Apologies for absence were received from Councillors Will Grover and Jill Makinson-Sanders.

It was noted that, in accordance with Regulation 13 of the Local Government (Committees and Political Groups) Regulations 1990, notice had been given that Councillor Ruchira Yarsley had been appointed to the Committee in place of Councillor Councillor Jill Makinson-Sanders for this Meeting only.

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

To confirm the Open and Exempt Minutes of the Meeting held on 30^th October 2024, the Open Minutes of the Extraordinary Meeting held on 27^th November 2024 and the Open Minutes of the reconvened Meeting held on 13^th December 2024.

The Open and Exempt Minutes of the Meeting held on 30th October 2024, the Open Minutes of the Extraordinary Meeting held on 27th November 2024 and the Open Minutes of the Reconvened Meeting held on 13th December 2024 were agreed as a correct record.

The Chairman informed Members that she had taken part in a Centre for Governance and Scrutiny (CFGS) pilot which examined the ways in which audit and scrutiny Committees worked together. 

Members were informed of the draft recommendations from the pilot which included:

·       The Chairman of both Committees communicating more formally on timetable dates;

·       To consider a memorandum of understanding similar to the model used by Birmingham City Council;

·       To understand the added value that both Committees provide to the Executive Board and to obtain feedback from Members;

·       To treat the RAG ratings on the risk register with caution and to ensure the rating is red where deadlines were missed;

·       To incorporate updated questions in the Audit and Governance Committee’s Annual Self-Assessment.

Members were further advised that a letter had been received from the Ministry of Housing, Communities and Local Government (MHCLG) on local audit reform and that following the Meeting, there would be a briefing on Global Audit Standards which would be followed by the Audit and Governance Committee’s Annual Self-Assessment exercise.

To confirm the Actions from the last Meeting.

Members were referred to the Action Sheet, pages 29 to 30 of the Agenda refer.

Members noted that the actions from the Meeting held on 30 October 2024, the Extraordinary Meeting held on 27^th November 2024 and the Reconvened Meeting held on 13^th December 2024 were confirmed as completed or in hand.

No questions or comments were received.

To receive a report from the Group Manager – Insights and Transformation.

Suzanne Rolfe, Group Manager (Insights and Transformation) who was in attendance virtually presented Members with the Quarter 2 Risk report 2024/25, pages 31 to 50 of the Agenda refer.  

A copy of the Strategic Risk Register was attached at Appendix 1 which included the Risk Scoring Matrix and Risk Definitions, pages 39 to 50 of the Agenda refer.

Members were advised that the report provided an overview of risk management in the authority as at the end of September 2024.

Members were invited to put their comments and questions forward.

·       A Member requested clarification on the term ‘LGR’, page 34 of the Agenda refers.  In response, the Group Manager (Insights and Transformation) advised Members that LGR referred to Local Government Reorganisation.

• In reference to Strategic Risk ELDC17 – Implementation of the Environment Act 2021, a Member expressed concern due to the widespread inland flooding in Lincolnshire in January 2025 alongside the impact of environmental pollution and queried whether the risk could be identified separately, page 33 of the Agenda refers.  In response, the Group Manager (Insights and Transformation) advised the Committee that Members’ concerns would be brought to the attention of the lead officer.

·       A Member commented on the effects of flooding in Horncastle and further supported that the risk of inland flooding should be separately identified.

• In reference to Paragraph 2.7 Fraud Risks - Assets - Equipment, a Member queried whether equipment referred to small equipment or larger equipment such as waste vehicles, page 35 of the Agenda refers.  In response, the Group Manager (Insights and Transformation) advised Members that equipment referred to all of the Council’s assets.  Members were further advised that the specific risks around waste vehicles would be reviewed for inclusion in the Quarter 3 report.

• In reference to ELDC Strategic Risk 16 – Economic Hardship, the Chairman queried the evidence basis for the removal of the risk, page 33 of the Agenda refers.  In response, the Group Manager – Insights and Transformation advised Members that the risk was no longer perceived as a strategic risk for the Council and that the risk remained in the underlying risks of the operational risk registers.  The Group Manager – Insights and Transformation further advised Members that additional clarification would be sought from the lead officer.

