Apologies for absence were received from Councillors Danny Brookes, George Krawiec and Walter Leschenko.

Members were invited to disclose any relevant interests. No interests were disclosed.

To confirm the Open and Exempt Minutes of the Meeting held on 13^th April 2022 and the Minutes of the Special Meeting held at the rising of the Annual General Meeting held on 12^th May 2022.

Members queried the attendance of Directors/Chief Executive at future Audit and Governance Meetings.  The Chairman had written a letter requesting attendance at future meetings

Members also commented on the state of our economy in terms of the global situation.  The Section 151 Officer confirmed discussions would take place with Cabinet Members in terms of overall finances of the authority moving forward.

A Member wished to make an amendment to the previous minutes, (page 12 of the agenda refers) to reflect that Councillor Will Grover on entering the meeting did not take the Chair as stated in the minutes. The Committee supported this amendment.

Further to the amendment above, the Open and Exempt Minutes of the Meeting held on 13^th April 2022 and the Minutes of the Special Meeting held on 12^th May 2022 were agreed as a correct record.

The Chairman provided an update to the Committee. The key highlights included:-

·         Training Programme and Draft Work Programme for comment.

·         Remote Pension Fund training to take place on 28^th July virtually. (The Chairman was very keen to see the return of training between Committee Meetings and encouraged Members of the Committee to make every effort to attend the training).

·         The Audit and Governance Committee Annual Report was on the agenda for noting which would subsequently be taken to Full Council for further comment.

·         It was highlighted that use of the word ‘adequate’ within the Internal Audit Report was actually ‘rather good’ in this instance.

Actions from the previous meeting.

The Deputy Chief Executive Corporate and Section 151 Officer outlined the actions from the Meeting held on 13^th April 2022, (pages 27-32 refers).

It was noted that the Procurement Strategy would be shared with Audit and Governance in due course. Further actions regarding the Procurement and Management Framework (Towns Fund Projects) (pages 31 of the agenda refers) would be reported back by the Deputy Chief Executive Programme Delivery in due course.

With regards to action No. 53, renegotiation of the Magna Vitae contract,  an update was provided and it was confirmed that PSPS Ltd were doing checks and balances on the new finance system.

Overall there had been good progress on the actions.

In response to queries, the Assistant Director Finance advised that the Procurement Strategy was still being prepared and Members were assured once  a document was ready it would be recirculated for consideration.  Members were further advised that there had been some recent recruitment activity which had secured a Head of Procurement for both ELDC, SHLC and BBC and therefore additional resources were being allocated to this going forward.

To receive a report.

The Interim Assistant Director Governance and Monitoring Officer presented to Members the Audit and Governance Annual Report 21/22.

Members were advised that the report was attached at Appendix A to the covering report.  This report had been presented previously and was a factual report which had now been extended to include summaries of key activities undertaken during the previous year.

It should be noted that it was not a constitutional requirement for this report to be submitted to Full Council.   However, it was suggested to the Committee that they may wish to approve the report for circulation to Full Council to raise awareness of the work of the Committee over the previous 12 months, and in line with the Committee’s role of supporting good governance and giving assurance to the Council of the work that the Committee had been undertaking.

Members suggested that this report be presented at Council by the Chairman of Audit Committee, to encourage Councillors to ask questions and recognise the important role of this Committee. The Chairman acknowledged the point raised and pledged to provide a full report to Council in future.

Reference was made to the background to the report, paragraph 1.2, (page 34 of the report refers) it was felt that there needed to be reference to the CIPFA Code of Practice in terms of how Audit Committee’s complied with this code.  It was confirmed that this would be actioned and included in the report that goes to Full Council.

RESOLVED

That the Audit and Governance Annual Report 2021-22 be noted and the report be presented to the Full Council for approval.

To receive a report.

The Head of Audit and Risk Management presented Members with the Internal Audit Annual Report 2021/22, (pages 43 to 67 of the agenda refer).  The purpose of the report was to give the annual opinion and outcome of the internal work undertaken during the year.

It was reported that overall, this was a positive report for Committee.  The key messages included direction of travel where improvements were required which was increasing, identifying any areas for inclusion in the Council’s Annual Governance Statement (AGS) and the outcome of the External Quality Assurance Inspection undertaken in March.

Members attention was drawn to the health check undertaken and key highlights (page 49 of the report refers).

