Meeting Details

The Committee was advised by the Democratic Services Officer that there had been an error in the published draft minutes, in relation to the Council’s working with an external provider to ensure social value since 2020 and not 2022 as stated. Additionally, the Council would seek to use local suppliers for contracts wherever possible.

A Committee member also recalled that at the meeting on 30 July 2024 it had been suggested that Officers consider the relative resource implications for achieving actions on the action plan which had been agreed at that meeting, and this suggestion had not been recorded.

RESOLVED that: the minutes of the meeting held on 30 July 2024 be confirmed as a correct record subject to being amended to show that the Council had been working with an external provider for the delivery of social value in procurement since 2020 and not 2022, and that it sought to appoint local suppliers wherever possible; and the addition of the suggestion that a cost benefit analysis be carried out in respect of the action plan which the Committee had approved. 

The Committee considered, in its role as the shareholder committee for Colchester Borough Homes, a report which sought to demonstrate the Council's regulatory compliance across a variety of areas, and which was monitored by the Regulator of Social Housing.

Philip Sullivan, Chief Executive of Colchester Borough Homes (CBH), attended the meeting to present the report and assist the Committee with its enquiries.

The Committee heard that the report which was before it was the Second regulatory assurance report since the introduction of pro-active regulation. In the context of the new regulatory regime, the Committee was being asked to provide oversight in its role as the landlord of CBH.

Esme Cole, Chair of CBH, attended the meeting and advised the Committee that CBH had commissioned Savills, the market leaders in this process, to carry out a mock inspection which had provided a good indication of what to expect from the inspection process. The outcome which received had been very positive, and the feedback offered had been focussed on continuous improvement rather than material changes to the processes of CBH. An action plan was being created based on Savill’s findings which would be shared with the Committee at its meeting scheduled for November 2024.

The Committee sought to understand the reporting around tenant satisfaction measures and the reason for the variance which was displayed between low reported satisfaction with communal areas and actioning complaints, and the much higher indication of satisfaction that CBH kept its tenants informed.

The Chief Executive of CBH explained that two different things were being reported, and would include an indicator of perceived satisfaction rather than a transactional survey where tenants had dealt directly with CBH. In terms of the data which had been provided around CBH’s approach to dealing with complaints, action was being undertaken to understand how CBH could implement improvement, and follow-up engagement would help to inform this work. With regard to communal areas, these may be internal or external, and some may not be located on Council land. Further data was required to enable CBH to improve specific services it offered where appropriate. The Committee was keen to ensure that the ratings showed signs of continuous improvement through future reports.

In discussion, the Committee wondered whether it was acting in its role as shareholder committee or landlord, and therefore whether it was considering the right areas, had too much detail been provided in the Officer’s report? If it was acting as the landlord, was the Committee to focus on the Savill’s report or the service which CBH was delivering for the Council, including the cost of this? If the Committee was acting as the shareholder committee, it was suggested that its role and approach would be different. A Committee member considered that much of the content of the Officer’s report could be handled by the CBH Board, and there was a lack of information provided in relation to costs and management fees being spent. He personally wished to hear more about the Housing Revenue Account and less about the regulatory performance, which he considered should be dealt with by the Board of CBH. The Chair explained that although this was not necessarily the view of the whole Committee, nonetheless it was expected that future reporting would evolve and become more streamlined, with the Board of CBH drawing salient points to the attention of the Committee for detailed consideration. In the future, was it possible to provide documentation which contained links to the more detailed information, allowing those Committee members who wished to interrogate this to do so, with a summary provided in the covering Officer’s report?

The Chief Executive of CBH advised the Committee that the context of the Officer’s report which was before it was that the Committee was acting as the landlord for the Council’s social housing. The Social Housing Regulation Act 2023 (the Act) had introduced new consumer standards, and the Regulator of Social Housing (RSH) would want to see evidence and assurance that the Council was adhering to those standards, which it was required to do as a landlord. The reporting structure which had been agreed aimed to provide this assurance in anticipation of an inspection. The Chief Executive of Colchester Borough Homes agreed with the comments which had been made by the Committee in relation to the level of detail which had been provided and the report would be refined in the future, with greater assurance being provided from CBH.

