No apologies of absence were received. 

The Chair welcomed Amanda Lukey, the Deputy Principal Accountant to the meeting.

The minutes of the meeting on the Tuesday 10 July 2017 were signed by the Chair.

No declarations of interest were made. 

The Service Manager (Customer & Theatre Services) provided the Finance & Audit Committee with a copy of the Local Government Ombudsman’s Annual Review Letter for Gravesham.

The Chief Executive informed the Committee the Letter is received annually and provides statistics that are associated with referrals to the Ombudsman office; the office found three faults in cases but it is a slightly more unusual situation here in the fact that the Chief Executive felt the actions of the Ombudsman were unwarranted due to Gravesham already concluding that they were at fault and providing an appropriate remedy to the problem.

The Service Manager (Customer & Theatre Services) added that she is awaiting a response for the Ombudsman Office  regarding the decisions made as at the moment they indicate the three complaints were upheld but they do not recognize that the Council had already settled two of them before their involvement.

The Chief Executive summarised one of the cases to Member’s:

• Part of the initial problem was that when the complainant raised the issue they were complaining about the works that were being carried out with the planning permission granted by the Regulatory Board
• The Regulatory Boards mind-set was that the reasons for the objections put forward by the complainant were more to deal with civil ownership matters than planning and should be dealt with through the Party Wall Act
• The complainants escalated the complaint to Stage 2 and added further issues to the initial complaint; these were addressed and it was reiterated to them that a number of the issues were civil matters not planning ones
• They were still not happy and progressed it to stage 3 at which point it landed on the Chief Executives desk and was investigated personally with great detail; it should be noted that several more issues were added to the complaint at that stage
• They introduced an allegation that two Councillors on the Regulatory Board had a very close relationship with the developer in question but the two Councillors were met with and they gave assurances that there was no truth to it and no evidence was found that backed up the allegations 
• Again, no fault could be found with the planning permission having been granted and the development moving forward so that was communicated back to the complainants while also advising if they still weren’t happy they could progress it to the Ombudsman office, which they did 
• The Ombudsman decided after the initial process that there would be an investigation; an investigator was appointed and he decided on the basis of the fact that the complainants had made a reference back to 2008 in which planning permission was first approved that the investigation would start there
• After looking through everything in detail the Ombudsman found out that the complainants had made an objection back in 2008 but could not see their objections as having been taken into consideration within the Planning Officers reasons for granting permission to the original application
• The Ombudsman concluded that those objections had not  ...  view the full minutes text for item 19.

The External Auditor, Grant Thornton informed Members of the findings from the audit of the council’s financial statements and arrangements for securing Value for Money for the year ended 31 March 2017.

The External Auditor, Grant Thornton outlined the following points to the Committee:

• The Audit is substantially complete with only a few final elements to conclude which could not be done until the report had been seen at this F&A Committee meeting
• The draft accounts presented for audit were of good quality with the level of amendments to them being minor
• It is anticipated that an unqualified opinion will be provided in respect of the financial statements of the Council for the year 2016/17, alongside a positive Value for Money Conclusion.

Resolved that:

• Members noted the information contained within the report.

The Assistant Director (Corporate Services) provided Members with the audited Statement of Accounts 2016/17.

The Assistant Director (Corporate Services) advised that:

• The changes made to the accounts as referenced in the previous agenda item had been actioned and listed at Appendix 2 to the report allowing Members to view the changes
• Appendix 3 is the final Statement of Accounts
• Appendix 4 is the letter of representation.  If the Committee are happy with the content of the letter of representation and the final audited Statement of Accounts then the Chair will sign the letter of representation at the closure of the meeting

Resolved that Members approved:

• The amended Statement of Accounts for 2016/17 as attached at Appendix Three

• The letter of representation at appendix four to the report for signing by the Chair of the Finance & Audit Committee

The Assistant Director (Corporate Services) provided Members with information on actual performance against the approved Revenue and Capital budgets for 2017/18, including known variances agreed or identified through budgetary control activity as well as updating Members on other key areas of financial performance that may impact on the Council’s Medium Term Financial Strategy, Medium Term Financial Plan, HRA Business Plan or Financial Statements.

