Agenda and minutes

Apologies were received from Councillors R Carrington and C Etholen.

Councillor N Thomas declared a personal interest in item 6 as a Member of the Leisure Board that was involved in the development of the Council’s Leisure Strategy.

To approve as a correct record the minutes of the meeting held on 18 November 2021.

RESOLVED –

That the Minutes of the meeting held on 30 November, 2021, be approved as a correct record.

The Committee received a report that set out proposals for appointing the external auditor to the Council for the accounts for the five-year period from 2023/24.  The current auditor, Grant Thornton, had been appointed as external auditors of the new unitary authority by Public Sector Audit Appointments (PSAA) until the end of 2022/23.

The auditor appointed at the end of the procurement process would undertake the statutory audit of accounts and Value for Money assessment of the Council in each financial year, in accordance with all relevant codes of practice and guidance. The appointed auditor would also be responsible for investigating questions raised by electors and had powers and responsibilities in relation to Public Interest Reports and statutory recommendations.

The Council had a choice of the way that it appointed its external auditors, via the following options:

(i)                  Option 1: National Auditor Appointment Scheme - opt into the arrangements offered by PSAA – benefits, that were explained at paragraphs 1.8 of the Committee report.

(ii)                Option 2: Own procurement arrangement following the procedures in the Act – Challenges, that were detailed in paragraph 1.9 of the Committee report.

(iii)              Option 3: To act jointly with other authorities to procure an auditor following the procedures in the Act – the challenges were the same as detailed at Option 2.

The report recommendation was for the Committee to recommend to full Council (which would be at the 23 February 2022 meeting) to opt into the arrangements offered (PSAA) for the appointment of the External Auditors from April 2023 (Option 1).  The Committee report explained in detail the differences between the options.  PSAA was specified as the ‘appointing person’ for principal local government under the provisions of the Act and the Local Audit (Appointing Person) Regulations 2015, and had built up considerable expertise and experience from the first contract period (since 2017) when circa 99% of Council’s opted in.  They had also worked hard over recent years to address the issues that had arisen such as consulting with the Council on the scale of audit fees and ensuring these reflected scale, complexity, and audit risk.

A Council procuring its own auditor or procuring through a joint arrangement entailed setting up an Audit Panel to oversee the procurement and running of the contract.  This procurement process was an administrative burden on Council staff already struggling for capacity, with ongoing contract management then a further burden.  Possible suppliers were limited to the small pool of registered firms with accredited Key Audit Partners (KAP), with a further difficulty being that the Council would not be able to prioritise its audit over others as Auditors were running at full capacity.

Members discussed the advantages and disadvantages of the available options at length and heard that there was a shortage of specialist accounting firms in the sector. It was possible that through the Council following its own procurement exercise, smaller audit firms could bid which would bring with it a significant risk due to the vast differences between  ...  view the full minutes text for item 4.

The Accounts and Audit Regulations 2015 required Local Authorities to prepare a Statement of Accounts in accordance with proper accounting practice that were required to be approved and signed by the Council’s Audit & Governance Committee.

The Committee received the draft Statement of Accounts for 2020/21 (Appendix 1 to the Committee report) and were informed that the Council was reporting a £400k underspend on outturn for 2021, increasing the General Fund balance to £49m (with £2m use of general fund reserves committed in 2021/22, bringing General Fund balance to £47m).  This was the first time the Committee had been presented the Council’s draft Statement of Accounts for 2021.  However, the external audit had commenced in September 2021 and was ongoing.  The three main adjustments made so far were:

(i)                  Group Accounts - the Council was now having to complete group accounts as well as single entity accounts due to its holdings in Consilio Property Limited and Aylesbury Vale Estates Limited.

(ii)                Property, Plant and Equipment – there had been several adjustments within this note. This including rework of the opening balances to split out historic revaluations and movements to re categorise Intangible assets and Investment assets and assets under construction.

