Agenda and draft minutes

Audit and Governance Committee - Monday, 22nd November, 2021 5.30 pm

Venue: Council Chamber - Civic Centre, St Luke's Avenue, Harrogate HG1 2AE. This meeting will be livestreamed here: https://bit.ly/HarrogateYouTube (Copy and paste the link in your browser).. View directions

Contact: Harriet Clarke, Trainee Democratic Services Officer  Tel: 01423 500600 Email:  democraticservices@harrogate.gov.uk

Items
No. Item

34.

Apologies for Absence and Notification of Substitute:

Minutes:

Notification had been received that Councillor Robert Windass was to act as substitute for Councillor John Ennis.

(5.30 pm)

35.

Declarations of Interest:

Members to advise of any declarations of interest.

Minutes:

No declarations of interest were made at the meeting.

(5.31 pm)

36.

Minutes: pdf icon PDF 280 KB

Of the meeting of 13 September 2021.

Minutes:

The Minutes of the meeting of the Committee held on 13 September 2021 were approved as a correct record.

 

(Three Members voted for the motion and there were two abstentions.)

 

(5.31 pm)

37.

Exempt Information:

To determine whether to exclude the press and public during the consideration of any exempt information items – item 11 (part), item 14 (part).

Minutes:

Appendices 1 and 1b of the item considered at Minute 44/21 and Appendix 2 of the item considered at Minute 47/21 were considered exempt under paragraph 3 of schedule 12A of the Local Government Act 1972. It was not necessary to discuss the exempt information and the agenda items were discussed in open session.

(5.32 pm)

38.

Public Arrangements - Questions:

To consider any questions under Standing Order 27.

Minutes:

There were no public questions to consider under Standing Order 27.

 

(5.32 pm)

39.

Treasury Management Strategy Statement and Annual Investment Strategy: Mid-Year Review 2021/22: pdf icon PDF 462 KB

The Financial Services Manager to submit a written report.

Additional documents:

Minutes:

The Financial Services Manager submitted a written report which introduced the in-year monitoring for 2021/22 of the authority’s Treasury Management activity, reporting on this was in line with CIPFA code requirements.

 

The capital expenditure for the year had increased significantly since the original budget. Some of this was down due to slippage from 2020/21, including the empty homes budget of £2.5m which rolled on from year to year. Some was attributed to additional or brought forward spending, such as the grant-funded decarbonisation works at the Hydro and Convention Centre, Ripon Pool, and ICT spend.

 

The impact on the Capital Financing Requirement was that the total internal borrowing at the end of the year was forecast to be about £3m higher than was in the original budget.

 

Investments in property funds were currently over £5.2 million, compared to a £5 million investment. Whilst it was reported at Minute 40/21 that property fund capital values had reduced slightly at 31 March 2021, these had recovered. Revenue income was on budget for the year. The Bank of England base rate was still at 0.10% and investment income was still low, but in line with the budget and there were some indications that interest rates could increase sooner rather than later.

 

A further update would be presented to the Committee as part of the Treasury Management Strategy for 2022/23. This would be presented at the next meeting of the Committee in January, before approval by Cabinet in February ahead of the start of the next financial year.

 

Members considered the increasing rate of inflation and that this would not have significant impact on returns on investments generally and especially not within the current financial year. The FSM provided some further details about the costs for the Ripon Pool project, he explained that there were two elements for this. One was increased costs that had recently been reported to and agreed by Cabinet and the other, referred to in the report, was how the current capital expenditure forecasts compared to the original budget.

 

RECOMMENDED (UNANIMOUSLY):

 

That the Committee receive the report.

(5.35 pm – 5.40 pm)

40.

Treasury Management Annual Report 2020/21: pdf icon PDF 438 KB

The Financial Services Manager to submit a written report.

Minutes:

The Financial Services Manager (FSM) introduced a written report, which provided details of the authority’s Treasury Management activity and performance for the year 2020/21. The Manager referred to Treasury Management training that had recently been delivered to the Committee and explained that the Annual report was one of the three treasury management reports received by the Committee each year.

 

Key areas of the report of the report were highlighted to the Committee. These included an update in relation to the Council’s Capital Financing Requirement (CFR) that had increased by nearly £5 million. The CFR reflected the amount of capital expenditure that had been incurred but not yet funded. The increase in 2020/21 was primarily due to internal borrowing for the construction of Ripon Pool. 

