ARAC Minutes - 10 September 2024

Chair’s welcome, apologies and declarations

The Chair welcomed everyone present to the meeting including observers HTT and JK.  ARAC noted apologies from SHR Chief Executive Michael Cameron, Senior Internal Audit Manager for Scottish Government Louise Carmichael,  Senior Audit Manager Audit Scotland Louisa Yule and Audit Scotland Audit Manager Sanya Ahmed. 

There were no declarations of interest.

Minutes of the previous meeting, matters arising & audit log

ARAC considered and approved the minutes from the last meeting on 11 June 2024, subject to a minor correction. 

ARAC discussed a matter arising around missing historical employment contracts for a small number of SHR staff .  IM updated ARAC on engagement with Scottish Government HR.  He explained that the issue of missing historical contracts for a sample of long serving employees was not unique to SHR and had arisen before through an audit of Scottish Government, and that Scottish Government HR has amended its procedures following this.  He reported that the Scottish Government does not consider it a material risk as all contracts are subject to variation and that Scottish Government does not issue updated contracts to reflect universal changes.  Standard grade-based contract templates are available via the intranet.  IM also reported that Scottish Government have no corporate memory of the absence of a copy of a historical contract causing any challenge.  ARAC considered the update and discussed:

• legal requirements to issue a written contract with terms and  conditions, noting that variations may take place over time and although updated contracts are not required a record of variation is and that these do seem to be in place for SHR;
• the origin of this issue being an external audit check seeking proof of employment, noting that the audit team used another route to satisfy this and that the historical contract only provides proof for a point in time;
• dialogue with Scottish Government, noting IM will retain relevant notes on file; and
• relationship to staff performance, noting objectives are set out and agreed with line managers rather than detailed in contracts.  

ARAC welcomed the further exploration carried out by IM.  It noted that while a risk remains, it is very small and that there are alternative sources to evidence the historical contractual arrangements for the small number of longer serving staff members.  It noted the update.

ARAC also noted that work around an internal procedure note covering deregistration of social landlords is expected to be completed before it meets next in December 2024.

ARAC noted the matters arising and audit action log. 

Internal Audit Update

PM presented an update on internal audit work to ARAC. He  reported that work continues as per the audit plan, with the final report on notifiable events included in the ARAC pack and he has been involved in follow up work relating to the deregistration of RSLs.   PM also explained that work around scoping and terms of reference for the business continuity office move audit would commence to allow for completion during Q4 2024/25.   In addition, PM reported that:

• Jennifer Inglis-Jones has been made the permanent Director of Internal Audit and Assurance and that four new staff have been recruited to the Division;
• Internal Audit is currently carrying out a self assessment to consider current compliance with Global standards and is reflecting both existing and new standards to be implemented in January 2025.  ARAC noted that the Audit Committee Chairs network received an update in August and asked PM to share the slide pack from that meeting; and
• for assurance, the annual performance report for the Directorate for Internal Audit and Assurance 2023/24 was enclosed in the ARAC pack, as well as the assurance report on Scottish Government’s Corporate Systems. 

ARAC considered the update and discussed:

• work around deregistration of landlords, asking PM to check and ensure references in the progress report and elsewhere are accurate; and
• assurance given for Scottish Government’s Corporate Systems, noting the worsening position compared to 2022/23 and that there would be further discussion under SHR’s risk register around the transfer to Oracle based HR and finance systems.

PM presented the audit report on Notifiable Events.  He explained that the assurance category is substantial with only one medium and three low level recommendations.   He highlighted good practice around guidance, management tools and learning, as well as a well-established quality assurance approach.   ARAC considered the report and recommendations and discussed:

• the process by which documents are considered for publication on SHR’s website, noting this is aligned to the Scottish Information Commissioner’s guidance and that although internal procedures notes are not routinely published, one in relation to Notifiable Events had been following a Freedom of Information (FoI) request and this was now out of date.  It noted that SHR will consider how to better clarify that that FOI-related releases reflect a point in time;
• information provided to the Board on Notifiable Events via the quarterly corporate performance report, noting the recommendation for further narrative in addition to the existing graphical data; and
• risk management, noting Management Team plans to consider how best to capture notifiable event-related risks under corporate risk R2: SHR’s regulatory framework does not work effectively in the risk register.

ARAC also noted a low-level recommendation around the use of consistent use of notes functionality within SHR’s Business Intelligence system, which is being addressed.

ARAC noted and welcomed the report and thanked PM.  

Actions:

• PM to check and correct references to the audit work on deregistration in the Internal Audit progress report; and
• PM to share slides on the new Global Internal Audit Standards with ARAC.

