Agenda and minutes

Audit & Governance Committee
Monday, 28th September, 2020 7.00 pm

Venue: Virtual Meeting on Zoom. View directions

Contact: Gary Woodhall  Tel: 01992 564243 Email:  democraticservices@eppingforestdc.gov.uk

Media

Items
No. Item

26.

Webcasting Introduction

(Corporate Communications Manager) This meeting is to be webcast. The Chairman will read the following announcement:

 

Please note that this virtual meeting will be filmed for live or subsequent broadcast via the Council's internet site.

 

You should be aware that the Council is a Data Controller under the Data Protection Act. Data collected during this webcast will be retained in accordance with the Council’s published policy.

 

Therefore by participating in this virtual meeting, you are consenting to being filmed and to the possible use of those images and sound recordings for webcasting and/or training purposes. If members of the public do not wish to have their image captured they should ensure that their video setting throughout the virtual meeting is turned off and set to audio only.

 

In the event that technical difficulties interrupt the virtual meeting that cannot be overcome, the Chairman may need to adjourn the meeting.

 

If you have any queries regarding this, please contact the Corporate Communications Manager on 01992 564039.

Additional documents:

Minutes:

The Chairman made a short address to remind everyone present that this virtual meeting would be broadcast live to the internet, and would be capable of repeated viewing, which could infringe their human and data protection rights.

27.

Declarations of Interest

(Monitoring Officer) To declare interests in any item on the agenda for the meeting of the Committee.

Additional documents:

Minutes:

There were no declarations of interest pursuant to the Council’s Member Code of Conduct.

28.

Minutes pdf icon PDF 133 KB

To confirm the minutes of the meeting of the Committee held on 27 July 2020.

Additional documents:

Minutes:

          Resolved:

 

(1)        That the minutes of the meeting held on 27 July 2020 be taken as read and signed by the Chairman as a correct record.

29.

Matters Arising

(Democratic & Electoral Services Manager) To consider any matters arising from the minutes of the previous meeting of the Committee.

Additional documents:

Minutes:

There were no matters arising from the minutes of the previous meeting which warranted further discussion.

30.

Audit & Governance Committee - Work Programme pdf icon PDF 24 KB

(Chief Internal Auditor) To consider the attached work programme for the Committee for 2018/19.

Additional documents:

Minutes:

The Senior Auditor, S Linsley, presented the Committee’s Work Programme for 2020/21.

 

S Linsley highlighted that here had been two changes to the Work Programme since the last meeting: the Treasury Management Mid-Year report for 2020/21 and the Statutory Statement of Accounts for 2019/20 would now be considered at the next meeting of the Committee. A Small informed the Committee that the Government had relaxed the deadline for the Statutory Statement of Accounts to be completed. C Hartgrove explained that due to Covid-19, the Mid-Year Treasury Management report was not quite ready yet but he was working with the Council’s consultants - Arlingclose – to finalise the report for the next meeting.

 

The Committee noted its revised Work Programme.

31.

The Redmond Review pdf icon PDF 354 KB

(Section 151 Officer) To consider the attached report regarding the independent review into the oversight of local audit and the transparency of local authority financial reporting (AGC-011-2020/21).

Additional documents:

Minutes:

The Council’s Interim Chief Financial Officer, C Hartgrove, presented a report on the Redmond Review, an independent review into the oversight of local audit and the transparency of local authority financial reporting which had been published on 8 September 2020.

 

C Hartgrove reported that the Review had examined the effectiveness of local audit and its ability to demonstrate accountability for audit performance to the public. It also considered whether the current means of reporting an authority’s annual accounts enabled the public to understand this financial information and receive the appropriate assurance that the finances of an authority were sound. Serious concerns had been expressed by consultees during the Review about the state of the local audit market and the ultimate effectiveness of the work undertaken by audit firms. Specifically, whether audit reports delivered full assurance on the financial sustainability and value for money of local authorities, and evidence submitted to the Review noted concerns about the balance of price and quality in audit contracts.

 

C Hartgrove drew the attention of the Committee to the fact that the fragmentation of the existing local government accounting and audit framework following the demise of the Audit Commission in 2015 had been pinpointed as a key area for reform. The creation of a new regulatory body – The Office of Local Audit and Regulation (OLAR) – was recommended, which would have specific responsibility for procurement, contract management, regulation, and oversight of local audit. The Review was also critical of the current size of audit fees (which had fallen dramatically in recent years) and recommended extending the deadline for the publication of audited accounts to 30 September from the current 30 July deadline.  

