Audit and Governance Committee - Tuesday 25 February 2025, 6:00pm - Folkestone & Hythe webcasting

Audit and Governance Committee
Tuesday, 25th February 2025 at 6:00pm 

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  1. Cllr Liz McShane
  2. Mr Jake Hamilton
  3. Cllr Liz McShane
  4. Mr Jake Hamilton
  5. Cllr Liz McShane
  6. Cllr David Godfrey
  7. Cllr Liz McShane
  8. Cllr Adrian Lockwood
  9. Cllr James Butcher
  10. Cllr Liz McShane
  11. Jonathan Smith
  12. Cllr Liz McShane
  13. Microphone D
  14. Cllr Liz McShane
  15. Cllr Liz McShane
  16. Cllr David Godfrey
  17. Cllr Liz McShane
  18. Jonathan Smith
  19. Cllr David Godfrey
  20. Cllr Liz McShane
  21. Cllr David Godfrey
  22. Cllr Liz McShane
  23. Cllr Liz McShane
  24. Cllr Tim Prater
  25. Cllr David Godfrey
  26. Cllr Liz McShane
  27. Jonathan Smith
  28. Cllr David Godfrey
  29. Cllr Liz McShane
  30. Cllr Liz McShane
  31. Cllr Adrian Lockwood
  32. Cllr Liz McShane
  33. Microphone D
  34. Cllr Liz McShane
  35. Microphone D
  36. Cllr Liz McShane
  37. Cllr Adrian Lockwood
  38. Lydia Morrison
  39. Cllr Liz McShane
  40. Cllr James Butcher
  41. Cllr Liz McShane
  42. Microphone C
  43. Cllr David Godfrey
  44. Microphone C
  45. Cllr James Butcher
  46. Lydia Morrison
  47. Cllr Liz McShane
  48. Jonathan Smith
  49. Cllr James Butcher
  50. Lydia Morrison
  51. Cllr James Butcher
  52. Jonathan Smith
  53. Cllr James Butcher
  54. Cllr James Butcher
  55. Lydia Morrison
  56. Cllr James Butcher
  57. Lydia Morrison
  58. Cllr Liz McShane
  59. Cllr David Godfrey
  60. Cllr Liz McShane
  61. Microphone C
  62. Cllr Liz McShane
  63. Lydia Morrison
  64. Jonathan Smith
  65. Cllr Liz McShane
  66. Cllr Tim Prater
  67. Cllr Liz McShane
  68. Cllr Liz McShane
  69. Mr Jake Hamilton
  70. Cllr Liz McShane
  71. Cllr Liz McShane
  72. Cllr Liz McShane
  73. Webcast Finished

Cllr Liz McShane - 0:00:16
Good evening, everyone. Thanks for coming tonight. Just before we start, I'll go through
the standard introductory bit. So good evening and welcome to the meeting of the Audit and
Governance Committee. This meeting will be webcast live to the internet. For those who
do not wish to be recorded or filmed, you will need to leave the chamber. For members,
officers and others speaking at the meeting, it is important that the microphones are used
so viewers on the webcast and others in the room may hear you. Would anyone with a mobile
phone please switch it to silent mode as they can be distracting. And finally, I would like
remind members that although we all have strong opinions on matter under consideration, it's
important to treat members, officers and public speakers with respect. Thank you.
So here we are for the February meeting and hopefully by the end of tonight we'll be in
a position to sign off the 23 -24 accounts. So thank you to all the team at GT and the
very short window from signing off for December, the last year at Cots and getting these ones
in this position for tonight. So really lots of thanks and people that we don't see tonight
here who are doing all the work behind the scenes as well. So just wanted to reiterate
that on behalf of all the committee. And apologies for absence, please.
Mr Jake Hamilton - 0:01:42
Thank you, Chair. We have one apology from Councillor Wing.
Cllr Liz McShane - 0:01:44
Mr Jake Hamilton - 0:01:47
Anything for Councillor Wimble? No, no. Nothing coming late?
Nothing. Okay. Thank you.
Declarations of interest?
Cllr Liz McShane - 0:01:51
There's actually quite a lot in here dealing with Princes Parade
Cllr David Godfrey - 0:01:59
and I think I should declare a voluntary declaration
that the time this was all going on, I was a cabinet member
and I was on the working group for Princes Parade.
