Agenda Document Pack - Risk and Audit Scrutiny Committee - 19/11/2024
South Lanarkshire Council · 19 November 2024
Back to Risk and Audit Scrutiny Committee — 19 November 2024 and its agenda
Text extracted from the council's PDF. Layout and reading order may differ from the original.
Page 1
Council Offices, Almada Street Hamilton, ML3 0AA Monday, 11 November 2024 Dear Councillor Risk and Audit Scrutiny Committee The Members listed below are requested to attend a meeting of the Committee to be held as follows:- Date: Tuesday, 19 November 2024 Time: 10:00 Venue: Hybrid - Committee Room 1, Council Offices, Almada Street, Hamilton, ML3 0AA The business to be considered at the meeting is listed overleaf. Yours sincerely Paul Manning Chief Executive Members Elaine McDougall (Chair), Mary Donnelly (Depute Chair), Mathew Buchanan, Alistair Fulton, Ross Gowland, Celine Handibode, Cal Johnston-Dempsey, Susan Kerr, Richard Lockhart Substitutes Colin Dewar, Monique Equi, Gavin Keatt, Helen Toner 1
Page 2
BUSINESS 1 Declaration of Interests 2 Minutes of Previous Meeting Minutes of the meeting of the Risk and Audit Scrutiny Committee held on 24 September 2024 submitted for approval as a correct record. (Copy attached) 3 - 14 Item(s) for Noting 3 Internal Audit Activity as at 31 October 2024 Report dated 1 November 2024 by the Executive Director (Finance and Corporate Resources). (Copy attached) 15 - 20 4 Audit Scotland – Transformation In Councils Report dated 28 October 2024 by the Executive Director (Finance and Corporate Resources). (Copy attached) 21 - 26 5 Forward Programme for Future Meetings Report dated 1 November 2024 by the Executive Director (Finance and Corporate Resources). (Copy attached) 27 - 30 Urgent Business 6 Urgent Business Any other items of business which the Chair decides are urgent. Clerk Name: Elizabeth-Anne McGonigle Clerk Telephone: 07385403101 Clerk Email: elizabeth-anne.mcgonigle@southlanarkshire.gov.uk 2
Page 3
RISK AND AUDIT SCRUTINY COMMITTEE Minutes of meeting held via MS Teams and in Committee Room 1, Council Offices, Almada Street, Hamilton on 24 September 2024 Chair: Councillor Elaine McDougall Councillors Present: Councillor Colin Dewar (substitute for Councillor Alistair Fulton), Councillor Mary Donnelly (Depute), Councillor Ross Gowland, Councillor Cal Johnston-Dempsey, Councillor Susan Kerr, Councillor Richard Lockhart Councillors' Apologies: Councillor Mathew Buchanan, Councillor Alistair Fulton, Councillor Celine Handibode Councillor Also Present: Councillor Gerry Convery (for items 3 and 4) Attending: Chief Executive’s Service P Manning, Chief Executive (for items 3 and 4) Finance and Corporate Resources J Taylor, Executive Director; Y Douglas, Audit and Compliance Manager; S Dunsmore, Insurance and Risk Management Adviser; E-A McGonigle, Administration Adviser; A Norris, Administration Assistant; L O’Hagan, Head of Finance (Strategy); I Strachan, Head of Administration and Legal Services Also Attending: Audit Scotland J Boyd, A Barclay and M Ferris, External Auditors 1 Declaration of Interests No interests were declared. 2 Minutes of Previous Meeting The minutes of the meeting of the Risk and Audit Scrutiny Committee held on 25 June 2024 were submitted for approval as a correct record. The Committee decided: that the minutes be approved as a correct record. 3a External Auditors’ Annual Report to South Lanarkshire Council 2023/2024 The following documents were submitted by Audit Scotland, the Council’s external auditors:- letter and appendices relating to the 2023/2024 Annual Audit report on South Lanarkshire Council 2023/2024 South Lanarkshire Council proposed Annual Audit report to members of the Council and the Controller of Audit 2 3
Page 4
The Audit Director, Audit Scotland, spoke on the Annual Audit report and highlighted the following:- the audit of the 2023/2024 Annual Accounts financial management financial sustainability best value vision, leadership and governance use of resources to improve outcomes key messages significant findings and key audit matters:- Council house evaluations significant risks of material misstatement in the annual accounts identified during planning of the audit:- risk of material misstatement due to fraud caused by management override of controls estimation in the valuation of land and buildings 2023/2024 action plan on recommendations for improvement summary of corrected misstatements The external auditors’ opinion on the Council’s Annual Accounts 2023/2024 and those of the 3 charities administered by the Council was unmodified, that is, the financial statements and related reports were free from material misstatement. Due to the interaction of section 106 of the Local Government in Scotland Act 1973 with the charities legislation, a separate independent auditor’s report was required for the statement of accounts of each registered charity where members of the Council were sole trustees and this was irrespective of the size of the charity. The Council had made good progress in reducing or removing the number of charitable trusts where it was the sole trustee. Officers responded to members’ questions in relation to:- the performance against indicators in the Local Government Benchmarking Framework (LGBF) the issue around the percentage of reports being submitted to the Children’s Reporter within the agreed timescale not meeting the target ongoing training support to elected members and when the results of the training needs analysis exercise, which had been carried out earlier in the year, would be implemented The Audit Director, Audit Scotland extended thanks to the Executive Director (Finance and Corporate Resources), the Head of Finance (Strategy) and the wider team for their help and support during the course of the audit. The Chair, on behalf of the Committee, echoed those remarks. The Committee decided: that the report be noted. 3b External Auditors’ Annual Report to South Lanarkshire Council 2023/2024: South Lanarkshire Council Charitable Trusts Summary letters, proposed independent auditor’s reports and letters of representation (ISA 580) were submitted by Audit Scotland, the Council’s external auditors for South Lanarkshire Council Charitable Trusts. 4
Page 5
The Senior Auditor, Audit Scotland advised that there were no unadjusted misstatements to be corrected for the Charitable Trusts administered by the Council. The Committee decided: that the report be noted. 