Agenda and draft minutes

SWT Audit and Governance Committee
Monday, 14th March, 2022 6.15 pm

Venue: The John Meikle Room - The Deane House. View directions

Contact: Jess Kemmish, Email: j.kemmish@somersetwestandtaunton.gov.uk 

Webcast: View the webcast

Items
No. Item

53.

Apologies

54.

Minutes of the previous meeting of the Audit and Governance Committee pdf icon PDF 279 KB

55.

Declarations of Interest

    To receive and note any declarations of disclosable pecuniary or prejudicial or personal interests in respect of any matters included on the agenda for consideration at this meeting.

    (The personal interests of Councillors and Clerks of Somerset County Council, Town or Parish Councils and other Local Authorities will automatically be recorded in the minutes.)

    Additional documents:

    Minutes:

    Members present at the meeting declared the following personal interests in their capacity as a Councillor or Clerk of a County, Town or Parish Council or any other Local Authority:-

     

    Name

    Minute No.

    Description of Interest

    Reason

    Action Taken

    Cllr L Baker

    All Items

    Cheddon Fitzpaine & Taunton Charter Trustee

    Personal

    Spoke and Voted

    Cllr S Coles

    All Items

    SCC & Taunton Charter Trustee

    Personal

    Spoke and Voted

    Cllr H Davies

    All Items

    SCC

    Personal

    Spoke and Voted

    Cllr D Johnson

    All Items

    SCC

    Personal

    Spoke and Voted

    Cllr J Lloyd

    All Items

    Wellington & Sampford Arundel

    Personal

    Spoke and Voted

    Cllr M Peters

    All Items

    Taunton Charter Trustee

    Personal

    Spoke and Voted

    Cllr T Venner

    All Items

    Minehead

    Personal

    Spoke and Voted

     

56.

Public Participation

    The Chair to advise the Committee of any items on which members of the public have requested to speak and advise those members of the public present of the details of the Council’s public participation scheme.

     

    For those members of the public who have submitted any questions or statements, please note, a three minute time limit applies to each speaker and you will be asked to speak before Councillors debate the issue.

     

    Temporary measures during the Coronavirus Pandemic

    Due to the temporary legislation (within the Coronavirus Act 2020, which allowed for use of virtual meetings) coming to an end on 6 May 2021, the council’s committee meetings will now take place in the office buildings within the John Meikle Meeting Room at the Deane House, Belvedere Road, Taunton. Unfortunately due to capacity requirements, the Chamber at West Somerset House is not able to be used at this current moment.  

     

    Following the Government guidance on measures to reduce the transmission of coronavirus (COVID-19), the council meeting rooms will have very limited capacity.  With this in mind, we will only be allowing those members of the public who have registered to speak to attend the meetings in person in the office buildings, if they wish (we will still be offering to those members of the public that are not comfortable in attending, for their statements to be read out by a Governance and Democracy Case Manager).  Please can we urge all members of the public who are only interested in listening to the debate to view our live webcasts from the safety of their own home to help prevent the transmission of coronavirus (COVID-19). 

    Additional documents:

    Minutes:

    No requests for public participation were received.

57.

Audit and Governance Committee Forward Plan pdf icon PDF 243 KB

58.

External Audit – Progress Report and Sector Update pdf icon PDF 218 KB

    The attached report provides the Audit and Governance Committee with a progress update regarding the work of the external auditors, Grant Thornton, together with information relating to emerging issues relevant to the Council.

     

    Additional documents:

    Minutes:

    The Corporate Finance Manager provided an introduction to the report:  

    ·         The report was the progress report and sector update from our external auditors, Grant Thornton.   

    ·         The recommendation of the report was for the committee to consider and note the report 

     

    The Director from Grant Thornton provided a further introduction to the report:  

    ·         For the 2020-2021 Audit the Financial Statement Opinion was issued on 30th September 2021 and the Auditors Opinion was issued on 15th December 2021. These dates were in line with the statutory deadlines. The final proposed fee subject to the Public Sector Audit Appointment’s (PSAA) approval was £68,500, this matched the fee in the original audit plan for 2021.  