Thank you for that. Any others? Councillor Lockwood.
Cllr Liz McShane - 0:02:11
Cllr Adrian Lockwood - 0:02:13
I'm a director of opportunity acts, which is also mentioned.
Hugh, Councillor Butcher.
Yeah, Declare and Interest as Director of Opportunities.
Cllr James Butcher - 0:02:21
Cllr Liz McShane - 0:02:24
Thank you as well. So moving on to Item 3, which is the chunky item we've got to look
at tonight. The Statement of Accounts for 2324. Who would like to introduce this?
Jonathan Smith - 0:02:40
Thank you. That's great. Team AFRID.
Thank you, Chair.
So the report that you'll see before you lays out the 23 -24 set of accounts.
Now members will be aware that two months ago we brought the 22 -23 statement of accounts
before you.
The reason behind some of the delays in bringing this 23 -24 accounts before you is because
of obviously we had to complete the 22, 23 accounts,
following which we then input or use
all the findings that came out of 22, 23,
and built those into the accounts for 23, 24.
We've had a short turnaround because obviously there's
a statutory deadline for the backstop deadline set
by government of the 28th of February
by the end of this week.
But we've brought before you the full set
of accounts which has been now audited by Grant Thornton.
They are producing or will be offering up
an unqualified opinion on the account,
or unmodified opinion on the accounts.
So obviously, the report before you
brings their audit findings report,
which details any adjustments that have
been required in the accounts.
And obviously, their report speaks for itself.
There have been some amendments that have been required.
We've done those.
agreed them with the auditors and effectively brought for you the full set of accounts that
are ready for your approval should you choose to do so. I'm happy to take any specific questions
but of course statements of accounts themselves will obviously speak for themselves and I'm
happy to deal with any sort of questions that you might have regarding any of the items
on the audit findings report as required.
Thank you Jonathan.
Cllr Liz McShane - 0:04:30
Anybody from the back talking more to speak next?
Yes, Jasmine.
Microphone D - 0:04:35
Thank you, Chair.
I want to reiterate the thanks to the Council's finance team for their hard work during the
23 -24 accounts audit.
At a high level, the report printed today, as alluded to by Jonathan, offers you an unmodified
opinion on your 23 -24 financial statements.
Significant audit work has been completed by my team,
so to satisfy ourselves as to the material accuracy
of these accounts, we have specific focus
on the risks outlined within our audit plan
that we presented to you in July 2024.
Those significant risk items that we focused on
included management override of controls,
which is a presumed risk of fraud that applies
to all entities for which auditors must investigate
the journals and the transactions entered by management
and prepare a risk strategy to evaluate the entries posted
and test those entries according to our assessment.
No issues were identified from this exercise
for our audit of 2324.
Further significant risk work included the valuation
of land and buildings, surplus assets, council dwellings,
and investment properties.
No significant issues were identified
with the valuation assertion where our significant risk
for these classifications.
However, some matters were identified in Appendix D
in relation to an immaterial asset, which
should have been classified as held for sale,
and a presentational adjustment that
was required within note 16.
A third significant risk for the audit
related to the net pensions liability,
which is a significant balance on your balance sheet,
We did audit procedures to obtain assurance around the accuracy of your actuary's estimate,
including using our own actuarial assumptions and ranges to corroborate the appropriateness of the estimate and use accounts,
and no matters were identified from our procedures.
And our final significant risk where we performed specified procedures relates to the evaluation of Level 3 assets.
This is assets for which there aren't observable market inputs, of which judgments have been
made by your management expert, are enclosed, for which we've prepared detailed workings
to incorporate the reasonableness of the estimate that they have undertaken.
Again, no issues were identified in that work.
That summarizes the response that we have taken in significant risks that were outlined
within our audit plan.
Throughout the report, as you go through, it's worth contextualizing that since that
audit plan, we've not made any significant changes to your risk assessment.
We have maintained the materiality level adopted in that audit plan in preparing our response
to the field work stage of the accounts.
As we go through the report, Appendix D will detail our findings, but at a high level,
it's worth mentioning.
So this report it would have come as a second version to you.