Risk Report

IM presented SHR’s risk register to ARAC.  He explained that there had been little movement in risk since the last ARAC review in June, and that discussions at Management Team had primarily focused on the Oracle transformation programme for HR and finance systems that Scottish Government is implementing and the housing emergency.  IM highlighted the complexity of the Oracle project and resource implication for SHR at all levels. ARAC noted this will intensify in the run up to go live in October 2024. IM noted that Scottish Government is reporting that the overall programme is on track for October, with a high level of confidence.   

IM also explained that at the time of Management Team’s most recent review of the risk register,  the Scottish Government’s emergency spending controls, in-year budget cuts and Programme for Government had not been announced.  He reported that a paper on SHR’s contribution to the new emergency spending controls will be brought to the Board on 17 September 2024.

ARAC considered the register and IM’s updates.  It discussed:

• the level of risks, noting that some important new developments have taken place since the most recent review of the register;
• Risk R7, noting there is no change to direction and asking IM to add in a direction of travel arrow indicator; and
• Risk R2, noting that the related bullet points are the likely place that Management Team will accommodate the notifiable events related recommendation. 

ARAC noted the risk register and report and that Management Team will review it in September taking account of recent events.

Action: IM to add a direction of travel indicator arrow to risk R7.  

Best Value

IM presented an update the outcome of the first annual review of the Best Value approach agreed by ARAC in December 2022.  IM reported that overall, there had been good coverage of all the best value themes via Board papers with even the lowest featuring in three quarters  of reports.  He explained that the focus was narrower for ARAC papers, but that this reflected the nature of ARAC’s remit.  ARAC considered the report and discussed: 

• overall tracking, agreeing it was useful to have this oversight and if there is scope to do this on a rolling basis so any gaps can be identified and addressed more quickly.  It welcomed potential for a quarterly Management Team review, agreeing that the best value principles are very important; and
• the process for identifying which Best Value themes are covered by Board and ARAC papers, noting the process in place for approving papers involves Directors and the Chief Executive and that Management Team would discuss this further when it considers quarterly reviews;
• in-depth Best Value reviews, noting, that while this is more resource intensive, it remains an approach available should ARAC agree it added value at any time;
• how SHR’s Board is updated, noting that while there is not a specific Board report, it is covered in the ARAC updates and that the full Board now has access to all ARAC papers, welcoming additional signposting for the Board to these sources of information.

ARAC noted the review and agreed to continue with the current approach and provide further signposting to assist SHR’s Board. 

Actions:

• IM to work with Management Team to develop a rolling quarterly review process including considering oversight of theme selections in Board and ARAC papers.
• IM to signpost SHR’s Board to the review of Best Value themes in the ARAC pack.

Assurance Mapping

IM presented a review of SHR’s Assurance Map.   He highlighted that this paper had been rescheduled to accommodate SHR’s new Strategy and reviewed risk register.  IM explained that the approach had been simplified to reflect previous feedback from ARAC. IM reported that Management Team have reviewed the Assurance Map and are content that it reflects management controls and there are no assurance gaps to highlight to ARAC.  Finally, IM explained that SHR’s logic model and approach to Best Value is also relevant to the assurance landscape. 

ARAC noted the updates, considered the review and discussed:

• the importance of proportionality, noting the various and sometimes resource-intensive approaches in other organisations;
• linkage with risk management and clarity around the categories for assurance;
• private meetings ARAC has with auditors, agreeing these should be added alongside audit reports under independent scrutiny;
• risk mapping, agreeing it would be useful to have assurance mapped against risk in addition to the existing mapping of risks against assurance.  

ARAC noted the assurance map and asked IM to update it to reflect discussions around private meetings with auditors and risk mapping.   It noted that the map is published on SHR’s website and SHR Board will have sight via ARAC papers and the ARAC update.  

Actions: IM to update map to reflect ARAC discussions and publish on SHR’s website.  

Agenda Planner, AOB, observer feedback

ARAC considered the agenda planner and agreed date proposals for 2025.  It noted forward agenda items and discussed the likely timing of future Internal Audit reports.  ARAC also noted that that although a private meeting with auditors is detailed for June 2025, as a requirement, there is an opportunity to do this at all meetings.  

RH reported that the letter from SHR Chair to EF on behalf of SHR Board appointing him to take over as Chair in January 2025 has been issued. 

ARAC noted that it will meet next on 10 December 2024 and the new SHR Board member, due to join SHR on 1 October 2024, will be invited to attend that meeting and will be appointed to ARAC.  

ARAC noted the updates.

HTT thanked ARAC for the opportunity to observe the meeting.   ARAC and HTT discussed Best Value, potential linkages to SHR’s logic model and monitoring progress in achieving outcomes. ARAC noted HTT’s feedback.    

JK thanked ARAC for the opportunity to observe and ARAC noted her feedback.  

Private session

ARAC held a private meeting with the auditors.