Agenda and minutes

Apologies for absence were received from Councillors Rob Shorrock and Peter Stephens.

Councillor Mark Whittington substituted for Councillor Stephens.

The minutes of the meeting held on 14 June 2023 were proposed, seconded and AGREED as a correct record.

The Chairman informed the Committee that a supplement had been circulated to Members prior to the meeting which confirmed any updates following the meeting of 14 June 2023.

The Chairman invited questions, however, there were none.

The purpose of this report was to provide details of the audit work during the period 1 March to 30 June 2023, advise on progress of the 2022/23 plan and raise any other matters relevant to the Audit Committee role.

The report was presented by Assurance Lincolnshire Auditors.  Since the last update report presented to the Governance & Audit Committee in March 2023, the following work has been completed:

·       Combined Assurance/ Service Assurance (Consultancy)

Work was completed with the Senior Leadership Team to produce a service assurance report.  This process involved discussion across the Council and provided management with an overview of the Council’s assurance across critical activities, key projects, key partnerships and key risks.  A report had been provided to Corporate Management Team (CMT) and the work used to support the annual opinion and audit planning.

There was one audit remaining from the 2022/23 plan, Debtors, which was at draft report stage awaiting a closure meeting and management agreement. The Capital Programme and Creditors reports were being finalised at the time of issuing this report.  Details would be included in the next progress report to the committee.  It was confirmed the audit opinion was substantial assurance for both these areas.

Following agreement of the 2023/24 Audit Plan at Committee in June auditors were now in the process of liaising with managers to schedule the audits.  They would also be carrying out a review of the audit plan and the remaining time available to provide a revised plan.

The actions made by Assurance Lincolnshire had been tracked since starting with the Council in 2022/23.  Progress in implementing the recommendations made to date had been obtained from the responsible officers and recommendations had been closed off where advised.  All but eight of the actions due by 31st May had been actioned, the eight have had their due date extended.

Members raised the following points during discussion:

·            Why had some audit completions been delayed?  Progress had been disappointing.

·            What assurance or guarantee could be given that the planned workload for the coming year could be completed within the required timeframe?

·            Prioritising the most important work was essential. 

·            Were the required meetings with senior management officers scheduled into the calendar and reports expected at the September Committee still within the agreed timeframe?

The Auditor informed Members that staff resources had been limited and the closing down process had taken longer than planned.  An updated plan on the schedule of audits was being prepared and was to be reviewed during the year according to risk assessments carried out.  The Auditor was unable to confirm that the full annual plan would be completed by March 2024 however, meetings with senior management were to be scheduled and discussions to take place prior to confirming a timescale for audits to take place.

The Chief Finance Officer confirmed that the plan had only been approved by the Governance and Audit Committee less than one month ago.  The purdah period and subsequent election had contributed to a delay which would  ...  view the full minutes text for item 21.

This report provides the Governance & Audit Committee with the details of the Council’s provisional outturn position for the financial year 2022/23.

The Deputy Leader of the Council introduced the report.

2022/23 was a turbulent financial year which required the Council on 24 November 2022 to approve a series of amendments to the budget framework in order to respond to significant volatility to the budgets resulting from the pressures on utilities, fuel, pay and inflation.  Following this, budgets were amended accordingly and the variances in this report were in relation to those amended budgets.

The report ensured that the final account figures could be reconciled back to the budget set by the Council.

Due to timing differences in grants and budgets being approved, it was proposed to carry a number of budgets forward into 2023/24 to fund specific and previously approved projects.

The amended budget set by Council on 24 November 2022 was £22.148m. Budgets have been amended as projects have commenced and these changes increased the 2022/23 budget to £22.209m.  For the purposes of the outturn variance analysis, the budget carry forwards had been removed from this which reduces the budget for comparative purposes to £20.249m.

The forecast outturn position as at Quarter 3 was reported to the Finance, Economic Development and Corporate Services Overview and Scrutiny Committee on 21 February 2023.  At this time, a reduction in the forecasted spend, additional projected investment interest and Minimum Revenue Provision (MRP) reduction resulted in a forecasted balanced position.

