| 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 (substitute), Councillor John Bishop and Councillor Jim McNally. |
| IN ATTENDANCE: | Norma Atlay - Strategic Director of Finance, Policy and Governance Antonio Ciampa - Accountancy Manager Dean Fury - Corporate Support Accountant Ian Gourlay - Committee and Member Services Manager Kay Storey - Manager (Govt. & Public Sector), Ernst & Young Debbie Hanson - Audit Executive Director, Ernst & Young |
| ALSO PRESENT: | |
| Meeting attachments |
Agenda Front Sheets Audio Recording of Meeting |
| Item | Description/Resolution | Status | Action | |
| PART I | ||||
| 54 |
APOLOGIES FOR ABSENCE Apologies for absence were submitted on behalf of Councillors Simon Harwood, Lorna Kercher and Deepak Sangha. Councillor Clare Billing was substituting for Councillor Kercher. |
Noted | ||
| 55 |
MINUTES Minutes RESOLVED: That the Minutes of the Meeting of the Finance, Audit and Risk Committee held on 10 December 2015 be confirmed as a true record of the proceedings and be signed by the Chairman. |
Agreed | ||
| 56 |
NOTIFICATION OF OTHER BUSINESS There was no other item of business tabled. |
Noted | ||
| 57 |
CHAIRMAN'S ANNOUNCEMENTS (1) The Chairman announced that Members of the public and the press may use their devices to film/photograph, or do a sound recording of the meeting, but he asked them to not use flash and to disable any beeps or other sound notifications that emitted from their devices. In addition, the Chairman had arranged for the sound at this particular meeting to be recorded; and (2) The Chairman advised that, in line with the Code of Conduct, any Declarations of Interest should be declared immediately prior to the item in question. |
Noted | ||
| 58 |
PUBLIC PARTICIPATION There was no public participation. |
Noted | ||
| 59 |
EXTERNAL AUDIT UPDATE - DECEMBER 2015 Cover Page External Audit Update - December 2015 The Chairman welcomed to the meeting Debbie Hanson (Audit Executive Director, Ernst and Young) and Kay Storey (Manager, Govt. & Public Sector, Ernst and Young). They both introduced themselves to the Committee and gave potted histories of their audit experience in the public sector. The Manager (Government & Public Sector) presented a brief External Audit update report, pursuant to the submission of a more detailed Audit Plan to the next meeting of the Committee in March 2016. It would be a Code of Practice audit, similar to those undertaken previously by Grant Thornton, albeit with a few subtle changes. Ernst and Young were currently on site carrying out detailed audit planning and initial audit work. The Manager (Government & Public Sector) advised that there were three areas to be covered during the audit, namely the audit of financial statements; certification of claims and returns (primarily Housing Benefits); and value for money conclusion, which was the subject of the next report on the agenda (see Minute 60 below). The Manager (Government & Public Sector) explained that she and colleagues had been involved in some initial discussions with NHDC officers, and were currently working through the Council's financial systems. She referred to Paragraph 1.4 of the report which stated that, from 2018/19 onwards, local authorities would be responsible for appointing their own auditors, and directly managing the resulting contract. The Manager (Government & Public Sector) drew attention to the audit timeline for the 2015/16 audit set out in Paragraph 2.1 of the report. As previously stated, the initial work was currently taking place, and Ernst and Young were planning to return in July/August 2016 to carry out work on the final accounts. The Manager (Government & Public Sector) answered a number of Members' questions on the report. RESOLVED: That the External Audit Update - December 2015 be noted. REASON FOR DECISION: To update the Committee with progress on external audit up to December 2015. |
Noted | ||
| 60 |
VALUE FOR MONEY CODE OF AUDIT PRACTICE 2015 Cover Page Value for Money Code of Audit Practice 2015 The Audit Executive Director presented a report on the Value for Money Code of Practice 2015. The Audit Executive Director advised that a Value for Money audit was a requirement of the Local Audit and Accountability Act 2014 (Section 21(1)). The National Audit Office (NAO) Code of Practice 2015 implied "reasonable assurance", and Auditors needed to plan and conduct a risk assessment and undertake sufficient work against any identified "significant" risks. The Audit Executive Director stated the overall criterion for the audit was that "in all significant respects, the audited body had proper arrangements to ensure it took properly informed decisions and deployed resources to achieve planned and sustainable outcomes for taxpayers and local people". This replaced the previous two criteria for audited bodies, which were securing financial resilience and challenging how they secured economy, efficiency and effectiveness. The sub-criteria and proper arrangements for achieving them were set out on Page 16 in the report. The Audit Executive Director commented that, in respect of the auditor's risk assessment, there was a risk that the auditor would reach an incorrect conclusion on