Minutes of the 254th Board Meeting

FINAL with FOI exemptions
Minutes of the 256th Board Meeting
Thursday 24 January 2008
Boardroom, 1st Floor Millbank Tower
9.30am to 1.05pm

Commissioners present:
Staff in attendance:
Michael O’Higgins (Chairman)
Paul Coombs (for part)
Steve Bundred (Chief Executive)
Gina Cutner (for part)
Bharat Shah (Deputy Chairman)
Gareth Davies
Lord Adebowale
Tracey Dennison
Jim Coulter
Martin Evans
Sheila Drew Smith
Jenny Grey
Cllr. Peter Jones
Roger Hamilton
Sir Thomas Legg
Julie Hope
Dame Denise Platt
Michael Hughes (for part)
Brian Pomeroy
Andy McKeon
Dr Raj Rajagopal
Siobhan O’Donoghue (minutes)
Professor Peter Smith
Agnieszka Scott (for part)
Cllr. Chris White (for part)
Dave Stewart
Jo Whitehead
Peter Wilkinson
Brian Willmor

Welcome, Apologies and Announcements

1.
The Chairman welcomed the Board to the meeting and the following
announcements were made:
a.
Apologies had been received from Commissioners Jennifer Dixon, Cllr.
Steve Houghton and Jenny Watson.
b.
Cllr. Sir Simon Milton, Chair of the Local Government Association and his
colleague, Corin Thompson, were welcomed to the meeting to speak to
the Board on matters of mutual interest.
c.
Brian Willmor, RD, London Region was welcomed to the meeting.
d.
Roy Shaw OBE, Hon Alderman of LB Camden, who had played a key
role in the formation of the Audit Commission, had died. The
Commission had been represented at the funeral.
e.
The Board welcomed the news that Commissioner Jennifer Dixon had
been appointed as Director of the Nuffield Trust; and that Frances Done,
former MD, Local Government at the Commission had been appointed
Chair of the Youth Justice Board.

Guest Speaker: Cllr. Sir Simon Milton, Chair, Local Government Association.

2.
Sir Simon Milton, Chair of the Local Government Association (LGA) addressed
the Board and spoke about matters of mutual interest. Sir Simon began by
summarising the LGA’s key activities and achievements over the past year;
subjects of ongoing discussions with central government; and the LGA’s aims
and challenges for 2008: [Section 36(2)(c)]
.

3.
Sir Simon concluded by saying that the relationship between the organisations
was positive, although not without difficulties: for example, the LGA had felt that
the recent Positively Charged report was well-balanced, but that the press
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release had been unfairly one-sided against local authorities. Although the level
and honesty of the dialogue between the organisations was positive, the
Commission needed to be clear that the LGA’s concerns were serious and
genuine, particularly around the issue of fee levels, and the LGA would welcome
the opportunity to discuss, and hopefully resolve, some of the concerns with the
Commission.

4.
Board members went on to discuss further some of the topics that Sir Simon
covered in his presentation, and asked questions on other matters of interest, as
summarised below: [Section 36(2)(c)]
.

5.
On behalf of the Board, the Chairman thanked Sir Simon and his colleague,
Corin Thompson, for taking the time to speak to the Board.

Minutes of the last Meeting – 13 December 2008

6.
The minutes of the 255th Board Meeting were approved as a correct record,
subject to the removal of paragraph 19a), which was potentially misleading.

7.
The Board approved the minutes of the last Meeting as a correct record.

Report
of
the
Chief
Executive
CP
01-08

8.
Cabinet Office Announcement on Data Security: In addition to the items in his
report, the Chief Executive announced that on 22 January 2008, the Cabinet
Secretary issued an instruction to all government departments and their
agencies that no unencrypted laptops or drives containing personal data should
be taken outside secured office premises. At this stage, it was not clear to what
extent that instruction applied to the Commission as a public corporation, but the
potential implications were considerable as our auditors held this type of
information, albeit temporarily, as part of their duties. It was also unclear
whether the restriction would apply to firms’ auditors and their hardware. The
Commission was in communication with the Cabinet Office about this matter
and a dispensation had been requested whilst we conducted an assessment of
the measures that we might need to take, and the associated cost implications.
The March Audit Committee would receive a detailed paper on this matter,
and other data and network security issues at its March 2008 meeting.
Regardless of whether the instruction applied to the Commission in a legal
sense, the Commission would seek to implement the spirit of the requirement,
and staff would also be re-issued with Freedom of Information guidance on the
deletion of personal data.

