An apology for absence was received from Cllr Samir Jassal; Cllr Alan Metcalf substituted.

The minutes of the Finance and Audit Committee held on Tuesday, 10 December 2024 were agreed and signed by the Chair.

No declarations of interest were made.

The Committee were presented with a report that informed them of the progress to date on the work of external audit; the report also drew Members attention to emerging national issues and developments that may be relevant to the Committee.

The Public Sector Audit Manager advised that:

• At the previous F&A Committee, Members were informed that the 2023/24 financial statements backstop date of 28^th February 2025 provided insufficient time to complete the audit procedures, and it was therefore expected a disclaimed opinion would be issued for 2023/24 the financial statements. The Value for Money (VFM) work had been completed and issued in the annual report for 2023/24 which was attached in the agenda
• The timeline for receipt of the 2023/24 draft financial statements had been discussed with the Councils management team and they were expected to be received sometime in March 2025
• There was insufficient time to complete the audit work to obtain assurances for the audit opinion for the 2023/24 accounts however Grant Thornton were completing bespoke assurances on key areas to be able to provide a level of assurance to the committee on significant changes that had occurred since the last full audit was performed in 2019/20; those assurances had previously been seen by officers and Members and were summarised on page 21 of the agenda
• A report would be provided to Members on the audit of the 2023/24 accounts in due course once the draft financial statements had been presented and had been subject to the inspection period
• An update on the audit fees for the intervening financial periods of 2021 up to 2022/23 were summarised on page 24 of the agenda pack; Members should note that there was a significant reduction of the final fees against the scale fees which was due to the unusual circumstances of the implementation of the backstop for the outstanding accounts.  These fees are subject to approval by PSAA.

In response to questions posed by the Chair, the Public Sector Audit Manager, the Director (Corporate Services) and the Assistant Director (Corporate Services) explained that:

• Grant Thornton would be discussing the changes stemming from the IFRS -16 leases in an upcoming March session with the financial reporting team and its accountants; more guidance would be provided for officers in due course. From a Council perspective, the Assistant Director (Corporate Services) clarified that all of the individual leases held by the Council were being reviewed with budget holders and the effects of the changes to the accounts were currently being calculated. The lease register and procurement information were also being reviewed as part of that work. The Director (Corporate Services) further added that it was her view that exposure to the Council was relatively low due to no significant services being contracted out; for example, the Council ran its own refuse collection service with an in house fleet of vehicles which were owned by the Council and were on the balance sheet. However, it was still important to complete the verification  ...  view the full minutes text for item 52.

The Committee were informed of the findings of the Council’s External Auditor, Grant Thornton UK LLP, from the audit of the council’s financial statements and arrangements for securing Value for Money for the year ending 31 March 2024.

The Director, Grant Thornton advised that:

• The report at appendix one provided the conclusion of the Value for Money work relating to the 2023/24 financial year and the outcome of other work under the National Audit Office Code of Audit practice
• At a previous committee meeting, Members were presented with the audit plan that identified areas where more detailed work needed to be completed by the auditors to assess any significant weaknesses; a key significant risk in that plan was around financial sustainability which was identified in the previous year and rolled forward
• Grant Thornton had worked with officers extensively and had requested a significant amount of information in order to create the report which held a vast amount of detail relating to the VfM assessment for 2023/24; an executive summary of the findings was on page 51
• Grant Thornton had identified good progress made in the arrangements around financial sustainability following the key recommendations made last year and implored the Council to continue the process, however it was recognised by that it would take more than a single year for the Council to restore financial sustainability. For example, a true sign of the Council being in a financially sustainable position was not having to use revenue reserves to fund day-to-day expenditure that was seen in this financial year. Grant Thornton acknowledged that the risk of financial sustainability was caused by external factors that were outside the control of the Council, but the Council needed to manage those pressures as effectively as possible
• Aside from that one significant weakness, the report was largely positive with only one improvement recommendation identified in areas of governance

In response to Members questions, the Director, Grant Thornton explained that:

• The Councils financial situation and the risks it faced were not uncommon and other Councils around the country were in similar positions with regards to financial sustainability; the report set out the national context of audit and the financial pressures local government faced
• Some of the benchmarking information was not included in the report; Grant Thornton looked at financial sustainability indicators such as the level of deficit compared to total gross capital expenditure. Those indicators showed that Gravesham was in the lower to middle end compared to the sector, which as a whole was struggling; that information was not ordinarily included but the Director, Grant Thornton agreed to add it to the next report
• The Council needed to make further savings to exist within its financial envelope as the revenue reserves could not continue to be used to fund business expenditure; there is a need for the Council to consider making further long term recurring savings by changing the way services were delivered

Following a question concerning the savings the Council had made so far, the Director  ...  view the full minutes text for item 53.

