Agenda and draft minutes

Apologies for absence were received from Councillors J. Reid and A. Wallace.

Minutes of the meeting of the Audit Committee held on 27 July 2022, as circulated, to be confirmed as a true record and signed by the Chair.

RESOLVED that the minutes of the meeting of the Audit Committee held on 27 July 2022, as circulated, be confirmed as a true record and signed by the Chair.

Unless already entered in the Council’s Register of Members’ interests, members are required where a matter arises at a meeting;

a. Which directly relates to Disclosable Pecuniary Interest (‘DPI’) as set out in Appendix B, Table 1 of the Code of Conduct, to disclose the interest, not participate in any discussion or vote and not to remain in room. Where members have a DPI or if the matter concerns an executive function and is being considered by a Cabinet Member with a DPI they must notify the Monitoring Officer and arrange for somebody else to deal with the matter.

b. Which directly relates to the financial interest or well being of a Other Registrable Interest as set out in Appendix B, Table 2 of the Code of Conduct to disclose the interest and only speak on the matter if members of the public are also allowed to speak at the meeting but otherwise must not take part in any discussion or vote on the matter and must not remain the room.

c. Which directly relates to their financial interest or well-being (and is not DPI) or the financial well being of a relative or close associate, to declare the interest and members may only speak on the matter if members of the public are also allowed to speak. Otherwise, the member must not take part in discussion or vote on the matter and must leave the room.

d. Which affects the financial well-being of the member, a relative or close associate or a body included under the Other Registrable Interests column in Table 2, to disclose the interest and apply the test set out at paragraph 9 of Appendix B before deciding whether they may remain in the meeting.

e. Where Members have or a Cabinet Member has an Other Registerable Interest or Non Registerable Interest in a matter being considered in exercise of their executive function, they must notify the Monitoring Officer and arrange for somebody else to deal with it.

NB Any member needing clarification must contact monitoringofficer@northumberland.gov.uk. Members are referred to the Code of Conduct which contains the matters above in full. Please refer to the guidance on disclosures at the rear of this agenda letter.

Councillor Cessford declared an interest in item 8 on the agenda (Annual Report of the Firefighters’ Pension Scheme Local Pension Board 2021-2022) as he was a retired member of the Tyne and Wear Metropolitan Fire Brigade with a pension managed by West Yorkshire Pension Fund.  He advised he would not take part in any debate relating to this.  N. Masson advised Councillor Cessford that he should also leave the room when this item was to be debated.

The Audit Committee operates under an agreed programme of core business, in accordance with its Terms of Reference as set out in the Council’s Constitution. The Committee is asked to review and note its monitoring report/action log for the 2022/23 council year.

The Committee was asked to review and note its monitoring report/action log for the 2022/23 council year (a copy of which had been filed with the signed minutes).

Regarding Action 1, it was confirmed that although a verbal response had been given a formal response would be prepared.

Regarding Action 2, the terms of reference for the Independent Review of International had been agreed.  J. Gilbert a former Chief Executive of Swindon Borough Council, had been appointed to lead the investigation and it was envisaged that key interviews would commence in the next three to four weeks.  Councillor Jackson welcomed the update and suggested a report to inform Audit Committee on progress made be prepared for the next meeting.

Councillor Jackson requested a report detailing the processes and practices of employment and redundancy payments to be added to the work programme.  J. Willis advised that an Internal Audit report had been drafted on this issue.  She stated that she may need to seek further legal advice, but it was hoped to present the paper to the next meeting of Audit Committee.

Councillor Jackson commented on the Caller Report which identified a number of governance issues.  Actions to address the concerns raised had begun but he suggested Audit Committee scrutinise and monitor improvements throughout the process.

Councillor Dale asked if the CIPFA audit report could be included in the work programme.  J. Willis confirmed that the report had been received by officers and had been subsumed into the Strategic Change Work Programme.  It was envisaged that an update could be ready to be reported to the next meeting of the Audit Committee.  However, in the meantime the CIPFA report could be circulated to Members. 

RESOLVED that the monitoring report/action log and comments made be noted.

Northumberland County Council – Consideration of ‘Going Concern Status’ for the Statement of Accounts for the year ended 31 March 2022

Northumberland County Council is required to assess whether it should be considered as a ‘going concern’ organisation, and whether the Council’s annual Statement of Accounts should be prepared on that basis. This report considers the Council’s status as a going concern and recommends that Members approve this.