9.
Local Government and Public Involvement in Health Act 2007: The Chief
Executive clarified that the powers under Schedule 2A, including the
Commission’s power of advice and assistance, would come into force on 31
January 2008, and that the Commission’s name would be changed to remove
the reference to Wales.

10.
Housing and Regeneration Bill: There were a number of areas of the draft Bill
where tightening and tidying-up of the legislation would be beneficial to the
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Commission and others. The Commission’s Chief Housing Inspector was a
member of the Transition Board that had been established.

11.
Meetings with Government Ministers and Others: The Chief Executive reported
that, despite the Local Government Minister’s initial negative reaction to the
publication of the flooding report, he was now engaging constructively with the
Commission about the report’s findings.

12.
[Section 36(2)(b)(i)]

13.
Review of the National Audit Office: John Tiner’s report on the National Audit
Office’s governance had been submitted to the Public Accounts Committee, for
their consideration on 5 February 2008.  Although the report had a narrow remit,
discussions as part of the review had touched on broader issues and it was
likely that there would be further consideration of these wider issues following
the initial report.

14.
[Section 36(2)(b)(i)]

15.
The Board noted the report of the Chief Executive.

Pay
Settlement
2008
–
2011
CP
02-08

16.
The MD, Human Resources presented the report that set out the proposals for a
three year pay settlement for all Commission employees on permanent or fixed-
term contracts, following direction on the parameters for such a pay deal from
the Board at its meeting in December 2007. The MD, Human Resources
confirmed that the report contained an erroneous statement in para. 7.1, in that
the two-stage year one (2008/09) settlement would have a knock-on effect of
4.5 per cent, and not 2.75 per cent as reported.

17.
Commissioners felt that the three-year settlement, which amounted to a 0.5 per
cent annual increase in real terms, was ultimately a neat solution to a complex
and important issue that had wide ranging implications for staff morale and
performance. However, there needed to be a serious budget assessment of the
implications of an above 3 percent combined CPI/RPI inflation rate; particularly
as an inflation rate cap had not been discussed, nor was there any legal basis
under which the agreement could be revisited in light of higher than anticipated
inflation rates. The Board felt that this was an important matter to address and
that a right to review the pay settlement should be built into any
agreement.

18.
The Medium Term Financial Plan discussed at the last Board meeting in
December 2007 had not reflected the implications of the proposed pay
settlement, and a revised version would be considered by the Board at its next
meeting in March 2008. The Board agreed that should any additional
resources have to be found as a result of the pay settlement, these would
have to be through in-house efficiencies.

19.
Commissioner Cllr. Peter Jones did not support the proposals as set out in the
report, and as such, did not approve the recommendations.
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Siobhan O’Donoghue                                                                                                                        Issued: 14.03.08

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20.
The Board;
a.
approved a three year pay settlement to apply to basic pay and
allowances for all Commission employees on permanent or fixed
term contracts, comprising;
b.
2008/09: a 1 per cent pay increase from 1 April 2008 and a further
3.5 per cent increase from 1 October 2008, equating to a 2.7675 per
cent increase in the full year;
c.
2009/10: from 1 April 2009, an increase equivalent to the average of
CPI and RPI inflation rates plus 0.5 per cent, based on an average
of six months’ CPI/RPI figures for the period ending September
2008; and
d.
2010/11: from 1 April 2010, an increase equivalent to the average of
CPI and RPI inflation rates plus 0.5 per cent, based on an average
of six months’ CPI/RPI figures for the period ending September
2009;
e.
agreed that any and additional resources required would be found
through in-house efficiencies;
f.
agreed that a right to review the settlement be built into any
agreement; and
g.
noted the intention to report to the next Board meeting the
outcome of a review of benefits provided by the Audit Commission
Pension Scheme.

Audit Commission Pension Scheme Governance

CP 03-08

21.
Commissioners Bharat Shah and Cllr. Peter Jones and the MD, Corporate
Services declared an interest as Trustees of the Audit Commission Pension
Scheme. It was not deemed necessary for the Trustees to leave the room, but
the Trustees would not take part in any decision on the recommendations.

22.
The Board had agreed at its December 2006 meeting to a number of measures
that strengthened the governance arrangements and structure of the pension
scheme, including an independent trustee who acted as Chair of the Trustee
Board. Although there was no legal requirement to have an independent
Pension Scheme Trustee it was considered good practice to do so, particularly
for a scheme the size of the Commission’s.

