Apologies for absence were received from Councillor Danny Brookes, Councillor Graham Williams and George Krawiec (Independent Co-optee).

Those present were noted as in attendance.

It was proposed and seconded that Councillor David Andrews be elected Vice-Chairman.

It was further proposed that Walter Leschenko, Independent Co-Opted Member be elected Vice-Chairman.  The proposal fell.

Upon being put to the vote, the result was as follows:

In favour of Councillor David Andrews being elected to Vice-Chairman – 6 votes.

RESOLVED:

That Councillor David Andrews be elected Vice-Chairman of the Audit and Governance Committee for the remainder of the Council year 2021/22.

A Member asked that a copy of the CIPFA Handbook be circulated to Members.  It was emphasised as a matter of urgency, in particular to the amount of relevant information it contained for Members in their role on Committee.

At this point in the meeting, Members were invited to declare any relevant interests.  None were received.

To confirm the Minutes of the Meeting held on 24 November 2021.

The Minutes of the Meeting held on 24 November 2021 were agreed as a correct record.

The Chairman referred Members to the Skills and Knowledge Questionnaire provided to them and asked that the completed forms be returned to the Democratic Services Officer.

Following previous requests regarding training for Committee Members, the Chairman advised Members that a training programme had been included at Item 13 as a discussion point.

Members were advised that due to unforeseen circumstances the update on the procurement and programme management framework around the Towns Fund projects had been moved to the next Committee meeting to be held on 13 April 2022.  A Member highlighted that an update on this had been provided at the recent Leaders’ meeting and queried whether this information could be circulated to Members.  Following a brief discussion, it was agreed that the item would remain on the Agenda for the meeting in April 2022 to give Members the opportunity to receive a presentation and debate on the item.

Actions from the previous meeting.

The actions from the Meeting held on 24 November 2021 were confirmed as in hand or completed.

Action No. 36 – Minutes – Information on Kingfisher Caravan Park re. Legal costs and position on risk register, page 25 of the Agenda refers.

The Section 151 Officers referred Members to the confidential briefing open to all Members held on Friday 4 February 2022, part of which was an update on Kingfisher Caravan Park whereby this particular item was addressed.  Due to the sensitivity of the information, the Section 151 Officer advised Members that she would circulate a confidential note to Members to update on this action.

Action No. 39 (c) – Internal Audit Progress Report (November 2021) – A paper to be provided on the whole issue of HR across the partnership in relation to staffing issues, in particular how it impacted on ELDC, page 25 of the Agenda refers.

Members were advised that a paper addressing this issue from the Organisational Development Service Manager was circulated electronically to Members on 7 February 2022 (a copy is attached at Appendix A to the Minutes).

A Member referred to some of the detail within the paper relating to education providers and queried how successful the campaign had been, including discussions with students regarding courses, training and qualifications that would be useful to the Council for future recruitment opportunities.  It was agreed that this would be taken back to the Assistant Director for a response.

Action No. 39 (d) – Internal Audit Progress Report (November 2021) – Flood Management Audit, page 25 of the Agenda refers.

A Member acknowledged the response to the action, however highlighted that in the Risk Register CORP002 ‘Uncertainty of future Lincshore flood defence scheme’ that it referred to a collaborative approach with other organisations including the Environment Agency (EA) and detailed mitigating actions and interaction.  Following which, clarification was sought as to why this was not being examined in the flood management audit.

The Internal Audit Manager explained that when the audit was undertaken, as part of the overall governance consideration would be given to the links that the Council had with other organisations to provide assurance back to the Council however, it was highlighted that there was no mandate to audit the EA or make any recommendations about them.

In his role as a county councillor, a Member clarified that there was an ongoing relationship between ELDC, the county council, the EA and resilience forums in terms of planning for any eventuality of flooding on the coast.

Action No. 40 (b) – Final Internal Audit Report Procurement Review 2020/21, page 26 of the Agenda refers.