4 Audited Annual Accounts 2023/2024 A report dated 10 September 2024 by the Executive Director (Finance and Corporate Resources) was submitted on the:- Council’s Certified Annual Accounts and Charitable Trusts’ Accounts for 2023/2024, which had received a clean audit certificate from the Council’s external auditors, Audit Scotland requirement to approve the Annual Accounts 2023/2024 for signature in terms of both the Council’s accounts and related charitable trusts The accounts covered the Council as well as 3 Charitable Trusts managed by the Council, namely South Lanarkshire Council Educational Trust, South Lanarkshire Council Charitable Trust and the East Kilbride Information Technology Trust. A clean audit certificate had been received for each with no qualifications on the Council’s accounts. An agreed action plan had been included in the external auditor’s report and officers would work to ensure those were implemented in 2023/2024. The Annual Accounts would be advertised as being available for public inspection on the Council’s website and on request from Finance Services. The Committee decided: (1) that it be noted that the South Lanarkshire Council Annual Accounts 2023/2024 and the Charitable Trusts’ Accounts had each received a clean audit certificate from the Council’s external auditors, Audit Scotland; (2) that the audited South Lanarkshire Council Accounts 2023/2024 and the Charitable Trusts’ Accounts be approved for signature; (3) that it be noted that the external auditor’s report would be referred to a future meeting of South Lanarkshire Council for information; and (4) that it be noted that, as detailed at section 3.6 of the report, the Audited Accounts 2023/2024 would be available on the Council’s website. [Reference: Minutes of 25 June 2024 (Paragraph 5)] 5 2022 National Fraud Initiative Exercise A report dated 6 September 2024 by the Executive Director (Finance and Corporate Resources) was submitted:- advising of the outcome of investigations undertaken as part of the 2022 National Fraud Initiative (NFI) exercise providing a summary of Audit Scotland’s report ‘The National Fraud Initiative in Scotland 2022’ which was published in August 2024 5
Page 6
The NFI matched similar data across public sector systems and identified possible inconsistencies. Those inconsistencies, known as matches, required to be investigated by participating public bodies with a view to detecting fraud. The Council had taken part in NFI exercises since 2004/2005. Those exercises were undertaken every 2 years and included data from benefits, payroll, creditors and blue badge holders along with a match of the electoral register to council tax records to detect where single person discount (SPD) had been claimed despite there being more than one person over 18 in the household. The 2022 NFI had been a full exercise and involved Council wide comparisons including:- housing benefits blue badge holders Council Tax Reduction Scheme payroll housing tenants waiting lists procurement creditors Council tax SPD Records had also been matched to the Department for Work and Pensions’ (DWP) deceased persons’ record. The 2022 NFI results were detailed at section 4 of the report and highlighted that for the Council:- at June 2023, a total of 26,026 matches had been identified. Following further data refreshes and a subsequent release of additional matches, the final number of matches was 28,090. Of those, it was intended to investigate a target of 10,676 which had been agreed by External Audit. A further 74 matches had been investigated outwith the target number and included responding to enquiries from other authorities/organisations separate to the NFI exercise, Benefits and Revenue used an external contractor, Datatank, to undertake rolling reviews around SPD eligibility. Due to a gap in the contract, which had now been addressed, there were a higher number of SPD NFI outcomes than the previous exercise the Housing Benefit Fraud team had transferred to the DWP Fraud and Error Service (FES), although initial NFI investigations were undertaken by the Council. If this indicated a potential benefit fraud, the case was passed to FES. Matches were closed on the NFI website as “passed to DWP” 317 recoverable fraud and errors had been detected through the current NFI exercise, with an amount to be recovered of £107,116 The following information was provided in appendices 1 to 5 to the report respectively:- a list of the matched areas in the 2022 exercise an update on matches previously reported a breakdown of target investigations and actual outcomes in relation to the 317 recoverable fraud and errors a comparison of outcomes to the 2020 NFI exercise a timetable for the 2024 NFI exercise At the conclusion of each NFI exercise, Audit Scotland published an overview report that set out NFI outcomes across Scotland which drew conclusions from the results and made recommendations for consideration ahead of the next NFI exercise. Detailed information was provided in section 5 of the report. Audit Scotland had reported that although governance and follow-up arrangements remained sound for most of the bodies in Scotland that participated in the 2022 exercise, several had struggled with the delivery and there remained scope for improvement. The Auditor had ranked the delivery as ‘satisfactory’, ‘mostly adequate’ and ‘unsatisfactory’ and reported that good delivery required leadership, knowledge and resources. The Council was ranked as ‘satisfactory’ by Audit Scotland in managing the 2022 NFI exercise. 6
Page 7
Within the Audit Scotland report, 3 recommendations were made for participating bodies as follows:- ensuring that an appropriate level of resource was available to deliver NFI follow-up activities in an efficient and effective manner, in line with local priorities using the NFI Self-Appraisal Checklist as part of the 2024/2025 exercise putting in place arrangements for monitoring follow-up activity, and where it was necessary, seeking to understand reasons for low or nil outcomes All 3 recommendations had been acknowledged by the Council and were already implemented. The following information was provided in appendices 6 to 8 to the report respectively:- a summary of methodologies in calculations applied to NFI datasets in relation to overall outcomes from the 2022 NFI exercise the NFI Self-Appraisal Checklist for the 2024 exercise Audit Scotland’s suggestions for improving efficiencies and effectiveness and associated checklist One of the suggestions from Audit Scotland, as detailed in Appendix 8 to the report, required action from the Council. This was in relation to ensuring that staff involved in the NFI were kept up to date with new features of the web application and good practice, by reading the guidance notes and watching the online training modules before work commenced on matches. It was proposed that all NFI users would be directed to complete refresher training where required ahead of the 2024 NFI exercise. The Audit and Compliance Manager responded to members’ questions on various aspects of the report and, where information was not readily available, undertook to provide this to relevant members. The Committee decided: (1) that South Lanarkshire Council’s outcomes from the 2022 National Fraud Initiative (NFI) exercise be noted; (2) that the summary of Audit Scotland’s NFI exercise report be noted; and (3) that the action highlighted in Appendix 8 to the report be agreed. [Reference: Minutes of 23 June 2023 (Paragraph 7)] 6 Financial Resilience and Sustainability A report dated 2 September 2024 by the Executive Director (Finance and Corporate Resources) was submitted providing an update on:- the Council’s financial outlook, financial resilience and sustainability how risks posed by the financial challenges would be responded to A report had been presented to the Executive Committee on 26 June 2024 which detailed the 2025/2026 to 2027/2028 Revenue Budget Strategy. The report to the Executive Committee had highlighted that the Chartered Institute of Finance and Public Accountancy (CIPFA) had introduced a Financial Management Code (the FM Code) for implementation by 31 March 2021. The FM Code provided guidance for good and sustainable financial management in local authorities. 7
Page 8