Yes, they are in stated 24 from this Appendix D, not the
Appendix 8 now in the pack. The minor adjustment relates to page
34 of the audit findings report, which is specifically in
relation to that note 16 adjustment in relation to proxy
partner equipment and the use of reserves in the accounting
treatment for that transaction. Perhaps you provide further
detail if helpful, but that is the key difference in those reports, which I thought I would
highlight so that you're aware of where to focus your attention in terms of comparing
the reports that are presented to you.
Overall, we've obtained sufficient assurance in order to able to issue that unmodified
opinion.
There are a couple of improvement recommendations that we have added to Appendix B, I believe
that is and we will go on to present our authors annual report separately after this so I'm
happy to take questions at this point.
Cllr Liz McShane - 0:08:47
Thank you, gentlemen. Any questions from committee members or visitors?
Councillor Godfrey.
Cllr Liz McShane - 0:08:55
Cllr David Godfrey - 0:08:59
Got to start somewhere I guess. I have to say that having had information bombarded
with over the last couple of days, I don't think it's really given us enough time to
absorb what's going on here.
When I got the first lot, I thought, oh, this is not too bad.
There were some questions around it which I'm going to come to.
But having had another bombardment of paper that I've not really had time to digest, it's
hard going.
So I just want to make that point.
I think my colleagues will probably find the same.
However, if I could go into a couple of questions,
they may have been corrected,
but there were issues around,
first of all, I'll take you a simple one,
page 28, Financial Statements, on the original.
It looks great.
There's green lights all the way along on IT.
And then you get to the end,
the Significant Risks, Management Override of Contribution.
Is there any way we know what protection there is there?
Is there two eye verifications, three eye verifications?
Can someone just come on and change it?
That's the sort of question I'm asking and it's the same with page 38 where we talk about
journal entries.
You've quite rightly identified some deficiencies there I think.
But if we are going to have those...
Are those journal entries and the ability to make those
journal entries, are they being addressed?
We've been told they're being addressed.
Are they being addressed and how long will it take to be addressed?
Again, it's a question of being secure that the right people are doing the right thing
and putting the information in the right place.
I've got questions around that just to get.
I think I'm going to leave it there for the moment because my question about property
plant equipment has been answered because it's been updated, so I'm happy with that.
And I'll let others have a chance.
I want to come back if you don't mind on a couple of other points but not related.
Thank you.
Who would like to respond?
Cllr Liz McShane - 0:11:10
Thank you, Chair.
Thank you, Councillor Godfrey.
Jonathan Smith - 0:11:17
So I'll still specifically with the question you had around the management override and
sort of the journal authorization.
So specifically on that point, I mean, you'll probably be aware that there was a finding
on part 22, 23 audit we brought in December which related to journal authorization.
Now we did investigate this matter with our external provider, so it's a system related
to control, effectively an IT control about journal authorization.
Now what we have in place is we do have a segregation of duties where you have somebody
who would basically request a journal and then another person who requests to approve
it.
There was an issue in terms of the system whereby one person can effectively both post
and propose the journal and approve it.
We went back to our IT provider.
That cannot be fixed as we understand it.
So what we're doing is we're putting in place
a management review control to ensure that journals
that where they are being posted,
it's not being done by effectively one person
so there is that segregation of duties.
Specifically, and the auditors will probably have to,
correct me if I'm wrong here,
but one of the focus areas that they do have
is they do do sample work over manual journals.
So it's an area of focus for auditors
where they will be doing sample checks
to ensure that obviously there is that segregation
which is a key control and sort of avoid management overrides.
For example, where one person is simply overriding or changing
numbers without due scrutiny.
So I hope that addresses the journal entry element,
because obviously we are putting in place a manual control
to ensure that we are maintaining
that association of duties and we can monitor them.
Because the system can produce reports
on the journals that have been posted
and then just ensuring that there is that segregation of duties in place.
Thank you.
So, basically it's a work in progress and that's still being put in place
Cllr David Godfrey - 0:13:17
because the system can't handle it and we're not into AI yet?
Correct, so yeah, because the system, when we went back to the supplier,
it can, based on the profiles that we have and the way it's set up,
we can't implement an automated control.
However, as many other either councils or other companies who do use finer systems,
there's not always an automated control that's in place.
