Agenda and minutes

To receive any apologies for absence and notification of substitutions.

Apologies for absence were received from Councillor Fidler.  Councillor Bateson attended in his place.

The Chair welcomed Philip Briggs, Independent Member, to his first Audit Committee meeting.

To confirm the minutes of the meeting held on 24 November 2022.

The minutes of the meeting held on 24 November 2022 were approved as a correct record, subject to the addition of the text below in relation to the item on the forward plan:

“There was also discussion regarding concerns and risk to the authority from hybrid working and it was agreed that this be covered at the next committee meeting”.

To receive any disclosures of interest from Councillors in accordance with the Council’s Code of Conduct for members.

There were none.

To receive and note the KPMG 2017/18 Audit Opinion.

This document is to follow.

Joanne Lees and Philip Johnstone from KPMG, the Council’s external auditors, attended for this item.

The Chair introduced this item noting the 5-year delay in receiving the final report from the Council’s outgoing external auditors.

KPMG presented the final 2017/18 ISA 260 report which included the ISA 260 report, the auditor’s opinion on the Statement of Accounts and Value for Money, the financial statements for 2017/18, and a management representation letter.  A draft ISA 260 report for 2017/18 had been presented to this Committee in February 2019.  The final ISA 260 report concluded an adverse Value for Money (VFM) opinion which was set out in the Auditor’s 2022 Public Interest Report (PIR).  The PIR had been presented to Council on 8 December 2022.  The Committee noted that all of the follow up recommendations in Appendix 1 of the ISA report had been addressed.

Joanne Lees, for KPMG, explained that KPMG had completed the financial statements, issued an unqualified opinion on the financial statements, and provided commentary on each valuation risk.  She restated KPMG’s adverse opinion in relation to the Value for Money (VFM) opinion.  The report included significant risks, recommendations raised and followed up, audit differences and the issuance of a Public Interest Report (PIR) which would be discussed in the item below.

Philip Johnstone, for KPMG, confirmed that the Public Interest Report had been issued to the Council on 12 October 2022, but not published until 30 November 2022 due to the death of a councillor and a subsequent by-election.  The pre-election period had ended on 30 November 2022 and the PIR had been published on that date.

The Independent Member noted the important control recommendations in the report and asked if these would be carried forward by the new auditors.  The Chief Finance Officer reported that they had been addressed and would be kept under review.

The Committee resolved

1.       to accept the ISA 260 report from KPMG and to accept the opinions on the Statement of Accounts and Value for Money, and

2.       that the Chair of the Audit Committee and Chief Finance Officer would sign the accounts and the letter of representation.

Councillors Bateson and Nichols voted against the resolution. 

To note the Public Interest Report Recommendations Action Plan and agree the Recommendations Action Plan.

The Committee considered a Public Interest Report (PIR) Recommendations Follow Up report which was presented by the Chief Finance Officer.  The PIR Recommendations Action Plan set out the Council’s responses to the five recommendations made in KPMG’s Public Interest Report.  One of the recommendations was to develop an action plan to address weaknesses identified in the report.

The Chief Executive, the Monitoring Officer and the Chief Finance Officer addressed the Committee.

Statement from the Chief Executive Officer:

“At 8pm on the 12^th October 2022, KPMG released their 2017/18 Public Interest report, concluding their Value for Money process.  Despite being in close communication with KPMG for several months prior, the report literally came out of the blue without any prior indication of its intended release.

The very next day, on the 13^th October, the KPMG Working Group, comprising of the Leader and the Deputy Leader, who are also the Chair and Vice-Chair of the Corporate Policy and Resource Committee, as well as the Chair and Vice-Chair of the Audit Committee supported by senior and statutory officers, met and assessed the legal practicability of complying with our statutory obligations in setting the necessary course of action.

Urgent communications with KPMG and the Secretary of State and DLUHC ensued immediately thereafter.  As the timing coincided with the pre-election period for Spelthorne’s most recent by-election and, as the Committee will know we had 4 of those last year, the report’s release was delayed until immediately after the polls were closed on the 30^th November.

The audit report presented to this Committee in the previous item, has thus taken our auditors 5 years to produce - though to be fair to KPMG, the best part of a year’s delay can be directly attributed to the actions of one individual Spelthorne Councillor which is currently being investigated under the Members’ Code of Conduct.

Audit congestion and lengthy tailbacks are endemic in the sector and now only 12% of local authority audits are currently being completed within the 6 months statutory deadline. 