Northumberland County Council – Consideration of ‘Going Concern Status’ for the Statement of Accounts for the year ended 31 March 2022

Northumberland County Council was required to assess whether it should be considered as a ‘going concern’ organisation, and whether the Council’s annual Statement of Accounts should be prepared on that basis.  The report considered the Council’s status as a going concern and recommended that Members approve this.  (A copy of the report has been filed with the signed minutes).

J. Willis, Interim Executive Director of Finance and S151 Officer introduced the report which detailed all of the considerations that were taken into account in arriving at the judgment that the statement of accounts should be prepared on a ‘going concern’ basis.  

Members were reminded that there had been a forecast outturn for this financial year with a gross overspend of £17 million and a net of the exceptional inflation reserve, which was set aside at the beginning of the year, of just under £12 million. 

She commented that it was helpful that an intervention was being made to address rising energy costs which would help the Council as well as helping residents and businesses. 

However, the latest issue was rising interest rates with the latest estimates of where interest rates could potentially end up being around the 6% mark.  This was significantly higher than anticipated when this year’s budget was set and even planning assumptions for the following year.  The risks associated were increasing which would mean that it was more important than ever to maintain an adequate level of reserves to deal with the unforeseen.  The Council was going into a very challenging period, and it would be very difficult over the next eighteen months.

Nevertheless, the financial position of the Council for the time being remained healthy, with significant reserves and strong financial disciplines. 

The Chair welcomed the report and the financial position of the Council.  However, he stated that it was uncertain times and Audit Committee would need to monitor and be kept up to date with developments.

Councillor Oliver commented that the final two candidates for the central government leadership election had both made strong statements about local authorities delivering more public services.  He questioned whether there had been any indication of what might happen in terms of local authority funding at the end of the year.  Or was it anticipated that it would be another one year funding settlement.  In response J. Willis stated that unfortunately there had been no indications other than the announcement of a £500 million funding package around social care and hospital discharge which would probably go to the NHS rather than local authorities.  Ordinarily the Chancellor’s Autumn announcement would happen in October, but it was now being pushed back to the end of November.  Local authorities would normally get their financial settlements in December, but it was quite possible that this would also be pushed back.  Usually there was intelligence ahead of what was likely to be in the  ...  view the full minutes text for item 34.

Treasury Management Annual Report for the Financial Year 2021-22

This report provides details of performance against the Treasury Management Strategy Statement (TMSS) 2021-22, approved by the County Council on 24February 2021. The report provides a review of borrowing and investment performance for 2021-22, set in the context of the general economic conditions prevailing during the year. It also reviews specific Treasury Management prudential indicators defined by the (CIPFA) Treasury Management Code of Practice and CIPFA Prudential Code for Capital Finance in Local Authorities, (the Prudential Code), and approved by the Authority in the TMSS.

Treasury Management Annual Report for the Financial Year 2021-22

This report provided details of performance against the Treasury Management Strategy Statement (TMSS) 2021-22, approved by the County Council on 24 February 2021. The report provided a review of borrowing and investment performance for 2021-22, set in the context of the general economic conditions prevailing during the year.  It also reviewed specific Treasury Management prudential indicators defined by the (CIPFA) Treasury Management Code of Practice and CIPFA Prudential Code for Capital Finance in Local Authorities, (the Prudential Code), and approved by the Authority in the TMSS.  (A copy of the report has been filed with the signed minutes).

The report was introduced by J. Willis, Interim Executive Director of Finance and S151 Officer.  The report reviewed the activities of the Treasury Management function for the period 01 April 2021 to 31 March 2022.  It was noted that with the exception of a temporary increase to approved limits for Money Market Funds, all other treasury activities met the Treasury indicators set out in the TMSS, and borrowing was within the borrowing limits set by the Council.  The half yearly report would be presented to the November meeting of Audit Committee. 

The Chair commented that since the end of March economic conditions and interest rates had changed considerably as discussed at length in the last agenda item.  

Councillor Oliver asked about short term borrowing and where officers expected PWLB rates to go.  He questioned why the Council was locking into short term loans.  J. Willis confirmed that PWLB rates normally followed a similar pattern to Gilts.  With the prediction of further rises it was beneficial to lock in some borrowing on a short term basis, mainly authority to authority lending.  By doing this it would give the Council time to determine where the markets were likely to go.

Councillor Dale asked about other borrowing and lending that was not locked in.  J. Willis suggested they discuss outside of the meeting to clarify the question being asked to ensure a full response could be provided.

RESOLVED that:

(a)      The report and performance of the Treasury Management function for 2021-22 be received.

(b)      Members recommend County Council review and note the report.

(c)      A response be provided to Councillor Dale’s query once clarified by the Section 151 Officer.