It could just be a manual control, but then the authors could then test that manual control
that we perform.
Okay, thanks.
Any other questions?
Cllr Liz McShane - 0:13:52
Yeah, a bit more detail, and this is where the presentation is.
Cllr David Godfrey - 0:14:01
Prince's Parade comes in for me.
I'm going to go to page 101.
Of the original report.
Where we talk about.
The impact of cancelling Prince's
Parade project reflected in the
2324 accounts to release supported
capital spending back to the revenue
account all or part of it and
Originally it's talking about 5 million.
We know that's less because we've found some money,
which is great.
But has that been put into revenues?
And if so, where can we see that?
How can we see that?
Has it been moved from capital to revenues?
Perhaps it's a dumb question.
I'm not an accountant, but...
The other Paul Park final decision hasn't been made
because it's still subject to public consultation.
So therefore there won't be any movements
out of the capital or based on
the current expenditure until that public consultation has been concluded.
The consultation was held last week but we're now an advising results to take it.
Yes.
Okay, thank you.
And the other one which I have to bring to your attention,
which staggered me,
it says that the external value,
review the value of the council's surplus assets as of 31st of March,
resulting in a decrease of 17 .2 million
due to the land at Prince's Parade
being revalued as amenity land
instead of residential development land.
That's a huge, huge drop in the hole in the reserves
by that simple stroke of a pen.
I don't know who did it and when it was done,
but I think the public ought to be aware of that.
Cllr Liz McShane - 0:15:59
Thank you. Any other questions for this section?
Cllr Liz McShane - 0:16:07
Sorry, I didn't realise you wanted to speak. Please do.
Okay, I'll do the answer for that one.
Cllr Tim Prater - 0:16:14
Effectively, the revaluation of Prince's Parade has valued it as zero.
And as you'll know, as you were on cabinet at the stage
that the development was going through,
that the development wasn't killed by the new administration.
It died under the weight of its own financing under the previous one.
It was an unaffordable development and the remediation of the site was going to cost
more than the value of the site that was going to be paid to the developer.
Therefore effectively if it's going to cost you more money to make the site available
to, ready for development, than a developer would pay for it, it's not worth anything
anymore.
and that's essentially the case which has been run through the books of this date,
is that it was never worth £17 .7 million unless it was remediated
and it cost more to remediate it than £17 .7 million.
It was a fictional number. It has been removed from the accounts.
I'm sorry, Councillor Prater, I don't buy that one at all.
Cllr David Godfrey - 0:17:18
We can revisit that at some other stage because I don't think it was talked about that much
remediation and we're talking about that it's okay to remediate it for people to play on
so I'm a bit worried about that one.
I think we've actually taken 17 .2 million of value out of our assets because I don't
believe that that site when they had planning condition we know it was worth 20 plus million
has suddenly lost its value.
We'll leave it there.
Cllr Liz McShane - 0:17:47
Jonathan. Thank you chair and cancel
Jonathan Smith - 0:17:51
copy. I can probably interject slightly
on specifically this item and so the
our assets do go through external
valuations and so this particular item.
It was it went through our external
valuers and where we've had a change
of use and that change of use has
resulted in the revaluation and
And obviously our external valuers do value according to the use of the land and we have
to do so in our accounts.
And so it so happens that they came back with a new valuation in effect based on the changed
use, i .e. as a mini -city land, and that's the move and this is the reason for the revaluation.
So this did go through our external valuers, this particular item.
I'm not worried about that at all.
You can understand that and just find the figure astonishing.
But anyway.
Cllr David Godfrey - 0:18:44
Any questions?
Cllr Liz McShane - 0:18:48
It's not awkward.
Cllr Liz McShane - 0:18:51
Thank you, Chair.
Cllr Adrian Lockwood - 0:18:55
I just had one around the level three valuation, asset valuations, which gets the green light
in the report, which is good to see.
It seems the analysis is around the method by which these assets are valued, which I
know is tricky because they're the most difficult to value.
But it doesn't say anywhere whether this council's carrying a regular amount of these assets
or is there a risk around...
We've seen other councils suffer with these so -called assets suddenly vanishing from the
books and financial problems ensuing.
So just a reassurance that this council has got the right level of those assets in relation
to normal levels.
