key controls that are in place and key actions thought necessary by officers to mitigate the risk. 3.2 In December 2019, the Council approved an Interim Climate Emergency Report and Action Plan (Report No 19/362 refers). This highlighted the Intergovernmental Panel on Climate Change’s (IPCC) concerns in relation to keeping the global average temperature rise below 1.5°C, which had been also reflected at COP26. 3.3 In December 2021, a report was submitted to the Council that provided an update on the climate action progress made since the Council approved the Interim Climate Emergency Report and Action Plan. It also provided a summary of public engagement undertaken and the latest emissions update. Based on this evidence, the Climate Strategy and Action Plan was developed and approved by the Council, (Report No. 21/245 refers).
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3.4 The Council has a legal responsibility for emissions reductions and climate resilience both within the Council’s operations and the Perth and Kinross geographic area. As such, the Climate Change Strategy and Action Plan covers the identified necessary actions for the Council to undertake for both areas. 3.5 The Council has signed up to a number of initiatives, becoming signatories to the Covenant of Mayors, the Edinburgh Declaration and the Glasgow Food and Climate Declaration (Report No. 21/209 refers). 3.6 The Action Plan is broken down into eight thematic areas. The first five from the interim plan, aligned with significant emissions sectors: transport; buildings and energy; business and industry; waste; and land use, and a further three included in the updated plan: climate resilience – as a result of the Council’s legal duty in this area; education and engagement – to address behavioural change; governance – to recognise the importance of clear governance and performance monitoring in delivering improvement. There is a roadmap for each theme within the Strategy and a detailed Action Plan. 4. Scope and Limitations 4.1 The review consisted of identifying and testing controls in place to ensure delivery of the Climate Change Strategy and Action Plan. 4.2 The review identified the design and substance of the key controls listed in the Council’s Strategic Risk Register and tested their effectiveness. It also considered the progress of the key actions listed on the Register. 4.3 To arrive at an opinion on the achievement of the control objective, the review included interviews with officers and a review of systems and documents in use. 4.4 Internal Audit recognises that many of the big drivers for climate change are outwith the control of the Council and that, for those areas within the influence of the Council, funding required from Scottish and/or UK Government may not be forthcoming. It is noted that progress against our targets from 2011 to 2021 has been very slow and if it continues on this path, the probability of the Council meeting the Scottish and UK Government targets are slim / unlikely. However, the overall achievement of climate objectives, at this point in time, is not the subject of this audit review but will be considered for inclusion in future Internal Audit plans. 5. Assessment of the Control Environment 5.1 The table below contains a summary of the findings against each control objective and Internal Audit’s assessment of the adequacy and effectiveness of the controls in place to meet each of the objectives agreed for this audit. Further details, including any improvement actions, are set out in the Management Action Plan.
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No. Control Objective Action Rating Control Objective Assessment 5 4 3 2 1 1. To ensure the adequacy of governance arrangements to deliver on the Council’s Climate Change Strategy. 1 3 1 Reasonable Assurance 5.2 The auditor has assessed that reasonable assurance can be placed on controls overall in relation to the limited sphere of influence the Council has regarding climate change. Meaning: There is a generally sound system of governance, risk management and control in place. Some issues, non-compliance or scope for improvement were identified which may put at risk the achievement of objectives in the area audited. 5.3 A summary of the key findings and actions are provided in section 5. In addition, the following areas of good practice have been highlighted during the audit: 5.4 The governance structure is good, in terms of: thematic working groups; Climate Change Board; Climate Change and Sustainability Committee; and Council. These working groups, Board and Committee meet regularly. 5.5 There are standing items on the Climate Change Board agenda to review the action log and for updates to be provided by the Climate Change and Sustainability Team Leader and from each of the Theme Leads. 5.6 There is a template in use for the Climate Change and Sustainability Team Leader to direct their reporting of data to the Climate Change Board. The template heading requests the preparer’s name and the date of preparation. It has six sections and an appendix: • Key actions since last Board Meeting; • Status Tracker; • Recruitment and budget update; • Key risks to development and delivery; • Looking ahead; • Funding; and • Summary of Top Actions Classified as Red (Appendix). 5.7 There is a template in use for each thematic working group Lead to direct the reporting of data to the Climate Change Board. The template heading requests the working group name and the date of preparation. It has five sections: • Key progress since last Board Meeting; • Priorities for the next two months; • Successes/challenges/areas for assistance to raise at Board meeting;
