Agenda Item No. 2
RESOURCES SCRUTINY COMMITTEE
Minutes of the Resources Scrutiny Committee held in the Conference Room 1A, County Hall, Ruthin on Thursday, 2nd December, 2010 at 9.30 a.m.
PRESENT
Councillors H.Ll. Jones (Chair), J. Cahill, G.C. Evans, G. Green, R.L. Feeley, G.M. Kensler and D. Owens. Councillors M.Ll. Davies, E.W. Williams and J. Thompson-Hill attended as Observers.
ALSO PRESENT
Corporate Director: Governance and Efficiency, Head of Environmental Services, Head of Finance and Assets, Head of Customer Services, Head of Strategic Human Resources, Head of Revenues and Benefits, Principal Management Accountant, Corporate Improvement Manager, Democratic Services Manager, Audit Manager, Scrutiny Support Officer (R. Evans) and Administrative Officer (C.I. Williams).
1 APOLOGIES
Councillors D. Lee and G. Williams.
2 DECLARATIONS OF INTEREST
RESOLVED – that no Members declared any personal or prejudicial interests in any business identified to be considered at this meeting.
3 URGENT MATTERS
No items were raised which in the opinion of the Chair, should be considered at the meeting as a matter of urgency pursuant to Section 100B(4) of the Local Government Act, 1972.
4 MINUTES
The Minutes of a meeting of the Resources Scrutiny Committee held on Thursday, 21st October, 2010 were submitted.
Matters arising:-
Page 2. item 8. Little Theatre, Rhyl – The Scrutiny Support Officer explained that she had contacted the Valuation and Property Manager regarding the Little Theatre, Rhyl and she was awaiting a response.
Item 4, Review of the Policies Affecting the Operational Management Sustainability, Condition and Size of the Council’s Agricultural Estate – Councillor G.C. Evans expressed concern that Members had not been kept informed regarding the progress
1 and implementation of the policy and any other relevant matters relating to the Agricultural Estate, as tenants within his ward had contacted him with queries and concerns. The Principal Management Accountant advised that the intention was for the new Agricultural Estate Advisory Group to meet early in the new year. Councillor Evans informed the Committee that the issues that required resolving were urgent ones as the tenants concerned had deadlines to adhere to which were imminent. This point was emphasised to the Corporate Director: Governance and Efficiency when she joined the meeting. She advised that she was not aware of these issues but would therefore convene a meeting of the Group forthwith to deal with them.
In response to concerns expressed by Councillor G.A. Green regarding a lack of consultation with the Scrutiny Committees and insufficient feedback from Cabinet in respect of recommendations made by the Scrutiny Committee, it was agreed that representations be made to Cabinet that they provide a response to issues raised within specified deadline e.g. seven days.
Item 5. Scrutiny Work Programme - The Committee was informed by the Chair that a report in respect of the Corporate Risk Register would be available during the first quarter of 2011. He also confirmed that a report would be submitted to the Scrutiny Committee in January, 2011 in respect of Corporate Procurement.
Item 6. Engagement of Consultants – The Chair informed Members that representations had been made to the Corporate Governance Committee requesting that they examine the timescales involved in approving changes to the Council’s Constitution and whether the procedure could be expedited. The Scrutiny Support Officer explained that the Corporate Governance Committee had met and a response was awaited.
In reply to a request from Councillor M.Ll. Davies, it was agreed that, following the forthcoming staffing restructuring exercise, an organisational chart be circulated to all Members.
RESOLVED – that, subject to the above, the Minutes be received and approved as a correct record.
5 SERVICE BUSINESS AND FINANCIAL PLANS
A copy of a joint report by the Heads of Services in the Governance and Efficiency Directorate, had been circulated with the papers for the meeting.
The report sought the Scrutiny Committee’s observations on the draft Service Business Plans currently under development, or the position statements supplied in relation to the service planning process, by the services within the Governance and Efficiency Directorate and the Business Planning and Performance Service which lies within the Chief Executive’s Department.
From April, 2010 onwards the focus on how the Council delivered its corporate priorities and achieved its strategic aim of being “a high performing council closer to the community” had been centered on the delivery of individual Services’ Business
2 Plans. Draft Business Plans were submitted to the respective scrutiny committees for comments as part of the budget setting process every December.
It was explained that due to a number of service restructuring exercises, and budget uncertainties at present, the service plans for 2011/12 were not in as advanced a stage as they would normally be at this point in time. Consequently, the draft Plans circulated with the report had not been extensively populated, and some services had submitted position statements rather than draft Service Plans for Members consideration.
Members were informed that the Internal Audit and Risk Management Service would not be preparing a separate Business Plan for 2011/12 onwards as its Internal Audit Strategy was effectively seen as the Service’s Business Plan for the year ahead. The Strategy outlined the audit projects which would be carried out during the year, as agreed by the Corporate Governance Committee in March of each year, and would contain performance measures and information on risks, all of which would be in line with Service Business Plans.
It had recently been decided by the Scrutiny Chairs and Vice-Chairs Group that the best approach would be for each Scrutiny Committee, when considering the Service Business Plans at their November/December meetings, to select a basket of indicators or outcomes which they would wish to monitor on a regular basis until the end of the current reporting year. Members had been requested to have regard to this proposal during the consideration of the draft Service Business Plans.
It was confirmed that early consideration of the draft Service Business Plans/Position Statements would provide Members with an opportunity to contribute to the Business Planning Process with a view to ensuring that the Service Business Plans address identified risks and contributed to the effective delivery of the Council’s corporate priorities within constrained budgets. The identification of specific areas or outcomes measures for regular performance monitoring would assist the delivery of current service plans and the Council’s priorities and underpin the aims and objectives of future Business Plans.
Draft Service Plans/Position Statements had been attached to the report and representatives from each of the respective services provided the following summaries:-
Finance and Assets: Property Group (Appendix 1) and Finance (Appendix 2)
The Principal Management Accountant provided a summary of the Business Plans for Finance and Property Services and explained that they had only recently assumed responsibility for Property Services, with a new manager having been appointed within the past two months, and were not in a position to provide detailed information. He referred to the restructuring process being undertaken within the Service, and the significant changes being undertaken as a result, and made reference to the relevance of the Asset Management Action Plan which reviewed the Council’s building management activities as part of a national review.
3 Reference was made to the major changes which would be occurring in Finance following the imminent departure of the Head of Finance and Assets. The Principal Management Accountant explained that the previous year’s template had been used to draft the Business Plan and he outlined the process to be adopted in producing the Business Plan for the delivery of the service at operational levels. He also highlighted the influence and importance of Finance in respect of the operation of other departments within the Authority.
In response to a question from Councillor G.A. Green, the Principal Management Accountant explained that he was confident that changes arising from the restructuring process would be incorporated effectively and efficiently and expressed his confidence in the officers appointed to the posts in question.
In reply to a request from the Chair, the Principal Management Accountant agreed that a copy of the Service Plan for the coming year would be provided by February, 2011, in a similar format to last year’s plan, for the Committee to consider.
Members of the Committee thanked the Head of Finance and Assets for the work undertaken and the assistance provided and wished him well in his retirement.
Revenues and Benefits (Appendix 3)
The Head of Revenues and Benefits highlighted the difficulties encountered in producing the Business Plan as it was unclear which services Revenues and Benefits would be expected to deliver during the coming years. He referred to the introduction of Universal Credit by the Department for Work and Pensions and the lack of clarity relating to the provider of the service during the coming years, particular reference being made to the various aspects relating the provision of Housing Benefits and the costs pertaining to the new software equipment required to deliver the changing benefit service.
The uncertainty relating to the categories and levels of service provision required during the coming years in respect of services such as Council Tax, National Non Domestic Rates, Sundry Debtors, Bailiffs, Housing and Council Tax Benefit, Free School Meals, Prevention and Detection of Counter Benefit Fraud and Student Loans, was emphasised by the Head of Revenues and Benefits.
Members expressed their concern regarding the possible impact of any financial or staffing cuts within the Section and any subsequent detrimental affect on service delivery, performance and income generation. Members agreed that representations be made to CET and Cabinet expressing the support of the Resources Scrutiny Committee for maintaining staffing levels within the Revenues and Benefits Department. Councillor G.A. Green stressed the importance of ensuring that a response was received in respect of the representations made. The Chair commended the staff within the Revenues and Benefits Section on the work undertaken and the achievements attained.
During the ensuing discussion it was agreed that a further update report be submitted to the February 2011 meeting of the Resources Scrutiny Committee.
4 Human Resources (Appendix 4)
The Head of Strategic Human Resources informed Members that the report was currently in the form of a position statement and that it would be difficult to formulate the Business Plan until the requirements of the various services were known, however it was anticipated that the draft Plan would be completed in January, 2011.
It was confirmed that the review of Strategic Human Resources (HR) had provided the service with a solid basis to ensure service delivery. Reference was made to key dependencies such as the new Intranet system, which it was hoped would be finalised by April, 2011, and it was anticipated that a more consistent and efficient service would be provided with a 14% saving based on current budget levels.
The Head of Strategic Human Resources outlined the move towards the Business Partner model which would split the strategic and operational aspects of the HR function. She also highlighted the two key indicators in the Corporate Plan which related to Sickness Absence and Performance Appraisal Indicators. Members referred to the reduction in sickness absence figures and the Chair stressed that it would be of paramount importance for the support provided to managers by the dedicated sickness absence HR officer and through the provision of the Building Resilience training courses to be maintained if the Council was to sustain its improved performance in this area. The Committee therefore agreed that representations be made to Cabinet and the Corporate Executive Team (CET) with respect of the importance of maintaining staffing levels and support with a view to sustaining performance. In response to questions from Councillor G.A. Green, the Head of Strategic Human Resources provided details of the new Intranet system and agreed that the progress with its implementation be reported to Members in due course.
Following further discussion, it was agreed that the revised Business Plan be submitted to the February 2011 meeting of the Resources Scrutiny Committee.
Corporate Governance (Appendix 5)
The Democratic Services Manager referred to Appendix 5 to the report, the Service Position Statement, and informed Members that the Service Business Plan was currently in draft form and would be finalised and available in the near future. He outlined the role of the Corporate Governance Department and explained that the Department had recently undergone an intensive review as part of the review of the Council’s support services. It was explained that recent reorganisation of administrative functions had led to the formation of Democratic Services Section and a Member Support and Development Section.
Members were informed that the Legal Service’s review report had been published and that a number of options for collaboration had been proposed with a view to realising efficiencies and a more effective service, the operational procedures and funding provisions in respect of legal services provided for other directorates were outlined. The importance of successfully implementing both reviews to ensure that the reductions in the efficiency reviews were achieved were highlighted to Members. The Democratic Services Manager responded to a number of questions from
5 Members regarding operational procedures, costs and charging arrangements within Legal Services. The Scrutiny Support Officer explained that the Legal Services Review Report, which had been included in the Forward Work Programme but had been deferred pending completion of the Support services Review, could be extended to incorporate the issues raised by Members.
A number of Members questioned the accuracy of the reporting process in respect of the costs of the provision of the translation service and the need to review the organisation and operation of the service. The Committee considered the views expressed and agreed that a report on the review of translation service be included in the Future Work Programme.
In reply to questions from Members regarding budget provision within the Democratic Services, Member Support Development and Legal Services, it was agreed that details pertaining to the allocation of budget provision, particularly the costs of legal services provided to other Directorates, be circulated as an information report.
The Head of Customer Services responded to issues raised regarding communicational requirements and the provision of IT equipment for use by Members, particular reference being made by Councillor G.A. Green to the provision, by the Council, of Blackberry devices for Members. She explained that the requirements of individual Members would need to be examined, taking into consideration budgetary constraints and security aspects.
Members agreed that the Democratic Services Manager liaise with the Scrutiny Support Officer with regard to the submission of a further update report to the Resources Scrutiny Committee.
The Chair and Members of the Committee requested that the Corporate Director: Environment and the Head of Corporate Governance be thanked for the work they had undertaken, and the assistance they had provided to the Committee, and they wished them well in their pending retirement.
Customer Services (Appendix 6)
The Head of Customer Services explained that the service consisted of an amalgamation of three areas which included Customer Care, Communications and ICT, each having previously had their own Business Plans. She outlined the reasons for the delay in producing the Business Plans and explained that Customer Services had recently been subject to the Support Service Review, and would also be undergoing a Service Efficiency Challenge, and the provision of ICT Support by that Service was currently out to consultation with users within the Authority. Reference was made to the impact of the new ICT Strategy, which would be in draft form in the new year. It was also confirmed that work was currently being undertaken to produce ideas on to how to reinforce the marketing function corporately.
The Head of Customer Services provided details relating to internal work currently being undertaken and she highlighted the various phases pertaining to the Intranet
6 project. She referred to the collaboration agenda and explained that they were currently looking at how staff work and communicate between Authorities. The issue of IT and information security was emphasised by the Head of Customer Services. She explained that the Department for Work and Pensions relied on the working arrangements and standards adopted by the Authority with regards to the security of the information which it shared with the Council. Denbighshire was one of only a minority of local authorities which had attained GSi 4.1 security standard accreditation.
The importance of encouraging and engaging the public was highlighted by the Head of Customer Services, reference was made to the Contact Centre and the Authority’s website which were both means of providing a high quality and professional customer focused service. Councillor G.A. Green referred to the possible risks to individuals, particular reference being made to Councillors, who participate or respond to comments made on social media network sites such as Blogs or Twitter.
In response to a request from Members, it was agreed that representations be made to the Leader and Chief Executive that the provision of Blackberry devices to all Members who requested them be made free of charge so that all elected representatives were treated on an equal basis.
Following further debate, it was agreed that the revised Service Business Plans, be submitted to the February 2011 meeting of the Resources Scrutiny Committee.
Business Planning and Performance (Appendix 7)
It was explained by the Corporate Improvement Manager that the draft Service Business Plan for the Business Planning and Performance Service was currently unavailable due to the restructuring of the service and issues surrounding future funding for the Programme and Project Team. He outlined the timetable for the production of the draft Service Business Plan and confirmed that it had been anticipated that it would be completed during December 2010.
Members were informed that the Service consisted of three teams the Corporate Improvement Team, the Partnerships and Communities Team and the Programme and Project Team and, in response to questions from Members, the Corporate Improvement Manager provided an overview of the role of the Service. He made particular reference to the Ffynnon Performance Recording and Monitoring System and to the steps underway to align business planning processes in both Denbighshire and Conwy Councils, including agreeing a new joint Service Business Plan template for those services managed on a collaborative basis.
In reply to issues raised by Members regarding collaborative working arrangements, the Corporate Director: Governance and Efficiency referred to a report being submitted to Cabinet on the 14th December, 2010 which would be proposing the formation of a new Collaboration Programme Board between Conwy and Denbighshire and would include Executive and Scrutiny Members. The purpose of the Board being to pull together all the collaborative projects, improve integration and increase Member participation in the collaboration process.
7 During the ensuing discussion, it was agreed that the Business Planning and Performance Department should submit its revised Service Business Plan to the Committee for consideration at its February 2011 meeting.
The Chair requested that all Heads of Services within the Directorate attend the February meeting to present their revised Service Business Plans.
With regards to monitoring individual services’ performance in delivering their 2010/11 service business plans and achieving their agreed targets, the Committee agreed to the Corporate Improvement Manager’s suggestion that each service submit their Service Position Statements to the Committee with their revised business plans in February 2011 to enable Members to monitor their performance to date.
RESOLVED – that
(a) all Services submit their revised Service Business Plans for 2011/12 to the Committee at its meeting in February 2011 for further consideration; and
(b) Services also submit their Service Position Statements for 2010/11 to that meeting to enable the Committee to monitor their performance to date in delivering their current business plans, achieving the set targets and to identify areas of under performance that require addressing.
6 ASSET MANAGEMENT ACTION PLAN
A copy of a report by the Principal Management Accountant, which reviewed the progress made in implementing the agreed action plan, had been circulated with the papers for the meeting.
During 2009 the Wales Audit Office (WAO) carried out a review of the Council’s building management activities as part of a national review. The report detailed the Council’s response to the recommendations made in the review and outlined its adopted Action Plan. Appendix 1 to the report summarised the recommendations along with the actions either being, or to be, taken to address them.
It was explained that in January, 2010 responsibility for the management of the Property Services Department had moved from the Environment Directorate to the new Governance and Efficiency Directorate. This had coincided with the results of the WAO review of Asset Management and the commencement of a corporate review of the department as a whole.
Details of changes which had taken place, and that had a significant impact on asset management within the Department, had been incorporated in the report and included:-
• The appointment of a new Principal Property Manager • The Asset Management Team being split from the Design and Development Team to form a new department
8 • The Council’s Carbon Management Officer moving into the new Asset Management Department • The Department assuming responsibility for continuing development of WorkSMART
An outline of the strategies and policies adopted to address the recommendations and progress the action plan had been incorporated in the report. It was confirmed that most of the recommendations had been addressed, and the report provided a brief overview of the issues and current actions.
Members were informed that a key issue for property included the state of the current stock and the investment required to bring it up to a proper standard. The report highlighted the backlog of repairs of at least £29m and the lack of Council funds to address the problem. It was explained that the Council would need to view its assets differently and have a greater focus on asset disposal and rationalisation of property wherever possible. Members were informed that the Council had begun to address these issues with a thorough review of its assets, which included:- . • Completion of work on the Agricultural Estate. • Area Members’ Groups receiving presentations and maps of assets in their areas to enhance their knowledge of the Council’s asset base. • All Heads of Service having undertaken a Service Challenge and an Asset Challenge to ensure a better understanding of how assets were being used. • A review of the rationalisation of office accommodation. • Discussions being undertaken with other Councils and public bodies in respect of more efficient use of assets. • Responsibility for the management of the commercial portfolio being transferred to Property Services
Reference was made to the WorkSMART programme which looked at the use of office space in Caledfryn, Denbigh. A decision had been made to split the project in two, the Electronic Document Records Management System (EDRMS) had become the responsibility of the ICT department and the responsibility for making more efficient use of space had moved to Property. The remit of the remaining member of staff, who had been transferred into the Asset Management Department, had been to ensure that WorkSMART principles were embedded in all property strategies and that any office moves took the opportunity to review all aspects of office use. From a property perspective the WorkSMART project had proved very positive and had successfully merged into normal working methods, becoming the way in which the Authority managed office moves. Members were informed that the transfer of the Education Department from Middle Lane, and the centralisation of Human Resources, had both followed this methodology and allowed departments to occupy a smaller space than previously.
In reply to a question from the Chair, the Principal Management Accountant confirmed that further information and training in respect of the Property Services Department could be provided for Members depending on their requirements.
The Principal Management Accountant responded to questions from Members and confirmed that the Authority would be looking at rationalising its asset portfolio, with
9 Member input, and that an office accommodation strategy had been adopted. He also confirmed that the service challenge exercise for Heads of Service had influenced views in respect of accommodation requirements.
The Corporate Director: Governance and Efficiency informed the Committee that it was intended to make the Asset Management Group more robust and more of a strategic Asset Management Capital Group. This Group, which would include Member representation from the Scrutiny Committees, would examine the strategic capital programme and the strategic asset portfolio. It was highlighted that it would be important to ensure the best use of assets and improve existing accommodation where necessary and appropriate. The Corporate Director explained that the Informal Council, scheduled for January, 2011, would be discussing the Strategic Capital Plan and the Asset Portfolio, and in addition Property Services would be liaising with Area Member Groups to ascertain issues pertaining to their respective localities.
In response to concerns raised by Councillor M.Ll. Davies, the Principal Management Accountant assured Members that the Council’s assets would only be disposed of if the Council was certain that they would not be required.
During the ensuing discussion the Chair referred to the nine actions identified, listed in Appendix 1 to the report, in response to the Wales Audit Office Review of Building Management. Members agreed that following full compliance with the recommendations a further report be submitted to the Resources Scrutiny Committee prior to it informing the Corporate Governance Committee of the action plan’s closure. The Corporate Director: Governance and Efficiency confirmed that Informal Council would be considering the Capital Programme at its meeting on the 7th January, 2011.
RESOLVED – that
the Resources Scrutiny Committee receive and note the Asset Management Action Plan, and
to receive a further report, in April 2011, following full compliance with the recommendations in Appendix 1 to the report.
7 WORK SMART/EDRMS
The Head of Customer Services introduced a report which provided information on how the Electronic Document and Records Management System (EDRMS) had been progressed corporately since August 2010. The report had been circulated to members beforehand.
An understanding of how the EDRMS project was being taken forward would assist with the scrutiny of the budget setting process for 2011/2012, specifically highlighting how project briefs would be developed for future rollouts of EDRMS across the County and its benefits for improving service delivery. Confirmation was provided that ideas for the further rollout of EDRMS had been explored as part of the wider
10 approach to ICT Strategy and development and would be set out in project briefs on an invest to save basis.
Originally EDRMS and WorkSMART had been joint projects which had assisted in delivering mobile and flexible working, better use of office and more efficient information management. The outcome of the WorkSMART pilot and EDRMS had been reported to the Scrutiny Committee in May, 2010. Responsibility for the EDRMS project had now transferred to the ICT Service, while WorkSMART had been aligned with Property Services. Information pertaining to the principles of WorkSMART had been progressed corporately and had been incorporated in the report on the Asset Management Action Plan.
Members were informed that the EDRMS was now live in Revenues and Benefits and the EDRMS team, with the Planning Service being scheduled to go live on the 6th December, 2010.
It was explained by the Head of Customer Services that although the EDRMS contract had been negotiated through Denbighshire County Council to achieve good value, provision had been made for partners to use it. Since August, 2010, Conwy County Borough Council had adopted the Civica contract to rollout EDRMS and this would enables joint working, particularly in the joint business areas such as Highways, Planning and Public Protection.
The benefits of EDRMS and been incorporated in the report and included:- • sharing and re-using information • access to documents as soon as they were filed • the ability to share documents easily with colleagues • enabling geographically split teams to work on the same material • reducing the need for duplicate copies to be held • enabling better security and confidentiality of information.
The Head of Customer Services emphasised that EDRMS would be a critical component in the corporate ICT architecture, delivering the right information available to the right people at the right time. She confirmed that proposals were being developed in respect of how EDRMS could be rolled out further across the Council to support the Intranet, which would be launched in January, 2011 and Human Resources, Finance and Highways.
Details in respect of further funding required for the rollout of the software had been included in the report. It was confirmed that this would be made on an invest to save basis where the benefits would be tracked and realised. In response to a question from Councillor R.L. Feeley, the Head of Customer Services confirmed that Member training, following the introduction of new ICT equipment, would be provided depending on their personal requirements and preferences.
In reply to a question from Councillor G.C. Evans, the Head of Customer Services explained that issues pertaining to funding arrangements for future projects were currently being addressed by liaising with the respective services to ascertain their needs and requirements, and whether they would be in a position to fund the required investment from within their own budgets.
11
Councillor G.A. Green expressed concerns regarding staffing issues between the months of August, 2010 and March, 2011, the Head of Customer Services explained that they were currently examining business projects, and the requirements of service users, to ascertain the support required within Customer Service. Members supported the view expressed by Councillor Green that the Scrutiny Committee acknowledges and endorses the value of the work undertaken within the service and express its support with regards staffing requirements.
RESOLVED – that the Resources Scrutiny Committee:-
recommends that the future rollouts of EDRMS should be considered as part of the developing ICT Strategy for Denbighshire County Council and that investment in future rollouts should be made on a business case basis where the return on investment was clear, and
endorses the value of the work undertaken within the service and express its support with regards staffing requirements.
8 SCRUTINY WORK PROGRAMME
A copy of a report by the Scrutiny Support Officer, which reviewed the future work programme for the Resources Scrutiny Committee and provided an update on the relevant issues, had been circulated with the papers for the meeting. For information purposes a copy of the Cabinet’s forward work programme had been included as Appendix 2 to the report.
The Scrutiny Support Officer provided a summary of the report and Members agreed the following actions:-
Information Security Action Plan – Members were informed that an update report on progress to date in delivering the action plan had been scheduled for presentation to the current meeting. However, due to a review of management arrangements for progressing the activities detailed in the action plan the Chair had agreed to a request from officers that the presentation of the report be deferred until February, 2011.
Clwyd Pension Fund - The Scrutiny Support Officer explained that this item had originally been scheduled for inclusion on the current meeting’s agenda. However, as the Fund’s Manager due to another commitment was unable to attend the meeting, the Chair had agreed that the presentation to the Committee be deferred until its meeting on 13th January, 2011. It was confirmed that the Clwyd Pension Fund had recently launched its new website and the Fund’s latest Annual Report was available on its website.
Ruthin Craft Centre – The Scrutiny Support Officer referred to the resolution of the Scrutiny Committee, at its meeting in February 2010, that an information report be submitted to Members in late 2010 informing them of future revenue funding streams for the Craft Centre and the venue’s financial position going forward.
12 It was explained that as the Arts Council of Wales was not expected to announce its funding for revenue funded organisations until mid-December or early January it had not been possible to compile the report. However, assurances had been provided that the report would be available for circulation prior to the February 2011 meeting of the Committee. Members were informed that the Arts Council of Wales was proposing to include the Craft Centre in its new portfolio of revenue funded organisations and had indicated that it viewed Ruthin Craft Centre as a national centre for applied arts. The Committee agreed that the report be circulated to Members of the Committee prior to its meeting in February, 2011.
Scala, Prestatyn – Members were informed that a summary of the discussion which had taken place, and the subsequent recommendation to Cabinet, had been included in the minutes of that meeting. The Chair informed the Committee that, as the Scala Company Limited was scheduled to present its updated Business Plan to Cabinet on the 14th December 2010, it was his intention to attend the Cabinet meeting and report back to the Resources Scrutiny Committee any recommendations made.
