Agenda and draft minutes

To approve the minutes of the meeting of the Audit and Governance Committee held on 21 November and 4 December 2024 as published.

The Chairman referred to the Update from External Audit (BDO) in the November minutes with regard to a request from Puneet Jasuja for a list of outstanding items.  In response to a query from The Chairman in respect of an item in action tracker, Steve Bladen of BDO confirmed that the update report before the Committee would set out those items and added that he had provided some questions to the S151 Officer which could be circulated more widely.

RESOLVED

That the minutes of the Committee held on 21 November 2024 and 4 December 2024 be approved and signed as true and correct records.

To receive any apologies for absence.

No apologies for absence were received.

(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 Persons – Stephen Fitzgerald and Adesuwa Omoregie

Stephen Fitzgerald, Strategic Director for Finance (S151 Officer) introduced the draft Work Programme 2025/26 and Action Tracker and stated that in relation to one of the actions, monthly meetings were held between Finance Directors of local authorities in exceptional financial support or intervention which was useful although the situation in Woking could be regarded as unique.

Puneet Jasuja referred to the impact of the proposed amended Terms of Reference on the Work Programme to provide the Committee with oversight on risk and the Council’s Risk Register, treasury management, and the provision of full Internal Audit reports.  Adesuwa Omoregie, Director of Legal and Democratic Services (Monitoring Officer), advised that the Work Programme would be reviewed following Council adoption of the amended Terms of Reference and Councillors Cosnahan and Rice emphasised the importance of covering during the year all the areas under the remit of the Committee.

RESOLVED

That the Work Programme and Action Tracker be noted.

Reporting Person – Adesuwa Omoregie

Adesuwa Omoregie introduced the report which proposed changes to the Terms of Reference of the Committee following a review to ensure that they were aligned with the CIPFA guidance.  If agreed, the terms of reference would need to be recommended to Full Council for approval to be included in the Council’s Constitution.  Reference was made to an email received from Councillor Cosnahan which set out the following points: renaming section 7 to Approving of Audits; the moving of paragraph 7.15 regarding access to the Committee for the Head of Internal Audit as it was stated to be a Chair’s right and not a Committee function; and a numbering inconsistency in paragraph 10.

Councillor Rice stated that quorum should be mentioned in the Terms of Reference and Adesuwa Omoregie noted that the quorum in the Committee was set out elsewhere in the Constitution.  Councillor Rice stated that the quorum should be a higher number than currently, which had been captured in the action tracker from the September meeting.  Adesuwa Omoregie stated that there is a review of quorum levels in other committees as a whole.  Committee Members felt that increasing the quorum of the Committee from two to three Elected Members would be prudent.

Following a question by Councillor Cosnahan over whether cybersecurity should be included in the list under paragraph 5.2, Kevin Foster stated that cybersecurity and risk were currently covered by scrutiny and so the Council would need to consider whether this should be amended to audit to avoid duplication.

Members noted some typographical errors which would need to be corrected and that there should be a glossary for some items.  Following a question by Councillor Rice regarding paragraph 7.4, it was stated to be Committee Members who would be able to request summaries of specific internal audit reports, which were also held in the Councillors’ area on Teams.  This item has been superseded by the fact that it was agreed that full audit reports would be provided to Members and therefore this sections of the Terms of Reference would be amended to reflect this.

Councillor Rice noted that at the training session the resource allocated to Internal Audit was under the equivalent of one FTE and Stephen Fitzgerald discussed process for securing an increase in funding.  Stephen Fitzgerald stated that the current arrangements provided flexibility as extra days could be purchased from Mazars to take account of particular issues that might need internal audit attention, who also provided resource to other areas outside of the plan. 

Following a question by Councillor Rice over additions or deletions from the CIPFA guidance, Adesuwa Omoregie stated that the additions were largely extracted from the CIPFA guidance to ensure the Council’s compliance.  Councillor Rice added that a national template of an Audit and Governance Committee’s Terms of Reference would prevent local authorities taking time to prepare their own versions. This would be added to the FRSC recommendation in respect of a letter sent out with recommendations regarding constitutional matters.

The Chairman stated  ...  view the full minutes text for item 6.