Compliance with the principles and standards within the Code would enable local authorities to demonstrate financial sustainability. A key goal of the FM Code was to improve and evidence the financial resilience of organisations by embedding enhanced standards of financial management. In the Annual Audit report for 2023/2024, which was presented earlier on the agenda, it was acknowledged that given the scale of the financial challenges, there was an opportunity to enhance focus on financial resilience, which included:- greater emphasis on reserves clear financial resilience indicators and measures alignment to risks, ensuring there was a clear financial strategy to support a resilient council The Revenue Budget Strategy report to the Executive Committee on 26 June 2024 had detailed that a further report would be presented to the Risk and Audit Scrutiny Committee which would provide further information on the Council’s resilience. Detailed information was provided on:- the financial position and plan for 2025/2026 to 2027/2028 at section 4 of the report financial resilience and a summary of the Financial Resilience Framework at section 5 and Appendix 1 to the report The review of financial resilience was key to understanding the financial risks to the Council. The Financial Strategy was the way in which the Council managed a number of those key risks which directly impacted on the money available to deliver Council outcomes. Officers responded to members’ questions on various aspects of the report. The Committee decided: (1) that the Financial Position and Plan for 2025/2026 to 2027/2028, as detailed in section 4 of the report, be noted; and (2) that the Financial Resilience Framework, as detailed in section 5 and Appendix 1 of the report, be noted. [Reference: Minutes of the Executive Committee of 26 June 2024 (Paragraph 9) and Minutes of the Performance and Review Scrutiny Forum of 27 August 2024 (Paragraph 6)] 7 Internal Audit Activity as at 30 August 2024 A report dated 6 September 2024 by the Executive Director (Finance and Corporate Resources) was submitted on work completed by Internal Audit during the period 1 June to 30 August 2024. Findings from internal audit assignments were reported to this Committee throughout the year and the last progress report was considered by this Committee on 25 June 2024. Information was provided for Internal Audit work completed during the period 1 June to 30 August 2024. As at 30 August 2024, 72% of the 2024/2025 Audit Plan was in progress. Assignments completed in the period 1 June to 30 August 2024, together with a summary of overall assurances, were detailed in Appendix 1 to the report. Key performance indicators for the period to August 2024 were included in Appendix 2 to the report. 8
Page 9
The Council formed part of the Glasgow City Region City Deal which funded a range of capital projects within South Lanarkshire. At the August 2024 meeting of the Cabinet, audit reports had been presented on:- Internal Audit Review Shared Prosperity Fund (SPF), Assurance Framework Compliance 2023/2024 Internal Audit Report and Annual Governance Statement Links to those reports were provided at paragraph 5.1 of the report. The audit of SPF, Assurance Framework Compliance sought to obtain assurance that member authorities were complying with the requirements outlined in the SPF Assurance Framework and that an adequate audit trail was being maintained. Further details were provided in paragraphs 5.2 and 5.3 of the report. The 2023/2024 Internal Audit Report and Annual Governance Statement had provided a positive audit opinion for the year ended 31 March 2024. An update was also provided on progress against the Audit Strategy which was a requirement of the Public Sector Internal Audit Standards (PSIAS). Delivery of the 2024/2025 Strategy would be evidenced by the completion of the Internal Audit Plan in year, and monitored during the year by performance indicators which were regularly reported to the Committee The Committee decided: that progress on Internal Audit activity be noted. [Reference: Minutes of 25 June 2024 (Paragraph 7)] 8 Fraud Statistics Annual Report 2023/2024 A report dated 6 September 2024 by the Executive Director (Finance and Corporate Resources) was submitted on fraud statistics for the year to 31 March 2024 and comparing those figures with the previous year’s statistics. The number, types, outcomes and costs of fraud investigations, together with performance measures for the year to 31 March 2024, were detailed in the report. A comparison to the statistics for the same period in the previous year was also provided. Those statistics highlighted that:- 101 fraud investigations, with a total value of £32,000, had been reported in the period, representing an increase in both number and value from the previous year 66 cases were closed in the period of which:- 19 were founded 28 had insufficient information 19 were unfounded of the 19 founded allegations, 18 were external and one was internal On conclusion of all internal investigations, an assessment would be made on whether improvement actions were necessary. If required, an improvement plan would be issued with recommended actions. The plan would be agreed with the relevant Heads of Service and the actions followed up by Internal Audit to ensure implementation and that gaps had been addressed. Outcomes for concluded investigations would be reported to this Committee as part of Internal Audit’s annual assurance report. The Committee decided: that the contents of the report be noted. [Reference: Minutes of 30 January 2024 (Paragraph 4)] 9
Page 10
9 Year End Insured Risk Report 2023/2024 A report dated 2 September 2024 by the Executive Director (Finance and Corporate Resources) was submitted on the Council’s insurance claims for the year to 31 March 2024 for the following main classes of insurance:- combined liability (covering both public liability and employer’s liability) motor insurance property insurance and other miscellaneous risks Appendix 1 to the report provided annual comparisons of the numbers and values of claims by Resources for the years 2019/2020 to 2023/2024. Claims costs had fluctuated over the last 5 years. On average, over that period, the self-insured cost of claims per annum was £2.444 million, however, the costs for 2023/2024 were above average at £3.548 million. The figures for 2023/2024 had been impacted by a number of significant storm events, with the self-insured estimated cost of those 4 losses being £0.801 million. Inflation, increased costs of materials, car parts and repair charges had also impacted on claim values. Appendix 2 to the report compared claim numbers and costs for 2023/2024, at 31 March 2024, with the equivalent position for 2022/2023. This showed an increase of 7 claims (1%) on the numbers reported in 2022/2023 and an increase in the cost of claims from £2.475 million in 2022/2023 to £3.548 million in 2023/2024. This represented an increase of £1.073 million (43%) which was a result of the damage to council properties from 4 significant storm events that occurred over the winter period. Appendix 3 to the report provided a further breakdown of public liability claims and costs specifically for Roads and other services within Community and Enterprise Resources. Information was also provided in sections 7 to 9 of the report on:- motor claims property claims the areas of work which had been progressed over the last year to mitigate insurance hotspots The Insurance and Risk Management Adviser responded to members’ questions on various aspects of the report and undertook to respond to relevant members on specific claim enquiries. The Committee decided: that the Insured Risks Report for the year ended 31 March 2024 be noted. [Reference: Minutes of 22 August 2023 (Paragraph 5)] 10 Year End Risk Management Report (2023/2024) and Review of Council’s Top Risks (2024/2025) A report dated 5 September 2024 by the Executive Director (Finance and Corporate Resources) was submitted providing an update on:- progress with risk management activity undertaken during 2023/2024 the Council’s top risk register following the review and consultation process the Risk Management Strategy following a review process 10