Cllr Liz McShane - 0:19:50
I'm happy to take the point.
Microphone D - 0:19:54
So those sorts of assets are entirely dependent on the council's own portfolio.
So certainly there is a range of, from going to nil to very high levels of those across
the sector.
For this council in particular, those level three assets primarily relate to your valuations
of article and opportunitas as your subsidiaries.
So very much the level three valuation is dependent on their own sort of asset base
and their own kind of financial sustainability.
should those change in the future,
that will certainly affect the Level 3 asset valuation,
but that's what underpins those figures in the estimate.
Cllr Liz McShane - 0:20:32
Thank you.
On the subject of assets, there was a reference,
I'm trying to find it, to Level 3 assets,
somewhere in the report.
Can you clarify what that is, what Level 3 means,
or what is the reference district?
Microphone D - 0:20:50
Perhaps to clarify, level three assets, it's a quite technical part of financial accounting
relating to financial instruments.
Level three assets is sort of level one, level two, level three, and they are based off of
unobservable market input.
So level one would be things like cash and cash equivalents.
You know exactly what that's worth.
It's money in the bank.
Level two is made up of observable inputs, so that might be shares in a listed company.
You can see those online, compare them accordingly.
But level three is off of unobservable,
sort of untested market data.
So as I've discussed, those level three assets
for this council relate to the valuation
of Autopall and Oportunitas.
Those are not available for sale on the public market.
It's not a tested estimate.
And so management quite rightly engage an expert,
all the way in close, to perform that estimate for yourselves.
Thank you.
Cllr Liz McShane - 0:21:40
Councillor Lockwood.
So just to be absolutely clear,
Cllr Adrian Lockwood - 0:21:47
We as a council are comfortable with the level of debt that we hold on Otterfield Park.
Lydia Morrison - 0:22:04
As your section 151 that is a matter that I report regularly to you and you'll be receiving the confirmation that the level of debt that we currently carry is financially sustainable and that will be reported to full council tomorrow as part of your budget strategy.
Cllr Liz McShane - 0:22:22
Any other questions?
Cllr James Butcher - 0:22:30
I just wanted to check, are we moving then on to the annual report?
Are you saying more about that before we move to questions?
and then asking to the W8 for a
45 report there and move on to the
magical money annual report.
Cllr Liz McShane - 0:22:44
Next. Part of the item.
Thank you, Geoff.
Microphone C - 0:22:50
Oh, sorry. Oh, you're announcing.
Cllr David Godfrey - 0:22:58
So I will move on to the
audit design your reports on the
Microphone C - 0:23:02
agenda just to finalise
on the account side, I confirm that the two objections that were in progress are now complete,
with statement of reasons issued and as a consequence, we've now issued the four years
of outstanding audit certificates from 19 -20 to 22 -23.
So in terms of the auditor's annual report, now I believe that is on the updated statement
of accounts report plus appendices six and seven.
A directorial attention to page 15 of that, and I think it's page five of the report,
page seven of the report itself,
which is the executive summary, slide three.
You'll see a sea of amber, hopefully,
if I've directed you to the right page.
And I want to just really let you all know
that this is a very good report for the Council.
The position has remained stable.
We have not identified any significant weaknesses
in the Council's arrangements
for financial sustainability, governance or the 3Es for 23 -24.
We have identified five improvement recommendations, and those are on pages 31 onwards, and that's
page 23 of the report itself.
And they're in the area of governance and also in the 3Es.
The other area to draw your attention to is Appendix C, which is the follow -up of our
prior year report recommendations.
And in this appendix, starting on page 36 of the pack and page 28 of the report, we
let you know for each of the prior year improvement recommendations if we feel that they've been
addressed and are closed, or if we feel that there is still some work to do and that they
remain open.
And I will stop there for any questions.
Thank you.
I'm sure we've got lots of questions on this section,
so who's going to start?
Mr Butcher.
Just give me a moment to find, I think this is page 13 or so
of the pack.
Executive summary one about the reserves.
And it was really just to get a bit more clarity
Cllr James Butcher - 0:25:45
on the trends in the use of our reserves.
