An apology for absence was received from Cllr Aaron Elliott. Cllr Jordan Meade substituted.

The minutes of the Finance and Audit Committee held on Tuesday, 17 September 2024 were agreed and signed by the Chair.

No declarations of interest were made.

The Committee were provided with a verbal update from Grant Thornton on external audit progress.

The Director, Grant Thornton updated Members on the progress of the statutory backstops to bring the local audit system back on track:

• On the 10 December 2024, a special meeting of Finance & Audit Committee would be held in order to allow the Committee to sign off the accounts for 2020/21, 2021/22 and 2022/23 alongside the audit findings reports in relation to those financial years. An explanation would be provided with the report advising of the Governments backstop legislation 
• The disclaimed opinions for those audits would then be issued by the first backstop deadline date of 13 December 2024
• The 2022/23 accounts were recently published, and everything was on track to meet the 13 December 2024 deadline; Paul Dosset from Grant Thornton would be providing the audit opinion for those accounts
• At the previous Committee it was explained that there was insufficient time to meet the next statutory backstop deadline date of 28 February 2025 to complete work on the 2023/24 accounts audit. However, Grant Thornton were still keen to undertake some specific work in relation to the financial statements for the 2023/24 accounts. That specific work related to auditing group accounts which was the first time they had gone through the audit process, the termination of the Aviva transaction and the accounting for the Charter transaction. Under auditing standards, opinions could not be provided for those three things as they would form part of the disclaimed opinion but an audit findings report explaining Grant Thornton’s views and findings on those three areas could be created
• The audit for the 2023/24 accounts would commence in early 2025 with a view to provide the audit findings report around February 2025

  The Director, Grant Thornton updated Members on the progress of Value for Money (VFM):

• The VFM reports were up to date and had been issued on all accounts up to 2022/23; work was currently underway on the VFM report for the 2023/24 accounts. The initial risk assessment had been completed and was with the Director, Grant Thornton for review; once it had been finalised, it would be shared with the Council’s Management Team and the Chair. The assessment would outline what the significant risks and weaknesses were; as reported at the last meeting the Director, Grant Thornton confirmed there would be a significant weakness around financial sustainability. The VFM report would be submitted to Members at the next Finance & Audit Committee meeting
• In the previous year, Grant Thornton had identified the significant weakness around financial sustainability which was why was it being reviewed in 2023/24; no other significant areas of weakness had been identified as of yet, but the assessment was still subject to final reviews. An addendum to the audit plan would be submitted with the other reports on the 10 December 2024

In relation to a question concerning the location of the published accounts on Gravesham’s website, the Director (Corporate Services) confirmed that there was  ...  view the full minutes text for item 32.

The Committee were provided with a mid-year review report that updated them on treasury management activity undertaken and the impact of capital expenditure during the period April to September 2024.

The Principal Accountant (Housing & Exchequer) advised that the economic performance update and forecasted interest rates as at 03 October 2024 were provided by Link Asset Services in sections three and four of the report.

The Principal Accountant (Housing & Exchequer) guided Members through the rest of the report and highlighted key points concerning the Councils capital position, borrowing requirements, debt provision and the current position of the Councils investments with property and multi-asset funds.

The Principal Accountant (Housing & Exchequer) and the Director (Corporate Services) fielded questions from the Committee and explained that:

• The operational boundary for external debt for 2024/25 was £319,630 and the authorised limit for external debt for 2024/25 was £339,630. The operational boundary was a figure which shouldn’t be exceeded on a day to day basis but the Council had the ability to exceed if needed to meet significant circumstances however, the figure for the authorised limit could not be exceeded no matter the need. The two figures were linked, and the Council determined the limits for each; Members noted that there was no requirement for the way the limits were calculated. When calculating the limits, existing borrowing, current investments and the Council’s outgoings were all taken into account in order to determine what the maximum position the Council could borrow would be if a worse case scenario happened. The limits were reviewed annually and could be lowered or increased when required
• As part of the budget setting process, the Director (Corporate Services) had to produce a statement on the robustness of the budget setting process and the adequacy of reserves. All of the reserves would be reviewed, and an assessment would be made on whether they were fit for purpose. The Hermes Property Fund would be part of that review, and would be the decision of the Director (Corporate Services) to determine if increased funds needed to be added to the investment income equalisation reserve at that time in order to mitigate in case of loss. The Principal Accountant (Housing & Exchequer) added that the Council’s current investment with Hermes didn’t have a capital loss so there wouldn’t be a huge impact if the investment was taken out of the fund
• The CCLA and Hermes Property Funds were the only funds that the Council had invested into which couldn’t be accessed readily; all of the investments into the multi-asset funds could be redeemed within a few working days

The Committee noted the report.

