Agenda and minutes

Apologies for absence had been received from Councillors Haywood and Purser.

            Members and Officers are reminded to make any declarations of pecuniary, personal and/or prejudicial interests that they may have in relation to items on this agenda and are reminded that they should re-declare their interest before consideration of the item or as soon as the interest becomes apparent.

            Members and officer should make their declaration by stating :

a) the application they have the interest in

b) whether it is a pecuniary, personal and/or prejudicial

c) the nature of the interest

d) if it is a prejudicial or pecuniary interest, whether they will be exercising their right to speak to the application

Councillor Stanley declared a Personal Interest in agenda item 14 as an employee of Nationwide Building Society.

The Committee will be asked to approve as a correct record the Minutes of the Audit & Governance Committee held on 03 October 2024.

The Minutes of the meeting held on 03 October 2024 were approved by the Committee. These would be signed after the meeting.

The Chair explained that he had received a request from Southern Internal Audit Partnership to make a change to the published order of the agenda, by moving Item 11 [Implementation of the Global Internal Audit Standards] to before Item 10 [Internal Audit Progress Report September 2024]. The Committee agreed this change by a show of hands.

To receive questions from the public (for a period of up to 15 minutes).

No public questions had been submitted.

The Completion Report for Those Charged with Governance will be presented to Members of the Audit & Governance Committee by representatives from Ernst & Young LLP.

[10 Minutes]

Upon the invitation of the Chair, Simon Mathers, External Audit Partner from Ernst and Young LLP (E&Y) presented the report to the Committee. He reminded Members that at the last meeting he had appraised Committee of the backlog in local public audit, and the arrangements being introduced by government to address the backlog. Legislation had been passed at the end of September that allowed for the clearance of old open audits by set statutory backstop dates. The backstop date for old open audits up to and including 2022/23 was 13 December 2024. At the last meeting he had explained E&Y’s intention to disclaim the opinion on the Council’s 2022/23 financial statements to ensure delivery by the backstop date. The Audit Completion Report set out the work completed in 2022/23 and work done in order to be able to disclaim opinion on the financial statements. The executive summary on page 11 set out reasons for the backlog in local public audit. This report confirmed E&Y would disclaim the opinion on the 2022/23 financial statements. This was not attributed to any issues at Council, but to the national pervasive issues. He did however, state that the Council did not file the Accounts for 2022/23 and 2023/24 by the target established in the regulations. The Leadership team were aware, and actions were being taken to ensure this did not happen again.

The External Audit Partner highlighted page 19 of the agenda, which showed the 2022/23 Work Plan. Page 26 set out the results and findings of those procedures, and there were no particular findings he needed to draw Members’ attention to. This also set out the draft auditors report including the basis for the disclaimer, which was the national context and not any particular issue at the Council. Page 32 set out the Value for Money Work that had been completed. This had been presented to Committee in July. There were no changes to the conclusions, and they had not identified any risks of significant weaknesses, and no actual significant weaknesses.

          The Chair invited questions, and it was asked how the land and buildings were valued, and whether this was based on current use or potential use. The External Audit Partner explained that each year the valuation of land and buildings was a significant risk as it was an accounting estimate. The estimate would be based on both current use and potential use based on factors such as whether planning permission had been granted. This had not been tested in the 2022/23 year, however it had been tested in the 2023/24 year, and would be presented to Committee at the next meeting. The Group Accountant confirmed he would provide Members with an update on exactly how the valuations were carried out, and whether additional information was provided to the external valuers by the Council.

It was asked whether the External Audit Partner could provide assurance that the next audit would take place without any problems. The External Audit Partner was  ...  view the full minutes text for item 314.

The Statement of Accounts 2022/23 attached as Appendix 1 and the Letter of Representation attached as Appendix 2 require approval by this Committee following consideration of Ernst and Young’s Completion Report for Those Charged with Governance.

