Agenda and draft minutes

There were no apologies for absence.

There were no Substitute Members.

There were no urgent items.

There were no Visiting Members.

There were no disclosures by Members or Officers.

There were no disclosures of lobbying.

RESOLVED:  That all items on the agenda be taken in public as proposed.

RESOLVED:  That the Minutes of the meeting held on 23 September 2024 be approved as a correct record and signed.

There were no questions from Local Residents.

There were no questions from Members to the Chairman.

The Committee considered its Work Programme for the remainder of the 2024/25 Municipal Year.  In response to questions:

The Director of Finance, Resources and Business Improvement explained that:

·  The co-option of an Independent Member (a non-Councillor with experience in areas such as audit, accounting or governance) was in line with best practice and guidance from the Chartered Institute of Public Finance and Accountancy.  Having an Independent Member with relevant experience working alongside elected Members would give the Committee a broader perspective in its deliberations.

·  The position of co-opted Independent Member of the Committee had been advertised on the Council’s website and through LinkedIn and PF Jobs.  The closing date for the receipt of applications was 24 November 2024 and the outcome of the selection process would be reported to the next meeting of the Committee in January 2025 with a view to a recommendation being made to the Council in February 2025.

The Chairman explained the process for the preparation of the Work Programme and the incorporation of issues arising from the Committee’s discussions.

RESOLVED:  That the Committee Work Programme be noted.

The Director of Strategy, Insight and Governance introduced her report providing an update on those matters identified in the Annual Governance Statement for 2023/24 as requiring action.  It was noted that:

Progress had been made across all areas identified for action, for example:

·  Training on the Nolan Principles and Standards in Public Life had been included in the annual Member training and development programme.

·  The Democracy and General Purposes Committee had reviewed the size of the Planning Committee and determined that no change was required.  The Committee would be considering the role of the Policy Advisory Committees and the possibility of combining them with Overview and Scrutiny to reduce duplication and ensure the Council has effective governance arrangements in place for decision-making going forward.

·  The Democratic Services Team was in discussion with the providers of Modern.gov regarding improvements to enable better use of the system and reduce the need for paper copies of agendas for Members and Officers.

·  Work was continuing on the development of a policy for the use of Artificial Intelligence and its governance.

In response to questions and comments, the Director of Strategy, Insight and Governance advised the Committee that:

·  Consideration was being given to how Artificial Intelligence (AI) might be integrated into the Council’s operations; for example, in minuting internal meetings and in improving transactional processes.  It was important to have an AI governance policy/framework in place with proper controls and information about the use of AI technologies.

·  She would consider which Committees within the Council’s governance framework would be appropriate to address the use of Artificial Intelligence and the associated risks.

·  She accepted comments about the arrangements for Carbon Literacy training for Members.  If there was demand for a weekend event, it would be accommodated as a lot of Councillors did work on weekdays.  The date and time of the training when arranged would be advertised well in advance.

·  In terms of Carbon Literacy training, no decision had been made on seeking bronze, silver or gold accreditation.  The aim was to ensure that all members of the senior management team are trained, and it might be appropriate to include a target on Carbon Literacy training in the Biodiversity and Climate Change Action Plan in future.

·  Report templates would be reviewed and amended to reference the need to ensure economic, social and environmental benefits are considered in decision-making.  The new templates would be brought in following approval of the new Strategic Plan with training for report authors rolled out ahead of this.

·  The aim was to make Modern.gov much more user-friendly and usable to reduce the need for paper copies of agendas.  However, those Members who requested paper copies would still receive them.

Arising from the discussion, the Chairman said that it was the policy not to provide iPads for Councillors.  Should that position change, he would advocate for all Members of the Committee, including Co-opted Members, to have appropriate equipment.

RESOLVED:  That the update on progress against the current Annual Governance Statement Action Plan,  ...  view the full minutes text for item 56.

The Head of Mid-Kent Audit Partnership introduced her report summarising progress towards delivering the 2024/25 Audit and Assurance Plan agreed by the Committee in March 2024 and providing an update on changes within the resources of the Partnership and changes to the Public Sector Internal Audit Standards coming into force in January 2025.  It was noted that:

·  Notwithstanding a partially successful recruitment campaign, there continued to be some vacancies within the Partnership and external contractors were being used to support delivery of the 2024/25 Audit and Assurance Plan.