the arrangements (as opposed to the risk that the arrangements were inadequate). It was performed to determine the nature and extent of any further work, and would be undertaken only on significant risks. A matter was significant if, in the auditor's professional view, it was reasonable to conclude that the matter would be of interest to the audited body or the wider public. Significance had both qualitative and quantitative aspects. She outlined the documented sources that would be used for the risk assessment, as set out in the report. The Audit Executive Director advised that examples of potential significant risks would include organisational change and transformation; significant funding gaps in financial planning; legislative/policy changes; repeated financial difficulties or persistently poor performance; and concerns about the quality of services identified by other independent inspectorates or review agencies. The Audit Executive Director explained that the audit work to be undertaken needed to be proportionate and to a level sufficient to be clear on the conclusion and reduce the initial audit risk. The Audit Executive Director advised that qualified conclusions could result in an "adverse" conclusion, whereby there were weaknesses in arrangements that were so significant in their impact or so numerous that proper arrangements were affected, in which case a report would be prepared providing a concise summary of the information leading to that conclusion. The Audit Executive Director concluded by drawing attention to NAO supplementary information and other information sources regarding public sector audits. The Audit Executive Director answered a number of Members' questions on the report. RESOLVED: That the Value for Money Code of Audit Practice 2015 be noted. REASON FOR DECISION: To update the Committee with on the Value for Money Code of Audit Practice 2015. |
Noted | ||
| 61 |
CORPORATE BUSINESS PLANNING - REVENUE BUDGET 2016/17 Report Appendix 1 - General Fund estimates (1.9% Council Tax increase) Appendix 2 - General Fund Summary for 2016/17 Appendix 3 - Efficiency proposals Appendix 4 - Revenue Investment proposals Appendix 5 - MTFS extract - budget assumptions Appendix 6 - Description of earmarked reserves Appendix 7 - Financial Risks assessment The Accountancy Manager presented the report of the Strategic Director of Finance, Policy and Governance in respect of the proposed Budget for 2016/17, and advised that the report was before this Committee for consideration prior to presentation to Cabinet on 26 January 2016. The Accountancy Manager advised that he would be focussing on the changes to the proposed 2016/17 Budget made since the draft Budget report he had presented to the Committee on 10 December 2015. The Accountancy Manager stated that the most significant change was as a result of the announcement of the Government's Provisional Finance Settlement on 17 December 2015. The Provisional Settlement included figures for the four financial years up to 2019/20, and the General Fund Estimates set out at Appendix 1 to the report had been re-aligned to cover this four year period. The Accountancy Manager commented that, whilst it had been originally expected that the Revenue Support Grant (RSG) would be reduced to zero by 2019/20, the Government had advised that NHDC's RSG would be reduced to zero two years earlier (ie. from 2017/18). Furthermore, the additional tariff adjustment would mean that NHDC would effectively be in a position of negative RSG from 2017/18 (with NHDC paying over to the Government a total of £1.6million from 2017/18 to 2019/20). The Accountancy Manager explained that another impact on funding would be the proposed changes to New Homes Bonus (NHB) from 2017/18 onwards. This changed the basis upon which the NHB was allocated between authorities. The Council would not know the full impact until the Government's consultation on the matter had been concluded. The Accountancy Manager stated that the total amount of efficiencies required over the next four years had more than doubled from the £1.2million in the draft Budget to the £2.8million now proposed. In the light of this, the Revenue Investment proposals were reviewed and updated, with the total investment figure reduced by £179,000. The remaining Investment proposals and the changes made to them were set out in Appendix 4 to the report. The financial risks assessment had also been updated, as set out in Appendix 7 to the report. The Accountancy Manager advised that the Budget estimates had been updated, with the significant variances outlined in Table 5 of the report. The overall effect was a reduction in the 2015/16 outturn of £245,000 and a corresponding increase of £115,000 in the Budget for 2016/17. These figures included £262,000 of expenditure carried forward into 2016/17, of which £114,000 related to unspent Area Committee grants. The Accountancy Manager stated that the Budget for 2016/17 was now estimated at £16.553million, and he drew attention to a high level summary set out at Appendix 2 to the report. The Accountancy Manager concluded by outlining the major changes in the proposed Revenue Investment proposals for 2016/17, as follows: R3 - Apprenticeship Levy - now £45,000 (previously "TBC"); R6 - North Herts Local Plan - now £30,000 (from £50,000); R8 - Government Framework Agreement (Microsoft) - now £3,000 (from £20,000); R14/15 - Use of Bed and Breakfast accommodation for homelessness - now zero (from £50,000), due to reduced use of such accommodation (Risk FR9 had been increased in value); and R16 - Staff related resource capacity issues - now zero (from £137,000), as these issues would be reviewed by the Head of Paid Service as part of future restructuring once the final 2016/17 settlement was known. The Strategic Director of Finance, Policy and Governance and Accountancy Manager answered a number of Members' questions on the report. RESOLVED: That the proposed Budget for 2016/17 be noted. REASON FOR DECISION: To ensure that the Finance, Audit and Risk Committee was aware of the proposed Budget for 2016/17. |
Noted | ||
| 62 |
CAPITAL PROGRAMME 2016/17 ONWARDS Report Appendix A - Capital Programme Summary Appendix B - Capital Programme Detail Appendix C - Capital Investment Proposals for 2016/17 onwards The Corporate Support Accountant presented the report of the Strategic Director of Finance, Policy and Governance in respect of the proposed Capital Programme 2016/17 onwards, and advised that the report was for consideration prior to presentation to Cabinet on 26 January 2016. The Corporate Support Accountant advised that the total estimated Capital spend for 2016/17 to 2019/20 was £19.4million. This included £8.349million estimated spend in 2016/17. The Corporate Support Accountant stated that proposed new Capital Investment proposals over the four year period totalled just under £1.3million, as set out in Appendix C to the report. In addition to the projects listed in Appendix C, the report recommended that the Council would be requested to give consideration to a capitalisation directive to allow the payment of a lump sum of up to £2.5million to the Pension Fund. If approved, this would ease the pressure on the General Fund by avoiding an increase in revenue contributions. In respect of funding for the Capital Programme, the Corporate Support Accountant reported that it was anticipated that 2016/17 would start with capital receipts of approximately £2.1million. Over the four year period, it was expected that £5million of capital receipts would be expended. An estimated £3.75million would be received, leaving a balance at the end of 2019/20 of £800,000. The Corporate Support Accountant advised that, in addition to the £5million of capital receipts, the Council would need to draw down approximately £12.5million of cash investments to fund the Capital Programme. The Strategic Director of Finance, Policy and Governance and Corporate Support Accountant answered a number of Members' questions on the report. RESOLVED: That the proposed Capital Programme 2016/17 onwards be noted. REASON FOR DECISION: To ensure that the Finance, Audit and Risk Committee was aware of the proposed Capital Programme for 2016/17 onwards. |
Noted | ||
| 63 |
TREASURY MANAGEMENT STRATEGY FOR 2016/17 Report Appendix A - Treasury Management Policy Statement Appendix B - Treasury Management Practices Appendix C - Treasury Strategy Statement The Corporate Support Accountant presented the report of the Strategic Director of Finance, Policy and Governance in respect of the proposed Treasury Management Strategy for 2016/17, and advised that the report was for consideration prior to presentation to Cabinet on 26 January 2016. The Corporate Support Accountant advised that no changes had been made to the 2016/17 Strategy from the 2015/16 Strategy approved in February 2015. The CIPFA Code of Practice on Treasury Management required that a report be submitted setting out four clauses (as detailed in Paragraph 7.2 of the report) which should be agreed in order to approve adoption of the Code. The Corporate Support Accountant commented that the Council would continue to use UK banks and building societies, together with foreign banks with a UK subsidiary. He had just placed some funds with a foreign bank with a UK subsidiary (Santander UK), a short term deal for three months. The Corporate Support Accountant explained that the Strategy made it clear that the Council would be investing no more than 75% with banks and no more than 75% with building societies. The Council would continue to invest for longer than 364 days when the opportunities arose, with a limit of no more than 40% of the Council's investments being long term. Currently, the Council had £10.5million invested for longer than 364 days, which was approximately 20% of outstanding investments. The Corporate Support Accountant commented that no new borrowing was anticipated during 2016/17, but that the Council was due to repay a LOBO loan in November 2016. It was expected that £370,000 worth of investment interest would be generated in 2016/17. RESOLVED: That the proposed Treasury Management Strategy for 2016/17 be noted. REASON FOR DECISION: To ensure that the Finance, Audit and Risk Committee was aware of the proposed Treasury Management Strategy and Treasury Limits for 2016/17. |
Noted | ||
| 64 |
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 | ||