Agenda and draft minutes

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There were no declarations of interest.

The minutes of the meeting held on 22 February 2024 were approved and signed by the Vice Chair.

The Group noted that the Service Manager – Finance and the Director – Finance and Corporate Services had responded to the actions from the meeting on 22 February 2024.

Report of the Director – Finance and Corporate Services

Mr Armstrong from BDO, the Council’s Internal Auditors presented the fourth Internal Audit Report for this financial year, which reflected progress made against the annual Internal Audit Programme. The report highlighted the completion of three reports and their findings as follows:

Fleet Management – the audit received a moderate assurance on control design and substantial assurance on control effectiveness. The review had looked at the operational effectiveness of the service and the climate change element, including the Council’s objective to move to net zero by 2030. Two findings were raised, a medium finding on the operational side, regarding periodic checks of agency drivers not being undertaken. The second related to the positive work already undertaken by the Council in trying to achieve its net zero target, including the recent conversion of 21 refuse vehicles to HVO fuel, and investigating future electrification of the fleet.   

Rushcliffe Oaks Crematorium – Income – the audit received substantial assurance on both the design of controls and on the effectiveness, with two low findings. One finding related to the timeliness of payments, with one invoice paid 140 days late, although it was noted that the level of aged dates was very low, and the Council worked proactively to recover those amounts. Secondly, on the performance reporting side for income collection, and it was recommended that a new KPI should be added to monitor the timeliness of payments.

E-Financials System Controls – the audit received substantial assurance for both the design of controls and effectiveness, with three low findings. One finding related to a specific privileged user account, where regular checks were not conducted, although there had been no adverse use over the year. Secondly, around checking changes to customer data, with a recommendation to add a monthly check. Finally, the user access review process, to check that the correct permissions were in place, and it was noted that a review had been undertaken in March 2023.  

Mr Armstrong concluded by referring to the quarterly Sector Update attached to the Progress Report.

Councillor Om commented on the user access reviews and questioned if they should be done every three or six months. Mr Armstrong advised that processes were already in place and this recommendation would be in addition to what was already undertaken.

Councillor Gordon Wheeler welcomed this very positive report, which highlighted how well the Council was working, and noted that the issues raised were minor ones and Mr Armstrong concurred, stating that very few Council’s received an overall substantial assurance, which Rushcliffe had.

Councillor Birch commented on the late invoice payments at the Crematorium, noted that although it was not a huge risk, one invoice had been paid nearly five months late and questioned if there were clear terms on the contracts, and incentives to ensure timely payment. Councillor Birch felt that given this was a relatively new service, it was important to have appropriate mechanisms in place to ensure timely payments. Mr Armstrong confirmed that there was a 21 day credit period on  ...  view the full minutes text for item 3.

Report of the Director – Finance and Corporate Services

Mr Armstrong from BDO, the Council’s Internal Auditors presented the Internal Audit Annual Report for 2023/24, which included the annual opinion of the Head of Internal Audit required by Public Sector Internal Audit Standards.

The Group was informed that the Internal Auditors had provided substantial assurance for the second year running, which reflected the positive outcomes referred to in this and previous reports to the Group. Mr Armstrong stated that other outside assurance was also taken, for example the broadly positive outcome from the recent Peer Challenge Review, together with the culture and cooperation of the management team, which had been positive over the last 12 months. The Group noted that every report had a substantial opinion on either the control design or effectiveness, or both, with the graphs on page 50 onwards of the report, which highlighted the positive trajectory, with a reduction in the number of medium recommendations. There was also a generally stable position on the number of control design opinions and a slight improvement on the number of control effectiveness opinions. Mr Armstrong concluded by referring to the key themes and added value from the work throughout the year, which was detailed at pages 52 and 53 of the report.

Councillor Butler welcomed this positive report and questioned what would happen going forward and Mr Armstrong confirmed that work was already progressing for 2024/25. The Director – Finance and Corporate Services referred to the considerable work undertaken by both officers and Councillors to get to this very positive position, and whilst not being complacent, everyone would continue to work hard to maintain this, and he believed that this was the third year that the Council had gained substantial assurance. 

It was RESOLVED that the Internal Audit’s Annual Report in relation to 2023/24 be noted.

Report of the Director – Finance and Corporate Services

Mr Armstrong from BDO, the Council’s Internal Auditors presented the Annual Fraud Report for 2023/24, which summarised the incidence of fraud and fraud prevention activities at the Council during the year 2023/24.

The Group was reminded that following a recommendation made by it last year, the Council has prepared a Fraud Risk Assessment, which would be brought to the next meeting in September. Mr Armstrong advised that in recent years across the public sector, a general increase around detected fraud had been well reported, with much of that driven by Covid related fraud.  It was noted that no instances of fraud had been identified as part of the Internal Audit work, and only one instance identified by the management team. The Council was working with the Nottinghamshire Fraud Partnership, which again showed commitment to tackling fraud across the wider sector. Mr Armstrong referred to the review undertaken in November 2023, to look at single person discounts for Council Tax, which had resulted in a significant additional increase in Council Tax revenue. Internal Audit had also looked at Grant Management Controls and the potential fraud risk of giving out grants, and he confirmed that substantial assurance had been provided from that review. Mr Armstrong concluded by referring to areas where the Council could improve, including specific fraud awareness training for staff and testing to gauge staff awareness.

