Agenda and minutes

Governance and Audit Committee
Friday, 26th July, 2019 2.00 pm

Venue: River Room - Jubilee Church Life Centre, 1-5 London Road, Grantham. NG31 6EY. View directions

Contact: Anita Eckersley 

Items
No. Item

10.

Apologies

11.

Disclosure of interests

12.

Minutes of the meeting held on 21 June 2019 pdf icon PDF 188 KB

13.

Updates from previous meeting

    Minutes:

    The Committee was given an update on the crowd funding reserve initiative for £100k that was approved by the Committee at the last meeting.  Members were informed that the initiative would be launched during August. Further information would be submitted to the September meeting of the Committee.

14.

External Audit - Annual Governance Report pdf icon PDF 548 KB

    Minutes:

    The Key Audit Partner from Grant Thornton, the Council’s external auditors, referred to the Audit Findings document noting that they had not identified any matters that required modification. An unmodified audit report was anticipated.

     

    Reference was made to the potential impact of the McCloud judgement and how this had delayed the finalising and issuing of the accounts and reports to members.  The Committee was reminded of the background to the case and the Court of Appeal’s ruling that age discrimination in relation to the pension schemes had been identified. The legal ruling would impact on Council pension funds and pension schemes where transitional arrangements for changing benefits were being implemented.

     

    As a result of the ruling and the GAD review which had been commissioned by the LGPS Scheme Advisory Board, work had been undertaken with the Council to ascertain potential implications. This had resulted in a further actuarial assessment being commissioned. The assessment had identified a non-material increase in the pension liability for the Council. The financial statements had not been amended at this time.

     

    It was noted that the McCloud case would impact on all local authorities.  The Committee was informed that a pension liability of £1.4m and above was classed as ‘material’. The Council’s pension liability was £1.2m so was therefore classed as non-material. The implications would not be immediate but future provision would be required and factored into future budgets.

     

    Reference was then made to the minor cash flow changes mentioned under audit adjustments but these were not seen as significant. Further reference was made to the McCloud judgement and Government Minimum Pension (GMP) and how the external auditors had satisfied themselves that there appeared to be no material misstatement. The Auditors acknowledged the uncertainties relating to the estimation of the impact on the Council’s liability at this time.

     

    Members were informed that the Value for Money conclusion would be submitted to the September meeting of the Committee. The reason for the delay in issuing the conclusion was to enable further consideration of the Council’s governance assessment following the recent announcement of the departure of the Chief Executive and the departure of the section 151 officer. It was emphasised that this was standard practice when senior management left and did not indicate a problem. The work would be undertaken as quickly as possible so that the value for money conclusion and completion certification of the audit could be issued.

     

    In response to a Member’s query on whether the mention of Warwickshire Pension Fund was correct, the Committee was informed that this would be corrected. Members were also informed that the real cost implications of the increase in pension liability would be subject to the outcomes from the Tribunal Review and would not be reflected immediately but in future years.                                                                                                                                                 

    A Member wished to have her concerns noted that in light of the error regarding the Pension provider in the papers there could potentially be other errors that had not been identified.  Confirmation was sought on whether the  ...  view the full minutes text for item 14.

15.

Statement of Accounts including Annual Governance Statement pdf icon PDF 281 KB

    Additional documents:

    Minutes:

    The Chairman reminded Members that the accounts had been available in draft form on the Council’s website at the end of May. A link had been emailed to Committee Members along with a copy of the draft accounts with the proviso that the Committee would receive details of any changes at the meeting. Members would need to raise any issues they had identified in the draft accounts.  A copy of the final accounts had now been provided and a short adjournment could be facilitated if Members felt they wanted to look through the final accounts in more detail.

     

    A Member wished to have noted that she would have preferred to have had an adjournment but was happy to follow the lead of other Members of the Committee.

     

    The Director of Finance noted that the draft Statement of Accounts 2018/19 had been published on the website on 31 May 2019. The Statement of Accounts had been updated to reflect the changes identified by the Finance Team and external audit following the completion of the audit. The final Statement of Accounts had to be published by 31 July 2019.  A summary of accounts had also been presented for Committee approval.