    ·         Planning and interim work for the 2021-2022 audit had begun and would continue.  

    ·         In terms of the timetable for 2021-2022 accounts the regulation stated that the authority must have produced draft accounts by 31st July 2022. The deadline for published audited financial statements to be published by the Council this year was 30th November 2022.  

    ·         The Director from Grant Thornton proceeded to provide a verbal update on item eight on the agenda: 

    ·                     Normally Grant Thornton would have brought a report on the Audit Plan to be considered and noted by the committee but were not in a position to do so at present. This was due to there being ongoing discussions nationally with PSAA around fee proposals for 2021-2022 audits and there was also an emergency consultation on potential changes to the CIPFA financial code. Audit plans would not be issued until the consultation was complete.  

    ·                     The report would be issued to relevant officers and the committee Chair outside the normal committee cycle and then be brought to the Audit and Governance Committee in June for formal noting.  

    ·                     The date for the auditor's annual report was yet to be confirmed. 

    ·         In terms of value for money the External Auditors continued with the updated code of audit practice from the prior year. An auditor’s annual report would be produced and provided.  

    ·         Undertook work to certify the Council’shousing benefits subsidies claim in line with the Department for Work and Pensions (DWP) regulations. This was reported on 18th February 2022. The DWP requested a small amount of follow up work based on some documents having been deleted in line with General Data Protection Regulations (GDPR) however the DWP required the Council to go back to claimants to recover that information. That work was completed, and the updated report provided back to DWP.  

    ·         Undertook work on the Council’s pooling of housing capital receipts and the report on this was issued in advance of the national deadline. 

    ·         Discussed accounting changes with officers.  

     

    During the debate the following points were raised:  

    ·         It was asked about the figures which the DWP had asked Grant Thornton to go back and check, but which Grant Thornton then found the Council had deleted due to GDPR restrictions and whether this was a cause for concern. The  ...  view the full minutes text for item 58.

59.

External Audit - Audit Plan 2021/22 pdf icon PDF 222 KB

    This report introduces the External Audit Plan for 2021/22.  The Plan is prepared by the Council’s external auditors, Grant Thornton, ahead of the financial year-end (31 March).

    The purpose of the Plan is to summarise the approach to the 2021/22 audit programme together with the audit view on risk and materiality.

    A verbal report on the Plan will be provided by the Audit Director, covering all known aspects of the Plan ahead of it being issued.

     

    Additional documents:

    Minutes:

    Having received the External Auditor’s verbal presentation as part of the previous agenda item the Committee resolved to carry the recommendations in the report;  

    2.1 Members are requested to:  

    ·                     consider and note the External Auditor’s verbal presentation,  

    ·                     delegate receipt and consideration of the final Audit Plan for 2021/22 to the Assistant Director – Finance (S151 Officer) and to the Chair and Vice Chair of this Committee, prior to it being presented to the June meeting of this Committee. 

     

60.

External Audit Risk Assessment 2021/22 pdf icon PDF 219 KB

    Grant Thornton LLP is the Council’s appointed auditor responsible for the audit of the accounts for the periods 2019/20 through to 2022/23. As part of the preparation for the 2021/22 audit, Grant Thornton has followed its risk assessment procedures to obtain an understanding of management processes in several areas. This report shares the information provided by the Council’s management to help inform this risk assessment.

     

    Additional documents:

    Minutes:

    The Corporate Finance Manager provided an introduction to the report: 

    ·         Senior Management of the Council had contributed to the responses to the range of questions passed to officers by the auditors. These responses were set out in the report.  

    ·         The questions followed a similar trend each year but there were some additional new questions added this year.  

     

    The Director from Grant Thornton provided a further introduction to the report: 

    ·                     Each year auditing standards required that a number of questions were posed by Grant Thornton to management who then provided responses. The paper then comes to the Audit and Governance Committee as it is the body charged with governance at the authority. The Committee is then asked to consider whether the responses from management are in line with their understanding of the authority. 