Members discussed in detail and supported the views expressed by the Principal Management Accountant that as a different process had been adopted in preparing the Capital and Revenue Budgets for 2011/2012 to meet the stringent challenges facing the Authority, and taking into account the timescale and Members involvement in the Budget process at Informal Council, it would be more beneficial for Members of the Committee to scrutinise the process adopted in setting the Budgets prior to making a formal decision in February, 2011. In response to concerns raised by Councillor G.C. Evans regarding Member involvement in the Budget setting process, the Corporate Director: Governance and Efficiency explained that there would be a focus on the Revenue budget at December’s Informal Council and that any issues arising would be considered at Informal Council on the 7th January 2011 when the Revenue Budget could be amended. At the January Informal Council meeting councillors would also consider the proposals for the Capital Budget. During the ensuing discussion Members agreed that it would be beneficial to amalgamate the scheduled business items on the Committee’s forward work programme for January on the 2011/12 budget and the recommendations of the Capital Strategy Group.
Reference was made to the meeting of the Resources Scrutiny Committee scheduled for February, 2011 and Members agreed that the Service Business Plans be considered in the morning with meeting being resumed in the afternoon to consider other items of business.
The Chair referred to the information report circulated in respect of Energy Efficiency which provided an update on the Council’s progress in becoming more energy efficient and addressing the risks identified in the Corporate Risk Register. Members agreed that a progress report on energy efficiency, including monitoring the implementation of the Action Plan in respect of the Welsh Assembly Government recommendations in relation to the management of energy and water, be included in the Resources Scrutiny Committee Work Programme for April, 2011.
13 RESOLVED – that, subject to the above inclusions and amendments, the Resources Scrutiny Committee approves the work programme as set out in appendix 1 to the report.
EXCLUSION OF PRESS AND PUBLIC
RESOLVED – that under Section 100A of the Local Government Act 1972, the Press and Public be excluded from the meeting for the following item(s) of business on the grounds that they involve the likely disclosure of exempt information as defined in Paragraph 14 of Part 4 of Schedule 12A of the Local Government Act 1972.
PART II
9 MARSH TRACKS PROJECT
A copy of a confidential report by the Lead Member for Finance and Efficiency, which reported the finding of an internal investigation into the Marsh Tracks Project, had been circulated with the papers for the meeting.
Members were informed that following a recent report to Cabinet regarding potential significant financial overspends within the Marsh Tracks/Rhyl Recycling Park project, the Lead Member for Finance had requested the Internal Audit team to investigate and review the project. A copy of the Internal Audit report was attached to the covering report, and the Committee was asked to consider the financial issues raised within it.
A detailed summary of the background to the Marsh Tracks/Rhyl Recycling Park project, which included details relating to funding agreements, had been incorporated in the report. The Lead Member for Finance and Efficiency explained that the main findings of the review had been summarised in the contents page, with greater detail having been included in the body of the report.
The Committee was informed that since Members had been made aware of the difficulties with the project there had been consultation with the Project Sponsor, Project Manager, officers within the Finance team both within the Environment Directorate and Corporate Governance Directorate, Internal Audit and the relevant Service Cabinet Members.
A review of the capital monitoring procedures had been undertaken and as a result, the Capital Strategy Group, which was a joint senior Officer/Member Group would in future extend its remit to include monthly monitoring of the projects within the Council’s Capital Plan.
The Lead Member for Finance and Efficiency informed Members that the review’s findings had been considered by the Corporate Governance Committee at its meeting on the 1st December, 2010. He explained that the Corporate Governance Committee had examined the corporate elements of the project and he provided a summary of the main points raised which included the need to review the Capital Strategy Group, project management arrangements, the business case process and the risk management elements. During the ensuing discussion Members of the
14 Resources Scrutiny Committee fully endorsed the recommendations of the Corporate Governance Committee. The Lead Member for Finance and Efficiency referred to the financial perspective of the project and made particular reference to the earth works contract and the Civil Engineering works as being two of the major key elements.
A number of Members raised issues pertaining to project management aspects for the programme of works and the role of the Council's Capital Strategy Group in monitoring such projects. They also emphasised the need for the Business Case documentation format to be revised, and for all capital projects (including major capital investment projects which attract grant funding) to adhere to the Council’s Corporate Project Management Methodology. The Corporate Director: Governance and Efficiency confirmed that there were lessons to learn and that there had been a lack of clarity at a corporate level. She referred to the complexity of the situation and the need to introduce more challenging mechanisms to examine future projects and in particular the risks involved. Following detailed discussion in respect of matters relating to these issues, Members of the Scrutiny Committee agreed the following recommendations:-
• the role/terms of reference for the Council's Capital Strategy Group should be reviewed and extended to include the monitoring of the delivery of capital projects, as well as the appraising of the initial bids. • to support the suggestion that one of the Council's Corporate Directors be assigned overall responsibility for overseeing all of the Council's Capital Projects. • the 'business case' documentation format, including the risk management aspect, for all project bids be revised with a view to enhancing its robustness. • in future all projects, including those being delivered by the Major Projects Group, utilise and adhere to the Council's own Corporate Project Management Methodology.
In addition to the above, the Committee also recommended that the Authority should ensure that Project Sponsors were not allocated an excessive number of projects to supervise at any one time. This would ensure that projects were regularly monitored and all project milestones were met.
Members thanked the officers in the Internal Audit Department for the work undertaked in producing a concise and informative audit report.
RESOLVED – that, the Resources Scrutiny Committee recommends:-
(a) the role/terms of reference for the Council's Capital Strategy Group should be reviewed and extended to include the monitoring of the delivery of capital projects, as well as the appraising of the initial bids.
(b) one of the Council's Corporate Directors be assigned overall responsibility for overseeing all of the Council's Capital Projects.
15 (c) the 'business case' documentation format, including the risk management aspect, for all project bids be revised with a view to enhancing its robustness, and
(ch) in future all projects, including those being delivered by the Major Projects Group, utilise and adhere to the Council's own Corporate Project Management Methodology.
Meeting ended at 2.07 p.m.
**********
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Introduction by the Chair of the Clwyd Pension Fund Panel
I have the pleasure of introducing the 2009/10 Annual Report as Chair of the Clwyd Pension Fund Panel.
The Annual Report includes:
• An overview of the Fund by the Treasurer and Administrator • An independent Annual Report from the Fund’s Advisor/Consultant Cllr Brian Dunn, Chair • Details on Investment strategy and performance • Results of internal Audit Reports • Details of Training received by Panel Members • Pension Administration performance data • A statement from our External Auditors and Actuary
Further information or statutory documents not included in this Annual Report can be found on the Fund’s new web-site www.clwydpensionfund.org.uk and employers and employee representatives are invited to an Annual Joint Consultative meeting each November.
Following a very challenging year in 2008/09, the theme for 2009/10 and continuing into 2010/11 has been very much one of consolidation and review. The Panel have received and supported a number of reports recommending changes to governance, investment strategy and administration strategy. We are also aware of external reviews which may impact on the future management of the Fund. The Fund’s stakeholders will see changes in these areas in 2010/11 and beyond.
I wish to assure all stakeholders of the importance Flintshire County Council places on administering the Fund and to thank the officers, consultants and Members of the Panel for guiding the Fund through 2009/10.
I hope you find the Annual Report informative and welcome any comments or questions on the content.
Cllr Brian Dunn, Chair - Clwyd Pension Fund Panel
Clwyd Pension Fund Mission Statement
The Fund has identified in its mission statement the following:
We will be known as forward thinking, responsive, pro-active and professional providing excellent customer focused, reputable and credible service to all our customers. We will have instilled a corporate culture of risk awareness, financial governance, and will be providing the highest quality, distinctive services within our resources. We will work effectively with our partners, being solution focused with a can do approach.
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Governance Structure of the Clwyd Pension Fund
Administering Authority: Flintshire County Council
CLWYD PENSION FUND PANEL
Elected Members
Cllr Brian Dunn Flintshire County Council Chair
Cllr Ted Evans Cllr Peter Pemberton Cllr Huw Llewelyn Jones Cllr Gerry Craddock Flintshire County Flintshire County Denbighshire County Wrexham County Council Council Council Borough Council Vice Chair
Substitute: Substitute: Substitute: Substitute: Cllr Ron Hampson Cllr Haydn Bateman Cllr Julian Thompson-Hill Cllr Arwel Jones
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PANEL MEETINGS HELD DURING 2009/10 (All held in Mold)
PANEL AGENDA MEETINGS COUNCILLOR ATTENDEES
11th June 2009 Councillor Brian Dunn Councillor Ted Evans Councillor Peter Pemberton Councillor Gerry Craddock Councillor Huw Llewelyn Jones Councillor Ron Hampson (non voting)
13th August 2009 Councillor Brian Dunn Councillor Ted Evans Councillor Peter Pemberton Councillor Gerry Craddock Councillor Huw Llewelyn Jones Councillor Ron Hampson (non voting)
5th November 2009 Councillor Brian Dunn Councillor Ted Evans Councillor Peter Pemberton Councillor Huw Llewelyn Jones Councillor Haydn Bateman (non voting)
19th February 2010 Councillor Brian Dunn Councillor Ted Evans Councillor Peter Pemberton Councillor Gerry Craddock Councillor Huw Llewelyn Jones
INVESTMENT MANAGER COUNCILLOR ATTENDEES MEETINGS
20th May 2009 (London) Councillor Brian Dunn Councillor Ted Evans Councillor Peter Pemberton
28th July 2009 (London) Councillor Brian Dunn Councillor Ted Evans
5th November 2009 (Mold) Councillor Brian Dunn Councillor Ted Evans Councillor Peter Pemberton Councillor Huw Llewelyn Jones Councillor Haydn Bateman
3rd February 2010 (London) Councillor Brian Dunn Councillor Ted Evans Councillor Huw Llewelyn Jones
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TRAINING UNDERTAKEN APRIL 2009 – MARCH 2010
Member training and awareness is recognised as an important role in pension funds. The Clwyd Pension Fund is committed to providing appropriate training to Councillors on the panel through various presentations, seminars and collaboration with other Local Government Pension Schemes.
During the year, managers provide training sessions to members at the London panels, topics covered during the year included: Frontier Markets Training (provided by BlackRock) Property Training (provided by Igloo) Sustainable Investment Training (provided by Hermes)
Each of the quarterly panel meetings in Mold provides members with presentations and reports covering: Current Investment Issues Governance and LAPFF Updates Economic Reviews Funding Strategy Risk Assessments Fund Review
Members have also attended the following seminars and events during the year: Merseyside Pension Fund training days LGC Investment Summit (Newport) LAPFF Annual Conference LGC Investment Seminar (Chester)
A full detail of all training received is presented annually to the Clwyd Pension Fund Panel identifying the number of hours of training completed by each member. For the year to March 2010 the following number of training hours was recorded: Chair of Panel 72 hours Vice Chair 54 hours Other Panel Members 68 hours Substitutes 31 hours
In 2009/10, CIPFA launched a Knowledge and Skills Framework in order to assist Pension Funds with Training Needs Analysis for Officers and Members involved with the governance of the Fund. The Clwyd Pension Fund is in the process of subscribing to a training tool which will assist in determining future training requirements. Progress will be reported in future Annual Reports.
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Officers of Flintshire County Council Other Members
Head of Finance Scheme Member Observer Kerry Feather (Staff and Union): Cemlyn Foulkes
Clwyd Pension Fund Manager Consultant to the Fund Philip Latham YCS UK Limited
Investment Managers
Aberdeen Asset Management One Bow Churchyard, London, BlackRock 33 King William Street, London Fidelity Investments 25 Cannon Street, London Goldman Sachs Asset Management Christchurch Court, 10-15 Newgate Street, London Gottex Fund Management 5 Saville Row, London Investec Asset Management 2 Gresham Street, London Liongate 103 Mount Street, London Pioneer Alternative Investments UK Ltd 123 Buckingham Palace Road, London SSARIS 20 Churchill Place, London Standard Life Investments 1 George Street, Edinburgh Stone Harbor Investment Funds 86 Jermyn Street, London T Rowe Price Global Investment Services Ltd 60 Queen Victoria Street, London TT International Moor House, 120 London Wall, London Wellington Management International Ltd Cardinal Place, 80 Victoria Street, London
Custodian Bank of New York Mellon 160 Queen Victoria Street, London
Actuary Mercer Ltd Mercury Court, Tithebarn Street, Liverpool
Performance Measurement WM Company 525 Ferry Road, Edinburgh
External Auditors Wales Audit Office Unit 4, Evolution, Lakeside Business Village, St Davids Park, Ewloe
Under a framework agreement the following can be contacted for advice as and when required:
Hammonds LLP 7 Devonshire Square, London Aon Consulting Ltd 40 Torpichen Street, Edinburgh Sacker & Partners LLP 29 Ludgate Hill, London Mercer Human Resource Consulting Tower Place West, London JLT Benefit Solutions Quay West, Trafford Wharf Road, Manchester Allenbridge Devonshire House, 60 Goswell Road, London bfinance 15 Bedford Street, London
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Treasurer and Administrator’s Report
Introduction The financial year 2009/10 was a year of consolidation and review for the Clwyd Pension Fund after the dramatic events in financial markets in 2008/09. Through this Annual Report, I would like to set out the main issues which have been addressed during the year and give a progress update for 2010/11.
The Clwyd Pension Fund Panel meets quarterly and the agenda covers three main areas: Governance, Investment and Administration and my report Kerry Feather follows these three main themes.
Governance There are two major external reviews being undertaken in 2010/11, the results of which could have a major impact on the future management of the Fund.
1. The Public Service Pensions Commission, led by John Hutton, which has been commissioned by the UK Government to conduct a structural review of public service pension provision, including the Local Government Pension Scheme.
2. PricewaterhouseCoopers have been commissioned by the Society of Welsh Treasurers (Pensions Sub Group) to report on whether there is a business case for future collaborative models for the eight Welsh Local Government Pension Funds. Options could range from closer collaboration, sharing some functions or a single fund across Wales.
Members of the Panel and other stakeholders will continue be updated as these reviews progress.
In terms of Fund specific issues, CIPFA were commissioned to undertake an independent Governance Health Check to review how the Fund’s governance arrangements compare with current best practice. I am pleased to report that the review concluded that the Fund has a high standard of governance, leading to a small number of recommendations for improvement. The most significant of the recommendations is that responsibility for the management of the Fund, which is currently delegated to me, as Treasurer and Administrator for the Fund supported by an advisory Member Panel, should transfer to a newly constituted Pension Fund Committee and that there should be wider representation of stakeholders. I am in agreement with this recommendation and so are the members of the Clwyd Pension Fund Panel. Whilst a detailed plan has not yet been drawn up to implement the change, the intention is to consult with employers and to take account of the emerging outcomes from the external reviews outlined earlier.
This Annual Report includes details of attendance by members at Panel meetings and the training they have received during the year. These details reflect the commitment to the Fund from the elected representatives from Denbighshire County Council, Flintshire County Council and Wrexham County Borough Council. In addition, the recently published CIPFA Knowledge and Skills Framework will be used by Members and Officers going forward to identify any knowledge or skill gaps, so that appropriate training can be arranged.
The Staff/Union Observer to the Fund, Cemlyn Foulkes, retired from his position in early 2010/11 after over 15 years service to the Fund. I am very grateful for his dedication and contribution over these years. After consultation with all the Joint Trade Unions, Alwyn Hughes was nominated as the Union Observer on the Panel.
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Internal and external audit reports are reported to the Panel and recommendations are included on the Fund’s Service Plan to monitor action. The only significant recommendation received during the year was for Service Level Agreements with employers to be revised to include a requirement for employers to provide more information with their monthly contribution payment.
An external operational review by Mercer Consulting of the Administration Section was undertaken during the year. A number of recommendations have been received including a revised organisational structure. The operational model will change with the operations team being organised by employer. In addition, two projects will be undertaken with employers to review data transfer and resolve backlogs. A review of the operations and resources required for the Governance, Investment and Accounting Team has also been undertaken. It is anticipated that the revised organisational arrangements will be in place by early 2011 following formal consultation and approval processes.
The Governance and Compliance Statement can be found on the Fund’s website.
Investment and Funding Strategy The Fund’s Statement of Investment Principles (SIP) is reviewed every year and remained unchanged for the year 2009/10. However, a review was undertaken in July 2010 and this revised SIP is included in this Annual Report. The revised SIP measures the Fund’s compliance with six new Myners Principles on investment decision making and includes a new Sustainability Policy for the Fund. The new SIP shows that there is full compliance in most areas and where there is partial compliance, this is, in the main, related to governance issues already outlined above. The Fund has always considered Responsible Ownership as part of the SIP; however, the Sustainability Policy further enhances the Fund’s approach and is covered in more detail later in this Annual Report.
After the dramatic financial events of 2008/09 and the resulting disappointing investment performance of the Fund, the story of 2009/10 was very different as global markets rapidly recovered. The value of the Fund increased from £700m at the previous year end to £950m as at 31st March 2010. The Fund out-performed its strategic benchmark as most of the Fund’s investment managers out-performed their specific targets. Further details on the Fund’s investment strategy and performance are included in this Annual Report, along with the Fund’s Annual Accounts. Financial market volatility has continued in 2010/11. As at 30th June 2010 the Fund’s market value was near to £900m.
Whilst this report concentrates on the last financial year, it is long term performance which is key. Despite the 2009/10 market recovery, over the last ten years, equity markets, where local authority pension funds invest the majority of their funds, have provided little by way of return at about 2% per annum. In addition, the yield from government bonds has been low which has significantly increased the value of pension fund liabilities. It is this scenario and other factors such as longevity which have resulted in the debate on the cost of final salary pension funds, especially in the public sector.
The Fund recognises the importance of quarterly monitoring of both investment returns and movements in liabilities, which can be equally volatile. It is estimated that the funding position as at 31st March 2010 was 65%. This is a significant improvement from the 50% estimated as at 31st March 2009 but below the target set under the current 20 year funding strategy which started in 2004 when the Fund was 65% funded. This funding strategy had the aim of returning to a 100% funding position by 2024.
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The triennial Actuarial Valuation date is 31st March 2010, with new employer contribution rates being introduced from 1st April 2011. To determine some key assumptions used by the Actuary, a review of the funding strategy is required. This has already commenced and employers will be involved in the consultation process. It is hoped that at the employers meeting (AJCM) in November the Actuary will be in a position to present the results of both the funding strategy and the Valuation.
The Fund fundamentally reviews its investment strategy at least every four years. The recommendations from the 2010 Review were agreed by the Panel in August 2010. It is planned for the new investment strategy to be in place by 1st April 2011. The aim of the investment strategy remains to generate returns to meet future pension liabilities and contribute towards repaying the current deficit. In simple terms, it is more beneficial to stakeholders for the assets to fund liabilities than employee and employer contributions.
Although, the current investment strategy has been recognised as being advanced and has won several awards for its diversification, it did not protect the Fund value as hoped during the financial crisis. This Fund will always learn from experience and change its approach as the global financial environment changes. Some themes from the review include an increased allocation to developing markets and introducing more flexibility to move between assets classes in the event of further financial crisis in the future. The details of the Fund Review will be presented at the AJCM by the Fund’s Adviser/Consultant.
Administration The demands on the Section continued in 2009/10 with a continuing increase in membership numbers.
A Pensions Administration Update is included in the Annual Report which outlines performance and developments within the service. However, this year the review undertaken by Mercer’s has very much been the focus. The Fund is committed to enhancing communication with all stakeholders. The Communication Strategy is included in the Annual Report and a new web-site has been launched in 2010.
It is more essential than ever that we are able to work jointly with all employers in the Fund over the coming year especially with regard to data transfer and backlogs to ensure a quality service for the scheme members.
Conclusion I would like to thank all those involved with management and administration of the Fund for their hard work and dedication during the year.
Finally, I invite any stakeholder to contact me or my officers with any comments or suggestions for improvement on any aspect on the management of the Fund.
Kerry Feather Treasurer and Administrator for the Clwyd Pension Fund September 2010.
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Independent Adviser/Consultant Annual Report
1. The purpose of this commentary is to provide an independent annual appraisal of the administration, governance and performance of the Clwyd Pension Fund. As my appointment to the Independent/Adviser role commenced on 1 July 2008, this report covers my first full year in this dual capacity.
2. After the traumas and uncertainties of the September and December quarters of 2008, 2009/10 proved to be volatile again but this time in a much more positive way for pension fund assets, as returns recovered strongly from the liquidity crisis and the impact of this world markets and asset classes. Those asset classes affected earliest, such as equities and corporate bonds, recovered the quickest whilst other asset classes such as property and private equity were slower to respond to the changed environment. Elsewhere on the Fund, it was a year of consultation, consolidation and progress, albeit slow at times, towards resolution of key issues, both internal and external. Many of the internal issues still revolve around staffing and clearly proper resourcing continues to be essential in ensuring ongoing good service and sound governance of the pension scheme.
3. Whilst the corporate restructuring was agreed in July 2009, unfortunately implementation was delayed due to various factors including job evaluation issues and single status results. It is pleasing to note, however, that Philip Latham was appointed as Clwyd Pension Fund Manager later in the year, thus ensuring the retention of extensive experience and expertise on the Fund’s management. The vital next step is to quantify the resources and structures required to administer the scheme within the wider Finance Function review, both on Funds and scheme administration. Clearly early progress on this is important. In the interim, additional temporary staffing is being made available to both Funds and pensions administration.
4. On Funds, the above situation has inevitably caused some delay in the more active involvement of in-house staff in some of the consultant’s areas of responsibility but this should pick up speed again in 2010/11. At the same time, the investment world continues to reinvent itself and become increasingly complex, partly as a result of events in 2008 and partly as a result of globalisation, coupled with the search for more consistent and more risk- averse returns. Whilst it is clearly vital that existing investments are closely and regularly monitored, the speed of progress on the development of new ideas and approaches requires in-house staff to be forward-looking and pro-active in keeping aware of and reviewing such new opportunities. The Funds team has shown considerable diligence in applying itself to both these aspects despite the pressures.
5. On scheme administration there were also pressures. Membership numbers continued to increase, with the number of pensioners and contributors up 12% in the 3-year period to 31 March 2009 and up a further 7% in 2009/10 alone. At the same time, the rollover effects of the revised regulations for the Local Government Pension Scheme (LGPS) in 2008, their increasing complexity and the need for clarification of these after issue continued to impact on workloads in 2009/10. This was exacerbated in December 2009 by the issue of information on further regulation amendments, backdated to April 2008. There was also staff turnover. Targets inevitably suffered as a result. In the light of these and other pressures, an external review of the pensions administration operation was commissioned during the year and the resultant report is expected early in 2010/11. This will be an important input to the determination of the ongoing level of resources and team structure required.
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6. On scheme administration, there are also positives to report. The administration team’s focus on communication was maintained through timely correspondence to members affected by regulation changes and training sessions on key issues, as well as the introduction of pension surgeries early in 2009 for individual scheme members. There is also a plan, currently at an early stage, to move to the new generation of pension administration computer systems, aimed at ensuring increased efficiency for administrators and an improved service for both scheme members and employers.
7. On externally driven LGPS matters, the focus during the year was on governance and funding. On governance the Government’s Department for Communities and Local Government (DCLG) issued a consultation paper in May 2009, identifying training and facilities availability for members as potential weaknesses. This paper linked in with the issue of revised Myners principles (6 instead of 10) for pension funds and the issue of a “Knowledge and Skills Framework” targeted at these principles by CIPFA.
8. Whilst the DCLG consultation period ended on 30 September 2009, the outcomes have not been issued at the time of writing. Despite this, the pensions team has responded positively in anticipation of the outcomes, with the drafting of a revised and more detailed Myners compliance statement plus other forward-looking initiatives on training, corporate governance and sustainability. An external review of governance has also recently been commissioned. At the same time, there is an initiative within Wales to examine possibilities for collaborative working opportunities across the 8 pension funds. This is being closely monitored as regards possible implications for the Fund, but is still at a very early stage.
9. With the next actuarial valuation due at 31 March 2010, the other focus during 2009/10 was on funding. In the previous two years, funding levels had fallen dramatically, caused as much by the increase in liability values on the back of falling gilt yields as by the negative absolute returns from assets. As noted above, asset values recovered strongly in 2009/10, almost back to pre-crash levels, but this was largely offset by the increase in liabilities as gilt yields continued to fluctuate but generally to trend downwards.
10. The DCLG, very much aware of this and the potential impact of likely funding levels on the 2010 valuation results, issued a consultation paper, “Delivering Affordability, Viability and Fairness”, early in 2009, which focused primarily on funding and financing issues, suggesting alternative approaches. The Fund welcomed the debate and responded positively to the consultation paper. However again, whilst the consultation period ended on 30 September 2009 and the valuation exercise has now commenced, no guidance has been forthcoming at the time of writing.
11. At Pension Fund Panel (PFP) level, the year was one of consolidation. The elected members appointed in June 2008 continue to work extremely well together and to show a real enthusiasm for their duties. Attendance and participation levels have both been very good. Key areas for the PFP during the year have been pension team resourcing, the various consultation papers noted above and, of course, ongoing training.
12. After the events of 2008 and the different investment environment emerging thereafter, a key focus has been the continuation of regular training through a combination of updates by the in-house team, joint training sessions with other pension fund authorities, specific conferences and presentation by managers as part of PFP meetings. Such an active involvement in training belies the negative comments made in the DCLG consultation paper on governance and suggests that the Fund has one of the stronger training regimes. However, there is no sense of complacency and guidance included in CIPFA’s “Knowledge and Skills Framework” provides a basis for best practice that has already been accepted by PFP members.
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13. As noted in last year’s report, the Fund’s SIP states that a full Fund Structure Review exercise should be completed “at least every 4 years”, although historically this has been carried out every 3 years. The first stage of this exercise was commenced in 2009 and this resulted in the high-level strategic report going to PFP in August 2009. The key consideration for the PFP at that time was whether to take this forward to the next stage or whether to postpone this to 2010. In view of the considerable uncertainty about the timing of economic recovery, market direction and the financial environment generally, as well as the potential impact of Government intervention and regulation, the PFP agreed to delay to 2010 the second Fund Structure Review stage. This will involve the assessment of investment managers’ performance (existing or others), the review of investment approaches (current or new) and the determination of forward structures (tactical or strategic).
