Agenda and minutes

To approve the minutes of the meeting of the Audit and Governance Committee held on 19 September 2024 as published.

RESOLVED

That the minutes of the Committee held on 19 September 2024 be approved and signed as a true and correct record.

To receive any apologies for absence.

Apologies for absence were received from Councillor M I Raja and Graeme Clarke of Forvis Mazars.

The Chairman welcome Annie Ren and Puneet Jasuja to their first meeting of the Committee as newly appointed Independent Co-Opted Members and Sir Tony Redmond, Lead Commissioner, along with the external representatives attending the meeting.

(i)         To receive declarations of interest from Members and Officers in respect of any item to be considered at the meeting.

(ii)        In accordance with the Officer Employment Procedure Rules, the Strategic Director - Corporate Resources, Kevin Foster declares a disclosable personal interest (non-pecuniary) in any items concerning the companies of which he is a Council-appointed director.  The companies are listed in the attached schedule.  The interests are such that Mr Foster may advise on those items.

In accordance with the Officer Employment Procedure Rules, the Strategic Director - Corporate Resources, Kevin Foster declared a disclosable personal interest (non-pecuniary) in any items concerning the companies of which he is a Council-appointed director.  The interests were such that Mr Foster could advise on those items.

To consider any business that the Chairman rules may be dealt with under Section 100B(4) of the Local Government Act 1972.

There were no items of Urgent Business.

Reporting Person – Kevin Foster

The Chairman advised those present that the Health and Safety Annual report was being brought forward to the first major item on the agenda as representatives from Human Resources were attending for this item only.

Vicky Pickett, the Council’s Health, Safety and Insurance Officer, introduced the report which covered the period from 1 April 2023 to 31 March 2024.

Following a question from Councillor Rice, it was stated that the health and safety training software would identify officers who had not completed their training and senior managers would be contacted as required.  Completion of mandatory training such as cybersecurity was required as part of the staff appraisal process. 

Following questions from the Chairman, the Committee was advised that good progress was being made on the 2025/26 policy updates which were due by the end of the fourth quarter.  It was noted that the non-reporting of incidents was hard to measure unless they were reported by a third party.  Vicky Pickett undertook to establish whether Freedom Leisure collated near miss statistics.  Additionally, it was noted that the Council’s systems recorded households where caution was required when staff were visiting.  In relation to the Internal Audit of Health and Safety, the Head of Human Resources, Strategic Director – Communities and Internal Audit Manager (Forvis Mazars) would determine the areas for inclusion.

The Committee noted that future annual health and safety reports would be received at the July Committee closer to year end.

RESOLVED

That the Health and Safety Annual report be received with no matters of concern.

Reporting Person – Steve Bladen (BDO)

Steve Bladen and Geraint Jones were attending the meeting from BDO.  Steve Bladen introduced the report which set out an update on the status of the Audits from 2019/20 to 2022/23 and stated that there were a number of outstanding matters which had to be resolved before the four sets of accounts could be signed off.  He advised that it was unlikely the backstop date of 13 December 2024 would be met due to issues around Minimum Revenue Provision (MRP) and the Council's use of loans to fund its subsidiaries.  He stated that the Council should consult with the Ministry of Housing, Communities and Local Government (MHCLG) over whether its sole entity accounts provided a true and fair view and the amended Statement of Responsibilities section.

The Chairman asked for a path for completion, to which Steve Bladen advised that an exact timeline could not be provided due to the complexity of the issues and the consultation with MHCLG, as BDO would need to include the outcome of the outstanding matters in their audit completion report.

Stephen Fitzgerald noted that the accounts would need formal approval by the Council to trigger an audit opinion from BDO, which would likely be a disclaimed opinion.  Consultation was also taking place with the Financial Reporting Council and the Chartered Institute of Public Finance and Accountancy.

Councillor Rice questioned the timeliness and turnaround of information requests from both parties, given the known backstop date since September.  Steve Bladen and Stephen Fitzgerald confirmed that they had no issues over the other party’s timeliness.

Adesuwa Omoregie asked whether BDO would accept the advice from MHCLG or seek further advice.  Steve Bladen stated that BDO would need to view the advice first.  Stephen Fitzgerald added that the formal written advice once received would be shared with BDO.

