| Time: | 7.30pm | Place: | Committee Room 1, Council Offices, Gernon Road, Letchworth Garden City |
| PRESENT: | Councillor M.E. Weeks (Chairman), Councillor John Booth (Vice-Chairman), Councillor Clare Billing, Councillor Jim McNally and Councillor Deepak Sangha. |
| IN ATTENDANCE: | Norma Atlay - Strategic Director of Finance, Policy and Governance Tim Neill - Accountancy Manager Dean Fury - Corporate Support Accountant Nigel Schofield - Committee and Member Services Officer Iain Murray - Engagement Lead at Grant Thornton |
| ALSO PRESENT: | At commencement of the meeting one member of the public. |
| Meeting attachment |
Agenda Front Pages |
| Item | Description/Resolution | Status | Action | |
| PART I | ||||
| 49 |
APOLOGIES FOR ABSENCE An apology for absence had been received from Councillor Simon Harwood. An apology for absence had been received from Andy Cavanagh - Head of Finance, Performance and Asset Management. |
Noted | ||
| 50 |
MINUTES Minutes That the Minutes of the Meeting of the Finance, Audit and Risk Committee held on 11 December 2014 be confirmed as a true record of the proceedings and be signed by the Chairman. |
Agreed | ||
| 51 |
NOTIFICATION OF OTHER BUSINESS There was no other item of business tabled. |
Noted | ||
| 52 |
CHAIRMAN'S ANNOUNCEMENTS Councillor Michael Weeks in line with the Code of Conduct advised that any Declarations of Interest should be declared immediately prior to the item in question. The Chairman gave a warm welcome to Dean Fury the NHDC Corporate Support Accountant to his first meeting of this Committee and to Iain Murray from Grant Thornton also to his first meeting of this Committee. |
Noted | ||
| 53 |
PUBLIC PARTICIPATION There was no public participation. |
Noted | ||
| 54 |
NORTH HERTFORDSHIRE DISTRICT COUNCIL - GRANT CERTIFICATION REPORT Introduction Report Mr Iain Murray of Grant Thornton thanked the Chairman for the opportunity to address the Committee and confirmed that Richard Lawson was unable to attend the meeting and that he would now be the Engagement Lead replacing Phil Westerman. Mr Murray reminded the Committee that Grant Thornton were required to certify claims and returns submitted by NHDC which provided confirmation that NHDC were entitled to receive funding. The Committee noted that one claim had been certified for the financial year 2013-2014 which concerned the payment of £38.3M for the housing benefits subsidy claim. An amendment of £19,170 was necessary which represented the net of the manual adjustments processed by NHDC and the removal of the Housing Revenue Account rent rebate expenditure from the claim. Mr Murray advised the Committee that there were two issues arising from the certification process: 1. The draft housing subsidy was subject to a positive amendment of £20.091 to the overall balance owed by NHDC. This was due to the manual adjustment after the claim had been submitted to the Department of Work and Pensions but prior to the commencement of the audit and 2. There was a deduction of £921 from the Housing Revenue Account as a few claims could not be substantiated by a claim form or other relevant prime records. The Chairman thanked Mr Murray for the update on the Grant Certification report. RESOLVED: (1) That the details of the Grant Certification Work performed by Grant Thornton be noted; (2) That the two issues arising from the certification work regarding the Draft Housing Subsidy and Housing Revenue Account be noted. REASON FOR DECISION: To ensure that the Finance, Audit and Risk Committee are appraised of the outcome of the Grant Certification Report issued by the external auditor. |
Noted | ||
| 55 |
CORPORATE BUSINESS PLANNING - BUDGET 2015 - 2016 Report Appendix 1 - High Level General Fund Forecasts Appendix 2 - General Fund Summary for 2015-2016 Appendix 3 - Expenditure Reduction Proposals Appendix 4 - Income Generation Proposals Appendix 5 - Revenue Investment Proposals Appendix 6 - MTFS Extract - Budget Assumptions Appendix 7 - Description of Earmarked Reserves Appendix 8 - Financial Risks Assessment Erratum report The Accountancy Manager (AM) presented the report of the Strategic Director of Finance, Policy and Governance and advised that this report was before this Committee for consideration prior to presentation to Cabinet on 27 January 2015. The AM reminded the Committee that the draft budget for 2015-2016 was considered at the meeting held on 11 December 2014 (Minute 47 refers). The AM tabled an Erratum Paper to this report which detailed a replacement Recommendation 2.4 to Cabinet and stated that there was a £404,000 decrease in net expenditure and a corresponding increase in the 2015-2016 Budget of £80,000 with a revised cross reference to Paragraph 9.2.8 and Table 5 of the main report. The AM reminded Members that the major element