In terms of the Invest East Lindsey (IEL) Company, the Head of Audit and Risk Management would be taking this forward to Leadership Team in July and subsequently September Audit and Governance Committee. In terms of annual governance, the following highlights were made: -

• CIPFA had issued some guidance on good practice in Local Authority Companies, this would be included within the report.

• Number of areas of red assurance highlighted as part of the management assurance mapping process, relating to procurement and ICT project management.

The following update was provided: -

• No restriction in scope, some of the delays in the audit process were due to hybrid working which had taken longer.  The Internal Audit Manager would be working with the Council to make this process much smoother.

• One of the key challenges had been resources, including low resources in the sector which impacted delivery.

• It was pleasing to report that there had been successful recruitment and additional auditors engaged over the previous 3 months, also the Internal Audit Manager had delivered 60% of the Internal Audit Plan.

• Delivery of the annual opinion and external inspection around delivery of services by an independent person undertaken by CIPFA in March and fully conformed with it being recognised that actions taken were appropriate and robust.

• Outcome of audits undertaken, list of audits completed with their performance opinions and our assurance information were detailed with the report (page 61 and 62 refers)

Comments and questions were responded to as follows: -

Reference was made to fraud risk (page 50 of the report refers) it was noted that this was not currently reported to Audit, and Governance and it was suggested that this be received in future. With regard to fraud risk the Section 151 Officer advised that Officers were currently in the process of re-instating these reports and were look at commissioning externally to continue to have this work undertaken.

Furthermore, the Council contributed to the Lincolnshire Counter Fraud Partnership and Officers would be looking at pro-active work around grants.  This piece of work would be incorporated within Internal Audit Plan by Counter Fraud Specialists at Assurance Lincolnshire.  The Lincolnshire County Council’s Counter Fraud Annual Plan had been recently published and covered areas of growing risk around grants it was confirmed this would be brought back to a future meeting.  ...  view the full minutes text for item 9.

Report to follow.

The Deputy Chief Finance Officer (Corporate), PSPS Limited presented Members with the unaudited 2021/22 Financial Statements including the Annual Governance Statement prior to approval by the Section 151 Officer in advance of the 31^st July deadline.

Members were advised that this was the third year-end process that had been undertaken where the deadlines had been extended as a result of the pandemic.  The team was now aiming for the deadline of 31^st July 2022 and the audited accounts were required to be published by 30^th September 2022.  The accounts would be formally published on the Council’s website following today’s meeting marking the formal 6-week public inspection period.

Members were advised that the account had been produced in line with CIPFA’s Code of Practice on Local Authority Accounting and in line with the Council’s Accounting Policies which were brought before this Committee in April. An additional accounting policy had been subsequently added to reflect the new requirement for Invest East Lindsey (IEL) to produce group accounts.

It was further reported that: there had been increased activity around IEL and it was therefore considered material for the 21/22 accounts to produce group accounts and incorporate this. The group accounts were still in progress and were not included in the appendix to this report however, these would be covered when the accounts were brought back for review as part of the audited accounts process.

Key points on the draft Accounts had been highlighted earlier to Audit and Governance Committee at a virtual session: -

• The formation of the South and East Lincolnshire Partnership and new Senior Management Structure which would change the way the Council reported on these statements to reflect the new Assistant Director structure.
• The impact of the pandemic in terms of Covid grants, associated transactions, and increased business rates collection fund deficit, although this had reduced from the previous year.
• Due to the change in ownership from PSPS from 1^st April 2021, the Council now incorporated Boston as a new shareholder within PSPS and therefore East Lindsey’s share of the PSPS accounts was consolidated into East Lindsey.

Members were referred to Appendix A, unaudited financial statements (page 5-113 of the supplementary agenda refers). Some of the key highlights included: -

• Reference to the Narrative Report (pages 15-16 of the report refer) and the general fund outturn table presented by Assistant Director Area, resulting in an underspend of £0.868m at year-end.
• Reference to the sources of income and expenditure by Assistant Director, which gave an overall view of the financial performance of the Council during 2021/22. It was noted that the Narrative Report only covered the finances of East Lindsey and did not incorporate any figures relating to PSPS.
• Capital Financial Performance the outturn table had shown a £19m underspend against the budget.
• Further details on general fund and capital outturn were included in the outturn report presented to Executive Board this week.

Members were reminded of the purpose of the Financial Statements (page 18 of the  ...  view the full minutes text for item 10.