(iii)              Cash Flow Statement – Correction of mis statements within the original draft accounts.

The next steps would be for the outstanding work on the audit to be finalised over the coming weeks and any further amendments resulting from this work actioned before the accounts are then re-presented to the Committee for approval and sign-off by the Chair of the Committee and S151 Officer.  The draft accounts were presented to this meeting to allow Members the opportunity to ask questions of the officer responsible for their production, as she would shortly be leaving the authority. The Committee recognised the significant amount of work that had gone into the Statement of Accounts and congratulated the team on their efforts.

Members sought additional information on the draft Statement of Accounts and were informed:

-          That the production of the draft Statement of Accounts had been delayed due to staffing capacity difficulties, consequently the accounts had been submitted to Grant Thornton late. As it was the first year of operation for the authority there was a significant volume of work.  Grant Thornton had not been the external auditors for the legacy District Councils and had made a lot more requests for information on opening balances than had been anticipated.    The Council had also had to contend with a number of staffing shortages and had found it difficult in bringing skilled staff in to support the work.

-          Mr Ian Murray, Grant Thornton (external auditors) reported that there had been challenges due to the accounting complications of being the authority’s first year of operation. The Grant Thornton team on site had other commitments to meet in February, notably to some NHS organisations, which would result in decreased external audit capacity during this period. The Committee heard that the external auditor had attempted to be accommodating  ...  view the full minutes text for item 5.

The Committee received a report with the draft Annual Report and financial Statements for the Higginson Park Trust for the year ending 31 March 2021.  The accounts had been prepared in accordance with the requirements of the Charities Act 2011 and had adopted the provisions of Accounting and Reporting by Charities Statement of Recommended Practice and Financial Reporting Standards.  They had been audited by Seymour Taylor Audit Limited, with the auditors’ report attached as Appendix 1 to the draft Annual Report.  It was possible that the auditors’ report could change once the outstanding audit work had been completed and finalised.

Members heard of the assets owned by the Trust and were informed that the net worth of Higginson Park Charity had decreased by £306k from £7,534k in 2020 to £7,228k in 2021, of which £190k was depreciation of assets.  The net operating expenditure for the year had been a net loss of £269k compared to net income £1,892k in 2019/20.  The difference being mainly due to the £2m grant received in 2020.

Covid-19 restrictions had a significant negative impact on the Charity during 2020/21, with leisure centre facilities at Court Garden required to close and events cancelled because of the national lockdowns and social distancing restrictions in place.  Places Leisure, along with all the other national leisure operators, had seen facilities in Buckinghamshire closing for more than eight months of the financial year.  During the short periods of reopening, levels of attendance at Court Garden Leisure Centre had been minimal due to the mandated social distancing requirements which meant significant reductions in capacity and type of activity allowed or on offer, however these were recovering and the leisure centre was currently operating at around 90% of pre-covid levels.  There had also been additional costs, such as increased cleaning regimes to ensure a COVID-secure environment.

The impact had been a loss of income of £117k from the closure of the leisure centre as well as a loss of income from events. There had been mitigation of £105k for some of these income losses through the Government’s Support Scheme – currently the accounts did not reflect this amount as a debtor at year end as the treatment in line with Charity Commission rules first needed to be agreed with the auditors.  If not included in this year’s accounts, the amount was expected to be reflected next year.

With the gradual easing of restrictions during the current financial year in line with the government roadmap, recovery was underway, with a positive trajectory being experienced in terms of people returning to the leisure facilities, as well as outdoor events starting to return.  However, the pace of recovery remained subject to the evolving position on the pandemic.

Members sought additional information and were informed:

(i)                  Pre-covid, the Trust produced a small amount of surplus income, and whilst recovery from Covid would take time the Trust had a reasonable level of reserves and was deemed to be sustainable moving forward. Energy costs were  ...  view the full minutes text for item 6.