Councillor Gowland asked what the whistle blowing procedure was at Rushcliffe and how easy it was to access and use, and the Service Manager – Finance advised that staff were made aware of the clear guidance, which could be shared.

Councillor Butler referred to Council Tax discounts for 18 year olds and the mismatches and questioned if there was a danger of more losing out on discounts, given that more people were not registering on the electoral role and the Service Manager – Finance advised that there were other ways of matching people to property.

The Vice Chair questioned why the Council did not have a dedicated fraud prevention resource and Mr Armstrong advised that the Council did take fraud seriously and fraud was more the responsibility of Service Managers. The Director – Finance and Corporate Services stated that historically the Council did have a Fraud Manager; however, when part of Housing Benefits had transferred to the DWP, part of that post was also transferred, which happened at many councils. He stated that if the Council was concerned that the risk was significant enough, it would look at the possibility of creating a post; however, based on recent history it was not considered necessary, although that would continue to be monitored.

The Director – Finance and Corporate Services thanked Mr Armstrong on behalf of the Council for his hard work over the past months.

It was RESOLVED that the Annual Fraud Report for 2023/24 be accepted.

Report of the Director – Finance and Corporate Services

Mr Surridge from Mazars, the Council’s External Auditors presented the Council’s External Audit Annual Plan, which summarised the approach to External Audit activity with regard to the final accounts process and value for money arrangements for the financial year 2023/24.

Mr Surridge referred to Mazar’s responsibilities as the External Auditor, with five key areas as detailed on page 80 of the report, which included:

·                  Audit opinion

·                  Internal Control

·                  Fraud

·                  Wider reporting and electors’ rights

·                  Value for money

Ms Norman from Mazars referred to the operational side of the Audit Plan and confirmed that the planning, risk assessment and interim phases had been completed, with the fieldwork stage due at the end of June, and the audit opinion hopefully given in September. The Group noted the three main risks, which were common for all district councils:

·                  Management override of controls

·                  Devaluation of the LGPS defined benefit pension

·                  Valuation of land and buildings

Mr Surridge referred to page 94 of the report and the value for money arrangements, and advised that as External Auditors, Mazar’s responsibility was to follow the Code of Audit Practice, which defined what was required to ensure financial sustainability, and it would involve checking the Council’s financial plans and processes and its governance arrangements. It would also look at improving economy efficiencies and effectiveness, which involved looking at how performance management worked and how the Council worked with key partners. Mr Surridge confirmed that this was a live process, and currently no areas had been identified where a ‘deep dive’ would be required. Reference was made to the substantial increase in audit fees since last year, and the Group was advised that the fees were set by an independent body and Mr Surridge concluded by confirming that Mazars was independently appointed to undertake the audit.  

Councillor Birch asked which body set the fee, and Mr Surridge advised that the Council had opted into a framework appointment by Public Sector Audit Appointments (PSAA), which ran a contracting round, and bid and allocated pieces of work to different firms. As part of that process, PSAA determined a scale fee, to deliver the entire contract, which resulted in a level of subsidy. The Director – Finance and Corporate Services advised that the public sector audit market was currently in a challenging state, and was a high risk market, and there were issues recruiting auditors, and all that led to a degree of pressure. PSAA had undertaken a procurement exercise, and the increase for Rushcliffe was very similar to that for other councils, and the Group was advised that if the Council spent time and money undertaking its own procurement exercise, it would not result in cheaper fees. 

Councillor Regan referred to Community Infrastructure Levy (CIL) and Section 106 monies and asked at what point did the Council evaluate the erosion through inflation, given that those funds could not be accessed until phases were completed, and he asked if anyone reviewed the effectiveness of the CIL and Section 106 funds at the  ...  view the full minutes text for item 6.

Report of the Director – Finance and Corporate Services

The Director – Finance and Corporate Services presented the Annual Governance Statement report and the Council’s Annual Governance Statement, to be signed by the Leader and Chief Executive, detailed in Appendix 1 to the report, which was published alongside the Council’s Statement of Accounts, in accordance with the Accounts and Audit Regulations 2015. 

The Director – Finance and Corporate Services highlighted some of the principles referred to in the Annual Governance Statement, around whether or not business was being conducted to excellent standards, if the Council was compliant with the law and delivering value for money, with the appropriate controls and procedures in place. The Group was reminded that that all of the audit documents were linked to audit standards and the Council followed good practice, with this delivering good guidance in Local Government 2016, which was a CIPFA and SOLACE publication and Appendix 1 included the basic principles of that good guidance. The Group noted that this was a standard report covering the section below as detailed in Appendix 1:

·                  Section 2: Governance and Framework – covering processes and procedures

·                  Section 3: Review of Effectiveness – framework and mechanisms in place

·                  Section 4: Important Governance Issues – budget position and the CIPFA Financial Management Code

The Director – Finance and Corporate Services advised that this was a living document and was subject to change, and it would come to the Group again in September, with the Statement of Accounts, and would reflect any changes that had been made. The document referenced how the Council would deliver on the recent Peer Review recommendations and he referred to the various potential risks going forward, including legislation changes and a potential new government. An Action Plan detailing how the Council reported on the key issues was referred to on page 130 of the report.