A Member referred to the update to the Action at Annex 1, page 31 of the Agenda refers where it stated ‘there have been some significant cases of non-compliance with the Council’s contacts and procurement procedure rules’ and asked for reassurance that this was no longer the case and was now being dealt with properly.  The Chairman asked that this matter be  ...  view the full minutes text for item 52.

To receive a report.

Richard Green, Interim Principal Auditor, Assurance Lincolnshire presented to Members the Internal Audit Progress Report Quarter 3, 2021/22 which covered the period November 2021 to December 2021, pages 35 to 58 of the Agenda refer.

The purpose of the report was to provide Members with:

·         Details of the audit work completed during the period;

·         To advise on progress with the 2021/22 plan;

·         To raise any other matters that may be relevant to the Audit Committee role.

Members noted that three assurance reports had been issued since the last progress report in November 2021 as follows:

• Housing Benefit Subsidy – Substantial Assurance
• Magna Vitae’s Health and Safety Arrangements – Substantial Assurance
• Brexit – Substantial Assurance

The Assurance definitions were detailed at Appendix 1, page 48 of the Agenda refers.

·         One consultancy report had been issued on the New Finance System Review – Unit 4 Business World which looked at the implementation of the system, the outcome of which was positive.

2021/22 Audit Plan

Members were assured that work was progressing and that there were currently eight audits as work in progress as follows:

·         Payroll – Draft Report

·         Towns Fund – Draft Report

·         Carbon Reduction – Draft Report

·         Invest East Lindsey (Development Company) – Drafting Stage

·         Good Governance – Fieldwork

·         Combined Assurance - Fieldwork

·         Flood Management – Developing Terms of Reference

·         Key Controls – Developing Terms of Reference

Full details were set out at page 43 of the Agenda.

Members were advised that the 2021/22 audit work commenced on 21 July 2021 and performance on Key Indicators as at 31 December 2021 was highlighted as follows:

• Percentage of revised audit plan completed – 49% (against 66% of the Audit Plan)
• Percentage of recommendations agreed – 100%
• Percentage of agreed actions implemented – 76%

The Interim Principal Auditor assured Members that the Audit Plan was progressing very well and was on target and management was working to ensure that resources were available to achieve this.

A summary of the number of outstanding agreed actions and details for all audits, together with progress against the Audit Plan as at 31 December 2021 was highlighted to Members at Appendices 2 and 3, pages 49 to 56 of the Agenda refer.  The Interim Principal Auditor informed Members that the Procurement Audit Action with high priority was currently being worked on and there was no major concern to Internal Audit.

Members were advised that as at 31 December 2021 there were 34 recommendations due to be implemented since October 2021, 26 of those were actioned straight away and 8 remained outstanding.

Members were referred to Appendix 4 – Record of changes to the Internal Audit Plan 2021/22 relating to deferred and new items, pages 57 to 58 of the Agenda refer.

Members were invited to put their comments and questions forward.

·         A Member referred to the detail of substantial assurance awarded for the Brexit Audit, page 40 of the Agenda refers and was surprised to see that it stated there had been no impacts with key suppliers  ...  view the full minutes text for item 53.

To receive a report.

Councillor Richard Fry, Portfolio Holder for Finance presented Members with the Annual Budget Report, Medium Term Financial Strategy, Financial Strategies and Council Tax 2022/23 Report.  Members were invited to review the papers and provide comment and feedback to Executive Board for consideration at its Meeting to be held on 16 February 2022.  The report and associated documents were attached to the Agenda, pages 59 to 176 refer.

The Portfolio Holder for Finance placed recognition on the dedication and expertise of the Finance team, the service areas teams and portfolio holders in the context of the budget challenge process and was pleased to report that the 2022/23 budget was balanced and retained the Council’s current baseline service levels.