23.
The contract with the current independent Trustee was due for renewal in March
2008, and as such, the Board agreed that this would provide an opportunity to
begin a re-tendering exercise with a view to appointing a suitably qualified and
experienced corporate and individually professional Trustee. The Board also
agreed that the role of Trustee Chair was a suitable role for such an
independent member, and that the appointment process must be focused
absolutely on the requirements of that position.

24.
The Board:
a.
agreed to the appointment of a new independent trustee and
nominated Commissioner Dame Denise Platt to serve on the
appointment panel;
b.
agreed to consult the Trustees of the Audit Commission Pension
Scheme on:
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Siobhan O’Donoghue                                                                                                                        Issued: 14.03.08

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c.
any change in the status of the independent trustee, if it is
proposed that the independent trustee should no longer be Chair
of Trustees ;
d.
any proposed alternative process for the appointment of a Chair of
Trustees, or the name of a nominated individual Trustee to take
that role; and
e.
delegated final decision on these matters, following consultation
with the Trustees, to the Chairman.

Q3
2007/08
Performance
Report   CP
04-08

25.
The MD, Corporate Services presented the performance report covering the
period October to December 2007. The balanced scorecard reflected a
cautious assessment, with eight amber and one red status issues. The red
assessment reflected ‘the firms’ financial performance’, as income from the
firms was currently £1.8 million lower than the budgeted of £5.4 million.
However, this was due to over-optimistic budgeting assumptions and lower than
anticipated volumes of workload returns in the first half of the year, rather than
actual performance.

26.
Amber risks in the balanced scorecard included ‘people management, culture
and diversity’. As well as those areas for improvement addressed in the report,
it was suggested that, in order to avoid reputational damage, progress needed
to be made in the appointment of CAA Lead roles, as the predominant profile for
CAA Leads so far in the regions was white and male.

27.
It was suggested that some of the amber risk areas could be discussed in a less
formal environment at the forthcoming Board Awayday, for example the
challenges the Commission faced in terms of knowledge capture and sharing;
implementing good practice; and a culture of learning within the organisation.

28.
The Board also noted the pension adjustment costs and felt that the IFRS
figures might need to be reconsidered. In light of the recent discussion on the
pension scheme, (see CP 03-08 elsewhere) and the instability of the current
market, the Board requested that a paper on the risk profile of the pension
scheme should be produced, once the new Chair of the Trustees had been
appointed. The Deputy Chair and Cllr. Peter Jones; the MD Human Resources
and the Commission Solicitor would discuss this and other pension scheme
matters outside the Board meeting.

29.
The Board noted:
a.
the overall performance summarised in the balanced scorecard;
b.
the key achievements in the quarter;
c.
progress against Strategic Plan activities;
d.
the publications timeline; and
e.
the management accounts to December.

Audit
Issues
CP
06-08

30.
The MD, Audit presented the report that sought the Board’s agreement on
various operational issues; and reported on a number of professional practice
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Siobhan O’Donoghue                                                                                                                        Issued: 14.03.08

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matters and sensitive issues. The Board approved the audit appointments as
set out in the recommendations, before considering individual regulatory and
professional matters, as follows:
a.
Long standing audit appointments: The Board welcomed the research
that had been carried out on whether there was any correlation between
the length of appointment and the performance of the audited body.
However, Commissioners felt that, based on the information as
presented in the report, the conclusion that there was no evidence of
a link was not strictly accurate, and that there should be more
analysis.
b.
Limited Assurance Audits: The procurement exercise in relation to
limited assurance audits had been successfully concluded, with an
overall saving of £300,000 per year.
c.
[Section 33]
d.
[Section 33]
e.
Audit Inspection Unit (AIU): The AIU inspectors would be on-site from 10
February 2008 and the five auditors for file review had now been
selected.

31.
The Board:
a.
approved the appointment of Deloitte as the appointed auditor to
Imperial College Healthcare Trust;
b.
approved the appointment of Paul King as the appointed auditor to
Colchester and Ipswich Museum Service Joint Committee;
c.
approved to appointment of Alison Rigg to deal with residual
matters arising form an objection raised by an elector at Corby
Borough Council;
d.
approved the extension of Stephen Warren’s appointment to deal
with an objection raised by an elector at Croydon Council;
e.
approved other changes as set out in Appendix 1 of the report; and
f.
noted the other issues as set out in the report.

