Agenda, decisions and minutes

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Venue: Virtual Meeting

Contact: Ann Holmes 01248 752518 

Items
No. Item

The Chair welcomed all those in attendance to this virtual meeting of the Audit and Governance Committee following which introductions were made and the apology for absence was noted.

1.

Declaration of Interest

To receive any declaration of interest by any member or officer in respect of any item of business.

 

Minutes:

No declaration of interest was received.

2.

Minutes of the Previous Meeting pdf icon PDF 307 KB

To present the minutes of the previous meeting of the Audit Committee held on 11 February, 2020.

 

Minutes:

The minutes of the previous meeting of the Audit and Governance Committee held on 11 February, 2020 were presented and were confirmed as correct.

 

Arising thereon –

 

The Committee sought an update on the availability of the report of Audit Wales on the financial sustainability of the Council which was one of 22 such assessments of local authorities in Wales being undertaken by the Audit Wales. The Director of Function (Resources)/ Section 151 Officer advised that the first draft of the report was received for factual verification in late January/early February following which a second version updated to reflect the comments made was received towards the end of March, 2020 at the outset of the lockdown period after which it was set aside as the Council moved to respond to the emerging Covid-19 pandemic crisis. The Officer confirmed that the second draft was cleared for acceptance last week and that it is anticipated that the formal report will be published definitively in the near future. In terms of substance, the report which was more advisory in nature and compared local authority practice and approach, has been overtaken by events with the situation having changed significantly since the draft version was issued. One of the points raised with regard to Anglesey Council was its level of financial reserves which at the time was expected to reduce further but which has since improved as the Statement of Accounts testifies to. Additionally, the Council’s lack of commercial income was noted although it was recognised that the opportunities available to the Council for generating such income was limited compared to larger councils in urban areas. The Officer commented that  given the situation in which councils now find themselves, the fact that the Council in Anglesey is not reliant for its financial well-being on commercial income might prove an advantage as those income streams have greatly reduced in the wake of the Covid-19 crisis. However, the Council is likely to be affected financially by the Covid-19 pandemic including by a loss of income.

 

3.

Treasury Management Annual Report 2019/20 pdf icon PDF 601 KB

To present the report of the Director of Function (Resources)/Section 151 Officer.

 

 

Minutes:

The report of the Director of Function (Resources)/Section 15 Officer incorporating the Treasury Management Review for 2019/20 was presented for the Committee’s consideration. The review provided a synopsis of the Council’s treasury activities during the 2019/20 financial year including its approach to borrowing and investment.

 

The Director of Function (Resources)/Section 151 Officer highlighted the following -

 

           The external context and the wider factors that have influenced treasury management decisions including the state of the UK economy; interest rate performance during the year; the continued uncertainty over Brexit – especially a no-deal Brexit - and the impact of Covid-19.

           The internal factors including :

 

           The performance of capital expenditure – the table at 3.1 shows the actual capital expenditure and how this was financed. Actual General Fund capital expenditure financed by borrowing was £2m against a projected £7m at the start of the year. The main reason for the underspend was the large underspend on the projects as listed and in particular the £4.547m underspend on 21st Century Schools programme  which has been delayed by further consultation on the schemes in the Llangefni area.

           Reserves and cash balances – the Council’s cash balances comprise revenue and capital resources and cash flow monies. The Council’s core cash resources are set out in the table at 3.2 of the report and include the Council Fund General Reserve which increased from £5.912m as at 31 March, 2019 to £7.060m as at 31 March, 2020. The Council’s total usable reserves and provisions stood at £31.124m at 31 March, 2020 (compared to £30.078m at 31 March, 2019).

           Borrowing taken out by the Council – in March, 2020 the Council took out one short-term borrowing with the PWLB to fund planned capital expenditure to the end of the financial year. On 18 March, 2020 the Council made a borrowing of £10m (unplanned at the start of the year) with an interest rate of 2.05% to ensure it had sufficient cash in the bank going into the Covid 19 crisis in light of the uncertainty surrounding that period.