Councillor Oades asked when the consolidated accounts would be available if required for an audit opinion to be issued by BDO. Stephen Fitzgerald stated that they would not be available by the backstop date, noting the initial focus had been on producing sole entity accounts.  Following a question by Councillor Oades as to how long it would take BDO to issue opinions after the production of consolidated accounts and the receipt of MCHLG advice, Steve Bladen reiterated that an exact timeline could not be provided due to the complexity of the issues and the need to consider the advice.

The Chairman expressed frustration over ongoing issues, such as the resident's objection regarding the calculation of MRP, which had been outstanding for some time.

Puneet Jasuja requested a list of outstanding items from BDO, which Steve Bladen stated could be provided. Puneet Jasuja also asked if other Councils were in similar situations and Stephen Fitzgerald confirmed that there were a number of authorities in exceptional financial situations and that he would liaise with some of those Section 151 officers.

Following a question by Councillor Cosnahan, Stephen Fitzgerald stated that the Council had initially commissioned Price Waterhouse Coopers to assist with the  ...  view the full minutes text for item 6.

Reporting Person – Joanne Brown and Paul Jacklin (Grant Thornton)

Joanne Brown from Grant Thornton presented an update on the External Audit for 2023-24, which included information on the backstop regulations, the progress of the Audit as at 1 November 2024, Audit Deliverables and a Sector Update.  Joanne Brown stated that time and effort invested in old financial statements, which would ultimately be disclaimed, should be balanced against focusing on the 2023-2024 accounts. It was stated that Grant Thornton could disclaim the 2023-2024 accounts without consolidated group accounts, referencing their absence in the opinion, noting the backstop date of 28 February.

Joanne Brown set out the work that should be undertaken on the 2023-2024 accounts and that it was anticipated that the Council could achieve unqualified audit accounts by 2027-2028, recognising the lengthy recovery process.  It was planned to bring an audit findings report and a provisional opinion to the Committee before the end of February, explaining the basis for disclaiming the accounts. Additionally, the Value for Money conclusion covering broader governance and financial sustainability arrangements was being prepared.

The Chairman asked if Grant Thornton's approach differed fundamentally from BDO in relation to whether group accounts were required. Joanne Brown explained that Grant Thornton’s approach was designed to be pragmatic, focusing on closing accounts and recovery while still applying the code and guidance.  Steve Bladen from BDO advised that there was no fundamental difference between the two firms' positions but stated the need for the Council to seek approval from MHCLG and FRC, and also clarified that BDO was undertaking only the minimum required audit procedures for prior years where they expected to disclaim their audit opinion.

Councillor Oades reiterated an error in the audit deliverables section of the report, which he had highlighted at the previous meeting, noting that the planned date for the audit findings report was incorrectly listed as February 2028 instead of February 2025.

Councillor Cosnahan referred to the timeline for recovery outlined in the report, noting that the Commissioners might not see an unqualified set of accounts before the end of their five-year term. Joanne Brown explained that the elongated timeline was due to the lack of assurance over opening balances, which carried through into future years.

Sir Tony Redmond, Lead Commissioner, reiterated the importance of addressing historical account issues to ensure the Council's financial resilience and sustainability. He stressed the need for pragmatism in dealing with outstanding accounts and the importance of achieving a firm financial footing for the future. He stated that the Commissioners were pushing for timely resolution while being realistic about the challenges faced by the Council.

The Chairman noted that the next scheduled meeting was on 29 February 2024, which was a day after the second backstop date, which could need to be rearranged to assist with the backstop date, ensuring that it was aligned as necessary with Full Council.

RESOLVED

That the update be received.

Attached is a copy of the report prepared for the Extraordinary meeting of Council to be held on the evening of 20 November 2024 in respect of the recently published Public Interest Report.  A copy of the Public Interest Report is appended to the report.

The Chairman introduced the public interest report from Grant Thornton, noting it had been added to the agenda for the Committee to consider and for newly appointed independent members to raise points. The report was not intended to repeat the previous night's discussion at Full Council.

The Chairman highlighted the report's finding that the evidence suggested that Internal Audit had been kept at arm's length and asked what had led to this statement. Joanne Brown from Grant Thornton explained that several historic internal audit reviews had been deferred or removed from the Internal Audit plan following management decisions. She stated that the plan had seemed to be based on an inadequate corporate risk register and had not focussed on the key areas of risk.