The budget set by Council on 3 March 2022 for the 2022/23 General Fund Capital programme was £19.608m.

As at 31 March 2023, there was an underspend of £13.008m which included underspends of £308k on the Disabled Facilities Grant, £224k on the Vehicle Replacement Programme, a deferral of works to the re-surfacing of Welham Street car park at £127k and £793k underspend on the Sustainable Warmth Grant which the Council received to assist with the upgrade of energy efficient homes for low income households.

Discretionary Reserves of £10.873m have been established to financially support the delivery of the Council’s Corporate Plan ambitions including both revenue and capital projects as well as to prepare for unforeseen financial pressures, such as an impending staff pay award.  It was within the role of the Governance and Audit Committee to consider the movement of funds within the Reserves.

The Deputy Leader informed Members that the Climate Change Reserve was used to fund one-off climate initiatives.  There were sufficient funds to create a Lighting Reserve for the upgrade of street-lighting to LED lighting within the district, as discussed at the Environment Overview and Scrutiny Committee held on 11 July 2023. 

Governance Reserves of £8.071m were maintained to mitigate risk, satisfy statutory and grant awarding bodies’ requirements and support prudent financial management.

The Chief Finance Officer informed Members that the last year had seen significant increases in investment income compared to budgets due to 13 increases in the base rate. 

The Housing Revenue Account (HRA) capital fund was approximately £10 million underspent at this time.  The General Fund was in a similar position due to the Deepings Leisure Centre refurbishment  ...  view the full minutes text for item 22.

To update the Committee on the progress of the audit of the 2021/22 Statement of Accounts and the delayed publication of the draft unaudited Statement of Accounts for 2022/23.

The report was presented by the Assistant Director of Finance.

The draft 2021/22 Statement of Accounts were reviewed by the Governance and Audit Committee on 20 July 2022 and subsequently published on 29 July 2022.  Updated Statement of Accounts were presented to the Governance and Audit Committee on 30 November 2022 which reflected the changes that had been identified by the Finance Team and those agreed with the external auditors, Grant Thornton.  In accordance with the Accounts and Audit (Amendment) Regulations 2022, the target date for completing the 2021/22 audit and publishing the final accounts was 30 November 2022 which the Council did not meet due to delays beyond its control.

Since the last update to the Governance & Committee in November 2022, significant progress had been made with the external auditing of the accounts.  With respect to Property, Plant and Equipment (PPE) external audit had requested additional information from the Council and the external valuers to enable them to audit the property valuations included in the accounts.  This information had now been provided to the audit team in order for them to finalise the audit of this important area of the Council’s accounts.

Following the completion of the triennial review of the pension fund in 2022/23 external audit requested an updated 2021/22 IAS 19 Pension Valuation Report to enable them to establish whether the review has had a material impact on the pension information included in the accounts.  This information has been provided to the audit team for review.  The Assistant Director of Finance informed Members the Finance Team were confident in having the accounts signed off by mid-August 2023.  In respect of the 2022/23 accounts, a notice of the delay was published on the Council’s website.

Draft 2022/23 accounts would be brought before the Governance and Audit Committee in September 2023, however Grant Thornton Auditors have indicated they were unlikely to meet the deadline of 30 September 2023.  An update was to be provided at Committee at a future meeting.

The following points were raised in discussion:

·            Members were concerned about the unfortunate delay by external auditors in signing off the 2021-2022 Statement of Accounts and the impact on the 2022-2023 accounts.

The Deputy Leader acknowledged the concerns and confirmed that the shortage in supply of external auditors was a nationwide issue which was beyond the control of the Council.

The Assistant Director of Finance informed Members that KPMG had returned to the external audit market for Local Government which enables more audit firms to be for local government work.   Conversations were taking place with Grant Thornton Auditors and KPMG to ensure a smooth handover and establish when the audit would be completed.  Any changes on the value of assets would impact both the balance sheet and the income and expenditure statements for 2021-2022.  However, these would be ‘reversed out’ as they were accounting adjustments, not actual monetary adjustments.  On the 2022-2023 accounts, the Council had been able to process all year-end adjustments, except for depreciation and the revaluation,  ...  view the full minutes text for item 23.