14. There is very little doubt that this postponement was the right decision. In 2009/10 there was considerable uncertainty about the emerging investment environment and LGPS funds tended to focus on the status quo, both in terms of their asset allocation positions and their managers. Towards the end of the period, however, some confidence started to return and funds became more outward looking. The focus of attention by LGPS funds now appears to be on increasing diversification, particularly into alternatives and real assets such as property, commodities and infrastructure, plus a greater interest in emerging markets and more dynamic approaches to asset allocation. These are all areas that are likely to receive attention when the Fund Structure Review exercise is restarted early in 2010/11.
15. For the Fund’s assets, 2009/10 was a much more positive year, reflecting the rebound suggested in last year’s report. Absolute asset performance was extremely strong in the year, up over 30%, and was largely instrumental in seeing the Fund rise in value from £697 million at 31 March 2009 to around £950 million. In the year to 31 March 2010, equities led the way with returns of over 50% in UK markets and over 70% in emerging markets. Property and private equity were slower to recover but positive returns were seen in the final quarter of the year, presaging well for 2010/11. At manager level, returns were generally good and there were no real areas of concern in 2009/10. The Fund’s four key managers with the largest holdings, who had all under-performed badly in 2008/09, recovered very strongly and produced returns well above target in 2009/10. However, there remains ground to be made up on a longer-term view.
16. On a comparative basis, the very strong performance of equities, coupled with the Fund’s more diversified structure and below average weighting to this asset class, seems unlikely to be favourable. However, the Fund is structured for the long-term rather than the short-term and the extraordinary performance of equities in 2009/10 is extremely unlikely to be repeated on many future occasions. The indications for 2010/11 are for a more subdued year on equities with other asset classes catching up as markets pause for thought in the light of ongoing economic concerns in some areas.
17. In many ways, 2009/10 was another extraordinary year. Economies and markets recovered extremely strongly from the depths of 2008/09, helped by the considerable level of assistance afforded by Governments. Just as in 2008/09 when the pessimism and panic was certainly overdone, there is a feeling that the euphoria that drove up markets in 2009/10 probably went too far and was not fully supported by fundamentals. Serious concerns remain on the withdrawal of quantitative easing, public spending cuts, increased taxation, inflation and the impact of these on growth, suggesting that 2010/11 might be less positive for growth-related markets.
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18. Overall, the last year has been a period of reflection and consultation for the PFP rather than action, after the changes and turbulent events of 2008/09. On the scheme side there were Government consultation documents on governance, as well as future funding and affordability, and the start of a Welsh initiative on collaborative working. On fund management, there was much analysis of recent happenings and how these might affect the future investment policy, with funds generally very reluctant, initially at least, to start changing structures in reaction to these events. Within this environment it was important that PFP members and officers maintained the Fund’s impetus and, whilst the Fund did not submit entries for any prizes this year, good progress continued to be made in crucial areas.
19. With the actuarial valuation, recommencement of the Fund Structure Review exercise and an increasing focus on governance and sustainability, 2010/11 is likely to be much more a year of action. However, with the foundations laid in 2009/10 and further early progress in other key areas, the Fund and its PFP will be very well placed to meet the challenges ahead.
R T Young Independent Adviser/Consultant
10 May 2010
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2009/10 - Facts and Figures at a Glance
How the Fund Works Contributions are paid into the Fund by the Member Bodies and their employees and those monies are then invested in stocks and shares, bonds and alternative investments in order to provide benefits i.e. pensions, lump sums etc. Both the employees’ rate of contributions and benefits are fixed by statute. This leaves the employers’ rate of contribution as the only variable factor and this is assessed by the Actuary to the Fund as part of the statutory valuation process.
2009 -10 Income 2009 -10 Expenditure Income £m Expenditure £m Employees 15 Pensions 37 Employers 50 Lump Sums 12 Investment Income 3 Other 11 Other 9 Surplus 17 77 77
Contributors Pensioners - 31 March 2010 31 March 2010 Retired Members 7,395 All Contributors 15,073 Widows/Dependants 1,425 Preserved Benefits 5,969 14,789
Market Value of Fund Change in Net Assets as at 31 March 2010 £m £m Fund at 1st April 2009 697 Fixed Interest Securities 112 Net New Money 17 UK Equities 242 Changes in market value Foreign Equities 315 during the year Alternative Investments 281 Realised and Cash 3 unrealised profit 242 Net Assets 3 956 Fund at 31st March 2010 956
Investment Performance The returns to the Fund are measured in terms of investment income, profit on sales and capital appreciation generally against targets set. The aim of the pension fund is to maximise these returns whilst remaining within the acceptable limits of risk. Investment performance therefore affects the rate of growth of the fund and can have significant impact when the Actuary assesses the assets and liabilities of the fund for valuation purposes. The aims of the pension fund are long term and therefore a sustained performance over several years is much more important than the performance in any single year.
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Investment Managers & Performance
Long Term Strategy
In determining the Investment Strategy for the Clwyd Pension Fund, the overall investment objective is to:
• aim for a funding level of 100%; • to aim for long term stability in employers' contribution rates; • superior investment returns relative to the growth of liabilities.
The investment policy of the Fund is intended to strike the appropriate balance between the policy most suitable for long-term consistent performance and the funding objectives. A favourable investment performance can play a valuable role in achieving adequate funding over the longer term.
Summary of 2009/10
The strategic asset allocation for the Fund remained unchanged in 2009/10 from 2008/09. The current investment arrangements of the Clwyd Pension Fund are carried out by thirteen external managers covering fifteen mandates which are all pooled vehicles. The asset allocation as at 31st March 2010 is shown on page 19. In addition the Fund manages its property and private equity investments in house through thirty eight managers investing in excess of eighty funds which are listed in this Annual Report.
The only fund manager changes during the year were the appointment of Liongate and SSARIS as Fund of Hedge Fund Managers to replace BlackRock and Pioneer. There was a merger of Barclays Global Investments (BGI) and BlackRock. The Fund had two mandates with BGI which have now transferred to BlackRock, European Equity and Global Tactical Asset Allocation.
2009/10 was a good year for the Fund with the market value of the Fund increasing from approximately £700m to £950m, investment return of +33.3% and the funding level improving from an estimated 50% to 65%.
As well as absolute returns, investment performance is compared to a strategic benchmark and to a peer group of the other Local Government Pension Schemes. The investment return for 2009/10 was ahead of the strategic benchmark for the year by 6.3% as most of the fund managers out-performed their individual benchmarks. This is demonstrated in the chart below. Asset Performance 12 Months to March 2010 Performance
Asset Class
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At a total fund level the peer group comparison was a little disappointing with a ranking compared with the nominal 100 funds of 63%. The long term expectation for the Fund is to be upper quartile rather than third quartile. This is a result of the Fund having a lower equity weighting than the peer group. This hides the excellent performance in the year across most asset classes with performance in top deciles - Pacific Rim Equity = 5%, UK Equity = 6% and Japan Equity =10%. The asset class performance compared with the peer group for 2009/10 is shown below.
Asset UK US Europe Pac Rim Japan Other Bonds Other Property Total Class Equities Equities Equities Equities Equities Intl
Return % 65.7 42.6 49.3 78.2 38.0 68.7 27.0 6.6 3.9 33.3 Rank % 6 32 40 5 10 53 23 50 89 63
Summary of the Longer Term
Although, this Annual report concentrates on 2009/10 it is the longer term that is key. The Fund carries out a fundamental review of fund management arrangements at least every four years. The table on the following page shows changes made to the Fund’s investment strategy during the decade and changes to be implemented from 1st April 2011 following the 2010 Review. This shows a reduction in the allocation to equities and increase in alternative assets. This asset allocation is very different from the average Local Government Pension Fund. The Fund has been particularly active and very early in its commitments to alternative assets through a broad range of specialist managers.
The market value of the fund has increased from approximately £500m in 2001 to £950m in 2010 as shown in the chart below.
Growth of Fund 2001 - 2010 Value
Year
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The chart below shows the Fund has outperformed its strategic benchmark in 3 of the last 6 years. Total Performance of Fund against Benchmark Performance
Year
Changes to Investment Strategy 2001 2004 2007 2011 LGPS %% %%Average Equities Global Unconstrained - - 5.0 5.0 Global High Alpha/Absolute - - - 5.0 UK Active (traditional) 35.0 29.0 15.0 - UK Active (portable alpha) 10.0 10.0 12.0 - US Active 7.0 8.0 5.0 - Europe (ex UK) Active 11.0 9.0 6.0 - Japan Active 4.0 4.0 4.0 - Far East (ex UK) Active 2.5 3.0 4.0 7.0 Emerging Markets Active 2.5 3.0 4.0 7.0 Developed Passive - - - 19.0 72.0 66.0 55.0 43.0 63.0 Fixed Interest Traditional Bonds 10.0 9.5 - - High Yield/Emerging 1.5 2.0 - - Unconstrained - - 13.0 15.0 Cash/Other 2.5 0.5 - - 14.0 12.0 13.0 15.0 24.0 Alternative Investments Property 5.0 7.0 6.5 7.0 Infrastructure 0.5 0.5 1.5 2.0 Timber/Agriculture - - 1.5 2.0 Commodities - - 2.0 4.0 Private Equity 4.5 4.5 6.5 8.0 Hedge FOF/Market Neutral 4.0 4.0 5.0 5.0 Currency Fund - 4.0 4.0 - Free Allocation - - - 2.0 GTAA/TAA - 2.0 5.0 12.0 14.0 22.0 32.0 42.0 13.0
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The table below shows a summary of annualised investment performance over the last 10 years compared with the Fund’s Benchmark. Peer group and Corporate Pension Funds.
Period Clwyd Pension Clwyd Average Local Corporate Ranking (Years) Fund Benchmark Authority Funds (%) (%) (%) (%) (%) 1 33.3 27.0 35.2 28.4 63 3 0.5 4.0 1.7 1.8 69 5 6.4 7.9 7.1 7.0 65 10 3.5 3.8 3.8 3.3 60
Source : WM Company The period of the ‘credit crunch’ in 2008/09 was particularly disappointing. However, in the 12 quarters covering 1st April 2007 to 31st March 2010 the Fund was upper quartile in 4 quarters and above the Local Authority Average in a further 4 quarters.
In terms of the Funding Strategy this continues to remain behind the 20 year recovery target set in 2004 to return to 100% funding by 2024. However, the average employer contribution rate, which is expressed as a percentage of pensionable pay, has remained reasonably stable over the last three Actuarial Valuations, despite lower than expected returns from global equity markets.
The continued impact on the Funding Strategy for the Fund of lower than expected investment returns along with low gilt yields, which increase the value of the Fund’s liabilities, is being considered as part of the 2010 Actuarial Valuation. The new employer contribution rates will apply from 1st April 2011.
The table below shows historic funding, deficit and employer contribution rates. As a result of advice received by Clwyd County Council (pre welsh local government re-organisation in 1996), during the implementation of the Community Charge, the employers in the Fund received a ‘contribution holiday’ which allowed the Fund to reduce to a 75% funding position in the late 1980s.
Actuarial Funding Recovery Deficit Average Valuation Position Period (£m) Employer (%) (years) Rate (%) 2001 77 15 158.4 19.5 2004 65 20 295.7 20.4 2007 75 17 294.0 21.6
The 2009/10 fixed strategic benchmarks for each of the managers and the mandates within their remit are shown overleaf along with their actual allocation at the year end. As stated in the Statement of Investment Principles, having agreed the fixed benchmark there is a need to keep the position under review. Re-balancing of the Fund to keep it in line with the benchmark will incur costs and will, therefore, need to be considered in light of the benefits to be achieved and the costs associated with turnover. Re-balancing will only take place quarterly when an asset class has moved by more than the ranges indicated in the table above except in exceptional economic / stock market circumstances. Although there is no long term strategic allocation to cash or other assets, there is a need to include a tactical range to accommodate these circumstances where it is not considered appropriate to re-balance the portfolio and where investment commitments have been made.
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Fixed Strategic Benchmark
Manager Scenario Weight Allocation Tactical (%) 31/03/10 Ranges Equities Investec Asset Management Global Unconstrained 5 4.6 +/-1% Standard Life Investments - UK Traditional active 15 14.0 +/- 1% Gottex Fund Management - UK portable alpha FTSE 12 11.4 +/- 1% T Rowe Price Global - US equities 5 5.5 +/- 1% Investment Services Ltd BlackRock (4%) - Europe equities 6 5.7 +/- 1% TT International (2%) Fidelity Investments Ltd - Japan equities 4 3.3 +/- 1% Aberdeen Asset Managers - Pacific Rim equities 4 4.6 +/- 1% Wellington Management - Emerging Markets 4 4.7 +/- 1% International Ltd equities Fixed Interest Stone Harbor Unconstrained 13 11.7 +/- 2% Investment Funds Cash/Other 0 2.4 Up to+5% Alternatives BlackRock Asset Allocation 5 4.6 +/- 1% Various Private Equity 8 10.8 +/- 2% Various Property 8 6.6 +/- 2% Liongate (2.5%) Hedge Fund of Funds 5 5.5 +/- 1% SSARIS (2.5%) BlackRock Pioneer Alternative Investments UK Ltd Goldman Sachs Currency Funds 4 3.0 +/- 1% Asset Management Wellington Management Commodities 2 1.6 +/-1% International Ltd
TOTAL 100 100
Note: Liongate and SSARIS replaced BlackRock and Pioneer during 2009/10.
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Property and Private Equity Portfolios During 2009/10, the Fund committed €10 million in total to Access European Fund of Funds and Impax New Energy Fund. Property Open Ended Holdings Schroders Hermes Ashley House Medical Properties LAMIT Legal and General BlackRock Morley Junction Unit Trust Closed Ended Holdings Aberdeen Property Select (Asia Pacific) BlackRock US Residential Opportunity Fund Darwin Leisure Property Fund Ediston Opportunity Fund HSBC Active Property HSBC European Active Real Estate Fund Igloo Regeneration Fund Morgan Stanley Global Real Estate Partners Group Global Real Estate Franklin Templeton (2 funds – European and Asia Pacific) Timber RMK Timberland (2 funds) Stafford International Timberland (2 funds) Private Equity Direct Apax (6 funds) Candover (5 funds) Charterhouse Capital (5 funds) Crossroads (2 funds) ECI Ventures (3 funds) Environmental Technologies Fund Impax New Energy Fund Ludgate Environmental Fund Granville Baird (5 funds) August Equity (3 funds) MTI (2 funds) Parallel Ventures (2 funds) Fund of Funds Access Capital (2 funds) Harbour Vest (4 funds including Cleantech Fund) Partners Group (7 funds) Capital Dynamics (9 funds) Infrastructure Arcus European Infrastructure Henderson PFI HSBC (3 funds including Environmental) Innisfree Morgan Stanley Leveraged Loans ECM Opus Credit
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Corporate Governance & Corporate Social Responsibility
Aim and Definition The aim of Corporate Governance is to align the interests of individuals, corporations and society. Corporate Social Responsibility is operating a business in a manner that meets or exceeds the ethical, legal, commercial and public expectations that society has for business.
The Clwyd Pension Fund Policy The Clwyd Pension Fund has always included a section in the Statement of Investment Principles (SIP) on environmental, social and ethical considerations and corporate governance. However, in light of the publication of the United Nations Principles on Responsible Investment (UNPRI) and the revised Myner’s principles which includes Principle 5 on Responsible Ownership, Stage 1 of the Fund Review carried out last year considered a suitable policy for the Fund on responsible ownership.
As a result, the Fund produced a Sustainability Policy to be included in the SIP which can be found within the regulatory documents section of this Annual Report. The format of the Policy follows that of the UNPRI but as recognised in the Policy, given the pooled nature of the investments, it would be difficult to become a formal signatory of the UNPRI.
Compared with the previous sections in the SIP on this area, this Policy makes a clear commitment that the Fund will be an active supporter of UN principles. The Policy is specific in the actions the Fund will take in the 6 principle areas:
• Investment Strategy • Company Engagement & Voting • Investment Management & Monitoring of Performance • Investment Management Selection and Contracts • Collaboration • Reporting and Disclosure
Implementation of the Policy The Sustainability Policy included within the SIP identifies in detail, the approach the Fund will adopt within each of the areas specified above. The progress the Fund achieves will be reported in future Annual Reports.
The Fund is also a member of two bodies, the Local Authority Pension Fund Forum (LAPFF) and the National Association of Pension Funds (NAPF).
The Fund is invested in pooled vehicles, therefore does not own individual shares. However, in the case of the UK and US, the fund managers report on how they voted the shares within the vehicle. In particular if corporate governance concerns are raised by LAPFF or NAPF, these are reported to the fund managers and an explanation is received from the managers on how they voted and the engagement undertaken with the managers of the company.
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The LAPFF has 52 LGPS members with combined assets of over £90bn. In line with the Fund’s policy LAPFF believe that by actively encouraging companies to comply with best practice shareholder value is improved over the medium and long term. The LAPFF work programme is on-going on projects on overseas employment standards, company workforce practices, climate change and greenhouse gas emissions. Further details can be found on the LAPFF web site www.lapfforum.org.
As can be seen below, as part of the Fund’s Property & Private Equity allocation, the Fund invests in environmental and sustainable projects, including Timber, Regeneration, and Environmental Technology Funds. During 2009/10 all new investments made within this asset allocation were in the New Energy, Timber and Environmental areas.
On-going, the Fund will continue to review the approach taken and welcomes any comments Member Bodies have on the policy, its implementation, and any ideas that might be adopted by LAPFF for future projects.
Year Investment Commitment
2006 Igloo Regeneration Fund £2m 2006 Ludgate Environmental Fund £1m 2007 Stafford Timberland IV $8m 2007 RMK Timberland $8m 2008 Environmental Technologies Fund £3.7m 2008 Ludgate Environmental Fund (additional) £1m 2008 Stafford Timberland V €2.6m 2008 RMK Timberland Resources Fund $4m 2008 HSBC Environmental Infrastructure €5m 2008 Harbour Vest Cleantech Fund $7.5m 2009 Impax New Energy €5m
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Participating Employers of the Fund at 31 March 2010
The Fund has 34 bodies who contribute to the Fund, 28 scheduled and 6 admitted. Contributions are paid over to the Fund by the 19th of the following month the contributions relate to. An analysis of contributions received during 2009/10 is shown below.
Scheduled Employer Employee Bodies Contribution Contribution £ £
Flintshire County Council 17,531,884.15 4,966,111.63 Wrexham County Borough Council 15,918,725.84 4,505,780.01 Denbighshire County Council 11,490,352.62 3,344,952.94 Glyndwr University 1,298,689.57 454,295.02 North Wales Probation Board 1,149,897.73 431,659.98 North Wales Fire Service 833,635.62 257,739.06 Deeside College 740,076.41 289,961.33 Yale College of Wrexham 629,148.56 247,388.80 Llysfasi College 128,720.10 61,773.78 The Maelor School, Penley 61,428.72 17,976.16 St Brigid’s School, Denbigh 55,640.13 15,525.16 Welsh College of Horticulture 36,351.97 12,159.45 North Wales Valuation Tribunal 36,174.65 9,571.56 Rhyl Town Council 24,797.77 8,596.26 Hawarden Town Council 23,457.95 9,567.37 Ysgol Derwen, Kinnerton 23,418.80 6,115.81 Yale Enterprise Ltd 21,377.74 5,894.39 Caia Park Town Council 16,367.57 5,923.26 Prestatyn Town Council 14,031.92 6,640.14 Connah’s Quay Town Council 13,447.11 3,603.50 Buckley Town Council 10,520.40 4,292.54 Mold Town Council 9,658.26 3,538.78 Coedpoeth Town Council 7,105.45 2,289.29 Offa Town Council 5,925.14 2,656.08 Rhosllanerchrugog Town Council 5,793.68 2,103.87 Shotton Town Council 4,193.82 1,622.74 Argoed Town Council 3,228.69 1,140.53 Llanasa Town Council 221.00 0
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Admitted Employer Employee Bodies Contribution Contribution £ £
Careers Wales 424,171.97 187,716.15 Clwyd Leisure 80,670.47 24,531.45 Cartreff y Dyffryn Ceiriog 44,823.46 4,711.56 AD Waste 29,451.32 5,312.87 Bodelwyddan Castle Trust 24,886.68 10,508.85 Denbighshire Voluntary Services 10,716.50 3,709.08
The Pensions Regulator allows the Fund the option to levy interest on overdue contributions during the financial year. During the year the Fund monitored timeliness of contributions and liaised with employers to overcome any problems they may be encountering. The analysis below shows the number of late contributions made to the Fund, along with the amounts concerned. The Fund did not exercise their option to levy interest against any of the employers during the year as the amounts involved were only 0.1% of total contributions received, £89k compared to £66m.
Employer Late Occasions Contributions £ A 1 1,217.69 B 1 1,780.54 C 5 1,806.07 D 3 3,424.81 E 6 13,538.33 F 1 66,844.50
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Pensions Administration Update
Introduction
The current Local Government Pension Scheme regulations have now been in force for 2 years, and there have been continual amendments and additions made to those originally set. The Clwyd Pension Fund has continued to keep up with these changes to ensure that the scheme is administered correctly and also to ensure that our pension members are aware of any changes that may affect them.
The new Government has also started a review on public sector pensions which could create more changes to the Local Government Pension Scheme in the future. The Clwyd Pension Fund will continue to keep up-to-date with proposed changes to determine any preparation that needs to be made to ensure correct administration of the pension regulations in the future.
Changes to the Local Government Pension Scheme
• The current Local Government Pension Scheme allows members to nominate their cohabiting partner to receive a pension if the LGPS member pre-deceases their partner. Until recently, cohabiting partner pensions could only be based on post April 1988 LGPS membership. In December 2009, it was determined by CLG to give LGPS members with pre April 1988 membership the option to pay Annual Survivor Benefit Contributions (ASBCs). The additional contributions ensure pre April 1988 membership will be taken into account when calculating a cohabiting partner’s pension. This new facility has been backdated to take effect from 1st April 2008. • Historically, a pension paid to an LGPS member’s surviving Civil Partner or Widower was only based on post April 1988 membership. In December 2009 it was determined by CLG that surviving Civil Partner and Widower pensions should be based on full membership. This is to ensure equality with benefits received by Widows. This amendment to the regulations has been backdated to take effect from 1st April 2008. No extra contributions need to be paid by the LGPS member for this facility. • The earliest age that an LGPS member is eligible to retire has now increased from age 50 to 55. The retirement protection for those members aged 50 – 54 has now ceased. Retirements under age 55 are now only possible if it is an ill health retirement. • Under the emergency budget proposals, LGPS pensions will no longer increase in line with Retail Price Index (RPI). Instead, from April 2011, LGPS pensions will increase in line with Consumer Price Index (CPI). This will not only affect LGPS pensioners, but also any members with a deferred pension. The change from RPI to CPI will also affect ARCs and pension transfer calculations for contributing members of the pension scheme. The Government Actuaries Department (GAD) must now revise factors used for these types of calculation to take into account the change from RPI to CPI. • The emergency budget also increased the age limit to buy an annuity from age 75 to age 77. This will affect any LGPS member with an in-house AVC. • The annual allowance of pension is proposed to reduce to between £30,000 - £45,000. The annual allowance is the amount by which the value of a members pension savings may increase in any one year before a tax charge has to be paid. The annual allowance for 2009/2010 was £245,000. The annual allowance for 2010/11 is currently £255,000 so this is likely to be reduced for future years.
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Communications
The Fund is committed to enhancing its communications with employers, scheme members and pensioners. During the 2009/2010 financial year the Fund has:
• Distributed issue 5 of Clwyd Catch Up – a newsletter for our pension members which is issued along with their pensions increase notification. • Circulated issue 14 of Penpal – a newsletter that is sent to our active members informing them of changes to the scheme. • Sent out booklets entitled ‘The Employees Guide to the Local Government Pension Scheme’ to all new scheme members as part of a welcome pack. • Kept stocks of booklets entitled ‘Topping Up Your Benefits’ and ‘Opted Out? Missing Out!’ For general distribution as and when required / requested. • Distributed benefit statements to both active and deferred Local Government Pension Scheme members. • Informed high-earning LGPS members of new rules concerning tax implications and pensions. • Held 11 drop-in surgeries for scheme members at their place of work. • Held 9 employer training sessions with regard to the new pension regulations. • Continued to develop other communications on an All Wales basis with the other 7 Welsh Funds. • Created a new Clwyd Pension Fund website ready for re-launch to the general public
For further information on Clwyd Pension Fund communications, please refer to our updated Communication Policy Statement on pages 74 - 79 of this Annual Report.
Developing the Service
The Fund will be enhancing its service delivery to employers, scheme members and pensioners by:
• Reviewing its service level agreements with employers on an annual basis • Maintaining an effective business continuity plan • Formulating an Administration Strategy • Continuing to attend LGPS manager meetings to discuss effective administration of the pension scheme and to debate current issues with regard to the LGPS regulations • Attending LGPS training courses to ensure staff skills and LGPS knowledge are up-to-date • Implementing a new structure in the Pensions Section so that it works more efficiently
The Clwyd Pension Fund is now predominantly a paperless office with all archived files scanned onto our computerised document imaging system. All current post that is received into the office is also scanned onto our document imaging system on a daily basis.
The Pensions Payroll system and the Pensions Administration system are now merged. Both systems run under CLASS-AXISe. This means that any new pension which has been calculated and authorised by a supervisor is automatically uploaded onto the Pensions Payroll system without any manual intervention.
The new-look Clwyd Pension Fund website is now available to the general public and has more self-service facilities than the former website, for example, online forms, also forms/literature for download, and pension calculators. The new website is easier to navigate to find information required about the LGPS rules and regulations.
