Venue: Room 116, West Midlands Combined Authority, 16 Summer Lane, Birmingham, B19 3SD
Contact: Craig Evans, Governance Services Officer
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Apologies for Absence Presented By: Chair Minutes: An apology for absence was received from Councillor Karen McCarthy (Birmingham). It was noted that Councillor Ian Woodall had been nominated by the Worcestershire Non-Constituent Authorities.
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Minutes - 15 July 2024 Presented By: Chair Minutes: The minutes of the meeting held on 15 July 2024 were agreed as a correct record. |
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Matters Arising Presented By: Chair Minutes: Minute No. 7 WMCA External Audit Plan 2023/24
The Director of Law and Governance noted that although the previous minutes were an accurate record of comments made, she acknowledged that in fact the role of Chief Audit Executive fell within the job description of the Head of Audit and Information Governance.
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Presented By: Chair Minutes: That the actions list be reviewed and noted. |
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Presented By: Chair Minutes: That the work programme be reviewed and noted. |
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Chair's Remarks (if any) Presented By: Chair Minutes: The Chair provided a brief update, highlighting a meeting with the Mayor in late August to discuss priorities and issues, and emphasised the importance of this in shaping agendas accordingly.
The September WMCA Board meeting had been postponed to October, where a significant discussion on bus franchising was expected. The Chair also attended an Overview and Scrutiny Committee meeting, with an important scheduled agenda item to discuss policy engagement with the mayor during October.
The Chair further reported on his attendance at the Investment Board meetings attended in July and September, to note a focus on the progress of previously approved investments and ensuring projects were delivered on time and within budget. This shift aligned with internal audit findings and would be further discussed during the meeting.
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West Midlands Combined Authority External Audit Progress Report Presented By: Louise Cowen Minutes: The committee considered a report from the Head of Financial Management to update on progress towards completing the external audit of the WMCA’s financial statements for the year ended 31 March 2024 and to provide an update on legislation proposed by the Government aiming to clear the existing national local audit backlog.
The Head of Financial Management continued to provide an update on the ongoing audit by Grant Thornton, which recommenced in early September and was expected to conclude by the end of October. It was anticipated that the findings, including the audit report and value for money assessment, would be presented at the 18 November ARAC meeting.
Following publication of recent guidance by both the Government and the FRC, changes to legislation regarding backstop dates were discussed, noting that while most of these changes did not directly impact on the combined authority at the present time, it would affect some of the local authorities. It was noted that the deadline for publication of draft unaudited accounts had been put back to 30 June following the financial year to which they relate, 30 days later than the previous deadline.
The discussion also covered the implementation of IFRS 16, which required significant changes to lease accounting starting 1 April 2024. Although the new standard did not apply until next year, its impact must be disclosed in the accounts for the year ended 31 March 2024 year.
The Chair emphasised the importance for ensuring member attendance at the November meeting to sign off the accounts, with substitutes arranged in advance if necessary.
Resolved: (1) That the report be noted. |
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Independent Transport Review Update Presented By: Helen Edwards Minutes: The Director of Law and Governance noted that the review was currently in its early stages and that Arup had been selected as the reviewer after a tender process involving three bids. Arup had been appointed in mid-September and had begun gathering information from various people within the organisation. The review was expected to be short-term, with initial results anticipated by the end of October.
With regard to the scope of the review, Councillor Fitter suggested that this should be shared with members of the committee and the Director of Law and Governance agreed that this could be circulated by the Governance Services Officer as it was a public document.
The Chair noted that the review was considered important to the overall governance framework of the WMCA and that there could be follow-up implications dependent on the findings.
Resolved: (1) That the verbal update be noted.
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Internal Audit Charter 2024/25 Presented By: Matthew Dean Additional documents: Minutes: The committee considered a report from the Head of Audit and Information Governance to note that the Internal Audit Charter was a formal document that established reporting lines within the organisation, authorised access to records, personnel and physical property relevant to the performance of audit work and defined the scope of Internal Audit activities.
The Head of Audit and Information Governance further noted that the Internal Audit Standards Board had issued new global standards in January 2024, which would take effect in January 2025. The WMCA would align with these new standards, and the updated charter would be brought back for approval, once the standards were in place.
Councillor Martin and other members expressed approval of the document, with minor points raised about scrutiny interaction and the annual report. It was noted that an external assessment of the internal audit would be premature, but that it should be considered in the future.