Page 11
Annual reviews of the Council’s top risks were undertaken, with the findings of the last review reported to the Committee on 31 October 2023. This year’s full review commenced in April 2024 and the consultation had sought views from Heads of Service, elected members and trades unions on new areas of risk. Risk Sponsors were required on an annual basis to assess their Resource’s compliance with the Risk Management Strategy and provide supporting evidence. The information for 2023/2024 was summarised in the end of year compliance statement, which was detailed in Appendix 1 to the report. Resources continued to demonstrate full compliance with the Strategy, having scored 45 out of 45. The progress made in delivering actions to control the Council’s top risks was detailed in section 5 of the report. As at 31 March 2024, the percentage of actions completed on the 2023/2024 risk control plan was 94.4% against an overall target of 90%. One action, in relation to developing neighbourhood plans in East Kilbride and Hamilton, had been delayed and carried forward to the 2024/2025 risk control plan. The annual review, in line with previous years, did not result in wholesale changes to the top risk register. The risks from the previous year’s review, as detailed in the report to this Committee on 31 October 2023, were still deemed to be valid. The results of the review of the Council’s top risks 2024/2025 were detailed in section 6 of the report. The main changes to the risk profile from the previous year were:- 2 new risks had been added to the top risk register:- the Council inherited commercially unviable shopping centres due to the financial failure of existing owner/management companies resulting in significant financial and operational liabilities transferring to the Council the Council failed to comply with its statutory duties by not conducting sufficiently robust impact assessments where the same were required, including in respect of budget/service redesign proposals, leading to potential legal and financial challenges, which could result in failure to deliver those proposals some key risk wordings had been updated to reflect the current status of risks and/or to provide more straightforward and understandable risk descriptions the risk score for ‘Inability of the Council to effectively provide accommodation and support to households who were homeless and people who arrived in South Lanarkshire as part of refugee resettlement and the asylum seeker dispersal programmes, (including those for unaccompanied children)’ had increased from 16 to 20. This was consistent with the difficulties faced managing the risk, reflected in the Council’s recent declaration of a housing emergency the risk score for ‘Inability to take the necessary action due to funding constraints, to combat climate change, and work toward achieving net zero carbon emissions by 2045, thereby contributing to negative and irreversible environmental, social and economic impacts on the Council and its residents’ had increased from 16 to 20, reflecting funding constraints and difficulties faced by the Council in meeting climate change targets the risk score for ‘Fraud, theft, organised crime and cyber attacks’ had increased from 12 to 20. Whilst controls in this area had been assessed as adequate, the threat landscape was very active at the moment and showed no signs of easing the residual score for ‘The Council does not fully deliver the strategic outcomes required of the Integration Joint Board (IJB) as outlined in their Strategic Commissioning Plan’ had increased from 16 to 20, due to the requirement to implement significant savings to address budget shortfalls alongside significant demand pressures the residual risk score in respect of ‘Lack of capacity and skills to meet increased service demands’ had increased from 9 to12 in light of a shift in supply/demand of officers and recruitment difficulties 11
Page 12
the risk score for ‘Increasing levels of adverse weather’ had gone up from 9 to 16. This reflected more frequent issues being encountered by the Council as a result of weather- related events, including significant damage to council properties over recent years as a result of storms and burst pipes. Weather events were also impacting upon the Council’s property insurance premiums and level of uninsured excesses carried the risk score had reduced from 16 to 9 in relation to the ‘Implications of the Scottish Fire and Rescue Service Unwanted Fire Alarm Signals Policy within the Council's non-domestic estate’ risk the ‘Community Wealth Building Strategy’ risk score had reduced from 16 to 9 which aligned this risk with the risks for the Council’s other plans and strategies the ‘IT development/functionality’ risk description had been widened to encompass implementation of new systems. This reflected the 3 significant IT projects which continued to be progressed at present for the Integrated Housing Management System, the SWIS+ replacement (Liquidlogic) and Oracle Fusion The Council’s top risk register was monitored on an ongoing basis and updates were reported annually to this Committee. Risk scores and rankings would be amended if new information came to light that allowed the position to be reassessed. The top Risk Register for 2024/2025 was attached as Appendix 2 to the report. Details were provided at section 7 of the report on a benchmarking exercise that had been conducted by the Scottish Local Authority Chief Internal Auditors Group (SLACIAG) in December 2023. A total of 28 public sector organisations, including South Lanarkshire Council, had taken part in the exercise. Details were also provided at paragraphs 7.2 to 7.5 of the report on the AON Global Risk Management Survey, which was published within ALARM Stronger Journal in April 2024. Horizon scanning was used to identify several areas that could pose potential threats and risks or emerging issues and opportunities that could affect the Council. Areas identified, as detailed in section 8 of the report, included Transformational Change, Scotland Excel Supply Chain Intelligence Report and Artificial Intelligence. Those areas would continue to be monitored to ensure the Council was adequately prepared to respond where required. Details were also provided in sections 9 and 10 of the report on the following areas:- the ‘Three Lines Model’ work being undertaken by Internal Audit. This was now concluding and Resource Risk Sponsors would be provided with individual analysis and guidance to support in developing further controls and in closing gaps for the Council top risks the scope and appetite for risk which included the top risks heat map and the top risks profile To comply with best practice, and to ensure it was fit for purpose, a review of the Risk Management Strategy had been undertaken, as detailed in section 11 of the report. There were no fundamental changes to the Strategy, however, the main revisions were summarised in paragraph 11.2 of the report. The updated Risk Management Strategy was attached at Appendix 3 to the report. The Committee decided: (1) that Resource compliance with the requirements of the Risk Management Strategy be noted; (2) that the progress being made in delivering actions to mitigate top Council risks be noted; (3) that the updated Council’s top risks, as detailed in section 6 of the report, be noted; and 12
