Apologies of absence were received from Cllr William Lambert (Cllr Michael Wenban subbed), Emily McKeown and Elizabeth Jackson, the two representatives from Grant Thornton.

The minutes of the meeting on Tuesday, 11 September 2018 were signed by the Chair

Cllr John Burden declared a non-pecuniary interest in respect of item 4.1 on page 106 of the report relating to the Older Persons Champion.  It refers to Age UK and Cllr Burden is the Chair and Director of Age UK North West Kent.

Cllr John Burden also declared an other interest in respect of item 3.11.6 on page 104 as he is a Director of the Gr@nd.

Members were provided with an update on the work, outputs and performance of the Audit & Counter Fraud Team for the period 1 August 2018 to 30 September 2018.

The Audit & Counter Fraud Shared Service Team Leader stated that the update at Appendix 2 is the second of three updates to be produced during 2018-19; detailing the work undertaken by the Audit & Counter Fraud Team between 1 August and 30 September 2018 and the progress made against the annual work plan.

The Audit & Counter Fraud Shared Service Team Leader highlighted a number of key points to the Committee:

• Paragraph 3.4 of the update, on page 16, explains that due to staff sickness, an unexpected vacancy created by a promotion within the team and one Audit & Counter Fraud Officer taking flexible retirement from 01 September 2018, the level of resources available has been affected.
• As of 30 September, the net loss from the original resource budget of 660 days for Gravesham, resulting from these issues is approximately 56 days. Overall the team is forecasting a loss of 155 days; the 56 days is Gravesham’s proportion of that based on the agreed split of resources and work that has already been completed.
• Despite the resourcing issues the work plan for 2018-19 is progressing well and the table in section 4, which starts on page 18, provides an update on all work completed during the period. During this period four audits were finalised. 
• An update against the team’s key performance indicators is given in the table at section 5, which starts on page 25.
• The outturns provided are as at 30 September; however as of today (for the year to date):

-       A&CF10 Proportion of productive time spent on assurance and consultancy work is 62%

-       A&CF11 Proportion of productive time spent of counter fraud work is 38%

-       A&CF12a Proportion of agreed assurance assignments delivered is 32%

-       A&CF12b Proportion of agreed assurance assignments underway is 24%

• Section 6, on page 27 of the update, sets out a request to defer the audits of Tenancy Enforcement and Repairs & Maintenance to the 2019-20 plan due to changes in the Services. This will allow for more effective reviews to take place next year.
• There are no further expectations to request changes to the plan at this time; the resource situation is being continually monitored to see if we can recover lost time through other means. Revisions of the plan may become necessary in the future, in which case Members will be provided with a full explanation and approval sought. 
• Section 7, which starts on page 28, provides an update on all Audit & Counter Fraud recommendations; including a table on page 34, which lists agreed recommendations that are outstanding more than 6 months past the scheduled implementation date. All of the recommendations in this table were reported to the Committee in September; the Director (Housing & Regeneration) gave assurance at the previous Committee meeting that these recommendations will be implemented by December 2018.  ...  view the full minutes text for item 82.

Members were provided with a mid-year review update report to Members of the Finance and Audit Committee on treasury management activity undertaken during the period April to September 2018.

Section 3 (page 38) includes an economic background update from Link along with an interest rate forecast.  Following the Quarterly inflation report and minutes from the MPC meeting, Link is anticipating an interest rate rise in 3^nd quarter of 2019, and further rate rises in 2020 and 2021. Those forecasts will form the basis of the investment income forecast when setting the 2019/20 budget.

As at 30^th September, the Council’s investment balance was £55.3m. That is a significant increase which reflects the investable balances that the Council is holding as a result of the St George’s Centre development. The redevelopment of the St George’s centre has led to an increase in the Council’s capital programme which has resulted in revised estimates for the capital expenditure and financing of the capital programme prudential indicators which can be found in section 6 of the report at pages 41 and 42 of the pack.

Full details of the Council’s investments as at 30 September can be found in appendix 2 and 3 of the report.

Of the £55.3m, £34.9m is currently managed internally and £20.4m is managed externally within Property and Multi Asset Funds.