·  Although progress had been made, overall delivery of the Plan had been impacted.  Two audits had been completed and five were currently underway.  The Head of Audit Partnership had discussed with the contractors the need for additional support to complete enough audit work to ensure delivery of the Plan and provide an audit opinion.  It would not be possible to deliver all of the audits within the available resources and a further update would be provided at the January meeting of the Committee.

·  In terms of following up agreed management actions, there were no overdue actions, but there were actions that had been ongoing for some time.  This was being followed up with management to ensure their completion.

·  In terms of implementation of actions arising from audits with weak assurance ratings issued in 2023:

All high-risk actions arising from the Grounds Maintenance audit had been completed with one medium-risk recommendation still in progress.

All actions arising from the Facilities Management audit were high-risk and had been completed.

There were four high-risk actions and four medium-risk actions arising from the Subsidiary Company Governance audit and one high-risk action was outstanding.

The Contract Management audit had received a partially weak assurance rating.  The actions had not yet been followed up and an update would be provided at the January meeting of the Committee.

·  Working with management, some new processes had been introduced to ensure ownership of and accountability for actions to make sure that they are completed within a reasonable time frame that resources permit.

·  The Global Internal Audit Standards would come into force in January 2025.  Implementation of the new Standards would have implications for the Internal Audit function, the management team and the Committee, and an overview would be provided at a training session.

In response to questions:

The Head of Audit Partnership explained that:

·  While she had been in post (approximately two years), there had been four recruitment exercises with varying success.  There were still vacancies in the team, and she would continue to use external contractors to bridge the gap.  The contractors were a local authority owned company whose costs could be met from within the existing budget.  She was working with the shared services board and the partner authorities to determine the best course of action given the ongoing recruitment problems which were being experienced in the audit industry.

·  In terms of Audit Plan progress, three audits were shown to be ‘under review’.  They were under review by her  ...  view the full minutes text for item 57.

Ms Sophia Brown of Grant Thornton, the Council’s External Auditor, introduced the report providing an update on progress with auditing the 2023/24 Statement of Accounts.  It was noted that:

·  In preparing the report, the External Auditor had taken into account feedback from the last Committee meeting about what Members wanted to see in terms of progress on the 2023/24 financial statements audit.  Different sections had been included in the report including progress against the audit’s significant risk and other risk-related areas communicated in the audit plan; a breakdown of the sample testing carried out for the audit; and more details about the audit deliverables planned for 2023/24.

·  The External Auditor was happy with progress at this stage.  There were a few delays, but these were normal audit delays, rather than the delays experienced in previous audits.  It should be noted that further progress had been made since the preparation of the report.

Mr Asad Khan of Grant Thornton then provided a more detailed update on progress.  It was noted that:

·  Work on the valuation of other land and buildings and investment properties was ongoing and the initial responses from the Valuer had been received, but some minor delays had been experienced.

·  For management override of controls, the listings had now been received and journals had been selected, but some minor delays had been experienced.

·  In terms of the pensions liability, the actuary had advised that there was no additional liability arising from the new Standard IFRIC 14.  The External Auditor would be looking at the response given by the actuary to test and confirm the figures.

·  Work on completeness of expenditure was in progress.  Evidence for selected samples had been received and was being processed.

·  Sample testing was in progress and on track with some minor delays.  70-80 additional samples had been taken out relating to management override of controls.  192 samples were with management, 107 samples had been cleared and 56 samples were with the audit team.

In response to questions, the representatives of the External Auditor explained that management had been asked to obtain an IFRIC 14 assessment from the actuary to be satisfied that there was no additional pensions liability to be accounted for.  The assessment had been received that day and would be tested, but it did not appear at this stage that there would be an additional liability.  An explanation was also provided as to how samples were extracted.

RESOLVED:  That the External Auditor’s Audit Progress Report, attached as Appendix A to the report of the Head of Finance, be noted.