           Gross borrowing and the Capital Financing Requirement (CFR) – the gross borrowing of £139.2m as at 31 March, 2020 is above the CFR as at 31 March, 2019 but is within the forecast CFR for the following two years (table 3.3.1 refers). The year end-position has exceeded the CFR because of the £10m borrowing taken out in March, 2020; also the global pandemic has meant that capital expenditure in the final month of the year was less than anticipated resulting in external borrowing exceeding the CFR. This is for the short-term as the level of external borrowing will fall below the CFR in 2020/21 as external borrowing is repaid and capital expenditure incurred.

           Internal borrowing – at the beginning of the year, the internal borrowing position whereby the Council uses its own cash reserves to fund capital expenditure was £6.2m. By taking out the new £10m PWLB loan, the internal borrowing position as  ...  view the full minutes text for item 3.

4.

Draft Statement of Accounts 2019/20 pdf icon PDF 14 MB

To present the report of the Director of Function (Resources)/Section 151 Officer.

 

Minutes:

The report of the Director of Function (Resources) and Section 151 Officers incorporating the draft pre-audit Statement of the Accounts for the 2019/20 financial year along with the draft Governance Statement for 2019/20 was presented for the Committee’s consideration.

 

The Director of Function (Resources)/Section 151 Officer prefaced his presentation of the draft Statement of Accounts by thanking the Finance Service’s Accounts team for their work in successfully completing the draft accounts in line with the statutory deadline which since last year has been brought forward to the 15 June. The task this year has been made especially difficult by circumstances with the majority of staff working remotely from their homes because of the pandemic as well as contributing to the Covid-19 crisis response. The Statement of Accounts has been prepared and set out in accordance with accounting regulations and practices and is produced annually to give electors, local taxpayers, Members of the Council, employees and other interested parties information about the Council’s finances and how it spends public money. The Statement in setting out  information about the financial performance of the Council in a way prescribed by accounting regulations is a long and a complex document and despite the need for simplification being highlighted with CIPFA the format remains unchanged from last year.

 

The Officer referred to the Explanatory Narrative Report which provides background information about the Isle of Anglesey County Council and sets its financial performance in the context of the year’s key achievements, issues, challenges and risks. In 2019/20, the Council reported an underspend of £0.308k against a planned activity of £135.210m (net budget) and achieved £2.205m of savings. The table at 3.4.1 reflects the final budget for 2019/20 and actual income and expenditure against it. The impact of the underspend means that the Council increased its general reserves by £0.308k to £7.060m which is 4.9% of its net revenue budget for 2020/21. The Capital Budget was underspent in the year with the total spend amounting to £30.015m against a total Capital Budget for 2019/20 of £43.907m. The subsequent main financial statements comprise the following –

 

           Comprehensive Income and Expenditure Statement (page 21 of the accounts) – shows the cost of providing the Authority’s services during the year in accordance with accounting practices rather than the amount to be funded from taxation hence the figure of  £28.161m surplus. The amount that is chargeable to council tax requires a number of adjustments which are explained in Note 1a (Note to the Expenditure and Funding Analysis 2019/20) and Note 7 (Adjustments between accounting basis and funding basis under regulations).The CIES also shows gains or losses with regard to the authority’s assets and liabilities including pension liability and changes as a result of the revaluation of assets.

           Summary of Movements in Council Reserves (page 23 of the accounts) – shows the movement in the year on the different reserves held by the Council analysed between usable and unusable reserves. The Council’s General Fund Balance stood at £7.06m at the  ...  view the full minutes text for item 4.

5.

Internal Audit Annual Report 2019/20 pdf icon PDF 534 KB

To present the report of the Head of Audit and Risk.

 

Minutes:

The Annual Report of the Internal Audit Service for 2019/20 was presented for the Committee’s consideration. The report outlined the Internal Audit work carried out during the year ended 31 March, 2020 based on which the Head of Audit and Risk gave her overall opinion on the adequacy and effectiveness of the Council’s framework of governance, risk management and control during the year which also informs the Council’s Annual Governance Statement.

 

The Head of Audit and Risk reported that for the 12 months ended 31 March, 2020, the Isle of Anglesey’s Chief Audit Executive i.e. the Head of Audit and Risk is of the opinion that the organisation had an adequate and effective framework for risk management, governance and internal control. While the Head of Audit and Risk does not consider there to be any areas of significant concern, some areas require the introduction or improvement of internal controls to ensure the achievement of objectives, and these are the subject of monitoring. There are no qualifications to this opinion.