The Principal Accountant (HRA & Exchequer) highlighted an error in the report; in paragraph 7.2 the yield on the internally managed investments is shown as 0.453% against a 3 month LIBID benchmark of 0.21%.  Those are the figures for 2017-18. The correct figures should be the average investment return is 0.43% against a 3 month LIBID figure of 0.67%.

In turn that means that GBC were below the benchmark and this is primarily due to the volume of cash GBC hold and having to hold relatively large balances in the Money Market Funds.  Whilst the TMSS was amended to increase the total sums that can be invested with each counterparty following the St George’s redevelopment, as a result of the EU MIFID2 legislation that came about in January the funds haven’t been able to be placed immediately. The next step is to go through an on-boarding process with new counterparties which has been time consuming and therefore as a result GBC have had to hold monies in the Money Market Funds until such time as investments can be placed. However GBC have now been able to place longer term investments, and are now starting to achieve over 1%, therefore the yield should start to rise.

Moving onto the Property Funds and Multi Asset funds the team have continued to see capital growth across all three property funds as can be seen in the table on page 45 of the pack.  The capital value of Multi Asset Funds continues to be very volatile and is currently below the opening value.  It is important to remember those are long term investments and the value can go up as well as down.  ...  view the full minutes text for item 83.

Members were presented with mid-year progress information in respect of all risks recorded in the 2018-19 Corporate Risk Register which can be found at appendix two of the report.

The 2018-2019 Corporate Risk Register was approved by Council on 17 April 2018 and is attached at appendix two to the report for Member information. Seven strategic risks were identified as being above the Council’s risk tolerance threshold and were therefore included in the register. Management action is provided against each of those risks by the officers in charge of them and the quarterly risk assessment for each risk is located on pages 81- 93 of the report.  

The Principal Accountant (HRA & Exchequer) welcomed Member input on adding or moving any risks for the 2019/20 register.

The notion was raised by a Member that risk 5 and 6 should be combined for the new register as they link to each other and homelessness can be increased by the rollout of Universal Credit. The amount of Universal Credit given compared to high rent levels is not compatible and makes large swathes of people homeless in a vicious cycle. But the point was stressed that something needed to happen immediately as the nights are growing increasingly colder as winter approaches, action needs to be carried out before the paperwork.

The Assistant Director (Housing) advised that there are synergies between those two risks and there are several lobbying groups nationally that are looking into that correlation. It is a national problem although as of yet no one has linked those two problems together. Measures are in place addressing the risks separately at Gravesham. Over the last four years housing rent arrears have reduced by approximately £800K, however upon roll-out of Universal Credit that rate of reduction rate has slowed down. MT have agreed to the procurement of a particular software which is an analytical tool which helps to better focus the rent recovery work undertaken by staff ; the software will be active from January 2019. The Homelessness Reduction Act that came into effect in April 2018 has directly impacted the figures especially causing an increase in approaches to the council for assistance and also in the numbers placed in temporary accommodation (the figure now stands at 90 as at the end of quarter 2). Some of the temporary accommodation used is in privately rented accommodation, which are charged for at a nightly rate and therefore more expensive.  The grant received from Central Government goes towards topping up some of the rents paid for such accommodation where housing benefit doesn’t cover the cost of the accommodation. 

After a further short discussion on homelessness and Universal Credit, Members agreed that more light should be shone on the difficulties the Housing Team face and it should be made publicly aware that Universal Credit is causing more people to become homeless. Members felt that the public needed to be more aware of the problem people face with claiming for Universal Credit.

Referencing risk 1, concern was raised  ...  view the full minutes text for item 84.

Members were provided with information on actual performance against the approved Revenue and Capital budgets for 2018/19, including known variances agreed or identified through budgetary control activity. Members were also updated 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) advised that it is the second budget report of the 2018/19 financial year for second quarter to 30 September 2018 and directed Members attention to Page 96 of the report. It was a detailed one page executive summary that highlighted and explained the main points from the report regarding: 

• General Fund (Revenue)
• General Fund (Capital)
• HRA (Revenue)
• Housing Capital

The Principal Accountant (General Fund) and the Principal Accountant (Housing & Exchequer) elaborated further on their respective fields outlined in the executive summary, quoting the figures from the report.  

