Members are reminded to consider the categories of interest, identified in the Code of Conduct for Members to determine: whether they have an interest in any agenda item and any action they should take. For further details, see the attached note from the Monitoring Officer.

Members are also reminded to declare the nature of the interest at the earliest opportunity and the agenda item it relates to. Please note that ultimately it is the Members’ responsibility to identify any interests and also update their register of interest form as required by the Code.

If in doubt as to the nature of an interest, you are advised to seek advice prior the meeting by contacting the Monitoring Officer or Democratic Services.

There were no pecuniary declarations of interest declared at the meeting by the members.

To confirm the minutes of the Audit Committee held on 1^st December 2021.

The minutes from the meeting held on the 1^st December 2021 were agreed to be an accurate record of the meeting and were approved by the Committee.

The Chair proposed and the Committee AGREED to take all four reports from Deloitte’s together.

The Chair invited Mr Jonathan Gooding, from Deloitte’s to address the Committee.

Mr Gooding provided a summary of the findings and said the difficulties experienced with the Statement of Accounts for 2018/19 and 2019/20 had been documented in previous meetings and therefore he did not intend to revisit this.  Referring to the 2018/19 accounts, Mr Gooding said good progress had been made to address the issues raised. He said there was still some work outstanding however the key findings summarised the significant risks and the approach taken to address this. He said the opinion was likely to be a qualified opinion, as the authority should have prepared group accounts because the subsidiary entities were material. Mr Gooding stated the accounting of the pension fund liability, where employees transfer to one of the subsidiary entities was also a concern and said the accounting treatment applied as per the 2019/20 accounts was incorrect. Mr Gooding said he was continuing to discuss and consult on this aspect of the opinion and had not reached a conclusion on this. He said the other reasons identified related to insufficient evidence provided to support disclosures of expenditure in the accounts and disclosure of Officer renumerations.

In reference to the use of resources, page 51, Mr Gooding drew attention to the conclusions and explained why a qualified conclusion had been given in respect to value for money. Mr Gooding said the prior year adjustments were set out on page 37 and the current year adjustments, in appendix A. He said the control deficiencies were significant for this year and therefore this was reflected in recommendations made.

Referring to 2019/20, Mr Gooding stated the audit was very similar with a qualified opinion given. He said the qualifications were different because they had been able to satisfy themselves in respect to the disclosure of expenditure for that year.

Referring to the Pension Fund reports, Mr Gooding stated these were shorter reports as the number of issues identified were less. He said these set out the materiality applied and the significant risks which related to management override of controls and the procedures performed to identify this risk. He said an area of focus was the completeness of valuation and presentation of investments and the immaterial uncorrected misstatements where control recommendations had been made.

In response to questions and comments from members the following was noted:

• Councillor Whitehead stated this had been a long journey for both the Council and the external Auditors. She was pleased that both set of accounts were nearing completion and had been presented to the Committee.
• Councillor Whitehead said whilst it was disappointing to have qualified opinions, the hard work of Officers and the Auditors was a testimony to the efforts it had taken to resolve the issues identified. Councillor Whitehead stated she had met with Deloitte’s in a private meeting and that they had not raised further concerns other than  ...  view the full minutes text for item 3.4

Mr Kevin Bartle, Interim Corporate Director for Resources and Section 151 Officer introduced the report and stated this was a significant milestone for the Council with the end point in sight. He said this had been the most thorough audit he had been involved in.

Mr Bartle thanked the staff involved in resolving the accounts for the previous years and said this had been a mammoth task, with interim staff recruited to assist in correcting the errors. He also thanked Deloitte for their patience and diligence, in particular Mr Gooding, Mr Fish and Mr Ross who had worked hard to highlight issues and had worked with the Council to get to the position where the accounts had been published. Mr Bartle said that after two years, Deloitte’s were able to give an opinion on the accounts of the Council. Mr Bartle said whilst the opinion was a qualified opinion and staff were disappointed with this - they take this outcome seriously, as this is a question of professional pride – they accepted the opinion given. Mr Bartle said going forward, as the Finance Improvement Plan will show, policies and procedures had been tightened to ensure learning from the accounts can be embedded for the future production of the accounts.

Mr Bartle said he was pleased to inform the Committee that the 2020/21 accounts had also been published as of today. He said that due to the work involved for the 2018/19 and 2019/20 accounts, this had had a knock-on effect on the 2020/21 accounts. He said the errors found in the 2018/19 and 2019/20 related to past years and therefore it was not easy to go back and correct all of them. He said the versions in front of the Committee were the ones published in October 2021. He said they required finalisation, once one or two further amendments had been made, which were not significant or material. Mr Bartle said the report provided members with a detailed response to the external auditor’s report and he’d be happy to take questions relating to this.

In relation to some of the questions raised by members during the Deloitte presentation, Mr Bartle made the following comments.

