Agenda item

To receive a risk management service update following a limited assurance audit.

Perry Holmes, Director Legal and Governance and Monitoring Officer presented the Risk Management Service Update. The Monitoring Officer outlined that he was grateful for the work which had been undertaken by SWAP, including a comprehensive audit of the risk process with there an aim of making improvements. The audit was conducted at the start of the year, and it was reported in July that there had been significant progress against agreed actions.

It was outlined that a new version of the Risk Register had been launched as well as a first draft of the new risk policy. Work was progressing on other actions, with some areas set to be completed within timescale or ahead of schedule. The Monitoring Officer stated that next week the first meeting of the new Risk Working Group would take place, which he would chair and along with colleagues from the Extended Leadership Team, would respond to questions posed by the Committee as well as providing feedback on risk appetite and considering training. The group would review strategic risks and come forward with a new reporting protocol for reports, like what was previously seen at Cabinet. Significant progress had been made against concerns previously brought forward, with it outlined that an approach is being taken so that each action can be moved to a better place with an intention to look at best practice across the Local Government sector and HMRC.

The following points and questions were raised by Members of the Committee, including queries relating to procurement risks, having seen some failures in other corporate governance. Clarity was provided that there are bigger areas of risk exposure within contract areas with process guarantees, declarations insurance cover and certification required. Additionally, it was outlined that due diligence checks are carried out in an operational and financial capacity. The complexity of the contracting landscape was referenced, with differences between care and highways contracts cited. Reference was made to ensuring that the tender document evaluated the right criteria with experts evaluating responses provided as well as ensuring the correct legal process was followed. The importance of credit checks was cited as well as management indicators and mitigations to ensure contractual performance. Further clarity was cited that there is not a one size fits all contract and clauses in each contract will vary.

A question was raised as to whether it would be possible to set up an audit process on each cost input to identify where cost index risks might lie within contracts. The Section 151 Officer stated that there is a need for there to consider the balance of complexity when going through the procurement process and that it would leave the Council open to challenge should documents not be clear. It was also important to be mindful that each independent bidding company would have a different cost base and model. It was important to have a strong contract management process in place so that the Council was able to understand risk and have conversations with strategic contractors.

The concept of being able to be flexible with the terms and conditions of contracts was discussed to allow businesses to financially survive whilst still delivering a service. It was stated by officers that contract management and relationships were the key to success as well as having honest conversations about service delivery. The Section 151 Officer stated that when putting out contracts, the Council would need to be aware of the initial position of a contract as to change details in the future would leave the Council open to challenge from other bidders.  The officer also confirmed that conversations take place regarding the cost of living, however there was an importance of being aware of the legal position and processes in place.

Assurance was sought regarding the responsibilities of the Audit and Governance Committee and the Overview and Scrutiny Committee (OSMC), with concern raised that it wasn’t clear whether OSMC were aware of what was expected of them and how their obligations should be discharged. The Monitoring Officer outlined that the Risk Register had been shared to both Cabinet and OSMC and that the risks within had been mitigated and were open for all committees to deal with risks. It was stressed that Members of OSMC spoke about risks, with examples cited about risks to children’s services and that the Audit and Governance Committee retained an ability to highlight any risks in its area to OSMC, which might need further consideration.

It was suggested that there wasn’t appropriate interaction between the Audit and Governance Committee and OSMC, with is suggested that there was ambiguity between responsibilities and clear evidence of such responsibilities being discharged. The Monitoring Officer stated it would be for the Committee and individual Scrutiny Committees to assure themselves of the mitigations taking place to stop risks from derailing the business plan. Reference was made to how the Risk Register was split so that each relevant Committee would receive risks relevant to their respective areas to then be reported upon.

Informal Action: It was agreed that the Chairman and the Vice-Chairman of the Audit and Governance Committee would have a conversation with the Chairman and Vice-Chairman of the Overview and Scrutiny Committee to ensure that responsibilities were understood.

A point was made regarding the relationship between risk and insurance, with it hoped that new risk management would recognise this. The Monitoring Officer noted that new risk management would improve the flow of information and that insurance was a good way of dampening the impact of risk should it come to fruition. It was noted that regular conversations take place with the legal department to ensure coverage.

Reference was made to exception contracts and how reconciliation is made should the Council encounter issues. The Section 1515 officer noted that the law must be applied depending on the tendering situation faced and with different processes. Regarding exceptions, decisions have to be made where contractors might not be following the rules but still acting legally; therefore meaning it was important to note that there isn’t a one size fits all approach to each contract. The Council has a framework in which it needs to operate and laws, however each situation and expectations can be different. Further detail was also provided that documents are sent out to bidders in a certain way with steps to be considered.

It was questioned whether the Council had appropriate contingency plans in place for should risks come to fruition, to which the Monitoring Officer provided assurance to the Committee that all building contracts taken out consider  contingency. Horizon scanning was discussed, with it noted that in general the Council had shown agility and resilience in the past 5 years to respond to issues outside of its control. It was agreed that as part of policy work it would be considered whether the idea of contingency was covered sufficiently. The Section 151 drew reference to budget setting and that financial contingency was considered within this process through assumptions and whether reserves would be adequate to offset risks.

The Chairman proposed the recommendation within the report to accept the status update following the recent risk management audit. This was seconded by Cllr Gavin Grant.

After which, it was,

Resolved:

·   To accept the status update following the recent risk management audit.