Sir Tony Redmond outlined the Commissioners' role going forward, including acknowledging and accepting the findings of the Grant Thornton report, exploring potential actions and continuing to look at the historic issues highlighted. He mentioned ongoing discussions with audit and accountancy bodies and the need to oversee the development and training plans for staff to prevent recurrence.

Councillor Rice emphasised the need for training in governance for Committee members, noting that many Councillors would not have prior experience in this area. The Chairman agreed and noted the importance of stability within the Committee membership. Sir Tony Redmond added that a balance was needed between consistency and a healthy level of turnover.

Puneet Jasuja raised a concern about the section of the report which stated that Internal Audit had not provided absolute assurance to the Council regarding its risk management and governance protocols. Sam Lowe of Forvis Mazars explained that the reference to absolute assurance was intended to distinguish it from reasonable assurance, noting the need to draw upon a range of assurance sources.

Puneet Jasuja also advised that there were synergies with the Annual Governance Statement and the Improvement and Recovery Plan, and stated that Members should be well informed about risk control.  Sir Tony Redmond stated that as the Improvement and Recovery Plan reported to the Improvement and Recovery Board (IRB), it could be appropriate for the Committee to receive the governance aspects.  Adesuwa Omoregie stated that the overall Improvement and Recovery plan was also received by the Executive and that it was important to avoid duplication between scrutiny and audit functions.  At its next meeting in February, the Committee would receive its first annual review which would enable Members to assess how adequately the Committee was fulfilling its role and amend the work programme accordingly. 

RESOLVED

That the report be received.

Reporting Person – Stephen Fitzgerald

Stephen Fitzgerald presented the draft Statement of Accounts for 2022/23, noting that the approach taken had been consistent with the previous meeting in July. He asked the Committee to note the accounts and highlighted the inclusion of events related to the Section 114 notice and the Government Intervention in the explanatory forward. He referred to page 114, the statement of the Chief Financial Officer's responsibilities, and mentioned the same caveat as previously would be included regarding the shortcomings of the financial information.

Stephen Fitzgerald explained that the inspection period for the 2022-23 Accounts would not have ended by the time of the special Audit & Governance Committee meeting on 4 December.  He noted that BDO and CIPFA had been consulted, and further clarification was being sought from MHCLG.

The Chairman raised a technical point about her being listed as a signatory to the accounts despite the fact that this Committee does not approve the accounts and, in any event, she is a non-voting member of the Committee.  Stephen Fitzgerald agreed that it would be corrected.  Councillor Rice questioned why the accounts were being reviewed by the Committee twice. Stephen Fitzgerald explained that the accounts needed to be noted first and then recommended to Council for approval after the inspection period had concluded.

RESOLVED

That  (i)      the annual accounts for 2022/23 be noted;

          (ii)     the signing-off of the accounts by the Council’s Strategic Director for Finance and Section 151 Officer be noted, with the caveat that they are based on the best information available and the policies and conventions in place for the year that the specific accounts refer to; and

          (iii)     it be noted that the issues concerning bad debt on investments in group companies identified in the June 2023 Section 114 Notice and Capitalisation Direction will be dealt with in the 2023/24 accounts which are planned to be presented to the Council ahead of the Government’s backstop date of 28^th February 2025.

Reporting Persons – Graeme Clarke and Sam Lowe (Forvis Mazars)

Sam Lowe of Forvis Mazars introduced the Internal Audit Charter and stated that it defined the purpose, authority and responsibilities of Internal Audit in line with Public Sector Internal Audit Standards. The current version included only minor changes, such as the Committee's name change, with the content remaining largely the same.

The Chairman stated that it was important to consider the robustness of the Charter, clarity over reporting and escalations, whether it was appropriately risk-based, and if the audit process had been officer-led. Councillor Guy Cosnahan also questioned how the Charter compared with those of other Councils.

Puneet Jasuja suggested a separate discussion might be needed to address similar concerns, including how the Committee gained assurance over the completion of actions identified in the audits.  Councillor Rice expressed a concern over the level of substantive testing.

Annie Ren asked for more information about the Internal Audit methodology. Sam Lowe agreed to provide information about their methodology, explaining that it was subject to internal and external quality assessments with substantive testing being performed on each audit.

The Chairman asked for assurance that Internal Audit remained impartial and not officer-led. Sam Lowe confirmed that the Charter allowed for direct access to key individuals and that any limitations affecting their ability to provide an objective opinion would be reported.