The report which was currently before the Committee focussed on assurance to the Council in a regulatory capacity for the Committee as landlord for the Council’s housing. This did not take away additional reporting requirements for the Committee as the shareholder of CBH, and at its next meeting the Committee would be asked to consider the Annual Governance Statement (AGS) of CBH, including financial information. A Committee member considered that the Committee needed to be afforded the opportunity to consider the management costs associated with the Council’s social housing in significant detail as it was not clear that these costs were addressed through benchmarking figures which had been provided, and this was relevant to the Committee’s role as the landlord. It was essential that the Committee was provided with a costs reconciliation between the Councils accounts and costs which were reported through benchmarking, and the Chief Executive of CBH was requested to consider incorporating such a reconciliation in the report presented to the next meeting of the Committee.

The Chief Executive of CBH confirmed that information and an update on the current review of the Council’s HRA review which was being undertaken would be presented to Scrutiny Panel in October 2024. He considered that CBH was completely transparent with regard to its costs, and the accounts, which were public documents, would be considered at the next meeting of the Committee.

The attention of the Committee was drawn to the benchmarking statistics which had been provided, and which indicated that CBH was above the median on overall satisfaction. Action to address emergency repair times already been taken, and as at the end of August 2024, the year to date performance was at 94.7% as a result of the improvements which had been made. An action plan arising from the survey was being considered by CBH and the 2024-2025 survey was currently taking place.

CBH had received an annual report from the Housing Ombudsman which showed that there was a national maladministration of 73%, compared to 67% in Colchester. Increased customer awareness and media campaigns by the Ombudsman had increased the number of cases which had been considered, and this was supported by CBH.

The Chair of the Board of CBH offered assurance to the Committee that the Board had carefully considered the Tenant Scrutiny Panel’s updates on progress of repairs and Social Media Scrutiny, and also received outcomes from a lettings scrutiny and would track the progress of this. The complaints system had been scrutinised, and the Board had approved the approach being taken. The Board was assured that the correct reports and detail were being considered appropriately. The Board was assured that the 2023/2024 Tenant Satisfaction Measures results had been submitted correctly, and had also carried out a detailed review of the 6 largest health and safety areas, together with the appropriate Strategic Risk Map and was assured that all suitable mitigations were in place.

The Committee noted that a very good percentage of the Council’s Housing stock was rated at energy performance certificate (EPC) C or above, however, the costs of improving properties which did not meet this standard could vary considerably. How many of the Council’s current properties was it considered may not be financially viable to bring up to EPC C standard? When would the Council consider the potential disposal of these properties if improvements were not considered to be economically viable?

The Chief Executive of CBH was confident that it would be possible to bring properties up to EPC level C or above by 2030, and from a cost perspective the majority of the expenditure which would be required had already taken place, putting the Council in a better position than many other landlords. The biggest challenge which was faced was to reach the target of net zero emissions by 2050, which was a very different position and would be a very challenging target from both a financial and technological perspective. Disposals of properties had been considered as part of the HRA review, however, any action also needed to be linked to the Council’s Asset Management Strategy.

A Committee member noted that a number of graphs had been provided to the Committee which demonstrated performance over time, and the target levels for some areas of performance had been reduced, what was the reasoning for this? There had also been a sudden apparent decline in reporting of complaints, what was the reason for this? The Chief Executive of CBH confirmed that the reason for the drop in target performance had been to make the target challenging but realistic. With regard to the apparent change in the volume of complaints which had been received, this would require further investigation, and at the request of the Chair, detailed questions would be submitted to the Chief Executive of CBH by the Committee member who had raised the issue.

The Chair noted the importance of CBH being a learning organisation, and how inspectors were used to assess complex repairs which had not been carried out satisfactorily. He requested that consideration was given to notifying local ward Councillors when repairs had reached this stage, so they were better able to deal with any issues raised by their constituents. It was noted that although void re-let times were generally good, give the known issue of homelessness in Colchester what steps were being taken to improve this? Chris Wait, Director of Assets, CBH, attended the meeting and advised the Committee that CBH was working very hard on reducing void re-let times. Two key areas were being worked on, pre-termination inspections to identify any issues which may have to be dealt with when tenants had moved out so that work could be pre-assessed, and tenants were being reminded of their duties to clear properties when they were vacated.

