Agenda and minutes

Corporate Governance & Audit Committee
Thursday 23 November 2017 9.30 am

Venue: Committee Room 2, East Pallant House. View directions

Contact: Mrs Bambi Jones on 01243 534685  Email:  bjones@chichester.gov.uk

Items
No. Item

154.

Chairman's Announcements

Any apologies for absence that have been received will be noted at this point.

 

Minutes:

The Chairman welcomed all to the meeting. There were no apologies. Mr Hobbs had been delayed and would be arriving shortly.

 

155.

Approval of Minutes pdf icon PDF 112 KB

The committee is requested to approve the minutes of its ordinary meeting on 28 September 2017.

Minutes:

The minutes of the last meeting held on 28 September 2017 were considered.

 

The number of days in the audit plan referred to at minute 153 (before the resolution on page 9) would be covered at agenda item 12, but should read ‘The audit plan approved by the committee for 2017-18 is 420 days…’

 

RESOLVED

 

That the minutes of the meeting held on 28 September 2017 be agreed as a correct record.

 

156.

Urgent items

The chairman will announce any urgent items that due to special circumstances are to be dealt with under the Late Items agenda item.

Minutes:

There were no urgent items.

 

157.

Declarations of Interest

These are to be made by members of the Corporate Governance and Audit Committee or other Chichester District Council members present in respect of matters on the agenda for this meeting.

 

Minutes:

There were no declarations of interest.

 

158.

Public Question Time

The procedure for submitting public questions in writing by no later than 12:00pm the day before the meetingis available here or from the Democratic Services Officer (whose contact details appear on the front page of this agenda).

Minutes:

No public questions had been received.

 

159.

Annual Audit Letter 2016-17 - Ernst & Young LLP pdf icon PDF 2 MB

Further to minute 147 of 28 September 2017 the committee is requested to consider and note the key issues arising from the work of the council’s external auditors on the 2016-17 Accounts in the Annual Audit Letter from Ernst & Young LLP.

Minutes:

Mr P King, Ernst & Young LLP, introduced the annual audit letter for the period ending 31 March 2017. The messages were similar to those contained in the audit results report considered at the last meeting and he had nothing particular to point out to the committee except the earlier statutory deadline for production and audit of the 2017-18 financial statements.

 

Mrs Belenger advised that planning was underway to enable this to be carried out between the beginning of June and the end July 2018. Mrs Belenger assured the committee that the trial carried out this year had been reasonably successful. Lessons had been learned and changes put in place in order that the deadlines would be achieved in 2018.

 

Mr King informed the committee that there would a change to the EY audit team from January 2018. He would be moving off the audit and would be replaced by Mr Kevin Suter, who would lead the audit from now on. Mr Young had reduced his hours and would be replaced by Mr Jason Jones, who was also the audit manager for Arun District Council. EY considered it sensible to have the same audit manager across both authorities.

 

He thanked the committee and particularly the Chairman for the support he had received over the last five years.

 

RESOLVED

 

That the annual audit letter ending 31 March 2017 be noted.

 

160.

Audit Progress Report 2017-18

An oral report will be provided by Ernst & Young LLP on progress against the 2017-18 audit.

Minutes:

Mr King provided an oral report on the current progress of the 2017-18 audit.

 

Planning for the audit had been started, the bulk of which would in the New Year and then again after the accounts had been prepared at the end of the financial year. The auditors were required to certify the housing benefit subsidy return to the Department for Works & Pensions (DWP) by 30 November. Additional testing had been required however work on that claim was nearing completion.

 

The certification report would be presented to the next meeting.

 

161.

Financial Strategy and Plan 2018-19 pdf icon PDF 91 KB

The committee is asked to consider the attached report and to make recommendations to Cabinet on the Council’s five year financial strategy.