The Council is required by regulations issued under the local Government Act 2003 to produce regular reports on treasury and debt management operations during the financial year. This report meets the requirements of the CIPFA Code of Practice on Treasury Management (the Code).

The Deputy Leader introduced the report, pointing out the position of the global economy and the difficulties faced in finances.  There was a balance required between investing funds and utilising funds on public services to benefit the district’s residents.

Treasury Management was the term used to cover the Council’s borrowing and investment strategies.  In line with the Chartered Institute of Public Finance and Accountancy (CIPFA) Code of Practice on Treasury Management the Council had adopted a treasury management policy statement that required regular reports on treasury and debt management operations during the financial year.  Additionally, under part 1 of the Local Government Act 2003, the Council was required to have regard to the Prudential Code for capital finance including the setting of Prudential Indicators.  Relevant treasury management indicators were incorporated into the Treasury Management Strategy 2023/24 approved by Council on 1 March 2023.

This report provided a review of treasury management for the period ended 30 June 2023 and reviewed current developments.  The following elements were covered by the report:

• A review of debt management operations

• A review of investment operations

• An update on the treasury management Prudential Code Indicators

No additional borrowing was required during the first quarter of 2023/24.  All current Council borrowing was with the Public Works Loan Board (PWLB) and the average rate of interest paid on the debt portfolio was 2.47%.

As at 30 June 2023, the Council had short-term borrowing, which was defined as borrowing due to be repaid within 365 days, of £3.221m.  This would be repaid in instalments of £1.611m on 28 September 2023 and 28 March 2024. The average annual rate of interest on these loan repayments was 3.03%.

The average size of the investment portfolio for the 3-month period was £68.611m compared to an average portfolio size of £90.996m during the same period in 2022/23.  The decrease in the portfolio was due to the repayment of COVID-19 business grants following the reconciliation of the schemes and the payment of the Council Tax Rebate grant to eligible households during 2022/23.

As at 30 June 2023 the Council held short term investments of £77.891m (specified investments) and £3m (non-specified investments).  The Treasury Management Strategy stipulated that the Council should not ordinarily hold more than 35% of investments as non-specified and this was adhered to during the first quarter of 2023/24.

In the period ended 30 June 2023, £34.0m of short-term fixed deposits were placed; £25.0m of investments matured within this same period.  In the period ended 30 June 2023, there were no long-term fixed deposits placed and no long-term fixed deposits matured.

Prudential Code indicators for 2023/24, 2024/25 and 2025/26 were approved by Council on 1 March 2023 as part of the Treasury Management Strategy 2023/24.

Members raised the following points during discussion:

·            What mitigation was available to the Council to counteract the reduction in value of investments due to high inflation?

·            A Member thanked the Officers for their work in unenviable circumstances and acknowledged that the effort must  ...  view the full minutes text for item 24.

To consider the Committee’s Work Programme for 2023 – 2024.

The Committee noted the Work Programme 2023 – 2024.

The Assistant Director of Finance had confirmed that the Statement of Accounts update would be scheduled for the September Committee and the Democratic Services Manager informed Members that this was to be added to the Work Programme.

It was confirmed that the questionnaire sent out to all members on the subject of Full Council meeting timings had also asked for views on the timing of all committee meetings.

The Chief Finance Officer, whilst acknowledging that the proposed agenda for September’s meeting was lengthy, confirmed that some agenda items were annual reports and if it was the will of the Committee, those items could be deferred to the November meeting.

Following the meeting, it was agreed that the following items were to be deferred to the November meeting:

·                              Strategic Risk Register

·                              Risk Management Annual Report

·                              Risk Management Framework

ACTION:

Statement of Accounts update to be scheduled as an agenda item at the Governance and Audit Committee meeting on 26 September 2023.

There were no other items of business.

The Chairman closed the meeting at 16:00.