Annual Governance Review and Annual Governance Statement 2020/21

The purpose of this report is to enable the Audit Committee to review the final Annual Governance Statement for 2020-21 and consider whether it properly reflects the risk environment and supporting assurances, taking into account Internal Audit’s opinion on the overall adequacy and effectiveness of the Council’s framework of governance, risk management and control.

Annual Governance Review and Annual Governance Statement 2020/21

The purpose of this report was to enable the Audit Committee to review the final Annual Governance Statement for 2020-21 and consider whether it properly reflected the risk environment and supporting assurances, taking into account Internal Audit’s opinion on the overall adequacy and effectiveness of the Council’s framework of governance, risk management and control.  (A copy of the report has been filed with the signed minutes).

The report was presented by J, Willis, Interim Executive Director of Finance and S151 Officer who highlighted the main points of the report and advised that the final Annual Governance Statement (AGS) for 2020-21 took account of the S114 Notice, the final report of the Caller Review and other significant events that occurred post 31 March 2021.

Councillor Jackson commented that he had been very critical of past governance reviews from the Council.  However, he felt this Annual Governance Review was laudable, the three lines of defence were detailed, and the overall objectives were good.  But he felt that it still did not detail what would happen if the three lines of defence were breached.  He also felt that Audit Committee’s role was not fully established within the document to ensure it would provide an independent review of the Council’s governance, risk management and control frameworks and oversee the financial reporting and annual governance processes.  He questioned how Audit Committee would ensure the procedures and processes of the Council followed good governance, particularly in light of the Caller Report recommendations. 

The Chair stated that he thought the report did clearly set out the responsibilities of the Audit Committee and showed that it would have a key role in addressing the lessons learnt from the Caller Review.

J. Willis confirmed that Audit Committee had a key role in ensuring that lessons learnt, and actions agreed following the Caller Report were acted upon.  A request for Audit Committee to receive regular Caller Report progress reports had already been made and would take place.  Internal Audit also produced regular assurance reports to Audit Committee which gave an opinion on the adequacy of the governance arrangements.  Audit Committee also had an essential role in overseeing governance processes and ensuring follow up in terms of agreed actions from previous annual governance statements.  She commented that maybe in the past Audit Committee had not asserted its role enough.  However, Audit Committee were in full control of their own work programme, and it would be up to Members to determine how much involvement they wanted to have in monitoring the implementation of the agreed actions set out in the governance statement.

The Chair agreed that the Committee needed to decide how they wanted to be updated on these issues, whether that be in a cyclical way or a more granular approach.  Officers confirmed that there was no issue in bringing reports or providing information to Audit Committee.

Councillor Dale commented there was not enough detail within the governance statement.  The statement quoted that  ...  view the full minutes text for item 36.

Annual Report of the FPS Local Pension Board for 2021/22

Audit Committee is asked to receive the Annual Report of the FPS Local Pension Board for 2021/22, attached as Appendix 1 to this report and provide comment to the Board and NCC’s FPS Scheme Manager, if appropriate.

Annual Report of the FPS Local Pension Board for 2021/22

Audit Committee was asked to receive the Annual Report of the FPS Local Pension Board for 2021/22, attached as Appendix 1 to this report and provide comment to the Board and NCC’s FPS Scheme Manager, if appropriate.  (A copy of the report has been filed with the signed minutes).

C. Gorman, Principal Accountant (Pensions) - Project Officer highlighted the main points of the report which provided a summary of the work of the LPB over the previous year including data on FPS membership, statement of accounts, and issues progressed through the Internal Disputes Resolution Procedure (IDRP) and Fire Disputes Panel.  The Board considered one breach relating to the administration of the FPS in NCC which was recorded in 2021/22 but concluded it was not of material significance to the Regulator and should not be reported.  One Stage Two IDRP complaint was made in the year and the Board was satisfied that a fair and transparent process had taken place. 

RESOLVED that the Annual Report of the FPS Local Pension Board for 2021/22, attached as Appendix 1 to this report be received. 

At this point Councillor Cessford and C. Waddell returned to the meeting.

External Audit Progress Report

This report provides the Committee’s September 2022 meeting with:

•an update in respect of 2019/20 value for money (VFM) work;

•an update in respect of 2020/21 remaining audit work;

•an update in respect of 2021/22 audit work; and

•a summary of recent relevant reports and publications for your information (Section 2).

External Audit Progress Report

(A copy of the progress report has been filed with the signed minutes).

The External Audit progress report provided the Committee’s September 2022 meeting with:

•an update in respect of 2019/20 value for money (VFM) work;

•an update in respect of 2020/21 remaining audit work;

•an update in respect of 2021/22 audit work; and

•a summary of recent relevant reports and publications for your information (Section 2).