·       The Chairman commented on the benefits of including target dates as highlighted by the external auditors.  In response, the Group Manager (Insights and Transformation) assured Members that the Committee’s and Auditor’s recommendations were being incorporated and that good progress was expected in the next quarterly risk report.

No further comments or questions were received.

Following which it was,

RESOLVED:

That the Quarter 2 Risk Report 2024/25 be noted.

To receive a report from the Treasury and Investment Manager, PSPS Limited.

Sean Howsam - Treasury and Investment Manager, PSPS Limited was in attendance to provide Members with an update on changes to Statutory Guidance: "Capital Finance: Guidance on Minimum Revenue Provision" and the IFRS9 Statutory Accounting Override for Pooled Investments, pages 51 to 60 of the Agenda refer.

The Treasury and Investment Manager, PSPS Limited advised Members that the report aimed to update the Committee on recent changes to Statutory Guidance which was mainly effective from the 2025/26 financial year, and that Statutory Guidance on Minimum Revenue Provision prescribed how Council’s calculated their annual Minimum Revenue Provision (MRP) charge for all unfinanced capital expenditure which made up its Capital Financing Requirement (CFR).

Members were further advised that the Statutory Accounting Override in relation to Pooled Investments ended on 31 March 2025 and that this report updated Members on the current Government stance which was that they were not minded to extend the override.  Members were advised that the report was being presented to the Audit and Governance for scrutiny prior to its submission to Council on 5 March 2025.

Members were invited to put their comments and questions forward.

·         A Member queried the approach to handling the Council’s MRP.  In response, the Section 151 Officer advised Members that the forthcoming approach proposed to pull the Voluntary Revenue Provision (VRP) back to fund the MRP for future years which would enable the funds to be put back into the Council’s reserves as quickly as possible.   Members were advised that MRP accelerated the process of reversal of VRP, however the VRP could only be reversed to the amount set for the MRP in a specific financial year.

The Section 151 Officer assured Members that in relation to the property funds, the proposed approach was an effective way of managing the situation.

·         A Member queried the understanding of the new MRP Charge of £67,456.77 for 2025/26 from the perspective of a layperson, page 56 of the Agenda refers.  In response, the Section 151 officer explained to Members that the figure was a cost to the revenue account which could be offset by the VRP from previous years.

Members were further advised on the types of MRP and their constraints and that the 2025/26 financial year would require careful management.

·         In reference to Paragraph 2.6 - Unfinanced Equity Investments (e.g. Property Fund Investments), a Member queried whether a professional opinion that confirmed the acceptability of the approach of using a 50 year life expectancy for property assets had been received.  In response, the Section 151 Officer advised Members that a view had been taken on the suitability of a 50-year life expectancy and that a valuer’s opinion would be obtained to agree the approach.  Members were further assured that there were no concerns with conclusion of the property valuations and that discussions had taken place with a national expert from KPMG.

·         A Member queried when a report would be forthcoming to reflect the changes in regulations in relation to capital and revenue investments in property  ...  view the full minutes text for item 68.

To receive a report from the Treasury and Investment Manager, PSPS Limited.

Sean Howsam - Treasury and Investment Manager, PSPS Limited was in attendance to present Members with the Draft Treasury Management Policy and Treasury Management Strategy Statement, Minimum Revenue Provision Policy Statement and Annual Investment Strategy 2025/26, pages 61 to 108 of the Agenda refer. 

A copy of the Council’s Treasury Management Strategy Statement was included at Appendix 1 and the Treasury Management Strategy Statement, Minimum Revenue Provision Policy and Annual Investment Strategy 2025/26 at Appendix 2, pages 67 to 108 of the Agenda refer. 

The Treasury and Investment Manager, PSPS Limited advised Members that the report was the Draft Treasury Management Policy and Strategy Statement for the 2025/26 financial year and was included as part of the Budget Setting Report that was submitted to Executive Board and Council for approval.

Members were advised that the report was being presented to the Executive Board on 20th February 2025 prior to its submission to Council on 5 March 2025 and 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 2025/26.