 

The Officer said that the opinion above was reached based on the work and activities undertaken by the Internal Audit Service during the year specifically with reference to the following –

 

           During 2019/20, the Internal Audit Service reviewed 50% of the risks in the corporate risk register with a red or amber residual risk rating (83% over a 17 month rolling period) (Appendix A refers) and was able to provide Reasonable assurance that the Council was effectively managing all but one of the risks reviewed. The review of IT Resilience finalised towards the end of 2019/20 concluded in a Limited assurance rating and has received attention from the Senior Leadership Team.

           Of the total 21 audits finalised during 2019/20, six were awarded Substantial assurance for the arrangements for governance, risk management and internal control with no significant or material risks/issues identified compared to three in 2018/19. Thirteen reviews resulted in a reasonable assurance rating (14 in 2018/19). As in the previous year, two audits received a Limited assurance rating; two reports remain with Limited assurance after follow-up and will continue to be reviewed to monitor the implementation of the risks raised.

           No audits received “No” assurance and no Critical (red) issues/risk were raised during the year. There are no red issues/risks currently outstanding.

           Where Internal Audit has identified issues/risks, Management has accepted them all

           During 2019/20 Internal Audit found senior management at the Council to be supportive and responsive to the issues raised.

           There were no issues deemed to be of a significantly high risk or impact to warrant inclusion in the Annual Governance Statement

 

With regard to performance, the Internal Audit Service has in place a quality assurance, and improvement programme to ensure continuous improvement. The Service has performed well during the year against the targets agreed with the Audit and Governance Committee as part of the Strategy for 2019/20 (Appendix D) with 3 out of 5 indicators meeting or surpassing their targets. The  ...  view the full minutes text for item 5.

6.

External Audit - Draft Audit Plan 2019/20 pdf icon PDF 557 KB

To present the report of External Audit.

Minutes:

The External Audit report incorporating the proposed Audit Plan for the 2019/20 audit year was presented for the Committee’s consideration. The Plan set out the work proposed to be undertaken in relation to the financial audit and matters related thereto along with an outline of the performance audit programme and a timetable for the completion and reporting of the external audit work at the Authority. Attached to the draft Plan were two supplementary letters – the one dated April, 2020 outlining potential issues with regard to the accounts and financial audit process and timetable as a result of the Covid 19 emergency and the other dated June, 2020 which updated the performance audit work programme for 2020/21 and schedule in the wake of Covid-19.

 

Mr Alan Hughes, Audit Lead referred to -

 

           The assessment of financial audit risks as set out in Exhibit 1 of the draft Plan and clarified that the risks outlined therein are common to all public bodies that are subject to audit. At the time of its writing, the draft Plan anticipated that the Covid-19 national emergency could lead to a significant delay in the preparation and publication of accounts hence its inclusion as a risk; the situation has become clearer in the period since with the Authority succeeding in completing the draft accounts on time; the financial audit is now into its third week and is progressing meaning that the risk in terms of a delay to the issuing of the draft accounts was not realised in the case of Anglesey. As regards other areas of audit attention, the auditors will be reviewing the impact of the McCloud judgment in connection with the provision made for pension liabilities.

           The performance audit work programme and confirmed that the planned examination under the Well-being of Future Generations Act focusing on the theme of “prevention” would be postponed to be replaced by a review of local and regional arrangements for recovery. External Audit also intends to discuss with the Senior Leadership Team whether the piece of work on planning and delivering savings is one it believes will be of benefit to the Council or whether attention might be more productively directed elsewhere. The report on the assessment of the Council’s financial sustainability has now been finalised and will be presented to the Committee in September; although circumstances have changed significantly since the report was commissioned it contains important general principles for ensuring the financial sustainability of the local authority.

 

The Committee in accepting the report noted and asked for clarification of the discrepancy between the figure of £427k in the 2019/20 draft accounts for fees payable to Audit Wales  and the actual figure of £362k in the External Audit draft Audit Plan. The Director of Function (Resources)/Section 151 Officer said that he would clarify the variance with Mr Alan Hughes and report back to the Committee.

 

It was resolved to note and accept the External Audit draft Audit Plan for the 2019/20 audit year.

 

ADDITIONAL ACTION  ...  view the full minutes text for item 6.