Key information was highlighted as follows:

·         Identified requirements for efficiency savings of £685k were presently covered off by reserves – this was being linked to partnership delivery plans in the final budget;

·         The Council was investing in a mobile Pride of Place Team who would address the improvement of ‘grot spots’ in the district.  To facilitate this extra support was being provided to Waste Services consisting of a purpose built vehicle, two operatives and a supervisor.  Together with the further development of the Fairfield Vehicle Servicing Facility, the Council would be taking forward a significant capital programme including delivery of the Towns Fund elements and completing the development of the Horncastle Hub;

·         Notable risks included the increase to the Internal Drainage Board Levy due to external factors;

·         The Council was achieving its plans with regards to the Kingfisher Caravan Park, the Invest East Lindsey Business Plan delivery and service area growth that had resulted in noticeable costs pressures.

·         There were issues around the disposal assets, including Tedder Hall and Skegness Town Hall;

·         Collection fund changes had now been finalised and were not having a significant impact on the final budget being submitted to Executive Board and Council.

It was highlighted that there was an error on Appendix 1C with the date headings, page 101 of the Agenda refers and it was confirmed to Members that this had now been corrected in the budgets.

The Portfolio Holder for Finance deferred to the Section 151 Officer to deliver the Budget 2022/23 presentation to Members, attached at Appendix B to the Minutes which included a high level summary of the budget papers attached to the Agenda.

Members were invited to put their comments and questions forward.

·         A Member referred to the budget assumptions at Table 1, page 71 of the Agenda refers and highlighted that the 2% pay cost increase was not going to meet the rise in the cost of living.  It was considered a major concern that this assumption was built in as together with the expected 7% increase in inflation in 2022 working people would be bearing the brunt of this.  It was further considered that the assumption for a 30% increase in electricity costs for 2022/23 and a 0% increase for fuel cost rises was unrealistic, with fuel cost increases predicted and  ...  view the full minutes text for item 54.

To receive a report.

Jacqueline Mundy, Interim Treasury and Investment Manager, PSPS Limited presented Members with the Quarter 3 Treasury Management Update 2021/22 Report at Appendix A, pages 181 to 198 of the Agenda refer which showed the treasury position up to 31 December 2021.

Members were informed that the report referred to a key element of the Council’s Governance Framework and represented an important contribution to the evidence trail in support of the Annual Governance Statement 2021/22.

The following areas were highlighted to Members:

•  An economic update for the first three quarters of the 2021/22 financial year;

•  The outlook for the remainder of the financial year along with interest rate forecasts;

•  A review of the Treasury Management Strategy Statement and Annual Investment Strategy;

•  A review of the Council’s investment portfolio for 2021/22;

•  A review of the Council’s borrowing strategy for 2021/22;

•  Debt rescheduling;

•  Compliance with Treasury and Prudential indicators.

Key information was highlighted to Members as follows:

·         As at 31 December 2021 the Council had £46m of treasury investments.  The return on these investments was 0.139% against a benchmark of three month libor of 0.039%;

·         The Council held £28m of property fund investment and the estimated return on the property fund investments at the current time was 3.64%.  This created a combined rate across all investments of 1.426%.  Members were referred to the table on page 192 of the Agenda that provided a detailed breakdown of the investments held as at 31 December 2021.  Further tables on pages 194 and 195 of the Agenda showed the property fund purchase costs and current performance;

·         The Council’s budgeted investment return for 2021/22 was £1.272m.  At the time the report was written the outcome was projected to be £1.1m, £160k below estimate.  The budget shortfall could be attributed to the current exceptionally low level of interest rates available, however interest rates had started to rise so there was a level of optimism that the gap would close before the end of the year.

·         The borrowing rates were detailed on the chart on page 196 of the Agenda which showed the Public Works Loan Board borrowing rates during the first three quarters of the financial year.  The basic trend was that the longer-term rates were falling as the interest rates rose as there was the assumption that this would control inflation in the future and inflation had the largest impact on 50-year interest rates.

Members were invited to put their comments and questions forward.