     

    Further reference was made to the requirement for the accounts to reflect the impact of the McCloud judgement on the pension liability.  The ruling had been made regarding age discrimination arising from the public sector pension scheme transition arrangements relating to judges and firefighters. It was anticipated that there would be implications for the Local Government Pension Scheme. At the time of producing the Statement of Accounts there was uncertainty regarding the amounts and timescales involved in the appeals process. The accounts did not at this time reflect potential implications from the McCloud judgement.

     

    In response to a Member’s query about why the Statement of Accounts did not include the accounts from the Council’s Companies, the Committee was informed that the companies’ accounts would not be consolidated into the Council’s Statement of Accounts. The companies would publish their own accounts.  Members were directed to Note 30 of the Statement of Accounts which detailed the Council’s interests in other companies. Further discussion ensued on the nuances of particular posts and whether they were on the Council’s payroll or the respective company payroll.  It was noted that the posts included on the Council’s payroll were recharged to the companies and that funding to the companies was for core service provision.

     

    It was also noted that the Companies Committee would scrutinise the Council’s companies’ governance.  This committee was in the process of being created.

     

    A Member wished to have recorded his concerns that there did not appear to be a mechanism in place to hold the Companies to account since the Shareholder Committee had been disbanded and no timeline could be provided in respect of when the Companies Committee would be in place.

     

    The Cabinet Member for Finance confirmed that the accounts for the companies would be published by the end of December in line  ...  view the full minutes text for item 15.

16.

Treasury Management Annual Report 2018/19 pdf icon PDF 238 KB

    Report of the Cabinet Member for Finance

     

    Additional documents:

    Minutes:

    The Director of Finance reminded the Committee that the Council was required under the Local Government Act 2003 to produce an annual treasury management review of activities and performance against prudential and treasury indicators for 2018/19. The report in the papers met 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 Committee was also reminded that the Strategy for 2018/19 was approved by Council on 1 March 2018. Reference was made to a key element of daily operations and how focus was on comparing current market conditions in conjunction with the Link credit rating list and the option to deviate from this guidance should there be clear alternative options available to the Council.  Such decisions had to be clearly documented for audit purposes.  The aim of the strategy was to generate a list of highly creditworthy counterparties that enabled diversification of investments and avoided risk but provided security.

     

    Delegated powers from Council had been given to the Governance and Audit Committee to deal with matters relating to the Council’s Treasury Management activities.  In particular the Committee had the responsibility to monitor, review and amend as appropriate the Council approved Treasury Management Strategy during the course of the financial year. The regulatory environment placed a much greater onus on members to review and scrutinise the treasury management policy and activities. Any potential amendments or minor changes would be submitted to the September Committee meeting. 

     

    Members were informed that strong growth in Quarter 2 and Quarter 3 had impacted by weak growth in Quarters 1 and 4.  With the uncertainties over Brexit this was expected.  The base rate had also increased by a quarter of a percent from 0.5% to 0.75% and this had provided new opportunities and increased income from investments for the Council. 

     

    The average annual interest rate of the Council’s portfolio had slightly increased from .07% to 0.97%.  The budgeted assumption for average investment balances had been £56.684m but was in fact £65.774. The graphs contained in the report highlighted the variances in the short-term investment market.

     

    In respect of Long Term Borrowing no additional long term borrowing had been required during 2018/19. The long-term debt outstanding as at 31 March 2019 was £70.879m and related to the HRA self-financing loans.

     

    Short-Term/Temporary Borrowing outstanding as at 31 March 2019 was £28.221m.

     

    Internal borrowing had been utilised to purchase the Cummins site in Stamford during 2018/19 and it was noted that borrowing would be required to fund any future purchases.

     

    Debt rescheduling had been unviable during the year due to the average 1% differential between PWLB new borrowing rates and premature repayment rates.

     

    Discussion took place on benching marking, rankings and the interaction with other local authorities and the importance of identifying any issues that may arise and how they could be addressed. It was noted that the Treasury Management strategy had been adopted by Council, but it  ...  view the full minutes text for item 16.

17.

Close of meeting