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Clwyd Pension Fund Administration Statistics
As part of the Pension Fund Annual Report, it is a requirement to provide statistics with regard to how the Clwyd Pension Fund is performing. The following tables and graphs show data with regard to caseloads, achieving targets, pension staff turnover, and LGPS member trends.
Top ten case types 2009/2010:
Case Type No. of Cases New starters 1,606 Part-time hours change 1,430 Calculation of deferred benefits (over 3 months) 1,384 Change of address/name 900 Input of GMP 862 General Enquiries 619 Input Death Grant Expression of Wish 453 Update Axise and File 429 Annual Benefit Statement Queries 315 Re-employed Member from Deferred Benefit or Refund Status 228
Tasks completed on time against targets 2009/2010:
Case Type % Within Target Comments New starters 98.44% Part-time hours change 46.50% Calculation of deferred benefits 28. 10% The query can only be dealt with when all (over 3 months) relevant information has been received from the Employer. Change of address/name 92.88% Input of GMP 81.55% General Enquiries 58.15% If information is required from a 3rd party, answering queries may take longer depending on when the pensions office receive the 3rd party information. Input Death Grant Expression of Wish 81.67% Update Axise and File 91.60% Annual Benefit Statement Queries 51.11% The query can only be dealt with when all relevant information has been received from the Employer. Re-employed Member from 34.21% The query can only be dealt with when all Deferred Benefit or Refund Status relevant information has been received from the Employer.
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Staff Turnover 2009/2010:
Pensions staff as at 31/03/2010 18 Staff leaving as at 31/03/2010 2 Staff joining as at 31/03/2010 5
Ratio of Pensions Staff to LGPS Member 2009/2010: Although there are 18 members of pension staff, only 13.3 staff members deal with administration. The remaining 4.7 staff members deal with I.T., pension payroll and communications.
As at 31/03/2010, there were 32,921 members of the Clwyd Pension Fund (including cases waiting to be deferred). This means that there are 2,475 members per pensions staff member.
Member trends:
Period from – to Contributors Deferred Pensioners Dependant Members Pensioners 01/04/2005 - 31/03/2006 13,094 4,378 6,299 1,358 01/04/2006 - 31/03/2007 13,538 4,811 6,580 1,384 01/04/2007 - 31/03/2008 14,159 5,024 6,815 1,394 01/04/2008 - 31/03/2009 14,554 4,961 7,087 1,420 01/04/2009 - 31/03/2010 15,073 5,969 7,395 1,425
Pensioners who were awarded enhanced retirement benefits:
Period from - to No. of Enhanced Benefits 01/04/2005 - 31/03/2006 92 Members 01/04/2006 - 31/03/2007 85 Members 01/04/2007 - 31/03/2008 33 Members 01/04/2008 - 31/03/2009 23 Members 01/04/2009 - 31/03/2010 27 Members (ill health only)
Age profile of members 2009/2010:
Age Trends Clwyd Pension Fund 2500
2000
1500
1000
LGPS Members LGPS 500
0 16-20 21-25 26-30 31-35 36-40 41-45 46-50 51-55 56-60 61-65 66-70 71-75 Ages
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Internal Dispute Resolution Procedure 2009/2010:
1st Stage Cases Submitted Cases Won Cases Lost
0 0 0
2nd Stage Cases Submitted Cases Won Cases Lost
0 0 0
Administrative Responsibilities: The Clwyd Pension Fund is solely responsible for the administration of pensioner payroll. The administration for scheme members is mainly the responsibility of the Clwyd Pension Fund although the Employers must adhere to certain standards set out in the Service Level Agreements. For example, the Employers must supply the Clwyd Pension Fund with documents in a timely manner in order for benefits to be calculated as soon as possible.
Although the Clwyd Pension Fund has the power to seek compensation from Employers in respect of any breaches of such standards, the Clwyd Pension Fund has not used this power.
If you require any further information with regards to the pensions administration please contact Helen Burnham, Pensions Manager on 01352 702872.
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The Actuary’s Report
This is the Statement required under Regulation 34(1)(d) of The Local Government Pension Scheme (Administration) Regulations 2008. An actuarial valuation of the Clwyd Pension Fund was carried out as at 31 March 2007 to determine the contribution rates with effect from 1 April 2008 to 31 March 2011. The results of the valuation are contained in our report dated 28 March 2008. The valuation allowed for the new look LGPS benefit structure which was introduced from 1 April 2008.
On the basis of the assumptions adopted, the valuation revealed that the value of the Fund’s assets represented 75% of the accrued liabilities Funding Target at the valuation date. The valuation also showed that a common rate of contribution of 12.5% of pensionable pay per annum was required from employers. The common rate is calculated as being sufficient, together with contributions paid by members, to meet all liabilities arising in respect of service after the valuation date.
Adopting the same method and assumptions as used for assessing the Funding Target the deficit would be eliminated by an average additional contribution rate of 9.1% of pensionable pay for 17 years. This would imply an average employer contribution rate of 21.6% of pensionable pay in total.
In practice, each individual employer’s position is assessed separately and the contributions required are set out in our report dated 28 March 2008. In addition to the certified contribution rates, payments to cover additional liabilities arising from early retirements (other than ill-health retirements) will be made to the Fund by the employers.
The funding plan adopted in assessing the contributions for each individual employer is in accordance with the Funding Strategy Statement (FSS). Different approaches adopted in implementing contribution increases and deficit recovery periods are as determined through the FSS consultation process. For certain employers, in accordance with the FSS, an increased allowance has been made for assumed investment returns on existing assets and future contributions, for the duration of the employer’s deficit recovery period.
The valuation was carried out using the projected unit actuarial method and the main actuarial assumptions used for assessing the funding target and the common contribution rate were as follows:
For past service liabilities For future service liabilities Rate of return on investments: - pre retirement 6.40 % per annum 6.50 % per annum - post retirement 5.40 % per annum 6.50 % per annum
Rate of pay increases 4.35 % per annum 4.00 % per annum
Rate of increases in 3.10 % per annum 2.75 % per annum pensions in payment (in excess of Guaranteed Minimum Pension):
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The assets were assessed at market value and full details of the assumptions adopted for the valuation are set out in the actuarial valuation report.
Since the 2007 valuation the markets have shown a high degree of volatility, and the Fund has monitored the implications for funding closely with further actuarial advice provided.
The next triennial actuarial valuation of the Fund is due as at 31 March 2010. Based on the results of this valuation, the contribution rates payable by the individual employers will be revised with effect from 1 April 2011.
Paul Middleman Fellow of the Institute of Actuaries Mercer Limited July 2010
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Clwyd Pension Fund Accounts
THE MANAGEMENT AND MEMBERSHIP OF THE CLWYD PENSION FUND The Clwyd Pension Fund is administered by Flintshire County Council on a lead authority basis. The administration and investment strategy of the Fund is considered and agreed each quarter by the Clwyd Pension Fund Panel, consisting of five elected Members, the Head of Finance, the Clwyd Pension Fund Manager, a consultant to the Fund, and a scheme member observer. The Fund's investment management arrangements are implemented by fifteen investment managers.
The Clwyd Pension Fund is a statutory Local Government Pension Scheme (LGPS), set up to provide death and retirement benefits for local government employees, other than teachers, police and firefighters in North East Wales. In addition, other qualifying bodies which provide similar services to that of local authorities have been admitted to membership of the LGPS and hence the Fund.
The Clwyd Pension Fund operates a defined benefit scheme whereby retirement benefits are based on employees' final remuneration and length of service. The Fund was funded by variable percentage contributions from both employees and employers which take account of the relationship of assets to liabilities (see Actuarial Valuation on page 37). The benefits of the scheme are prescribed nationally by Regulations made under the Superannuation Act 1972.
The membership of the Fund as at 31st March 2010 is shown below:-
2010 2009 Number Number Contributors 15,073 14,554 Pensioners: Ex employees 7,395 7,087 Widows/dependants 1,425 1,420 Preserved benefits 5,969 4,961 Total membership 29,862 28,022
The scheduled bodies contributing to the Fund are:-
Authorities: Flintshire, Denbighshire, Wrexham. Colleges: Glyndwr University, Deeside College, Llysfasi College, Welsh College of Horticulture, Yale College of Wrexham. Schools: The Maelor School Penley, Ysgol Derwen Kinnerton, St Brigid's School (Denbigh). Councils: Argoed, Coedpoeth, Connah's Quay, Hawarden, Rhosllanerchrugog, Buckley, Prestatyn, Offa, Mold, Caia Park, Rhyl, Shotton, Llanasa. Other: Yale Enterprise Ltd, North Wales Probation Board, North Wales Fire Service, North Wales Valuation Tribunal
The admitted bodies contributing to the Fund are:-
Other: Careers Wales, AD Waste, Cartref y Dyffryn Ceiriog, Denbighshire Voluntary Services, Clwyd Leisure, Bodelwyddan Castle Trust.
The content of the accounts comply with accounting standards, but further information is available in the Clwyd Pension Fund Annual Report and Statement of Investment Principles which are presented each year to the Annual Joint Consultative Meeting.
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CLWYD PENSION FUND ACCOUNTS STATEMENT OF ACCOUNTING POLICIES
ACCOUNTING STANDARDS
The accounts have been prepared to meet the Code of Practice on Local Authority Accounting in the United Kingdom 2009 – A Statement of Recommended Practice (SORP), developed by CIPFA/LASAAC. This Code of Practice complies in principle with the main recommendations of the SORP 'Financial Reports of Pension Schemes', issued by Pensions Research Accountants Group (PRAG), with some revisions in the disclosure requirements. The Accounting Standards Board (ASB) has approved PRAG as an issuer of SORPs for pension schemes.
ACCOUNTING POLICIES
The accounts have been prepared on an accruals basis with the exception of transfer values.
The Pension Fund's financial statements provide information about the financial position and performance of the Fund. The Fund’s financial statements do not take account of liabilities to pay pensions and other benefits after the period end. This is reported separately in the actuary's statement.
Investments are shown in the accounts at market value as at 31st March 2010 as detailed below:-
• UK and overseas listed securities are valued using the official bid prices quoted on the relevant stock exchange. • Overseas securities are converted to sterling at an exchange rate quoted at close of business on 31st March 2010. • Unit trusts are valued at the bid market price. • Private equity is valued in accordance with the International Private Equity and Venture Capital Valuation Guidelines, net of estimated carried interest.
With effect from 1st April 1990 pension increases are charged to the Fund.
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CLWYD PENSION FUND ACCOUNTS STATEMENT OF ACCOUNTING POLICIES (continued)
ACTUARIAL VALUATION The last actuarial valuation was held on 31st March 2007, the findings of which became effective on 1st April 2008. The findings of this valuation showed that the market value of the Fund's assets of £888.8m increased the funding level from the previous valuation on 31st March 2004 from 65% to 75%. The employers' contribution rates are structured to achieve a gradual return to 100% funding level over a 17 year period. If the deficiency is recovered over 17 years then the average contribution rate is 21.6% of pensionable pay, reverting to 12.5% of pensionable pay at the end of this period.
The Chancellor of the Exchequer announced in his Emergency Budget on 22 June 2010 that the consumer prices index rather than the retail prices index will be the basis for future public sector pension increases. It is estimated that this will reduce the value of an average employer’s liabilities in the Clwyd Pension Fund by around 5-8%, based on an employer with a “typical” membership profile. This change will be reflected in the actuary's assumptions when the next actuarial valuation is held. The next actuarial valuation will be as at 31st March 2010, the findings of which will become effective on 1st April 2011.
The contribution rates were calculated using the projected unit actuarial method and the principal financial assumptions were as follows:-
For Past For Future Service Liabilities Service Liabilities Investment return-pre retirement 6.40 % p.a. 6.50 % p.a. Investment return-post retirement 5.40 % p.a. 6.50 % p.a. Pensionable pay increases 4.35 % p.a. 4.00 % p.a. Pension increases 3.10 % p.a. 2.75 % p.a.
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Clwyd Pension Fund Accounts for the year ended 31st March 2010
2010 2009 (restated) Note £000 £000 £000 £000 Contributions and Benefits Contributions receivable: From employers 2 50,713 49,602 From employees or members 2 14,915 14,458 Transfers in 6,774 4,073 Other income 2,571 2,472 74,973 70,605 Benefits payable: Pensions 2 37,637 34,931 Lump sums (retirement) 2 11,444 7,288 Lump sums (death grants) 2 897 1,163 Payments to and on account of leavers: Refunds of contributions 18 1 Transfers out (individual) 4,869 1,735 Other 179 77 Administrative and other 3 1,280 1,128 expenses borne by the scheme 56,324 46,323 NET ADDITIONS (WITHDRAWALS) 18,649 24,282 FROM DEALING WITH MEMBERS
Returns on Investments Investment income 5 2,466 3,171 Change in market value of investments 241,627 (224,081) (realised and unrealised) 5 Investment management expenses 3 (4,321) (4,461) NET RETURNS ON INVESTMENT 239,772 (225,371) NET (DECREASE)/INCREASE IN THE FUND 258,421 (201,089) OPENING NET ASSETS OF THE SCHEME 697,412 898,501 CLOSING NET ASSETS OF THE SCHEME 955,833 697,412 Net Assets Statement Investment Assets: 6 Managed fixed interest fund 111,825 88,246 Managed equity funds 556,765 367,263 Property funds 63,197 55,126 Private equity funds 123,096 102,075 Hedge fund of funds 52,121 34,848 Commodity funds 14,847 11, 119 Currency fund 28,400 29,440 Cash (including derivatives) 7 2,944 4,062 Other investments assets 9 0 2,002 Current assets 8 4,380 3,708 Current liabilities 8 (1,742) (477) NET ASSETS AT 31ST MARCH 955,833 697,412
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Notes to the Clwyd Pension Fund Accounts
1. PRIOR YEAR ADJUSTMENT As a result of a correction to the accounting treatment of absorbed investment management expenses, the Return on Investments Statement has been restated.
2009 2009 Prior Period Adjustment Prior Period Before Adjustment Restated £000 £000
Returns on Investments Investment income 7,815 (4,644) 3,171 Change in market value of investments (228,725) 4,644 (224,081) (realised and unrealised) Investment management expenses (4,461) 0 (4,461)
NET RETURNS ON INVESTMENT (225,371) 0 (225,371)
2. ANALYSIS OF CONTRIBUTIONS RECEIVABLE/BENEFITS PAYABLE Contributions represent those amounts receivable from various employing authorities in respect of their own contributions and those of pensionable employees. The total contributions received from employers during 2009/10 amounted to £50.713m. This comprised an amount of £29.426m relating to the common contribution rate of 12.5% paid by all employers and £21.287m relating to the individual adjusted rates and additional contributions paid in respect of deficit funding for individual employers. Benefits payable and refunds of contributions have been brought into the accounts on the basis of all valid claims approved during the year. Analysis of contributions received and benefits paid is shown below:-
Benefits Contributions Payable Receivable £000 £000 Scheduled Bodies Flintshire County Council 16,254 22,498 Wrexham County Borough Council 15,275 20,424 Denbighshire County Council 11,800 14,835 Fund apportionment with: Gwynedd and Powys County Councils 2,565 0 Probation 1,421 1,582 Fire 443 1,091 Colleges 1,461 3,899 Schools 49 180 Community Councils 169 191 Others - scheduled bodies 69 73 Others - admitted bodies 472 855 49,978 65,628
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2. ANALYSIS OF CONTRIBUTIONS RECEIVABLE/BENEFITS PAYABLE (continued) The above merely reflects the figures in the accounts. The circumstances pertaining to each of the bodies listed is different for a variety of reasons (contribution and pensioner profiles, employees' contribution rates, early retirement experience etc.) and direct comparisons, therefore, are largely meaningless.
3. ADMINISTRATION AND INVESTMENT MANAGEMENT EXPENSES The regulations permit the County Council to charge the cost of administering the scheme to the Fund. The external managers' fees have been accounted for on the basis contained within their management agreement. The cost of pensions administration and investment management is shown below:-
2010 2009 £000 £000 Investment management fees 4,321 4,461 Administration 1,280 1,128 5,601 5,589
Investment management fees are based on valuations of the investments. The Fund is invested in pooled vehicles of which the majority of fees are charged within the Funds. In order to be transparent, the Fund discloses these fees.
4. INVESTMENTS AND PERFORMANCE Further details on the investment strategy are available in the Statement of Investment Principles which can be obtained from the Head of Finance, County Hall, Mold, CH7 6NA (or telephone 01352 702264). The County Council uses the investment performance services of the WM Company. Their report for the financial year 2009/10 showed that the Fund achieved an overall return of 33.3% from its investments (-23.0% in 2008/09). This compares with the benchmark return of 27.0% for the year.
5. ANALYSIS OF TRANSACTIONS AND RETURN ON INVESTMENTS Details of the 2009/10 investment transactions and the net profit on sales of £11.192m (£4.408m in 2008/09) together with investment income of £2.466m (£3.171m in 2008/09) are shown overleaf. The unrealised profit for 2009/10 as a result of the change in the market value of investments, amounted to £230.435m (£228.489m loss in 2008/09). Therefore the increase in market value of investments (realised and unrealised) is £241.627m.(£224.081m loss in 2008/09)
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5. ANALYSIS OF TRANSACTIONS AND RETURN ON INVESTMENTS (continued) Purchases Sales Net Profit/ Investment Loss on Sales Income £000 £000 £000 £000 Fixed interest 226 0 (74) 0 UK equities 20,170 0 0 0 Foreign equities 635 27,998 10,748 241 Hedge fund of funds 42,590 30,709 (3,827) 0 Currency fund 0 3,000 256 0 Commodity fund 0 0 0 0 Property funds 6,308 214 0 1,689 Private equity funds 19,033 2,870 425 356 Miscellaneous Profit 0 0 3,655 0 Interest Earned 0 0 0 180 Currency 0 0 9 0 88,962 64,791 11,192 2,466 2008/09 98,236 43,448 4,408 3,171
6. MARKET VALUE OF INVESTMENTS (EXCLUDING CASH AND DERIVATIVES) The book cost of the investments is £886.116m as at 31st March 2010, compared with book cost of £856.417m in the previous year. The market value of investments (excluding cash and derivatives) as at 31st March 2010 is £950.251m which can be analysed below. By Listed and Unlisted (Investments at Market Value) Although the majority of the investments within the Fund are unlisted, the underlying investments of those funds are listed. Within the Private Equity and Property portfolios, although some are listed, the Fund does have substantial holdings in unquoted investments (£139.146m). These are valued at a fair value by the fund managers, using an appropriate basis of valuation. As private equity investments are generally crystallised through the sale or flotation of the entire business as a whole will provide a base for estimating the fair value of an investment in that business. However, the resulting valuations are subjective as they are based on forward looking estimates and judgements. The realisable values may well differ from the fair values and the amounts may be material.
2010 2009 Listed Listed Unlisted Listed Listed Unlisted Managed Managed £000 £000 £000 £000 £000 £000 Fixed Interest 0 0 111,825 0 0 88,246 UK equities 132,966 0 108,480 80,421 0 51,690 Hedge fund of funds 0 0 52,121 0 0 34,848 Currency fund 0 0 28,400 0 0 29,440 Commodity fund 0 0 14,847 0 0 11,119 Foreign equities 271,065 0 44,254 205,268 0 29,884 Property funds 37,690 2,130 23,377 34,536 990 19,600 Private equity funds 0 7,309 115,787 0 6,977 95,098 441,721 9,439 499,091 320,225 7,967 359,925
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6. MARKET VALUE OF INVESTMENTS (EXCLUDING CASH AND DERIVATIVES) (continued)
By Continent
2010 2009 £000 £000 UK 330,881 208,785 Europe 114,931 92,187 Asia Pacific 75,486 54,914 North America 88,643 67,348 Emerging markets 44,545 33,373 Global Investments 295,765 231,510 950,251 688,117
By UK Holdings
The UK holdings as at 31st March 2010 account for 35% of total investments at market value and are classified as follows:-
2010 2009 £000 £000 Managed funds 108,731 52,509 Private equity funds 49,615 41,148 Property funds 39,820 35,526 Resources 20,185 15,387 Basic industrials 17,893 8,093 General industrials 13,416 10,326 Cyclicals 8,251 6,395 Non-cyclicals 37,776 22,768 Utilities 1,894 1,867 Financials 31,845 13,152 Information technology 1,455 1,614 330,881 208,785
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6. MARKET VALUE OF INVESTMENTS (EXCLUDING CASH AND DERIVATIVES) (continued)
By Fund Manager
2010 2009 £000 % £000 % Fidelity 31,568 3 23,269 3 Barclays Global Investors 77,737 8 66,283 10 Gottex 108,480 11 51,690 8 Wellington 59,392 6 44,492 6 Aberdeen 43,918 5 31,645 5 T Rowe Price 52,399 5 36,756 5 TT International 20,898 2 13,942 2 BlackRock (Quellos) 10,108 1 16,442 2 Pioneer 5,501 1 18,406 3 Liongate 18,050 2 0 0 SSARIS 18,462 2 0 0 Goldman Sachs 28,400 3 29,440 4 Standard Life 132,966 14 80,421 12 Investec 44,254 5 29,884 4 Stone Harbor 111,825 12 88,246 13 Property & 186,293 20 157,201 23 Private Equity Funds 950,251 100 688,117 100
7. ANALYSIS OF CASH BALANCE The cash balance can be analysed as follows:-
2010 2009 £000 £000 Fund manager balances 491 472 In-house balance 2,453 3,590 2,944 4,062
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8. DEBTORS/CREDITORS
2010 2009 £000 £000 £000 £000 Current Assets : Admitted bodies 3,248 3,486 Added years 191 106 H.M. Revenue & Customs 59 70 Strain - current year 378 0 Strain - subsequent years 471 0 Miscellaneous 33 46 4,380 3,708 Less Current Liabilities : Lump Sums 1,277 102 Death Grants 16 0 Miscellaneous 449 375 1,742 477 Net Current Assets 2,638 3,231
Prior to 2009/10, any strain costs relating to years other than the current financial year have not been accrued for. For comparison purposes, the amount outstanding for subsequent years was £294k.
9. OTHER INVESTMENTS
2010 2009 £000 £000 £000 £000 Other Investment Assets: Sales of investments 0 2,000 Income accrual 0 2
0 2,002 Other Investment Balances 0 2,002
10. POST BALANCE SHEET EVENT The accounts outlined within the statement represent the financial position of the Clwyd Pension Fund as at 31st March 2010. Since this date, the performance of the global equity markets may affect the financial value of pension fund investments. This movement does not affect the ability of the Fund to pay its pensioners.
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11. ADDITIONAL VOLUNTARY CONTRIBUTIONS (AVCs) These amounts are not included in the Pension Fund Accounts in accordance with Regulation 4(2)(b) of the Pension Scheme (Management and Investment of Funds) Regulations 2009 (SI 2009 No 3093). These assets are specifically allocated to the provision of additional benefits for particular members. The Clwyd Pension Fund has the services of two AVC providers for members’ additional benefits with the funds being invested in a range of investment products including fixed interest, equity, cash, deposit, property and socially responsible funds, as follows:-
Contributions paid £ 423,534 Units purchased No. 77,501 Units sold No. 89,098 Market value as at 31st March 2010 £ 3,456,797 Market value as at 31st March 2009 £ 3,209,227
12. RELATED PARTY TRANSACTIONS In the course of fulfilling its role as administering authority to the Fund, Flintshire County Council provided services to the Fund for which it charged £904,671 (£858,847 in 2008/09). These costs are in respect of those staff employed in ensuring the pension service is delivered, and other costs such as payroll and information technology. The costs are included in the accounts within administration expenses (see note 3). The Clwyd Pension Fund In-House cash balance is held within the Flintshire County Council's group of Bank Accounts. The overall surplus cash held in the Group of Bank Accounts is invested on a daily basis. Flintshire County Council pays interest over to the Pension Fund, quarterly, based on the average monthly balances and interest rates over the year. During 2009/10, the Fund received interest of £65,686 from Flintshire County Council. There are no amounts outstanding between Flintshire County Council and Clwyd Pension Fund as at 31st March 2010.
13. CONTINGENT LIABILITIES AND CONTRACTUAL COMMITMENTS As at 31st March 2010, the Fund has contractual commitments of £336.6m in private equity and property funds, of which £208.9m has been invested, leaving an outstanding commitment of £127.6m.
14. TRANSACTION COSTS Transaction costs are incremental costs that are directly attributable to the acquisition or disposal of an investment. They include fees and commissions paid to agents, advisers, brokers and dealers, levies by regulatory agencies and securities exchanges and transfer taxes and duties. They can be added to purchase costs or netted against sales proceeds, as appropriate. These costs cannot be directly identified as the Clwyd Pension Fund is wholly invested in pooled vehicles.
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Statement of Investment Principles Executive Summary
1. The Clwyd Pension Fund adopted as best practice from April 1997 the production, publication and regular review of a Statement of Investment Principles (SIP). The Fund continued this practice in response to the Local Government Pension Scheme (Management and Investment)(Amendment) Regulations 1999, which required the formal publication of a SIP. This SIP now complies with Local Government Pension Scheme (Management and Investment)(Amendment) Regulations 2009, including a statement on compliance with the Myner’s Principles and a newly formulated Sustainability Policy.
2. Flintshire County Council delegates responsibility for the Clwyd Pension Fund to the Head of Finance, as such, the Pension Fund Panel, which is made up of elected Members from Flintshire, Denbighshire and Wrexham, is an Advisory Body.
3. Elected members on the Clwyd Pension Fund Panel, whilst in an advisory capacity, act as quasi-trustees, recognising that they have fiduciary duties towards the beneficiaries, the employers and local taxpayers which are akin to to those holding the office of Trustee in the private sector.
4. The Fund's investment policy and management of the Fund will be directed at achieving and maintaining a fully funded scheme and, where practical, a stable employers' contribution rate.