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• Comments on any Top or High Priority Actions with Red Status and what is being done to get these back on track; and • Funding opportunities – summary of any opportunities on the horizon (if not able to pursue them, why not e.g. capacity). 6. Summary of Findings 6.1 Below is a summary of key findings and actions, which are reflected in the Management Action Plan, detailed in section 9. 6.2 Governance Structure: We noted that there are at least seven stakeholders who are involved in assisting PKC achieve its Climate Change Strategy and Targets see below list of the parties. 1. Climate Change Board 2. Climate Change Sustainability Committee 3. Perth and Kinross Climate Change Commission 4. Executive Director (Communities) as Executive Sponsor 5. Climate Change Working Group Theme Leads 6. Climate Change Team 7. The Council There are clear terms of reference and responsibilities are in place for most of these. There is clarity of the role of the Climate Change Working Groups but there is scope to improve clarity of the role of the theme leads regarding their expectations. Working groups and other parties involved submit data against their actions plans. These are collated by the Climate Change Team and provided to the Climate Change Board for scrutiny and challenge. Internal Audit has been informed that the Perth and Kinross Climate Change Commission (PKCCC) is undertaking a review of how it functions and its effectiveness. However there was an undertaking that the PKCCC will provide an annual report on its work and in doing so will provide its assessment of the Council’s progress”. No annual report has been prepared since its establishment in May 2022. Action Point 1 The Climate Change Board consists of officers from across the Council, with sufficient seniority to effect change. With the new leadership structure being implemented, the Service has informed Internal Audit that there will be a review of membership of the Board, along with its role within the overall Council governance structures, to ensure that this is the case going forward. Action Point 2 6.3 Action Plans There are eight themes: Transport; Building and Energy; Waste and Resources; Business and Industry; Land Use; Climate Resilience;
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Governance: and Education and Engagement. Each theme has a lead and working group. There are 182 strategic actions in the Climate Change Master Action Plan, with 89 KPIs. Each working group is responsible for updating their action plan and this is compiled into the master document. Internal Audit reviewed this master document and found that it does not detail targets for all key performance indicators nor was progress recorded for many of the indicators reviewed. Of the 182 actions, 97 actions (53%) do not have specific start or end date, with 90 (49.4%) also not having milestones. Two different files are used to capture information, one for Action Plan and one for KPIs and targets. It is a little challenging to reconcile the two files. There is scope to streamline these documents to limit duplication, gaps and overlaps. Action Point 3 6.4 Resourcing of priority actions. The Council has identified 25 actions as top priority and funding was provided for these 25 top priorities. However, A review of the Master Action Plan that 9 of these top priority actions had available resources, 7 had partial resources (i.e. for feasibility / design), and 9 were without allocated resources. Action Point 4 6.5 Buy in from community and private sectors. Taking the necessary comprehensive and urgent action on climate change requires the Council to work in partnership with our communities, businesses and organisations at an unprecedented scale. The PKCCC was formed in May 2022. Its aim is to bring together people and organisations from the public, private and civic sectors who work collaboratively to help drive, guide, support and monitor climate action. The PKCCC is to provide independent active leadership and support for cross- sector collaboration and action on climate change. However, it is unclear from the website whether private sector organisations are represented, as individuals only are named, and the PKCCC is yet to measure and report since its establishment, as detailed in paragraph 5.2 above. Internal Audit has been advised that the PKCCC is reviewing its approach and membership. It may be helpful to have explicit links to the external organisations that individuals represent, where this is the case, to demonstrate the representation of such organisations and to for the Council to consider whether the PKCCC is a control measure for the strategic risk register. Action Point 1
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7. Conclusion 7.1 The Internal Audit review is able to place reasonable assurance on the overall control environment for the Council’s arrangements for Climate Change at this time. The agreed actions, once implemented, should enable Internal Audit to place substantial assurance on these. 8. Acknowledgements 8.1 Internal Audit would like to thank all officers who were involved in this audit, particularly the officers within the Climate Change team and Property Services. 9. Action Implementation & Follow up 9.1 Responsibility for the maintenance of adequate and effective controls rests with management. Where the audit has identified areas for management action, these are identified in the Management Action Plan. Where a decision is taken by management not to act in response to finding from this review, it is the responsibility of management to assess and accept the risk arising from non-implementation. 9.2 Achievement of the agreed actions is monitored through Internal Audit’s ‘follow up’ arrangements.