Members considered the Treasury Management Strategy 2022/ 2023 at Appendix 1. The strategy was expected to be agreed by full Council at its meeting on 23 February 2022. It was noted that the Council was required to approve a treasury management strategy before the start of each financial year.

The Committee was informed that the strategy for 2022/23 covered the current treasury position, treasury indicators which limit the treasury risk and activities of the Council, prospects for interest rates, the borrowing strategy, policy on borrowing in advance of need, debt rescheduling, the investment strategy, creditworthiness policy and the policy on use of external service providers.

The treasury management function ensured that the Council’s cash was organised in accordance with the relevant professional codes, so that sufficient cash was available to meet service activity and the Council’s capital strategy. This involved both the organisation of the cash flow and, where capital plans required, the organisation of appropriate borrowing facilities. The Council was asked to approve the borrowing activity detailed for the following:

-          The operational boundary (limit beyond which external debt was not normally expected to exceed – figures at paragraph 1.8 of the report.

-          The authorised limit for external debt (key prudential indicator and represented a control on the maximum level of borrowing – figures at paragraph 1.9 of the report.  Estimates were provided for years from 2021/22 to 2024/25.

-          Maturity structure of borrowing (gross limits set to reduce the Council’s exposure to large, fixed rate sums falling due for refinancing, with required upper and lower limits), figures at paragraph 1.10 of the report.  The time periods mentioned were from under 12 months, up to 40 to 50 years.

The report also provided information on the types of investment instruments that the treasury management team were authorised to use.  The maximum exposure to non-specified treasury management investments was £100m. 

Following a competitive tendering process, Link Treasury Services Limited (Link) were appointed as the Council’s treasury advisor with effect from 1 August 2021. This appointment had resulted in the TMSS being presented in an alternative way to that which Members may have been used to in the past. Changes to the TMSS included introducing the definition of specified and non-specified investments. Specified investments were those with a high level of credit quality and subject to a maturity limit of one year or had less than a year left to run to maturity if originally they were classified as being nonspecified investments solely due to the maturity period exceeding one year. Nonspecified investments were those with less high credit quality, may be for periods in excess of one year, and/or are more complex instruments which require greater consideration by Members and officers before being authorised for use.

The Council had also determined that it will only use approved counterparties from the UK and from countries with a minimum sovereign credit rating of AA- from Fitch (or equivalent), previously the minimum sovereign credit rating was AA. The cash limit for AA+,  ...  view the full minutes text for item 7.

The Committee received a report on the 2021/22 Business Assurance Strategy update, including progress against the Internal Audit Plan.  The 2021/22 Internal Audit Plan had been reviewed to identify the key audit activities to be delivered considering the priorities within the Directorates and working around the service reviews that were in progress.

The Business Assurance Strategy, including the Internal Audit Plan, had been agreed by the Audit Board and by the Audit and Governance Committee in June 2021.  The Internal Audit Plan was produced with reference to the Strategic and Directorate Risk Registers and informed through discussion with the Senior Leadership Teams for each Directorate, Heads of Finance, Section 151 Officer and the Deputy Chief Executive.  The Internal Audit Plan continued to be dynamic in nature with activity reviewed and realigned on a regular basis to take account of new, emerging and changing risks and priorities.

Quarterly Business Assurance updates were presented to each Directorate Leadership Team providing updates on the planned audit and assurance activity, which were reviewed for appropriateness each time.  Views were also sought from the Directorates on the work of the Business Assurance Team to enable continuous improvement and ensure that it was meeting the needs and expectations of the organisation.  Progress against the strategy had been presented to, and agreed by, the Audit Board (S151 Officer, Monitoring Officer and Director of Legal Services).

Members sought further information on Business Assurance work and progress against the Audit Plan and were informed:

-          The CIPFA business assurance review report should be completed in the coming weeks and was planned to be presented to the Committee at its next meeting, this would include an assessment of the Council’s performance on public sector internal audit standards.

-          The Business Assurance team worked closely with directorates to understand risks and score them appropriately. A service review of the business assurance function was being undertaken and may identify additional capacity for further in depth check and challenge.