The Committee were provided with a report that updated them on mid-year progress information in respect of all risks recorded in the 2024-2025 Corporate Risk Register, which could be found at Appendix 1 to the report.

The Assistant Director (Corporate Services) advised that the 2024-2025 Corporate Risk Register was approved by Full Council on 16 April 2024. The eight identified strategic risks in the register were outlined at section 1.3 of the report and mitigating actions had been agreed to help manage the risks recorded in the 2023-2024 register, as set out in appendix two.

The development of the council’s Corporate Risk Register for 2025-2026 would commence in December 2024 and Members were requested to initiate the process by putting forward suggestions for any new or emerging risks for consideration, as well as recommend which of the current risks should be carried forward.

The Committee suggested the following areas be considered the Corporate Risk Register:

• Local Government Devolution
• Financial stability and lack of Government funding support
• The increased public use of artificial intelligence (AI) including by the Council’s external partners such as KCC; it was advised that in 2023 the Government added AI to their National Risk Register

The Assistant Director (Corporate Services) responded to the Committees suggestions:

• Devolution had been identified as a risk by the Council and risk two could be amended to ‘Changes in national and regional priorities and legislative change’ to support that risk
• The autumn statement was announced by the Government last week, but it only released headlines, there weren’t many details on their proposals. More detail was expected to be released in the next few weeks with the provisional statement being released around 17th-19th December 2024. Once that detail was released, then more consideration could be given to the risk of future financial stability and insufficient funding support from the Government

In response to the Chair’s question asking to what extent the council needed to incorporate the risk from the Capital Programme and several large upcoming projects into the risk register, the Director (Corporate Services) advised that it was recognised that slippage was experienced in the Capital Programme and posed a risk. In order to mitigate that risk, the Council could look to investigate as normal through the budget setting process and capture the risk within an existing risk as a specific trigger or assess it separately as a new risk. The decision would be made as part of the deliberations on the register.

The Chair thanked the Committee for their suggestions and stated they would be taken under advisement.

The Committee noted the report.

The Committee were provided with a report that update them on the work, outputs and performance of the Internal Audit Team for the period 01 August 2024 to 30 September 2024 as well as the progress made against the Q1-Q2 workplan.

Members were advised that the report at appendix two was the second of three updates to be produced during 2024-25; the report covered a short period of only two months, with only one review (Tenancy Management) finalised during the period.

The Head of Internal Audit and Counter Fraud guided Members through the report and gave an update for each section. An executive summary of the reporting period was listed on page 78 of the report.

The Head of Internal Audit and Counter Fraud directed Member to the key performance indicators on page 83 of the report and gave updated figures, as of 06 November 2024, for IA9 ‘Proportion of agreed assurance reviews’:

a)    Delivered – 14%

b)    Underway – 18%

The Head of Internal Audit and Counter Fraud was confident that, despite the resources impact, the team would be able to deliver an annual opinion however it may be heavily caveated that it was on a limited scope. There would be additional reliance on external inspections and alternative forms of assurance; the Head of Internal Audit and Counter Fraud was monitoring the situation and advised that temporary resources could be sought, if required, in order to finish work to deliver the opinion. 

The Committee noted the report.

The Committee was provided with an update on the work, outputs and performance of the Counter Fraud Team for the period 1 August 2024 to 30 September 2024 in relation to the agreed workplan.

Members were advised that the report at Appendix Two was the second of three updates to be produced during 2024-25; due to the relatively short reporting period of only two months, there has been limited activity in relation to a number of areas within the counter fraud plan and a further 7.5% of estimated resources delivered during the period.

The Head of Internal Audit and Counter Fraud guided Members through the report and gave an update for each section. An executive summary of the reporting period was listed on page 94 of the report.