 

C Hartgrove stated that Governance arrangements had also come under the spotlight, and a review of the composition of Audit Committees was recommended, and the switch to a narrative report on the value-for-money (VFM) opinion was supported. The Review also urged statutory status for the principles in the Chartered Institute of Public Finance and Accountancy’s Financial Management Code as a means of better judging financial resilience. In terms of financial reporting, the Review highlighted the “impenetrable” nature of local government accounts and had recommended a simplified statement of service information and costs be prepared alongside the statutory accounts. The implementation of the recommendations would, in part, require regulatory or legislative change and the report of the Review was now being considered by the Government. Any implementation of the recommendations of the Review would be effective for the 2021/ 22 municipal year.

 

Cllr R Jennings supported the report and whole heartedly supported the principle that the required knowledge should always be present in the membership of an Audit Committee. In addition, the Councillor supported the recommendation that financial reports should be understandable by the general public.

 

C Hartgrove stated that Public Sector Audit Appointments Limited (PSAA) had removed many of the requirements for local authority audits, which had reduced the fees levied by the Audit companies. As highlighted in the Review, there would  ...  view the full minutes text for item 31.

32.

Risk Management pdf icon PDF 245 KB

(Section 151 Officer) To consider the attached report reviewing the Corporate Risk Register and recommending the revised Risk Management Strategy to the Cabinet for approval (AGC-012-2020/21).

Additional documents:

Minutes:

The Section 151 Officer, A Small, presented a report on the review of the Corporate Risk Register.

 

A Small reported that the Corporate Risk Register had been reviewed by the Officer Risk Management Group at its meeting on 9 September 2020, and the following revisions had been proposed:

 

  • The Covid-19 risk had been removed as its affects had been adequately captured in many of the other corporate risks, especially the Financial Resilience and Economic Development risks.
  • Risk 3 (Financial Resilience) had been upgraded given the size of the cost of Covid-19.
  • Risk 6 (Business Continuity) had been downgraded as the Council continued to demonstrate the way it had coped with Covid-19.
  • Risk 12 (Travel Plan) had been upgraded as it linked with Risk 11 (Accommodation Project) and the need to consider parking arrangements in light of commercial opportunities to rent out space at the Civic Offices.

 

A Small stated that the Council’s Risk Management Strategy had not been revised since September 2017. The Risk Management Strategy had been reviewed and updated to reflect the changes in reporting arrangements. In addition, the ‘Future Actions’ section reflected the need for the Council to define its risk appetite and engage better with staff, and the Risk Assessment matrix (Appendix 1 of the Strategy) had been updated to ensure the Council could better identify its medium (amber) and high (red) risks. The Committee was asked to consider the amended Risk Management Strategy and recommend it to the Cabinet for adoption.

 

Cllr S Heap opined that risk 10, Climate Emergency, should be scored as A1 not B2, and that there appeared to be no strategy for developing manufacturing or the arts within the District as part of risk 4, Economic Development. In addition, Cllr S Heap asked why the Council was so concerned about reputational damage for a number of the risks and whether risk 1, Local Plan, was such a high risk if the District Council got merged as part of Local Government Reform? The Councillor also enquired if there would be any answers forthcoming for the detailed questions that he had previously emailed in before the meeting.

 

A Small stated that the Council’s new Sustainability Officer had now started with the Council and the authority was now in a position to develop the necessary plans and actions. There was a high degree of uncertainty with Local Government Reform but it was still important to ensure the Council was prepared for whatever happened in the future. The perceived risks to the Council’s budgets were much sooner than 2024, and the Council needed to plan accordingly.

 

The Portfolio Holder for Finance & Economic Development, Cllr J Philip, acknowledged that reputational damage was irrelevant in certain cases as the Council would be blamed regardless of what had actually happened. However, it was significant in a number of instances to allow the Council to represent its residents properly. Cllr J Philip felt that it was hazardous to refocus the Council’s Risk Strategy on what might or might not  ...  view the full minutes text for item 32.

33.

Internal Audit Monitoring Report - September 2020 pdf icon PDF 224 KB

(Chief Internal Auditor) To consider the attached report summarising the work of Internal Audit and Corporate Fraud for the period July to September 2020 (AGC-013-2020/21).

Additional documents:

Minutes:

The Senior Auditor, S Linsley, presented the Internal Audit Monitoring Report for the period July to September 2020.

 

S Linsley stated that no reports had been issued since the Committee’s last meeting in July. The current Recommendation Tracker showed that eight audit report recommendations had passed their due date (down from 16 previously), of which two were high priority. The two overdue, high priority audit recommendations were concerned with the development  of a Corporate Data Retention and Disposals Policy, and Health & Safety Risk Assessments at the Council’s Satellite Offices; however, good progress was being made to resolve both recommendations. The progress of all audit report recommendations continued to be monitored by the Corporate Governance Group. Progress against the Audit Plan for 2020/21 had initially been hindered due to Covid-19 but had now resumed.