-          Nineteen audits had been deferred, many to Q1 and Q2 of 2022/23 due to resources pressures and other priority risk areas having been identified. Planning for 2022/23 was underway and Members were advised that the team would ensure adequate resource was in place throughout Q1 and Q2. It was noted that Mazars delivered a great deal of the Council’s audit work. In relation to governance around deferrals, the Committee was advised that these would be discussed at Senior Leadership Team (SLLT) meetings of the appropriate directorate and required Corporate Director sign off. Where business assurance had concerns the deferral would not be agreed and these would be referred to the audit board, on which the S151 officer, Monitoring Officer and Director of Legal and Democratic services sat.

-          Children’s Services audit work would re-commence once the OFSTED inspection report had been received and its findings assessed. Resources would then be directed to areas as appropriate. By the time of the next meeting a revised programme for Children’s Services should be available.

-          The  ...  view the full minutes text for item 8.

The Council, as a public body when undertaking procurement exercises and awarding contracts, had to comply with the Public Contracts Regulations 2015.  The Regulations placed a great deal of restrictions on the Council in how it was permitted to run procurement exercises and in some cases the Council could be sued by bidders for not following these Regulations.  It was the relevant service area / directorate that was responsible for undertaking procurement exercises and the management of contracts, not the procurement team.  The procurement team developed the corporate policy, supported high risk/value procurement exercises and provided training on procurement and contract management.

The Committee received a report summarising compliance with the Council’s Contract Procedure Rules (CPR’s) and compliance with the Public Contracts Regulations 2015 during the reporting period from April to 30 September 2021, i.e. the first 6 months of financial year 2021/22.  The report explained the Council’s Contract Procedure Rules and different financial limits relating to contracts, waivers and breaches.  Rule 6.18 allowed a Waiver to the requirement for competition and for a contract to be placed by direct negotiation with one supplier. This needed to be agreed and documented in advance.  However, waivers under this rule could not be granted if over the relevant Procurement Thresholds.  The various thresholds were £189,330 for goods and services, £663,540 for Light Touch Regime and £4,733,252 for works.

If a direct award was made that was above this threshold (if a legal alternative such as a Framework was not used) a breach had occurred, and officers were obliged to report this to the S151 Officer and Monitoring Officer (statutory officers).  In some instances, there may be legal permitted changes within the Public Contracts Regulations 2015.

The process for Service areas to complete waiver forms to waive internal rules was explained.  There had been a total of 32 waivers registered in the first 6 months of the financial year 2021/22, 19 in the first quarter and 13 in the second quarter.  There had also been one breach reported to the Statutory Officers in the period.  Information on this was included in the confidential appendix on the agenda.

Members were informed that one of the issues of bringing together five Councils was the procurement and contract management culture of relevant services areas/directorates.  To assist in developing a new positive culture and to ensure a high level of assurance the Procurement team provided training on several areas.  Details of procurement and contract management training undertaken during April-September 2021 was at Section 6 of the report.

The Committee report also included information:

-          On a recent Green Paper released by central Government on the future transformation of public sector procurement, although any changes would not happen before 2023.

-          On new public sector procurement thresholds that had come into force from 1 January 2022 and would apply to all public procurement under the Public Contracts Regulations 2015 (PCR 2015) and the Concession Contract Regulations 2016 (CCR 2016).

-          On a summary of all waivers registered during  ...  view the full minutes text for item 9.

The Committee received a report looking at the lessons learnt from other Local Authorities who had experienced financial management and governance arrangements difficulties over the last 3-4 years.  These included looking at the experiences of Northamptonshire County Council (March 2018), to the most recent section 114 notice issued by Slough Borough Council, which followed closely behind the critical 2018/19 audit by Grant Thornton.