Reporting Persons – Adesuwa Omoregie, Stephen Fitzgerald, and Kevin Foster

The Committee received its inaugural Annual Review for recommendation to Full Council, which set out a brief factual summary of the Committee’s work during the 2024/25 Municipal Year, with information included on Membership and Attendance; Remit of the Committee; Committee Meeting Activity; Training and Development; and a section on looking forward to the next Municipal Year.

Councillor Mukherjee requested that in order to ensure that members were drawn to the key points of reports that for reports over four pages long an Executive Summary should be included at the start.  A proposal was put forward and an amendment to the resolution as set out below was voted on and agreed.

RECOMMENDED TO COUNCIL

That  (i)      the Annual Review of the Audit and Governance Committee for 2024/25 be received; and

          (ii)     Audit and Governance committee reports over four pages long should include an Executive Summary at the start.

Reporting Person – Stephen Fitzgerald

Stephen Fitzgerald introduced the Final Accounts 2023/24, which had been published on 16 January to comply with the end of the public inspection period on 27 February.  The Accounts covered the year of the Section 114 announcement and Government Intervention.  They would need to be approved by Full Council at its meeting on 27 February to fulfil its obligations for the backstop date of 28 February.  Stephen Fitzgerald stated that in the Council's Chief Financial Officer’s Certification, the same caveat had been included as in previous sets of accounts stating the accounts had been prepared on the basis of the best financial information available.  Much work had taken place to prepare and bring five years’ of outstanding accounts through the committee process over the past year.

Brendan Bradley, Deputy Section 151 Officer, reported that the Accounts set out the issues regarding asset valuations, borrowing levels and the servicing cost of the borrowing.  Referring to the balance sheet of the Council, he stated that the level of stated reserves had reduced from circa £200m as at 31 March 2023 to circa minus 651 million as at 31 March 2024 due to loan impairment following external review, which had created a reliance on Exceptional Financial Support.  It was noted that the 2023/24 Accounts dealt with the issues outlined in the Section 114 notice and the mitigations set out in the Extraordinary Financial Support:  loan impairments; the suspension of interest from Group Companies; the application of the Capitalisation Direction; Minimum Revenue Provision; and Housing Revenue Account Legacy Charges.  They would be the first set of accounts subject to Audit from Grant Thornton.

The Accounts were stated to be single entity for the Council alone, with group accounts to be made available once completed.  The Audit was in train for the group accounts and it was anticipated they would be received by the Committee in June.

Councillor Rice asked if there were any issues not set out in the Accounts which the Committee should be made aware of.  Stephen Fitzgerald confirmed that he was not aware of anything material that had not already been disclosed, that impacted to the proper approval of the Accounts that Members needed to be aware of.  Stephen Fitzgerald also referred to the Chief Finance Officer’s Statement of Responsibilities in the accounts which showed the approach that had been taken.

Councillor Rice referred to the variance analysis which he stated provided the level of detail needed by Members to understand the actual budget variance and full year forecast and stated that it would be useful as a template for the budget monitoring report.  Stephen Fitzgerald stated that work was taking place to provide the correct level of detail.

Councillor Mukherjee asked for further assurance that there was nothing further the Committee should be made aware of and Stephen Fitzgerald stated that he had disclosed everything required for the draft Accounts to be referred to Council for approval, adding that the Accounts would require his signature.

Adesuwa Omoregie highlighted that at  ...  view the full minutes text for item 8.

Reporting Person – Stephen Fitzgerald

Yusuf Erol, Strategic Financial Adviser, presented a report on local audit reform, highlighting the Government's efforts to address the national backlog in local authority audits.  Nearly a thousand audits were stated to be outstanding, some dating back to 2015-16, and only one percent of local bodies had published audited accounts on time for the 2022-2023 financial year.

The proposed reforms included establishing a new local audit office, a central body to oversee and regulate local audits as recommended by the Redmond and Kingman reviews; simplifying financial reporting to make reporting requirements more practical for local authorities; increasing auditor capacity to address the shortage of auditors and improve market competition; improving collaboration to strengthen relationships between councils, auditors, and oversight bodies; and enabling clearer accountability to ensure audits effectively served local communities and enhanced transparency.  The government planned to finalise and implement the reforms between Autumn 2026 and April 2027.

