Agenda and minutes

The Independent Member (IM) disclosed that he was engaged as a consultant to Public Sector Audit Appointments (PSAA), which appoints the Council’s external auditor.

The declaration was duly noted.

The minutes of the meeting held on 4 October 2023 were confirmed as correct subject to comments/clarifications from BDO, summarised as follows:

Minute 12. Update on External Audit Delivery

A fuller explanation as to the reasons why BDO could not progress the audit despite the Council publishing draft Accounts in August 2020.

BDO stated the reasons were as a result of waiting for additional working papers from officers in connection with previous years’ accounts which compounded the on-going delays with the 2019/20 Accounts. BDO felt this was a more accurate description of the delay rather than what was recorded in the minute, namely “a significant number of outstanding issues as detailed in the report”.

The minute then stated alongside these issues there were resourcing challenges for BDO (unplanned long-term sickness and staff resignations).

BDO clarified that at the time of presenting progress report to Members in March and August 2022 there were no such resourcing challenges, and that in their view the delays were for the reasons set out in above, and which BDO recognised had later been compounded by the technical matter that had been identified for all local authorities regarding the treatment of material infrastructure assets on the balance sheet.

Minute 13. 2018/19 Audit Fees

Deletion of the word “imposition” in the second paragraph in respect of the former Section 151 Officer agreement to the payment of an additional fee.

The Committee received the Monitoring Officer’s update on one existing complaint against Members of the Council concerning a possible breach of the Code of Conduct. It was noted that the former MO had considered the circumstances of the matter and that subject to recommendations made, it should not proceed further.

The MO confirmed that as she was still reviewing the former MO’s decision, she was not yet able to formally conclude the matter for which she apologised. Consequently, she was not in a position at this time to respond to questions raised by the Committee.

Following questions on the processes around addressing complaints generally, and in that respect the role and involvement of the Committee, the MO undertook to provide the Committee with information about the Complaints Procedure.

Report to follow

Following the publication of the agenda the Chair referenced that in respect to the update on the latest position regarding the audits of the Council’s Accounts 2019/20 to 2022/23 a supplementary report from the Section 151 Officer had been issued. This provided commentary on the outgoing external Auditor (BDO) report (similarly presented as a supplementary) which included a proposed revised timeline of 31 August 2024 to complete their audit of the Council’s Statement of Accounts for 2019/20, together with the breakdown of the 2018/19 additional fees, something requested at the last meeting (minute 13 refers)

The Section 151 Officer introduced her report by stating that since the last meeting it had been announced that subject to consultation, the intention was to extend the original backstop date of 31 December 2023 to 30 September 2024 for the completion of outstanding audits of accounts up to and including 2022/23. Consequently, the revised date put forward by BDO would leave the Council in an incredibly difficult position in the context of the now likely backstop date.

The Section 151 Officer reflected on the recent progress of the audit since her appointment. In May 2023 when the Committee received an update about the 2019/20 audit, the aim at that time was to achieve the sign off of the accounts by January 2024. The previous and current Chief Accountant had and continued to work closely with BDO to provide responses to queries in a timely fashion, in addition to which the Section 151 Officer had been communicating regularly with her contacts at BDO with the intention of getting sign-off by today’s meeting. She stated that even with the change of assigned audit partner at BDO, following the recent announcement of the impending retirement of the current partner, and the resultant handover period, she could not understand why the accounts would not now be completed and signed off until August 2024, given that the audit had now been substantially completed. 

Steve Blandon the new audit partner explained that the supplementary update report set out the revised timeline for when he expected to be able to issue an opinion on the 2019/20 financial statement of the Council’s Accounts. In order to provide an informed opinion, there was a reasonable amount of review work to be done on the completed audit work to date, alongside which he had a number of other audit responsibilities which impacted on his time, and therefore he felt the August deadline was a reasonable target date to set, based on the various steps set out in the report, which included a number of key milestones and dates.