C. Waddell drew members’ attention to the main points in the report. 

He reported that the conclusions in respect of the Council’s value for money arrangements remained outstanding for the 2019/20 financial year. 

In terms of the 2020/21 accounts this work was fundamentally complete.  There was an issue regarding the note that had set out how much senior officers were paid which related back to the S114a report and the International allowance.  External Audit were looking carefully into the wording of the Code of Practice and Audit Regulations to establish clearly what must be included in the note.  If there was sufficient disclosure within the accounts around the Section 114a notice, then the implications of that would not result in the External Auditor qualifying the accounts in relation to this.  It was envisaged that conclusions reached would be reported formally when the audits were concluded hopefully later in the year, subject to the infrastructure issue being resolved.  One other issue within the 2020/21 accounts was exit packages, with External Audit examining the information recently received to determine if further disclosure was needed. 

The infrastructure issue was still not resolved and impacting on most local authorities.  Until a solution was found accounts could not be signed off.  It was reiterated that this was a national issue and not specific to Northumberland.

In a response to a query from Councillor Dale, it was confirmed that External Audit were examining the Caller Report and the Section 114 notice and various other issues gathered over the course of the last two years while trying to pin down the year it related to either the 2019/20, 2020/21 or 2021/22 account.  It was envisaged that most outstanding issues related to the 2019/20 accounts but not all.  However, External Audit would strive to try to capture it all together including the value for money Group Accounts to hopefully speed up the process.  It was noted that value for money applied to the County Council not Advance Northumberland but would apply in terms of some of the issues raised by the previous External Auditor and the Caller Report around governance arrangements for Council subsidiary companies.

Councillor Jackson commented that there had recently been a resolution of an employment tribunal in relation to Advance Northumberland and questioned whether the outcome would have any bearing on the value for money view and that of the Council’s Group position.  C. Waddell confirmed that he was not aware of the resolution as he was not Advance Northumberland’s auditor, it was carried out by another team within Mazars.  That team would conclude  ...  view the full minutes text for item 38.

The next meeting is scheduled for Wednesday, 30 November 2022 at 10.15 am.

RESOLVED that the next meeting is scheduled for Wednesday, 30 November 2022 at 10.15 a.m.

The Committee is invited to consider passing the following resolution:

(a)    That under Section 100A (4) of the Local Government Act 1972, the press and public be excluded from the meeting during consideration of the following item on the Agenda as it involves the likely disclosure of exempt information as defined in Part I of Schedule 12A of the 1972 Act, and

(b)    That the public interest in maintaining the exemption outweighs the public interest in disclosure for the following reasons:-

Agenda Items          Paragraph of Part I of Schedule 12A

13                             Disclosure could adversely affect the business reputation or confidence in the person/organisation, and could adversely affect commercial revenue.

RESOLVED:

(a)      That under Section 100A (4) of the Local Government Act 1972, the press and public be excluded from the meeting during consideration of the following items on the Agenda as it involves the likely disclosure of exempt information as defined in Part I of Schedule 12A of the 1972 Act, and

(b)      That the public interest in maintaining the exemption outweighs the public interest in disclosure for the following reasons:-

Agenda Item

13                          Paragraph 3 of Part 1 of Schedule 12A

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

Disclosure could adversely affect the business reputation or confidence in the person/organisation, and could adversely affect commercial revenue.

Group Audit Committee: Advance Northumberland Internal Audit Update

The purpose of this report is to update Group Audit Committee on progress with the Internal Audit plan of work for Advance Northumberland Group of Companies.  A report presented to Advance Northumberland Audit Committee on 13 September 2022, summarising Internal Audit coverage, is provided at Appendix 1.

Group Audit Committee: Advance Northumberland Internal Audit Update

The purpose of the report was to update Group Audit Committee on progress with the Internal Audit plan of work for Advance Northumberland Group of Companies.  A report presented to Advance Northumberland Audit Committee on 13 September 2022, summarising Internal Audit coverage, was provided at Appendix 1.  (A copy of the report has been filed with the signed minutes, coloured pink and marked “Not for Publication”).

K. McDonald, Head of Internal Audit and Risk Management detailed the main points of the report for members.

RESOLVED that Group Audit Committee notes the update in relation to the progress of Internal Audit work within Advance Northumberland Group of Companies, summarised in Appendix 1, and considers this as part of its ongoing evaluation of the framework of governance, risk management and control within Northumberland County Council’s accounting group boundary.