This report sets out some of the main highlights from the financial statements and explains the purpose of the Letter of Representation.

Approval of the accounts and the Letter of Representation is sought to enable the audit opinion to be issued and for the accounts to be published within the statutory backstop date of 13 December 2024.

[10 Minutes]

          Upon the invitation of the Chair, the Group Accountant presented the report to the Committee. The Statement of Accounts for 2022/23 had been prepared in accordance with the Chartered Institute of Public Finance and Accounting Code of Practice for 2022/23. He explained that due to a change requested by Ernst & Young LLP, he had a verbal update in relation to the Statement of Accounts for 2022/23. As the Statement of Accounts for 2021/22 were signed off by Ernst and Young LLP, it was deemed unnecessary to include the restatement wording within the paragraphs and tables. Therefore, some amendments had been made to the published agenda pages contained in Appendix 1 as follows: The word restated had been removed from page 75 (at the end of the narrative in the paragraph referring to the 2021/22); the word restated had been removed from the tables on pages 77, 78, 81, 83, 105, 107, 108, 123, 126, 127 - Grant Receipts in Advance, 140 – Housing Revenue Account, Income and Expenditure, 140 – Movement on the HRA Statement, HRA adjustments between accounting basis; the paragraph at the bottom of the table on page 78 had been removed;  the title on page 80 had been amended to just 2021/22 and the paragraph underneath had been removed; on page 82 the paragraph below Balance Sheet (continued) had been removed; on page 83 the paragraph at the bottom had been removed; on page 139, Prior Period Adjustments had been removed.

These changes had not altered the figures within the Statement of Accounts. The Council’s usable reserves remained at £39.5m at 31 March 2023, and the Council’s net assets increased by £65.4m to £395.3m at 31 March 2023, which was largely due to the increase in Pension Assets.

          Some Members expressed their concern that so many changes had been made to the document at such a late stage, and they felt it difficult to approve the recommendations due to this. It was asked how the changes impacted the Council’s Letter of Representation. The Group Accountant confirmed there was no impact on the Letter of Representation. The Group Head of Finance and Section 151 Officer explained the Letter of Representation was confirmation of the accuracy and completeness of information provided to the auditors. The updated changes did not alter any of the actual figures, and did not materially change the decision required or substantive content of the accounts. A revised version of the Statement of Accounts would be sent to Members.

          One Member believed the business rates (page 103) went into a pool held by West Sussex County Council (WSCC), and was unclear how this affected Arun District Council (ADC). The Group Head of Finance and Section 151 Officer explained that ADC did keep a share of the business rates, and the growth levy went into the pool held by WSCC. Most Councils had to return that money back to central government, however WSCC had been given dispensation to set up the pool and so were able to  ...  view the full minutes text for item 315.

The 2023/24 Statement of Accounts require approval by the Committee in accordance with the Accounts and Audit regulations.

Approval prior to the audit, subject to there being no material changes arising from the audit, will contribute towards the timely publication of the final set of accounts within the statutory backstop date of 28 February 2025.

This report sets out some of the main highlights from the financial statements.

[10 Minutes]

          Upon the invitation of the Chair, the Group Accountant presented the report to the Committee. The Statement of Accounts for 2023/24 had been prepared in accordance with the Chartered Institute of Public Finance and Accounting Code of Practice for 2023/24. He highlighted the Council’s total usable reserves reduced by £3.5m, from £39.5m at the beginning of the year to £36.0m at 31 March 2024. The Council’s net assets at 31 March 2024 reduced by £39.8m to £355.6m, which was largely due to the reduction in pension assets.

There were no questions or comments from Members.

The recommendations were proposed by Councillor O’Neill and seconded by Councillor Oppler.

The Committee

RESOLVED that

(a)    It approves the draft Statement of Accounts 2023/24, contained in Appendix 1, which is subject to the completion of the audit, with any resulting changes delegated to the Section 151 Officer, in consultation with the Chair of the Audit and Governance Committee, for resolution.