The Principal Accountant (General Fund) and the Principal Accountant (Housing & Exchequer) elaborated further on their respective fields outlined in the executive summary. Key points from the report were outlined to Members as follows:

·         At the end of Quarter One there is projected underspend on the General Fund for the year of £183,730

·       The most significant variance in the quarter was the acquisition of St John’s House           which is the Council’s third property purchase under the Commercial Property        Acquisition Strategy with an anticipated annual income of £160K

·       Other variances of note relate to business rates and the associated Section 31      Grants with a £140K variance for the Section 31 Grants and a £70K adverse            variance for Business Rates Income

·      As a result of   effective management of vacant posts combined with natural staff             movement around £129K of staffing savings were generated in quarter one

·      Total Working Balances brought forward from 2016/17 is £6,162,550 with the        Forecast Usable Working Balances Carry Forward at the end of the year (as       projected at 30 June 2017) at £3,083,380

·      The General Fund Capital Programme for the year is budgeted at £16.1m, with     spend to the end of quarter one of 0.5m. The budget includes a further £10m         allocated to a second tranche of commercial property acquisitions as agreed by Full   Council in June.    

·      The report includes a new section on Capital Resources that outlines the resources           available to fund capitals projects in the future. The balance of total General Fund         Capital Resources projected at year-end is £1,7m.

·      At the end of Quarter 1, income and expenditure  for the year remains balanced   within the Housing Revenue Account

·      The PV Panels were anticipated to be sold by August but the sale has not gone     through yet; an updated projection of the effect of this sale on FIT income expected     in 2017-18 will be provided for Quarter 2

·         The leftover funds from the grant from Kent Fire & Rescue Service towards expenditure relating to the replacement of a sprinkler system at Carl Ekman House has been rolled forward into this financial year to cover the cost of the capital works

·       The staffing budget for 2017/18 incorporates a target of £100K and for the first three         months to June 2017 the actual vacancy saving achieved was £91K

·       Working balances on the HRA at year end are projected to remain at £3m.

·       Spend to the end of quarter one on the Housing Capital Programme was £3.6m.

·       The council has had recent communication from Property Funds Managers in       response to the Grenfell Fire providing assurances of their arrangements for ensuring    fire safety in their portfolio.  This information will be shared  ...  view the full minutes text for item 22.

The Audit & Counter Fraud Shared Services Manager provided Members with an update on the work, outputs and performance of the Audit & Counter Fraud Team for the period 1 April 2017 to 31 July 2017.

The Audit & Counter Fraud Shared Services Manager gave a brief overview of the report:

• Section Three shows a reduction in audit days with reasons outlined in the report; the period of time for the report is shorter, two employees are on long term sick leave with another officer resigning soon, extra resources will be needed but they will be funded through salary savings from vacant posts
• All of the fieldwork for audits carried forward from last year has now been completed and the last audit has been finalised since the report was issued.  Work on the 2017/18 plan is underway.
• The counter fraud software currently in use has been upgraded and due to technical issues the figures for the number of fraud cases opened and closed are not included in the report. The link between the fraud system and the reporting system is being fixed and figures should be available for the next update.
• The entire service is proportional with both Gravesham and Medway so both authorities have seen a reduction in their productive resources.

Resolved that:

·         The outputs and performance of the Audit & Counter Fraud Plan for Gravesham for the period 1 April 2017 to 31 July 2017 as detailed at Appendix two be noted

The Assistant Director (Corporate Services) updated Members on progress in the appointment of a local auditor, effective for the audit of the accounts for 2018/19.

• It was agreed at Full Council to opt for the sector led approach that was offered by the appointment body PSAA.  98% of all eligible local authorities took up the offer for that approach
• The PSAA went out to tender and the procurement process has been hailed as highly successful, delivering an expected reduction of approximately 18% in the scale of fees payable by local bodies
• The PSAA’s intention is to appoint Grant Thornton as the council’s external audit provider from 2018/19; the council will need to formally respond to the PSAA to confirm acceptance of the appointment unless it wishes to make representations against the appointment on the grounds of there being conflicts of interest or experience of poor service, of which there are not considered to be any.