5. Since 1 April 1996, the Clwyd Pension Fund has published a set of Corporate Governance Policy Guidelines, supported by other statements on social, environmental, ethical and governance- related investment issues. From 1st July 2010 the Clwyd Pension Fund has incorporated all these areas into its new Sustainability Policy.
6. In determining its detailed fund management arrangements and operations, the Head of Finance and the Pension Fund Panel adopt a positive engagement approach on sustainability. There will therefore be no direct investment restrictions applied and managers will have full freedom to invest. However, under the Fund’s Sustainability policy, managers will be encouraged to take account of sustainability issues in their investment decisions and to use their influence with companies on behalf of the Fund to effect improvements. Their performance in these respects will be monitored and reported in accordance with the terms of the Sustainability Policy.
7. The Fund will pursue a policy of lowering risk through diversification of both investments and fund managers (see table overleaf). Fund managers will be given clear investment mandates, incorporating appropriate benchmarks and agreed targets, and will be employed on a fully discretionary basis within these mandates, subject to compliance with any legislative requirements and the Fund’s stated policies.
8. Investment management arrangements will be reviewed periodically and as required. A full in- depth review will be carried out at least every four years.
9. The security of the Fund's assets will be closely monitored through its Global Custodian or the custodians of pooled vehicles.
10.The Fund's investment managers and custodians will be made aware of this Statement of Investment Principles.
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Fixed Strategic Benchmark
Scenario Weight (%) Tactical Ranges Equities +/- 3% Global Unconstrained 5 +/-1% UK equities +/-1% - UK Traditional active 15 +/- 1% - UK portable alpha FTSE 12 +/- 1%
Overseas equities +/- 2% - US equities 5 +/- 1% - Europe equities 6 +/- 1% - Japan equities 4 +/- 1% - Pacific Rim equities 4 +/- 1% - Emerging Markets equities 4 +/- 1%
Fixed Interest Unconstrained 13 +/- 2% Cash/Other 0 up to +5%
Alternatives +/- 3% Asset Allocation 5 +/- 1% Private Equity* 8 +/- 2% Property* 8 +/- 2% Hedge Fund of Funds 5 +/- 1% Currency Funds 4 +/- 1% Commodities 2 +/-1% TOTAL 100
Manager Asset Category Benchmark Target
Standard Life UK Core Equity FT All Share +2.00% Stone Harbor Unconstrained Fixed Interest FT All Stocks +1.50% T Rowe Price US Equity S&P 500 +1.25% Blackrock Europe Equity FT Europe excl. UK +1.50% Fidelity Japan Equity FT Japan Topix +2.00% Aberdeen Asia Pacific (ex Japan) Equities MSCI AC AP (ex Japan) +3.00% Wellington Emerging Markets Equity MSCI EM Free +1.50% TT International Europe Equity (High Alpha) FT Europe (ex UK) +3.00% Gottex UK Equity Portable Alpha FTSE 100 +4.00% Investec Global Equity MSCI World +3.50% Wellington Commodities GSCI Sectors +1.50% Blackrock Global Tactical Asset Allocation 3 Month £ Libor +15.00% Liongate Fund of Hedge Fund Absolute Return +8-10% SSARIS Fund of Hedge Fund Absolute Return +8-10% GSAM Currency Fund Absolute Return +8-10% Various Property/Private Equity Absolute Return +8-10%
* Private Equity includes infrastructure funds * Property includes timber funds.
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1. INTRODUCTION
1.1 The Pensions Act 1995 requires Trustees of private sector pension schemes to prepare and keep up to date a written statement recording the investment policy of the pension fund, through a Statement of Investment Principles (SIP).
1.2 The Local Government Pension Scheme (LGPS), which is subject to Regulations made under the Superannuation Act 1972 and which regulates some of the same issues, was initially exempt from this requirement of the 1995 Act. Nevertheless, the creation, consideration and periodic review of a Statement of Principles on Investment and Fund Management was considered best practice for all funds and one with which the Clwyd Pension Fund voluntarily complied with from 1 April 1997.
1.3 With effect from 1 July 2000, LGPS Funds were required by the Local Government Pension Scheme (Management and Investment)(Amendment) Regulations 1999, to publish a SIP. These regulations have been replaced by, the Local Government Pension Scheme (Management and Investment of Funds) Regulation 2009. The Regulations state the SIP must include the following:
• the types of investments held • the balance between different types of investments • risk, including ways risks are measured and managed • the expected return on investments • the realisation of investments • the extent to which social, environmental or ethical considerations are taken into account in the selection, retention and realisation of investments • the exercise of the rights (including voting rights), if any, attaching to investments • stock lending
1.4 The SIP is designed to comply with guidance given by the Secretary of State. It incorporates a newly formulated Sustainability Policy, covering social, environmental, ethical and governance- related investment issues and, as required, details the Fund’s degree of compliance with the Myners 6 principles.
1.5 The SIP is effective from 1 July 2010 and will be reviewed every six months with any material changes published.
1.6 The SIP should be read in conjunction with the following statutory documents:
• Funding Strategy Statement implemented from 1st April 2008 • Governance Policy and Compliance Statement • Communications Policy Statement • Clwyd Pension Fund Annual Report and Accounts • Clwyd Pension Fund Actuarial Valuation as at 31st March 2007.
All the above statements and documents can be found on the Fund’s web site at www.clwydpensionfund.org.uk
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2. STATUTORY FRAMEWORK & GOVERNANCE BACKGROUND
2.1 Flintshire is designated as lead authority for the Clwyd Pension Fund by Regulations made under the Local Government (Wales) Act 1995, which dealt with the reorganisation of Local Government in Wales, effective from 1 April 1996.
2.2 The administration of Clwyd Pension Fund is a statutory duty laid upon the authority by Regulations made under the Superannuation Act 1972. The Fund is simply a Fund of the Council, albeit closely regulated by statutory instruments, and has no separate legal identity from the Council.
2.3 It follows, therefore, that Elected Members are not Trustees of the Fund, even though convenient usage sometimes results in that term being applied to them. Elected Members do, however, have a duty of care to the beneficiaries, employers and the local taxpayers, which is analogous to the responsibilities of Trustees in the private sector. They could therefore be more accurately described as "Quasi-Trustees". The term Quasi-Trustee will be used throughout this document in order to distinguish those responsible for the Fund from contributor, pensioner and deferred members of the Fund who will, collectively, be termed beneficiaries.
2.4 The Clwyd Pension Fund, as a statutory LGPS fund, is set up to provide death and retirement benefits for local government employees in North East Wales, other than teachers, police and fire fighters. In addition, employees of certain other qualifying bodies which provide services similar to that of local authorities have been admitted to membership of the LGPS and hence the Fund. The latest Regulations made under the Superannuation Act 1972 are the LGPS Regulations 2008, which came into effect from 1 April 2008. These are amended from time to time to take account of scheme changes.
2.5 In the discharge of this function, the Flintshire County Council has delegated its powers to the Head of Finance and employs an advisory body – The Clwyd Pension Fund Panel, which is made up of elected Members from Flintshire County Council, Denbighshire County Council and Wrexham County Borough Council. In addition, officers and advisers, who are knowledgeable in the management and investment of Pension Funds, provide advice and assist the Head of Finance and Panel in the discharge of their responsibilities. A Union representative is also on the Panel in an observer capacity. Further details of the Fund’s governance arrangements can be found in Fund’s separate Governance Policy & Compliance Statement.
2.6 As noted above, in administering the investments of the Fund, the Head of Finance and Quasi-Trustees have a duty of care. That duty has been expressed as seeking, ".....to maximise the return on the invested funds so far as it can do so without incurring unacceptable risks" (McFadyen QC 5/90).
2.7 The investment responsibilities of the Head of Finance, Clwyd Pension Fund Panel and other third parties involved with the investment management and funding of the Fund are set out on the following page.
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The Head of Finance and the Clwyd Pension Fund Panel, in an advisory capacity, are responsible for:
• Agreeing the SIP, including the Sustainability Policy. • Publication of a Funding Strategy Statement (in line with the Actuarial Valuation), Governance Policy & Compliance Statement and Communications Strategy. • Establishing and reviewing strategic asset allocation targets. • Appointing the investment manager(s) and external consultant(s). • Appointing the custodian and actuary. • Reviewing on a regular basis, the fund managers' performance against established benchmarks, and satisfying themselves as to the managers' expertise and the quality of their internal systems and controls. • A review of fund management arrangements (at least every four years).
The Fund Managers are responsible for:
• The investment of the Fund's assets in compliance with prevailing legislation, and each Manager's detailed Investment Management Agreement or Investment Memorandum. • Where allowed, tactical asset allocation around the benchmarks, as set out in the Investment Management Agreements or Investment Memorandum. • Stock selection within asset classes (purchases and realisations). • Preparation of a quarterly review of investment performance. • Attending review meetings with the Fund’s officers, advisors and quasi-trustees. • Providing details, as required, to the Fund’s custodian and independent performance measurer. • Reporting on compliance with this SIP, including the Sustainability Policy.
The Global Custodian is responsible for:
• Where the Fund holds segregated assets, the safekeeping of assets, the collection of income, the voting of shares and the execution of transactions in accordance with the Custody Agreement and the Fund's corporate governance guidelines within the Sustainability Policy • Its own compliance with prevailing legislation. • Providing the Head of Finance and the Clwyd Pension Fund Panel with quarterly valuations of the Scheme's assets, details of all transactions during the quarter, bank statements and all other relevant documentation.
The Actuary is responsible for:
• Providing the Head of Finance and the Clwyd Pension Fund Panel with advice as part of the establishment of strategic asset allocation benchmarks; • Providing the Head of Finance and the Clwyd Pension Fund Panel with advice as to the maturity of the Fund and its funding level. • Working with the Fund at each actuarial valuation to produce a Funding Strategy Statement (FSS). • Providing quarterly updates on funding levels. • Performing the triennial valuations.
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3. FUNDING LIABILITIES AND INVESTMENT POLICY
3.1 The LGPS is a public sector statutory defined benefit pension scheme that provides benefits related to the final salary of members. Each member's pension is specified in terms of a formula, based on salary and service, and is unaffected by the investment return achieved on the Fund's assets. Full details of Scheme benefits are set out in the LGPS Regulations.
3.2 All active members of the Scheme are required to make banded pension contributions dependent on salary.
3.3 The employing bodies are responsible for meeting the balance of costs necessary to finance the benefits payable under the Scheme and their contribution rates are determined on a triennial basis (Actuarial Valuation). These contribution rates take account of both assets and estimated liabilities, both of which are subject to volatility.
3.4 Beneficiaries have an interest in the extent to which the Fund's assets are sufficient to meet accrued benefits, albeit that their benefits are guaranteed by the Regulations. The employers, however, have a direct financial interest in the investment return achieved on the Fund's assets and movements in liabilities, since both can have a direct bearing on their own costs.
3.5 The existence of surpluses or deficits from previous valuation periods can reduce or increase the contributions made by employers. Given constraints on employer spending, volatility in the employers' contribution rate is undesirable.
3.6 In managing the Fund, therefore, the overall investment objective should be:
• to aim for a funding level of 100%; • to aim for long term stability in employers' contribution rates
3.7 The Clwyd Pension Fund was funded at 75% of liabilities (2007 Actuarial Valuation) and employers' rates are currently structured to achieve a gradual return to 100% funding by 2024.
3.8 Whilst stability of costs from the employers' rates has the higher priority, absolute cost to the employer is also important. This implies that:
• the cost of administering the Fund will be constrained by the adoption of best management practice; • employers will adopt appropriate and economic policies in those areas where they have discretion and where the costs of their actions fall on the Fund; • the Fund's overall investment policy will be aimed at superior investment returns relative to the growth of liabilities. This implies that the Fund will continue to take an active risk relative to its liability profile.
3.9 The investment policy of the Fund is intended to strike the appropriate balance between the policy most suitable for long-term consistent performance and the funding objectives. A favourable investment performance can play a valuable role in achieving adequate funding over the longer term.
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3.10 At a more detailed level, the Fund's membership comprises approximately 49% contributors and 51% pensioners (including deferred and frozen pensions). The best asset match for index-linked pensions would be index linked gilts, with perhaps some conventional bonds. This would be a least risk investment strategy but would also result in an increase in employer contributions. A departure from this least risk strategy, particularly the inclusion of equity-type investments, increases risk but also adds the potential for higher returns, which should over time reduce the contribution requirements. The Fund is a long-term investor and can favour the latter.
3.11 The Fund’s current profile also shows that the extent of contributions will exceed the cost of benefits in payment and administration expenses, producing a positive cash flow of over £20 million per annum. This means that there will be no necessity to draw down money from investments to pay pensions in the near future.
3.12 This positive cash flow means there is no pressure to switch to fixed interest stocks to ensure an income stream for benefit payment purposes and a longer-term investment view can be maintained. However the Clwyd Fund is continuing to mature gradually in terms of its scheme member mix and there is therefore a limited window of opportunity to seek higher returns in order to get back to 100% funding from the 75% level noted above.
3.13 The Clwyd Pension Fund Funding Strategy implemented for three years from 1st April 2008 includes a number of investment return assumptions:
• An investment return for past service of gilts + 1.4% (assumed 5.8%) • An investment return of future service of 6.5% (Inflation + 3.75%)
Over a three-year period an investment return above these assumptions will contribute to reducing the funding deficit and thus employer contributions, providing that liability assumptions such as longevity and inflation remain on target. The Fund’s triennial Valuation considers all these factors when determining employer contribution rates. The next Actuarial Valuation will be as at 31st March 2010, with new employer rates implemented from 1st April 2011.
3.14 A Funding Strategy Statement (FSS) was prepared in accordance with Regulation 76A of the Local Government Pension Scheme Regulations 1997 (as amended) in 2008. The Statement outlines the strategy for recovering the funding deficit over 17 years. A copy of the FSS can be obtained from the Fund’s web site at www.clwydpensionfund.org.uk. The funding strategy will be reviewed during 2010/11, for implementation from 1st April 2011.
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4. INVESTMENT STRATEGY & RISK
4.1 On the basis of the above consideration, the following would appear to be the key factors to be taken into account when determining an appropriate investment strategy for the Fund:
• The Fund is a long-term investor. • Capital gain is more important than income generation and liquidity. • The Fund needs to take investment risk. • The level of out-performance would need to be in access of gilt returns by more than 1.4% to contribute to the Fund’s deficit. • For future service, an investment return of 6.5% per annum is required, so a return in excess of this is needed to contribute to the Fund’s deficit. • Risk or volatility should be constrained as far as possible, consistent with the achievement of the returns required.
4.2 Risk, though defined in many ways, generally refers to the volatility of returns or their tracking error in the context of investments. Investment theory suggests that different asset classes, such as equities and bonds, behave in different ways and that diversifying the asset mix within a fund can reduce overall risk at total fund level.
4.3 The Fund’s overall strategic risk and return profile is currently determined through its fixed strategic benchmark. In establishing the Fund’s long-term strategic asset allocation or strategic benchmark, the key factors are the overall level of return being sought, the minimum level of risk consistent with this and the impact of diversification in reducing this risk further. At asset class or mandate level, asset class weightings, appropriate benchmarks and out-performance targets are the key building blocks in framing this overall Fund strategy.
4.4 It is Fund policy to carry out a fundamental review of the Fund’s structure and management arrangements at least every four years. The review includes research on market views for the longer-term risk, return and correlation profiles for different asset classes and a more tactical view on the global economic and market environment over the next three to five years. This research is used to determine an optimum future balance between the various assets classes and hence the Fund’s fixed strategic benchmark.
4.5 The last fundamental Fund Review was in 2006, implemented, in the main, from 1st April 2007 and monitored each quarter. The resulting strategic benchmark and tactical ranges, applicable for the financial year 2009/10 are shown below. The optimisation model used to determine the strategic benchmark suggests that the asset mix and the requirement for fund managers to deliver out-performance against market indices should produce a long-term return in the region of gilts+5% with volatility of around 10%. This equates to an information ratio (the return per unit of risk) just below 1 or 100%. A conservative independent review by the Actuary indicated that in terms of funding strategy, this investment strategy should deliver a return of gilts+3%.
4.6 The latest Fund Review exercise commenced in early 2009 but with economic, fiscal and market indicators extremely unclear so soon after 2008 and the credit crunch, the exercise was postponed. The Fund Review was recommenced in early 2010/11 with the aim of implementing a revised strategic benchmark and other operational changes from 1 April 2011.
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Fixed Strategic Benchmark
Scenario Weight (%) Tactical Ranges Equities +/- 3% Global Unconstrained 5 +/-1% UK equities +/-1% - UK Traditional active 15 +/- 1% - UK portable alpha FTSE 12 +/- 1%
Overseas equities +/- 2% - US equities 5 +/- 1% - Europe equities 6 +/- 1% - Japan equities 4 +/- 1% - Pacific Rim equities 4 +/- 1% - Emerging Markets equities 4 +/- 1%
Fixed Interest Unconstrained 13 +/- 2% Cash/Other 0 up to +5%
Alternatives +/- 3% Asset Allocation 5 +/- 1% Private Equity* 8 +/- 2% Property* 8 +/- 2% Hedge Fund of Funds 5 +/- 1% Currency Funds 4 +/- 1% Commodities 2 +/-1% TOTAL 100
* Private Equity includes infrastructure funds * Property includes timber funds.
4.7 Although there is no long-term strategic allocation to cash/other assets, a tactical range has been included to accommodate exceptional economic/stock market circumstances, where it is not considered appropriate to re-balance the portfolio or where cash can be held temporarily to meet investment commitments in private equity and property.
4.8 The aim of the 5% allocation to asset allocation is to add an additional 0.75% per annum return at total fund level to the performance of the Strategic Benchmark. This is achieved by investing in a Global Tactical Asset Allocation Fund.
4.9 Once the fixed benchmark is agreed, there is a need to keep the Fund’s actual position under review. Re-balancing of the Fund to keep it in line with the benchmark will incur costs and such changes need therefore to be considered in light of the relevant costs and benefits. As a result, re-balancing will only take place quarterly when an asset class has moved outside the tactical ranges above, except in circumstances outlined above.
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5. IMPLEMENTATION OF INVESTMENT STRATEGY AND RISK
5.1 When implementing investment strategy, the Fund must comply with the Investment Regulations laid before Parliament, which include:
• The definition of an investment manager • Manager appointments and terms • Diversification of fund managers • The review of fund manager performance • Restrictions and limits on investments. • Use of fund money by an Administering Authority.
5.2 The policy of the Fund is to out-source the implementation of the investment strategy of the Fund to professional fund managers. These fund managers are appointed by following EU procurement legislation. In selecting managers, the Fund gives weight to their past performance, risk and compliance, investment and administration processes, key people, fees and degree of compliance with the Fund’s Sustainability Policy.
5.3 On appointment, fund managers are delegated the power under the appropriate client agreement (Investment Management Agreement, Investment Memorandum) to make such purchases and sales as they deem appropriate within their mandate. Each fund manager mandate has either a benchmark or target to outperform or achieve over three-year rolling periods. A quarterly update is received from each of these funds managers and regular meetings are arranged, as outlined in the Fund’s Governance and Compliance Statement.
5.4 There are exceptions to the above arrangements. Funds selected within the allocations to property and private equity are treated as specific investment decisions and therefore outside the scope of EU Procurement Regulations. Here investment funds are selected for recommendation to the Head of Finance and Panel after appropriate due diligence by the Fund’s officers and Adviser/Consultant, with criteria similar to those noted for fund manager appointments. These investments are usually the subject of detailed Limited Partnership agreements or Investment memoranda that set out the arrangements for their operation. As a minimum, an annual review on these investments is undertaken but valuations are provided quarterly for the most part. Although, a size limit for individual investments is not noted within the Fund’s policy statements, the commitments made are usually in the region of £5m-£8m.
5.5 In terms of historic background, the Fund has for many years now pursued a policy of lowering risk by diversifying both investments and fund managers. As a result of a fundamental fund management review carried out in 1992, a specialist approach was adopted and three fund managers were appointed with effect from 1 April 1993 to manage specific portfolios, with prescribed benchmarks and out-performance targets. This structure was reviewed again during 1997 and a number of changes were introduced, including the appointment of a fourth manager, aimed primarily at marginally reducing risk and increasing diversification. A further exercise was carried out in 1999 to review detailed asset allocation processes and manager performance on a couple of specific portfolios. No manager changes were proposed as a result of the review but a further exercise in 2000 resulted in the Japanese portfolio being awarded to Fidelity from 1 April 2001. The 2003 Fund Structure Review resulted in an increased allocation to alternative investments.
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5.6 The current investment strategy was framed by the 2006 Fund Review exercise and implemented, in the main, from 1st April 2007. The Fund made no fundamental structural adjustments but there were changes in the method of delivery, aimed at further diversification from, and less constraint on, traditional asset classes. New investment approaches, tools and products were also utilised to improve returns further and reduce volatility. All the investments are now in pooled vehicles rather than segregated accounts.
5.7 The only subsequent change in fund manager arrangements related to the hedge fund of fund mandates. Pioneer and Blackrock were replaced by Liongate and SSARIS during 2009, although for liquidity reasons some assets still remain with the original managers at this time. Blackrock has recently acquired BGI mandates via a business merger of the companies. The current investment strategy is implemented as stated in the table below.
Manager Asset Category Benchmark Target
Standard Life UK Core Equity FT All Share +2.00% Stone Harbor Unconstrained Fixed Interest FT All Stocks +1.50% T Rowe Price US Equity S&P 500 +1.25% Blackrock Europe Equity FT Europe excl. UK +1.50% Fidelity Japan Equity FT Japan Topix +2.00% Aberdeen Asia Pacific (ex Japan) Equities MSCI AC AP (ex Japan) +3.00% Wellington Emerging Markets Equity MSCI EM Free +1.50% TT International Europe Equity (High Alpha) FT Europe (ex UK) +3.00% Gottex UK Equity Portable Alpha FTSE 100 +4.00% Investec Global Equity MSCI World +3.50% Wellington Commodities GSCI Sectors +1.50% Blackrock Global Tactical Asset Allocation 3 Month £ Libor +15.00% Liongate Fund of Hedge Fund Absolute Return +8-10% SSARIS Fund of Hedge Fund Absolute Return +8-10% GSAM Currency Fund Absolute Return +8-10% Various Property/Private Equity Absolute Return +8-10%
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6. SUSTAINABILITY
6.1 The issue of social, environmental, ethical investment and corporate governance has been considered on a regular basis since 1996. On 1 April 1996, the Clwyd Pension Fund published a set of Corporate Governance Policy Guidelines incorporated requirements on social, ethical and environmental awareness. Further updating has been carried out on sa regular basis since then and further supporting statements have been issued. From 1st July 2010 the Clwyd Pension Fund has incorporated all these areas and others into its new Sustainability Policy.
6.2 Panel members are firm supporters of the need for social, environmental and ethical improvements by companies and, subject to its primary fiduciary duties, have a clear view that the investment process should be used as a means of encouraging and achieving this. The key issue, considered at length by the Head of Finance and the Panel, is how these aims could be best met and the outcome is the new all-embracing Sustainability Policy.
6.3 At its simplest sustainability is about focusing attention on longer-term issues. More specifically for pension fund investors, it concerns delivering the long-term returns required to fund long-term liabilities by ensuring that the long-term risks inherent in investments are recognised and, where possible, addressed. These risks are many and varied but include environmental, social, ethical and governance issues.
6.4 In framing an approach to sustainability, the key focus has to be on the application to the Fund’s operation of the United Nations Principles on Responsible Investment (UNPRI) and specifically principles 1 and 2, as these underlie most investment and governance processes.
6.5 The aims of the Fund’s Sustainability Policy, therefore, will be both to ensure that the Fund’s future strategy, investment management actions, governance and reporting procedures take full account of longer-term risks and sustainability and to promote acceptance of sustainability principles, working together with others to enhance the Fund’s effectiveness in implementing these.
6.6 In order to achieve its stated objective, the Clwyd Pension Fund will apply a series of guidelines covering most aspects of pension fund investment, structured in accordance with UNPRI principles 1-6 and covering –
• Investment strategy (UNPRI 1) • Company engagement & voting (UNPRI 2) • Investment management & performance monitoring (UNPRI 3) • Investment manager selection & contracts (UNPRI 4) • Collaboration (UNPRI 5) • Reporting & disclosure (UNPRI 6)
6.7 As part of the Policy, the Clwyd Pension Fund continues to believe in an active engagement approach to the pursuit of its sustainability objectives and thus will not adopt a negative approach to sustainability, which involves screening and excluding investment opportunities nor will it invest in pooled vehicles constructed using this same approach. It will encourage its managers to adopt a long-term approach that involves working with companies to encourage improvement in all sustainability areas, will monitor the performance of managers in pursuing such objectives and will invest directly in specific vehicles and investment areas that clearly match its sustainability objectives.
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7. COMPLIANCE WITH GUIDANCE
7.1 The Investment Regulations require the Fund to explain the extent to which it complies with guidance given by the Secretary of State. The most significant guidance published in 2009 is CIPFA’s “Investment Decision Making and Disclosure”, a guide to the application of the revised Myner’s Principles. The six Myner’s Principles are:
• Effective Decision Making • Clear Objectives • Risk and Liabilities • Performance Assessment • Responsible Ownership • Transparency and Reporting
7.2 The Fund’s compliance statement on these Myners Principles is attached, explaining the extent of compliance with each Principle and the reasons for this. In summary the statement demonstrates near full compliance with all six Principles. In areas where compliance is only partial, the statement also identifies areas for review and improvement. The information in the SIP itself provides more details on the application of the Principles.
7.3 The Investment Regulations require an administering authority to make a statement about its policy on stock lending. The Fund only currently invests in pooled vehicles so cannot undertake any stock lending. However, there may be, subject to the governing document for the pooled vehicle, an option to stock lend within that pooled fund.