Members were invited to put their comments and questions forward.

·       In reference to Paragraph 2.2 - The Council's borrowing need (the Capital Financing Requirement (CFR)) and the work being undertaken to calculate the full value of lease liabilities, a Member queried the timescale for conclusion of the work, page 75 of the Agenda refers.  In response, the Treasury and Investment Manager, PSPS Limited advised Members that lease accounting had changed due to changes in government legislation and that as part of the Council’s year end accounting process for 2025 lease liabilities would now be displayed on the balance sheet each year. 

·       In reference to the table on the Council’s cumulative CFR projections, a Member queried the reasoning for the large increase in CFR movement for 2027/28, page 75 of the Agenda refers.  In response, the Section 151 Officer explained to Members that the projection included the cost for the replacement of waste vehicles and that there was a clear pattern in the Council’s capital programme for when waste vehicles needed to be replaced.

·       A Member queried the methods used for generating and calculating forecasts in terms of inflation.  In response, the Treasury and Investment Manager, PSPS Limited advised Members that the Council made forecasts for inflation as part of the budget setting process which included underlying assumptions.

·       A Member commented on the lack of investment risk benchmarking and queried the considerations for undertaking formal benchmarking exercises.  In response, the Treasury and Investment Manager, PSPS Limited advised Members that investments had been benchmarked in the past by Link Group and that benchmarking had not been continued as frequently due to many authorities investing in similar areas.  The Committee were assured that benchmarking risks were adequate, and that Members could request a review on the way in which risks were assessed.

·       A Member queried the Council’s relationship with Link Group.  In response, the Treasury  ...  view the full minutes text for item 69.

To receive a report.

Christine Marshall, Deputy Chief Executive (Corporate Development) and S151 Officer presented Members with the Draft Budget Report 2025/26 – 2029/30.

The report highlighted to Members the final details of the 2025/26 budget, the 5-year Medium Term Financial Strategy (MTFS) from 2025/26 to 2029/30 and Capital Programme which included the recommended level of Council Tax for 2025/26 taking into account budgetary pressures including that of the Internal Drainage Board (IDB) levy, pages 1 to 52 of the Supplementary Agenda refer

Members received a presentation that provided an overview of budget progress which included highlighting budget pressures, risks and considerations, improvements and further opportunities, a summary of the consultation response and a review of the risks.  A copy of the presentation is attached at Appendix A to the Minutes.

Members were invited to put their comments and questions forward.

·       A Member queried the background for the utilisation of the S113 Recharge, page 29 of the Supplementary Agenda refers.  In response, the Section 151 Officer advised Members that due to the Memorandum of Agreement between the three authorities of the Partnership, Section 113 of the Local Government Act 1972 had been activated to enable the placing of staff at the disposal of the other authorities.

·       A Member queried whether multiyear staff salaries were being negotiated by unions and sought clarification on the capitalisation of salaries.  In response, the Section 151 Officer advised Members that she was not aware of any considerations for multiyear settlements and that the continuation of the flat rate pay rise was expected.  Members were further advised that capitalisation referred to capitalising on project management costs for the people working on projects within the Capital Programme.

·       In reference to Table 16 - Efficiency Target, a Member requested an explanation for the £592,000 Budget Savings Requirement, page 34 of the Supplementary Agenda refers.  In response, the Section 151 Officer advised Members that a final figure would be reached and that the Savings, Transformation and Efficiency Plan operated as part of the Annual Delivery Plan.  Members were further advised that service reviews aimed to generate efficiencies and that the PSPS Transformation Plan was also looking to align savings opportunities across the Partnership.

·       In reference to Internal Drainage Board (IDB) levies, a Member queried who was responsible for setting the fees.  In response, the Section 151 Officer advised Members that IDBs operated a committee structure and were responsible for setting their own levies. 

·       A Member further queried whether IDBs would be categorised as a third-party service provider.  In response, the Section 151 Officer advised Members that IDB levies were effectively a precept embedded in the Council’s budget whereas historically residents had been billed separately by the IDBs.