The Assistant Director (Corporate Services) answered a Members question:

·     Should the council accept the offer of appointment, the appointment would be formally made by the PSAA in December, following which the council would seek to engage with Grant Thornton in planning the audit process for 2018-19.

Members agreed with officers in that Grant Thornton had carried out an exceptional job of external auditors in their time working with Gravesham and the appointment from PSAA was very welcome.

Resolved that:

• Members endorsed the appointment by PSAA of Grant Thornton (UK) LLP as the auditor for Gravesham Borough Council for a five year period from 1 April 2018.

The Assistant Director (Corporate Services) presented Members with the proposed Terms of Reference for the Member-led Statement of Accounts Glossary review

The Assistant Director (Corporate Services) noted the error at the end of the report for ‘Key References for the Corporate Debt Working Group’ and would amend accordingly.

Cllr John Burden advised that he agreed the terms of reference and appointed Cllr Peter Rayner and Cllr Colin Caller to the cross party working group.

The Chair advised that he agreed the terms of reference and appointed Cllr Karen Hurdle as the Chair and Cllr Robin Theobald as the Vice-Chair of the cross party working group.

Resolved that:

• The Terms of Reference for the Member-led Statement of Accounts Glossary Review be agreed

• The nominations put forward by the Committee as follows:

-       Cllr Karen Hurdle (Chair) (Conservative)

-       Cllr Robin Theobald (Vice-Chair) (Conservative)

-       Cllr Peter Rayner (Labour)

-       Cllr Colin Caller (Labour)

The Director (Corporate Services) informed Members of the findings of initial investigations into alternative treasury management investment options, in particular the use of Diversified Income Funds. The report presented a proposal to progress the use of Diversified Income Funds as an alternative investment option for the council, subject to further due diligence work by officers.

The Director (Corporate Services) apologised for the lateness of the report being released but informed the committee that the Chair, Vice-Chair and Cllr John Burden had been briefed on the matter ahead of the meeting.

The Director (Corporate Services) outlined the following key points:

• On 27 June 2017, Full Council agreed to the Property Acquisition Scheme being extended by recommendation of the Finance & Audit Committee and a further £10m from the investment balances was made available to the scheme
• Since securing the money it has become clear that the commercial property market is in a very different position than it was twelve months ago; there have been fewer properties put up for sale and those that have been are more fiercely bid upon by other parties.
• Three potential acquisitions are being pursued at this moment in time; no bids have been made and none have been considered by the Property Acquisition sub group yet
• Whilst the council is waiting to make these acquisitions, the funds can be invested into more fluid investments types which will achieve a higher return than traditional investments with banks and building societies and allow for increased manoeuvrability of the funds

The Principal Accountant (HRA & Exchequer) advised that GBC are now looking at diversified income funds run by external fund managers which start off with traditional investments in property and equity but also branch out to more unusual assets such as toll roads, surgeries, student accommodation etc. The range of assets provides a wide spread of risk and more liquid funds which means GBC can disinvest in a shorter period of time. The council’s cashflow model has been updated which indicates that the council’s cashflow position will permit placing funds in these alternative investment vehicles in the short to medium term.

The council will be engaging with its treasury advisors, Capita Asset Services, to seek their advice on potential investment opportunities.

It was proffered by a Member that he supported the proposal but there shouldn’t be a restriction against particular investments funds; there are high returns on areas such as military and tobacco investment and GBC should not be overly concerned with who their investments also invest their money in.  However other Members of the Committee felt that any unethical investment should be avoided by the Council and if found out to be later on in an investment, GBC should pull out immediately.

The Director (Corporate Services) advised that he would pass the information along to the sub-group to ensure that possible investments are investigated thoroughly to see how they would invest GBC’s money and cited that at this time GBC are approaching £2 million income per annum from investments.

Resolved  ...  view the full minutes text for item 26.