·         A Member referred to the Investment Strategy Security Liquidity Yield and stated that she had always considered the importance of ethics and investments that cut down on fossil fuels.  It was highlighted that comments received from the property funds had reinforced the importance of this, particularly some of the environmental social and governance (ESG) benchmarking that was used which emphasised making its properties more sustainable and this should be considered to be added into the Council’s investment strategy as ethical investments which were sound, not only  ...  view the full minutes text for item 55.

To receive a report.

Suzanne Rolfe, Insights and Transformation Manager presented Members with an update on risk management arrangements and the report included a copy of the Strategic Risk Register at Appendix A, pages 199 to 218 of the Agenda refer.

Members were advised that the risk update was to support the Committee’s assurance and role around risk management and governance and included the latest review of the strategic risk register which had been reviewed by the senior leadership team.  A timeline of the work ongoing had been set out in the report for the quarter and a refresh of the risk registers of all three councils across the Partnership would enable any common risks to be identified which would elevate to a Partnership risk register.  Therefore, the Council would retain its own risk register but there would be a mechanism to look at risks across the Partnership.

Members were further advised that training was being organised with officers around risk management and in 2022/23 focus would be made on risk appetite as this was due to be refreshed.

Members were referred to the detail in the report that covered the following areas:

·         Risk management approach for the partnership

·         Risk Registers

·         The Strategic Risk Register

·         Timeline

·         Expected Benefits to the Partnership

The Insights and Transformation Manager highlighted the discussion already held by Members on income risks that related to Risk CORP001a, page 207 of the Agenda refers and confirmed that she would pull the comments together and provide to the lead officer to include in the next refresh of the risk register.

Members were invited to put their comments and questions forward.

·         A Member referred to CORP006 – Local Plan not delivering economic growth and prosperity, page 210 of the Agenda refers.  It was considered that this risk also needed to handle change, for example in-migration from cities to rural areas driven by COVID and working pattern changes.  This resulted in creating structural changes in the types of housing needed to accommodate people working from home, as well as connectivity.  With regards to in-migration it was highlighted that there was now circa 2000 people registered on the local housing list seeking affordable housing.  The Insights and Transformation Manager advised Members she would take this back to the lead officer to review.

A Member highlighted that the Local Plan was due for review in 2023 and as part of the process would come back to Council for adoption.  With regards to caravan sites on the coast referred earlier now being a material consideration in planning law, any new applications would be subject to this and this would clearly have an impact on the refresh of the Local Plan and it was important for this to be picked up properly.

·         A query was raised as to how the risk register was used in the decision-making process for portfolio holders when signing off an expenditure at Executive Board, including how a risk was reflected in the writing of a report around that process and how this correlated  ...  view the full minutes text for item 56.

To receive a report.

Samantha Knowles, Assistant Director, Finance presented Members with a report that provided the Committee with an update on actions taken following the recent procurement audit report.

The report contained details of the action plan drawn up and progress against the actions identified, including timescales for what had been proposed.  The Committee was asked to note the report and the action plan, including progress made against the actions.  A copy of the East Lindsey District Council - Procurement Strategic Plan 2022/23 was attached at Appendix A, pages 1 to 8 of the Supplementary Agenda refer.

Rebecca James, Procurement Manager updated Members in relation to the query raised on the update at Item 6 to Action No 40(b), page 31 of the Agenda refers with regards to instances of non-compliance with the Council’s contract and procurement procedure rules (CPPRs).  Members were advised that the update provided a summary of previous audit activity which had been superseded by the current audit, however some similar issues were found as detailed at Paragraph 2.7 on page 3 of the Supplementary Agenda.  Currently an exercise to review the contract register was being undertaken which was due to complete on 10 February 2022.  All four of the directorate areas had been involved and early findings had identified that a large number of errors were administrative rather than purposeful breaches of  compliance with CPPRs or transparency rules.   It was hoped that all contracts would be fully updated and published in compliance by the end of March 2022.

The Chairman queried with Members whether they had all had sight of the report due to late submission and in light of further information still to be provided asked Members if they were happy for the report to be deferred to the next meeting.  The Assistant Director, Finance added that a further update would be available for the next meeting and a further update following the internal audit would be available with regards to the completion of the recommendations.