 

S Linsley highlighted the other activities being undertaken by the Internal Audit Team, which included: providing advice and assistance with the Local Authority Discretionary Grants Scheme; assisting with development of Decision Making Accountability; and coordinating preparations for the National Fraud Initiative exercise for 2020/21. The Corporate Fraud Team had been instrumental in the withdrawal of six Right-to-Buy applications and were currently assisting Internal Audit and the Revenues Team investigating three potentially fraudulent applications for Covid-19 Business Grants.

 

Cllr S Heap highlighted possible issues with long-term sickness during the pandemic for the recommendations in relation to the implementation of a Council-wide approach for Business Rates, and felt that some of the outstanding Audit Report recommendations should have been implemented before the first lockdown came into being. S Linsley pointed out that the recommendations arising from this Audit Report were low priority, and the Service had also to deal with the implementation of the Small Business Grants scheme during the lockdown. However, the recommendations have now started to be progressed as the Service had pulled over resources from the Council Tax Team. In addition, S Linsley assured the Committee that audits were completed thoroughly, and that progress with outstanding recommendations from previous Audit Reports were monitored to ensure they were properly managed.

 

            Resolved:

 

(1)        That the summary of the work undertaken by the Internal Audit Team and the Corporate Fraud Team during the period July to September 2020 be noted.

34.

Statement of Accounts 2019/20 - Update pdf icon PDF 236 KB

(Section 151 Officer) To consider the attached report on the progress with preparing the Statutory Statement of Accounts for 2019/20 (AGC-010-2020/21).

Additional documents:

Minutes:

The Council’s interim Chief Financial Officer, C Hartgrove, updated the Committee on the Council’s progress in discharging its statutory duty to prepare an Annual Statement of Accounts for 2019/20.

 

C Hartgrove reported that The Accounts and Audit (Coronavirus) Amendments Regulations 2020 had extended the statutory deadlines for 2019/20 for all local authorities:

 

  • Unaudited Accounts – these were required to be published on the Council's website by 31 August 2020; the Council’s Accounts were published on Friday 21 August 2020; and

 

  • Audited Accounts – these were required to be published on the Council's website by 30 November 2020.

 

C Hartgrove informed the Committee that the audit of the Statement of Accounts for 2019/20 was currently in progress and it was anticipated that the external auditors would be able to issue their audit opinion by the statutory deadline of 30 November 2020.

 

            Resolved:

 

(1)        That the progress with the preparation of the Council’s Statement of Accounts for 2019/20 be noted; and

 

(2)        That the receipt and scrutiny of the Council’s audited Statement of Accounts for 2019/20 at the Committee’s meeting scheduled for 23 November 2020 be agreed.

35.

Any Other Business

(Democratic & Electoral Services Manager) Section 100B(4)(b) of the Local Government Act 1972 requires that the permission of the Chairman be obtained, after prior notice to the Chief Executive, before urgent business not specified in the agenda (including a supplementary agenda of which the statutory period of notice has been given) may be transacted.

Additional documents:

Minutes:

            Resolved:

 

            (1)        That, in accordance with Section 100B(4)(b) of the Local Government                         Act 1972, the following items of urgent business be considered following the                         publication of the agenda:

 

                        (a)        Treasury Management Outturn Report 2019/20; and

 

                        (b)        Audit Planning Report – Year Ended 31 March 2020.

36.

Treasury Management Outturn Report 2019/20 pdf icon PDF 545 KB

(Section 151 Officer) To consider the attached report concerning the Council’s Treasury Management activities in 2019/20 and proposed amendments to two Treasury Management Investment limits (AGC-014-2020/21).

Additional documents:

Minutes:

The Council’s interim Chief Financial Officer, C Hartgrove, presented the Treasury Management Outturn Report for 2019/20.

 

C Hartgrove reminded the Committee that the Treasury Management Outturn Report detailed the Council’s actual Treasury Management activity for the year, and included the year-end position which would be included in the Council’s Statement of Accounts. During the year, external borrowing by the Council had risen by £39million to £224.5million and the value of the Council’s investments had risen by £5.5million to £22.1million. The Council’s Commercial Property Portfolio was also included and this had delivered a net income of £6.2million during the year, although there were also valuation losses due to unfavourable market conditions.

 

C Hartgrove reported that full compliance had been achieved with the majority of the Council’s adopted Treasury Management and Prudential Indicators; however, there had been some technical breaches with Investment Limits. The £3million limit on investing in any single organisation (except for the UK Government) was breached during the year, with the Council holding larger amounts of cash with NatWest, the Council’s main bankers. The peak cash holding was £26million in mid-December 2019 for a period of 6 days. The increasing scale of commercial activity generally, including the Qualis initiative, meant that the current Investment Limits were proving operationally very difficult. A review of the Limits had therefore been undertaken and a solution (that balanced risk with operational need) had been developed. Based on discussions with Arlingclose, the Council’s Treasury Management consultants, a revised Investment Limit for a single institution had therefore been suggested at £4million.

