Venue: Council Chamber - Council Offices, St. Peter's Hill, Grantham. NG31 6PZ
Contact: Email: Democracy@southkesteven.gov.uk
Apologies for absence
Apologies for absence were received from Councillors Ian Stokes and Sue Woolley.
Councillor Ashley Baxter was to represent Alliance SK on the Committee today.
Disclosure of interests
Members are asked to disclose any interests in matters for consideration at the meeting.
No interests were disclosed.
Minutes of the meeting held on 28 September 2022 PDF 193 KB
A Member asked for an update on minute no.24 (page 4 of the agenda). Grant Thornton were asked to amend their report that previously had an incomplete sentence.
The Assistant Director of Finance clarified that an amended report had been received. The incorrect sentence should have read ‘spending’ not ‘accordingly’. The Officer clarified the corrected report was to be distributed to all Committee Members and Democratic Services were to ensure the report was published on the website.
Democratic Services Officer to distribute the amended audit report to Committee Members and publish on the website.
The minutes of the meeting held on 28 September 2022 were proposed, seconded and AGREED as a correct record.
Updates from previous meeting PDF 32 KB
To consider updates on Actions agreed at the meeting held on 28 September 2022.
A Member confirmed that they were grateful for the Scrutiny workshop held that morning that was made available to the public, although the Member expressed the view that it was a shame that the public were unable to speak, however it was a productive meeting and they looked forward to seeing the results implemented at the earliest opportunity.
Internal Audit Progress Report PDF 423 KB
This report provides an update on progress against the internal audit plan and summarises the results of our work.
The purpose of this report was to:
· Provide details of the audit work during the period October 2022 to 15th November 2022
· Advise on progress of the 2022/23 plan
· Raise any other matters that may be relevant to the Audit Committee role
Since the last progress report in September, one audit report has been completed – Cyber Security Phase 1. This received a substantial assurance opinion although some improvement needed in the application of controls but overall, they were adequate, appropriate and operating sufficiently so that risks to the activity were medium / low.
Reports at Draft stage were:
• Programme management
• Housing void management
The delivery of the plan was on track and all audits were scheduled. The key focus over the next five months included:
• Health & Safety
• Key control testing (Debtors – Creditors – Capital Programme)
• Combined Assurance (addition to the plan)
The following audits had been re-scheduled to April – June 2023 to ensure the audits added most value:
• Housing Income – new system currently being implemented
• HRA building programme – programme not started
There had been a request for some engagement with the internal audit plan and there was a brief outline of the process in the report. A further report was to be presented in March 2023. This was to enable earlier insight into any areas of concern the Committee may have.
During discussion, a Member asked if the Committee were to have sight of the action plan?
The Auditor confirmed given the subject matter, cyber-security, no details had been provided but there was a tracker available that provided more detail if required. There was substantial assurance but the Auditor informed that more detail would require the report to be an exempt item.
The Chief Finance Officer confirmed that a detailed action plan would be welcomed so the Committee had full sight of the actions and the timelines agreed with the management responses.
The Vice Chairman agreed more details would be very helpful, given the important subject matter. Cyber-security had been in the news a lot recently and the Committee would like the extra assurance of seeing the details.
The Chairman thanked the Auditor for the report.
It was proposed, seconded and AGREED:
a) That the Governance and Audit Committee noted the Internal Audit Progress Report
External Audit Annual Governance Report PDF 4 MB
Report outlining the key findings arising from the Statutory Audit of South Kesteven District Council.
This report, presented by an Auditor from Grant Thornton, summarised the findings to date on the 2021 – 2022 audit of the financial statements. It was important to note this was a draft version currently due to the limited progress that had been made in audit procedures on the Council’s property valuations. The aim was to finalise this work within the next couple of months so as to be in a position to sign off the financial statements. To date no significant inconsistencies had been identified and progress had been made on outstanding audits since the report had been completed.
The Auditor highlighted the fact that the assumption used for salary growth in the Pension Liability was considered optimistic. However, no overall material issues were identified.
Recommendations were listed within the appendices of the report. It was expected that the Auditor’s Annual Report was to be issued by March 2023 in line with the National Audit Office’s revised deadline.
During discussion, Members raised the following points:
· In reference to the net pension liability, did there not need to be an agreement between the Auditor’s view and that of the Council?
· There was no report obtained from the payroll software with respect to the availability of a service auditor report. Why was this?
· When was certification expected to be completed?
· What audit had taken place on InvestSK Ltd and EnvironmentSK Ltd?
The Auditor informed the Committee that a central report was written by appointed experts which set out the assumption range to be expected. When assumptions fell out of this range, it had to be considered whether the assumption was appropriate and not materially different. The Auditor added that in reference to the payroll services, i-trent were requesting a fee for the provision of a report and this had not been requested. No significant concerns were identified with the processes. Certification was to be completed at the very end of the process once the National Audit Office as completed their guidance, early in the new year.
The Assistant Director of Finance informed Members that the i-trent system was used for the storage of data only and clarified that payroll services had not been outsourced. The Council had taken all steps to ensure a secure and robust process was in place. Members were informed that group accounts were only required for the materiality threshold, for example Gravitas Housing Ltd. LeisureSK Ltd accounts had been included within the Statement of Accounts in July 2022. InvestSK Ltd accounts had been considered at Companies Committee.