     

    During the Debate 

    ·                     It was asked about the bad debt provision expected credit losses and what type of bad debt would be written off and how it would be deemed irrecoverable. Officers responded that debts on both the General Fund and Housing Revenue Account were looked at. The older a debt was the less likely it was to be repaid. Calculations were done using formulas to work out the likelihood that debts would not be repaid. Debts were not looked at on an individual basis but rather on a group basis for doubtful debt. When debts were considered for being written off debts were looked at on an individual basis. 

    ·                     It was asked if in the external auditor’s opinion, they would advise the Council to exit the commercial Investment portfolio it had and sell all properties. The Grant Thornton Director responded that it was not their place to answer that. Looking forward nationally the view of the sector and government bodies was that investments of the same commercial nature should not be made by local authorities. Selling all properties immediately could however also be a risk particularly if all other local authorities decided to do so at the same time.  

    ·                     It was asked if the external auditors felt that actions taken by the Council in response to the auditor’s recommendations had reduced the risk of the commercial investment. It was responded by the Grant Thornton Director that the recommendations were there with a view to reducing and highlighting risk and to encourage officers and councillors to recognise that risk and take action to respond to it. It was a democratic decision to invest or not. The guidance from government was not to invest in properties for yield. Officers responded that the purchase of Commercial Investments by the Council had been completed and there were no plans to purchase any more commercial properties. The purchases had been completed before the new prudential code was established. It was the prudential code which now outlined guidance not to invest 

    ·                     The granularity of the report was praised.  

    ·                     It was asked about the separate approval threshold for journal transactions over £50,000 and whether that was the correct level in terms of  ...  view the full minutes text for item 60.

61.

SWAP Internal Audit - Progress Report 2021-22 Internal Audit Plan pdf icon PDF 401 KB

    This report summarises the work of the Council’s Internal Audit Service and provides:

    ·     Details of any new significant weaknesses identified during internal audit work completed since the last report to the committee in December 2021.

     

    ·     A schedule of audits completed during the period, detailing their respective assurance opinion rating, the number of recommendations and the respective priority rankings of these.

     

    Additional documents:

    Minutes:

    The Assistant Director from SWAP introduced the report: 

    ·                     The report was a progress update to be noted by the Committee.   

    Cllr Pugsley left the meeting at 19:03 

    ·         It highlighted progress against and changes to the Internal Audit Plan and brought significant findings to the Committee’s attention.  

    ·         Four reviews had been completed. No adverse opinions had been given.  

    ·         Council Tax Business Rates audit was given reasonable assurance and three low priority recommendations were raised. 

    ·         Housing benefits audit was given reasonable assurance. There were two low priority recommendations around use of printers and around system access.  

    ·         The audit around GDPR received reasonable assurance. There were a few level 2 priority actions.  

    ·         A small annual piece of work was done around system parameter testing. This was done to ensure various areas had been correctly updated in terms of terms and conditions.  

    ·         Operate a rolling audit plan. The priorities were agreed for January through to March with the Council’s Senior Management Team.  

    ·         There were no adverse opinions to bring to the Committee’s attention.  

     

    During the Debate the following points were raised: 

    ·                     It was asked whether projects such as Tonedale Mill which were partly funded by Historic England or other groups were included under Regeneration Projects in the reporting. It was responded by the SWAP Assistant Director that the Regeneration Projects audit area was a high-level scope so when an audit was undertaken it would be decided what areas of Regeneration Projects should be looked at in terms of Governance.  

    ·                     It was raised that there were some advisories which needed to be considered and concerns were raised about this in relation to local government reorganisation. In particular, concerns were raised about the time officers were spending on unitary work and the hidden costs of this. It was responded by the SWAP Assistant Director that the Unitary Preparedness review was to look at lessons learned from the Transformation this council went through and to use those lessons for the current local government reorganisation. There would be pressures on staff as a result of the work involved in the transition to a unitary authority and maintaining services would be a challenge.  