 

Additional documents:

Minutes:

Mrs Belenger introduced the report which set out the financial strategy and the principles which underpinned the council’s approach to managing its financial matters and medium term financial plan. Part of that process was trying to understand the risks and how we could control and mitigate some of those risks. The council was currently in year three of a four year government settlement. 2019-20 was the final year of the settlement and thereafter officers had made assumptions based on best information. Part of that was underpinning the key financial principles and how we approach those future years with an unknown quantity.

 

One of the key financial principles set out in Appendix 1 relating to investment income had been amended. Last year the investment income from the property fund was used to support the deficit reduction plan. It was intended that the extra £8m we were placing in mixed asset bonds would also be used to close that gap. 

 

Mrs Belenger recommended that we maintain the £5m reserve and continued to maintain the provision of £1.3m of revenue support which would allow the council to smooth things in relation to business rates retention as localisation had some risks. The council has not used this reserve which was first earmarked in 2010 and she assured the committee that the reserves figure was there to help mitigate risks with the council’s spending plans.

 

The committee made the following comments and received answers to questions as follows:

 

·       Queried which elements of current fees and charges were susceptible to the economy. Certain areas such as green waste and car parks were subject to fluctuation. The council had a fees and charges policy setting out that the user pays for the service where it was not a statutory service. The increase in charges in 2017-18 had been 3%. An income of £16.4m had been achieved through our income streams. Officers did their best to forecast this figure based on a number of predictions. The council was working in a more commercial environment; officers were expected to look for new opportunities and services were expected to continually assess their charges.

·       Queried the point of entering the business rates pilot for 2018-19 if there was no impact on the model. There was no impact on individual authorities but as part of a wider pool the growth money that would have gone to the government would be available to the pool to invest across the county. The bid required to be submitted from an economic area and all authorities in West Sussex were part of that bid.

·       Queried whether certain areas would not get their full business rate return. Even with localisation there would still be a mechanism to redistribute business rate income to areas where need was greater. The mechanics had not yet been divulged.

·       Queried the current council tax premium payable on empty properties following the Chancellor’s announcement of the power to charge a 100% premium. The council currently has a zero council tax discount policy  ...  view the full minutes text for item 161.

162.

Treasury Management 2017-18 Mid-Year Update pdf icon PDF 140 KB

The committee is requested to consider this 2017-18 mid-year review of treasury management activity and performance and to provide comments to Cabinet as necessary.

Minutes:

Mr Catlow presented this mid-year review of treasury management activity and performance, informing the committee of the relevant regulatory changes that would impact on the council’s treasury management activities next year.

 

The committee made the following comments and received answers to questions as follows:

 

·       Queried whether we were still struggling to find counterparties. A number of banks, due to regulatory change, were splitting their banking and retail arms, and until it was known where we would end up we were reluctant to invest with them therefore at present we had a more limited number of counterparties and a reduced maximum duration of investment with many.

·       Queried whether external funds had an equity component. These were funds invested with and managed by a fund manager, equivalent to investment in a multi-asset fund. They were not cash investments in the council’s name. M&G could have a small equity component. By investing in multi asset funds risk considerations were reduced.

·       Queried corporate bonds. These were bonds with individual companies, generally of high quality and the council preferred those with a supporting asset base.

·       Queried the definition of balance and how that squared with the definition of value and whether the two should tie up. The committee was tasked to decide whether these had been good investments however there was insufficient information to provide comfort to the committee. Returns were calculated based on the original investment therefore the reference on page 59 should probably be amended. This would be considered as part of responding to new prudential codes. The change in capital value had not been an issue for local authorities as there had been no impact however it was likely that could be amended as part of the regulatory changes going forward. Mr Catlow agreed to revisit the presentation of this information in future reports to the committee.

·       Queried external funds (showing as green) and the lack of clarity in the figures as there had been some disappointing quarters. At this time (and until updates in regulation) changes in capital value did not have a revenue impact on the council’s budgets until the investment was disposed of.