The Head of Audit and Information Governance also noted that the use of the term “satisfactory” had been updated to “reasonable” to align with best practices in internal audit report conclusions.
Resolved: (1) That the Internal Audit Charter 2024/25 be reviewed and approved.
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Internal Audit Update Report [Please note this item includes four private appendices] Presented By: Matthew Dean Additional documents:
Minutes: The committee considered a report from the Head of Audit and Information Governance to provide an update on the work completed by the Internal Audit team since the previous update in July 2024 and progress made against delivery of the 2023/24 and 2024/25 Internal Audit Plan.
The Head of Audit and Information Governance noted that the 2023/24 internal audits were nearly complete, with only the Swift audit pending. Four audits had been completed since the last meeting of ARAC: Business Continuity, Retrofit, Longbridge Park and Ride Follow-Up, and Adult Skills Procurement, with varying levels of assurance. Additionally, two audits from the 2024/25 plan were in draft status and awaiting management comments.
The committee discussed the status of outstanding actions, noting that target dates for two key financial systems audit recommendations had been amended to December 2024. In response, the Head of Audit and Information Governance clarified that actions related to Procurement Exemptions and IR35 had revised implementation dates of January 2025 and December 2024 respectively, with one red and four amber actions remaining.
Concerns from the committee were raised about the energy efficiency retrofit programme, particularly regarding its adequacy in light of increased fuel poverty in the West Midlands. Following the concerns raised, the Chair noted that the issue would probably be further discussed in an upcoming Overview and Scrutiny Committee policy session in October.
The remaining audit reports and detailed comments would be addressed during the private session of the agenda.
Resolved: (1) That the contents of the latest Internal Audit Update Report be noted.
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Strategic Risk Update Presented By: Peter Astrella Additional documents:
Minutes: The committee considered a report from the Risk Manager to present visibility of the strategic risks currently faced by the WMCA and to support its function in monitoring the operation of risk management at the WMCA as outlined within the Strategic Risk Update at Appendix 1 and the Strategic Risk Register at Appendix 2.
The risk register update highlighted the closure of inflation and global supply chain risks, while a new risk was identified in transport capital delivery projects and a revision to the risk in relation to housing capital delivery projects. Financial resilience of the WMCA was noted as an increased risk, reflecting uncertainty in certain areas following the change of government and business continuity risk had been updated to reflect the findings from the recent internal audit report on business continuity.
In terms of business continuity, the Chair emphasised the importance of IT systems security and the committee recommended to receive a future update from the Strategic Head of Digital and Data on IT security to keep the committee informed of risks and safeguards. Councillor Lakha noted the importance of staff training in this area.
A significant portion of the meeting focused on financial resilience and transport funding. The region’s £250 million contingency revenue funding for transport was potentially uncertain due to a change in government, prompting contingency plans and an emergency meeting scheduled for 1 November between the Mayor and Metropolitan Leaders to address the impact of the budget on 31 October. The committee also discussed the disparity in local transport funding between the West Midlands and Manchester, emphasising the need for strategic planning.
Governance awareness and monitoring were also key topics, with the Head of Law and Governance noting a comprehensive training programme conducted in September for staff. Continuous monitoring and enhancements in governance processes, particularly around third-party investments, were discussed by the committee to ensure the organisation remained vigilant and proactive.
It was also acknowledged by the committee that the WMCA Board was exploring bus franchising options, with an independent audit of the data relating to the business case currently underway. A decision on franchising would potentially be made at a discussion at the WMCA Board scheduled for 11 October.
The importance of robustly managing contracts with independent training providers was emphasised, partly due to the size of the budget for expenditure in this area but also due to matters flagged in internal audit reviews and whistleblowing matters highlighting this as an area of risk.
The discussions from the committee concluded with an agreement to monitor the new and expanded risks closely. The committee further recommended updates on IT security and cyber assurance from the Strategic Head of Digital and Data and for the committee to receive an update on the transport funding situation at its next meeting in November.
Resolved: (1) That the key messages in the Strategic Risk Update and revisions to the Strategic Risk Register be noted.