RESOLVED that:

- The positive outcomes and the recommendations arising from the mock inspection completed by Savills be noted, and the action plan arising from this review to be received at the meeting of the Committee on 19 November 2024.

- The performance update contained in the report and Appendix 1 be noted.

- The Housing Ombudsman 2023/24 Colchester Performance Report and the Ombudsman case detailed at Appendix 2 be noted.

- The deep dive on stock quality provided in the report and Appendix 3 be noted.

- Updates to be received as set out in the workplan provided at Appendix 4 to the Officer’s report.

- The remaining updates provided in the Officer’s report be noted. 

The Committee received a Verbal update from the Council’s S151 Officer with regard to the Council’s statement of accounts.

Andrew Small, S151 Officer, attended the meeting to present the update and assist the Committee with its enquiries. An update report had been circulated to the Committee setting out the national position prior to the meeting. The government had committed to introducing a backstop date which by which all outstanding local authority audits up to and including 2022/2023 had to be completed, and this date had been pushed back to 30 December 2024. A number of new backstop dates had also been introduced for the next 4 or 5 years to bring the production of local authority accounts back within statutory deadlines. This situation was far from ideal, but it was accepted that action had needed to be taken to resolve the current issues and normalise the process. There would be delays and disclaimed opinions for years to come.

The S151 Officer had been asked to speak with the Council’s auditors, BDO, who had agreed to meet with the Committee in private. BDO had indicated that they still intended to produce an audit opinion for 2020/2021 ahead of the backstop date, but it would not be possible to produce anything other than a disclaimed opinion for the years 2021/2022 and 2022/20233. BDO had confirmed that Colchester was in the same position as all their other clients at this time. The Chair noted that there had been audit delays for many years now, but was assured that the scrutiny of the accounts by the new S151 and Deputy S151 Officers would have revealed any serious issues. The Democratic Services Officer was asked to look for a suitable date to meet with BDO.

The Committee was very pleased that BDO was prepared to meet with it, and considered that this would provide substantial assurance and indicated good governance. It was hoped that the Committee would see a renewed determination to solve the problem of delayed audit opinions and the subsequent lack of audited accounts. The Committee hoped to see the draft accounts for 2023/2024 in the near future, and acknowledged that their preparation was a significant task containing the need for complicated adjustments to be made. The Committee also noted that it would meet in private with the Council’s incoming auditor, KPMG in the near future which was in line with the Charter Institute of Public Finance and Accountancy (CIPFA)’s guidance.

Councillor Cory, Portfolio Holder for Resources attended the meeting, and, with the permission of the Chair, addressed the Committee. He reaffirmed that it would be extremely helpful to meet with BDO to understand the elements which had led to a lack of audited accounts. He confirmed that the S151 Officers had his full support and had been working to correct processes over the past 18 months, which had provided him with assurance that the Council’s accounts were sound. The Council was keen to improve processes wherever possible, and would seek to improve the presentation of financial information in the future, while acknowledging that local government accounts were complex by their nature. The Committee acknowledged that the presentation of the accounts had improved greatly over the past 18 months.

The S151 Officer confirmed that it was hoped that the draft accounts for 2023/2024 would be ready for consideration by the end of October 2024. It was considered that the Committee would receive no audit opinion on the quality of the accounts for 2021/2022 or 2022/2023 from BDO by the backstop date in December 2024, and this was the same for local authorities across the country.

Emma Larcombe, Audit Director at KPMG, attended the meeting and advised the Committee that at this stage KPMG, who were the Council’s incoming auditors, had not yet had the opportunity to carry out detailed work on the preparation of the 2023/2024 accounts, and delivering these by the backstop date of the end of February 2025 would be challenging. It was important to manage the expectations of the Committee in this regard.

RESOLVED that: the contents of the update be noted.

The Committee considered a report setting out the 2023/24 General Fund and Housing Revenue Account positions for both revenue and capital, as at 31 March 2024, and representing the Quarter 4 (Provisional Outturn) for the 2023/24 financial year.

Andrew Small, S151 Officer, attended the meeting to present the report and assist the Committee with its enquiries. The report before the Committee covered the revenue and capital positions for both the General Fund and the Housing Revenue Account, and also set out the findings from a year-end review of the Council’s General Fund revenue reserves.