In response to Member questions, the Head of Internal Audit and Counter Fraud  and the Assistant Director (Corporate Services) explained that:

• Whenever any form of discount/exemption was removed from an individual’s council tax bill, it increased the liability for Council Tax and went through the normal recovery process for the remaining council tax owed. The Head of Internal Audit and Counter Fraud couldn’t comment on exactly how much was recovered from individual cases. The Assistant Director (Corporate Services) confirmed that figures to that level of detail wouldn’t be available, but it became part of the arrears which was monitored. Those arrears went directly to the individual Council Tax account so if they weren’t paid then reminders would be issued; if those reminders were ignored then final summonses would be issued and a liability order sought through court to recover the arrears. Following a request to have any report that outlined outstanding council tax issues to reflect a breakdown of where adjustments had taken place on individual council tax cases, it was explained that it wasn’t possible as it was an intensive administrative task that would require a large amount of resources due to every council tax account having to be reviewed. The Assistant Director (Corporate Services) added that Members would see in the outstanding arrears report if officers were not collecting the monies owed to the Council that stemmed from the adjustments
• The Internal Audit Team had two officers off due to major surgeries which had an impact, and one officer had been seconded from Counter Fraud to Internal Audit, Unfortunately a few officers had been lost to the same organization as they offered higher salaries; recruitment would soon be underway to fill those positions. Medway Council had just completed a major pay review process which brought the teams salaries up to average for similar roles with other organizations which should help with recruitment

The Committee noted the report.

The Committee was provided with a report that outlined the work completed in relation to the data matches received as part of the National Fraud Initiative Exercises 2022-23 and 2023-24.

The Head of Internal Audit & Counter Fraud directed Members to section two, three and four of the report and highlighted key points; the report gave details of the NFI activity and outcomes to date relating to the 2022-23 and 2023-24 exercises which had both been concluded. The total financial results from those exercises as of 30 September 2023 were £278,075.

Data submissions for the 2024/25 bi-annual exercise were completed in October 2024 with exception of Council Tax and electoral roll data which would be summitted in December 2024. The team were expecting all matches to be received just before Christmas.

In response to the Chairs question regarding the cost of being in the national fraud initiative, the Head of Internal Audit & Counter Fraud advised that the Council were mandated to take part in the exercise and the cost to District Authorities was around £2600. It was the opinion of the Head of Internal Audit & Counter Fraud that the Council were receiving a return on that small investment. The Chair noted that there were also non-financial benefits to taking part in the initiative.

The Committee noted the report.

The Committee were provided with a report that presented information about the new Global Internal Audit Standards and Application Note: Global Internal Audit Standards in the UK Public Sector and a consultation being conducted by CIPFA in connection with a new Code of Practice for the Governance of Internal Audit in UK Local Government.

The Internal Audit Manager provided an update on the upcoming changes which would replace the current Public Sector Internal Audit Standards:

• In January 2024, the Global Institute of Internal Auditors’ (IIA) published a set of new Global Internal Audit Standards (the Standards) which were due to come into effect from 09 January 2025.
• Alongside the Standards, the IIA introduced Topical Requirements, which would ensure that all internal audit functions applied a consistent methodology when assessing the effectiveness of governance, risk management and controls in particular topical areas.
• The Relevant Internal Audit Standard Setters (RIASS) agreed to use the Global Internal Audit Standards as the basis for internal auditing in the UK public sector. An Application Note: Global Internal Audit Standards in the UK Public Sector (the Application Note) had also been developed by RIASS setting out additional public sector interpretations and requirements. The final Application Note would be applicable from 1 April 2025.
• The team were currently undertaking a self-assessment against the new standards and application note; an action plan would be created following conclusion of the assessment to address any gaps.
• CIPFA had issued a new code of practice which provided guidance as to how to apply the requirements of domain three of the new standards in local government. That domain introduced explicit requirements to the Finance & Audit Committee and Management Team, as well as the Chief Audit Executive
• Although there were significant changes was noted that the requirements, laid out in appendix one, mostly articulated arrangements that the Council already had in place
• A consultation was live on the code of practice, attached at appendix two

The Internal Audit Manager fielded questions from the Committee and explained that:

• The team would not know the full impact of the new standards until the self-assessment had been completed; however, from what had been seen so far, there were numerous tweaks that needed to be made but there wasn’t anything that would fundamentally change the day to day work of the team 
• The topical requirements were set by the IAA but to date, only one draft topical requirement had been published, due to them following on from the work on global standards and the associated guidance. With regards to future topical requirements, roughly ten subjects had been mooted but nothing had been confirmed yet. The Internal Audit Manager added that although the IIA set the requirements that needed to be considered when undertaking audits, those subject areas were not required to be audited. The Council would still be subject to the same bi-annual risk assessment process and the requirements would only need to be followed if the Head of Internal Audit & Counter Fraud selected one of those  ...  view the full minutes text for item 38.