Year
End
Accounts
Timetable
CP
06-08

32.
The Board noted and approved the timetable for the production of the
Commission’s Annual Report and Accounts for 2007/08, and noted the
proposals to align the cycles of 2009 Board meetings with the latter stages of
the NAO’s 2008/09 audit programme work and the Parliamentary summer
recess.

33.
The Board approved the timetable and the delegations to the Audit
Committee and the Accounting Officer, as set out in the report.

Minutes of Recent Meetings

    CP 07-08 and CP 08-08

34.
The Board noted the minutes of the 31 October 2007 meeting of the Housing
and Regeneration Advisory Group; and the 12 December 2007 meeting of the
Audit Committee, in particular the Audit Committee’s approval of a new
approach to internal audit by means of an internal Head of Assurance.

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Siobhan O’Donoghue                                                                                                                        Issued: 14.03.08

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35.
The Board noted the minutes of the previous meetings without
comment.

National Study: Efficiency of Back
Office
Functions   CP
09-08

36.
The MD, Policy Research and Studies and the Director of Studies presented to
the Board the emerging findings of the study on how local authorities achieve
efficiency gains in back office services. Work so far had found that local
government had achieved considerable efficiency gains to date, particularly
where a transformational approach had been adopted, but, there were still
possibilities for further gains. There was no formulaic solution to achieving
efficiencies, and each local authority had its own individual efficiency journey to
make and had to be aware of its own starting position. Efficiencies had to be an
ongoing process and would be challenging, even for the best authorities.
Strategic whole service redesign required a longer-term view, risk-management
and investment, but ultimately delivered significant and sustainable benefits.

37.
[Section 36(2)(b)(ii)]

38.
The Board:
a.
commented on the draft key messages; and
b.
delegated authority to the Chief Executive to approve the full report
for publication.

National Study: Local Government Workforce

CP 10-08

39.
The MD, Policy Research and Studies and the Director of Studies presented to
the Board the emerging findings of the study on local government workforce and
the recruitment and retention challenges faced by local authorities and their
partners. The study looked at: links between authorities’ approaches to
developing their workforces and their ability to achieve strategic objectives; and
identifying costs and benefits of particular approaches, including their impact on
diversity and equality. The study followed on from the Commission’s 2002
report Recruitment and Retention: a public service workforce for the twenty first
century, although the messages and recommendations in this latest study were
aimed at chief executives and lead councillors; as a coordinated, long term
strategic action was required to address the recruitment and retention issues
raised in the study.

40.
Local government faced a number of significant recruitment and retention
challenges. Employee expenditure was the single largest area of spend for
local government, with the average cost of filling a vacancy being £4,333 per
employee, rising to £7,750. Nearly 90 per cent of authorities reported difficulties
recruiting and retaining professional staff, including planning officers, adult
social carers and environmental health officers, who were the key groups
addressed in the study. These recruitment difficulties were exacerbated in the
context of a changing environment, for example an increasingly mixed economy
of provision, and a greater emphasis on partnership working and joint delivery
across sectors. Failure to act on recruitment and retention at a strategic level
could have massive consequences for service delivery, for example, a predicted
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Siobhan O’Donoghue                                                                                                                        Issued: 14.03.08

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fifty per cent national shortage of qualified planners by 2012; and a predicted 15
per cent shortfall of social workers by 2020.

41.
Despite progress since the 2004 National Pay and Workforce Strategy, the
extent of workforce plans and strategies across local government varied widely
and the quality was unknown in any great detail. However, the study had found
a number of common characteristics among councils with effective approaches
to recruitment and retention, and these were picked out in the case studies.

42.
[Section 36(2)(b)(ii)]:

43.
The Board:
a.
commented on the draft key messages and findings;
b.
commented on proposals for securing impact; and
c.
delegated authority to the Chief Executive to approve the full report
for publication.

Information Bulletin / Speaking Engagements

CP 11-08 and CP 12-08

44.
The Board noted the Information Bulletin and the Chairman’s recent speaking
engagements.

45.
The Board noted the Information Bulletin and Chairman’s speaking
engagements without comment.

Any Other Business

Verbal

46.
There were no further items of business.

Date of next meeting

47.
The next Board meeting would take place at 9.30am on Thursday 13 March
2008, in the Boardroom, Millbank Tower.
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