Page 13
(4) that the updated Risk Management Strategy be noted. [Reference: Minutes of 31 October 2023 (Paragraph 8)] 11 Forward Programme for Future Meetings A report dated 26 August 2024 by the Executive Director (Finance and Corporate Resources) was submitted on the outline forward programme for the meetings of the Risk and Audit Scrutiny Committee to 30 September 2025. As part of future arrangements, members were invited to suggest topics for inclusion in the Committee’s forward programme. The Committee decided: that the outline forward programme for the meetings of the Risk and Audit Scrutiny Committee to 30 September 2025 be noted. [Reference: Minutes 25 June 2024 (Paragraph 10)] 12 Urgent Business There were no items of urgent business. 13
Page 14
14
Page 15
Report Agenda Item Report to: Risk and Audit Scrutiny Committee Date of Meeting: 19 November 2024 Report by: Executive Director (Finance and Corporate Resources) Subject: Internal Audit Activity as at 31 October 2024 1. Purpose of Report 1.1. The purpose of the report is to:- update the Risk and Audit Scrutiny Committee (RASC) on progress of the Internal Audit service in the period 31 August to 31 October 2024 2. Recommendation(s) 2.1. The Committee is asked to approve the following recommendation(s):- (1) that progress is noted. 3. Background 3.1. Findings from internal audit assignments are reported to the Committee throughout the year. The last progress report to the Committee was in September 2024 and reported on work completed in the period 1 June to 30 August 2024. This report covers all work completed in the period 31 August to 31 October 2024. Performance information is also included. 4. Delivery of the Internal Audit Plan: Progress and Performance 4.1. As at 31 October 2024, 89% of the 2024/2025 Audit Plan is in progress. Of the 89% of assignments started, 32% relate to assignments that are delivered over the course of the year. There has been significant progress in these areas including the successful upload of all requested datasets for the 2024 National Fraud Initiative exercise that commenced in September 2024. 4.2. Appendix 1 lists all assignments completed in the period 31 August to 31 October 2024 together with a summary of overall assurances from each area of work. 4.3. Key performance indicators for the period to 31 October 2024 are included at Appendix 2. 4.4. Members are asked to note progress. 5. Global Internal Audit Standards 5.1. The Internal Audit function within South Lanarkshire Council is required to comply with the Public Sector Internal Audit Standards in its delivery of an internal audit service. Members will be familiar with reference to these Standards within reports presented to the Committee. From April 2025, these Standards will be replaced by the Global Internal Audit Standards (UK Public Sector). These new standards have two elements, the Global Internal Audit Standards (GIAS) and an Application Note: 3 15
Page 16
Global Internal Audit Standards in the UK Public Sector which will be supplemented by a CIPFA Code of Practice on the Governance of Internal Audit in Local Government. A separate report on the new Standard, Application Note and Code of Practice will be presented to the Committee in February 2025. A brief overview is set out in paragraphs 5.2 to 5.7 below. 5.2. The Code of Practice is a practical interpretation of the new Standards with an intention to provide clarity to audit committees and senior management on their role; to provide confidence to internal auditors that they can satisfy the requirements of the new internal audit standards; to provide a relevant interpretation of the new standards for UK local government and to ensure a consistent approach throughout the sector. 5.3. These new Standards will apply to all Public Sector bodies’ internal audit functions. The annual Internal Audit report presented to Committee from 2025/2026 will include a statement that the function has conformed with GIAS in delivering the internal audit service during the year. There will continue to be a requirement for compliance to be periodically, externally assessed and reported to audit committees. A statement around compliance will also now be required to be included in the Council’s annual governance statement from 2025/2026. 5.4. These new Standards will apply to the 2025/2026 Internal Audit Plan that will be presented to this Committee on 18 February 2025. The Plan, when presented, will be accompanied by a mandate, charter and strategy. The authority of the function will be set out within the charter and mandate and will seek Committee support to allow the function “to be effective and to meet the requirements of professional standards” and “to apply their mandate and charter in practice and meet expectations”. 5.5. The Code of Practice also sets out the responsibility to position Internal Audit independently, demonstrated by organisational independence and to ensure that there is effective leadership of the function by a qualified and experienced chief audit executive. To ensure the internal audit function’s effectiveness, the Code expects an overview by the audit committee such that it can satisfy itself that sufficient resources are available to deliver an effective internal audit service. 5.6. Arrangements to review annual conformance are set out within the Code along with a continuation of the arrangement for this to be assessed independently once in each 5-year period. 5.7. Within South Lanarkshire Council, work is underway to ensure that the internal audit function complies with these new Standards from April 2025 and is able to deliver an internal audit service that aligns to both professional standards and best practice. A detailed report around wider requirements and responsibilities, set out within the new Standards, will be presented to this Committee in February 2025 to ensure that the organisation continues to demonstrate compliance with internal audit standards. 6. Internal Audit Plan 2025/2026 6.1. Work has commenced to prepare the 2025/2026 Internal Audit Plan. Consultation exercises involving Council Resources and External Audit are being progressed and will conclude by the end of the calendar year to discuss ideas and suggestions for inclusion in the Plan. Suggestions are also being sought from the Risk and Audit Scrutiny Committee. These should focus on strategic or top risk areas where there are known control weaknesses. 16
Page 17