7.4 On the issue of separate bank accounts for pension funds, best practice guidance is expected from CIPFA on the interim arrangements to be followed by funds, like the Clwyd Fund, that do not currently have a bank account separate from the administering authority. It is the intention of the Clwyd Fund to operate a separate bank account before the statutory deadline of 1st April 2011. Until the CIPFA guidance on interim arrangements is received, the Fund’s cash is being invested separately using the administering authorities Treasury Management Policy. A new policy for the management of Clwyd Pension Fund cash after 1st April 2011 will be developed during 2010/11.
7.5 The Secretary of State has indicated that there may be further consultation on changes to the Investment Regulations or further points of guidance issued. The SIP will be updated on a six monthly basis to reflect these and any other changes.
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7.6 The Fund's Annual Report and Accounts sets out current details relating to the following areas, as determined by the LGPS Regulations 2008:
• A report on the management and financial performance of the Fund • A report explaining the investment policy and performance • A report on the administration arrangements • An actuarial statement including the funding level • Funding Strategy Statement • Statement of investment principles (SIP) • Governance Compliance statement • Pension Fund Accounts • Pension Fund Administration strategy • Communication Policy statement
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SUSTAINABILITY POLICY
Definition
At its simplest sustainability is about focusing attention on longer-term issues. More specifically for pension fund investors, it concerns delivering the long-term returns required to fund long-term liabilities by ensuring that the long-term risks inherent in investments are recognised and, where possible, addressed. These risks are many and varied but include environmental, social, ethical and governance issues.
Legal Framework, Constraints & Considerations
In framing a Sustainability Policy, the following are pertinent –
• There already exists a regulatory requirement to include in the Fund’s Statement of Investment Principles (SIP) details of its policy on social, ethical and environmental issues. This Sustainability Policy encompasses such issues and will be updated as required to take account of relevant new regulatory requirements. • The Fund is required to fulfil its overriding fiduciary duty to focus as a primary consideration on financial performance and the maximisation of Fund returns, after taking full account of all existing and future financial risks. Such risks increasingly include sustainability issues. • As the Fund uses third part providers for the most part and invests largely through pooled vehicles, its level of active engagement with underlying investment companies and its control over governance issues is limited to some extent. • The investment industry tends to focus on short term factors in terms of company interaction, shares prices and performance, and fund managers incentives tend to reflect this rather than being aligned with the longer-term objectives of pension fund investors.
Objective
Within the above legal framework, constraints and considerations, the Clwyd Pension Fund’s objective aim will be to –
• Ensure that its future strategy, investment management actions, governance and reporting procedures take full account of longer-term risks and sustainability; • Promote acceptance of sustainability principles and work together with others to enhance the Fund’s effectiveness in implementing these.
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United Nations Principles for Responsible Investing (UNPRI)
Details of the UNPRI are attached as an Appendix A to this Sustainability policy document. Given the constraints outlined above and particularly the pooled nature of many of the Fund’s investments, it would be difficult for the Fund to become a formal signatory to the UNPRI.
The Clwyd Pension Fund –
• Is committed to the principles underlying the United Nations Principles for Responsible Investing (UNPRI) and will be an active supporter of these; • Will encourage its external managers to become signatories to the UNPRI.
The Fund Objective stated above already encompasses most of the UNPRI.
Application of Sustainability Principles
In order to achieve its stated objective, the Clwyd Pension Fund will apply a series of guidelines covering most aspects of pension fund investment under the following headings –
• Sustainability approach • Investment Strategy (UNPRI 1) • Company engagement & voting (UNPRI 2) • Investment management & performance monitoring (UNPRI 3) • Investment manager selection & contracts (UNPRI 4) • Collaboration (UNPRI 5) • Reporting & disclosure (UNPRI 6) • Review
The paragraphs overleaf set out the Fund’s thought processes in establishing such guidelines and detail the guidelines adopted as part of this Sustainability Policy document.
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Sustainability Approach
In framing an approach to sustainability, the key focus has to be on the UNPRI principles 1 and 2 as these underlie most investment and governance processes. Sustainability-related issues have been considered on a regular basis for many years, with broad corporate governance policy guidelines in place from 1996. More recently these form part of the Fund’s SIP and are reviewed annually.
The Clwyd Pension Fund approach has always been and continues to be based upon “active engagement”. This involves the Fund’s managers researching and forming a view on the sustainability credentials of companies, taking this into account in investment decisions and, where there are sustainability concerns, on environmental, social, ethical or governance grounds, engaging with companies to seek and achieve positive change.
The Clwyd Pension Fund believes in an active engagement approach to the pursuit of its sustainability objectives and, on this broad basis, it –
• Will not adopt a negative approach to sustainability which involves screening and excluding investment opportunities; • Will not invest in pooled vehicles constructed using this same approach; • Will encourage its managers to adopt a long-term approach that involves working with companies to encourage improvement in all sustainability areas; • Will monitor the performance of managers in pursuing such objectives; • Will invest directly in specific vehicles and investment areas that clearly match its sustainability objectives.
Investment Strategy
The Clwyd Pension Fund recognises that there is a relationship between good environmental, social, ethical and governance practices and long-term sustainable business profitability and in its investment strategy aims to place a strong focus on this. It is recognised that, whilst there are links, the three main sustainability areas, environmental, social and ethical, each raise their own issues, although the approaches and guidelines appropriate to each are similar.
Environmental
The impact of poor environmental practices on profit sustainability is very clear. There are direct costs in terms of fines for pollution etc. and increasingly now for carbon-charging and waste disposal that can have major impacts on business models. In addition there are potential indirect costs from bad publicity and reputational risk. On the positive side, however, there are opportunities to promote sustainability through investment in new technologies aimed at cleaner solutions.
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Social
This concerns areas such as employee relations, community relations and health & safety and again can lead to direct financial costs from health and safety breaches an strike action etc, as well as more subtle risks to company operations, reputation and long-term profitability.
Ethical
This is a difficult area as ethical views can vary considerably but there are some areas that are widely accepted for inclusion. These include supply chain issues that reflect potential breaches of human rights and especially the employment of children, bribery and corruption and operations in certain world areas such as Zimbabwe.
Investment Strategy
On forming and implementing its investment strategy, the Clwyd Pension Fund –
• Will encourage its managers to use their own resources or specifically-focused research agencies to identify at company level actual or potential financial risks attributable to sustainability issues – environmental, social or ethical; • Will seek, through its managers, to engage with companies that have questionable environmental, social or ethical practices in order to seek improvements; • Will seek, through its managers, to engage with companies that have a carbon- intensive or water-intensive focus in order to promote alternative approaches and longer-term reductions; • Will encourage the adoption of the best environmental standards amongst its property and infrastructure managers; • Will, subject to fiduciary duties, make selective investments in environmentally supportive areas such as clean-technologies, clean energy, environmental infrastructure and forestry etc.
Company Engagement & Voting
Getting the Board right with the right behaviours and structures means that better decisions are more likely and this adds value over the longer-term. The Fund’s former broad corporate governance policy guidelines, whilst touching upon environmental, social and ethical issues, were largely designed to address these Board factors and related voting issues. Myners Principle 5 is also relevant here. This requires that trustees adopt, or ensure their investment managers adopt, the Institutional Shareholders’ Committee (ISC) Statement of Principles on the responsibilities of shareholders and agents. The Institutional Limited Partners Association (ILPA) has authored the ILPA Private Equity Principles, a document that contains best practice concepts and hat speaks to issues relating to the alignment of interest between general partners and limited partners, fund governance, transparency and reporting.
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The Clwyd Fund -
• Will aim to comply with the Myners Principle 5 on shareholder activism and become more engaged as an active investor, especially with companies where sustainability factors are a matter of concern; • Will adopt, ensure that its managers adopt or ascertain their level of compliance with the ISC Statement of Principles on the responsibilities of shareholders/agents; • Will adopt, ensure that its managers adopt or ascertain their level of compliance with the ILPA private equity principles; • Will, wherever practical, exercise voting rights through its managers based upon the following broad criteria – - The prime consideration must be financial and the protection of the Fund’s assets in the long term; - There should be a properly structured Board including an appropriate number of contributing independent non-executive directors; - Unless there are strong arguments to the contrary and adequate safeguards guidelines, no director should hold the posts of Chairman and Chief Executive at the same time or be in a position of unaccountability by virtue of having absolute control; - All Directors should be subject to at least three-yearly re-election; - In view of their stewardship role, non-executive directors should normally be independent in terms of other links to the company and other directorships; - The issue of shares with reduced or non-existent voting rights often disadvantages the majority of shareholders and should not normally be supported; - Existing shareholders in a company should have a right to subscribe for new equity capital raised by a company, normally in proportion to their existing share of the company's equity capital; - Unless financial criteria dictate otherwise, the general policy on take-over bids should be to support incumbent management in good standing; - Directors’ remuneration packages in different companies should reflect relative performance taking business size and complexity into account; - A properly constituted Remuneration Committee is the best judge of what is necessary to recruit, train and motivate; - If not already in place, companies should be working towards one year fixed term contracts for executives; - There should be a properly constituted Audit Committee; - No return that is rightfully the Fund's should be diverted to political donations; - Charitable donations are acceptable if they are reasonable and have public relations values. • Will periodically review these criteria and inform investment managers of changes, should there be any.
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Investment Management & Monitoring of Performance
Investment managers need to be made aware of the Fund’s Sustainability Policy and related guidelines in order that these can be taken account of in their investment management decision-making processes. In order to monitor the performance of external managers in terms of their degree of compliance with the guidelines and the performance of underlying investments with the Fund’s sustainability objectives, there needs to be regular reporting and disclosure on sustainability issues, particularly areas of concern, as well as actions taken to address these. A similar approach needs to be adopted on in-house managed investments.
The Clwyd Pension Fund -
• Will endeavour to ascertain the extent to which its fund managers are formal signatories to, support and comply with the UNPRI; • Will encourage its fund managers to produce policy statements on sustainability issues and report formally on these. • Will seek, through its managers, to ensure the full disclosure of environmental, social and ethical policies and practices by companies in which the Fund is invested; • Will ask investment managers for statements on their degree of compliance with the ISC Statement of Principles on the responsibilities of shareholders and agents; • Will request policy statements and practical evidence of the adoption of the best environmental standards amongst its property and infrastructure managers; • Will ask private equity managers for statements on their degree of compliance with the ILPA private equity principles; • Will ensure that investment managers regularly report records of voting on the Fund’s investment and periodically produce statements on compliance or otherwise with the broad corporate governance elements of the Fund’s Sustainability Policy; • Will assess the performance of managers both in terms of financial returns and on sustainability issues over a time frame that adequately reflects the Fund’s sustainability objectives.
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Investment Manager Selection & Contracts
The Fund’s standard selection process for managers has always incorporated broad questions on sustainability issues but the main focus has been on investment philosophy, process, personnel and performance. Within process, there has been some limited focus on sustainability inputs to investment decision-making but risk has tended to be quite narrowly defined and linked to shorter-term financial rather than longer-term sustainability considerations. As a result, sustainability has never been a main factor in the comparative assessment of managers prior to appointment or in the formal appointment process itself. This approach has now been reviewed with a view to incorporating into the selection and contracting process a far greater focus on sustainability issues.
As an active part of this process, the Clwyd Pension Fund –
• Will require from potential managers formal statements of their objectives, policies and practices on sustainability and related factors; • Will ascertain from potential managers the degree to which sustainability factors are taken into account in the investment decision-making process; • Will seek from potential managers details and the level of in-house tools, agency inputs and other resources on sustainability factors used in their investment processes; • Will review with potential managers the quality, integration and impact of such research on their investment processes and performance; • Will consider the record of potential managers on active engagement with companies, voting and governance issues generally; • Will, in the assessment of potential managers, give appropriate weight to all these sustainability and related factors; • Will, where relevant and appropriate, build elements of the Fund’s Sustainability Policy and detailed guidelines into investment management agreements.
Collaboration
The Clwyd Pension Fund is already a committed member of the Local Authority Pension Fund Forum (LAPFF), a body that seeks improvements in corporate governance, promotes socially responsible investing (SRI) and, with the Fund’s active encouragement, is devoting considerable resources to environmental issues and climate change in particular. LAPFF is already a signatory to the UNPRI. The Fund has also had contact with other relevant bodies on sustainability issues both directly and through its managers.
The Clwyd Pension Fund –
• Will join and/or collaborate with organisations that are relevant to pursuit of the Fund’s sustainability objectives; • Will, subject to regulatory and operational constraints, seek relevant information from and share relevant information with such organisations in order to further the effective delivery of its Sustainability Policy.
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Reporting & Disclosure
The Clwyd Pension Fund Annual Report already includes copies of various regulatory documents, including various policy statements and the Fund’s SIP. The latter includes details of the Fund’s current policy statements on social, environmental and ethical considerations and corporate governance issues. The Annual Report is circulated widely and all these documents are also published on the Fund’s website. It is already accepted that approaches on sustainability and other policy areas tend to evolve and develop over time. It is essential therefore to keep policies and practices under continual review so as to improve their efficacy.
The Clwyd Pension Fund –
• Will, through its quarterly meeting procedure, report regularly and as appropriate on relevant sustainability issues; • Will, once a year, report formally on managers’ level of compliance with the its Sustainability Policy, progress made in the year and areas where further progress needs to be made; • Will, once a year, review its Sustainability Policy in the light of best practice and agree any proposed changes through its governance procedure; • Will circulate this revised document to relevant bodies and particularly its managers; • Will incorporate this revised document into its SIP and publish its contents both in the Annual Report and on its website.
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The aim is to bring this together this bring The aim is to Training is given priority status through formal initial induction for elected members and elected initial induction for formal status through priority is given Training and seminars. collaboration managers, through regularly ongoing sessions provided officers and an independent suitably experienced by is supported The Head of Finance specialist advice. in place for call-offadviser/consultant with contracts reports are Panel plans and regular a full Annual Report, project-based SIP, An extensive required. information of the containing much produced, Council. by and set considered reviewed, are and expenses Remuneration and contracts as regards both SIP requirements and reflect above noted are Arrangements introduced (call-off periodically contract reviewed are Arrangements of interest. conflicts in 2009). The Fund operates through powers delegated to the Head of Finance and an advisory Head of Finance the to delegated powers through operates The Fund are There SIP. defined in the are and roles members. Representatives panel of elected Council. also bi-annual reports to it is focus, required the and provides structure Council agreed current is the Whilst this under review. currently new CIPFA’s reflect will need to and this be introduced is to A needs assessment process framework. skills and knowledge sufficiency should ensure of and this being restructured function is currently The Finance future. the for resources internal ongoing monitoring. facilitate to 2010/11 business plan for formal into MYNERS PRINCIPLES – 2010/11 COMPLIANCE MYNERS PRINCIPLES – 2010/11 Principle 1 - Principle : that should ensure authorities Administering their implementation, and implementation, their Decisions are taken by persons or organizations with the skills, knowledge, advice and resources necessary to make them effecti them make necessary to advice and resources skills, knowledge, the with persons or organizations by taken Decisions are and mana receive, advice they the and challenge evaluate be able to sufficient expertise to have Those persons or organizations Key Areas and GuidanceKey Comment & Actions Compliance It is good practice to have an investment sub-committee, to sub-committee, an investment have to It is good practice and skills on investment focus appropriate the provide decision-making. effective skills for appropriate should have The board decision-making. and access to resources should be sufficientThere internal effective make to and boards trustees for resources external decisions. progress business plan with should be an investment There evaluated. regularly should be considered. of trustees The remuneration managing and should be paid to attention Particular advisers (including advice on strategic external with contracting issues) and actuarial management allocation, investment asset
• •
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The Fund’s SIP sets out its investment and funding objectives as well as its overall strategic as its overall as well and funding objectives out its investment SIP sets The Fund’s class targets. and asset benchmark customized A longer-term in progress. is currently and this cycle on a 3-4 year is reviewed Structure Fund regular more involving is being considered, funding objectives to approach reactive and more asset/liability in line with allocation benchmark asset strategic and adjustment of the reviews be sought. to is likely dynamic approach allocation, a more On tactical asset movements. rolling main of 3-year based in the mandates written detailed to operate managers Fund in nature. return absolute more others with some market-based targets, performance The cost sole criterion. be the should not performance managers, of changing In terms factors. as key more be recognized possibly need to and timing of change classes and its extremely asset very widely at available looked has always The Fund sought with always deals are Whilst competitive this. reflects structure diversified in optimizing that, grounds on the been less of a consideration have levels fee managers, costs are such basis and that on a net been considered always have returns structures, very carefully fund costs are Other minimal additional performance. offset by anyway and monitored. considered in future. consideration greater high and should receive are fees The Fund’s receives on stakeholders impact Fund but the Government-backed is effectively The Fund attention. appropriate - Key Areas and GuidanceKey Comment & Actions Compliance Benchmarks and objectives should be in place for the should be in place for and objectives Benchmarks scheme. of the funding and investment mandates clear written should have managers Fund include clear time which expectations, scheme covering and evaluation. measurement performance for horizons size of fund, a the given consider as appropriate, Trustees styles management or passive classes, active of asset range costs when management of investment impact and the and mandates. objectives formulating sponsor of the strength should consider the Trustees covenant. Principle 2 Principle str liabilities, the scheme’s account of the takes fund that the for objective(s) investment out an overall should set Trustees managers. advisers and investment to these communicate and clearly sponsor, and the trustees the of both risk attitude to the
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As e include the strength of the of the strength e include the
A separate bank account will be established during 2010/11. bank account will be established during A separate
Such issues will be looked at again as part of the 2010 Fund Structure review. review. Structure Fund as part 2010 at again of the issues will be looked Such
Most managers have market-related benchmarks. There is clear acceptance of the fact that fact of the is clear acceptance There benchmarks. market-related have Most managers is benchmarks strategic Fund’s of the The setting short in the term. can be volatile markets whilst classes. Similarly, of specific asset performance long-run probable based upon the of at all times, periods benchmarks their will outperform managers aim is that Fund’s the in tact. remains performance as long longer-term accepted are under-performance sole criterion. be the should not performance managers, of changing in terms above, noted factors. as key more be recognized possibly need to The cost and timing of change account of probable take used that are techniques optimization exercise, Review Fund each At actuarial Fund’s and the class correlations as asset as well factors and risk performance position. of return rate long-term an overall is aimed at achieving exercise Review Fund Each and mortality) changes rate interest inflation, (pay/price liability growth cover to adequate and funding actuarial full funding status. Whilst regular in time to return and to asset/liability has been no formal there Fund, on the available is now information some time. for modeling (ALM) exercise Review. Fund out as part 2013 An ALM should be carried of the Internal Risk Management, independent reports from regular members receive Panel bodies these by actions recommended Any controls. on internal Audit and External Audit actioned quickly. are used process actuarial as part regular is considered of the strategy investment The Fund’s is an two the between and consistency of contribution rates employers’ and set review to important factor. - Key Areas and GuidanceKey Comment & Actions Compliance Trustees should have a clear policy on willingness to accept a clear policy on willingness to should have Trustees conditions. market due to underperformance long-term affecting should analyse factors Trustees on impact these advice on how and receive performance and its liabilities. scheme the with risks associated account the into should take Trustees and management. valuation liabilities’ their establish and operate to requirement a legal have Trustees controls. internal is strategy investment the should consider whether Trustees and ability objectives sponsor’s scheme the with consistent to pay. Principle 3 Principle In setting and reviewing their investment strategy, trustees should take account of the form and structure of liabilities. Thes and structure form account of the should take trustees strategy, investment their and reviewing In setting sponsor covenant, the risk of sponsor default and longevity risk. and longevity of sponsor default risk the sponsor covenant,
70 www.clwydpensionfund.org.uk 12952 Pensions Ann ENG 12/10/10 15:24 Page 71 Full but further Full improvements suggested but further Full improvements suggested Full Partial Full stees should also stees members.
A specific section in the SIP on performance and SIP on performance A specific section in the
The contract with the current Adviser/Consultant current the with The contract
In line with best practice, this factual recording could be enhanced through an could be enhanced through recording factual this best practice, In line with
In line with the SIP, the performance of the Fund and its fund managers is formally and its fund managers Fund of the performance the SIP, the In line with is also The Independent Adviser/Consultant meetings. quarterly through monitored members and Panel Fund, of the performance an annual report on the produce to required Annual Report and on its website. in-house staff. Fund’s This is published in the relevant an annual could be enhanced through arrangements current best practice, In line with ability to their performance, own on their members, focusing Panel self-assessment by needs. identification of training and the contribute Panel maintained for are events and training meetings at Panel of attendance Records members. members with Panel and for Head of Finance the with Chairman the for annual appraisal Chairman. the Independent records, documents (Training evaluation performance All current as specific agenda Panel to brought are Audit) Risk Management, Adviser/Consultant, agreed. actions are and appropriate in this role has a key The Chairmen items. and monitor ability to Chairman’s the adopted, were suggestions best practice above If the be enhanced. issues would performance address is no but there Panel specific reports to SIP and through in the partlyThese are covered together. all these brings that statement should be introduced. monitoring performance based on competitively, selected are or call-off on a normal contracts, whether Advisers, factors. and other price performance, when the This will be addressed review. a number of times after forward has been rolled incumbent retires. existing - Key Areas and GuidanceKey Comment & Actions Compliance There is a formal policy and process for assessing individual for policy and process is a formal There and managers. of trustees performance and contribution an effective should demonstrate Trustees by measured example (for role the commitment to participation at meetings). performance of the results the should address The chairman evaluation. performance of how should be a statement There been conducted. have evaluations including factors advisers, relevant When selecting external account. into should be taken and price past performance Principle 4 Principle periodically make a formal policy assessment of their own effectiveness as a decision-making body and report on this to scheme scheme to as a decision-making body and report on this effectiveness own policy assessment of their a formal make periodically Trustees should arrange for the formal measurement of the performance of the investments, investment managers and advisors. Tru managers investment investments, of the performance of the measurement formal the for should arrange Trustees
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Statements on governance, sustainability and responsible on governance, Statements Whilst there are implicit indications in manager reports received and sustainability policies reports received indications in manager implicit are Whilst there been not have policy statements explicit property managers, been discussed with have all managers. sought from of advisers. The pooled nature Fund’s position of the the also reflect The comments above specific actions difficult Fund’s but the makes managers holdings with Fund’s all the in place for currently policies and procedures in establishing the involved advisers were Panel. the by approval to prior ownership responsible The Fund has for many years incorporated general “corporate governance policy guidelines” governance “corporate general incorporated years many has for The Fund of relevant records The voting fund managers. to circulated are its SIP and these within Local is also a member of the The Fund Panel. the to reported regularly are managers (LAPFF). Forum Fund Pension Authority mindful of sustainability issues and is always Fund the strategy, investment In formulating when classes. Similarly all asset across Fund the for focus an increasing are these and sustainability although about engagement asked are questions appointing managers selection. for of managers evaluation sufficient in the given weight not is probably this policy detailed and more needs a formal probably Fund the best practice, ensure To and be monitored is to this and sustainability how ownership on responsible statement manager in the matters such to be given needs to weight greater In future managed. appointment process. Responsible for Principles Nations United the with (including compliance investing all managers. will be sought from Investment) will Independent Adviser/Consultant current Fund’s the on this, is compliance Whilst there above. noted improvements the introduce to in-house team the with work - Key Areas and GuidanceKey Comment & Actions Compliance Policies regarding responsible ownership should be ownership responsible regarding Policies annual report and members in the scheme disclosed to Principles. of Investment Statement accounts or in the to engagement for potential should consider the Trustees and strategy investment when formulating add value managers. selecting investment an have managers investment that should ensure Trustees they in which circumstances out the setting strategy, explicit in a company. will intervene ISC’s the consultants adopt investment that ensure Trustees Statement Principle 5 Principle of (ISC) Statement Committee Institutional Shareholders’ the adopt, managers investment their or ensure should adopt, Trustees should be included in ownership policy on responsible scheme’s of the A statement and agents. of shareholders responsibilities responsibilities. of such discharge members on the to should report periodically Trustees Principles. Investment
72 www.clwydpensionfund.org.uk 12952 Pensions Ann ENG 12/10/10 15:24 Page 73 Full nt, its governance and risks, nt, its governance sider most appropriate.
Details of the Fund’s Communication Policy Statement and all other key reports – SIP, key and all other Statement Communication Policy Fund’s of the Details Statement, Strategy Guidelines, Funding Policy Governance Annual Report, Corporate all are Statement Compliance and Myners Principles Statement Compliance Governance of these many incorporates The Annual Report, which website. Fund’s published on the nor a summary this is circulated neither However, copy. in hard documents, is also available main two The other is also published periodically. members. A newsletter all scheme to ensure to Panel on the representation formal have and Wrexham) sponsors (Denbighshire also attends. representative Union and a nominated transparency issue a summary Annual pension fund authorities of the many transparency improve To should be considered. members and this all scheme Report to - Key Areas and GuidanceKey Comment & Actions Compliance Reporting ensures that the scheme operates transparently operates scheme the that Reporting ensures members and best scheme and enhances accountability to of continuing improvement the a basis for provides practice standards. governance Principle 6 Principle including performance against stated objectives. Trustees should provide regular communication to members in the form they con they form members in the communication to regular should provide Trustees objectives. stated against including performance Trustees should act in a transparent manner, communicating with stakeholders on issues relating to their management of investme management their to on issues relating stakeholders communicating with manner, should act in a transparent Trustees
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Communication Policy Statement
Since April 2006, the Clwyd Pension Fund has published a Communications Policy Statement. Each year this statement is reviewed and amended where necessary to ensure it is up-to-date.
This statement outlines Clwyd Pension Fund’s policies concerning communications with the following people and organisations:
• Scheme Members • Prospective Members • Employing Authorities • Fund Staff • Other Bodies
The Clwyd Pension Fund reviews and updates this statement to ensure that there is a continual improvement in the provision of information.
Mission Statement
The Fund’s communication policy statement follows the principles of the Clwyd Pension Fund Mission Statement which is identified as:
• We will be known as forward thinking, responsive, pro-active and professional providing excellent customer focused, reputable and credible service to all our customers.