I suppose I'm thinking from the point of view
of a concerned resident who makes that a similar question
to Councillor Lockwood about just the overall
financial sustainability of our arrangements,
just to get a bit more clarity about how the reserves work
and how we're doing in terms of working our way
through those reserves that we have
and is that in line with how other authorities are doing?
should we be reassured, concerned or happy about our use of reserves?
Lydia Morrison - 0:26:20
The matter of how we set our reserves and use our reserves is a matter for the Council.
External audit will look at the statements and effectively ensure that we are using them in the manner that we have allocated.
Again, tomorrow you are up for Council, you are receiving a report on our reserves and why we are creating different reserves.
A lot of it is about prudent financial management.
We are in a good, healthy position and I think you'll find that my report to you tomorrow
will confirm that.
But the use of reserves is a matter for each individual council based on their needs and
what they feel is their priorities.
Thank you.
Councillor Butcher, follow up or?
Go on, Jonathan.
Cllr Liz McShane - 0:27:05
Thank you, Chair.
Jonathan Smith - 0:27:06
And thank you, Councillor Butcher.
So, I mean, yes, in particular in response to the reserves point, obviously there are
two different types of reserves as well, and following on from what Lydia has said, and
obviously she'll present, tomorrow there's the Council's full budget.
Now the budget each year has use of earmarked reserves and it also has, then the Council
obviously has a general reserve as well.
Now earmarked reserves are created specifically when there is a specific need or a specific
use in mind.
The use of the earmarked reserves is effectively us using our reserves according to the use
that was originally set out for that specific reserve.
We create those earmarked reserves for a specific reason, so the use of earmarked reserves for
those reasons is obviously in line with expectations.
And obviously we create earmarked reserves and we will do sort of have reserve movements
suggested on each budget, so each year when we bring a full budget and full general fund
to Council and that obviously will incorporate and is approved by members.
Sort of the use of the specific earmarked reserves and even sometimes the creation of those.
So hopefully that in terms of the use of reserves it's all in line with the specific.
Certainly earmarked reserves with the specific use that was originally intended.
I mean, I guess some of this is a presentation issue and given this is
Cllr James Butcher - 0:28:32
a public document that
I guess we're getting a view from Grant Thornton,
set out in a public document.
It doesn't feel that straightforward to get a sense.
I know there are absolute numbers given,
but not percentages, so it's not that easy just to come to view.
I think I won't be able to find the page number now,
but there's somewhere where it talks about it.
There's a pie chart, 11 % of the budget,
that says from reserves.
I think I can't remember if it says from general
or in art or what have you.
I think just that kind of statement,
and 11 % of our budget is met by reserves might lead to some questions understandably about
is that prudent, is that wise, without some sort of clear explanations of that.
Lydia Morrison - 0:29:16
We're happy to provide you with a detail of how the reserves are used but there are ring
fence reserves which are used for specific items which are provided by government and
therefore they have to be used for a specific and there is no discretion and most of that
11 % is made up of that, so things like the homeless prevention grant, the section 31
grants, there's a whole raft of them, so 11 % will be mostly around ring fence grants that
come directly from central government.
Cllr James Butcher - 0:29:46
I'm going to guess this is partly my curiosity, but it's kind of curiosity on behalf of people
out there who might just want to get an understanding of how reserves work and so on, and the point
and making guesses, it's really hard to do that.
Thank you.
And thank you, Councillor Burch.
Jonathan Smith - 0:30:04
Another point I would make is that specifically when we're looking at the statement of accounts,
it's important to bear in mind, something I feel I should highlight is obviously the
statement of accounts provides the position at the 31st of March 2024.
And so obviously this is a backwards looking, so the audit and the statement of accounts
are always really backwards looking.
and the numbers here have been verified by the auditors,
I think possibly the reserves point
is something possibly better viewed as part of, say,
the budget and the MTFS.
And those are the items, obviously, that are
going to full council tomorrow.
But certainly this, I mean, by the time the statement
of the council is effectively created,
it's already in effect out of date
because it is a backwards looking.
But obviously it's a statutory requirement.
So we produced certain things.
I mean, sometimes we produce things in a certain format
to meet obviously the requirements of the sixth code and the like.
But of course there may be some other reporting that is...
that has a more flexible structure
and we can certainly deal with that as part of any budget reports
that we can take to full council.
Cllr James Butcher - 0:31:17
Thank you. I've got another question, if I can.