The Finance Manager introduced his report setting out the activities of the Treasury Management function for the first six months of the 2024/25 financial year in accordance with CIPFA’s Code of Practice on Treasury Management in Local Authorities.  It was noted that:

·  The 2024/25 Treasury Management Strategy was agreed by the Council in February 2024.  In accordance with the Strategy, most investments in the year to date had been kept short-term to be made available when required for the Capital Programme.  Investments were spread between call accounts, money market funds and short-dated deposits with other local authorities to partly mitigate the risks of falling interest rates.  The investment balance on 30 September 2024 was £38.12m.

·  Investment income to 30 September 2024 totalled £945k at an average rate of 5.28%.  However, investment income was likely to fall during the year if the Bank Rate was reduced.

·  The Council had £45m of long-term loan debt with the Public Works Loan Board and Aviva Life and Pensions UK Limited (Aviva) and was committed to a further £40m forward borrowing with Aviva, the next tranche of which would be drawn down in February 2025.  The borrowing would be used to fund the current Capital Programme.

·  The Prudential and Treasury Indicators reflected the anticipated reduction in Capital Programme spend from an estimate of £95m to a revised estimate of £39m for 2024/25.

In response to questions, the Director of Finance, Resources and Business Improvement advised the Committee that when the Council set the Treasury Management Strategy for the year, it was anticipated that further progress would be made with the Capital Programme than was the case.  However, it had benefitted the Council not to have spent that capital as the cash held was generating income at around 5%.  The Capital Programme was monitored, and capital spending was reported to the Policy Advisory Committees and the Cabinet on a quarterly basis.

RESOLVED:

1.  That the position regarding the Treasury Management Strategy as at 30 September 2024 be noted.

2.  That no amendments to the current procedures are necessary as a result of the review of activities in 2024/25.

The Director of Finance, Resources and Business Improvement introduced his report highlighting the risks faced by the Council in delivering the budget.  It was noted that:

·  The Council had set a balanced budget for 2024/25.  However, some budget variances had now arisen and while it was stated in the report that an overspend of £350,000 for the year was projected, that was at the end of quarter one.  The figures for quarter two were being worked on and it now looked as though this overspend would be higher.  The reasons for this included service pressures in temporary accommodation, a significant shortfall in income due to the number of planning applications continuing to be less than forecast and the impact of Kent County Council’s current financial challenges.  It was early enough in the financial year to address this by, for example, freezing discretionary spend to get back within budget.

·  The budget planning process for 2025/26 was underway and savings would need to be found to offset expected pressures on temporary accommodation and planning income.

·  The Chancellor’s budget statement on 30 October 2024 had provided some further clarity about the impact of central government policy on local authority finances including the increase in Local Government Core Spending Power, the increase in Employer National Insurance Contributions, and the Fair Funding Settlement which looked likely to move resources away from the South-East.  There was no mention of the Council Tax referendum limit in the budget, but there was an expectation that it would be 3% for district councils in 2025/26 as it was in 2024/25.

·  In terms of the Capital Programme, the government had announced increased borrowing in the Chancellor’s budget statement.  Market reaction suggested that interest rates were likely to remain high for some time owing to the amount of central government borrowing that markets would be expected to absorb.  This meant that the threshold for demonstrating a business case for investment locally was likely to remain high.

In response to questions:

The Director of Finance, Resources and Business Improvement advised the Committee that:

·  It might be necessary to take an even more cautious approach to budget setting depending on the intentions of the incoming US administration and the impact on UK interest rates and growth.

·  The purpose of the table on page 61 of the agenda was to set out the upper and lower level of the impact of each of the identified budget risks materialising.  The aim was to give an idea of the order of magnitude of the risks.

·  In year monitoring of income indicated that business rates income remained well in excess of the baseline defined by government, notwithstanding a number of successful appeals against business rates assessments.

·  The increase in the National Living Wage would have an impact on the Council’s pensions liability, but a small one in the overall calculation.

·  In terms of the risks associated with delivery of the Affordable Housing Programme and the specific requirement to provide the necessary subsidy for tenants, one-off support from  ...  view the full minutes text for item 60.

6.30 p.m. to 8.10 p.m.