6.2. Once the consultation process has been concluded, the comprehensive list of audits will be risk assessed and an audit plan presented to the Committee for approval that ensures adequate coverage across all risk areas and is sufficient to inform an annual audit opinion. 7. Progress against Strategy 7.1. The Public Sector Internal Audit Standards (PSIAS) require progress against the audit strategy to be monitored and reported to the Committee as part of regular monitoring reports that are presented at each meeting. 7.2. Delivery of the strategy in 2024/2025 will be evidenced by the completion of the Internal Audit Plan in-year and will be monitored through the performance indicators regularly reported to the Committee. 8. Employee Implications 8.1. There are no employee issues. 9. Financial Implications 9.1. A breakeven position for 2024/2025 is forecast at the end of the financial year for the Internal Audit section. 10. Other Implications 10.1. The main risks to the delivery of the Audit Plan are, generally, vacancies and team up-skilling requirements, unforeseen service demands and delays with client sign-off. These are mitigated by coaching and training, regular meetings and escalation processes as well as inclusion of contingency time within the annual plan. The risk of significant, subsequent amendments to the Plan, arising from a change in the Council’s priorities or risks, are mitigated by regular re-assessment of capacity and Audit Plan content to allow incremental adjustments as the year progresses. 10.2. There are no implications for sustainability in terms of the information contained in this report. 11. Equality Impact Assessment and Consultation Arrangements 11.1. There is no requirement to equality assess the contents of this report. 11.2. Heads of Service are consulted on each and every audit assignment. Jackie Taylor Executive Director (Finance and Corporate Resources) 1 November 2024 Link(s) to Council Values/Priorities/Outcomes Accountable, effective, efficient and transparent Previous References Risk and Audit Scrutiny Committee – 26 March 2024 – 2024/2025 Internal Audit Plan Risk and Audit Scrutiny Committee – 24 September 2024 – Internal Audit Activity as at 30 August 2024 17
Page 18
List of Background Papers Figtree extracts of Action Plans Contact for Further Information If you would like to inspect the background papers or want further information, please contact:- Yvonne Douglas, Audit and Compliance Manager Tel: 01698 452618) E-mail: yvonne.douglas@southlanarkshire.gov.uk 18
Page 19
Assignments completed 31 August to 31 October 2024 Appendix 1 Job Number Assignment name Draft Issue Final Issue Assurance Info I674223 Supplier Expenditure Data Analysis 01/06/2024 22/10/2024 Data analysis shared for further review and action. I674229 Whistle Blowing Concerns 06/08/2024 30/10/2024 Concerns referred to various Council Services. No significant issues identified with some areas being considered for further action if necessary. I674230 External report 08/10/2024 08/10/2024 Preparation of report for external organisation. 19
Page 20
Key audit performance indicators as at 31 October 2024 Appendix 2 Indicator Numbers Percentage Target Comment Assignments delivered within budget 5/5 100% 80% Draft reports delivered within 6 weeks of file review 5/5 100% 80% 2024/2025 Audit Plan completed to draft by 30 April 2024 5/44 11% 100% 39/44 (89%) of 2024/2025 Audit Plan in progress at 31 October 2024. Internal Audit recommendations delivered on time 5/5 100% 90% Client to agree findings and actions within 4 weeks of draft issue 5/5 100% 80% 20
Page 21
Report Agenda Item Report to: Risk and Audit Scrutiny Committee Date of Meeting: 19 November 2024 Report by: Executive Director (Finance and Corporate Resources) Subject: Audit Scotland – Transformation In Councils 1. Purpose of Report 1.1. The purpose of the report is to:- provide the Risk and Audit Scrutiny Committee with a summary of the information contained within the Audit Scotland Transformation In Councils briefing, published in October 2024 2. Recommendation(s) 2.1. The Committee is asked to approve the following recommendation(s):- (1) that the key messages from the Audit Scotland report entitled ‘Transformation in Councils’, as detailed in section 4 of the report, be noted; and (2) that the Council’s position in relation to these key messages, as detailed in section 5 of the report, be noted. 3. Background 3.1. In October 2024, Audit Scotland published a report titled Transformation in Councils on behalf of the Accounts Commission. The introduction and key messages from the report are outlined in section 4 including consideration of the requirement for transformation and the actions required to progress it. 3.2. Section 5 summarises the Council’s position in relation to these key messages and its progress in relation to Transformation, will be detailed for members’ information. 4. Key Messages from the Audit Scotland Report 4.1. This report is part of a series of outputs produced by the Accounts Commission that provide an independent overview of the local government sector. It provides an insight into how the sector is responding to a key challenge currently facing local government and looks at the role that transformation and collaboration can play in helping councils to achieve financial sustainability. 4.2. This report sets the scene for the analysis of plans for transformation at an individual council level. This will then be captured as part of the Best Value thematic focus in the 2024/2025 annual audit, with the national Best Value thematic report on transformation scheduled for 2026. 4.3. Financial sustainability is an issue that extends across the whole public sector. This report complements work planned by the Auditor General for Scotland on the Scottish Government’s approach to fiscal sustainability and reform due for publication later this year. 4 21
Page 22
4.4. A number of key messages are presented by Audit Scotland in part 1 of their report in relation to Transformation in Councils. Each is taken in turn. a. As financial and service demand challenges continue to deepen, councils know they urgently need to transform how they deliver services. Transformation in local government has been happening for decades, but a step change is now urgently required. Councils face barriers to transformation and progress has been slow, but reform is vital and must happen at greater pace and scale. Not doing so puts the sustainability of vital public services at risk. b. To meet these challenges, the Society of Local Authority Chief Executives (Solace) and the Improvement Service have put in place a sector-led Transformation Programme focused on developing proposals for a future operating model for councils through short-term transformation projects, dialogue with public sector partners and a forum for developing leadership capabilities. c. Councils cannot deliver transformation alone and it is essential that the Scottish Government and Community Planning and third sector partners support the transformation of local services through more effective collaboration. Achieving consensus on the longer-term vision for local services is crucial. Faster progress in delivering the aims of the Verity House Agreement (VHA) should also aid the development and delivery of sector-led and local transformation work. d. Public and political support is critical. All elected members must exercise their responsibilities to give clarity on the longer-term vision and ambitions of the councils they represent. A coordinated sector-wide public engagement and communication campaign should be undertaken to help gain backing from communities. To deliver on the change now urgently needed, councils must prioritise both capacity and capability in their workforces to match the ambition and pace needed to transform. This is highly challenging given the significant pressures they face to deliver day-to-day services. 