(b)    It authorises the Chair of the Audit and Governance Committee to sign off the final 2023/24 Statement of Accounts, after the audit, subject to there being no material changes to the draft approved by the Committee under recommendation 2.1 (a).

(c)    It authorises the Chair of the Audit and Governance Committee to sign the Management Letter of Representation 2023/24 on behalf of the Committee.

This report presents the final Annual Governance Statement for 2023/24 which is required to accompany the Annual Accounts.  The draft Annual Governance Statement was noted by the Committee at its July 2024 meeting.

[10 Minutes]

Upon the invitation of the Chair, the Internal Audit Manager presented the report to the Committee. The Annual Governance Statement was a mandatory document to accompany the annual accounting statements. The draft Annual Governance Statement had been noted by the Committee at the July 2024 meeting and published on the Council’s website. The Committee was requested to approve the final version to be provided for audit and published alongside the 2023/24 Accounts presented to the Committee in the last item.  As it related to the 2023/24 year, it had been signed by the (then) Interim Chief Executives as well as the Leader. There had been no additional governance issues that would relate to the 2023/24 period, so no changes had been made between the draft and final versions.

The Chair invited questions and it was asked what the Council gained by being a member of the Greater Brighton Economic Board, and how much this cost ADC. Officers confirmed that the Director of Growth would be bringing an update to the Economy Committee in January at the request of that Committee.

The recommendation was proposed by Councillor May and seconded by Councillor Oppler.

The Committee

RESOLVED that

The final version of the Council’s Annual Governance Statement for 2023/24 be approved.

The report outlines the key differences between the existing Public Sector Internal Audit Standards and the new Global Internal Audit Standards.

[10 Minutes]

Upon the invitation of the Chair, Antony Harvey, Audit Manager for Southern Internal Audit Partnership (SIAP), presented the report to the Committee. The report provided a brief overview of the new Global Internal Audit Standards, which were required to be adopted by April 2025. Since the implementation in 2013, the Council’s internal audit function had been required in accordance with the Accounts & Audit Regulations, to comply with the Public Sector Internal Audit Standards which were based on the mandatory elements of the Institute of Internal Auditors (IIA) International Professional Practice Framework (IPPF). In January 2024 the IIA published a significant revision of their IPPF in the form of the Global Internal Audit Standards (GIAS). The revised framework was to take effect within the public sector from April 2025 (effective from January 2025 in the private sector). Some of the changes had been outlined in paragraph 4.5, page 304 of the agenda pack. In order to bridge the gap between public and private sector, consultation was underway. It was important to note that there were some additional requirements from the Council, and these arrangements must be in place for the forthcoming year. SIAP had completed a gap analysis and drawn up an action plan to implement the required changes by April 2025. If the result of the consultation changed the requirements, they would keep the Committee updated.

          There were no questions from Members.

          The Committee noted the report.

The report outlines the progress of the Council’s Internal Audit service against the approved Internal Audit Plan for 2024/25 from 1 April 2024.

[10 Minutes]

          Upon the invitation of the Chair, Nick Barrett, Audit Manager for Southern Internal Audit Partnership (SIAP), presented the report to the Committee, the purpose of which was to update on internal audit progress. The report had been presented to the Corporate Leadership Team on 22 October 2024. He highlighted Section 3 - the Performance Dashboard, and updated that the figures in the report were slightly incorrect with the correct ones being 17% completed, 35% work in progress and 48% yet to commence. These figures were more positive than the figures reported. Whilst the report showed SIAP were slightly behind the curve with delivery, he highlighted Section 7 and the rolling programme and explained the reviews had moved on since production of the report. The final report on the UK Prosperity Fund review had been issued with a substantial opinion and the Parks and Greenspaces review was now complete with a substantial opinion. The Accounts Payable and Housing Benefit reviews were at draft report stage and they were agreeing the final report wording for both with Officers. The close of audit meeting for the payroll review had been held and the draft report was due to be issued later that week. The close of audit meeting for the Environmental Health and Protection review had taken place earlier that day and the draft report had been issued. There were a number of other reviews now under way, which included Community Safety, Responsive and Emergency Repairs, Neighbourhood Services Tenancy Management, Climate Strategy and Fees and Charges within Technical Services. With regard to the ICT reviews, the Disaster Recovery review was also under way. It had been agreed that the Cleansing Services reviews that had been moved into quarter 3, would not go ahead at this time as the government changes to recycling had not yet come in, and the main contract had been covered last year.