    ·                     It was asked what issues had been highlighted from Dorset and what lessons had been learned. The Assistant Director from SWAP responded that the report with lessons from Dorset’s transition could be provided once it was completed.  

    ·                     It was asked about staff retention being included in the audit and why this had been included. It was responded by Assistant Director from SWAP that staff retention had been highlighted as a risk of Local Government Reorganisation. SWAP would look at what the Council was doing to address this risk and to support staff.  

    ·                     It was raised that the Unitary Programme was currently four weeks behind and it needed to be considered what could be done to prevent any last-minute rush due to running out of time. It was asked if this could be considered by the auditors as part of the Unitary Preparedness audit. The  ...  view the full minutes text for item 61.

62.

SWAP Internal Audit - 2022-23 Internal Audit Plan and Internal Audit Charter pdf icon PDF 420 KB

    This report introduces the Internal Audit Plan for 2022/23 and also incorporates an ‘Internal Audit Charter’ which sets out the operational relationship between Somerset West and Taunton (SWT) and the South West Audit Partnership (SWAP).   

     

    This is a flexible plan that may be amended during the year to deal with shifts in priorities or new and emerging risks.  The following plan has the support of the Section 151 Officer and has been approved by the Senior Management Team.

     

    Additional documents:

    Minutes:

    The Assistant Director from SWAP introduced the report: 

    ·                     The report asked for the Committee’s approval for the Audit Plan and the Audit Charter.  

    ·                     Having an agile rolling audit plan would be important for the next twelve months. The items on the plan would change over time but the rolling audit plan was tailored based on what was expected to be a priority for the year.  

    ·                     This year's plan was a quarterly rolling audit plan.  

    ·                     The priorities for quarter one had been agreed with the senior management team and tied into the corporate risk register. Areas included homelessness and cyber security.  

    ·                     The members of the Committee were asked to submit any items which they felt should be considered for auditing to the SWAP Assistant Director.  

    ·                     The Audit Charter set out the nature, role and responsibilities of the Internal Auditors. It outlined the relationship between the Internal Auditors and the Council. The Audit Charter had not changed since last year. The Charter was reviewed to ensure it met the necessary standards.  

     

    During the Debate 

    ·                     It was raised that one of the greatest savings from Local Government Reorganisation would be financial and that most of this saving was from a reduction in staff. Concerns were raised about how this would impact upon staff retention and how everything would be kept track of in terms of aspects such as payroll systems needing to be combined. The SWAP Assistant Director responded that they were in regular contact with senior officers and with the Unitary Programme. There would not be time to review and audit every area of the programme but focus would be prioritised based on risk.  

    ·                     It was raised that there would need to be large numbers of redundancies due to the level of savings being talked about. Assurance of the robustness of any redundancy packages would be needed, particularly given the differences between the five authorities. 

    ·                     It was asked about the increased Cyber Security risk given world events. The Assistant Director from SWAP responded that sanctions in relation to events in Ukraine could increase the risk of Cyber Attacks, particularly on government and local government.  

    ·                     It was asked if all the five councils were looking at the same areas in terms of unitary and audits. The Assistant Director from SWAP responded that the rolling audit plan was for Somerset West and Taunton. The audits in relation to Unitary were agreed with the workstream leads from all five authorities and aimed to ensure no one authority was disproportionately burdened 

     

    The Audit and Governance Committee resolved to approve the recommendations in the report: 

    2.1 Members are requested to approve the Internal Audit Plan for 2022/23. 2.2 Members are requested to approve the Internal Audit Charter. 

     

63.

Summary of Level 1 and 2 Internal Audit Actions pdf icon PDF 270 KB

    The purpose of this report is to update the Committee on progress against level 1 and 2 Internal Audit Actions as at the end of January 2022.

    Additional documents:

    Minutes:

    The Business Intelligence and Performance Manager introduced the report: 

    ·                     The report updated on progress on implementing the Level 1 & 2 Audit Actions. The report gave the position as of January 2022. 

    ·                     Since the last report to the Committee there was one Audit which now had all Level 1 & 2 actions completed which was the audit on Procurement.  