determining the Budget for 2015-2016 besides government grant was the amount of Council Tax to be levied that would be recommended by Cabinet to Council for agreement on 12 February 2015 and the consideration of key factors which were known and unknown and could impact on NHDC Finances for the period of the medium term financial strategy from 2015 to 2020. A provisional grant settlement had been received on 18 December 2014 and a final announcement was expected possibly on 12 February 2015. The AM confirmed that the settlement was as expected which equated to an overall 15.5 per cent reduction since 2014-2015. In response to a question the AM confirmed that the settlement reduction this year of 15.5 per cent was very similar other District Authorities but there was considerable variance between different types of local authorities, unitary and shire counties settlements. The AM also reminded the Committee that the Council had over achieved its target for efficiencies needed to balance the 2015-2016 budget which would be used beyond 2015-2016. The AM described to the Committee the changes made to the Medium Term Financial Strategy (MTFS) implemented in previous years including inter alia: A review of the allocation of resources for lower or non priority areas; A review of the level of generated income from charges compared to the costs of provision; The reduction of interest income; Agree all savings for each Directorate; Allow for the possibility of negative RPI figures that would affect the rate of Council Tax; Further emphasis of ‘Invest to Save' and obtain better rates of return than investments with regard to capital expenditure and the development of financially self- sustaining arrangements for NHDC properties. With regard to the level of increase in Council Tax the AM advised that no increase would result in a reduction in special reserves and balances from almost £7M in 2014-2015 to £2.1M in 2019-2020 and that this low sum would leave the Council in an exposed position. The Committee noted that in order to maintain a reasonable amount of reserve there would need to be on going efficiencies of £1.7M from 2016 - 2017 to 2019-2020 with modest increases in Council Tax each year and were aware that the budget for 2015-2016 must be regarded as an estimate following the constant changes to the local government funding arrangements. The AM proceeded to refer the Committee to: Table 1 - Provisional Settlement for 2015-2106; Table 2 - Estimated Government Funding for 2015-2016 onwards; Table 3 - Spending Power; Table 4 - Budget Risks 2015-2016; Table 5 - Variances on the 2014-2015 General Fund Budget; Table 6 - Other Reserves and Provisions for 2014-2015; Table 7 - Capital and Revenue Investment Key Factors; Table 8 - Estimated Employee Budget from 2009 - 2010 to 2015-2016 and to Table 9 - Average Band D Council Tax with the acceptance that the County Council took 76 per cent of the individual council tax payment. The AM emphasised that a 1.9 per cent increase in Council Tax (as in previous years) would mitigate the impact of inflationary increases faced by the Council each year. The AM described in some detail the procedures relating to the Collection Fund which had to account for the costs of collecting Council Tax and Business Rates and that the fund was expected to ‘break even' over time. Despite the monies being totalled, the two accounts had to be kept apart at all times, and It had become apparent that the collection fund deficit in the first two quarters of 2014-2015 had increased and that by the end of the year would be at £3M. The AM advised that to cover the deficit the General Fund would be charged £1.2M to fund the NHDC share in the Business Rates deficit but a contribution of £83K would be received for the surplus in the collection of Council Tax. The AM stated that Section 31 monies could be taken from earmarked reserves into the general fund and would offset the charge of £1.2M. In response to a question the Strategic Director of Finance, Policy and Governance (SD) advised that the collection rates for both taxes equated to about 97 per cent. The AM also advised that the successful application to be part of a Hertfordshire Business Rate Pool in 2015-2016 would reduce the amount of levy the Council would have to pay next year. The Committee noted that the New Homes Bonus was awarded for six consecutive years and was calculated on the number of new homes delivered in the District each year. The SD advised that Year One had to be a forecast and the number of new homes built would relate directly to the amount of cash received but there were no restrictions as to how the grant should be spent. The SD also advised that the New Homes Bonus grant could be withdrawn at any time by Government and that a projected income of £2.4M must be