 

The Council had relatively high cash balances, and investment returns were very low, so it was beneficial to use cash reserves rather than take on external borrowing. There was no new external borrowing in 2020/21.

 

The next major movement in external borrowing would be in March 2022, when another repayment of £15m would be made to the Public Works Loan Board in relation to the loans that were taken out in 2012 to fund HRA self-financing.

 

The capital value of property funds had reduced a little as at 31 March 2021. Income distributions for the year exceeded budget, being £196k against a budget of £175k.

 

The average investment rate on normal cash investments was 0.288%, which was very low, however this was in the context of the Bank of England base rate being 0.10% all year.

 

The FSM explained that the report had also been considered by Cabinet on 13 October 2021. The 2021/22 mid-year review had been considered earlier in the meeting at Minute 39/21.

 

RECOMMENDED (UNANIMOUSLY):

 

That the Committee receive the report.

(5.32 pm – 5.35 pm)

41.

Draft Audit and Governance Committee Annual Report 2019/20 And 2020/21: pdf icon PDF 374 KB

The Scrutiny, Governance and Risk Manager to submit a written report.

Minutes:

The Scrutiny, Governance and Risk Manager (SGRM) submitted a written report, which presented work undertaken by the Audit and Governance Committee in 2019/20 and 2020/21. The SGRM explained that it was good practice for the Committee to report their work to Council in the form of an annual report. The COVID-19 pandemic meant that a report had not been produced last year, and so the report before the Committee presented a summary of the work undertaken for the past two years. The report reviewed the work of the Committee and compared it to its Terms of Reference.

 

The SGRM explained that the report was in draft form at present and the purpose of presenting it to the Committee was to provide the opportunity for Members to make any amendments or comments and agree a final version to be referred to Council. The Chair could then present the report as a summary of the work of the Committee for the years 2019/20 and 2020/21.

 

Section C of the report was a review of the effectiveness of the Committee, and Members had been asked to provide feedback through a questionnaire that had been circulated. The responses would inform this section of the report, that could be updated, as well as contributing to a plan for future training.

 

RESOLVED (UNANIMOUSLY):

 

That the Audit and Governance Committee Annual Report 2019/20 and 2020/21 is agreed and referred to Council.

(5.40 pm – 5.42 pm)

 

(D)

42.

External Audit Progress Update:

The External Auditors (Mazars LLP) to provide a verbal update.

Minutes:

The Chair welcomed Diane Harold, Senior Manager at Mazars LLP, the Council’s external auditors, to the meeting to provide a progress update to the Committee. Ms Harold explained that based on the timing of the receipt of the accounts for 2020/21 it was unlikely that their work would be completed before the end of January and would therefore likely to be presented to the Committee in March 2022, not the end of November as previously reported. There had been a revised deadline for the reporting of financial documents for the 2020/21 year, and performance reporting showed that only around 9-10% of authorities signed off audited accounts within the revised timescale. There was a backlog caused by the pandemic and wider issues within the audit market that were still affecting timescales nationally.

 

It was reported that progress was being made on the audit work and resources were in place to advance this through December and January. This was also enabled through effective working arrangements with Council Officers.

(5.42 pm – 5.44 pm)

 

          (D)

43.

Draft Unaudited Statement Of Accounts 2020/21: pdf icon PDF 159 KB

The Financial Services Manager to submit a written report.

Additional documents:

Minutes:

The Financial Services Manager presented the draft accounts for 2020/21 to the Committee. He explained that the deadline for signing off the audit of these accounts was 30 September 2021, and this had not been met. However, and as discussed at Minute 42/21, only 9% of authorities had met that deadline.

 

The format of the accounts was largely the same as for 2019/20, the main difference being the numerous impacts of the COVID-19 pandemic. These included:

 

·       On the income and expenditure statement some service incomes, in particular Sport and Leisure, were down compared to the previous year;

·       Place-shaping and Economic Growth had increased expenditure and income as their figures included the discretionary elements of COVID-19 grants that were paid to businesses (and for which a grant from the Government was received);

·       Business rates income was very low and grant income was very high. This was almost entirely due to the high levels of business rates reliefs that the Government granted in the year and the Council had been compensated for these. Another factor was moving from 75% retention in 2019/20 to 50% retention in 2020/21;

·       Reserve levels had increased, primarily due to approximately £14m of business rates grants being carried forward to meet the deficit on the Collection Fund that would need to be met in 2022/23 and 2023/24.

