Agenda and draft minutes

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Apologies were received from Councillor Jones, Bearshaw, Nash and Long.

To approve the minutes from the Audit Committee held on 24^th June 2024.

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RESOLVED: The Minutes from the meeting held on 24^th June 2024 were agreed as a correct record and signed by the Chair.

Please indicate if there are any interests which should be declared.  A declaration of an interest should indicate the nature of the interest (if not already declared on the Register of Interests) and the agenda item to which it relates.  If a disclosable pecuniary interest is declared, the Member should withdraw from the room whilst the matter is discussed.

These declarations apply to all Members present, whether the Member is part of the meeting, attending to speak as a local Member on any item or simply observing the meeting from the public seating area.

There were no declarations of interest.

To consider any business which, by reason of special circumstances, the Chairman proposed to accept as urgent under Section 100(b)(4)(b) of the Local Government Act 1972.

There was no urgent business under Standing Order 7.

Members wishing to speak pursuant to Standing Order 34 should inform the Chairman of their intention to do so and on what items they wish to be heard before the meeting commences.  Any Member attending the meeting under Standing Order 34 will only be permitted to speak on those items which have been previously notified to the Chairman

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Councillor Rust, Morley and Beales were present under Standing Order 34.

There was none.

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The External Auditor from Ernst and Young presented the Value for Money Interim Report for years ended 31^st March 2021, 2022, and 2023. The External Auditors explained a requirement of the Local Audit Reset was the Value for Money report be completed. He outlined the report included an Executive Summary, Value for Money Commentary and Appendices.

He referred the Committee to the page 22 of the agenda and highlighted the External Auditors are required to be satisfied the Council has proper arrangements for securing economy, efficiency, and effectiveness use of resources. He confirmed a conclusion or opinion is not issued and where significant weakness were identified this would be reported by exception in the Auditor’s Report on the financial statements.

He added the criteria set out in the appendix ensured this complied with requirements of the 2020 Code of Audit Practice and the Auditor Guidance Note 3. 

The External Auditor referred to page 23 and 24 which outlined the risks procedure which identified the significant weaknesses. He brought to the Committee attention the one risk identified and therefore a significant weakness was the arrangements to publish the statement of accounts for 2020/21, 2021/22 and 2022/23 as the deadline was not met.

He provided assurance to the Committee the 2022/23 accounts were now published and on the Borough Council’s website.

The External Auditor brought to the Committee’s attention, section 2 of the report, page 26 set out the high-level summary arrangements. He added the findings on page 29 related to the ability to publish the accounts and explained the 2020/21 and 2021/22 did not include property, plant and equipment or Investment Property valuation transactions. He added there was delays to some of the year end bank reconciliations.

He explained to the Committee, appendix A provided further details on the arrangements and appendix B was the recommendation made and the response from management.

The Chair thank the External Auditor for the report and invited comments and questions from the Committee.

Councillor de Winton referred to page 29 and 38 which outline the external auditors concern of the cash figures and the report stated this could be materially misstated, he sought clarification that now the 2022/23 accounts had been published this was no longer a concern.

The External Auditor advised as the audit had not been carried out on the 2022/23 accounts so the issue had not cleared but they would look at it as part of the audit of the 2024/25 accounts.

The Assistant Director Resources and Section 151 Officer then provided further explanation and background to the issue and that this was now up to date with a full working paper prepared to support the auditor when they come to review this going forward.  

The Chair, Councillor Ryves referred to page 37 which stated one of the controls was the quarterly budget monitoring report were presented to the Audit Committee however this was not presented since March.

The Assistant  ...  view the full minutes text for item A196

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The External Auditor from Ernst and Young presented to the Committee the Local Audit Reset which was the action to tackle the local audit backlog in England. He referred to the letter received from the Minister of State which outlined the actions to be taken.

He explained the proposals were paused as the parliamentary election were called in July 2024 and the new administration adopted the original proposals. He added the letter confirms the proposals were being continued.

He advised the letter included backstop dates which were set out below.

The External Auditor explained to the Committee the financial statements for 2020/21, 2021/22 and 2022/23 will be completed by 13^th December 2024 with a disclaimed opinion and disclaimed based on statutory override not limitations within the Council’s own arrangements.

The regulations then set backstop dates for financial year 2023/24 to 2027/28.

The External Auditor raised to the Committee of the importance of understanding the modification of a disclaimed opinion takes several years to unwind to get back to a clean position for the periods which had not been audited and influenced the opening balance. He added work was required over these years to get assurance back and ensured movements and key pointed would be audited to provide assurance.

The Chair thanked the External Auditor and invited questions and comments from the Committee.