regarded as uncertain. The Accountancy Manager concluded his presentation by referring the Committee to Appendices 1 to 8 which gave more detail supporting the proposed budget for 2015-2016, with particular reference to Appendices 3,4 and 5 which detailed Efficiencies (reduction in expenditure), Efficiency (increase in income) and Revenue Investment respectively. In response to a question regarding Financial Risks the AM clarified that the financial risk included in the estimates for the North Hertfordshire Museum and Community Facility at Hitchin Town Hall were revenue implications and that there were also capital funding risks which would need to be considered separately and confirmed that the loan to Hitchin Town Hall Limited for legal fees was still an outstanding high risk, but was not included in the General Fund. With regard to Table 5 and new investment proposals the AM advised that there were £235K of new investments on top of £165K already agreed with a total net district expenditure of £16M in 2015-2016 and that £600K would be transferred to General Funds. The AM confirmed that due to increased recycling rates there would be monies transferred into the reserve for Waste and Recycling and that the development and implementation of the Careline Service was underway and it was anticipated that all costs including overheads would be covered in 2015- 2016 but this service would remain under review. The Chairman thanked the Accountancy Manager for the presentation and the clarification of the issues pertaining to the Collection Fund. RESOLVED: (1) That the contents of the report to Cabinet on 27 January be noted; (2) That the eight recommendations (including the revised recommendation 2.4) to Cabinet be noted; (3) That the proposal to increase the Council Tax by 1.9 per cent in 2015 - 2016 be noted. REASON FOR DECISION: To ensure that the Finance, Audit and Risk Committee were aware of all the relevant factors taken into consideration for the decision on the Council Tax precept for 2015-2016 and aware of the need to present a balanced budget to Council on 12 February 2015. |
Noted | ||
| 56 |
CORPORATE BUSINESS PLANNING - CAPITAL PROGRAMME 2015-2016 ONWARDS Report Appendix A - Capital Programme Summary Appendix B - Capital Programme Detail Appendix C Capital Investment Propsals for 2015-2016 and onwards The Accountancy Manager (AM) presented the report of the Strategic Director of Finance, Policy and Governance and advised that this report was for consideration prior to presentation to Cabinet on 27 January 2015. The AM confirmed that there had been no changes from the report presented to this Committee at the meeting held on 11 December 2014 (Minute 45 refers). The AM advised that Cabinet would be requested to approve all the Capital Investment Proposals which were detailed at Appendix C and totalled £18.494M of which £9.254m were profiled in 2015-2016. Cabinet would also be asked to note changes to the schemes listed in Appendix C which were an on-going commitment to the capital programme including inter alia: Cease the commitment to the Tenant Cash Incentive Scheme; Withdraw the £500K annual budget for the Housing Association Grant Scheme - and consider capital bids on an individual basis; Maintain the £754K per annum funding for the Disabled Facility Grant Scheme and increase the annual budget for home Repair Assistance Grants Scheme from £35K to £60K. Cabinet would also be requested to forward to Council an approved provisional capital programme for 2015-2016 to 2018-2019 of £20.5M. The AM referred the Committee to Appendices A (Summary) and B (Scheme by Scheme) which detailed the provisional capital programme, all of which were linked to the Council's three priorities. The AM commented that a major change to the Capital Programme for 2014-2015 and subsequently moved forward to the 2015 - 2016 programme was a capital bid of £190K for an incremental and affordable improvement to the Bancroft Recreation Ground in Hitchin by providing a water splash park. There was also an on going commitment to Housing Associations, Car Parking Investment and IT Investment The AM concluded his presentation by advising the Committee on the use of reserves to pay for capital investment which were considered as part of the general fund budget estimates including; Invest to Save proposals; Investment at North Herts Leisure Centre; General Asset Management; Delivery of the Green Space Strategy; Provision of Car Parks and Investment in IT Infrastructure. In response to a question the AM advised that the proposals for the anticipated asset disposals were all land sites and the objective was to dispose of land for capital receipts which would then promote development. Several Members expressed concern about expenditure on Growth Fund Projects as listed at three