·       Queried our reliance on treasury management advisors Arlingclose for advice. The council had a four year contract with Arlingclose for professional treasury management advice. The advisor supported the accountancy team in undertaking additional treasury management research. Officers had access to a number of other websites and professional sites for information. There were not many similar advisory companies in the market. Mr Catlow, Mrs Belenger and Mr Ward had to declare to Arlingclose how we met their criteria as a client before they took us on. The contract, due for renewal in 2018, included training on site for members and access to training courses for officers.

·       Queried whether modelling had taken place to allow members to understand the parameters should there be a volatile period with a dramatic change in interest rates. The council was risk averse in building income into base budgets or financial models  ...  view the full minutes text for item 162.

163.

Strategic and Operational Risks 2017-18 pdf icon PDF 59 KB

The committee is requested to note the current strategic risk register, the high scoring programme board and organisational risks, the internal controls and mitigation actions in place to manage those risks and to raise any issues or concerns. Appendix 1b is confidential* and is available to members of the committee and relevant officers only.

 

*Note Exempt category Para 3: Information relating to the financial or business affairs of any particular person (including the authority holding that information)

Additional documents:

Minutes:

Mrs Belenger presented the report reminding the committee of the exempt element of the report at Appendix 1(b) on pages 78 to 79.

 

The committee was reminded that the Corporate Management Team considered the council’s strategic risks quarterly and this committee considered them bi-annually following review by the Strategic Risk Group. The Risk Management Strategy and Policy would be reviewed following the management restructure in early 2018.

 

The committee made the following comments and received answers to questions as follows:

 

·         Queried the high workload in the planning team and plans to alleviate it. Additional resources were being recruited to the team to mitigate against that risk.

·         Queried the reduction in the recycling score and whether there was evidence that renewed activities had worked. There had been a major drive in the revised recycling strategy and action plan. The EU would fine the UK and not the individual council for not reaching the target of 50% and obviously the country’s exit from the EU would change the likelihood of any fine. We are working as a county to review initiatives; waste going into landfill was a key priority for WSCC. This was a corporate priority and key performance indicators were constantly being reviewed.

·         Queried whether councillors were the weak link in terms of data protection issues. An officer working group had been considering the new General Data Protection Regulations (GDPR) which would take effect from May 2018. An assessment of the information members held would be carried out and training provided to members as part of that process.

 

It was proposed and seconded and supported that the following resolution should be passed to exclude the press and the public from the meeting during the consideration of Appendix 1(b) - Cyber Attack across ICT estate.

 

RESOLVED

 

That the public and press be excluded from the consideration of the reports and their appendices for Appendix 1(b) – Cyber Attack across the ICT Estate on the grounds that it is likely that there would be in respect of that item a disclosure to the public of ‘exempt information’ of the description specified in Paragraph 3 (information relating to the financial or business affairs of any particular person (including the authority holding that information)) of Part I of Schedule 12A to the Local Government Act 1972 and because in all the circumstances of the case the public interest in maintaining the exemption of that information outweighs the public interest in disclosing that information.

 

Following discussion of this item, the committee voted to return to normal public business and took the following resolutions.

 

RESOLVED

 

1)      That the current strategic risk register and the internal controls in place, together with the associated action plans to manage those risks, be noted.

2)      That the current high scoring programme board and organisational risks, together with the associated mitigation actions in place, be noted.

 

164.

S106 Exceptions Report pdf icon PDF 69 KB

The committee is requested to note the contents of this report concerning section 106 agreements nearing their expenditure date (as set out in Appendix 1) and to raise any concerns.

 

Additional documents:

Minutes:

Mrs Dower presented the report. Mrs Peyman attended to answer questions on the S106 payments relating to leisure initiatives.

 

The reports outlined those contributions which required additional monitoring as they were due to reach their target date within the next two years or were now overdue.

 

Mrs Peyman gave an update on leisure contributions where progress had been made since publication of this agenda and these had been reported back to the portfolio holder and the ward members.