The Chair, Councillor Ryves asked the consequences of a disclaimer being published on the accounts.

The External Auditor advised it would depend on the disclaimer and the implications could include the escalation process which involved value for money report, and public interest reporting.  He provided an example of the disclaimer being related to other concerns such as the transactions and bank reconciliation however provided assurance to the Committee the Borough Council was not near this position as the backstop dates were going to be met.

The Chair, Councillor Ryves sought further clarification and referred to the letter in which stated a sustainable solution to the wider/broken local audit system and asked what that would mean for the Committee.

The External Auditor re-iterated the two stages of the reset, and the recovery part would be more difficult as there could be changes to the financial reporting framework and auditor responsibilities. He added further guidance was to be expected later in the year.

Councillor de Winton asked the External Auditor if there were any sanctions the Council could be subject to if the backstop dates were not met.

The External Auditor advised that names of Local Authorities and Auditors being published if the backstop dates were not met. He added if the backstop date was not met, there was a statutory requirement to publish on the Borough Council’s website the  ...  view the full minutes text for item A197

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The Monitoring Officer presented the Annual Governance Statements 2022-23 and 2023-24 in draft form.

The Monitoring Officer explained to the Committee this was a statutory requirement alongside the statement of accounts and the aim was to raise the profile of the Annual Governance Statements (AGS) to Officers and Members. She added the AGS was a review of the effectiveness of the Council governance arrangements and the document was created to be readable and easily accessible.

She provided a summary of the framework of the AGS and advised it complied with the CIPFA regulations and framework. She advised included in the AGS were 8 CIPFA principles against which it was set out what  went well and what did not go so well, which in turn  would feed into the action plan. 

The Monitoring Officer referred to 5.2 of the AGS which was a detailed review of effectiveness against the governance framework. She added included in 5.2 was Performance Monitoring, the Corporate Performance Panel (number of call in’s of executive decisions), Monitoring Officer, Chief Finance Officer, Head of Internal Audit, Anti-Fraud and Anti-Corruption, Information Governance, Policy Framework, Risk Management, Procurement and Contract Management, Equality, Diversion and Inclusion, Personnel Services, Information Technology and Data, Wholly Owned Companies, Place, Funding and Projects and External Assurance.

She highlighted to the Committee; section 6 set out the significant governance issues over the year. She explained schedule 1 was an action plan which was a requirement of the regulations.

The Monitoring Officer explained the action plan was being reflected in directorate plans and advised the AGS action plan enables the Corporate Strategy and Council business to be delivered.

The Monitoring Officer advised of an amendment to the second recommendation and explained the Audit Committee were being asked to approve the Annual Governance Statement 2022/23 and 2023/24 in draft pending the External Auditors feedback and comments.

Councillor de Winton stated his concern on the non-compliant spend and sought clarification of the definition of non-compliant spend.

The Monitoring Officer advised non- compliant spend meant it had not been evidenced that contract standing orders were followed in terms of the procurement procedure. She referred to the report and confirmed only big spends were considered as that was where the issues were. The Monitoring Officer explained that the bulk of the issues were where contracts were initially procured in line the with thresholds however Officers keep going back to the same contractor for the same nature of work, which has to be treated as accumulated spend not individual contracts. She added the overall spend on the contractor overtime is then considered and this will have become non-compliant whit thresholds because of the accumulation. She highlighted to members a procurement transformation was underway which would be addressing these matters. 

The Chair, Councillor Ryves sought clarification in the non-complaint spend being 15% however the contracts might be extended over 12 months period.

The Monitoring Officer explained the contracts were for that financial  ...  view the full minutes text for item A198

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The Interim Financial Services Manager presented the Annual Treasury Outturn Report and explained it covers 2023/24. He added the treasury function included borrowing, investing and cash management.

He advised the Committee the Council had formally adopted the Chartered Institute of Public Finance and Accountancy’s Code of Practice of Treasury Management (2017) and remains fully compliant with its requirement.  He added the report meets the requirements of both the CIPFA Code of Practice on Treasury Management, (the Code), and the CIPFA Prudential Code for Capital Finance in Local Authorities, (the Prudential Code).

The Interim Financial Services Manager highlighted the report included the 2023/2024 Treasury Outturn, Compliance with Treasury Limits and the Outturn Summary. He added the Borough Council did not breach any indicators in 2023/24 and the report indicated the market in which the Council operates in. 

The Chair, Councillor Ryves sought clarification on the recommendation of the report which was to note the report however included in the report it stated the report was to be scrutinised.

The Monitoring Officer confirmed the recommendation was to note the report.