It was proposed, seconded, and AGREED;
a) That the Governance and Audit Committee noted and accepted the contents of the Annual Governance Report
Treasury Management Mid-Year Report 2022-23 PDF 195 KB
This 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 Council formally adopted the key recommendations of the Chartered Institute of Public Finance and Accountancy (CIPFA) Code of Practice on treasury management (revised 2017). In line with the Code the Council adopted a treasury management policy statement that requires a mid-year report 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 2022-23 approved by Council on 3 March 2022. This report was submitted in accordance with these requirements and provided a review of treasury management for the period ended 30 September 2022. The following elements are covered by the report:
• A review of debt management operations
• A review of investment operations
• An update on the treasury management Prudential Code Indicators
• An economic update for the first part of the 2022/23 financial year
No additional borrowing was required during the first half of 2022/23. 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%. Appendix A shows loans outstanding as at 30 September 2022.
As at 30 September 2022, the Council had short-term borrowing, which is defined as borrowing due to be repaid within 365 days, of £3.221m. This was to be repaid in instalments of £1.611m on 28 March 2023 and 28 September 2023. The average annual rate of interest on these loan repayments was 3.03%.
As at 30 September 2022 the Council held short term investments of £77.424m (specified investments) and £5m (non-specified investments). The Weighted Average Rate of Return was 2.17% compared with that of the Link (the Council’s treasury management advisors) Investment Benchmarking Analysis group which was 1.76%. In the period ended 30 September 2022, £53.0m of short-term fixed deposits were placed; £64.0m of investments matured within this same period. In the period ended 30 September 2022, there were no long-term fixed deposits placed and no long-term fixed deposits matured.
Prudential Code indicators specific to treasury management were designed to ensure that treasury management is carried out in accordance with professional practice. Indicators for 2022/23, 2023/24 and 2024/25 were approved by Council on 3 March 2022 as part of the Treasury management Strategy 2022/23.
The Bank of England’s Monetary Policy Committee raised the base rate by 50 bps to 2.25% in September 2022 meeting, this was the 7th consecutive rate hike, and increased borrowing costs to the highest since 2008. Retail sales reduced by 1.6% in August, the biggest decline so far this year, following a 0.4% rise in July. In August 2022 initial estimates showed that the public sector spent more than it received in taxes and other income. This resulted in £11.8 billion of borrowing, which was £5.8 billion more than the £6.0 billion forecast by the Office for Budget Responsibility (OBR).
Statement of Accounts and Annual Governance Statement 2021/22 PDF 196 KB
The Statement of Accounts 2021/22 is presented to the Governance and Audit Committee for approval. This report covers:
• Accounts and Audit (Amendment) Regulations 2021
• Accounts and Audit Regulations 2015
• Section 21(2) Local Government Act 2003
• Revised Statement of Accounts
• Commentary on the outcome of the audit of the Statement of Accounts
The Assistant Director of Finance presented the report. The Officer informed the Committee that the Draft Accounts were reviewed by Governance and Audit Committee on 20 July 2022 and published on 29 July 2022. The statutory deadline was 31 July 2022 and this was met. The Statement of Accounts was updated to reflect any changes that were identified by the Finance Team and then agreed with External Audit and included a narrative report, providing a guide to the most significant matters reported within the accounts. It explained the Council’s financial position and assisted in the interpretation of the accounting statements. A table within the report listed amendments to the draft accounts made to date.
The Council was required to produce an Annual Governance Statement (AGS) in accordance with the CIPFA/SOLACE framework “Delivering Good Governance in Local Government” in order to meet the statutory requirement set out in Regulation 6 of the Accounts and Audit Regulations 2015. The statement was an open and transparent review of the effectiveness of the Council’s system of governance, risk management and internal control, including performance across all its activities.
The date for publishing the audited accounts was due to be 30 November 2022 but that deadline was not to be met due to delays beyond the Council’s control. Such delays were unfortunately common across Local Government due to the limited resourcing of external audit.
During discussion, Members raised the following points:
· Where was the loan to EnvironmentSK Ltd recorded?
· How and why had approximately £500,000 been paid in termination benefits to leaving staff members?
· Was it not the case that all four wholly-owned companies of the Council receive their income from the Council itself?
· How frequently were the risks reviewed on the register?
· Why was there insufficient uncertainty to indicate any impairment of assets as a result of potentially needing to close facilities or services?
· What were the two collaborations in reference to joint operations (mentioned on page 69)?
· Who made the decision when determining the uncertainty?
The Assistant Director of Finance confirmed that the EnvironmentSK Ltd loan was included within long-term Debtors on the balance sheet. The Officer explained that LeisureSK Ltd received their income from customers. This was a material amount (at least £1 million) of income from a third party. This was the same for Gravitas Housing Ltd who received income from the sale of assets.
The Chief Finance Officer informed Members that termination benefits were put through a ‘value for money’ process which was overseen by the Head of Paid Service – The Chief Executive the s151 Officer and the Monitoring Officer. The majority of these costs referred to were part of the recent Arts Restructure or the Corporate Restructure implemented in April last year. The costs were offset against salary savings in line with best value. The Officer clarified that the recommendations within the report were based on there being no material changes, just disclosure changes that had been identified. The report was seeking a delegation to continue the closedown ... view the full minutes text for item 8.
Work Programme 2022- 2023 PDF 87 KB
To consider the Committee’s Work Programme for 2022 – 2023.
The Committee noted the contents of the Work Programme 2022 – 2023.
The Chairman confirmed the next meeting of the Committee had been moved to 30 January 2023.
The findings from the recent Scrutiny Review were to be heard at the January meeting.
Any other business, which the chairman, by reasons of special circumstances, decides is urgent.
Close of meeting
The Chairman closed the meeting at 14:05.