As highlighted in previous quarters in 2023/24, Colchester City Council, as with councils up and down the country, had experienced several financial challenges in the year as it had tried to manage the local impact of a difficult economic backdrop which had driven up service demand.

There was a General Fund net revenue overspend of £0.461m, and this represented a significant improvement compared to the projected overspend of £1.916m at the Quarter 3 stage. The improved position predominantly reflected the impact of a year-end review of budget roll forward requests, which had resulted in a positive adjustment of £1.5m.

Service budgets were overspent by £2.955m, but this was heavily mitigated by an underspend of £2.494m on corporate items (and most notably, Financing costs, which were £2.111m underspent).

As previously reported, the headline Service pressure was Homelessness/Temporary Accommodation costs of £1.216 m, and income shortfalls were also recorded in several areas including Planning, Bereavement Services, and the Amphora Dividend.

The Funding outturn position was presented in the report and showed a positive position, with Government grants received, including Revenue Support Grant (RSG), exceeding expectations by £0.513m.

The Housing Revenue Account (HRA) budget recorded a budget surplus of £172,000, with a significant overspend (£1.928m) on Repairs and Maintenance being fully absorbed by a range of other savings, including substantially reduced utility costs. The report showed that there was limited movement on the HRA reserve balance, which ended the year at £4.380m.

With respect to capital, spending had continued to be subdued in Quarter 4, with an overall underspend of £78.060m eventually recorded for the year, with originally planned loan advances of £26.70m to the Council’s new Housing Company not materialising.

The HRA Capital Programme was presented in the report, and as with the General Fund, spending was also significantly below that originally assumed within the Programme, with an overall underspend of £21.978m eventually recorded for the year, with slippage of £12.123m on the Council House New Build Programme being the largest item.

The report contained a bar chart which set out a 10-year Balance Sheet history, and the Council’s General Fund revenue reserves were currently in a healthy position. The Council had received substantial Section 31 receipts from the Government by way of compensation for Business Rate Reliefs awarded at the start of the pandemic in 2020/21. In accordance with Government guidance, the balance on those receipts was applied over a three-year period to address the Colchester share of successive Collection Fund deficits.

However, the Collection Fund had now bounced back, predominantly due to consistently strong returns from Business Rates, with a surplus now restored since 31st March 2023. With the annual deficit contribution to the Collection Fund no longer required, the Council’s overall revenue reserves remained around £30m as of 31 March 2024, which was higher than was typically the case pre-pandemic.

The report contained the outcome of a review of the Council’s reserves which had been carried out, which showed that the overall General Fund revenue reserves ended 2023/24 at £29.627m. The review had considered updated risks and priorities as well as taking the opportunity to make a further step forward in reporting transparency and good accounting practice. The key points to note included:

- There had been a significant reallocation of reserves based on updated circumstances and priorities. This had purposely entailed returning available reserves to the General Fund (Unallocated) Reserve in the first instance, prior to the targeted re-allocation of surplus reserves for specific purposes.

- £15.619m had been placed into the General Fund Reserve with £10.877m re-allocated out. This leaves an unallocated balance of £6.917m as of 31/03/24, which the Committee was asked to note. It was deliberately and significantly higher than the opening balance of £2.175m at the start of the year, and the unallocated balances that the Council had been operating with in recent years. It now met the minimum £3.0m contingency balance adopted by the Council in February 2024 and provided some further resilience against potential unplanned budget pressures.

- Members were requested to note that the apparent change in accounting practice, was nothing new to Colchester, with the approach restoring the unallocated balance to the sort of levels that the Council operated with pre-Covid.

- The report provided summary details of the significant reserve adjustments made to both existing and newly created reserves. As well as the change in approach to the General Fund (Unallocated) Reserve:

- Some significant Existing Reserves had been returned to the General Reserve in full, such as the Pension Fund Deficit Reserve and the Revolving Investment Fund (RIF). £6.686m had also been taken from the Business Rates Reserve; and

- New Earmarked Reserves had been created covering risk areas such as Turnstone, Restructuring and (landlord) Health & Safety responsibilities, with significant provision made for corporate priorities such as a new “City Investment Fund” to replace the RIF, as well as “Fit for the Future;” and to further improve transparency.

- A separate Reserve had now been created exclusively to hold Rolled-Forward Budget commitments.

