To receive a report from Mazars LLP, External Auditors.

Mark Surridge was in attendance on behalf of Mazars LLP, External Auditors, to present the Audit Planning Update and Progress Report – March 2023, pages 53 to 64 of the Agenda refer and introduced his colleague Bethan Frudd who would be taking on Jon Machej’s role and attending future Committee meetings.

The report provided the Audit and Governance Committee with updates on:

•  The 2020/21 and 2021/22 audits and any significant matters to date, and

• Recent relevant reports and publications for Committee’s information (detailed at Section 2).  Full details were contained within the report.

Key points were highlighted to Members as follows:

·   The Council had a requirement for the first time to produce Group Accounts as a result of the growing activities of its subsidiary company Invest East Lindsey Ltd.  Mazars were yet to receive these from management and work over both the Council’s consolidation arrangements and detailed testing of any material balances had yet to commence.  Furthermore, Mazars had been made aware of a qualification on the accounts of the Council’s subsidiary company and needed to discuss this with the Council’s officers to fully understand the rationale for this and to consider the implications for Mazars required audit work and impact on its audit report on the Council’s Group Accounts.

Two elector queries had been received as follows:

·   The receipt of correspondence from an elector relating to the representation and handling of the income from the Business Improvement District Levy, which Mazars formally accepted an objection on East Lindsey District Council’s Statement of Accounts for 2021/22 was nearing its conclusion and the outcome would be reported in due course.

·   In relation to the Council’s failure to comply with its complaints and Freedom of Information request procedures, Mazars had to consider whether to accept this as a formal objection on East Lindsey District Council’s Statement of Accounts for 2021/22.  Mr Surridge confirmed that it did not meet the requirements for Mazars to investigate.

Value for Money work was ongoing that included an assessment of arrangements that the Council had in place around financial planning, financial management and governance and risk.

Members were invited to put their comments and questions forward.

·       A Member raised a concern with regards to Invest East Lindsey (IEL) and non-compliance with the Companies Act 2006, page 59 of the Agenda refers and asked for assurance that the Council was taking action to address this and what reporting mechanisms were in place, following which it was suggested that reports were provided on a regular basis until this had been clarified.

The Section 151 Officer advised Members that she would get an update, however assured Members that a lot of work was currently underway in providing additional support for IEL.

A Member considered that due to the wording around the risks identified in the accounting and governance arrangements of IEL whether this was an area that internal audit needed to do further work on.

The Section 151 Officer advised Members that IEL was a company that had its own arrangements for accounting.  There were also arrangements for internal audit in terms on the Council’s arrangements and as a company it had its own arrangements and also external audit had an oversight on this as it was included in the Council’s accounts.  Therefore, it was considered that there were sufficient audit processes in place and it was now important to take action to address some of the particular areas and as Section 151 Officer confirmed that she was satisfied with the audit arrangements in place.

·       A Member highlighted that IEL had been referred to Overview Committee for scrutiny on its governance arrangements due to a number of concerns raised by Members, however considered that action needed taking quickly and asked what action would be taken to solidify the governance around that.

Mr Surridge advised Members that Mazars had no concerns with the activities undertaken by IEL and it was the accounts they were focussing on.  For assurance, Members were advised that information was being provided by officers and highlighted that the accounts were complex and acknowledged that it would take some time to work through.

·       A Member queried whether any governance issues may impact on the financial stability of the company.  Mr Surridge responded that at the current time not enough work had been undertaken to fully conclude and confirmed that the lines of enquiry were not around financial stability but whether it was a technical breach in terms of documentation.  The Section 151 Officer added that extra resources had been provided to get certain tasks undertaken.

·       A Member highlighted that the Council had lent IEL £4.4m as detailed at Appendix A of the Q3 Treasury Management update, page 102 of the Agenda refers and queried whether this loan was in jeopardy.  The Section 151 Officer advised Members that in terms of the position of the loans, IEL had been impacted by the current economic financial climate as had other businesses and the knock-on effects, for example with properties not being built out as quickly and people struggling to get mortgages.  However, the timeline was what was expected and there were no concerns at the current time.

A Member highlighted her concerns with regards to Kingfisher Caravan Park (KCP) and considered that it was time that the Council faced up to the losses and ceased carrying on with schemes that were losing money.   The Section 151 Officer highlighted to Members that KCP was a company that had its own directors who would raise such concerns and was not aware that any such concerns had been received.  It was confirmed that the directors/shareholders were a mixed appointment of both Members and officers from ELDC.

·       A Member asked for a timeline of when a final document addressing the issues from IEL would be reported to Committee.  The Section 151 Officer confirmed that IEL was an area of focussed activity at the moment with resources around it to undertake the necessary actions.

No further comments or questions were received.

Following which it was,

RESOLVED:

That the Audit Planning Update and Progress Report - March 2023 be noted.