·       A Member commented that IDB levies were a significant risk that was not separately identified as a strategic risk.  In response, the Section 151 Officer advised Members that she was working with the Group Manager (Insights and Transformation) to ensure that the risks were recognised and up to date.

·       The Section 151 Officer drew Members attention  ...  view the full minutes text for item 70.

To receive a report from the Internal Audit Manager, Internal Audit Lincolnshire County Council.

Matthew Waller, Internal Audit Manager – Internal Audit Lincolnshire County Council presented Members with the Internal Audit Progress Report January 2025, pages 109 to 130 of the Agenda refers.

In accordance with the proper internal audit practices (Public Sector Internal Audit Standards), and the Internal Audit Charter, the purpose of the report was to provide Members with:

· the status of live internal audit reports.

· an update on progress against the internal audit plan.

· a summary of internal audit performance, planning and resourcing issues;

· a summary of significant issues that impact of the Head of Internal Audits annual opinion.

Members were invited to put their comments and questions forward.

• A Member requested assurance that the recommendations for improvement for bank reconciliation and insurance were being enacted, pages 117 to 119 of the Agenda refer.  In response, the Internal Audit Manager explained to Members that all findings and dates were tracked and that the Committee would only see reports for actions that were overdue.

·       In reference to the Insurance Audit Review, a Member queried the frequency of asset valuations and whether the Council had an asset evaluation policy for insurance purposes, page 119 of the Agenda refers.

In response, the Deputy Chief Finance Officer, PSPS Limited explained to Members that different categories of assets were valued on different bases and that assets were valued on an annual basis for accounting purposes and less frequently for insurance.  Members were provided with an example that play equipment was not revalued and was held at depreciating cost until the end of its useful life.

The Chairman advised Members that further clarification would be requested on insurance valuation practices.

·       A Member requested further clarification whether the definition of asset registers plural indicated that the Council held multiple registers, page 119 of the Agenda refers.  In response, the Internal Audit Manager advised Members that the definition referred to the asset registers of the three Partnership Councils.

·       A Member requested assurance that the manual procedure in place for bank reconciliations could be undertaken by accounting software to minimise the opportunities for fraud.  In response the Chief Finance Officer, PSPS Limited advised Members that management had been quick to implement daily monitoring procedures to ensure that the historic backlog of bank reconciliations that were not being completed in a timely manner was addressed.  Members were further advised that the audit actions had been drafted and were due to be completed by the target audit implementation date of the end of January 2025.

·       A Member further queried the reasons that the process for bank reconciliations was undertaken manually.  In response, the Chief Finance Officer, PSPS Limited advised Members that two of three of ELDC’s bank accounts still required manual bank reconciliation due to utilisation of different software and that ways to automate the process was being examined.

·       A Member queried the process for approval of bank reconciliations.  In response, the Chief Finance Officer, PSPS Limited advised Members that an officer performed the day-to-day matching of transactions which was then reviewed  ...  view the full minutes text for item 71.

To receive an update.

The Chairman advised Members on the work undertaken by the Constitution Working Group including consultation with the Leader of the Council for retaining the current structure of the group, the order of items on Full Council Agendas, harmonisation of the Partnership’s Constitutions and local government reorganisation.

Members received a tabled update which highlighted the six areas which had been examined by the Constitution Working Group (A copy has been attached at Appendix B to the Minutes.)

John Medler, Assistant Director (Governance) and Monitoring Officer informed Members that the Agenda had been amended for the December 2024 Council Meeting thorough a provision which had been identified in the Constitution and that work on the alignment of the three Council’s Constitutions would be re-examined following announcements regarding local government organisation.

The Chairman further advised Members that the Constitution Working Group had also considered legal changes following the government consultation on remote meetings which concluded in December 2024, the ongoing consultation ending in February 2025 on increasing sanctions for local authority Code of Conduct breaches and the Council’s 6-month attendance rule.

The Assistant Director (Governance) and Monitoring Officer further advised Members that all Councillors had received links to the consultations and that any changes to the standards regime would be monitored.

Members were invited to put their comments and questions forward.