This is by far the lowest percentage on record since the introduction of the Local Audit and Accountability Act 2014 which saw the abolition of the Audit Commission and the transfer of all audit work to private sector companies.

In fact as recently as last week, the Director General, Local Government, Resilience and Communities at the Department for Levelling Up, Housing and Communities wrote to me and other Chief Executives to update us on the Department’s continued work to respond to Sir Tony Redmond’s Local Authority Financial Reporting and external audit: independent review (the Redmond Review) and to reaffirm the Department’s continued resolve to work with us and others across the sector to ensure a system wide approach to reducing the continued delays to local audits.

However, by any measure the release of our Audit Report, virtually half a decade after the audit year in question, in itself is a remarkably poor turnaround, posing significant concerns in both the ‘timely value’  ...  view the full minutes text for item 5/23

To receive and note a verbal update on DLUHC’s Review of Councils with High Debt Levels.

A question was received from a member of the public in relation to this agenda item.

Question from Ms Kath Sanders:

“Please could the report to the committee lay out the terms of reference for the DLUHC's capital review of Spelthorne Borough Council's position and when does the Council expect to receive any interim and final report?”

Response from the Chair:

“Spelthorne Borough Council like other authorities are being externally and independently reviewed by DLUHC.  We are therefore not privy to the terms of reference or have any expectations to receive the final report within any given period as we are not the commissioning authority.”

The Chief Finance Officer gave a verbal update on the Department for Levelling Up, Housing and Communities’ (DLUHC) Review of Councils with High Debt Levels.  The Chartered Institute of Public Finance and Accountancy (CIPFA) was conducting the review on behalf of DLUHC.  The Council hoped to have a draft report by the time of the next Committee meeting.

The Committee resolved

1.      to receive and note the verbal update on DLUHC’s Review of Councils with High Debt Levels, and

2.      to place the DLUHC Review on the Forward Plan for the Committee’s meeting in July.

To consider and present to Corporate Policy and Resources Committee the significant strategic risks and issues highlighted in the report from the Internal Audit Manager.

As part of Risk Category 7 “Corporate Capacity, Resources, Recruitment and Retention” members discussed the impact of the Council’s hybrid working policy, focussing particularly on the risks involved.  The Group Head Commissioning and Transformation presented a report on hybrid working which set out many of its benefits and associated challenges (risks).  She stressed that the mixture of office and remote working was always in line with business need and that most staff were expected to work in the office two days a week.  Those who wanted to work in the office full time were able to do so.  Working from home had become the norm during the Covid-19 pandemic, particularly for public sector workers.  This had become an expected benefit for staff and assisted with recruitment.  From an environmental perspective, working from home reduced the Council’s carbon footprint.  Members noted that public facing services were still provided to residents by office-based staff and that not all employees had the option of working from home.

Members gave their own examples and experiences of hybrid working, some good, others less so.

The efficiency and effectiveness of hybrid working was due to be considered as part of the forthcoming Corporate Establishment Review requested by the Corporate Policy and Resources Committee.

The Committee agreed that Risk Category 7 of the Corporate Risk Register be widened to incorporate hybrid and flexible working.

The Committee took a break between 9.30pm and 9.43pm.

It was proposed by Councillor I Harvey and seconded by Councillor Bateson that standing orders be suspended in order to continue the meeting until 10.30pm.  This was agreed by the Committee.

The Internal Audit Manager presented a report on Corporate Risk Management.  This included an updated Corporate Risk Register (CRR), with red-amber-green (RAG) colour coding at the top of each risk category and blue highlighting within the report to show the risks which were significantly impacted by wider externalities, and a colour coded Risk Action Plan.  Risks had been assessed taking into account current controls and mitigations, in line with good practice.

The Internal Audit Manager highlighted external risk areas over which the Council had limited scope for risk mitigation; these included the current economic crisis and macroeconomic environment, such as inflationary pressures, increased rates of borrowing, and the continued cost-of-living crisis.  She noted an indicative risk score moving in a favourable direction if all risk actions in the Risk Action Plan were completed.  Continued visibility and recognition of all strategic risks in the Corporate Risk Register was important.

The Internal Audit Manager introduced three new actions in the Risk Action Plan; developing a long term relationship management in relation to existing tenants, any forthcoming recommendations from CIPFA and DLUHC reports in relation to capital risk mitigation, and the medium-term financial strategy and efficiency savings plan for addressing the budget deficit.