• We will have instilled a corporate culture of risk awareness, financial governance, and will be providing the highest quality, distinctive services within our resources.
• We will work effectively with partners, being solution focused with a can do approach.
Diversity of Communication
All of the Fund’s communication material is bi-lingual and members are able to receive all personal correspondence in Welsh should that be their preferred language.
The Clwyd Pension Fund’s information is also available in alternative formats for example, Braille, large print, BSL Video/DVD, audio tape and other languages on request.
The Clwyd Pension Fund always aims to use the most appropriate communication medium for the audience receiving the information. This may involve using more than one method of communication.
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Communications with Scheme Members
Local Government Pension Scheme (LGPS) members include contributing members, deferred members and pensioners. Each type of member receives different forms of communication according to their needs.
Annual Benefit Statements - These statements are distributed annually to both contributing and deferred members’ home addresses as per regulation requirements. In 2009/2010 the Clwyd Pension Fund used an improved format for the statements which combined pension figures and guidance notes in one booklet. In addition, the booklet included a projection of State pension benefits at State pension age for all LGPS members who elected to receive the information. Distribution of the Annual Benefit Statements is undertaken on an All Wales basis.
Newsletters - The Clwyd Pension Fund has a newsletter for contributing members entitled Penpal. The purpose of this newsletter is to keep members up-to-date with any changes to the pension scheme regulations.
The Fund also sends a newsletter to its pensioners entitled Clwyd Catch Up. This is sent out with the annual pensions increase notification and explains how their new annual rate of pension has been calculated. It also includes topical information regarding the budget, State benefits etc.
Both newsletters are distributed to home addresses at least once a year.
A new newsletter was established in 2008/2009 - Pensions Extra. No new editions of this newsletter were published in 2009/2010. It will only be published on an ad-hoc basis as and when it is required.
Presentations/Road-shows/Drop-in Sessions - The Clwyd Pension Fund offers LGPS presentations, Road-shows, and drop-in sessions throughout the year. During 2009/2010 several employers requested the Clwyd Pension Fund to visit and speak with their staff about the Local Government Pension Scheme.
The 2009/2010 financial year saw the Clwyd Pension Fund carry out 11 Drop-in Sessions.
The information given out at these events is constantly reviewed to ensure that the information provided is up-to-date and takes into account any changes in the pension regulations. LGPS literature, ranging from scheme booklets to death grant expression of wish forms, is always available at these events.
Pre-Retirement Courses - Fund Officers attend pre-retirement courses to inform members who are approaching retirement age about Local Government procedures. These courses are held quarterly and are run in partnership with Gwynedd Council. All course material is reviewed in advance of the course to ensure the information is up-to-date according to regulation changes.
Website - All members have access to the Fund’s website which can be found at www.clwydpensionfund.org.uk. The website was set up to provide comprehensive information regarding the Local Government Pension Scheme and the Clwyd Pension Fund. It enables members to download scheme literature/forms and provides a facility for them to make requests online, for example, to change their address or request an estimate of benefits.
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During 2009/2010, the Clwyd Pension Fund has been working to improve the website so that it is more user-friendly and easier to navigate. The revised website will be launched in the summer of 2010.
Literature - Current pensions literature available to scheme members include:
• Employee Guide to the Local Government Pension Scheme, which is sent to all members upon joining the Clwyd Pension Fund. This guide was reviewed and rewritten in 2009/2010. • Topping Up Your Benefits, which explains how members can pay extra contributions to increase their benefits on retirement • Retirement pack sent to all members about to retire from the Clwyd Pension Fund
Pensions Factsheets - Several factsheets are available and are updated as and when pension regulation changes make it necessary. They are produced on an All Wales basis. Most of the Welsh Pension Funds use the factsheets for general distribution to their LGPS members. The types of factsheets include:
• Authorised Unpaid Leave • Changing Working Arrangements • Commutation • Pensions on Divorce or Dissolution of Civil Partnerships • Flexible Retirement • Ill Health Retirement • Maternity Leave • The Rule of 85
Poster Campaign - The option to nominate a cohabiting partner to receive a pension has only been part of the scheme since April 2008. Posters advertising this option were designed, printed and placed in all workplaces of Clwyd Pension Fund members. It is very important to convey this message to all LGPS members to ensure anyone eligible to nominate their partner, is aware of this new pension regulation.
Facts & Figures - An extract of the Fund’s facts & figures for each financial year is included in the Penpal newsletter so that contributing members are aware of the Fund’s current financial position without having to read the Annual Report.
Annual Report - This report is published to highlight how the Fund has performed during the previous financial year. It also includes statements with regard to investment principles, funding strategy, and governance.
Contacting the Clwyd Pension Fund - All members have the opportunity to telephone, email or visit the Clwyd Pension Fund for information in addition to the other lines of communication open to them.
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Communications with Prospective Members
Literature – Various literature is available to prospective members that promotes the Local Government Pension Scheme and explains the scheme benefits. Booklets include:
• Your Pension at Retirement, which is distributed to all new employees alongside their contract of employment. This booklet has been updated and reprinted in 2009/2010. • Opted out? Missing out! which is sent to employees who request to opt out of the scheme informing them of the benefits they are missing out on
Induction Days – Flintshire County Council Corporate Training Unit organise induction days for new employees. As part of these induction days, Clwyd Pension Fund is invited to give a presentation to prospective scheme members in order to promote the benefits of joining the Local Government Pension Scheme. Three pension presentations were held on these induction days during the financial year 2009/2010.
Communications with Employing Authorities
AJCM – The Annual Joint Consultative Meeting is held every November and an invitation is extended to employers and Union representatives. The Annual Joint Consultative Meeting offers employers the opportunity to discuss the latest pension issues and to keep up-to-date with Local Government Pension Scheme regulations. The Annual Joint Consultative Meeting also includes a presentation summarising the Fund’s annual report and accounts.
Bi-annual Report – These reports are presented to Council and copies are sent to the scheme employers. The Bi-annual Report provides a summary of reports issued to the Clwyd Pension Fund Panel.
Individual Employer Meetings – Employers have the opportunity to meet with members of staff from the Clwyd Pension Fund to discuss any issues with regard to the Local Government Pension Scheme. These meetings take place as and when they are required.
Training Sessions – Training sessions are offered to both Payroll and Personnel departments within each employer. The sessions include training on the Local Government Pension Scheme regulations and administration procedures.
During the year 2009/2010, the Clwyd Pension Fund held 9 training sessions for our employers.
Employer Handbook – A handbook is available to all employers. It is designed to explain each administrative procedure and to assist employers with all pension administration matters. The handbook is currently being updated to take account of the new regulations and recent changes that have been made. The new handbook will eventually be available as a hard copy or to download on the Clwyd Pension Fund website.
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Service Level Agreements (SLAs) – Service Level Agreements were introduced in April 2007 in order to improve best practice and also to comply with audit requirements.
The Service Level Agreement sets out in detail the obligations and responsibilities of both the Employing and Administering Authorities concerning all aspects of Local Government Pension Scheme administration. These Agreements are reviewed and updated annually.
Website – During 2009/2010 the Clwyd Pension Fund has worked on the website to improve it. It now has a new look so that it is easier to navigate. All of the information is up-to-date and takes into account current LGPS regulations. The revised website will be launched in summer 2010.
The employing authorities also have their own website section that they can visit to find out how to implement LGPS regulations. They are able to download password protected pensions forms which must be completed by the employer in order for pension benefits to be calculated.
Communications with Pension Fund Staff
Clwyd Pension Fund Manager – The Clwyd Pension Fund Manager maintains an open-door policy and attempts to make himself available to staff both within and outside the Pensions office.
Team Meetings – Office and/or Team Meetings are held on a monthly basis to discuss operational issues.
Any items arising from such meetings are escalated to the Clwyd Pension Fund Manager and raised at Senior Management Team Meetings if required.
Staff Training – The Clwyd Pension Fund ensures that all pension staff receive both in-house and external training with regard to pension matters so that they are able to administer the scheme effectively, answer member queries and offer a good customer service.
The Pensions Section staff attend various 1 day courses run by Local Government for Employers (LGE) regarding the LGPS as and when these courses are available.
Several staff members have also committed to completing a 2 year Local Government Pension Scheme Diploma with the Institute of Pension and Payroll Professionals (IPP). These staff members are at various stages of the Diploma. In the last 3 years, 4 members of staff have passed the Diploma and 1 member of staff is due to complete the course in 12 months.
Fund staff are encouraged to attend other training courses that will assist in personal development.
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Communications with Other Bodies
Regional Forums – The Shrewsbury Pension Officers Group takes place regularly during the year. It is an opportunity for the Pensions Managers and other Pensions Officers from administering authorities in the region to share information and ensure uniform interpretation of the Local Government Pension Scheme, and other prevailing regulations.
Partnership Meetings with the 8 Pension Funds in Wales – The Pensions Manager regularly meets representatives from the other 7 Pension Funds in Wales to discuss best practice and to ensure that all the Welsh Funds have a consistent approach to their administrative procedures.
In addition, all of the Communications Officers from the 8 Welsh Pension Funds meet at least twice a year to share ideas about forms of communication. Some of the scheme literature that is produced is on an “All Wales” basis.
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Independent Auditor’s Statement to the Members of the Administering Authority of Clwyd Local Government Pension Fund I have examined the pension fund accounts and related notes contained in the 2009/2010 Annual Report of Clwyd Pension Fund to establish whether they are consistent with the pension fund accounts and related notes included in the Statement of Accounts produced by Flintshire County Council for the year ended 31 March 2010 which were authorised for issue on 29 September 2010. The pension fund accounts comprise the Fund Account and the Net Assets Statement.
Respective responsibilities of the Administering Authority and the Independent Auditor The Administering Authority, Flintshire County Council, is responsible for preparing the Annual Report. My responsibility is to report my opinion on the consistency of the pension fund accounts and related notes contained in the Annual Report with the pension fund accounts and related notes included in the Statement of Accounts of the Administering Authority. I also read the other information contained in the Annual Report and consider the implications for my report if I become aware of any misstatements or material inconsistencies with the pension fund accounts.
Basis of opinion I conducted my review of the Annual Report in accordance with the requirements of International Standard on Auditing (UK and Ireland) 720 ‘Other information in documents containing audited financial statements’ issued by the Auditing Practices Board.
I planned and performed my work to gain reasonable assurance that the pension fund accounts and related notes included in the Annual Report of the Pension Fund are consistent with the pension fund accounts and related notes included in the Statement of Accounts produced by Flintshire County Council.
Opinion In my opinion the pension fund accounts and related notes included in the Annual Report of Clwyd Pension Fund are consistent with the pension fund accounts and related notes included in the Statement of Accounts produced by Flintshire County Council for the year ended 31 March 2010 which were authorised for issue on 29 September 2010.
I issued an unqualified opinion on the Clwyd pension fund accounts. My opinion included an emphasis of matter note concerning unquoted investments carried at their fair value of £139 million. Because of the inherent uncertainty associated with the valuation of such investments, arising from the absence of a liquid market, the fair value of these investments may differ from their realisable values. The difference could be material.
Appointed Auditor: Anthony Barrett Address: Wales Audit Office Unit 4, Evolution Lakeside Business Village St David’s Park Ewloe CH5 3XP
Signature: Date: 30 September 2010 Agenda Item No. 5
Resources Scrutiny Committee
13th January 2011
Report by the Strategic Procurement Manager
Corporate Procurement – the benefits to all Directorates of utilising the Council’s Strategic Procurement Unit
1. Purpose of the Report
To inform members and seek their views on:
(i) Identified Issues associated with Directorates’ current procurement practices
(ii) The benefits to all Directorates of utilising the Strategic Procurement Unit and the potential way forward in order address current procurement issues
(iii) The measures the Council takes via the Strategic Procurement Unit to assist small business in the County
(iv) Draft proposals under consideration for a North Wales Procurement Shared Services
2. Executive Summary
As a Council we recognise that our procurement expenditure is significant. We spend circa £130 million annually within the capital and revenue budget, which involves acquisition of supplies, services and works from third parties.
2.1 Identified Issues
During the six year period that the Strategic Procurement Unit has been in existence, it has become apparent that there are a number of common issues associated with the way devolved procurement is currently undertaken within Directorates.
The main issues are highlighted below: (See Appendix 1)
Devolved departmental procurement teams are adopting a disparate approach to purchasing and procurement across the authority.
The knowledge, skills and experience of officers with procurement responsibilities varies greatly across the Council
Significant officer time and effort is spent resolving procurement related problems arising out of uninformed decisions or actions taken in good faith by inexperienced staff. As a result, robust contractual and commercial considerations are not being consistently applied.
Adherence to our Corporate Procurement Strategy is fragmented, resulting in some projects being procured in conflict with the strategy.
Corporate Purchasing Agreements are not always being complied with; hence there are still examples whereby potential savings from a corporate approach is being lost.
Not all spend is influenced by the Strategic Procurement Unit, resulting in a limited corporate view of procurement activity.
There are a number of officers with devolved procurement responsibilities who have a lack of understanding of the European Procurement Regulations; this in turn may increase the Authority’s exposure to financial and reputational risk, especially resulting from legal challenges from aggrieved contractors and suppliers in respect of non-compliance with procurement procedures.
The Authority’s own Contract Procedure Rules are not always complied with, with examples of non-compliance apparent even at Chief Officer level
The planning of procurement projects is generally poor, resulting in various procurement options and corporate project management principles not always being thoroughly considered and documented, as well as over reliance to utilise delegated approvals for exemption from quotation or tendering requirement There is a tendency not to involve early enough the Strategic Procurement Unit in major projects, which results in procurement best practice not being consistently applied.
Contract management and supplier relationship management is not formally adopted and documented on a consistent basis, usually due to resource capacity issues. Consequently, any savings resulting from a tender award process could be lost due contracts and suppliers not being managed to a sufficient level.
There is no formal Demand Management procedures in place which could challenge the need to buy in the first place as well as restricting the items that are being bought
Sustainable and socially responsible procurement is not deemed to be a priority across all procurement projects. As a result, projects are being procured in a manner which may not always be Small Medium Enterprise (SME) and Local Supplier friendly, with missed opportunities to deliver community benefits.
2.2 The benefits of utilising the Strategic Procurement Unit
The Strategic Procurement Unit (SPU) which consists currently of 3 procurement professionals has a track record of not only delivering substantial efficiency savings (£4m to date), but are recognised to be “gatekeepers” of procurement best practice. This was recognised in the Wales Audit Office report (see 5.2) as having implemented more robust procurement processes.
The main benefits that can be derived by utilising the Strategic Procurement Unit is generally to address the majority of current issues identified with the Directorates current procurement practices.
In summary, if ALL procurement expenditure was routed or influenced through the SPU
Devolved departmental procurement teams would no longer be adopting a disparate approach to purchasing and procurement across the Authority, since the adoption of category management would ensure the standardisation of procurement process through more robust procurement planning.
The knowledge, skills and experience of officers with procurement responsibilities would also be enhanced, since under a category management approach all officers would be required to obtain a common understanding of category management principles.
As a result of more robust procurement planning, significant officer time and effort would be reduced considerably in resolving procurement related problems arising out of uninformed decisions or actions taken in good faith by inexperienced staff.
Adherence to our Corporate Procurement Strategy would be ensured through more robust procurement planning
Compliance with corporate purchasing agreements would become mandatory, since under a category management process a category lead officer would monitor spend on a per category basis in order to identify any contract leakage
All procurement spend would be influenced by procurement professionals, resulting in a total corporate view of procurement activity.
The introduction of category management with a procurement professional as a category lead would ensure that the Authority is fully compliant with the European Procurement Regulations as well as with our internal contract procedure rules, hence mitigating potential financial and reputational risks arising from legal challenges from suppliers.
The application of category management would ensure more robust procurement planning, with option appraisals formally undertaken. As a result, the Strategic Procurement Unit would automatically be involved in major projects, in order to ensure procurement best practice is being applied.
Contract management and supplier relationship management would become more formally adopted and documented on a more frequent basis, especially in relation to our strategic critical suppliers. Consequently, any savings resulting from a tender award process would be realised and maintained. Through the category management process, formal demand management procedures would be in place that would challenge the need to buy in the first place as well as restricting the items that are being bought.
Sustainable and socially responsible procurement would be considered automatically as part of the category management process. As a result, relevant projects would be procured in a manner which would promote community benefits as well be sensitive to the local supplier market.
However, in order to ensure sufficient resource capacity within the SPU, as part of the support services review programme, all staff involved in procurement activities should be identified as matter of priority, with consideration given for the respective staff to be re-structured in a manner that has more direct integration with the Strategic Procurement Unit either on a direct or indirect line management basis.
2.3 SME and Local Supplier Support
The Strategic Procurement Unit has been actively implementing various improvement actions as identified in our Corporate Procurement Strategy with regard to supporting small businesses in the County. (See Appendix 2)
However, due to the current devolved procurement structure, departmental procurement teams are still adopting a disparate approach to purchasing and procurement across the authority, resulting in actions to support local suppliers not always being actioned or considered a priority.
Without the re-structuring of procurement and the implementation of a category management process which will enforce more robust procurement planning procedures, then there is a danger that the Authority could continuously be open to criticism from agencies such as Federation of Small Business for not ensuring that all service areas are demonstrating compliance with the Council’s own Corporate Procurement Strategy and the principles of the Opening Doors charter.
2.4 Regional Procurement Shared Services
The exploration of a regional procurement shared service is ongoing as part of a wider programme of work undertaken by the Regional Support Services Programme Board under the leadership of Harry Thomas, Chief Executive Gwynedd County Council.
Following a second regional workshop there are proposals to appoint independent consultants to develop an Outline Business Case for the implementation of various regional support services.
However, with respect to the development of regional procurement shared service vision, two additional workshops have been held involving Procurement Managers across the six local Authorities.
The output resulting from the workshops involved an outline agreement for a regional procurement service, based on a virtual shared service, incorporating the implementation of category management and supplier relationship management on a regional basis, as well as allocating individual procurement managers to take lead responsibility on:
Compliance and Regulation monitoring including Contract Procedure Rules development, supplier accreditation and procurement savings recording
Strategy and Policy development including sustainable procurement and training
E-procurement best practice and performance management
Due to procurement resource capacity implications, there is general acceptance that a regional or sub-regional approach would give greater resource capacity in the region, by utilising identified procurement personnel across the region in a more strategic manner in order to generate greater resource capacity, by avoiding duplication of effort on a number of common tasks.
The implementation of a virtual shared service platform would require the realignment of roles and responsibilities of existing staff in order to fit into the new structure and way of working.
A further verbal update will be given at the meeting.
3. Scrutiny Outcomes
To evaluate:
(i) the merits of Directorates’ current procurement practices
(ii) the merits of re-structuring the way procurement is undertaken in order to address the current procurement issues.
(iii) the measures the Council takes via the Unit to assist small business in the County
(iv) input into regional proposals for a regional Procurement Shared Service
4. Recommendations
In order to progress to the next level in terms of procurement best practice as well as positioning the Authority to maximise it’s potential of delivering the required efficiency savings as part of the Corporate Efficiency Plan, then the Resources Scrutiny Committee is asked to consider supporting the following recommendations that:
As part of the support services review programme, all staff involved in procurement activities should be identified as matter of priority, with consideration given for the respective staff to be structured in a manner that has more direct integration with the Strategic Procurement Unit either on a direct or indirect line management basis Within a new procurement structure a formal category management approach should be adopted across the ALL category of spend, with appropriate governance procedures set up in order to address any issues arising from the management of the spend.
To supplement the introduction of category management, a formal Supplier Relationship Management and Contract Management approach should be implemented, in order to ensure that savings identified at tender award stage are actually realised during the course of the contract.
Consideration should be given to put in place more robust demand management procedures in order to challenge the volume and type of commodities that are being bought, as well as the need to purchase in the first place.
5. Background
5.1 Strategic Procurement Unit
In order to implement a more strategic and corporate approach to procurement, the Authority established in April 2004 a Strategic Procurement Unit (SPU) which currently comprises 4 members of staff, of which 3 staff are professional members of the Chartered Institute for Purchasing and Supply.
Over the years the Unit has made a dramatic contribution to procurement improvements within the Authority, resulting in efficiency savings of £4.0 million.
5.2 Wales Audit Office Report
The testament to the work of the Unit was highlighted in a recent Wales Audit Office report: “A Baseline Assessment of Procurement” which concluded:
“…that over the past two years, Denbighshire County Council has taken a wide range of positive steps to developing a more robust approach to procurement…”
However, the WAO report also highlighted further areas for improvements which were:
“The principles of strategic procurement will not be applied consistently throughout the Council until there is a change in culture.” and
“Better clarity is needed for services around the future role and responsibilities of the Strategic Procurement Unit if a corporate approach to strategic procurement is to be successful. The imperative for this clarity is reinforced by the relatively limited staff resources within the Strategic Procurement Unit –client services must have clear expectations of the service level they will receive from the Strategic Procurement Unit”
The WAO report clearly recognised the disparate approach to purchasing and procurement across the Authority, of which cannot be addressed without a radical change to the culture. This in my view can be achieved through a re-structuring process involving category management and supplier relationship management principles.
Additionally, the WAO report also recognised that in order to deliver successful strategic procurement then the role and responsibilities of the Unit needed to be enhanced, with the need to increase the resource capacity level of the Unit. Again, the recommendation within this report to potentially re-structure the way procurement is undertaken and to re-utilise existing devolved procurement staff within an enhanced Strategic Procurement Unit is consistent with the recommendations of the WAO report.
5.3 Corporate Procurement Strategy 2009-2012
The adoption of our Corporate Procurement Strategy 2009-2012 has also set the objectives that by 2012 the Council will be:
Maintaining the highest professional standards of conduct and probity in supply chain management and pursue best practice
Achieving continuous improvement from all categories of procurement expenditure by putting in place an appropriate procurement strategy and the necessary resources for implementation.
Realising economic, social and environmental benefits for our communities through our procurement activities, by endeavouring to increase the amount of procurement requirements sourced from within Wales, and to try to encourage and develop the Welsh market.
With respect to issues identified within the current devolved procurement approach, it’s clear that without adopting the recommendations of this report, the above objectives will not be realised.
6.0 Staffing Implications
Any proposed re-structure of procurement related staff would involve changes to their roles and responsibilities as well as potentially to their direct line management. Additionally, there may also be training implications in relation to implementing category management and supplier relationship management.
7.0 Legal Implications
The introduction of category management principles would ensure greater compliance with the European Procurement Regulations as well as the Contract Procedure Rules. Consequently, this will potentially reduce the Authority’s exposure to legal challenges arising from aggrieved suppliers contesting tender award decisions.
8.0 Financial Implications
The implementation of category management and more robust contract management techniques is proven to deliver additional efficiency savings across all categories of spend.
9.0 Property Implications
Any proposed re-structure of procurement related staff would normally include the need to have direct line managed staff to be co-located. As a result there could implications of re-locating the Strategic Procurement Unit.
10.0 Collaboration Implications
The implementation of the recommendations within report would be compatible and could be expandable on a regional or sub-regional basis.
11.0 Consultation Carried Out
The issues identified in the way current procurement practices are undertaken within Directorates has been collated as result of ongoing analysis of various procurement projects over a period of time.
Federation of Small Business (Denbighshire Branch) in relation to feedback from SME’s on our procurement process
Operational Board of North Wales Procurement Partnership in relation to a regional procurement shared services vision
Value Wales – in relation to identifying procurement best practice as part of a procurement capability review.
12.0 Implications on Other Policy Areas
The implementation of the recommendations outlined in this report will ensure:
Greater compliance with European Procurement Regulations and internal Contract Procedure Rules Ensure the principles of our Corporate Procurement Strategy will be consistently applied including regeneration benefits through implementation of socially responsible procurement Contribute towards realising challenging efficiency savings in accordance with the corporate efficiency plan
13.0 Background Papers
• Corporate Procurement Strategy 2009-2012 • Wales Audit Office Report : A Baseline Assessment of Procurement
Contact Officer:
Arwel Staples, Strategic Procurement Manager Tel: 01824 706042 E-mail: [email protected] APPENDIX 1
A list of Identified Issues associated with Directorates’ current procurement practices
Identified Issues of current procurement practices
1) Devolved departmental procurement teams are adopting a disparate approach to purchasing and procurement across the authority.
2) The knowledge, skills and experience of officers with procurement responsibilities varies greatly across the Council
3) Significant officer time and effort is spent resolving procurement related problems arising out of uninformed decisions or actions taken in good faith by inexperienced staff as a result there are weaknesses in ensuring that robust contractual and commercial considerations are being applied
4) Adherence to our Corporate Procurement Strategy is not always consistent
5) Corporate Purchasing Agreements are not always complied with, hence there are still numerous examples whereby economies of scales are not being realised to their full potential and as a result potential savings from a corporate approach is being lost.
6) There are still numerous examples of duplication of effort taking place across organisations in respect of similar contracting activity. 7) There is a tendency that tender opportunities are not opened up to other public sector organisations, hence savings resulting from economies of scale are being potentially missed
8) Not all spend is influenced by the Strategic Procurement Unit in order to improve performance through professionalism, resulting in a limited corporate view of procurement activity.
9) There are a number of officers with devolved procurement responsibilities who have a lack of understanding of the European Procurement
1 Regulations; this in turn may increase the Authority’s exposure to financial and reputational risk, especially resulting from legal challenges from aggrieved contractors and suppliers in respect of non-compliance with procurement procedures.
10) The Authority’s own Contract Procedure Rules are not always being complied with, with examples of non-compliance apparent even at Chief Officer level 11) Various Council’s Approved Lists are not compiled and maintained including rotation of contractors 12) Departmental Contract Registers are not in place
13) Chief Officers do not always comply and maintain a scheme of delegation, detailing names and grades of officers approved for obtaining quotations, tendering and entering into contracts 14) The planning of procurement projects is generally poor, resulting in various procurement options not always being thoroughly considered and documented, as well as over reliance to utilise delegated approvals for exemption from quotation or tendering requirement
15) Even though the corporate project management methodology has been adopted, there are still a number of procurement projects that are not managed using the methodology.