·       A Member queried the reason that the Constitution Working Group did not take the decision upon themselves to exclude unaligned Members of the Council from being appointed to the Working Group.  In response, the Chairman advised Members that the Working Group had agreed to consult with the Leader of the Council and that the decision had been taken by the Working Group following that consultation.

·       Members discussed the role of the Constitution Working Group and the constraints of the current Constitution.

• A Member further queried whether the issue with the appointment of Members to Working Groups could be raised at Full Council.  In response, the Assistant Director (Governance) and Monitoring Officer clarified that the makeup of the Constitution Working Group had been previously agreed by Full Council and required its membership to be drawn from different political groups.

The Assistant Director (Governance) and Monitoring Officer further advised Members that the Council was able to consider changes to the Constitution in relation to Working Groups and that it was standard practice for the ruling group of an authority to have representation on a Constitutional Working Group. 

·       A Member further stressed the importance of all elected Members having the opportunity to be part of a Working Group irrespective of political alignment.

The Chairman thanked everyone for their comments.

N.B John Medler, Assistant Director (Governance) and Monitoring Officer left the Meeting at 13.02pm

To receive a report from the External Audit Director, KPMG.

The Chairman welcomed Rosie Kelly, External Audit Manager, KPMG who was in attendance virtually to present Members with the External Audit Plan & Strategy for the year ending 31 March 2024, pages 131 to 182 of the Agenda refers.

The External Audit Manager, KPMG highlighted to Members the significant risk for Invest East Lindsey in the value for money section which was consistent with the findings of the previous external auditor.  Members were assured that detailed information and conclusions would be presented at the next Audit and Governance Committee Meeting on 12th February 2025.

Members were invited to put their comments and questions forward.

·       A Member queried whether it was best practice for the Council to use internal valuers, page 136 and 137 of the Agenda refer.  In response, the External Audit Manager, KPMG explained to Members that it was not the external auditor’s role to advise but only to audit the work undertaken by the internal valuer and report any concerns.  Members were reminded that due to the audit being disclaimed for the year ended 31 March 2024, detailed work on land and buildings and the valuation of investment property had not been undertaken.

• In reference to the governance risk from Invest East Lindsey (IEL), the Chairman queried the way in which the response from IEL Management and the adequacy of its arrangements had been received, page 149 of the Agenda refers.  In response, the External Audit Manager, KPMG advised Members that from the Value For Money (VFM) perspective, group monitoring had not been identified and that subsidiary performance of IEL during the year had been loss making which had led to a focus on the governance arrangements.

In response, the Section 151 Officer advised Members to be mindful that the report was not a factual representation of what was currently in place and that the reports were backward looking.  Members were assured that the 2024-25 reports would be able to provide an up-to-date view from the auditors and that the internal audit follow-up was making good progress.

·       A Member commented that reports were always backward looking and that it was beneficial to observe in forthcoming reports that external audit recommendations were completed.  In response, the Scrutiny and Policy Officer confirmed to Members that an Internal Audit Progress Report was due in March 2025 as part of the earlier recommendation for the Committee to receive six monthly updates on IEL.

·       A Member further queried the nature of audit reports being retrospective.  In response, the Section 151 Officer explained to Members that retrospective looks were expected to change following the impact of the backstops which had been very effective in speeding up conclusions of the process.

No further comments or questions were received.

The Chairman thanked Rosie Kelly, the External Audit Manager for her report.

Following which it was,

RESOLVED:

That the External Audit Plan & Strategy for the year ending 31 March 2024 be noted.

N.B Rosie Kelly, the External Audit Manager left the Meeting at 13.14pm.

To consider the Audit & Governance Committee Work Programme 2024/25.

Members were presented with the Audit & Governance Committee Work Programme 2024/25, pages 183 to 188 of the Agenda refer. Members were invited to put their comments and questions forward.

No questions or comments were received.

Following which it was,

RESOLVED:

That the Committee Work Programme 2024/25 be noted.

The programmed date for the next Meeting of this Committee was noted as Wednesday 26^th March 2025.  Members were advised that an Extraordinary Meeting had been scheduled for Wednesday 12^th February 2025.