 

The committee made the following comments and received answers to questions as follows:

 

·       Mr Oakley asked whether the actual figures incorporated interest earned on those monies or whether they were the original contribution figures. These funds were invested whilst they were waiting to be spent and the interest earned was put back into the pot so the communities benefited from the interest earned. Mrs Dower undertook to update the committee on this. [Post meeting note: The interest is allocated to the S106 specific purpose i.e. affordable housing, leisure etc. but not to the individual schemes. The interest earned will be allocated to the individual schemes to ensure that the responsible officer is aware of these funds available for their schemes.]

·       Land at Windmill Park, Halnaker – This funding allocated to the Boxgrove Sports Pavilion project was past the notional expiry date and had been delayed as the community was looking to attract additional funding to progress the project. The return of these funds would be dependent upon the developer making a request however the position was strong as the funds had been allocated.

·       Queried the difference between S106 funding and CIL. S106 funding was to do with mitigating the impacts of individual planning applications and would reduce over time. Community Infrastructure Levy (CIL) funding related to the effects of cumulative development. The annual S106/CIL report to the committee in June each year reported on both sets of funding.

·       Queried the spend of funds on King Edward VII. It was understood that the South Downs National Park Authority (SDNPA) had a sum of money which they would release to us when the council had put forward appropriate projects on which the money could be spent. An update would be provided to the committee. [Post meeting note: There are two S106 agreements in respect of King Edward VII – one is in connection with a primary school therefore the money would go to WSCC as education authority; the other is in relation to affordable housing in the sum of £800,000 however the trigger for us to start receiving it is 2020.]

 

RESOLVED

 

That the contents of this report concerning section 106 agreements nearing their expenditure date be noted.

 

165.

Internal Audit - 2017-18 Audit Plan Progress pdf icon PDF 49 KB

The committee is requested to consider and note the audit plan progress report.

Additional documents:

Minutes:

Mr James presented the report, advising that there were no audit reports to present to the committee. Various audits were currently in draft form and would be reported to the committee in due course. Audit time had been spent on the key financial controls as there was a deadline of February 2018 in order that EY could place reliance on it as part of the final accounts audit.

 

At the last meeting members had expressed concern about the delay in the museum audit and the reduction in the number of audit days. Mr James confirmed that the museum audit had been delayed due to the need to await the outcome of the review of management delivery options and then subsequently the appointment of a new Museum Manager. With regard to the number of audit days, benchmarking had taken place with our “nearest neighbours’ family” and the current 2017-18 year had been set at 420 audit days as a median compared to other authorities. The 2018-19 audit plan was being developed and the number of audit days would be set dependent upon the audits required and having assessed the level of risk.

 

Assurance was requested that the milestones required during the year did not lead to staff feeling pressured to meet the target. Mr James confirmed that the number of working days within the team had been taken into account when setting the 2017-18 audit plan and that there was an element of contingency within the plan in-case non-programmed work needed to be undertaken. The staffing issue discussed at the last meeting had been resolved.

 

Mrs Hardwick referred members to page 9 of the minutes, second bullet point, where the committee had requested a more comprehensive explanation of delayed audits be provided in the audit plan progress report to allow the committee to fully understand the reasons and to be able to debate the issues and raise concerns. The explanation needed to confirm that authority had been given by Mr Ward that he had deemed the audit not able to be audited at that time. If the scope of the audit was not relevant to the current situation then it should be stated. Mrs Belenger undertook to liaise with Mr James as to how to present that information in order to allay the concerns of the committee.

 

RESOLVED

 

That progress against the Audit Plan be noted.

 

166.

Budget Review 2017 pdf icon PDF 39 KB

The committee is requested to consider and agree the Terms of Reference for this review and to nominate three members to contribute to this review.

Minutes:

Mrs Belenger presented the Terms of Reference and the scoping of this proposed review.

 

RESOLVED

 

1)      That the terms of reference for the Budget Task and Finish Group be approved.

2)      That Mr Barrett, Mr Hicks and Mrs Tull be approved as the committee’s representatives on this group.