 

As discussed at Minute 42/21 these accounts were currently subject to audit and currently the intention was to present them for sign off in March 2022, although it was anticipated that the audit would essentially be complete by the end of January.

 

RESOLVED (UNANIMOUSLY):

 

That the Committee receive the report.

(5.44 pm – 5.47 pm)

 

(D)

44.

Internal Audit Recommendation Report: pdf icon PDF 137 KB

The Audit Services and Fraud Manager submit a written report.

Additional documents:

Minutes:

The Audit Services and Fraud Manager submitted a written report, which provided a snapshot of the current position on the implementation of audit recommendations. This included details of outstanding priority one recommendations and of aged priority two and three recommendations, attached at exempt appendices 1 and 2. Two further appendices provided details of recommendations completed in the period and a summary of outstanding recommendations. There was no requirement to include recommendations whereby management had accepted the risks identified as all were agreed and closed.

 

The report had been considered by Management Board, and though there were some long-standing recommendations outstanding, Management Board were content with the progress on these, and the reasons for them. The HoF presented the report and referred to Appendix 3, where there were a number of recommendations that relied on the completion of projects that were progressing. The HoF explained that mechanisms were in place through Management Board to ensure these were addressed as soon as was practicable.

 

RESOLVED (UNANIMOUSLY):

 

That the Committee receive the report.

(5.48 pm – 5.54 pm)

 

(D)

45.

Audit Services October Monitoring Report 2021: pdf icon PDF 173 KB

The Audit Services and Fraud Manager submit a written report.

Minutes:

The Audit Services and Fraud Manager submitted a written report which summarised internal audit activity for the first seven months of the audit plan year, as required by the Public Sector Internal Audit Standards. The Head of Finance presented the report and referred to the table at paragraph 5.2, this showed that 60% of planned audits were finalised or in progress, 32% were yet to start and 8% were on hold or postponed. Audit Services were reporting that the audit plan was on track to be completed by 31 March 2022.

 

RESOLVED (UNANIMOUSLY):

 

That the Committee receive the report.

(5.55 pm – 5.56 pm)

 

(D)

46.

Internal Audit Annual Report 2020/21: pdf icon PDF 247 KB

The Audit Services and Fraud Manager submit a written report.

Minutes:

The Audit Services and Fraud Manager submitted a written report, which considered the key findings and conclusions from audit work undertaken in 2020/21 and set out the Audit Services and Fraud Manager’s opinion on the overall adequacy and effectiveness of the Council’s arrangements for risk management, governance and internal controls. In presenting the report the Head of Finance reported that the overall opinion for this year was that, based on the audit work undertaken during 2020/21, the Council’s framework of governance, risk management and internal control was satisfactory and operating effectively in practice. This was the same opinion as for previous years.

 

RESOLVED (UNANIMOUSLY):

 

That the Committee receive the report.

(5.56 pm – 5.58 pm)

 

(D)

47.

Strategic Risk Register 2021/22: pdf icon PDF 256 KB

The Scrutiny, Governance and Risk Manger to submit a written report.

Additional documents:

Minutes:

The Scrutiny, Governance and Risk Manager (SGRM) presented a written report, which provided the Strategic Risk Register (SRR) showing the most significant risks to the Council. The report included an exempt appendix containing details of a risk that was considered confidential. The SGRM explained that it was part of the role of the Committee to oversee the risks facing the Council, to provide assurance that they were being managed appropriately through internal controls. The SGRM confirmed that Management Board also agreed the SRR including the scores for individual risks and how they were managed.

 

The SGRM confirmed that no new risks had been added to the register since the last time the Committee had been updated. It was reported that the strategic risk for Brimham’s Active now related to the operational arrangements and performance of the new Local Authority Controlled Company, and the details for this risk would be updated.

 

RESOLVED (UNANIMOUSLY):

 

That the Committee receive the report.

(5.56 pm – 5.58 pm)

 

(D)