Agenda and minutes

Governance and Audit Committee
Thursday, 4th December, 2014 2.00 pm

Venue: Witham Room - Council Offices, St. Peter's Hill, Grantham. NG31 6PZ

Contact: Jo Toomey 

No. Item






Disclosure of interests


Minutes of the meeting held on 25 September 2014


Annual Audit Letter 2013/14

    External Audit to present the Annual Audit Letter 2013/14.          (Enclosure)


    Mike Norman from KPMG presented the annual audit letter 2013/14, which summarised the work that had been carried out through the year.


    The letter reported that the authority had been issued with an unqualified conclusion on its arrangements for securing value for money. The conclusion was based on the Council’s financial governance, financial planning, financial control processes and the prioritisation of resources and improving efficiency and productivity.


    External Audit also reported that it was satisfied sufficient work had been carried out to mitigate the audit risks for the value for money conclusion.


    On 26 September 2014, an unqualified opinion was issued on the Council’s financial statements with significant matters arising from the audit being raised with the Governance and Audit Committee. Members noted that no significant audit differences were identified and the quality of the accounts and supporting working papers were good.


    Following a review of the Annual Governance Statement, the external auditor concluded that it was consistent with their understanding.


    KPMG had not needed to report any inconsistencies between the authority’s audited accounts and the consolidation pack to the National Audit Office.


    External audit issued its certificate on 26 September 2014, which confirmed that the audit for 2013/14 had been concluded in accordance with the requirement of the Audit Commission Act 1998 and the Audit Commission’s Code of Audit Practice.


    The Committee noted the proposed fee for 2013/14. A slight increase took account of additional work required on business rates. It was clarified that as the work was nationally mandated, all business rate collection authorities experienced an increased fee. The fee charged to councils under the external audit contract was subject to market testing. While it was not used to inform the level at which the audit fee was set, KPMG kept records of costs, including time spent, to inform delivery.


    Mr Norman reported that the Grants and Housing Benefit Claim was certified as unqualified and that no significant changes were made. This would be formally presented to the Committee as part of the annual ‘Certification of Grants and Returns Annual Report 2013/14’ at its meeting on 26 March 2015.


    Members discussed the use of the word “consistency” regarding external audit’s opinion on the Annual Governance Statement. Mr Norman noted the feedback but informed members that the wording used was that which was required. He added that if Members felt it would be useful, further contextual information could be provided in future.


    Committee members noted the report.


Internal Audit Progress Report and Follow-up Report

    Report number HOF301 by the Head of Finance.                          (Enclosure)


    The Head of Finance introduced report number HOF301 which summarised work completed by the Council’s internal auditor, Baker Tilly, between 1 September 2014 and 18 October 2014.


    Amjad Ali from Baker Tilly presented the outcomes of the internal audit work. During the period, seven reports had been completed, including one follow-up report. Members were also informed of a number of changes that had been made to the internal audit plan: audits on partnerships, welfare reform and resident involvement had been deferred until 2015/16 while additional work was requested on governance arrangements for using eBay for the disposal of assets. While this audit was advisory, it was agreed that the outcomes could be shared with the Chairman and Vice-Chairman of the Committee. In response to questions, members were given a brief explanation of why the three audits had been deferred. The plan was on target to be completed by March 2015


    Members were given a brief summary of the completed audits, the level of assurance given and the medium and high risk recommendations.


    Planned Cyclical Maintenance and Capital Programme – amber/green opinion


    • Two medium and three low risk recommendations were raised
    • Members queried the recommendation that a stock condition survey be carried out for each of the Council’s properties – a 100% survey was undertaken in 2009 with the intention of maintaining records rather than conducting a further 100% survey
    • Members emphasised the importance of ensuring stock databases were kept up-to-date
    • Officers confirmed that the database would continue to be maintained to ensure investment decisions reflected a detailed understanding of the condition of the housing stock
    • Clarification was sought on the functions of the two databases through which Housing Revenue Account assets were managed


    Section 106 – amber/green opinion


    • Two medium and three low risk recommendations were raised
    • Internal Audit tested a sample of applications where Section 106 Agreements had been signed
    • In all cases the Legal team had notified the Land Charges team on a timely basis but there was a lag between notification and the Agreement being registered
    • Members were assured that additional members of the team were being trained and where Agreements had not been registered, manual checks were still undertaken
    • It was incumbent on the signatory to notify the Council when trigger points had been reached so delays should not have affected payments


    Contract Management – Ground & Tree Maintenance – amber/green opinion


    • One high, one medium and three low risk recommendations were raised
    • The high risk recommendation related to invoicing and use of registered contractors for additional works
    • Registered contractors had to undergo a range of checks, e.g. health and safety
    • The medium risk recommendation addressed the authorisation of variation forms. Members were assured that examples identified during testing had only related to low-value works
    • When urgent works were required, verbal orders should be followed-up with written orders


    Income and Debtors – green opinion


    • Two medium and one low risk recommendation raised
    • The first medium risk recommendation related to differences on the daily cash checklists: Cedar Fund  ...  view the full minutes text for item 33.


Treasury Management Mid-Year Review

    Report number HOF297 by the Head of Finance.                          (Enclosure)




    1. Councillors noted the mid-year activity position of 2014-15 (April to September 2014)
    2. Councillors approved the following amendment to the Treasury Management Strategy for 2014/15:


    “The Treasury Management Officer will use the Capita Credit Rating weekly listing as a tool for guidance, with the option to deviate from this guidance only when there are clear alternative options that are available to the Council. Any decision of this nature should be clearly documented for audit purposes.


    The current investment strategy does not allow the Council to undertake lending to Registered Social Landlords (RSLs). A scheme is proposed to provide an available source of funding for this sector to encourage the provision of social housing within the District. Charging interest at market rates would also increase the Council’s investment income over the period of the loan.


    The scheme would lend amounts up to £5m per investment to Registered Social Landlords for the purpose of providing housing within the District. Repayment terms of up to 10 years would be offered.


    Individual Housing Associations do not have credit ratings and it is proposed that we use our external treasury advisers to undertake due diligence checks to assess borrowers’ ability to make good the repayment of the loan.


    Loans would be secured by means of a legal charge over the borrowers assets. Related legal costs and loan set up fees would be charged to the borrower.


    Interest rates charged would be set at PWLB/market rates available at the time the loan is agreed. This will provide an investment return and ensure that no gratuitous benefit is included which would have soft loan or state aid implications.


    For accounting purposes loans would be treated as capital expenditure and financed from internal borrowing. This will increase the Capital Financing Requirement (CFR) by the amount of the loan and then this will be written down upon repayment of the principal. This approach means that there is no requirement to make a Minimum Revenue Provision (MRP) contribution which would be a charge to the working balances, therefore avoiding any additional cost to the tax payer.”


    The Head of Finance summarised report number HOF297 which provided a breakdown of debt management operations, investment operations, a summary of interest rate movement and investment performance, and an update on the treasury management Prudential Code indicators.


    The report also asked members to approve two changes to the Treasury Management Strategy. The first would allow the authority to provide loans to Registered Social Landlords to bring forward sites for development while the second would allow the Treasury Management Officer to use the Capita Credit Rating weekly listing as a tool for guidance with the option to deviate from this guidance.


    Members were advised that if the amendment to the strategy was approved, it would automatically be included in the Treasury Management Strategy presented to Council in March 2015.


    It was proposed, seconded and agreed that report HOF297 be noted and the recommendation to amend the treasury management strategy be approved.


Statement of Accounts - proposed changes


Corporate Risk Register


Health and Safety Annual Report 2013/14


Close of meeting