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10. Management Action Plan Action Point Para. No Finding Risk Rating Agreed Action & Evidence Action Owner Target Completion Date 1 5.2 1. Perth and Kinross Climate Change Commission (PKCCC) is required to provide an annual report on its work and provide its assessment of the Council’s progress. No annual report has been produced since its establishment in May 2022 2 It may be helpful to have explicit links to the external organisations that individuals represent, where this is the case, to demonstrate the representation of such organisations and to for the Council to consider whether the PKCCC is a control measure for the strategic risk register. 3 3 Agreed action: Climate Change Strategic Lead to work with PKCCC to review Commission’s role, membership and performance and to ensure that any annual reporting requirements are adhered to. Agreed evidence: Outcome of the review and annual report Agreed action: The Strategic Lead, Environment will work with, and consider, the outcome of the PKCCC’s own review in relation to the matters raised in this finding. Agreed evidence: F Crofts, Strategic Lead, Environment F Crofts, Strategic Lead, Environment December 2024 December 2024
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Outcome of review and updated Risk Register 2 5.2 The Climate Change Board consists of officers from across the Council, with sufficient seniority to effect change. With the new leadership structure being implemented, the Service has informed Internal Audit that there will be a review of membership of the Board, along with its role within the overall Council governance structures, to ensure that this is the case going forward 2 The Strategic Lead will review the membership of the Board to ensure that it remains relevant and fit for purpose following the leadership review. Agreed evidence: Outcome of review F Crofts, Strategic Lead, Environment December 2024 3 5.3 Action Plans. The Action Plan does not detail targets for all key performance indicators nor was progress recorded for many of the indicators reviewed. Of the 182 actions, 97 actions (53%) do not have specific start or end date, with 90 (49.4%) also not having milestones. Two different files are used to capture information, one for Action Plan and one for KPIs and targets. It is a little challenging to reconcile the two files and there is scope to streamline these documents to limit duplication, gaps and overlaps. 3 Agreed action: The Climate Change & Smart Investment Manager will support the Climate Change Board to review and approve actions in Climate Change Action Plan with milestones, KPI and targets. As part of this, the documents will be reviewed to ensure that they fully and completely record both actions and KPIs S Marone, Climate Change & Smart Investment Manager December 2024
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Agreed evidence: Revised documentation considered by the Climate Change Board 4 5.4 Lack of resources both financial and capacity. The Council has identified 25 actions as top priority and funding was provided for these 25 top priorities. However, we noted from our review of the Master Action Plan that 9, of these top priority actions had available resources, 7 had partial resources (i.e. for feasibility / design), and 9 were without allocated resources. 4 Agreed action: The Climate Change & Smart Investment Manager will support the Climate Change Board to review the actions to ensure that resourcing is appropriately reflected to deliver these top priority actions Agreed evidence: Outcome of review from the Climate Change Board. S Marone, Climate Change & Smart Investment Manager September 2024
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11. Authorisation 11.1 The auditor for this assignment was M Stewart. The supervising auditor was I Iman. This report is authorised for issue: 12. Distribution 12.1 This report has been distributed to: T Glen, Chief Executive B Renton, Executive Director (Communities) A Williams, Director, Economy, Place & Learning C Mailer, Director, Strategy, People & Resources F Crofts, Strategic Lead, Environment D Littlejohn, Strategic Lead, Economy, Development & Planning S Crawford, Strategic Lead, Property Services S Merone, Climate Change & Smart Investment Manager L Simpson, Strategic Lead, Legal & Governance Committee Services External Audit
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13. Assessment Definitions 13.1 The following table contains the definitions of the control objective assessment. Control Objective Assessment Level of assurance Definition Substantial Assurance A sound system of governance, risk management and control exists, with internal controls operating effectively and being consistently applied to support the achievement of objectives in the area audited. Reasonable Assurance There is a generally sound system of governance, risk management and control in place. Some issues, non- compliance or scope for improvement were identified which may put at risk the achievement of objectives in the area audited. Limited Assurance Significant gaps, weaknesses or non-compliance were identified. Improvement is required to the system of governance, risk management and control to effectively manage risks to the achievement of objectives in the area audited. No Assurance Immediate action is required to address fundamental gaps, weaknesses or non-compliance identified. The system of governance, risk management and control is inadequate to effectively manage risks to the achievement of objectives in the area audited. 13.2 The following table contains the definitions applied by Internal Audit in rating audit findings/actions. Risk Rating for Individual Findings Rating Rating description Definition 5 Critical Significant observations / major concerns which require immediate action. Management will need to add these to the appropriate Service risk register Issue represents a control weakness which could cause, or is causing, severe disruption of the process or severe adverse effect on the ability to achieve process objectives 4 High Significant observations regarding the absence / failure of key controls requiring urgent action. Management should consider adding these to the appropriate Service / divisional risk register Issue represents a control weakness which could have, or is having, major adverse effect on the ability to achieve process objectives
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3 Medium Observations regarding the effectiveness of key controls requiring reasonably urgent action. Management should consider these when updating any divisional / team risk registers Issue represents a control weakness which could have, or is having, significant adverse effect on the ability to achieve process objectives 2 Low Minor observations regarding the adequacy of controls which require action to improve the efficiency, effectiveness, or economy of operations or which otherwise require to be brought to the attention of Senior Management Issue represents a minor control weakness with minimal but reportable impact on the ability to achieve process objectives 1 Trivial / Minor Very minor observations which will be raised during the audit and may not be included within the final report Issue represents a very minor control weakness with negligible impact on the ability to achieve process objectives. The issue will be raised during the audit and may not be included within the final report.