Following a brief discussion, Members agreed that the item be deferred to the following meeting.

A Member commented that he would be interested in more information on the Exemption Log detailed at Paragraph 2.6, page 3 of the Supplementary Agenda refers and also sought assurance that all officers of the authority were fully trained and compliant with the regulations going forward.

A Member asked for an update on the recruitment of a Procurement Officer.  The Assistant Director, Finance informed Members that Rebecca James was the officer appointed to the role as Procurement Manager on a part-time basis and that was the only recruitment process in place at the current time.  A Member added that it was essential that contract procurement was undertaken correctly and lawfully and for the benefit of the taxpayers that Members represented.  It was considered that it was unfair to expect someone to undertake such an onerous task part-time, alongside other work without intensive training.

A Member commented that issues with procurement were widespread and suggested that a consultant  ...  view the full minutes text for item 57.

To receive a report.

Samantha Knowles, Assistant Director, Finance presented Members with a report in relation to the Appointment of External Auditors, pages 219 to 230 of the Agenda refer.

Members were informed that the current auditor appointment arrangements covered the period up to and including the audit of the 2022/23 accounts.  Public Sector Audit Appointments Limited (PSAA) was currently undertaking a procurement for the next appointing period, covering audits for 2023/24 up to 2027/28.  All local government bodies needed to make important decisions about their external audit arrangements from 2023/24.  They have options to arrange their own procurement and make the appointment themselves or in conjunction with other bodies, or they could join and take advantage of the national collective scheme administered by PSAA.

Members were invited to consider the contents of the report and to note the recommendations to Council, and to submit any relevant comments where appropriate.  Members noted that the national offer provided the appointment of an independent auditor with limited administrative cost to the Council.  By joining the scheme, the council would be acting with other councils to optimise the opportunity to influence the market that a national procurement provides.

Members were invited to put their comments and questions forward.

·         A Member referred to the ‘Other matters of interest’ at page 47 of the Agenda where it was proposed that the Council should receive the auditor’s annual report from the local auditor.  It was proposed that the recommendation be agreed with that proviso added to it that the external auditor’s report be presented to Council in future.

·         A Member was in support of the recommendations and stated that it was important to maintain standards and receive the reports and responses that the Council was looking for which would hopefully be built into the contract specification.

·         A Member referred to the full CIPFA Audit Committee Update Issue 35 (July 2021) on page 47 of the Agenda and asked that a copy be circulated to all Members.  The Internal Audit Manager advised Members that they would be able to make this available to Members.

No further comments or questions were received.

Following which it was,

RESOLVED:

That Committee noted the contents of the report and the following recommendations to Council:

Recommendation(s) to Full Council:

1.   To accept Public Sector Audit Appointments’ invitation to opt into the sector-led option for the appointment of external auditors to principal local government and police bodies for five financial years from 1 April 2023.

2.   That delegated authority be given to the Section 151 officer (or deputy in their absence) to communicate the willingness of the council to join the scheme, led by PSAA and to enter into the scheme after a satisfactory examination/negotiation of the proposed terms & conditions is concluded.

3.   That following the appointment of the external auditor, the external auditor’s report be presented to Council in future years.

To consider a future training programme for the Committee.

Mark Stinson, Monitoring Officer presented to Members details of training made available to the Audit and Governance Committee together with some suggestions for future training, pages 231 to 232 of the Agenda refer.

The Monitoring Officer highlighted that the skills and knowledge questionnaires had been sent out to Members and he was waiting for the completed forms to be returned to develop the programme further.

Members were invited to put their comments and questions forward.

·         A Member queried how many training sessions would be coordinated with Members across the Partnership as it would be a way of further creating efficiencies.  The Monitoring Officer informed Members that this was something that both he and the Section 151 Officer had identified and would look at where this could be achieved by offering the training to more than one partner at a time.