General Fund

The Principal Accountant (General Fund) and the Assistant Director (Corporate Services) fielded questions from Members explaining that:

·         The statue of the Queen was fully funded by third party contributions but the statue has to be included on the asset register as a council asset and therefore any capital costs incurred against the statue has to be reflected in the General Fund Capital Programme

·         Waste Freighter Vehicle Parts £25K adverse variance – GBC bought the vehicles new but they were new models and budgetary provision for replacement parts was not sufficiently made. The Assistant Director (Corporate Services) will liaise with the Operational Services Team to obtain further information on the matter.

·         Town Pier Remedial Works – It is unsure if any money has been reimbursed for the works that were carried out at the Town Pier; it will be followed up on and brought back to the Committee.  The Assistant Director (Corporate Services) advised that GBC are reviewing our repairs and remedial works requirement for the Civic Centre, all civic buildings and assets; the sea wall by St Andrews Church will be taken into account as a part of that planning. 

·         The Principal Accountant (General Fund) added that there are working groups which look at assets within the Borough, at what needs to be done with them, when it needs to be carried out by and funding arrangements such as securing external funds from the Heritage Lottery Fund

·         A £91k Flexible Homelessness Grant was received in 2017/18 and has been released to fund temporary accommodation costs; the Homelessness Reduction grant varies from year to year and the grant is held until it is required to be drawn upon to fund services the same as other grants are used

·         Refuse Collection – KCC contribution: KCC have fully reimbursed the council for the additional tipping-away costs (such as fuel and staffing) incurred due to the fire at the Pepperhill site

·         On page 109, Developer Contributions: Whitehill Road is possibly a typo, it should be Whitehill Lane, it will be clarified for the Committee 

The Assistant Director (Corporate Services) gave an overview  ...  view the full minutes text for item 85.

The Committee was informed of the progress to date on the work of external audit and attention was drawn to emerging national issues and developments that may be relevant.

The Assistant Director (Corporate Services) explained to Members that Elizabeth Jackson unfortunately had a situation arise which meant she was unable to attend. She has replaced Darren Wells as the Associate Director representative from Grant Thornton for our external audits. The Directors rotate between different authorities after a certain amount of time in order to maintain their independence and although it was a pleasure working with Darren Wells, the Finance team are looking forward to working with Elizabeth Jackson as she was a previous onsite auditor in 2010.

In terms of the report, at appendix two it provides Members with an update on the delivery of external audit responsibilities against the planned work for 2017/18 and 2018/19, a summary of emerging national issues and a number of challenge questions in respect of these emerging issues which the Committee may wish to consider.

The Assistant Director (Corporate Services) added that the 2017/18 Housing Benefit Certification work is due to be completed by the end of this month; officers are working with the auditor to finalise the audit, the outcomes of which will be brought back to the Committee in the future.

One Member raised two questions to be answered or taken back to Grant Thornton:

·         Can assurances be given that none of Elizabeth Jacksons team, nor herself, were involved with the financial audit of Patisserie Valerie

·         Page 144 – Concerns are raised over the language used in paragraph about setting up the LATc, the downgrading of staff in the terms and conditions and the references to pension rights

The Assistant Director (Corporate Services) advised that she would take those points back to Grant Thornton although with regard to the first point, she anticipated that they were not involved as Grant Thornton operates separate arms of the company for private and public organizations.

Resolved that Members noted the information contained within the report.

Members were informed of the PSAA Report on the results of the auditors’ work for 2017/18.

The report summarises the results of auditors’ work for 2017/18 at 495 public sector bodies including councils, fire and rescue authorities, police bodies and other local government bodies. The report summarises:

·         the audit of the financial statements;

·         the review of arrangements to secure value for money; and

·         any exercise of statutory reporting powers.

The report sets out that for 2017/18, the statutory accounts publication deadline came forward by two months to 31 July 2018. This was challenging for bodies and auditors and the PSAA are encouraged that 87 per cent of audited bodies received an audit opinion by the new deadline.

The report also highlights that the number of qualified conclusions issued by auditors on the arrangements to secure value for money remains relatively constant at seven per cent (32 councils, one fire and rescue authority, one police body and two other local government bodies) compared to eight per cent for 2016/17, with a further 30 conclusions for 2017/18 still to be issued.

The Chair thanked the officers for an informative meeting.