Whilst appreciating Members’ disappointment at this news Mr Blandon felt it was important to provide what he felt was a realistic assessment of the timeline to complete the audit. He reiterated the Section 151 Officer’s comments about the proposed backstop, which was subject to a National Audit Office consultation, albeit it was likely to be agreed as 30 September 2024. Whilst he was confident of being  ...  view the full minutes text for item 20.

Paul Dossett, Grant Thornton (GT) was welcomed to his first meeting. At the outset he made an observation as to whether spending a significant amount of the Committee’s time on the previous item was warranted given the equal importance of other matters on tonight’s agenda. 

He presented a progress report set out as Appendix A detailing delivering GT’s responsibilities as the Council’s newly appointed external auditors. The report summarised the emerging national audit issues and relevant developments to this Authority, specifically the significant delays in the completion of audit work and the issuing of audit opinions across the local government sector, with only 12% of Councils having received audit opinions in time to publish their 2021/22 accounts by the extended deadline of 30 November last year. 

GT have been working constructively with DLUHC, the FRC and audit firms to identify ways of rectifying the challenges that have been faced by the sector with a recognition of the difficulties the backlogs have caused local authorities across the Country. DLUHC were to launch a consultation regarding proposed backstop arrangements, in which they were expected to announce that all audit years from 31 March 2023 and earlier would be ‘backstopped’ if not completed by 30 September 2024, the result of which could see many disclaimers or qualified audit opinions.

Paul Dossett said that as yet the scope of work required for 2023/24 audits was yet to be determined. However, GT would, subject to no subsequent changes to backstop arrangements, intend to commence planning work this quarter with final accounts work from July 2024 onwards, with the aim of achieving sign-off by 31 December 2024. He stressed that GT would adopt a robust approach should Councils fail to produce accounts/respond to questions on time, insofar they would not hesitate to issue auditor recommendations to those Councils. He gave assurances that they would be proactive in reporting issues to Members for action. Given the level of resources available to GT he was confident that the majority of audits for 2023/24 would be signed off by the end of December 2024. 

In respect to fees Paul Dossett stated that the Public Sector Audit Appointments (PSAA) approach now was that in addition to setting the scale of fees they would set key milestones that auditors would be expected to meet such as producing audit plans, audit findings, opinions and annual reports, all of which would need to be completed before payments were made.  Consequently, it would be in the interest of GT to complete such tasks in a timely manner.

He then briefly referred to the second report on the agenda set out as Appendix B entitled ‘Preventing Failure in Local Government’ which GT produced in December following wide consultation with both Section 151 Officers and Monitoring Officers. He suggested that the paper be used by Members as a tool setting out the governance risks to sound financial management and the lessons learnt from past failures.

In response to the presentation, and specifically to Paul Dossett’s observation  ...  view the full minutes text for item 21.

The Head of Assurance (HOA) updated the Committee. He led a Risk Management Workshop with the Council’s Executive Team in September 2022 which undertook a fundamental review of the strategic corporate risks that might prevent the Council from achieving its objectives. This latest review had been undertaken personally by Strategic Directors as per the Risk Management Strategy, with some changes to risk wording having been identified and changes to the level of risk reported.

There were 13 Corporate Risks at the last review, however one risk, the Significant Incident in the Community (CR.3), was removed as the organisation and its partners were now better equipped to deal with any incident than previously.

In response to the presentation the Committee were curious as to why CR.1 (Population Change) and CR.4 (Safeguarding Failures) were both seen as low risk, especially in respect to CR.1 seeing the significant growth of the local population, which whilst bringing benefits, also presented significant and complex challenges for the Borough. What were the plans to mitigate and manage the associated risks in these areas?

The HOA responded by explaining the structure to support each of the risks. This involved assessing the gross risk of the likelihood of something occurring should there be no controls in place. Moving towards net risk this related to those faced today with controls in place followed by further actions, deadlines and responsible officers that sit between where we are now and the target risk. Applying this matrix, CR.1 was deemed now to be a lower risk due to the existing controls that were in place and the way the risk was managed, whilst in respect to CR.4, this remained a high (red) target risk as the impact of something going wrong was very significant, and could never be reduced, albeit there were actions in place to reduce the likelihood of an incident occurring.