In discussion, the Committee noted that it had discussed variances in expenditure at its previous meeting, and the outturn was close to previous assumptions. In terms of the presentation of the General Fund and reserves, it was suggested that any Councillor considering the report would be likely to assume that a contribution of £4m from reserves was required, whereas in fact the deficit was approximately £600,000. The reason for this was the greater than expected performance of the business rate returns, leading to additional income of approximately £3m. it was suggested that the report presented a slightly negative picture of the Council’s finances which were stronger than a cursory glance suggested, and there was the potential that decisions were made on the basis of this more negative presentation. In a bid to ensure that the financial picture was presented to all Councillors with as much clarity as possible, it was recommended to the Portfolio Holder that he consider how the Business Rate reserves were managed and reported in 2025/2026, and to consider that all changes to all reserves were reflected in the general fund to provide a complete financial picture in one place.

Councillor Cory, Portfolio Holder for Resources attended the meeting, and, with the permission of the Chair, addressed the Committee. He sought to reassure the Committee that both the Leader of the Council and he had specifically considered the Council’s Business Rates income as they were keen to use this income to support the changes the Council was having to make. It was correct that this was a volatile figure, and it was therefore prudent to increase the amounts of Business Rates income into the base budget. The Council had received advice LG Futures that the Council was consistently overperforming in this area, however, it was noted that Business Rate collection would be the subject of reform I the future.

The S151 Officer agreed that there was a need to improve the transparency of the Council’s accounts, and he would continue to try to simplify the presentation in the future. The Council had been prudent in the past by not becoming reliant on Business Rate gain, and putting money into a reserve had served the Council very well.

A Committee member was pleased to note that the Council’s outturn was better than had previously been anticipated. The presentation of the accounts was improving, however, where was the £4m loss which it was believed that the Council had sustained shown in the reserves? There was a pressing need to examine and understand the movements of money through the Council’s reserves, for example where were the write-offs associated with the hibernation of some of the Council’s wholly owned companies displayed? Concern was expressed at the Council’s treatment of the pension reserve, as it appeared as though the service costs of pensions exceeded what was being paid in. it was noted that much larger figures now appeared on the balance sheet in respect of the Turnstone development, and it was suggested that the fact that this development had not appeared in the Council’s risk matrices or balance sheet before this time was concerning. The Chair reminded the Committee that it should not seek to discuss the finances associated with the Turnstone development in public session, and confirmed that he had been clear with the Leader of the Council and the Chief Executive that all-Member briefings on the project should be provided as soon as possible.

The Portfolio Holder for Resources confirmed that Turnstone was now coming forward in the balance sheet because it had just started being shown as income and expenditure. An allocation in reserves had been made to allow for any risk from this development. The Amphora dividend reduction which was mentioned in the report had been dealt with during the year.

The S151 Officer advised the Committee that he considered that the Business Rate income was clearly shown in the accounts, and confirmed that there had been an rise in this income post-pandemic. He did, however, accept that there was a lot of information spread across a number of tables in the report but the reserves had been reported correctly, together with the Council’s financial position. All necessary information was available, but perhaps not in the most easily intelligible format. With regard to the pension fund reserve, 2 different valuation methods were used. The first was a valuation at a point in time which appeared in the accounts, and the second was a tri-year valuation which determined the amount of contributions made by the Council to the pension fund. The total write-off associated with the hibernation of the Council’s wholly owned companies had been approximately £275,000, which was lower than anticipated.

A Committee member requested that an update on the Turnstone project be delivered to the Committee during Part B of the agenda, and the Chair confirmed that there were no items for discussion in this part of the agenda, however, he would consider how best to approach this request in the future.

RESOLVED that:

- The General Fund revenue position at the end of Quarter 4 (Provisional Outturn) for 2023/24, be noted (including Appendices A, B and C).

- The General Fund capital position at the end of Quarter 4 (Provisional Outturn) for 2023/24 be noted (including Appendix D).

- The Housing Revenue Account revenue position at the end of Quarter 4 (Provisional Outturn) for 2023/24 be noted.

- The Housing Revenue Account capital position at the end of Quarter 4 (Provisional Outturn) for 2023/24 be noted;

- The General Fund Revenue Reserves position presented in Section 7, reflecting the (unadjusted) provisional outturn for 2023/24 and including the outcome of the risk-based review of year-end balances and their prioritised reallocation based on the Council’s updated circumstances be noted.

