Meeting Details

The Committee considered, in its role as the landlord committee for the City Council’s social housing, a report which demonstrated the Council's compliance across a variety of activities regulated by the Regulator of Social Housing.

Geoff Beales, Client Services Manager, attended the meeting to introduce the report and assist the Committee with its enquiries. He reminded the Committee that the Tenant Satisfaction Measures were intended to be a tool for tenants to scrutinise the performance of their landlord and managing agent, Colchester Borough Homes (CBH), and to give suggestions on how to improve services. 202425 had been the second year of tenant satisfaction results, and the Officer’s report detailed the results of the survey this year, together with the preceding year by way of comparison. The results were positive and encouraging as overall satisfaction had improved and was above the national benchmark. Most other ratings had improved significantly since last year, including scores for satisfaction with repairs. The results would be published to tenants as part of a regular newsletter, following which a consultation would take place to inform an action plan for the year. The data would be shared with the Regulator in the prescribed format, following which the third year of the survey would take place. A full report would be made publicly available on CBH’s website.

Philip Sullivan, Chief Executive, CBH, attended the meeting and drew the attention of the Committee to key areas in the Officer’s report which was before it. The Operations and Performance Commtitee of CBH had reviewed Q2 performance, and was able to provide this Committee with assurance that the year to date performance had been strong, particularly in relation to asbestos, electrical safety and voids. To improve void re-let times, weekly staff meetings were being held and new staff had been employed to carry out end of tenancy inspections.

The Committee was being asked to note the mock inspection action plan contained in the Officer’s report. Good progress had already been made, and assurance would be provided to the Committee that the action plan had been successfully implemented.

The Terms of Reference for the Committee had been updated to reflect its landlord function.

The Committee was asked to note data provided from the Ombudsman’s 2023/2024 annual complaint review, which included national findings of over 8,600 instances of maladministration. CBH always aimed to deliver high levels of service, the 2023/2024 report highlighted the fact that the Ombudsman had been more active. An update on steps taken by CBH to use customer feedback to improve services was noted by the Committee. Additional regulatory assurance, including from internal audits and tenant scrutiny, had been provided in the Officer’s report, and the Regulators Sector Risk Review had been considered by the Board of CBH, and CBH’s Strategic Risk Map would be updated to reflect any evolving or new risks identified.

A Committee member had suggested that the remit of the Committee had been changed, so that it was officially acting in a landlord and social housing role, and considered that this also meant that the Committee now had the responsibility for considering the Council’s Housing Revenue Account (HRA). This was a big responsibility which needed to be reflected in the work of the Committee. The Chair of the Committee did not necessarily consider this to be an accurate reflection of the Council’s Constitution, however, the Committee did need to be reviewing the HRA, and reports were provided to it on this basis. Richard Block, Chief Operating Officer, attended the meeting and advised the Committee that under the Council’s Executive Model, Cabinet was responsible for the oversight of the HRA and reported to Council on this basis, with the Governance and Audit Committee performing a scrutiny function. A Committee member considered that Cabinet needed to be aware of what he considered to be a governance vacuum in relation to the HRA, which constituted the largest item on the Council’s balance sheet.

Considering the report before it, the Committee noted that the performance figures which had been provided to it seemed to indicate that CBH was heading in a positive direction. Virtually all the indicators had been improving, and the majority of these were above the national average, which was a commendable position which represented a significant improvement which was to be congratulated. It was considered that the mock inspection was very important, and there had been wide diversity in the findings of the inspectors to date, was it possible for CBH to provide an indication of how it had been felt that the mock inspection had gone, and whether any areas for improvement had been identified?

The Chief Executive of CBH confirmed that overall very positive feedback had been provided by Savills who had carried out the mock inspection and who had indicated that CBH would be approaching the top Consumer grade which was available. In terms of opportunities for improvement, it was intended that additional information on knowing about the customers of CBH would be used to improve the service which was offered, and while Savills had been satisfied that CBH were meeting key requirements, it would be helpful if more evidence of this could be provided. Accordingly, more audits were planned for the forthcoming year to generate third party assurance. The Committee noted that the void re-let times had been improving, however, due to the current position with the pressures being generated by the homelessness crisis in Colchester, any actions which could be taken to reduce the re -let time down to the target of 28 days, or lower, would be welcomed.

