Agenda item

The Committee considered a joint report of the Assistant Director of Governance and the Head of Audit and Counter Fraud which provided Members with an overview of issues identified in the administration of members’ allowances, specifically relating to underpayments and overpayments. It sets out the underlying causes, the lessons learnt, and the measures implemented to strengthen controls and reduce the risk of recurrence.

The report explained that Members are entitled to allowances in accordance with the Council’s Members’ Allowances Scheme. Payments are administered via the payroll system, with information provided by Democratic Services and processed by the HR and Payroll teams. All Members are entitled to the basic allowance, and certain roles agreed by the full Council have a special responsibility allowance (SRA). An Independent Remuneration Panel (IRP) reviews Member allowances and makes recommendations to the full Council, who have a duty to consider the recommendations, but the final decision regarding allowances is with the full Council.

Once full council has made a decision about the Members’ Allowance Scheme, which includes the setting of basic and special responsibility allowance rates, they have no further involvement in its operation or implementation.

In light of some members raising a query with their allowances in June, following the Annual Council meeting where roles which have a special responsibility allowance are agreed, the Assistant Director of Governance undertook a quality assurance exercise of allowances. This was ahead of the full quality assurance work, which is good practice in many other Councils, which was planned to take place during recess. Through the quality assurance exercise, discrepancies were identified in the payment of allowances, leading to both underpayments and overpayments dating back to the 2022/2023 members’ allowances scheme. The Chief Executive therefore, instructed a full review be undertaken by Internal Audit, Democratic Services, Finance, HR and Payroll to identify the issues and lessons learnt, which would inform the report to the Audit Committee.

Finance and Democratic Services carried out detailed checks of historical records to ensure that payments made were in line with approved rates. This process was particularly complex as it has required us to examine approximately 2,500 individual payslips, alongside minutes of council and committee meetings in order to confirm the precise appointment details and allowances applicable to each member at different points in time, including the tracking through when there have been changes in political groups and roles during each year.

A review of communication between teams was also undertaken to establish what records were held and what instructions had been given. 

The Internal Audit team subsequently carried out sample testing of the overpayment calculations based on the information provided by the Assistant Director of Governance, and the calculations performed by the Finance Team.  No errors were identified based on the information provided. The Head of Internal Audit and Counter Fraud had also reviewed the proposed process for notification of future changes to Members’ allowances between Democratic Services, Finance, HR and Payroll and has confirmed that the proposed processes and controls appear reasonable and fit for purpose.

Errors were identified across all serving Members and some former Members. The responsibility for applying, administering, and ensuring compliance with the scheme rests entirely with officers.

The following factors contributed to the errors:

a)       Inconsistency with dates entered into the payroll system

Start and end dates for allowances were not consistently recorded accurately. For example, there was evidence of Councillors who retired or did not return following the election, and they had been paid until the end of May, resulting in overpayments.  There was also evidence that newly elected councillors had not been paid until the end of May, resulting in underpayments. 

b)       Lack of process for Members who forgo allowances

The Local Authorities (Members’ Allowances) (England) Regulations 2003 Part 3, Regulation 13 provides that a person may forgo all or part of any allowances to which they are entitled and must do so in writing. There was no evidence of records retained centrally in this regard. There was also lack of clarity when members forwent their allowance in one year, and how the national pay award would be applied in subsequent years.

c)   Incorrect rates applied.

d)    Incorrect roles applied- Some members were in receipt of more than one Special Responsibility Allowance (SRA) related to council business, which is not permitted under the scheme. Whilst payslips can be accessed via the online system, there was no evidence that Members had been told about the availability of this, or how to access the online system. Members therefore would not have had access to detailed breakdowns of payments.

e)    Poor communication - there was no evidence to confirm documented instructions between teams had been implemented, for example, when national pay awards had been applied.

f)      No, or limited record keeping - there was insufficient documented evidence that appointments and roles had been shared with HR and Payroll. When any in-year changes occurred there was no evidence of records being retained to track any changes which would impact on allowances, this included those members who forwent their allowance or changed roles in-year. There was also no evidence of informing Members about their allowances, or when their allowances changed.  There was evidence of partial compliance with the requirement to publish details of the total sum paid to each member in respect of basic allowance, special responsibility allowance, dependents’ carers’ allowance, travelling and subsistence allowance and co-optees allowance; as the Council published details of travel and subsistence; however, there was no evidence of publication of the amounts paid in respect of basic and special responsibility allowances, as required under the Local Authorities (Members’ Allowances) (England) Regulations 2003, which may have brought these matters to light earlier.

g)    No quality assurance - there was no regular quality assurance in place.

The factors outlined above contributed to overall issues relating to lack of clarity of roles and responsibilities, and no accountability of ownership.

Resolved:

That the Audit Committee notes the findings of this report and the associated actions taken to improve the robustness of processes relating to members’ allowances.