In light of the discussion it was proposed that a separate session be held with Forvis Mazars to discuss possible amendments that could be helpful to the Committee. Stephen Fitzgerald added that recent process improvements included regular meetings with the Chief Internal Auditor and the establishment of an audit tracker.  Councillor Rice pointed out a conflict of interest where the Internal Auditor reported to the Head of Finance and suggested that the internal auditor should report directly to the CEO or Monitoring Officer to avoid such conflicts. The Charter would then be revised for the February meeting of the Committee.

RESOLVED

That a separate session with Forvis Mazars be held to review the Internal Audit Charter which would be brought back to the February meeting of the Committee.

Reporting Persons – Graeme Clarke and Sam Lowe (Forvis Mazars)

Sam Lowe introduced the Internal Audit Progress Report which had been updated since the last meeting.  Final reports on Sickness Absence Management and Insurance had been issued, with several audits either at draft report stage or in progress.  The number of high-priority overdue items had now decreased from six to three, with the remaining items expected to be completed by the end of the year.

The Chairman stated that whilst the report set out the progress since the last meeting, it was difficult to extract meaningful information from the report to assist the Committee with the effective tracking of audit recommendations.  Councillor Oades added that further context should be included to enable Members to interpret the data provided in the tables in the report.  It was added that the finalised Internal Audit summary reports were available for Members in their reference area within Teams.

Councillor Rice emphasised the importance of understanding which high-risk observations remained unaddressed and for how long.   The Chairman added that where possible, it would be beneficial for members to have a consolidated view of the status of recommendations without needing to cross-reference multiple documents. 

Councillor Rice raised the issue of delays in the finalisation of summary reports.  Kevin Foster stated that each report was received by CLT to ensure that it was content with the management responses to the actions identified.  It was added that the GDPR report had been deferred due to the departure of the previous Data Protection Officer.

Sam Lowe undertook to take account of feedback in the report preparation process, seeking clarity on what specific information would be useful for the Committee.  Annie Ren suggested that the Progress Report be included in the aforementioned separate session to discuss the Charter.  Stephen Fitzgerald added that it would be beneficial for Andrew Hardingham, the Council’s LGA Advisor, to be invited.

RESOLVED

That the report be received, progress against the Internal Audit Plan be noted, and the separate session would include both the Internal Audit Charter and the Progress Report.

Reporting Person – Stephen Fitzgerald

Stephen Fitzgerald introduced the Annual Governance Statement for 2023-24, which outlined the Council's governance and operations in the year that included the Section 114 Notice, and stated that the statement aimed to reflect both challenges and positive actions. Key points included the principles of good governance, internal audit references, and the financial management code.  It was stated that the current statement strived for honesty and authenticity, acknowledging the need for genuine reflection of the Council's situation.

The Chairman suggested that the governance statement should be a living document, reviewed regularly to inform progress.  She referred to the Chairs' Forum which had focused mainly on scrutiny although should also include audit.

Councillor Cosnahan questioned whether the statement should be prepared before year start to guide the Council's actions and facilitate self-assessment.  Councillor Rice suggested that gaps identified in the Annual Governance Statement should be considered by the Committee during the year.

Puneet Jasuja noted an overlap between the governance statement and the internal recovery plan, along with the need to utilise various management tools mentioned in the governance statement, to ensure a risk-based approach in audits.  Councillor Oades suggested adding the relevant areas of the Improvement and Recovery Plan as an appendix to the Statement.  Adesuwa Omoregie stated that the governance aspects of the Improvement and Recovery Plan could be created as a living document to keep the Committee informed of progress.

The Chairman reiterated the importance of governance permeating all levels of the organisation, beyond the Corporate Leadership Team. Stephen Fitzgerald agreed to reflect this in the governance statement.

RESOLVED

That the Annual Governance Statement be received.

Reporting Persons – Stephen Fitzgerald / Adesuwa Omoregie

Adesuwa Omoregie advised that the Committee would need to vote to continue beyond 10.30pm or the meeting would cease at that time, and Members determined to conclude at 10.30pm with the Work Programme and Committee Action Tracker to be items deferred to the next meeting.

RESOLVED

That the item be deferred to the next meeting of the committee on 4 December 2024 due to the meeting end time of 10.30pm as set out in the Council’s Constitution.