A Committee member was pleased to see that historical data had been presented together with current data in the Officer’s report to demonstrate the rate of change. In relation to this data, and in particular the tenant satisfaction data, it would also have been useful to know the sample size, as it was difficult to understand the percentages which had been presented without additional context. The Chief Executive of CBH advised the Committee that the surveys had been carried out by an independent collection organisation, to provide assurance that the figures provided were robust, and additionally an internal audit had been carried out in the previous year to ensure that with the technical requirements of the Regulator had been complied with. The Client Services Manager believed that the sample size had been approximately 2,000, with 900 responses having been received, which had provided a statistically satisfactory survey.

In discussion, the Committee sought to understand the satisfaction ratings which had been provided in relation to repairs, where the 13% of dissatisfied tenants concerned with the time taken to carry out the repair, or with the quality of the work? Was CBH happy with the time taken to carry out repairs, and was it felt that tenants were reasonable in their expectations or were repairs potentially not being carried out quickly enough? The Chief Executive of CBH advised the Committee that there were a variety of issues which potentially affected repair satisfaction, including the quality of repairs, timescales and potentially a breakdown in communication between CBH and the tenant. Broadly speaking, repair quality and timescales were satisfactory, however, there was a desire to continuously improve the services which were offered. Feedback had been received that in instances when there had been a complicated repair, or a number of repairs had been completed in the same house, there had been communication issues, and steps were being taken to address this. There was confidence that repair services were being improved, and ways to increase satisfaction were always being sought.

In discussion, the Committee wondered how tenant satisfaction measures which measured the levels of satisfaction with the maintenance of public areas by the landlord worked in practice where areas contained a mix of social and privately owned housing? Who was responsible for the maintenance of shared spaces in these areas, and how was this maintenance co-ordinated to ensure that excellent standards were maintained? The Committee expressed surprise that the opinion of tenants was not sought on whether they considered that their tenancy represented good value for money.

In terms of whether or not the tenants felt that CBH delivered value for money, this was not one of the questions which had been prescribed by the Regulator, who set the questions and methodology for the surveys, and although this was an important question, it was not reported here. In terms of the tenant satisfaction scores for areas which contained both privately owned and social housing, this would also include areas managed by other landlords and housing associations. The new Consumer Standards set by the Regulator, had been explicit to housing associations that they should be contributing positively to the neighbourhood, and CBH would work with other agencies to try to achieve this. It was, however, the case that CBH could be performing well, but could be let down by other parties, a position which the Committee considered was somewhat unfair. The results of the surveys had been broken down by Council Ward so that Councillors were able to review the results which were relevant to their own Wards. It was hoped that if any Councillor was concerned about tenant satisfaction for any homes in their ward, they would liaise with CBH to try to address these concerns. The Committee was pleased to note that the suggestion which it had made that Ward Councillors were informed about Ombudsman complaints in their Wards had been taken forward.

The Committee had carefully reviewed the information which had been presented to it, and had indicated areas which it suggested be expanded upon in future reports. The Committee sought to be pro-active in its assessment of the Officer’s report presented to it.

RESOLVED that:

- The 2024/25 Tenant Satisfaction Measure performance be noted and that actions to support ongoing continuous improvement would be identified.

- That a verbal update providing assurance from CBH’s November Operations and Performance Committee on relevant Quarter 2 performance had been provided at the meeting.

- The action plan arising from the recent Savills mock inspection and that assurance would be provided to the Committee in Quarter 1 2025/26 from the CBH Board that the action plan has been successfully implemented with any exceptions being highlighted, be noted.

- The update that has been made to this Committee’s terms of reference and the “Governance and Executive Route to Regulatory Assurance” chart provided at Appendix 3 be noted.

- The new process being introduced to ensure that Ward Councillors are aware of Ombudsman cases be noted.

- The additional assurance being provided to the Committee from the CBH Board be noted.

The Committee considered a report which set out the 2024/25 General Fund and Housing Revenue Account positions, for both revenue and capital, as at 30 September 2024 (Q2).