          The Audit Manager also highlighted action tracking. SIAP were comfortable as there were not many actions running over the target dates, and actions overdue on Cyber Security, Accounts Receivable, Business Continuity and Risk Management had all completed since the progress report was prepared. Where actions were overdue, SIAP were comfortable with the reasons. There were very few actions to complete from the first year of SIAP internal audit, and a very small number from last year.

          There were no questions from Members.

          The Committee noted the report.

The Corporate Risk Register is reviewed and updated in line with the requirements of the Council’s Risk Management Framework.

Quarterly updates reflecting revisions are reported to the Audit and Governance Committee, this report highlights the changes since the last update.

It is proposed that the Committee consider and provide comments to officers on the revised Corporate Risk Register.

[20 Minutes]

          Upon the invitation of the Chair, the Insurance, Risk and Procurement Manager presented the report to the Committee, which highlighted the updates to the Corporate Risk Register. The new report template had now been adopted, with one of the aims being to make the entries more succinct, and to focus on the key mitigations and further actions. The review of all risks had been undertaken by the Corporate Leadership Team on 15 October 2024. The risk register summary was attached as appendix 3 on page 319 of the agenda.

          The Chair then invited the Chief Executive to give her update on CRR2 (Organisational capacity and transformation). This was currently a medium risk on the Corporate Risk Register, and an update had been provided to the Corporate Support Committee in January this year.

The Chief Executive explained that absence and turnover were both monitored on a monthly basis by the Corporate Leadership Team, and were presented to the Corporate Support Committee and Policy and Finance Committee in the quarterly KPI reports. Regarding sickness absence, quarter 2 KPIs for 2024/25 showed that for the rolling year 01 October 2023 to 30 September 2024 3.34% of working time was lost due to sickness absence. Recorded absence showed that whilst overall absence recorded as stress related accounted for 0.7% of working time lost, 0.6% was recorded as personal and 0.1% as work related.  Stress was the largest cause of sickness absence of all sickness absence reasons, with the majority of this being long term absences.

The following actions had been taken to address stress related absence:

• An employee Assistance programme was available to all staff which provided confidential counselling and support services across a range of topics (relationships, childcare, finance, stress and anxiety, family issues)
• Occupational Health provided more specialist mental health support options for staff with complex needs.
• Staff had free Freedom Leisure membership, access to health MOTs and 1 to 1 sessions with the Wellbeing Team.  Encouraging positive physical health was important to mental health resilience
• There had been training for managers on mental health awareness to better support their teams and ADC had trained mental health first aiders available to provide initial support. Stress risk assessments were carried out when required
• There were employment policies which encouraged and supported work-life balance, enabling flexible working arrangements to support personal commitments alongside work
• Human Resources (HR) continuously monitored sickness absence, providing advice and guidance to managers where necessary. Managers were required to stay in touch with staff and conduct ‘return to work’ interviews to understand the causes of absence and better support recovery.
• Culture change and initiatives to encourage positive staff engagement.

Recruitment and Retention was a regular topic for discussion at both the Corporate Support and Policy and Finance Committee meetings when KPIs were reported. A moderate level of turnover was healthy for an organisation as it brought in fresh perspectives and new skills. The Councils current target and performance of 14% was around the national average for similar Local Authorities. Turnover  ...  view the full minutes text for item 320.