projects (Appendix B) where expenditure was listed but there was no breakdown as to individual items and specific allocation of monies year on year. Following a short discussion it was agreed that officers should be requested to provide to the Committee outside of this meeting a detailed analysis of the precise amounts of monies paid for specific projects within the three main headings of: Cycle Strategy Implementation; Green Infrastructure Implementation and Target Plans Implementation for the years before 2013-2014, 2013-2014, 2014-2015 and the projected spend per project in 2015-2016 and which of the three projects might be allocated funds in 2015-2016. In response to a question the AM confirmed that monies under S106 allocated to specific development projects could be pooled into growth fund projects if the criteria of the S106 agreement was met. The Committee were made aware that many current S106 monies were linked directly to new housing and that in the future it was unlikely that the move to the Community Infrastructure Levy at 1 April 2015 would be very closely linked to specific housing developments. The AM confirmed that there were no conditions attached to the disbursement of any growth fund grants. The AM also confirmed that monies allocated to parking for a trial of: Installation of on - street charging had yet to be implemented, nor had a Town Centre pay and display scheme for on street parking been implemented, but, the provision of hand held equipment for parking enforcement officers had taken place. The Chairman thanked the Accountancy Manager for the presentation and clarification of proposed capital expenditure and the risks attached to such expenditure. RESOLVED: (1) That the update in the Cabinet report on the Capital Programme for 2015-2016 be noted; (2) That the proposals for the Capital Programme in 2015-2016 with a possible investment of £11.3M be noted; (3) That the estimated capital spend in the period 2015-2016 to 2018-2019 of £20.5M be noted; (4) That the proposed £9.3M of new capital investment proposals in the period 2015-2016 to 2018-2019 be noted; (5) That the Planning Policy and Projects Manager and the Accountancy Manager be requested to provide all Members of the Committee with a detailed breakdown of monies spent from the Growth Fund Projects listed in Appendix B i.e. Cycle Strategy Implementation; Green Infrastructure Implementation and Target Plans Implementation as per years before 2013-2014, 2013-2014, 2014-2015 and the projected spend per project in 2015-2016 and which of the three projects might be allocated funds in 2015-2016. REASON FOR DECISION: To ensure that the Finance, Audit and Risk Committee were aware of the Capital programme for 2015-2016 onwards and request detailed analysis of expenditure. |
Noted | ||
| 57 |
TREASURY MANAGEMENT STRATEGY FOR 2015-2016 Report Appendix A - Treasury Management Policy Statement Appendix B - Treasury Management Practices Appendix C- Treasury Management Statement The Accountancy Manager (AM) presented the report of the Strategic Director of Finance, Policy and Governance and confirmed that the Council must adopt a Treasury Strategy Statement before the commencement of each financial year. The AM advised that this report would be presented to Cabinet on 27 January 2015 and sought approval of the Treasury Management Statement for 2015-2016 and subsequent adoption by Council. In addition Cabinet would be requested to approve the Treasury Limits for 2015-2016 which included Treasury Management Prudential Indicators as required by CIPFA. The AM referred the Committee to Appendix C which detailed the Treasury Strategy Statement for 2015-2016 and in particular: Interest Rate Exposure, Maturity Structure of Borrowing, The Investment Strategy and Principal Sums Invested (for periods longer than 364 days). The AM advised that the 2014-2015 Treasury Strategy had a mid year review in December 2014 and no changes had been made. Also, that the Council's activities could provide exposure to a variety of risks such as a credit risk where third parties would not pay monies owed to NHDC. The CSA explained that investments were mainly with UK Building Societies and UK Banks. However, the Committee were advised to note that the forthcoming year of 2015-2016 would probably see investments in a Money Market Fund. Money Market Funds would be used as a counterparty for investments which were invested in high rated but low risk as funds were grouped and invested widely. The AM advised that interest rates obtained by NHDC compared favourably with neighbouring authorities in Hertfordshire as this authority was prepared to invest with non rated building societies and for periods longer than 12 months, and that the CSA attended the Herts Treasury Group on a regular basis. With regard to