Following a question by Cllr Cosnahan over the timetable being close to that for the proposed new unitary authorities, Stephen Fitzgerald explained that there was a sense of urgency from Government ministers to advance both agendas, and that the timetable would be challenging for local authorities.

Councillor Raja asked if there was any remedy available to taxpayers for the failure to complete Audits.  Brendan Bradley responded that there would be no compensation for taxpayers.  Stephen Fitzgerald added that the issue of missing the backstop date was regarded as uncharted territory and that the Government had been asked about likely consequences, to which a reply was awaited.

RESOLVED

That  (i)    the summary paper be received; and

          (ii)   the following recommendations for officers be noted:

That the Council:

I        engages with the government consultation: There are some 32 consultation questions that have been responded to by the deadline of 29^th January 2025;

II       monitor legislative developments: The Council should stay informed about changes to audit requirements, including backstop dates and exemptions for infrastructure assets;

III      engage with auditors: Strengthen collaboration with appointed auditors to ensure compliance with statutory deadlines and clarity around any disclaimed opinions;

IV      enhance internal processes: Review and optimise internal financial reporting and assurance mechanisms to align with the new audit framework; and

V       utilise Government resources: Leverage guidance, advice, and practical support provided by the government and system partners.

VI      plan for recovery: Continue the current strategy of catching-up on past accounts publications and audit opinions, ensuring a robust process to rebuild assurance and maintain stakeholder confidence.

Reporting Person – Steve Bladen (BDO)

The Committee received an update from Steve Bladen of BDO on the External Audit, which had been provided following the circulation of the agenda pack. 

The report provided an update on the progress of the Audits for the years 2019/20 – 2022/23.  The focus of BDO was stated to be on fulfilling its responsibilities under the Local Authority Backstop Arrangements, including responding to an objection received from a local elector, which was pending internal review and consultation with relevant parties; completing the work on compliance with laws and regulations, in relation to the Housing Revenue Account and amendments to the Chief Financial Officer’s Certification; and reporting on any known material accounting matters.  The backstop date for audits up to 2022-2023 was 13 December 2024; however guidance allowed for delays if auditors were dealing with compliance or objections.

Following a question by Councillor Rice about the expected completion date, Steve Bladen stated that it was difficult to provide a date due to ongoing consultations with other parties.  The Chairman noted that the objection from the member of the public from 2019 had not yet been resolved and questioned if an opinion would be issued before the formation of a potential Unitary Council, to which Steve Bladen stated that he anticipated an opinion would be provided before that time.

RESOLVED

That the update be received.

Reporting Person – Paul Jacklin (Grant Thornton)

The Committee received an update from Paul Jacklin of Grant Thornton on the External Audit for the 2023/24 financial statements, with the sole entity accounts having been received by the Auditor on 16 January 2025.  It had been agreed with the Council that limited work had been done on the 2023-24 statements due to the statutory backstop date being 28 February. 

Paul Jacklin stated that once the predecessor auditors (BDO) had disclaimed the previous years, Grant Thornton would be able to issue a disclaimed opinion for 2023-24.  For the 2024-25 audit, account balances would be tested focusing on in-year transactions and the balance sheet for March 2025.  Interim results and planning work would be reported to the Committee in June, along with the audit plan for 2024-25. 

The Chairman asked about the submission of consolidated accounts. Stephen Fitzgerald explained that the focus had been on single entity accounts to meet the backstop date, and that it was hoped that consolidated accounts would be received at the next meeting of the Committee.

RESOLVED

That the update be received.

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

The Committee received the Internal Audit Charter which established Internal Audit’s position within the organisation, including the nature of the Head of Internal Audit’s functional reporting relationship with the Audit and Governance Committee; authorised access to records, personnel and physical properties relevant to the performance of engagements; and defined the scope of Internal Audit’s activities.

Sam Lowe of Forvis Mazars presented the Charter, noting updates to the executive summary based on the workshop held on 27 January with Committee Members. The content had remained largely the same and was aligned to global and public sector internal audit standards.

Councillor Rice stated that an annual session between the Internal Auditors and Committee Members without Council officers present should be scheduled annually in the Work Programme.  Stephen Fitzgerald stated that this could be organised and added that the Internal Auditors could report concerns directly to the Chief Executive, the chair of the Audit Committee, the Monitoring Officer, or to an external body without informing the Section 151 Officer.