16) There is a tendency not to involve routinely and automatically the Strategic Procurement Unit in major projects, which results in procurement best practice not being consistently applied.
17) A non-standard approach and use of procurement documentation such pre-qualification questionnaires and invitation to tender documents is still apparent across the Council, even though standard tendering documentation templates have been developed and promoted.
18) Contract management and supplier relationship management is not formally adopted and document on a consistent basis, usually due to resource capacity issues. Consequently, any savings resulting from a tender award process could be lost due contracts and suppliers not being managed to a sufficient level.
19) There is an absence of well documented supplier improvement plans which are signed off
20) Top tier suppliers are not being encouraged to apply best procurement practice through their supply chains
21) Effective contract management processes are not in place for all contracts including the use of robust performance management involving
2 key performance indicators
22) There is no formal Demand Management procedures in place which could challenge the need to buy in the first place as well as restricting the items that are being bought
23) Sustainable and socially responsible procurement is not deemed to be a priority across all procurement projects. As a result, projects are being procured in a manner which may not always be SME and Local Supplier friendly, with missed opportunities to deliver community benefits.
3 Appendix 2
The measures the Council takes via the Strategic Procurement Unit to assist small business in the County
The Strategic Procurement Unit (SPU) in accordance with our Corporate Procurement Strategy and the principles of the Opening Doors: The Charter for SME friendly procurement is continuing to take a number of positive improvement actions in order to assist small businesses in the County.
During the 2009/10 Financial Year £28.0 million (26% of total procurement spend), was spent directly with suppliers within the Denbighshire. This compares with a regional public sector average across North Wales of 26.7% of expenditure spent locally.
However, the above figures need to be quantified, since there is substantial further expenditure that is spent locally, but the above analysis does not reflect that the payment is being made to an address outside the County normally to Headquarters office address. For an example, £2.3m is spent locally with agency staff suppliers and hence local labour but the payment is made to Matrix SCM who are based in Milton Keynes.
In order to progress the support to assist small business in the County win more public sector tender opportunities then the SPU has undertaken the following measures:
In order to understand the local supplier base, the SPU has become more familiar with SME’s in the region and the services they provide by establishing a database of suppliers based on the Thomson supplier directory. The creation of the database will ensure that suppliers can now be targeted in order to inform them of tender opportunities. Additionally, the database can also be used to analyse and understand where there is potential contracts been won by suppliers outside the area, where a local supplier market is available.
Several “How to Tender workshops” have been made at a number of local supplier events in conjunction with Menter ac Busnes and our internal regeneration department. These presentations have allowed local suppliers to understand what is required to win public sector contracts.
A successful “Meet the Buyer” event has taken place early December at the Optic Techium, St Asaph, with 100+ suppliers in attendance. The event provided an opportunity for suppliers to introduce themselves as well as providing a mechanism for local suppliers to discuss business opportunities with a number of public sector buyers.
In order to promote greater tender opportunities for local suppliers, the Unit has ensured that on a voluntary basis an increased amount of contracts above £25,000 are more widely advertised on the buy4wales website.
4 Currently, the Contract Procedure Rules only require contracts above £50,000 to be publically advertised.
With respect to collaborative framework agreements put in place by the North Wales Procurement Partnership, the Unit has consistently advocated the use of county or sub-regional lots when planning the procurement approach. This has allowed local suppliers to bid for either local or regional lots.
The Unit has regular dialogue with the WAG’s Local Supplier Development Service, in order to inform them of forthcoming tender opportunities as well as outlining future procurement plans. As a result the local supplier development champions specifically target local suppliers to make them aware of tender opportunities as well as providing interested suppliers with a one-to-one service to support them in completing their tender submissions.
In order to welcome applications from new business, we have developed and published an on-line guidance “Winning Council Business Guide” outlining who to contact, and how to tender for our business.
In order to take steps to find out what the barriers are for us doing business with appropriate local suppliers, regular meetings are held with the Federation of Small Business (Denbighshire Branch). These meetings are invaluable in order to understand the local suppliers’ viewpoint of trying to win public sector contracts.
We have actively encouraged our main suppliers to provide opportunities for SMEs to deliver elements of appropriate contracts. For example, with the respect to the recent Corwen and Denbigh Flood Defence schemes the Authority was the first organisations in the Welsh public sector to influence major contractors to explore the use of local suppliers by requesting that supply chain opportunities are advertised on the buy4wales website.
We have promoted and implemented the use of Community Benefit clauses in the recent Rhyl High School (new build) contract. This will ensure that there are contractual clauses within the main contractor contract for them to promote social benefits such as training and recruitment opportunities as well as establishing specific key performance indicators for the engagement of local labour as well as local sub-contractors
Issues for Consideration
Although a number of initiatives, have been put in place to support local suppliers to win public sector business, either as prime contractor or sub-contractor. However, adherence to our Corporate Procurement Strategy is not always consistent, since devolved departmental procurement teams are continuing to adopt a disparate approach to purchasing and procurement across the authority.
Without the re-structuring of procurement and the implementation of a Category Management process which will enforce more robust procurement planning procedures then there is a danger that the Authority could continuously be open to criticism from agencies such as Federation of Small Business for not ensuring that
5 all service areas are demonstrating compliance with the Council’s own Corporate Procurement Strategy and the principles of Opening Doors charter.
.
6 Agenda Item No. 6
RESOURCES SCRUTINY COMMITTEE
13 January 2011
Report by the Acting Head of Finance and Assets
Budget Setting Process
1. Purpose of the Report
The Council is facing a very difficult financial situation. As part of its response to this, it changed the budget setting process. This report is to update members on the process and invite comment from members on its effectiveness.
2. Executive Summary
While the Council has always had a robust budget setting process which has resulted in a deliverable budget, the upcoming financial challenge has meant that the Council needed something that was longer term, more transparent and more inclusive to ensure it could deliver the amount of savings it would require over the medium term.
Over the last six months, service departments have faced a number of service challenges and there have been several member seminars and meetings to aid the budget setting process.
This has allowed early engagement with members and allowed them to develop a broad understanding of the issues faced by services. Proposals have been debated and it is likely that full Council will agree its budget on 8 February.
3. Scrutiny Outcomes
Members are invited to comment on the budget setting process to enable these comments to be fed into next year’s process to allow any improvements to be made.
4. Recommendations
Members comment on the budget setting process.
5. Background
In 2008 and 2009 the world faced unprecedented financial problems. This showed most clearly in the collapse of a number of banks and the UK fell into the worst recession for decades.
1
The government took unique action in supporting the UK banking system to prevent its collapse. This support, coupled with a major recession and increased demand on public services caused significant financial problems for the government.
In their financial planning, officers realised that whatever solution was imposed by any government it was going to be financially painful for the Council and that this budget would probably need to be the most robust ever proposed to members.
This view was reinforced when the new UK government announced its emergency budget in June.
The Council wanted to ensure that its budget addressed a number of issues:
• It was a medium term solution as this problem would not go away in one or two years • Where possible services that the public valued would be protected, but • All services would be challenged on what they did and how they did it • The challenge would need to be consistent and transparent • Increased member involvement was required • Investment was still required in priorities
All support services had begun to go through a challenge in late 2009 and early 2010 as a first phase of the process as the Council began to develop its approach to medium term financial planning.
The main services began to go through a challenge from June 2010 onwards and the timetable was broadly:
Service Date Leisure June Environmental Services June/Sept Planning and Public July Protection Highways July/Sept Adult Social Services Sept (twice) Lifelong Learning Oct Children’s Social Services Nov Libraries Nov Housing Nov Regeneration & Tourism Dec
Some services were split over several dates or were requested to attend a second challenge where issues arose during the first session. Some support services are due to undergo a challenge during 2011 – Audit, ICT, Customer Services and Finance.
2 The reviews allowed Heads of Service to discuss their services and present proposals for budget savings for future years. The process was complicated by the senior management review which meant a number of responsibilities changed during the process.
The Council’s Senior Leadership Team (SLT) also debated the budget and provided a peer challenge during the service challenge and at SLT meetings.
Member Involvement
Each service challenge was chaired by the Lead Member for Modernisation and attended by the Leader, Lead Member for Finance and representatives of each Scrutiny Committee. In addition the Lead Member for each service attended specific sessions. This meant that there were up to eight Councillors at each meeting.
As budget proposals were developed meetings began with all members. An overview spreadsheet was developed which was presented to members along with explanations of proposals. Initially members were asked to score proposals at a workshop to give a steer on their political acceptability. This was followed by several informal Cabinet and Council meetings throughout the year. At each meeting members were taken through the spreadsheet to show progress and allow debate on any new issues. Informal Council met to discuss the budget in July, October, December and January.
After being reviewed by informal Council in December, final proposals along with more detailed explanation was sent to all Councillors to allow a final informal view on the budget to be had on 7 January.
Resources Scrutiny Committee is now reviewing the process and other Scrutiny Committees are looking at individual elements of the budget (e.g. Lifelong Learning will review their budget proposals on 14 January)
Cabinet will then review the budget for a final time before it is formally put to full Council on 8 February to set the budget and again on 22 February to set the Council Tax.
Other Stakeholders
During the process the Council also began to engage better with Town and Community Councils to start looking at the medium term provision of services in their areas and how we might work together differently. The Council also began the Big Debate to try to engage better with residents, employees and other interested parties. A series of staff roadshows were held to update staff. Work has also been undertaken with other Councils and partners to change the way services are provided.
The result of this process is a budget that has been widely presented to members, achieves a level of savings that is unprecedented for Denbighshire,
3 keeps the Council Tax increase at a reasonable level and still provides funds to invest in priorities.
Contact Officer:
Acting Head of Finance and Assets Tel: 01824 706140
4 Agenda Item No. 7
Resources Scrutiny Committee
13 January 2011
Report by the Head of Customer Services
One-Stop Shops
1. Purpose of the Report
To inform the Committee, and seek its views, on the progress achieved to date with the implementation of the recommendations which emanated from the feasibility study of the One Stop Shop Service (OSS). 2. Information
2.1 Following a review of the Library Service, a decision was taken not to close any libraries. As such, closing a OSS provision within a Library would bring no significant savings and would be detrimental to the services offered to the community. In the wake of this decision, and in response to a request from the Resources Scrutiny Committee, a feasibility study was undertaken into the effectiveness of the OSS Service.
2.2 The conclusions of the feasibility study were reported to the Committee in September 2010 and subsequently an action plan was drawn up with a view to progressing the recommendations which stemmed from the review. The action plan it attached at Appendix 1. However, as negotiations are still underway with a third party with regards to progressing one of the recommendations, the appendix is exempt from publication at present by virtue of Paragraph 14, Part 4, Schedule 12A of the Local Government Act 1972.
2.3 The action plan outlines the progress achieved to date in addressing the recommendations and seeks members’ views on the progress made and on future actions in this area.
3. Scrutiny Outcomes
An evaluation of the progress to date in implementing the action plan will assist with the development of an effective and efficient model for the future delivery of One Stop Shop services to the County’s residents and its communities.
1 4. Recommendations
That the Committee:
4.1 reviews the progress to date in implementing the recommendations of the feasibility study of the OSS Service, as detailed in Appendix 1 attached, and comments accordingly; and 4.2 considers whether any additional actions are required and/or further monitoring of the action plan is necessary in future.
5. Background Papers
Reports to Resources Scrutiny Committee and corresponding minutes of: • 1 July 2010 • 9 September 2010
6. Contact Officer:
Head of Customer Care Tel: 01824 706236
2 Agenda Item No. 8
Resources Scrutiny Committee
13 January 2011
Report by the Scrutiny Support Officer
Scrutiny Work Programme
1. Purpose of Report
To review the future work programme for the Resources Scrutiny Committee and to update members on relevant issues.
2 Scrutiny Outcomes
2.1 Committee members are recommended to review the items listed in the forward work programme (appendix 1) for future meetings, together with any issues raised by members of the Committee, taking into consideration:
• Relevance to the Committee’s/Council’s/community priorities • The Council’s Corporate Plan • Meeting workload • Timeliness • Outcomes • Key issues and information to be included • Officers and/or lead Cabinet members who should be invited • Questions to be put to officers/lead Cabinet members
2.2 By reviewing and prioritising issues, members are able to ensure that the work programme delivers a member-led agenda. The Committee has set a maximum limit of 4 reports plus the work programme for any one meeting. Where the number of suggested items exceeds 4, the Committee is requested to determine whether items should be rescheduled, issued to members for consultation or information, or rejected.
2.3 Committee members are also recommended to identify key issues and information which should be included in future reports. The participation of particular officers or lead Cabinet members should also be clarified, where the Committee feels that their attendance would be necessary or helpful.
3 Development of the Work Programme
3.1 The Constitution of Denbighshire County Council requires Scrutiny Committees to prepare and keep under review a programme for their future work. The Committee is therefore requested to consider its work programme, as detailed in appendix 1, and approve, revise or amend as it deems appropriate.
1
Cabinet Forward Work Programme 3.2 For information purposes a copy of the Cabinet’s forward work programme is attached at appendix 2. The Committee may find this document useful when considering items for inclusion on its programme of future work.
Committee Meeting 24 February 3.3 Following the presentation of service business plans/position statements to the Committee at its December meeting members requested that the revised service business plans be considered at February’s meeting. Due to the volume of work to be transacted at that meeting members decided to hold two separate meetings on that day. The morning session will consider the revised service business plans, with the afternoon session being set-aside for the remainder of the business, as provisionally shown on appendix 1 attached.
Scala, Prestatyn 3.4 At its December meeting Cabinet considered a report from the Chief Financial Officer detailing the financial projections for the Scala Company Limited for the current year and the next three years. Following consideration of the financial information provided by the company’s Board, Cabinet resolved that the Company had demonstrated a potential positive financial trading position going forward and therefore no further additional financial assistance was required. Nevertheless, Cabinet was of the view that the delivery of the revised financial projections should be monitored closely over the next six months in line with the Council’s agreed monitoring strategy for arms length companies.
3.5 The Committee is therefore requested to determine when it next wishes to schedule the scrutiny of the delivery of the Scala’s financial projections into its work programme.
4 Collaboration Programme Board
4.1 At its December meeting Cabinet approved new governance arrangements for existing and any future collaborative projects between Denbighshire and Conwy Councils. Under these new arrangements a Collaboration Programme Board will be established which will include three scrutiny members from each Council. As the first meeting of the Board was scheduled to be held early in the new year scrutiny committee chairs were asked to submit their nominations for membership of the Board before Christmas. As the Resources Scrutiny Committee was not due to meet until mid January the Chair agreed to attend the Board’s inaugural meeting pending the Committee appointing a representative to serve on the Board.
4.2 Further information on the Collaboration Programme Board can be found in the report to Cabinet on 14 December 2010 (agenda item number 4), which is available on the Councillors database, or alternatively on the Council’s website by following the link below: http://www.denbighshire.gov.uk/www/cms/live/content.nsf/lookupattachments/ English~DNAP-8BYK7J/$File/cab141210pt1E.pdf
2
5 Implications on Other Policy Areas
The development and review of a coordinated work programme will assist the Council in monitoring and reviewing policy issues.
6 Recommendation
That the Committee:
6.1 considers the information provided and approves or revises its forward work programme as it deems appropriate; and
6.2 nominates a representative to serve on the Collaboration Programme Board.
Contact Officer: Scrutiny Support Officer. Tel No: (01824) 712554 Email: [email protected]
3 Resources Scrutiny Committee Forward Work Plan Appendix 1
Note: Items entered in italics have not been approved for submission by the Committee. Such reports are listed here for information, pending formal approval.
Meeting Item (description / title) Purpose of report Expected Outcomes Author Date Entered
24 February 1 Draft Service Business and To review the revised draft (i) Member contribution to Jane December (am meeting) Financial Plans 2011/12 service business plans for and scrutiny of business Kennedy/Cara 2010 2011/12 and the services’ planning; Williams/Linda performance during 2010/11 in (ii) Performance monitoring of Atkin/Paul delivering their business plans 2010/11 business plans; McGrady/Alan as per their service position and Smith/Ken statements. (iii) To select a suite of PIs for Jones the purpose of regular monitoring for 2011/12
24 February 1 Update on Integrated To report on the progress to (i) An evaluation of whether the Paul March 2010 (pm meeting) Working on Council House date with the Council House programme is progressing in Quirk/Andrew Refurbishment Programme Refurbishment Programme line with the agreed Dailey timetable; and (ii) an assessment of whether the standard of workmanship is being delivered as per contract specification and is realising value for money for the Council (iii) an assessment of the quality of workmanship and value for money in comparison to other North Wales authorities 2 Management of Allocation of To examine the effectiveness An evaluation of the Graham Boase November Section 106 Commuted of the new management effectiveness of the new 2008 Sums (early 2011) arrangements for allocation of management arrangements and (review in funds (to be undertaken 2 to offer observations in relation early 2011)
1 Resources Scrutiny Committee Forward Work Plan Appendix 1
Meeting Item (description / title) Purpose of report Expected Outcomes Author Date Entered years after establishment) to the future arrangements for the function 3 Llangollen Royal To scrutinise the 2011/12 and An evaluation of the short and Jamie Groves April 2010 International Pavilion and medium term business plan for medium term financial plan for Site the site the site will enable an assessment to be made of site’s overall sustainability and the identification of additional works/costs that may be necessary to enhance the venue’s contribution to the regeneration priority 4 Corporate Risk Register for To review the high-level risks Scrutiny members will be aware Ivan Butler Feb 2010 the Governance and within the Directorate. of the risks which may influence (rescheduled Efficiency Directorate the Committee’s work September programme. 2010) 5 Information Security Action To monitor progress against An assurance that the actions in Ivan Butler April 2010 Plan the Information Security Action the plan are being implemented (re-scheduled Plan and progressed according to November the defined timelines with a 2010) view to ensuring the security of information held and to safeguard the Authority
7 April 1 Action Plan update on To review the progress made in Monitoring the progress made Paul McGrady December Making the Connections 3 – delivering the action plan in in delivering the remaining 2010 Land and Buildings respect of Asset Management outstanding actions in the Management action plan will ensure that the Authority is adequately addressing the recommendations and achieving the targets set 2 Energy Efficiency To update members on the The successful delivery of the Helen December Council’s progress in becoming action plan and assurances that Burkhalter/Robe 2010
2 Resources Scrutiny Committee Forward Work Plan Appendix 1
Meeting Item (description / title) Purpose of report Expected Outcomes Author Date Entered more energy efficient all possible energy efficiency rt Jones and address the risks identified measures are being taken with in Corp Risk no.56 of the respect to carbon management Corporate Risk Register; and to reduce cost implications to the progress made in the Council complying with the 6 recommendations in the 2006 WAO report on ‘Efficiency Focus: utilities – management of energy and water’;
19 May 1
Future Issues
Item (description / title) Purpose of report Expected Outcomes Author Date Entered CORP Risk 11 – HR System To inform members on the progress of the To monitor the implementation of Linda Atkin 2 October Implementation HR System implementation and to highlight the new system and to evaluate 2008 the risks of not managing and utilising the the measures put in place to HR system reduce the impact of the identified risks Establishment of a Foundation To update the Committee the To monitor the on the progress Vicky Allen March 2009 Modern Apprenticeship Scheme establishment of a foundation level modern being made in establishing a apprenticeship scheme with the Council foundation level Modern Apprenticeship Scheme with a particular view to assisting children in care and care leavers to access work opportunities, gain skills for employment and achieve better outcomes and expectations
3 Resources Scrutiny Committee Forward Work Plan Appendix 1
Update on Trent To provide members with an update on the To monitor the Council’s progress Linda December 08 implementation of the TRENT system with the implementation of the new Atkin/Keith (rescheduled HR/Payroll system and to ensure Amos until Post that the rollout is progressing as Project originally timetabled Review completed) Review of Translation Services To report the outcomes and conclusion of Provide observations and Steve Price December (April/May 2011) the review of translation services formulate recommendations in /Gareth Watson 2010 respect of the corporate delivery of translation services in future Scala Business Plan Update (i) To monitor the progress of the Scala (i) effective scrutiny of the Jamie Groves December PART II (representatives of the Scala Co Ltd in delivering against the progress made by the Scala Co 2010 Board to be invited) Service Level Agreement (SLA) and Ltd in delivering against the its revised business plan Service Level Agreement (SLA) to budget; and (ii) identification of any potential risks and measures to mitigate against future risks
For future years
Members Allowances To examine the Authority’s criteria for An evaluation of whether the Jane 30 October (following publication of the findings of determining eligibility for Members current procedures and criteria are Kennedy 2008 the Independent Remuneration Panel Allowances/Special Responsibilities fair to all members for Wales’ consultation) Allowances
Information/Consultation Reports
Information / Item Purpose of report Author Date Entered Consultation (description / title) Information (for Ruthin Craft To provide information on future revenue funding streams for the Jamie February 2010 (originally circulation Centre Ruthin Craft Centre and information on its financial position going Groves/Philip scheduled for distribution February 2011) forward Hughes Nov/Dec 2010 – rescheduled Nov 10)
4 Resources Scrutiny Committee Forward Work Plan Appendix 1
Information Intranet Pilot To report the results of the piloting exercise for the Council’s Intranet Cara December 2010 system in the Customer Services and Human Resources Departments. Williams/Linda The report to detail the benefits of the system and the problems Atkin encountered during the pilot exercise, along with the changes that will be implemented prior to its rollout to all Council staff and members 04/01/11 Note for officers – Committee Report Deadlines Meeting Deadline Meeting Deadline Meeting Deadline
24 February 10 February 7 April 24 March 19 May 5 May Resources Scrutiny Work Programme.doc
5 Appendix 2
CABINET: FORWARD WORK PROGRAMME 25 JANUARY 2011
Capital Plan 2010 – 2011 Councillor J Thompson Hill P McGrady Revenue Budget Monitoring Report 2010 -2011 Councillor J Thompson Hill P McGrady Final Budget Proposals 2011 - 2012 Councillor J Thompson Hill P McGrady Asset Review Councillor P J Marfleet B Jones / David Mathews Approval to enter into a contract for the Councillor S Frobisher treatment of recyclates and disposal of waste S Parker /Alan Roberts / Jim Espley Integration of Parking Services Teams CCBC Councillor S Frobisher and DCC S Davies / Mike Graham Extension of parenting programme contract with Councillor M M Jones Action for Children S Ellis / Vicky Allen / Helen Head Write off Sundry Debtors Councillor J Thompson Hill K Jones Tender for substance misuse services – joint Councillor S Frobisher contract with Conwy CBC Ceriann Tunnah, Substance Misuse Officer, Conwy CBC Mobile: 07717543398 Recommendations from Scrutiny Committees Scrutiny Officers
15 FEBRUARY 2011
Revenue Budget Monitoring Report 2010 -2011 Councillor J Thompson Hill P McGrady Housing Revenue and Capital Budgets 2011 – Councillor J Thompson Hill 2012 P McGrady Selection of Preferred Bidder - N E Wales Councillor S Frobisher Regional Food Waste Treatment Project S Parker / J Espley The Big Plan - Consultation Councillor H H Evans A Smith Strategy for Area / Town Plans – seeks Councillor H H Evans agreement to the strategy which will lead to G Boase development of the plans - Recommendations from Scrutiny Committees Scrutiny Officers
29 MARCH 2011
Revenue Budget Monitoring Report 2010 -2011 Councillor J Thompson Hill P McGrady Routine Report on Personnel to include Councillor P J Marfleet Sickness Management L Atkin / G Humphreys Scala Cinema and Arts Centre, Prestatyn: Councillor P A Dobb Updated 3 year business plan and annual report P McGrady / Gareth Williams to be presented annually to Cabinet as per Clause 8.2.2 of the Loan Agreement Approval to appoint a contractor for the Foryd Councillor S Frobisher Harbour Walking and Cycling Bridge Bob Humphreys The Big Plan Councillor H H Evans A Smith Regional Educational Project Councillor E W Williams H Williams Monitoring Performance against the Corporate Councillor H H Evans Plan A Smith / T Ward
1 Strategic Youth Justice Plan and Inspection Councillors S Frobisher and M M Jones Report Emma Rathbone Recommendations from Scrutiny Committees Scrutiny Officers
26 APRIL 2011
Revenue Budget Monitoring Report 2010 -2011 Councillor J Thompson Hill P McGrady Capital Plan 2010-2011 Councillor J Thompson Hill P McGrady Award of Contract for Provision of Insurance Councillor J Thompson Hill Policies for DCC Chris Jones West Rhyl Housing Regeneration Strategy – Councillors S Frobisher and D A J Thomas Implementation and Delivery Plan G Boase / Gareth Roberts 24 MAY 2011
Revenue Budget Monitoring Report 2011 -2012 Councillor J Thompson Hill P McGrady Destination Management - Tourism Partnership Councillor D A J Thomas North Wales have offered to work with the G Boase / M Dixon Council to undertake an audit of the experience which a visitor gets when they come to the County and this item will provide an opportunity for Cabinet to receive the results of the audit and consider actions which need to be taken to improve the experience JUNE 2011
Revenue Budget Monitoring Report 2011 -2012 Councillor J Thompson Hill P McGrady Final Accounts 2010-2011
Annual Council Reporting Framework (ACRF) – Councillors P A Dobb / M M Jones The Statutory Director of Social Services will be S Ellis / C O’Gorman responsible for publishing an annual report setting out her assessment of the effectiveness of social care services and priority areas for improvement in the year ahead Routine Report on Personnel to include Councillor P J Marfleet Sickness Management L Atkin / G Humphreys JULY 2011
SEPTEMBER 2011
Treasury Management Update Councillor J Thompson Hill P McGrady
2