• He hoped future accounts would have none or fewer errors in them. Additional staff had been recruited to correct the errors and learning from this was being embedded into new practices within the finance team and the Council more widely. Mr Bartle said it was important to ensure the transfer of knowledge was not lost when staff moved or left the Council.
• In respect to the qualification issues raised, Mr Bartle said he did not disagree with the recommendation of group accounts however this was subjective opinion and was not a requirement of the previous external auditors KPMG.
• The remuneration of officers and employees working for subsidiary entities sounds worse than it is. Mr Bartle said he was confident that with a little bit of effort the reconciliation of school payrolls with the Council’s, was achievable.  ...  view the full minutes text for item 4.1

Ms Marion Kelly, Programme Director for the Finance Improvement Team presented the progress report on the Finance Improvement Plan.

Ms Kelly referred to Appendix A and said of the sixty actions, 41 were now complete shown as blue, 12 were on track, shown as green and 4 actions were amber and 3 red rated. She said two-thirds of the actions were complete and good progress was being made.

Ms Kelly provided a detailed analysis of why the red rated actions had been slow to progress stating that this was mainly due to capacity issues. Ms Kelly said actions were risk assessed through a monthly dashboard and an in-depth review of the improvement plan was planned so to ensure the recommendations from Deloitte’s were also included in the plan. Ms Kelly said a fuller report would be provided to the Committee in March 2022, which would include how all the actions have been sustainably embedded within the finance function. She said progress on any remaining actions would be reported but incorporated into other Accounts reports after March.

In response to comments and questions from members the following was noted:

• The Chair, Councillor Whitehead commented that she was pleased the review of the Agresso system and health check had been brought forward to June and the review on whether the Council should continue with Best of Breed Systems or invest in an Enterprise Resource Planning system will take place in the Autumn. She said this was an outstanding issue that needed to be decided on, so that the Council can move forward in a smoother and more controlled way.
• Councillor Edgar provided feedback and said the work on reconciliations and the re-alignment of the budgets was an important task as this effected the balance sheet. He said it was clear the issues identified by Deloitte’s were historic, but it was crucial to ensure reconciliations were conducted in a timely way, as they help to identify issues quickly.
• In respect to the re-aligned budgets, Councillor Edgar said that aside from training budget holders, it was important that the organisational structures supported the budget managers and that these are reflected in the budgets.
• In reference to paragraph 3.13, Councillor McQuillan asked if the finance team were confident that the systems used would provide accurate information for the budget setting process that Councillors were currently tasked with. Mr Bartle responded saying although the matters with the accounts were serious, they did not affect the Council’s ability to set a balanced budget.

The Audit Committee RESOVLED to:

1. Note the progress against the actions set out in the Finance Improvement Plan (FIP).

Ms Miriam Adams, Interim Head of Pensions and Treasury provided the Committee with a detailed update on the Treasury Management Strategy Statement, Investment Report and the Capital Strategy Report for 2021-22. Ms Adams explained the three reports were a requirement of the legislation and guidance provided by CIPFA and the DLUHC.

Ms Adams referred to Appendix A, the Treasury Management Strategy Statement, which set out the external and local context. She referred to table 1, the balance sheet summary which detailed the Authority’s investments and borrowings. Ms Adams made reference to paragraph 4.7 and the table demonstrating capital expenditure. She said a key factor for the future was to ensure investment managers managing council’s strategic pooled funds meet the ESG requirements.

Ms Adams drew attention to paragraph 8.2 in the Investment Strategy Report, appendix B and said the table demonstrated the possible forecast and risk exposure on balances for investments and the forecast for future years as well as risk exposure in relation to other non-treasury investments like lending for service purposes. She said the Capital Strategy Report, appendix C was a high-level report which set out the Council’s strategy for capital expenditure. She referred to paragraph 1.4 which summarised how the £299m would be invested.

Ms Adams also referred to the remaining appendices and said the prudential indicators and treasury management statement provided guidance on the treasury management activities that are undertaken and monitored. She said they worked closely with their external treasury advisors, Arlingclose to ensure the investments were sound and provided value for money.

In response to comments and questions from members the following was noted:

• Councillor Edgar stated the reports were helpful. He asked about the capital programme and said the estimated cost rose from £231m in 2021-22 to £299m in 2022-23. He asked why projects seem not to complete on budget and in time, as per the capital strategy.
• Mr Kevin Bartle, Interim Corporate Director for Resources and Section 151 Officer responded saying it was the responsibility of the Project Manager to ensure projects were delivered to the budget set. He acknowledged there was considerable slippage within the capital programme and said the figures provided were a forecast. He said the report had been late coming to the Committee due to deliberations taking longer to be concluded. He said it was important to use the most up to date information possible as this effects projections and indicators. He said the figures are revised daily as part of the work done by Treasury Management.
• Referring to the New Homes bonus money, with forecasts increasing from 3.8m to 16.3m, Councillor Khan asked why there was a big jump. Mr Bartle responded saying there was a misapprehension in respect to this money. He said the government was consulting on the distribution methodology in 2021 and reached a final conclusion to roll over the previous years’ bonus for a year. It was a fortuitous windfall and therefore was not forecast.
• In response to the liability debit of 2.1m, Councillor  ...  view the full minutes text for item 4.3

The Audit Committee noted the work plan for the forthcoming meetings of the Committee.

There was no urgent business to be discussed.