RESOLVED

That the Internal Audit Charter be approved, with the amendment to include reference to an annual meeting between the Internal Auditors and the Committee members without Council Officers being present.

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

The Committee received the Internal Audit Progress Report from Graeme Clarke and Sam Lowe of Forvis Mazars which set out the work that had been undertaken since the last meeting.  At the meeting on 21 November it had been agreed to consider the format of the report as part of an Internal Audit workshop held on 27 January, with a new one page snapshot added; RAG status of each audit set out in Section 3; and detail of implementation of previously agreed High Priority actions included in Section 4.

It was noted that final reports on Group Companies; GDPR Compliance; Insurance – Administration and Management; and Commercial Leases and Licences had been issued.  In addition, fieldwork had concluded for Planning Services; Emergency Planning; and Budget Monitoring and Management, with draft reports issued for management response.  The number of high-priority overdue items had decreased from three to zero.

Following questions by Puneet Jasuja regarding the Group Companies and GDPR Audits, it was noted that the Group companies were held to account by the Shareholder Liaison Service to ensure they met the requirements of the Corporate Governance Framework at regular meetings of the Shareholder Executive Committee; and that there were possible areas where the Council could enhance GDPR compliance.  It was added that the Council’s next self-assessment on GDPR could be forwarded to Committee Members.

In relation to the Commercial Leases audit actions, Councillor Rice stated that the responsible person should ultimately be employees, noting that if no reply was received Forvis Mazars would escalate.

RESOLVED

That the report be received, and progress against Internal Audit plan be noted.

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

The Committee received the draft Internal Audit Strategy Update – Draft Operational Plans 2025/26 and 2026/27 which detailed how the Council would meet its statutory requirements for Internal Audit for 2025/26 and included an indicative plan for 2026/27.  Sam Lowe reiterated that the document had evolved to reflect changes in risks and audit requirements based on previous meetings and discussions.

It was noted that the areas originally set out for 2025/26 in last year’s paper had been included with the following areas added:  Counter Fraud; Group Companies; and Office 365.  The current plan was for 234 days (an increase from 181 days in 2024/25), of which 50 were expected to require specialist involvement (20 – 50 in 2024/25).  The resource for the follow-up of actions identified in the internal audits would increase from 7 to 15 days.

The Chairman raised a query regarding the level of priority allocated to some of the planned audits, for example Group Companies, Improvement and Recovery Plan and Risk Management.  Kevin Foster stated that a risk-based approach had been taken to focus on the areas of greatest risk and Sam Lowe added that the priorities also included when the area had last been audited and the opinion at that time. 

Puneet Jasuja stated that a rationale could be included in the table A1 in the plan and recommended that the Audit Plan be considered in the planned private meeting with Forvis Mazars.  Annie Ren proposed that the prioritising of the items in the Plan be reviewed and Councillor Rice added that the Plan should be reviewed on a quarterly basis.  It was noted that the further discussion should not cause a delay in the work due to begin at the start of the next financial year.

Following a question by Councillor Rice over the audit function of subsidiaries and how that should link with the Council’s audit function, noting the level of debt attributed to the subsidiaries, Kevin Foster explained that the governance framework for companies was separate from the Council's Audit and Governance Committee, although it should have a suitable role to ensure the Committee had awareness of company activities.  Councillor Rice also questioned whether external auditors, Grant Thornton, assessed the quality of control functions in subsidiaries.  Paul Jacklin clarified that the area was looked at from the focus of value for money as opposed to controls.

RESOLVED

That the Internal Audit Plan be considered at the meeting with Forvis Mazars which would be received by the Committee at its next meeting.

Reporting Person – Adesuwa Omoregie

The Committee received the biennial review of the Anti-Fraud and Corruption and Confidential Reporting Polices which had been undertaken by the Monitoring Officer, attached as appendices to the report with proposed minor changes.

Following a question by Puneet Jasuja, Stephen Fitzgerald explained that Reigate and Banstead undertook the fraud work for several local authorities in the Surrey and North Hampshire area and good work was taking place.  Following a question by Councillor Rice, Adesuwa Omoregie stated that the policies had been reviewed against legislation and reflected the Council's operations accurately. 

RESOLVED

That the amendments to the policies be noted.