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Single Assurance Framework (SAF) Assurance Performance Report - Q1 2024/25 Presented By: Joti Sharma Minutes: The committee considered a report from the Head of Programme Assurance and Appraisal to provide reassurance that the WMCA continued to support embedding the Single Assurance Framework arrangements at the WMCA to support increase in project management capability within the organisation and detailing quantitative information and preparations for integrated settlement, with a focus on robust controls involving finance, governance, and legal departments.
The discussion on change requests revealed an increase in activity, driven by external factors and opportunities to expand programmes. The Chair enquired as to the adequacy of both cost and time assessments in change requests, noting that the report highlighted that many breach the 10% tolerance before submission of a change request. In response, the Head of Programme Assurance and Appraisal acknowledged these issues and emphasised ongoing efforts to improve the process and controls.
The Chair further noted that many business cases came through unexpectedly, impacting team workload, and discussed the need for better planning and earlier intervention. In response, the Head of Programme Assurance and Appraisal highlighted the impact of election periods and short government bidding windows on planning and emphasised the potential benefits of moving to a Single Settlement for better regional planning.
Finally, the Chair queried the frequency of business case rejections, and the Head of Programme Assurance and Appraisal clarified that whilst the majority are recommended for approval, they often come with conditions. She emphasised that the appraisal scheme was independent, and efforts were ongoing to ensure that conditions were captured and integrated into funding agreements and decisions.
Resolved: (1) The
contents of the report which had been considered by
WMCA’s
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Overview of WMCA's Arms Length Companies Presented By: Helen Edwards Additional documents:
Minutes: The committee considered a report from the Director of Law and Governance to set out for consideration, the annual method of monitoring by the Audit, Risk and Assurance Committee of the WMCA’s arm’s length companies.
The report included recommendations for the committee to consider, particularly the proposal for an annual update following the last meeting of the municipal year to incorporate any arising actions into the following year’s work plans.
Councillor Martin thanked the Director of Law and Governance for the report and emphasised the importance of understanding the performance and contributions of the companies to the WMCA’s operations.
The Chair commended the Director of Law and Governance and her team for the comprehensive and consistent nature of the updated report, noting its usefulness for both the committee and external auditors.
The Chair highlighted to the committee that the companies listed within the report could fall within the remit of internal audit if necessary.
Resolved: (1) The recommendation as set out in paragraphs 4.7 and 5.1 of the report for the method of monitoring the companies, in which WMCA owns an interest, on an annual basis be considered and agreed.
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Exclusion of the Public and Press [In accordance with s100(A) of the Local Government Act 1972, the public and press be excluded from the meeting for the following items of business as they are likely to involve the disclosure of exempt information as specified in the paragraphs of the Act.] Presented By: Chair Minutes: [In accordance with s100(A) of the Local Government Act 1972, the public and press be excluded from the meeting for the following items of business as they are likely to involve the disclosure of exempt information as specified in the paragraphs of the Act.] |
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Update from questions raised in respect of item 7. WMCA External Audit Plan 2023/24 at the last meeting Presented By: Helen Edwards Minutes: Following the external audit plan at the last meeting that referenced litigation, the committee requested an update on current litigation within the WMCA.
The Director of Law and Governance provided a brief update of the small number of litigation cases that were either resolved or on-going and that were not considered to be material to the combined authority.
Resolved: (1) That the verbal update be noted. |
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Consideration of Private Internal Audit Reports Presented By: Chair Minutes: The Head of Audit and Information Governance summarised the four private audit reports completed since July 2024. The reports focussed on a park and ride site, business continuity arrangements, energy efficient retrofit schemes and the procurement of adult education services.
The business continuity report highlighted six high-level recommendations, with only limited assurance, due to outdated plans and inadequate governance. The Director of Law and Governance assured the committee that the WMCA’s Executive Board had been made aware and had allocated additional resources to address these issues.
It was agreed for the committee to receive regular updates on business continuity through the audit reports to each meeting and for a formal follow up report on this area to be discussed at a future committee meeting by the end of the municipal year.
The energy efficiency retrofit schemes audit received a satisfactory assurance rating but identified the need for improved monitoring systems and better oversight, partly due to the extensive level of work undertaken by Constituent members towards to the overall WMCA objectives. It was also flagged that the current schemes appeared to be significantly behind schedule and thus a concern was raised as to the risk of clawback of grants received.
The Chair recommended that for the next meeting, it would be helpful for the committee to receive more detailed context and scope of the schemes and suggested a representative from Energy Capital attend.
Resolved: (1) That the reports be noted.
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