The Council’s Risk Management Framework has been reviewed and updated to take account of changing legislation, government initiatives, best practice and experience gained within the Council.

This report highlights any amendments resulting from the review.

[5 Minutes]

          Upon the invitation of the Chair, the Insurance, Risk and Procurement Manager presented the report to the Committee. The Council’s Risk Management Framework was reviewed and updated each year, taking into account changes in legislation, government initiatives, best practice and experiences gained within the Council. The Audit and Governance Committee had oversight responsibility for risk management. The updated Risk Management Framework was included as appendix 1 in the agenda, and the changes were highlighted for ease of reference.

          There were no questions from Members.

          The Committee noted the report.

The Chartered Institute of Public Finance and Accountancy (CIPFA) Code of Practice for Treasury Management 2021 recommends that Members be updated on treasury management activities at least quarterly. The 2024/25 Treasury Management Strategy states this report will go to the Audit and Governance Committee around December time. This report, therefore, ensures this Council is implementing best practice in accordance with the Code.

During the second quarter to 30 September 2024, the Council complied with its legislative and regulatory requirements, including confirmation that the authorised limit was not breached.

[15 Minutes]

[Councillor Stanley re-declared his Personal Interest in this Item as an employee of Nationwide Building Society]

Upon the invitation of the Chair, the Group Head of Finance and Section 151 Officer presented the report to the Committee. Page 383, paragraphs 4.6 – 4.9 contained a general economic outlook. There was a base rate change in November from 5% to 4.75% and a further cut was anticipated in March 2025 to 4.5% (shown in the table in 4.13). Investments continued to perform very well, and page 391 showed they were performing just above the Council’s benchmark. Paragraph 1.13 (page 391) showed the outturn was expected to achieve around £2.3m in investment income, which was an over achievement of over £400k (Budget £1.9m). The table in paragraph 1.3 (page 388) showed the investments on 30 September 2024 at £50.22m and was broken down into the total amount in various sectors. There was only £42.77m on 31 March 2024 and the increase from March to September was more to do with the timing of payments such as precepts which were paid on 07 October 2024. There had been no change regarding borrowing in quarter 2. The main changes to prudential indicators were shown in the table on page 394. Capital expenditure had reduced from quarter 1 by just under £6m due to some expenditure on the Alexandra Theatre and Bognor Regis Arcade not happening until 2025/26. Arun internally borrowed around £2m worth of capital expenditure, and running balances were used to offset the need to borrow for as long as possible until those funds were needed elsewhere, this meant an under-borrowed position.

The Group Head of Finance and Section 151 Officer explained there had not been a Treasury Management Member Briefing prior to this meeting, as there had been a briefing on Accounts instead, however he would endeavour to provide one in advance of the next Committee meeting.

          The Chair invited questions and it was asked whether the easing in wage growth (paragraph 4.6) would likely be sustained given the national insurance changes, or whether public sector would be immune from that. The Group Head of Finance and Section 151 Officer did not yet know how this would impact ADC. They had estimated the cost of the national insurance increase to £350k, however the policy statement released the previous week stated those costs would be covered. It was unknown whether this would be adequately covered by the grant and a permanent adjustment, or whether this would just be for 2025/26, or deducted from other grants received by government to cover this.

The recommendations were proposed by Councillor Turner and seconded by Councillor May.

The Committee

RECOMMEND TO FULL COUNCIL that

1. the Quarter 2 (mid-year) treasury management report for 2024/25 be noted;

2.  the treasury activity for the quarter ended 30 September 2024, which has generated interest receipts of £1.2m (5.15%) against a budget of £1.9m (4.63%), be noted; and

3. the quarter 2 prudential and treasury indicators for 2024/25 contained in the  ...  view the full minutes text for item 322.

The Committee is required to note the Work Programme for 2024/25.

[5 Minutes]  

The Committee noted the Work Programme.