To receive a report.

The Deputy Chief Finance Officer (Corporate) presented the Annual Treasury Report on behalf of the Treasury Manager, (pages 69-92 of the agenda refer).  The purpose of the report was to present the Annual Treasury Review of the Council’s activities for 2021/22 including the prudential and treasury indicators, (Appendix A, page 69 of the report refers).

Members were advised that although the report had been included, the accounts were still in progress.  As such there were some amendments to the capital and financing figures within Appendix A that would be highlighted, and subject to change as part of the auditing of the accounts process.

Members were referred to the Council’s Capital Expenditure and Financing 2021/22, (paragraph 2, page 74 refers).  Reference was made to the capital expenditure the actual figure for 2021/22 being £9.436m and unfinanced capital expenditure of £1.880m, this constituted the establishment of Invest East Lindsey.

Members were referred to the Council’s Overall Borrowing Need, (Paragraph 3, page 65 refers).  Reference was made to the Councils Opening Capital Financing Requirement (CFR) balance this being £22.426m as opposed to an estimate of £22.444m with the addition of the Unfinanced Capital Expenditure of £1.880m.

The Council also had a Voluntary Revenue Provision (VRP) reversal in the year.  It was noted that the Council set VRP aside at the end of each year-end to be the value of the movement in the fair value of the property funds.  However due to an increase in the fair value of those property funds at the year end, the Council reversed some of that VRP at the year-end to the value of £1.194m, the closing CFR balance being £25.5m.  

Members were referred to the gross borrowing and CFR, (page 76 of the report refers).  It was noted that the Gross Borrowing Position was £20m and total CFR of £25.5m as updated previously.

Members were referred to the Treasury Position as of 31^st March 2022, (Paragraph 4, page 77 of the report refers). In terms of the Fixed Rate Temporary and PWLB borrowing, the figure was £20.149m this was to enable the Council to include the accrued interest on the borrowing which was consistent with the previous year.  The CFR figure being updated from £22.552m to £25.5m leaving an under borrowing position of £5.351m and total investment including cash equivalents of just over £82.5m.  Therefore, the net investment of the Council was actually £62.365m.

Members were referred to the Investment Portfolio, it was highlighted that the actual investment as of 31^st March 2022 had increased from 31^st March 2021.  As mentioned previously there had been an increase in government grants received in 2021/22 however these had not been paid out until 2022/23.

Members were referred to the Strategy for 2021/22, (page 79 refers), it was reported that investment returns remained close to zero for much of 2021/22.

Members were referred to the chart detailing the PWLB borrowing noting that this had started to rise from December 2021.

Members were referred to Section  ...  view the full minutes text for item 11.

To receive a report.

The Insights and Transformation Manager presented Members with the Strategic Risk Register as at Q4 Report,  end of March 2022 (pages 93 to 110 of the agenda refer).

It was highlighted that there were 5 high risks identified from previous reports these included the following 5 High Risks:-

·         Reduction in government funding to deliver Council services and local priorities.

·         Reduction in Council income

·         Impact of Covid19 on the local economy – people and business

·         Uncertainty of future Lincshore flood defence scheme.

·         Technical Infrastructure Failure

·         Cyber Incident

It was noted that the above were externally driven risks and if they were to happen the impact would be high.  Members were assured that there was mitigation and controls in place, and as such they continued to be reviewed and improved.  Further training and reminders to users and staff would assist around what could be done to help with this.

It was highlighted that the covering report included an update on the Operational Risk Register.  The risks were reviewed quarterly by officers, the plan being that for the Quarter from now - end of September Officers would be reviewing the Operational Risk Register again looking in detail at the risk themselves, emerging risks and mitigation. This would come forward to Audit and Governance Committee in due course.

Members were invited to put their comments and questions forward.

A comment was made around the risk of inflation on our budgets and the fact that this has not been included within the risk register.  Members were advised that the Risk Register was reviewed regularly and any new risks could be added.

Reference was made to inflation under the financial risks listed, this was something that could be looked at in Quarter 2.

Reference was made to Risk 9, Attainment of revenue through Treasury Management Policies and commercially driven capital expenditure.  Comments were made that some of the risks listed were changing, given the widespread inflation and difficult financial circumstances it be noted that this would change pretty quickly.  It was also noted that this risk was currently classified as low likelihood and medium impact, however this had a much higher impact.