    ·                     Currently twelve audit actions open. Three of those were beyond their set date for completion. These were all on health and safety and whilst not yet complete progress had been made. The other nine actions had a completion date in the future.   

     

    The Audit and Governance Committee resolved to carry the recommendation in the report: 

    2.1 The Committee reviews the overdue actions contained in the report and notes progress to date. 

     

     

64.

Capital Investment and Treasury Strategy 2022/23 pdf icon PDF 224 KB

    The purpose of this report is to bring to Members three recommended strategies covering Capital, Investment and Treasury Management (CIT Strategies) for their consideration and adoption.

     

    Appendix A to this report combines three Strategies together with the Council’s Minimum Revenue Provision (MRP) Statement.  Its format has been developed to meet the requirements of statutory guidance issued under Part 1 of the Local Government Act 2003, with particular reference to CIPFA’s Prudential Code of Practice and Treasury Management Code of Practice.

     

     

    Additional documents:

    Minutes:

    The Corporate Finance Manager delivered a presentation on the report: 

    ·                     The document was a comprehensive report and included information on capital strategy, investment strategy, treasury strategy policy statements, minimum revenue provision, prudential and treasury indicators and mechanisms for control of the Council’s finances. The Council were required to produce this report on an annual basis by CIPFA.  

    ·                     Responsibilities for these strategies and policies were with members, the senior management team and the treasury management team.  

    ·                     An update was given on some changes which had been made to the report before it would go to the Executive Committee following this Committee.  

    ·                     The strategy sought to ensure that the Council’s capital investment and everything around that including financing, borrowing and future revenue budgets, were affordable, prudent and sustainable.  

    ·                     Public Works Loan Board (PWLB) borrowing was restricted in November 2020 for the Council and other local authorities nationally who had undertaken investments in commercial strategies. The Council’s strategy therefore had to work around this.  

    ·                     The report included details of the Council’s minimum revenue provision (MRP) and this would be reviewed by the auditors who would examine whether the Council was making adequate provision for debt repayment.  

    ·                     The Council had various investments, of which the commercial properties were the largest. 

    ·                     The report provided information on the Council’s Treasury Management.  

    ·                     The report detailed the Council’s net turnover versus expenditure.  

    ·                     It was raised that there was an error in two figures in the report and the correct figures were provided.  

     

    During the Debate 

    ·                     It was asked if the financing costs to the authority for interest on loans and the MRP for debt were 1.24% of turnover in 2020/21 but would increase to 4.02% of turnover in 2021/22 and would continue to increase as a percentage in the following years. Officers acknowledged that this was correct.  

    ·                     It was asked how the Council’s investments and the financing costs associated with them would be kept safe and under control once the new authority was formed. Officers responded that a MRP would still be required and reviewed by the new authority’s auditors. It may be that the new authority would make some voluntary debt repayments which was something that Somerset West and Taunton Council had done to manage the pressure of debts.  

    ·                     It was raised that the financing costs reduced in 2022/23 but the proportion of turnover increased. Understanding was that the capital on the investment properties would be being paid off so it was asked if the percentage should go down rather than increase. Officers responded that the figures went up based on predictions that interest rates would continue to rise but figures could change based on interest rates. Borrowing strategies were also applied by officers to achieve best value for the Council’s borrowing costs. This was done using a balance on long-term, medium-term and short-term borrowing. For the Housing Revenue Account (HRA) the HRA’s assets long life assets and so would more likely use long-term borrowing. But short-term borrowing was also undertaken to enable the new  ...  view the full minutes text for item 64.

65.

Audit and Governance Committee Chair’s Annual Report 2021/22 - For Information Only pdf icon PDF 393 KB

    This report provides an update from the Chair of the Audit and Governance Committee, Councillor Lee Baker, on the work of the Audit and Governance Committee for the year 2021/22.

    Additional documents:

    Minutes:

    The Chair raised the need for members to complete the related party transaction forms and asked that members ensured they completed and returned them. 

     

    The Chair thanked the Committee for their support over the last twelve months.