N.B.  Councillor Terry Knowles left the Meeting at 12:51pm.

·         A Member considered that training should be made more widely available to all Members, not just those on the Committee.

·         A Member considered that a handbook would be useful for Members, to include information on the CIPFA code and the role of the Audit and Governance Committee for Members to refer back to.  The Monitoring Officer advised Members that he would be able to source and collate relevant documents and would speak to colleagues in other authorities to see whether they could borrow any learning from them.

·         A Member considered that a repository of recordings of presentations from the past, together with any materials or consideration of bite-sized training be made available.

·         A Member referred to the 45 minute training sessions that were previously delivered prior to the start of the Audit and Governance Committee Meeting and it was considered that it would be useful to reinstate these.

No further questions or comments were received.

Following which it was,

RESOLVED:

That the Audit and Governance Committee Training Programme be noted and the feedback and suggestions put forward be considered by the Section 151 Officer and Monitoring Officer.

To receive an update from the Monitoring Officer including an update on the Model Code of Conduct.

Mark Stinson, Monitoring Officer presented Members with a verbal update and advised on the following:

The draft Model Code of Conduct report would be brought to Committee at its next meeting to be held on 13 April 2022 with a view to taking the proposals to the AGM in May 2022 to adopt the Model Code of Conduct.  It was highlighted that Members had been offered two training sessions in November 2021 in terms of ethical standards, however further specific training would be delivered prior to the report being presented to Council.  This would also be presented to a meeting of the Constitutional Working Group ahead of being presented to Committee.  Engagement work would also be undertaken with the town and parish councils regarding this.

Members were informed that work was being undertaken on the Constitutions across the Partnership over the next few months to co-ordinate and align them, however each Council would have its own Constitution rules.

Members were invited to put their comments and questions forward.

·         A Member asked that all officers be made aware of the Constitution and referred to the protocol for responding to Ward Members as an example as Members often did not get timely replies and found this frustrating.  The Monitoring Officer responded that he was happy to pick this up and an ongoing programme of training or workshops would be the way forward.

·         A Member considered that the understanding of the revised Code of Conduct for town and parish councillors would be very important and considered that a discussion with the Lincolnshire Association of Local Councillors (LALC) may solve the problem of having to talk to a large number of different people.  It was further considered that a joint position on the revised code for both the parishes and district would be helpful.  The Monitoring Officer agreed to pick this up.

N.B.  Councillor Colin Davie left the Meeting at 13:03pm.

To exclude the public and press for the following item:

That under Section 100 (a)(4) of the Local Government Act 1972, the press and public be excluded from the meeting for the following item on the grounds that, if they were present, there could be disclosed to them exempt information as defined at paragraph 7 Part 1 of Schedule 12A to the Act (as amended).

The Monitoring Officer asked it be noted that the exemption advertised relating to the paragraph for excluding the press and public, Paragraph 7(a) was incorrect.  Members were advised that the basis for the exclusion was in relation to business and financial information of the Council, therefore should be Paragraph 3.

N.B.  Rebecca James, Procurement Manager, Matthew Waller, Internal Audit Manager, Richard Green, Interim Principal Auditor and Linda Pocklington, Senior Auditor left the Meeting at 13:05pm.

It was proposed and seconded that the public and press be excluded from the meeting.

RESOLVED:

That under Section 100(A) of the Local Government Act 1972, the press and public be excluded from the meeting for the following items on the grounds that, if they were present, there could be disclosed exempt information as defined at paragraph 3 of Part 1 of the Schedule 12A of the Act (as amended).

To receive a confidential report.

A confidential report was submitted by the Interim Treasury and Investment Manager which enabled Members to consider an update on property fund matters.

The Interim Treasury and Investment Manager set out the background to the report and the matter was duly considered by Committee Members.

RESOLVED:

That the information contained within the exempt minute be noted.

The programmed date for the next Meeting of this Committee will be Wednesday 13 April 2022.

The date of the next Meeting was confirmed as Wednesday 13 April 2022.