Further reference was made to the Risk Matrix in relation to Risk 13 Cyber Incident, it was questioned why these featured in 2 different places on the matrix both low and high likelihood, a Member suggested it be clarified where this sat on the matrix.

The Insights and Transformation Manager explained that this was an error and confirmed that Risk 13 should feature in the high risk category. This would be amended prior to the next report being submitted.

RESOLVED

That the Risk Management Position Report be noted.

To consider the draft Audit and Governance Committee’s Work Programme 2022/23.

The Assistant Director Governance and Monitoring Officer presented Members with the Draft Audit and Governance Committee Work Programme 2022/23.

Members were advised that this focused on the key pieces of work which were known to be coming forward to upcoming meetings scheduled in the Committee timetable for 2022/23. The intention was to append the Work Programme to the Audit and Governance Annual Report and to present this to Full  Council.

The Assistant Director Governance and Monitoring Officer suggested an addition to the Work Programme to include a note to recognise that additional items would be added to the programme as they arose, in particular constitution updates that may come forward during the year.  Furthermore, it was proposed that the Work Programme be brought forward to each meeting for review.

A Member noted that the Internal Audit Report on Invest East Lindsey needed adding to the Work Programme for the September meeting.

The Interim Assistant Director Governance and Monitoring Officer  advised that any completed audits would be dealt with under the Internal Audit Progress Report. In addition, a report around Fraud would need to be incorporated into the Work Programme.

Members suggested a report on how the Council was administering the BID also form part of the Work Programme.

The Chairman understood that the BID was an external organisation and the Council was only responsible for administering the collection.

The Section 151 Officer clarified that the BID was a separate organisation. The Council effectively acted as billing authority purely for the sums to the various parties on the list the same methodology as a parish levying council tax bills to parishioners in its patch.

In terms of  the work undertaken by the Council and PSPS this was in accordance with legislation and Members were further assured that all the normal checks and balances were in place for that process. As such there was no indication that there would be any difficulties or issues associated with the way the Council were acting as billing authority on this particular matter.

Following which it was,

RESOLVED:

That the Draft Audit and Governance Committee Work Programme 2022/23 be noted.

To receive a verbal update.

The Interim Assistant Director Governance and Monitoring Officer (MO) provided Members an update:

The Council had approved the LGA Model Code of Conduct at its previous meeting and this had now been updated in the Council’s Constitution. Members were advised that a communication had been circulated regarding an option for Members to voluntarily declare their support for the Code.  Members were reminded to respond to Democratic Services with their support.  Subsequently, this would be published on the website in due course in line with the recommendations agreed by Council.

Further work had been undertaken with Parish and Town Councils who had their own decision making processes and had to adopt a Code of Conduct. It was reported that many had started to adopt the LGA Model Code and an event was taking place this week in Woodhall Spa organised by Lincolnshire Association of Local Councils (LALC) around training and to encourage take up of the Code.

Further work was being undertaken around the process in which code of conduct complaints were received and this would be reviewed and reported back to the next meeting.  Also, further training on the LGA Model Code would be provided in the near future.

In addition, the Code of Corporate Governance  was being reviewed across ELDC with a view to bringing an updated Local Code of Corporate Governance forward in line with the CIPFA and Solace Framework which had been published. 

Members were invited to put forward any comments and questions:-

·         In terms of reference to Area Committees in the Constitution the Assistant Director Governance and Monitoring Officer would look into this with a view to updating this section.

·         In terms of the voluntary declaration this was discussed at this Committee and had proceeded as a recommendation to Council. The Code of Conduct now applied to all Members as adopted.  And the process for voluntarily supporting it was now being enacted by the Monitoring Officer.

·         In response to a query around a full review of Constitution, Members were advised that the legislation that permitted remote meetings was temporary legislation and no longer applied.

In terms of Monitoring and review of the Constitution this was ongoing and Officers were focusing on key priority areas firstly. However should Members spot any anomalies it was requested that this be brought to the MO’s attention.

Further discussion ensued around how council decisions are taken by remote means, Members were advised that part of that was having processes in place and delegation to allow that to happen. i.e. Chief Exec exercising special urgency powers. In terms of Task and finish groups these were informal meetings and were not bound by same rules as formal committees.

Further comments were made around ensuring that plans were in place for remote meetings should Covid-19 cases surge during the winter months.

RESOLVED

That the update and comments be noted.