RECOMMENDED to the Portfolio Holder: that he consider how the Business Rate reserves were managed and reported in 2025/2026, and to consider that all changes to all reserves were reflected in the general fund to provide a complete financial overview in one place. 

The Committee considered a report setting out the 2024/25 General Fund and Housing Revenue Account positions, for both revenue and capital, as of 30 June 2024 (“Quarter 1”).

Andrew Small, S151 Officer, attended the meeting to present the report and assist the Committee with its enquiries. The report which was before the Committee set out the Quarter 1 position for 2024/25, based on available information as of 30 June 2024. The report covered the revenue and capital positions for both the General Fund and the Housing Revenue Account as well as their respective funding positions.

The attention of the Committee was drawn to an important presentational change in the report which delivered significantly greater clarity. This had been made possible by an underlying change in accounting practice, which meant that the budget fixed by the Council in February 2024 did not change for the duration of the financial year. It was hope that this change demonstrated a further step towards increased transparency.

Unfortunately, it had not been a good start to the financial year for the Council. The report set out several significant financial pressures, and Homelessness/Temporary Accommodation costs were the most significant, with a forecast overspend of £826,000 at the Quarter 1 stage being the single largest single item, driving an overall forecast overspend of £2.048mi.

There was also a forecast overspend of £0.549m on Neighbourhood Services, with an underlying pressure of £0.308m on income from Garden Waste Collections being the most notable factor; this was due to the necessary accounting treatment of membership/subscriptions paid in 2023/24, which were required to be credited in full to that year, unlike the service charge, which was matched to the service provided.

The Committee was advised that Funding assumptions were mostly on track at the Quarter 1 stage with the notable exception of Reserve Contributions. If the forecast overspend emerged as projected, a Contribution from the General Fund Reserve of £1.536m would be required, as opposed to the Contribution to the Reserve of £0.512m assumed in the Budget. As presented in the report, this would leave a balance of £5.381m in the General Fund (Unallocated) Reserve. This was disappointing, but nevertheless would still leave a balance comfortably above the adopted minimum contingency of £3.0m.

The Housing Revenue Account (HRA) forecast was presented in the report, and it showed a good start to the year, with additional income of £1.391m anticipated and rental incomes performing strongly. 2024/25 was a 53-week rent year and an additional 36 units had been added at Greenstead in March 2024, after the budget had been set. The HRA balance of £4.380m was forecast to remain unchanged, and was well above £1.6m minimum assumed in the current HRA Business Plan.

The Capital Programme forecast was presented in the report and spending on both General Fund and HRA Capital has been subdued in Quarter 1, with notable slippage on Levelling Up schemes, such as St. Botolph’s Roundabout, with an impact of £11.014m, which is the single largest element of slippage on the General Fund Programme.

A Committee member noted the scale of the potential risk posed by the Turnstone development, and wondered whether any assumptions had also been made around staff wage settlements for this financial year? It was also noted that the budget which had been approved in February 20204 made provision for revenue to be received from the Turnstone project. The planned enabling works at Colchester Northern Gateway South now looked as though they may be delayed until the following financial year, was the Council on target to achieve this?

In response to questions from the Committee, the S151 Officer confirmed that it was not uncommon to see a rise in pessimistic forecasting early on in the financial year, but the advantage of this was that it provided an opportunity to consider mitigations to reduce the in-year overspend, and Cabinet was considering this now. The Council was making the same assumptions about staff wages as it had when the budget had been set in February 2024, however, it was necessary to await information from government in relation to any pay settlement and what impact this would have.

Councillor Cory, Portfolio Holder for Resources, attended the meeting, and, at the invitation of the Chair addressed the Committee. He confirmed that the timeframe for enabling works to take place at the Northern Gateway South site had slipped in the Council’s favour, and borrowing to fund this work would not be undertaken until work was to be carried out.

A Committee member suggested that it was important to watch for operational overspend at the end of the financial year. He believed that although the HRA appeared to show a positive picture, the figures may prove unworkable at current interest rates. The main reason for this was the capitalisation of major repairs, was the Council absolutely certain that it was applying the depreciation on major repairs correctly in the current accounts? He believed that the Medium-Term Financial Plan showed that it was not. The large underspend on the Capital Programme over the preceding years was noted, and a full review of the Programme had been requested in September 2022 and was still awaited, which was a grave cause of concern.