Cllr James Butcher - 0:31:20
And that was just further on page 28,
where it talks about procurement.
So we've got the new Procurement Act coming in.
It's simply good to understand what the implications of that are, but the narrative says there
are some current weaknesses and arrangements which will make this more difficult.
Limited assurance over whether register is complete and so on.
And I think given one of the objections that has been recently closed off, this does seem
important to make sure we're very kind of clearly sighted on what's happening to deal
with those.
Lydia Morrison - 0:31:53
I think we have had internal audit review our procurement and our procurement government,
so we have moved from a significant risk to substantial, I believe, recently.
So everything that we have taken on board, that has been reviewed by internal audit.
The new procurement regulations, there will be compulsory training across the board for
all budget holders and all procurement officers, and that will bring in line everybody to the
same technical knowledge on procurement.
So we did accept those findings
and it was findings not just by external auditors
but within our internal auditors as well.
But we do report through internal audit too,
this committee as well, on the progress.
Cllr James Butcher - 0:32:39
I mean, is the course just an example of the sort of weaknesses we're talking about?
Lydia Morrison - 0:32:49
One of the weaknesses as was previously reported, it was, I'd have to go back to the internal
report because it was probably three years ago and I'm afraid I don't have the detail
on, at the moment from the internal audit report.
If we don't normally discuss detail here, but...
No, I'm afraid it's up to me.
Cllr Liz McShane - 0:33:13
Thank you. Any questions from the committee?
Councillor Milne.
Cllr David Godfrey - 0:33:21
No, you may have thought I'd got a question, but as Jonathan says, we're looking backwards here.
What the questions we had for me have been answered so I think the Grant Thornton Board
of Reporters are very encouraging in fact.
So what we've been asked to do is to approve that report and the statement of accounts
and I'm quite happy to move that.
Cllr Liz McShane - 0:33:44
And just a few questions I have but they're all different parts of the agenda.
apologies.
The National Audit Office, in terms of certifying the accounts, there's no date for that.
Could you sort of give us an explanation, an update of what that might look like?
From Ren.
I'll take that one.
Thank you, Chair.
Microphone C - 0:34:02
So the audit certificate for the 23 -4 accounts won't come with the opinion tomorrow.
The National Audit Office has asked all auditors to hold certifying closure of audits whilst
the whole of government accounts are pulled together for 23 -4.
So there was a significant delay in the prior year for the 22 -23 whole of government accounts
exercise, and I think that being able to issue audit certificates for 22 -3 came quite late.
So it was fine for when we signed off your 22 -23 accounts in December.
I don't have a timeframe for the whole of government accounts timetable for 23 -4, but
we'll update once we know more and I'll be able to issue the audit certificate after
that.
Cllr Liz McShane - 0:34:51
And probably one for Jonathan.
Page 39 of the original document, the analog version.
You mentioned the reference to the financial management system and you want it being installed.
Could you give us an update on that and what that might look like and the impact?
Lydia Morrison - 0:35:13
The financial CLT reviewed the business case for the installation of a new financial system
last week and we are now preparing the business case to go to cabinet for the release of that
funding.
That should be procured early next financial year for roll out April 2026 and Jonathan
can talk a little bit about some of the improvements that we're looking to deliver on that.
Jonathan Smith - 0:35:41
Yes, as members will obviously be aware, our existing system is quite an old system.
We are looking to procure a new system that will obviously bring about sort of fast production
of the accounts, less sort of manual intervention, much more automated, even having things like
workflows in place that make it easier to sort of put in additional controls and or
extract reports from the system.
That's been quite difficult with our existing system,
but as Leda mentioned, the CLC have approved
Dustico Effectively 2 market,
but no decision, no contracts have been entered into as yet.
However, we are hopeful, obviously,
you're doing the market, finding supply, evaluating,
and then selecting the system that sort of fits our needs
and sort of updates effectively
and much are relatively old.
system, if I can put it that way.
Whilst we kept it up to date of course, in terms of functionality
it's probably, it's a little clunky if I can put it that way.
Cllr Liz McShane - 0:36:50
I'm fine for now.
Any more questions?
Oh, constipator. Sorry, I keep missing you.