There were several factors that have had an impact on local authorities in recent years.  After years of reduced government funding, local authority business models have become increasingly reliant on generating additional income to support frontline services. This has led to a number of local authorities increasing commercialisation and develop different vehicles to facilitate this, including partnership ventures, joint ventures, limited companies and Teckal companies.  The recent Public Interest reports had shown that the failure of council owned companies can have a devastating effect.

Grant Thornton had summarised the key issues arising out of the recent Public Interest and Best Value reports (Appendix 1) into 5 main areas:

-          Financial Management.

-          External Companies.

-          Organisational Culture.

-          Risk Management, Assurance and Audit.

-          Relationships and Decision Making.

From a political and governance perspective, the key issues identified related to Member conduct and behaviour, Legal capacity, confusion of roles and delegations, and poor scrutiny arrangements.  In addition, the Department for Levelling Up, Housing and Communities (DLUHC) had produced its own lessons learned document: ‘Addressing cultural and governance failings in local authorities: lessons from recent interventions’ which sought to provide guidance on recognising poor culture and weak governance.

DLUHC did not consider the following list definitive but had identified the following issues in various inspections undertaken:

-          lack of effective political and/or corporate leadership, including an overreliance on interim statutory officers.

-          a lack of corporate capacity, resulting in a lack of strategic vision and direction, and inadequate internal processes.

-          poor and inappropriate councillor conduct.

-          conflict and distrust among and between councillors and senior officers.

-          the absence of effective scrutiny, transparency, and public consultation, including inadequate protections for whistle-blowers.

-          a lack of awareness and acceptance of the need for improvement; and insufficient capacity to achieve the change required.

CIPFA identify that there are some common issues among councils holding companies and these were generally linked to organisational governance, leadership, capacity, financial stability and culture.  Building on the 2019 financial management code, CIPFA was planning to extend its financial sustainability work by developing additional guidance on council-owned companies.

Despite all the lessons learnt and signs identified through inspections and by CIPFA, there were no clear or unequivocal quantitative measures to assess whether a council had a poor culture.  Weak governance could be less tangible and visible from the outside.  In some instances, peer challenge/reviews could provide insight into some of these issues.

The Committee report provided some analysis of the new Buckinghamshire Council, stating that it could boast of having very strong political and corporate leadership, with a clear strategic vision and direction.  There were  ...  view the full minutes text for item 10.

The Committee considered their current work programme and it was,

RESOLVED –

That the work programme be noted.

The Committee noted that the due dates for the actions noted were not yet due.

RESOLVED –

That the action log be noted.

To resolve that under Section 100(A)(4) of the Local Government Act 1972 the public be excluded from the meeting for the following item of business on the grounds that it involves the likely disclosure of exempt information as defined in Part I of Schedule 12A of the Act.

Paragraph 3 Information relating to the financial or business affairs of any particular person (including the authority holding that information)

RESOLVED –

That pursuant to Section 100(A)(4) of the Local Government Act 1972 the public be excluded from the meeting during consideration of Minutes No 14, 15 and 16, on the grounds that they involve the likely disclosure of exempt information as defined in Part I of Schedule 12A of the Act as defined as follows:

Minute 14 – Contract Exemptions and Breaches (6 month update)

Minute 15 – Action Log (confidential)

Minute 16 – Confidential Minutes of the Audit and Governance Committee held on 30 November 2021.

The items include Information relating to the financial or business affairs of any particular person (including the authority holding that information) (Paragraph 3, Part 1 of Schedule 12A, Local Government Act 1972) (The need to maintain the exemptions outweighs the public interest in disclosure, because disclosure could prejudice the Council’s position in any future process or negotiations).

This item was undertaken in confidential session as part of Minute item 9 and details of the public discussion and the decisions taken are included within Minute number 9.

RESOLVED –

That the current Action Log (confidential) be noted.

To approve as a correct record the confidential minutes of the meeting held on 18 November 2021.

RESOLVED –

That the confidential Minutes of the meeting held on 30 November, 2021, be approved as a correct record.