The S151 Officer confirmed to the Committee that he was satisfied that depreciation and major repairs had been the subject of the correct accountancy treatment, and the forecasts had been compiled based on assumptions which had been used in budget forecasting until now.

A Committee member noted that the report contained a large amount of financial data, and wondered whether it would be possible to include year on year data points for the most significant areas to provide an indication of whether these were trending up or down. This would assist those Committee members with less of a technical financial background to more easily gain a greater appreciation of the general financial position. The Portfolio Holder for Resources welcomed this suggestion, however, noted that any such indication would require a large amount of commentary due to budgetary variations. Anything which increased the transparency of the figures overall would be welcomed, however. The S151 Officer supported the principle that documents be made as digestible as possible, and anything which assisted with this would be considered, although there were potentially a number of challenges in implementing the suggestion which had been made as direct comparisons from year to year may be difficult. The Chair noted the potential difficulty in ensuring that any comparison was on a ‘like for like’ basis, but if there was a straightforward way to introduce comparators then this would be supported.

RESOLVED that:

- The General Fund revenue position at the end of Quarter 1 (30 June 2024) for 2024/25, including actions being undertaken or proposed to ameliorate the position, where significant variances have been identified, be noted (inc. Appendices A, B & C).

- The General Fund capital position at the end of Quarter 1 (30 June 2024) for 2024/25 be noted (inc. Appendix D);

- The Housing Revenue Account revenue position at the end of Quarter 1 (30 June 2024) for 2024/25, including actions proposed to ameliorate the position, where significant variances have been identified, be noted;

- The Housing Revenue Account capital position at the end of Quarter 1 (30 June 2024) for 2024/25 be noted.

The Committee considered a report setting out the Council’s actual Treasury Management activity for the first three months (Quarter 1) of 2024/25 (i.e., April to June 2024).

Andrew Small, S151 Officer, attended the meeting to present the report and assist the Committee with its enquiries. The report set out the Treasury Management Quarter 1 position for 2024/25 and represented an update based on available information as of 30 June 2024.

The Committee was reminded that the report provided an update on the adopted Treasury Management Strategy for 2024/25, which was considered by it on 18 June 2024, and was subsequently adopted by full Council on 17 July 2024.

The opening to the financial year had been quiet. Significant slippage on the Capital Programme was contributing to a supressed need for External Borrowing, with overall Borrowing declining from £151.6m to £147.6m during Quarter 1. Treasury Management Investments had also fallen by £4.0m during the period, from £20.5m to £16.5m.

Performance against Treasury Management Indicators was also presented. Targets had been met in nearly all cases, with the only exception being the Interest Rate Exposure Indicator, where there had been a technical breach. However, a review of the position suggested that the indicator was defective rather than the performance. It was proposed that the Committee would receive greater detail at the Quarter 2 stage, but the Committee was assured that an overall risk exposure of just £182,000 as of 30 June 2024 was not a cause for concern.

A Committee member sought to understand the rationale for inter-council borrowing and lending, were other councils borrowing money to support cash flow or investments? The S151 Officer confirmed that such borrowing was wholly linked to cash flow. Councils had different collection dates for revenue and so sometimes would be cash rich or cash poor. Councils could go to banks or building societies, but the local government market was quite liquid and extremely safe, and so it made sense to lend to other councils rather than the private sector. There was no provision for declaring bankruptcy in local government, and so loans were unable to be written off and would be repaid. It was not possible to borrow in order to lend the money on, or to generate a direct profit.

A Committee member referred to the information in the report illustrating balance sheet summary and forecast, which indicated to him that the Council’s cashflow was subject to a significant deficit, what was the explanation for this? The S115 Officer suggested that the Council’s capital financing was an area of great complexity, and it may be more appropriate to offer a fuller explanation outside the meeting. The capital financing requirement was a financing requirement set out in the Prudential Code and was something the Council was obliged to report on. It represented an underlying expenditure on capital assets which might need financing.