 

In addition, C Hartgrove stated that it was the view of Arlingclose that the Council’s current Investment Limit of £10million in total for Money Market Funds (MMFs) was now excessively prudent, with a £10million limit more usually associated with a single MMF. These were not considered risky investments (and usually carried very high credit ratings), provided investments were spread across a range of MMFs. It was therefore proposed that the MMF Investment Limit be amended to £10 million for a single MMF. Consequently, the Committee was requested to recommend these revised Investment Limits to the Council for approval.

 

In relation to the increased borrowing undertaken by the Council of £39million during the year, the Section 151 Officer A Small reminded the Committee that £30million of this borrowing had been undertaken on behalf of Qualis. It was likely that the Council would undertake further borrowing on behalf of Qualis and this would be reflected in the Treasury Management Strategy in the future. The Portfolio Holder for Finance & Economic Development, Cllr J Philip, added that Qualis could test the market for future lending, and the Council would not necessarily be the only lender to Qualis in the future. C Hartgrove stated that the loan with the Public Works Loan Board of £185.5million was still to be repaid in 2022; the Council was due soon to make a repayment of £31.8million, for which it currently had approximately £12million currently set aside.

 

Cllr R Jennings was concerned that  ...  view the full minutes text for item 36.

37.

Audit Planning Report - Year Ended 31 March 2020 pdf icon PDF 1 MB

To consider the attached Audit Planning Report from the External Auditors for the year ended 31 March 2020.

Additional documents:

Minutes:

The External Auditor, C Wisdom, presented the Audit Planning Report for the year ended 31 March 2020.

 

C Wisdom highlighted the key areas of focus for the Audit, which included the three significant risks that had been identified: property valuations for fixed assets and investments; expenditure as part of the Council’s Capital Programme; and management override of accounting controls. In addition, the Council’s liability under the Local Government Pension Scheme would also be an area of audit focus. It was reported that this year’s audit was progressing more efficiently than last year and was expected to be completed on time.

 

In response to questions from the Committee, C Wisdom explained that many valuations changed due to the future outlook for a particular market, e.g. if rents were not expected to be as good as a year ago then property valuations would decrease. There was usually some degree of judgement with valuations. In respect of the Pension Scheme deficit, the Pension Scheme would have invested in a variety of assets so no single particular asset – such as land values – would be responsible for the deficit. A narrative regarding the actuarial valuations for the Pension Scheme would be added in future.

 

C Wisdom assured the Committee that there was no intent to mislead by quoting a figure of ‘£2,000k’ instead of ‘£2m’, and that ‘£2m’ would be used in future. The basis of valuations used for the assets transferred to Qualis was not currently known, but they would be examined in the future.

 

            Resolved:

 

(1)        That the Audit Planning Report for the year ended 31 March 2020 be noted.

38.

Exclusion of Public and Press

Exclusion:

(Democratic & Electoral Services Manager) To consider whether, under Section 100(A)(4) of the Local Government Act 1972, the public and press should be excluded from the meeting for the items of business set out below on grounds that they will involve the likely disclosure of exempt information as defined in the following paragraph(s) of Part 1 of Schedule 12A of the Act (as amended) or are confidential under Section 100(A)(2):

 

Agenda Item No

Subject

Exempt Information Paragraph Number

Nil

Nil

Nil

 

The Local Government (Access to Information) (Variation) Order 2006, which came into effect on 1 March 2006, requires the Council to consider whether maintaining the exemption listed above outweighs the potential public interest in disclosing the information. Any member who considers that this test should be applied to any currently exempted matter on this agenda should contact the proper officer at least 24 hours prior to the meeting.

 

Background Papers: 

(Democratic & Electoral Services Manager) Article 17 of the Constitution (Access to Information) define background papers as being documents relating to the subject matter of the report which in the Proper Officer's opinion:

 

(a)        disclose any facts or matters on which the report or an important part of the report is based;  and

 

(b)        have been relied on to a material extent in preparing the report and does not include published works or those which disclose exempt or confidential information and in respect of executive reports, the advice of any political advisor.

 

The Council will make available for public inspection one copy of each of the documents on the list of background papers for four years after the date of the meeting. Inspection of background papers can be arranged by contacting either the Responsible Officer or the Democratic Services Officer for the particular item.

Additional documents:

Minutes:

The Committee noted that there was no business which necessitated the exclusion of the public and press from the meeting.