4.5. Part 2 of the Audit Scotland report provides more detail on the transformation required to become financially sustainable and the urgent action required to progress transformation. Points of interest and background information not covered in the report’s key messages are provided below. 4.6. Audit Scotland Reports: Audit Scotland have recently issued a number of reports noting that councils face significant financial sustainability challenges, placing vital public services at risk. These are listed in the List of Background Papers section at the end of this report. They reported last year that councils have never faced such a challenging situation, with increasing demand, workforce pressures and council budgets under severe strain. Their most recent assessment of councils’ financial position was that the financial outlook is extremely challenging and presents real risks for the future. 4.7. Their local government budgets report found that councils have had to make difficult budget-setting decisions for 2024/2025 and that the budget gap is estimated to rise again into 2026/2027 while their recent report on the local government benchmarking framework showed how the pace of improvement in council services is slowing. 4.8. As a result, they have developed some principles to help guide all councils around their expectations for transformational activity at a council level, while allowing for the flexibility required. They expect all councils to follow these principles:- 22
Page 23
Vision - Have a clear vision that sets out the intended end state of any transformation activity Planning - Be clear on the scale of the change required and ensure transformation plans are sufficiently ambitious to credibly respond to the scale of the challenge Governance - Put in place effective governance and escalation processes so that the transformation activities are well managed in their own right, but also able to be given priority alongside other business-as-usual activities Collaboration - Develop better working relationships with communities and/or partners to achieve a sustainable model of service delivery Innovation - Implement new ways of thinking, including innovation, creativity and a desire, willingness, and action to change and do things in new and different ways that achieve the outcomes needed 4.9. Updates on the Transformation Programme: Audit Scotland note that the main sector-led piece of work to help councils reform how they deliver services is the Transformation Programme launched by Solace and the Improvement Service in September 2023. The Transformation Programme is still in the early stages, but good progress has been made in engaging with most councils and a small number of other public service bodies on the programme. 4.10. Work began on 6 focused 12-to-18-month projects in January 2024. These are aimed at helping councils achieve savings and identify longer term solutions and set the foundation for longer term collaboration. The 6 short-term projects are:- collaboration within the local government sector on procurement analysis of local government’s statutory and discretionary services the full implementation of Crerar for Local Government development of a Digital To-Be State for Scottish Local Government identification of new digital shared services that could be delivered nationally or regionally repository of examples of active communities/participatory design 4.11. These projects are at an early stage of development. Although the projects are short term, it is likely that some could take years to implement and for the benefits to be realised, particularly if legislative changes are required. 4.12. Building Capacity to Lead and Deliver Transformation: Council chief executives have established a Leadership Practitioner Forum aimed at aspiring chief executives, directors, and heads of service, to facilitate collaboration on the Transformation Programme and to develop leadership capabilities for the future. Thirty of the 32 councils have engaged to date. 4.13. Officer Led Conversation on Public Sector Reform: This workstream aligns with the Verity House Agreement and focuses on the need for behaviours and actions to change to collaborate effectively on reform. It aims to implement radical public sector reform over the next three to five years. Twenty-eight of the 32 councils have engaged so far. Local authority chief executives have demonstrated a clear desire to work with other public sector agencies and have taken steps to initiate dialogue with partners. There must be clarity on how they will agree a vision and timeline for transformation across the sector. 23
Page 24
4.14. Risks to the overall delivery of the Transformation Programme: The Audit Scotland reported noted a number of risks that could impact on delivery of the Transformation Programme. While programme, workstream and project documentation is in place for most activity, there is not yet sufficient detail on timescales, costs, resources, outcomes, outputs, and impact on the overall programme aims. These could provide reassurance and clarity for councils’ medium to longer-term planning. Clarity on resources includes the transition from the Improvement Service to councils for the implementation stage, and this suggests that councils should consider how to allocate staff resources to best build momentum with the programme and to minimise the risk of missing targets. 4.15. Cosla’s Role in Facilitating Transformation: COSLA established the ‘Innovating Developing and Transforming’ special interest group (SIG) to facilitate collaboration between political leaders, the Scottish Government and other key public sector partners. In April 2024, it agreed it would be the key stakeholder group for political engagement and monitoring progress on transformation work. While it is too early to see the impact of SIG’s role in sector-led transformation work, it has potential to be an important mechanism for gaining political consensus on what the future of local government looks like as well as the potential to facilitate better sector-wide public engagement and collaboration between local and national government. 5. South Lanarkshire Council Position 5.1. The Elected Members of the Council are regularly briefed on the financial challenges that lie ahead. A 3-year Budget Strategy was presented to the Council’s Executive Committee in June 2024, which clearly set out the scale of the task ahead. 5.2. That paper included reference to a Transformational Change Programme to assist in bridging the Budget Gap. Transformation is not new to the Council as we have undertaken service reviews for many years. The current Transformational Change Programme includes both Cross-Cutting and Resource Reviews and has been instrumental in identifying saving proposals for consideration by Elected Members as part of the Budget Setting process for 2025/2026 onwards. 5.3. The Cross-Cutting Reviews have been reported to the Council’s Performance and Review Scrutiny Forum and Elected Members have visibility on the cross-council changes being proposed in respect of the ongoing reviews including management structures, procurement, digital transformation (including customer contact) and the overall property estate of the Council. These reviews are looking at new ways to deliver services including the use of technology to support change and to do things in new and different ways to achieve the outcomes required. 5.4. Engagement with the public, elected members and partners is a key part of the Council’s Budget Setting process. An Elected Members’ seminar has already been held to explain the Budget position for the coming 3 years, and how the Transformational Change Programme can assist the Council in setting a balanced budget. 5.5. As in previous years, the 2025/2026 Budget Communication Strategy has been developed and will explain to the public the financial challenges faced by the Council. Similarly, this year’s Public Consultation detail the Council’s Budget position and will seek the public’s views on the savings proposed by officers. 6. Employee Implications 6.1. None. 24