Market Risk the AM advised that the current strategy set a limit of investment of £20M and not invested for a period greater than 364 days. There was a proposal to Cabinet that sought a change to investment levels being no more than 40 per cent of outstanding investments to be invested for longer than 364 days at any one time. The objective of this change was to ensure the on going relevance of this limit as cash balances declined. The Committee noted that Cash Manager Sterling had served notice to terminate the contract with NHDC and officers considered that there was insufficient financial return for Sterling to continue. It was proposed that Cash Manager Tradition would receive £8.5M of the funds previously managed by Cash Manager Sterling, NHDC officers would manage £4.5m and £2.5M would be used to fund Capital expenditure in the current year. Officers suggested that Cash Manager Tradition could find that the introduction of the new percentage limits more challenging than the current strategy when placing investments. In response to a question the Corporate Support Accountant (CSA) advised that the figure of 40 per cent of investments would equate to £16m but NHDC to date had not invested beyond £12M. The Accountancy Manager advised that all investment rates were considered on a daily basis in line with cash flow expectations and officers would be diligent in meeting the underlying principles in the order of security, liquidity and yield. The Accountancy Manager referred the Committee to the main proposed changes to the Treasury Management Strategy (Appendix C) and gave more information on changes to the Strategy including: An increase of the maximum balance to £30M allocated to Tradition and in-house officers; Remove the limit of £20M on investment (as described above); Allow in house deals to exceed 364 days; Continue to exclude foreign banks from the lending list but invest with UK subsidiaries of foreign banks (possibly Santander); Retain maximum monetary limits with counter parties and introduce a maximum percentage value with no more than ten per cent of investments with any one counter party. The Committee noted that the consequence of this would be a greater spread of investments but could result in a reduced level of interest received. One of the most important changes related to the proposal to exclude the current account held with Lloyds Bank from restrictive limits as interest received could be more favourable than short term investments (see above). The CSA stated that this arrangement would remove the need to move funds from the current account to a counter party at a reduced rate of interest as and when the total cash in the current account reached £9M or ten per cent of total investment. The AM advised that it was proposed that no more than 75 per cent of investments would be placed with banks, no more than 75 per cent of investments to be placed with Building Societies and no more than 25 per cent of investments to be placed with Money Market Funds. The CSA concluded his presentation by advising the Committee that another outlet for investments could be the use of Certificates of Deposits if interest rates were favourable. In response to a question about a vision for projected Capital Reserves both the Accountancy Manager and the Strategic Director confirmed that there was a strong link between the Treasury Management Strategy and the Capital Investment Programme. Much was dependent on the availability of funds, with the £40M from Housing Stock Transfer being less year on year, the cash reserves must be used to ‘earn' more money, invest to save was an important part of the Strategy and the main goal was to spend money wisely and for the benefit for the residents of North Hertfordshire. The Chairman thanked the Corporate Support Accountant and the Accountancy Manager for the presentation. RESOLVED: (1) That the details of the Treasury Management Policy as presented at Appendix A be noted; (2) That the details of the Treasury Management Practices as presented at Appendix B be noted; (3) That the proposed changes to the Treasury Management Statement as detailed at Appendix C be noted; (4) That the Treasury Limits for 2015 - 2016 as presented at Appendix C be noted; (5) That the termination of the contract with Cash Manager Sterling be noted; (6) That the proposed changes to the Cash Management Programme be noted. REASON FOR DECISION: To ensure that the Finance, Audit and Risk Committee were aware of the proposed changes to the Treasury Management Strategy and Treasury Limits for 2015-2016. |
Noted | ||
| 58 |
FUTURE MEETINGS - POSSIBLE AGENDA ITEMS The Chairman requested that should any Members have any suggestions for agenda items at future meetings would they please advise himself, officers or the Committee Clerk. |
Noted | ||