A Committee member sought to understand how the Council’s loans from the Public Works Loan Board (PWLB) were financed. It appeared that the Council had very significant debt which had to be repaid in the near future, how was the interest on the various outstanding loans calculated, what was the Council’s liability and how would this debt be repaid? The S151 Officer confirmed that it was possible to borrow to refinance a loan, and provision was made in the Councils’ revenue budget as Minimum Revenue Provision (MRP) in respect of the interest which was payable on the loans. The MRP represented the Council setting money aside to repay outstanding loans, and this was factored into all revenue plans.

RESOLVED that: The Treasury Management Quarter 1 Update 2024/25 (Appendix A) be noted.

The Committee considered a report which asked that it take a number of actions in support of the Council's compliance with the Chartered Institute of Public Finance and Accountancy (CIPFA)’s published revised guidance for the operation of local authority audit committees.

Hayley McGrath, Corporate Governance Manager, attended the meeting to present the report and assist the Committee with its enquiries. The report followed from the report which the Committee had considered at its last meeting, where work being carried out in relation to the CIPFA Review of Audit Committees had been introduced. The proposed action plan had been reviewed and updated in the light of the comments made by the Committee at its last meeting, and the revised plan was appended to the report. The Committee was reminded that the action plan was subject to change as work was developed until the Committee reached the stage where it felt that the plan contained a list of items which reflected the true purpose of the Committee.

Also before the Committee was a draft report to Full Council as part of the CIPFA requirements, and which had used the CIPFA format, which was an annual report summarising the work which had been undertaken by the Committee in the preceding municipal year. If the Committee was happy with this report, it would be presented to Full Council in October 2024. In future years it was anticipated that this report would come towards the beginning of the municipal year.

The last appendix to the report which the Committee was asked to consider was a template for a skills gap analysis (SGA), as there was a need to demonstrate the skill set of the Committee as a whole. It was felt that the SGA was a good starting point for future discussion, and if it were approved, the Committee would be asked to carry out a self-assessment on where its members thought their skills were. This information would be collated anonymously and offered for discussion with the Committee to identify future training needs.

In discussion, the Committee noted that the proposed action plan was a document which would evolve during the course of the municipal year. It was suggested that the proposed SGA was potentially too focussed on skills associated with accountancy when the Committee was concerned with a far wider range of responsibilities, and there was a need to make Committee membership available to as wide a pool of Councillors as possible.

It was noted that the SGA seemed to suggest that members of the Committee should avoid going into great detail when considering agenda items, however, this was sometimes necessary, and the Committee considered that the correct approach was to ensure that the Committee could consider things in detail when there was a need to do so.

A Committee member considered that the SGA concentrated too much on Council protocols and procedures, and it was more appropriate that Committee members were able to obtain an understanding of the fundamental operating principles of the Council. This would result in members who were more able to readily recognise important issues and understand risks on a more basic level.

The Corporate Governance Manager confirmed that there was a need to develop new processes and change the mindset of the Committee in the future. This process had only just started but a change in the challenge form the Committee had already been noted. It was ultimately for the Committee to decide how it wished to approach its work in the future, but it was considered that there was a need to make its work as straightforward as possible, with an appropriate balance between detail and fundamental understanding. The Committee accepted that the SGA was representative of an evolving process, and although the initial SGA contained a high level of detail, this could be revised in the future.

Andrew Weavers, Head of Governance and Monitoring Officer, attended the meeting and advised the Committee that it was important for it to meet in private to discuss the results of the SGA before these were referred to the Committee formally. The template for the SGA had been provided by CIPFA, and it was important to retain the language which it used at this point, as this would be what the Council was initially assessed against.

RESOLVED that:

- The revised action plan be approved, following comments made at the Governance and Audit committee meeting on 30 July 2024, and Officers be authorised to continue developing the actions.

- The draft Governance and Audit Committee Annual Report for 2023- 24 and its submission to Full Council be approved.

- The proposed Skills Gap Analysis template be approved, together with the development of a process for the Committee to undertake an assessment of members skills against the requirements.

The Committee considered a report setting out its work programme for the current municipal year.

The Democratic Services Officer attended the meeting to present the report and assist the Committee with its enquiries. The attention of the Committee was drawn to the additional meeting which had been scheduled for December 2024, and the items to be considered at this meeting would be presented for approval at its next meeting. Meetings with the Councillors auditors would also be arranged.

RESOLVED that: the contents of the work programme be noted