Cllr Tim Prater - 0:37:16
It's because I speak so rarely. I just wanted to do, if people had reached the end of their
questions, I wanted to make it clear on the record, my thanks to the entire finance team
and to Grant Thornton, their audit team,
Montesola and Daniela and Lydia and come up
with some kind of sweated blood to get this stuff to us.
And to be within range of a vote that then means
that we are as fully up to date as we can possibly be
in terms of our case and audit, as you say,
we're one certificate away, but that's dependent
on government and others, to be as up to date
as you could possibly be at this stage, is just remarkable.
And I just thank everybody for their work on that.
I could actually hear Jonathan punching the air
as he sent an email on Friday evening
saying that the final hurdle seems to be cleared
and we now have something we can bring to the meeting
for closure tonight.
So yeah, I wanted to have our thanks on the record
for that, it was really important.
I also entirely have heard the case being made strongly,
repeatedly in terms of financial system
which the team are currently working with despite the fact
that the, we may be looking at a limited timeframe for its use,
the case is being made strongly
that it has a payback period of that period of time.
And that it is worth doing even for a limited period of time
for a, some of the savings that we'll bring, and b, the amount of grey hair that will be
avoided in the intervening years. So I'm sure I'm going to listen to the case, I'm going
to listen to the business case receptively, and I'm sure other councillors will do so
as well, particularly the governance committee members who have heard some of the pain that
would be in through using what I think Conkey is possibly the fairest, the nicest description
that Jonathan's made of that gating system in the last 30 years. There have been other
words as well. But yeah, thank you for the good and thank you to the committee members
for your oversight of the reports in front of you and thank you to the grant form for
reading them.
Cllr Liz McShane - 0:39:41
For your effusive comments and I'd just like to echo them on behalf of the committee once
Cllr Liz McShane - 0:39:46
If there are no more questions, and what's your last chance or comments, then shall we
move to the recommendations?
Are we good to do that?
Do I need to read all the other?
Or can I just, is it best if I read them out individually?
Just for clarity, yeah.
Okay.
Mr Jake Hamilton - 0:40:09
Great point.
Thank you.
Yeah, well, bear with me.
Cllr Liz McShane - 0:40:11
Okay, so the committee is asked to note the recommendations set out below because the
accounts and audit amendment regulations require the council to consider and approve its 22,
23, 24 statement of accounts, Appendix 2, to enable formal publication to be made.
So recommendation 1, to receive and note the auditor's 20, 23, 24 audit findings report,
ISA 260 on the statement of accounts for 23 24, that's Appendix 1. Recommendation 2 to
approve the updated and audited statement of accounts for 23 24, Appendix 2. Recommendation
3 to approve the management letter of representation, Appendix 3, and note that it will be signed
by the chair of the audit and governance committee and the interim director, Finance and Governance
S151 officer on the approved 2023 -24 statement of accounts.
Recommendation 4, to approve the revised annual governance statement, Appendix 5, incorporating
additional detail around group arrangements.
Recommendation 5, to receive and note the auditor's annual report, 22, 23, sorry,
2023 -24, Appendix 6.
Recommendation 6, to receive and note the audit certificates for prior year audits attached
at Appendix 4.
Recommendation 7, to receive and note the auditor's response to the objections received
attached at Appendix 7.
And finally, Recommendation 8, to note the additional fees incurred by the Council in
respect of dealing with the objections to the accounts from members of the public.
That's paragraph 6 .3 of the report.
So are we happy to note those recommendations in totality?
So could I have a proposer, please?
You happy to propose?
Councillor Godfrey, thank you very much.
And the seconder?
Councillor Butcher.
Okay.
And then can we have a vote, please?
Agreed.
That's unanimous.
Cllr Liz McShane - 0:42:23
more item, but it's a straightforward one, I think. And it was to approve, if I can find
it, to approve the extension of the independent member. And that's Andy Van Buren, who's with
us tonight on every meeting, I should say. So we're happy to do that. Again, would you
would you like to propose so please? Councillor Goldfri, thank you very much. Seconder? Is
that the seconder? Councillor Librich, you're okay? And committee would be like to agree?
Cllr Liz McShane - 0:42:59
Agreed. Unanimous. I think that's us for tonight. So congratulations to the finance teams.
And he goes...