Additionally, the last time the report was presented to the Committee, members raised concerns about climate change, and why was it not highlighted as a specific risk, to which at that time the response was that it was incorporated as part of CR.3 (Significant Incident in the Community). Consequently, what was the thinking now behind removing the risk, especially given the recent experiences in the Borough with house fires due to the extreme hot weather conditions as well as flooding and the ‘mini tornado’ in Barking.

The HOA explained that whist climate change was not on the Corporate Register it did appear on registers that sat behind the Corporate Register, and therefore formed a key element, feeding into a number of the main risks.

It was noted that both financial risks CR.2 (Financial Management) and CR.7 (Economic Downturn) were rated as high (red) risk. The fact that the Council’s Accounts had not been audited since 2019/20 would only increase the financial risks to the Council. Consequently, with the changing economic environment including increases in interest rates and the downturn in the construction activity etc, why was CR.6 (Investment Decisions)  ...  view the full minutes text for item 22.

The HOA updated the Committee on the Internal Audit work carried out for the year ended 31 March 2023. The Public Sector Internal Audit Standards required the HOA to provide an annual opinion, based upon and limited to the work performed, on the overall adequacy and effectiveness of the organisation’s framework of governance, risk management and control. 

The Internal Audit as approved by this Committee included 46 audits consisting of 35 risk and compliance audits, 10 school audits and a project to follow-up prior year work in schools. Except for one school audit, all planned audits were delivered.

Based on the work undertaken the HOA was satisfied that sufficient internal audit work had been undertaken allowing for him to provide an opinion that was ‘generally satisfactory’ with some improvements required in a number of areas detailed in the report, for the purpose of enhancing the adequacy and effectiveness of the framework of governance, risk management and control.

The results of the audit work programme were set out in the report, listing the each of the audits against a scale of opinion ranging from substantial, reasonable, limited and/or no assurance, together with the various categories of associated risk ranging from critical to low depending on the impact of the associated risk attached to each recommendation. In total nine limited assurances were issued, the details of each being summarised in the report.

Of the nine limited assurance audits three were highlighted, from which the following questions arose:

Leasehold Management Service Charges – It was noted that there was no key performance indictor for the recovery of debts relating to Section 20 major works. Moreover, more concerning was that management were still trying to unravel what can and cannot be charged for some of the Section 20 works, meaning that no collections had been recovered for the period of the audit. In that respect the Committee asked as to whether there was statutory guidance as to what a Council could legitimately charge for?

The HOA responded that the expectation was that work re charging for Section 20 works should have been done by now. The original implementation date for reporting on this matter was September 2023, and in accordance with the agreed process, when a manager missed a deadline, it was then escalated to the Council’s Assurance Board where managers were required to both explain why they had not implemented the IA recommendation and to identify a revised date to do so. 

Right To Buy Valuation – The statement as to the lack of detail being provided by surveyors valuing properties and a subsequent uncertainty about the accuracy of valuations leading to a possible loss to the Housing Revenue Account was concerning.

The documentation provided by the previous surveyor contractor was not sufficiently accurate to give a view on the valuation of properties. However since, and as a result of the audit, there was now a different contractor undertaking the work to a set specification under the management of My Place, who now  ...  view the full minutes text for item 23.

Given the 9.30pm cut off time it was not possible to consider the Internal Audit Q3 update. Given the report was for noting it was agreed that should members have any questions or comments on the report these should be emailed to the Head of Assurance for a response. 

Given the 9.30pm cut off time it was not possible to consider the Counter Fraud Q3 update. Given the report was for noting it was agreed that should members have any questions or comments on the report these should be emailed to the Head of Assurance for a response. 

The Work Programme for the remaining part of the 2023/24 Municipal Year was noted.