The Service Manager – Finance referred to the Financial Management Code as detailed in Appendix A, which was adopted in 2021. The Group was advised that this year the Council had undertaken a self-assessment, with a Peer Review with other councils. This Code marked the Council against set principles that it needed to adhere to, and the recommendations made from the Peer Review have been incorporated. The Service Manager – Finance confirmed that all the points on the risk rating were green, and those had been subject to challenge by the Peer Review.

It was RESOLVED that the Annual Governance Statement 2023/24, which incorporated actions for the forthcoming year be approved.    

Report of the Director – Finance and Corporate Services

The Service Manager – Finance presented the Capital and Investment Strategy Outturn report, which summarised the capital and investment activities during the financial year 2023/24, against the Council’s Capital and Investment Strategy 2023/24.

The Service Manager – Finance referred to Table 1 in the report, which related to capital expenditure, with investments higher than expected, which was mainly due to slippage in the Capital Programme of approximately £5.7m.  Table 2 in the report detailed that all capital expenditure in the year was financed, which has ensured no external borrowing, and that had resulted in the set limits being met. Table 3 highlighted that overall the Capital Financing Requirement (CRF) had reduced to £9,889m. Table 4 showed a negative number for the ratio of financing costs to net revenue streams, due to the Council’s investment income exceeding its MRP charge, with Tables 6 and 7 showing that the limits for investments had not been breached throughout the year. Table 8 provided a snapshot as of 31 March 2024, of investments held at that point of around £71m. Paragraph 4.22 of the report detailed income received this year, which had increased to £1,887m due to higher balances invested together with higher than anticipated interest rates. Reference was made to the diversified portfolios, which had declined over £1m when Covid started, so a reserve had been earmarked to cover the effect of that and the Group was advised that this year the funds increased by £272k, albeit they were still £0.96m less than the original investment.

The Group noted that overall, for Treasury Investments, inflation was not reducing as quickly as anticipated, which therefore had resulted in slightly higher interest rates, and there was considerable economic instability. Table 12 showed the Council’s Non-Treasury Asset Investments and the returns, which were performing very well, with Charts 2 and 3 showing that the Council’s diverse portfolio to spread risk. It was noted that there was a risk of over reliance in investment income against the Council’s total income, so a 30% limit was set, and Table 13 highlighted that it was at 18.5%.  The Service Manager – Finance concluded by referring to the importance of training both for staff and members of the Group to ensure that appropriate scrutiny took place. An assessment was currently taking place and the findings would be brought to the Group for consideration.

Councillor Gowland sought clarification on the loss of investment due to Covid and the use of a reserve, and the Service Manager – Finance confirmed that money had not been lost, it was rather a paper reduction in value and the reserve was in place in case the Council wished to redeem the investment, at a time when the value was lower than when the Council had originally paid for it. The Director – Finance and Corporate Services advised that these were long term investments and it was anticipated that over time they would increase again, and if that was likely, the £1m would be returned to  ...  view the full minutes text for item 8.

Report of the Director – Finance and Corporate Services

The Service Manager – Finance presented the report of the Director – Finance and Corporate Services outlining the Group’s Work Programme for the next three meetings and advised that Treasury Management Training might be added to the meeting in September, together with the Fraud Risk Assessment work by BDO.

For the meeting in November, it was proposed to consider the appointment of an Independent Member. The Group was reminded that it had discussed this issue some years ago, and it was now considered appropriate to review that again, given that an independent person would bring another perspective and challenge to discussions. The Statement of Accounts was currently scheduled for the November meeting, but if Mazars met its proposed targets, that report could come to the meeting in September.

It was RESOLVED that Governance Scrutiny Group approved the Work Programme as follows:

19 September 2024

·                  Internal Audit Progress Report Q1

·                  Risk Management Update

·                  Going Concern

·                  Capital and Investment Strategy Q1

·                  Treasury Management Training (TBC) 

·                  Fraud Risk Assessment (TBC)

·                  Statement of Accounts (TBC)

·                  Work Programme

28 November 2024

·                  Internal Audit Progress Report Q2

·                  Annual Audit Completion Report 2023/24

·                  Capital and Investment Strategy Update Q2

·                  RIPA Review

·                  Appointment of an Independent Member (TBC)

·                  Work Programme 

20 February 2025

·                  Internal Audit Progress Report Q3

·                  Internal Audit Strategy

·                  External Audit Plan (TBC)

·                  Annual Audit Letter and Value for Money (VFM)

·                  Risk Management Update

·                  Risk Management Strategy

·                  Capital and Investment Strategy Update Q3

·                  Capital and Investment Strategy 2025/26

·                  Work Programme

Actions – 30 May 2024