The Committee had an initial discussion of risk management software and whether it should be used by the Internal Audit team to support presentation of the Corporate Risk Register which has continued to  ...  view the full minutes text for item 7/23

To receive and note a report on the Council’s Risk Exposure to Wider Externalities and Impact from the Internal Audit Manager.

The Internal Audit Manager presented a report to the Committee on the impact of wider externalities to the Council, its operations, and local communities as well as a wider externalities and impact risk assessment.

The Internal Audit Manager drew attention to the two major externalities presenting significant impact; the macro-economic environment (which was referred to earlier in the meeting) and the current geo-political uncertainty (war in Ukraine).  These wider externalities had a particular impact on three broad risk categories: economic activity and prosperity, the Council’s financial position in relation to sustainability and resilience, and housing and communities.  The refreshed risk assessment noted no movement from the previous review in November 2022 and no changes to report in terms of RAG ratings or positioning of risks on the risk matrix.

The context for the report was interest rates increases, little or no growth in the economy, rising unemployment, long term uncertainty regarding the macro-economic environment, with the cost-of-living crisis continuing to present increased demand on Council services.  Members noted local control measures and mitigating actions to alleviate pressures and further actions are set out in the last column of the risk matrix.

The Committee discussed reducing the overlap between this report and the Corporate Risk Management Report.  The Committee agreed to combine the two reports and to restructure some of the reporting in the Corporate Risk Register.

The Committee resolved

1.     to note the report, and

2.     to note the close linkages and common themes between this report and the Corporate Risk Management Report referred to earlier in the meeting, and

3.     to agree to combine this report and the corporate risk register, and

4.    to update the forward plan to reflect the changes agreed.

To note and approve the Internal Audit Plan for 2023/24.

The Internal Audit Manager outlined the proposed Internal Audit Plan for 2023/24 which demonstrated how the Council would fulfil its statutory and professional requirements and provide independent assurance to the Council on the adequacy of internal control, governance, and risk management arrangements.

The Plan included several higher risk areas that aligned with the council’s corporate priorities and objectives, and these had been prioritised “A” or “B” according to risk.  The wider externalities referred to earlier in the meeting would cut across the workstreams in the Internal Audit Plan.  Members noted the summary of work and that it included reactive and unforeseen work.

Members noted the likely Internal Audit interaction with the incoming external auditors and that it was intended to commission external resource for some  audits on the internal audit work programme.  Funding for these would come from the audit contractor budget.

The Committee resolved to note and approve the Internal Audit Plan for 2023/24.

To consider endorsing the Counter Fraud, Bribery and Corruption Strategy and recommend to the Corporate Policy and Resources Committee any changes proposed to the Strategy.

The Internal Audit Manager presented a report on the Council’s Counter Fraud, Bribery and Corruption Strategy and outlined proposed changes to the Strategy so that it remained relevant and current.  The Strategy was last reviewed by the Audit Committee in July 2021.  A tracked changed document and a final version of the Strategy were attached to the report which set out the reasons for the proposed changes.

The Committee noted that during economically challenging times fraud and corruption occurrences were perceived to be on the increase.  An open and honest culture, adequate preventive measures, collaborative arrangements and practices, systems for detection and investigation and an understanding and awareness of fraud, bribery and corruption, and whistleblowing procedures were all key elements of the Council’s strategy to prevent, detect and manage fraud.

The Strategy formed part of the Council’s constitution, was in line with best practice, and underpinned the Council's commitment to dealing effectively with all forms of bribery, fraud, and corruption.  The Committee was required to review the Counter Fraud Bribery and Corruption Strategy annually and make any recommendations for change to the Corporate Policy and Resources Committee.  Counter fraud measures, in particular, had been increased and these were set out in the revised Strategy.

The Committee resolved

1.       to endorse the Council’s Counter Fraud, Bribery and Corruption Strategy, and

2.       to approve the recommended changes to the Strategy and to submit these to the Corporate Policy and Resources Committee.

To note and endorse a report on the refreshed Audit Assurance Opinions from the Internal Audit Manager.

This item was deferred until the next meeting.

To consider and approve the forward plan for the municipal year 2023/24.

The Committee considered its forward plan for the forthcoming municipal year.

The Committee resolved to approve the forward plan for the forthcoming municipal year, with the addition of the following items:

• A Public Interest Report Action Plan
• DLUHC Draft Report
• To incorporate the Council’s risk exposure to wider externalities and impact report into the Corporate Risk Register
• Spelthorne Direct Services (SDS) and Knowle Green Estates (KGE) Accounts for March 2022 and March 2023.