Page 25
7. Financial Implications 7.1. The Audit Scotland Report raises a number of financial areas for consideration by councils, however, there are no direct financial implications as a result of the content of this report. 8. Climate Change, Sustainability and Environmental Implications 8.1. There are no implications for climate change, sustainability, or the environment in terms of the information contained in this report. 9. Other Implications 9.1. None. 10. Integrated Impact Assessment and Consultation Arrangements 10.1. This report does not introduce a new policy, function or strategy or recommend a change to an existing policy, function, or strategy and, therefore, no integrated impact assessment is required. There is also no requirement to undertake any consultation in terms of the information contained in the report. Jackie Taylor Executive Director (Finance and Corporate Resources) 28 October 2024 Link(s) to Council Values/Priorities/Outcomes Accountable, Effective, Efficient and Transparent Previous References Local government budgets 2024/25. Audit Scotland, May 2024. List of Background Papers Local government Overview 2023. Audit Scotland, May 2023. Local government in Scotland: Financial bulletin 2022/23. Audit Scotland, January 2024. Local government budgets 2024/25. Audit Scotland, May 2024. Local Government Benchmarking Framework annual report Contact for Further Information If you would like to inspect the background papers or want further information, please contact: Jackie Taylor, Executive Director (Finance and Corporate Resources) Ext: 5637 (Tel: 01698 455637) E-mail: jackie.taylor@southlanarkshire.gov.uk 25
Page 26
26
Page 27
Report Agenda Item Report to: Risk and Audit Scrutiny Committee Date of Meeting: 19 November 2024 Report by: Executive Director (Finance and Corporate Resources) Subject: Forward Programme for Future Meetings 1. Purpose of Report 1.1. The purpose of the report is to:- [purpose] advise members of the forward programme for the meetings of the Risk and Audit Scrutiny Committee to 9 December 2025 invite members to suggest topics for inclusion in the Committee’s forward programme [1purpose] 2. Recommendation(s) 2.1. The Committee is asked to approve the following recommendation(s):- [recs] (1) that the report and the outline forward programme for the meetings of the Risk and Audit Scrutiny Committee to 9 December 2025, attached as an Appendix to the report, be noted. [1recs] 3. Background 3.1. As part of a range of improvement measures introduced as a result of Audit Scotland’s report on the Audit of Best Value and Community Planning (2009), an Action Plan was prepared. One of the actions was to include, as a standard agenda item, a list of items proposed for consideration at subsequent meetings of this Committee to provide an opportunity for members to inform future agendas. The outline forward programme to 9 December 2025 is attached, for members’ information, as an Appendix to the report. 4. Employee Implications 4.1. There are no employee implications. 5. Financial Implications 5.1. There are no financial implications. 6. Climate Change, Sustainability and Environmental Implications 6.1. There are no Climate Change, Sustainability or Environmental implications in terms of the information contained within this report. 7. Other Implications 7.1. There are no risk implications in terms of the information contained within this report. 5 27
Page 28
8. Equality Impact Assessment and Consultation Arrangements 8.1. The report does not introduce a new policy, function or strategy or recommend a change to an existing policy, function or strategy and, therefore, no impact assessment is required. 8.2. There was no requirement to undertake any consultation in terms of the information contained in this report. Jackie Taylor Executive Director (Finance and Corporate Resources) 1 November 2024 Link(s) to Council Values/Priorities/Outcomes Accountable, Effective, Efficient and Transparent Previous References Executive Committee 8 July 2009 List of Background Papers Audit Scotland Audit of Best Value and Community Planning Contact for Further Information If you would like to inspect the background papers or want further information, please contact:- Elizabeth-Anne McGonigle, Administration Adviser Tel: 0738 5403101 E-mail:- elizabeth-anne.mcgonigle@southlanarkshire.gov.uk 28
Page 29
APPENDIX – RASC OUTLINE FORWARD PROGRAMME Meeting Date Item Responsibility 18 February 2025 Internal Audit Activity Report Audit and Compliance Manager Performance and Review Scrutiny Forum Annual Update Head of Communications and Strategy 2025/2026 Internal Audit Plan Audit and Compliance Manager Global Internal Audit Standards Audit and Compliance Manager Fraud Statistics Six Monthly Update 2024/2025 Audit and Compliance Manager Good Governance Update Head of Administration and Legal Services Annual Audit Plan External Audit 6 May 2025 Internal Audit Activity Report Audit and Compliance Manager 2024 NFI Exercise Audit and Compliance Manager Audit Scotland – Financial Bulletin 2023/2024 Head of Finance (Strategy) Financial Resources Scrutiny Forum Activity Head of Finance (Strategy) 25 June 2025 Internal Audit Assurance Report 2024/2025 Audit and Compliance Manager Annual Governance Statement for 2024/2025 and Significant Governance Areas Quarter 4 Progress Report Audit Scotland: Best Value Thematic Report Head of Administration and Legal Services External Audit Unaudited Annual Accounts 2024/2025 Head of Finance (Strategy) Interim Management Report External Audit Internal Audit Activity Report Audit and Compliance Manager 29
Page 30
30 September 2025 External Auditor’s Annual Report to South Lanarkshire Council 2024/2025 External Audit Audited Annual Accounts 2024/2025 Head of Finance (Strategy) Internal Audit Activity Report Audit and Compliance Manager Year End Insured Risks Report 2024/2025 Head of Finance (Transactions) Year End Risk Management Report 2024/2025 and Review of Council’s Top Risks 2025/2026 Head of Finance (Transactions) Fraud Statistics Annual Report 2024/2025 Audit and Compliance Manager 9 December 2025 Internal Audit Activity Report Audit and Compliance Manager Audit Scotland Report: Local Government in Scotland Overview 2024 Head of Communications and Strategy Performance and Review Scrutiny Forum Annual Update Head of Communications and Strategy Good Governance Update Head of Administration and Legal Services N.B:- Audit Scotland national studies and reviews will appear as a recurring item but the frequency and subject matter will vary according to their programme. 30