Councillor Jamieson referred to page 133 and 136 and sought clarification on the correct gross borrowing figure.  He commented the investments had decreased sharply from £27,113,000 to £7,554,000 and asked if investments of £7,554,000 was enough to maintain solvency.

The Assistant Director Resources and Section 151 Officer confirmed the typo in the report and confirmed the gross borrowing was £15,000,000 due to short-term borrowing towards the end of the financial year. She added if the investments were to continue to remain at £7,554,000 this would not be sustainable to maintain solvency. She explained further an unexpected payment had occurred back to central government at the year end which coincided with a reduction in collection of council taxes which impacted on the cashflow and resulted in the borrowing position at that time.

The Chair brought to the Committee’s attention page 136 and the table at 5.10 including financing cost as a proportion of net revenue stream was blank.

The Assistant Director, Resources and Section 151 Officer thanked the Chair for highlighting and will follow up this figure.

The Chair questioned the authorised limit of £86,000,000 and how it was decided and who decided the limit.

The Assistant Director Resources and Section 151 Officer advised this was an internal calculation which was decided on what was affordable based on capital programme and cash flow and the overall financial implications on the Borough Council.  She explained to the Committee the proposal of £86,000,000 was part of the treasury management strategy which was approved by Council for the financial year. The Assistant Director added the Borough Council has a low amount of borrowing compared to other local authorities and the Office for Local Government have brought in monitoring arrangements for local authorities in financial difficulties.

Councillor de Winton sought the opinion of the External Auditors on the £86 million limit.

The External Auditor commented £86,000,000  ...  view the full minutes text for item A199

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The Senior Internal Auditor presented the report on the Audit Terms of Reference and explained this was a requirement to review every 3 years. He outlined the Terms of Reference included the purpose of the Audit Committee, the membership, meetings, reporting, exclusions within the wider functions of the executive, core functions and responsibilities.

He highlighted the Terms of Reference needed to meet the requirements of the Accounts and Audit Regulations 2015. The Senior Internal Auditor added amendments were made to the Terms of Reference based on the CIPFA position statement 2022 Audit Committees in Local Authorities and Police.

He referred to the Committee to page 154 which identified the key issues including the wording to allow the appointment of independent co-opted member, the committee’s responsibility for receiving assurances on the wholly owned companies and the inclusion of the exclusions within the wider function of the executive.

He brought to the Committee’s attention further amendments to be made to the Terms of Reference;

Section 1, governance, risk, and control, - “Review and approve the Annual Governance Statement (AGS) and consider whether it properly reflects the risk environment and supporting assurances including the Head of Internal Audit’s annual opinion and fairly concludes that governance arrangements are fit for purpose.”

Section 6, financial reporting- “Review and approve the annual financial statements (including statutory statements and legislative disclosures) and specifically, consider whether appropriate accounting policies have been followed and whether there are concerns arising from the Financial Statements or from the audit that need to be brought to the attention of the Council.”

Section 8, Exclusions within the Wider Functions of the Executive- “Make or implement decision on behalf of the council in respect of approval of the annual governance statement and the financial statement of accounts.”

The Monitoring Officer advised the Audit Committee were an advisory Committee and their role is predominantly to review the frameworks however there was two matters where decision making responsibilities are with the Audit Committee for the approval of the annual governance statement and the approval of the financial statement of accounts on behalf of full council.

The Senior Internal Auditor invited suggestions from the Committee and explained the recommendation was for the Audit Terms of Reference to be amended and to go to Cabinet then full Council.

The Chair thank the Senior Internal Auditor and invited questions and comments for the Committee.

Councillor Dark referred to the membership section of the Terms of Reference and asked for Portfolio Holders to be included and explained how it benefited Cabinet Members being present in the meetings. He asked further if it was the role of the Committee to look at outside partners and their value for money as well as the wholly owned companies.

The Senior Internal Auditor explained the terms of reference includes the membership of 9 members for voting purposes. He referred to Standing Order 34 in which Portfolio Holders can attend under.

The Monitoring Officer  ...  view the full minutes text for item A200

To note the Committee’s Work Programme for 2024/2025.

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The Democratic Service Officer to liaise with The Assistant Director, Resource and Section 151 Officer and the External Auditor for the Audit Committee on the 18^th November 2024 and 20^th January 2025.

RESOLVED: The Committee noted the Work Programme for 2024/2025.

To note that the date of the next meeting of the Audit Committee will take place on 18^th November 2024 at 4:30pm in the Council Chamber, Town Hall.

The next meeting of the Audit Committee would be held on 18^th November 2024 at 4:30pm in the Town Hall, King’s Lynn.