The Committee were presented with and considered the:

• Treasury Management Strategy and associated Annual Investment Strategy
• The revised Minimum Revenue Provision Policy for 2024/25
• The Minimum Revenue Provision Policy for 2025/26
• The Capital Strategy for 2025/26-2029/30

The Principal Accountant (HRA & Exchequer) advised that:

• The documents were attached at appendix one and set out how the Council operated a balanced budget and how it intended to fund its capital programme
• The treasury strategy followed the same format at last year’s document and was reflective of the requirements in the CIPFA Prudential and Treasury Management Codes
• There had been some regulation changes which came into effect from 2025/26 and were outlined in the report
• The Council’s Treasury Advisors, Link, had been taken over and were now called MUFG however there was no difference to the service delivered or the personnel involved
• The Council would be issuing several bite sized training recordings in the early part of 2025-26 for Members to complete. Whilst some members of the committee would have undertaken training in the past, all Members were encouraged to take some time to watch those recordings once they were released in order to maintain and enhance their knowledge of treasury management

The Principal Accountant (HRA & Exchequer) further explained that the Statement of Accounts for 2020/21, 2021/22 and 2022/23 had been published and were concluded in accordance with the Government’s backstop arrangements. The Council were currently working on producing the Statement of Accounts for 2023/24 by the end of the current financial year which meant that the figures within the Treasury Management Strategy Statement and the Capital Strategy were based on unaudited figures. To ensure that the Treasury Management Strategy Statement remained reflective of the Council’s activity, delegated authority was sought for the Director (Corporate Services) to amend the Treasury Management Strategy for 2025/26 and the Capital Strategy for 2025/26 to 2029/30 as required following the completion of the 2023/24 final accounts process, in liaison with the Chair of the Committee.

Treasury Management Strategy

The Principal Accountant (HRA & Exchequer) took Members through the main sections of the Treasury Management Strategy and highlighted key points; the table of contents for the Strategy could be found on page 10 of the agenda.

Capital Strategy

The Principal Accountant (HRA & Exchequer) took Members through the main sections of the Capital Strategy and highlighted key points; the table of contents for the Strategy could be found on page 44 of the agenda.

The Principal Accountant (HRA & Exchequer) fielded questions from the Committee on both documents and explained that:

• The table at 8.4 showed debt increases from 2023/24 to 2027/28 which reflected the Charter development, a new Leisure Centre and the new build and property acquisition programme within the HRA as part of the Capital programme. Unfortunately, there weren’t any other sources of income that could support those projects which was why there was a reliance on taking on the debt. The debt should be considered alongside the affordability indicators, however it was reiterated that these were subject to  ...  view the full minutes text for item 54.

The Committee were provided with an update on the work, outputs and performance of the Internal Audit Team for the period 01 October 2024 to 31 December 2024.

Members were advised that the report at appendix two was the third and final update to be produced during 2024-25; ahead of the annual report; detailing the work undertaken by the Internal Audit Team between 01 October and 31 December 2024 and the progress made

against the Q1-Q2 and Q3-Q4 workplans.

The Head of Internal Audit and Counter Fraud guided Members through the report and highlighted each section. An executive summary of the reporting period was listed on page 96 of the report.

Section 7 of appendix two outlined proposed changes to the agreed workplans for Q1-Q2 and Q3-Q4 to address resource losses within the team.

The Head of Internal Audit and Counter Fraud guided Members to the key performance indicators on page 102 of the report and gave updated figures (as of 11.02.2025) for the ‘Proportion of agreed assurance reviews’:

9a) Delivered –  27%

9b) Underway – 32%

The Head of Internal Audit and Counter Fraud advised that there were no actions outstanding more than six months after the scheduled implementation date.

In response to a question from the Chair concerning team resourcing, the Head of Internal Audit and Counter Fraud advised that some of the resourcing issues were down to sick leave and post operative leave. He was hopeful the impact of resourcing could be limited moving forward and an advert for a new Internal Auditor post was currently being advertised.

Resolved that Members agreed the proposed revisions to the Q1-Q2 and Q3-Q4 internal audit workplans.

The Committee were provided with a report that updated them on the work, outputs and performance of the Counter Fraud Team for the period 1 October 2024 to 31 December 2024.

Members were advised that attached at appendix two was the third and final update to be produced during 2024-25; ahead of the annual report, detailing the work undertaken by the Counter Fraud Team between 01 October and 31 December 2024 in relation to the agreed

Workplan. The report  also provided a summary of the results of investigative activity and the savings achieved, as well as the outturns against the teams set performance measures.

The Head of Internal Audit and Counter Fraud guided Members through the report and highlighted each section. An executive summary of the reporting period was listed on page 112 of the report.

The Head of Internal Audit and Counter Fraud advised only five investigations were concluded in the reporting period with associated cashable Savings of £754 although a Council property was recovered representing a notional saving of £93,000. 

In response to a question from the Chair concerning team resourcing impacting fraud recovery, the Head of Internal Audit and Counter Fraud assured Members that the resourcing position would not impact on the councils ability to recover. If an investigation identified a fraud, the value of that fraud would be calculated from the point the offence was committed, not when it was identified and recovery of the full cost would be sought.. Two new counter fraud investigators had been recruited, with one starting at the end of February and another in March 2025 which brought the team up to full capacity. This will allow the team to move forward with other counter fraud activity in 2025/26.

Members noted the report.

The Chair agreed that pursuant to Section 100A(4) of the Local Government Act 1972 that the public be excluded from any items included in Part B of the agenda because it was likely in view of the nature of business to be transacted that if members of the public were present during those items, there would be disclosure to them of exempt information as defined in Part 1 of Schedule 12A of the Act.

The Committee were presented with the current fraud risk register following a review during 2024-25 and the addition of some newly identified risks.

The Head of Internal Audit and Counter Fraud took Members through the report and highlighted key points.

Members had their questions answered by the Head of Internal Audit and Counter Fraud.

Resolved that Members endorsed the assessments undertaken by Counter Fraud.