Chris Hartgrove, Deputy S151 Officer attended the meeting to present the repot and assist the Committee with its enquiries. The Officer’s report contained information on both the General Fund and the Housing Revenue Account (HRA), and the Committee was reminded that there had been an important change in presentation of information to it for the current financial year, with greater clarity than in previous years. This reflected an underlying change in accounting practice which meant that the budget which had been fixed by the Council in 2024 would not change for the duration of the financial year, which would aid the scrutiny process.

The Committee heard that it had not been a good start to the first half of the financial year for the Council, with several financial pressures being experienced, and the most significant of these were the costs associated with the current homelessness crisis with a forecast overspend of £1.142m at the Q2 stage. The Committee was asked to note that the anticipated savings from the recently adopted ‘Beyond the Box’ student accommodation initiative would be reflected in the Q3 report which would be presented to it.

Additional financial pressures were identified, including a forecast overspend of £510,000 on the Council’s Place and Prosperity Service, and a forecast shortfall of £270,000 in income from Planning Applications. A further notable factor was the underlying pressure of £445,000 on income from Garden Waste collections due to the necessary accounting treatment of memberships/subscriptions paid in 2023/2024 which were required to be credited in full to that year, unlike the service charge which was matched to the service provided.

A positive note was provided by a significant underspend of £1.630m now forecast on Financing Costs, which significantly offset the overspend on Service Budgets resulting in a net year overspend forecast of £0.957m. This was an improved position compared to Q1, where a net outturn of £2.048m had been forecast.

There had been an underspend on Capital Financing costs which had been driven by a combination of lower than expected net interest payable and reduced minimum revenue provision (MRP) charges, reflecting updated timing expectations on the delivery of a range of General Fund capital schemes.

The Officer’s report demonstrated that funding assumptions were on track at this stage, however, if the forecast overspend emerged as predicted then a contribution from the General Fund Reserve of £0.200m would be required, as opposed to the assumed contribution to the Reserve of £0.512 which had been assumed in the budget. This would leave a balance of £6.717 remaining in the General Fund (Unallocated) Reserve, which was comfortably above the minimum contingency of £3.0m.

The HRA forecast showed a broadly positive first half of the financial year, with additional income of £1.692m anticipated with rental income performing strongly. The HRA balance of £4.380m was forecast to remain unchanged.

The Capital Programme forecast was presented in the Officer’s report, and spending on both General Fund and HRA Capital had again been subdued in Q2, with notable slippage on Levelling Up schemes, such as the St Botolph’s Roundabout.

A Committee member raised a number of questions in relation to the General Fund. It was noted that the Council’s failure to deliver its Capital Programme had provided significant savings, was the current Capital Programme affordable? With regard to the Turnstone project, the projected income figure in the budget which had been passed in February 2024 was now unlikely to materialise, had this incorporated into the forecast outturn for this year? More explanation would be appreciated in relation to the accounting treatment of garden waste income, as it had been assumed that this had been fixed in the current budget. Were the same assumptions being made in relation to any prospective staff pay settlement that had been made in the current budget?

Turning to the Capital Programme, it was noted that as at 30 September allocated funding for the Colchester Northern Gateway (CNG) enabling works had yet to be spent, but this was predicted to be spent by March 2025, what was the reason for including it in the budget this year as the work had been due to take place in the summer of 2024, had the Council missed its time slot for these works?

The Deputy S151 Officer confirmed that the Council’s Capital Programme had been affordable at the point in time at which the budget had been set. If delivery of the Programme was rescheduled in any way, then the dynamics would change slightly, and some spending pressures were being picked up in emerging draft budget for 2025/2026. The reason that the Turnstone development was not showing as an overspend was that a significant Reserve was in place, meaning that any shortfall would be met from this. The treatment of garden waste income had been corrected in the emerging 2025/2026 budget and it was correct to say that this had not been picked up in the previous budget. With regard to any staff pay award, this had not been pre-empted as Cabinet had ye tot make a decision in respect of this.

Richard Block, Chief Operating Officer, attended the meeting and addressed the Committee. He noted the concerns which had been expressed around the Council’s Capital Programme, and assured the Committee that a robust programme management approach was taken by the Council in respect of this. It was expected that the forthcoming budget would contain stronger links with the Capital Programme. In terms of more specific schemes around Colchester, it was anticipated that repairs to the Moot Hall would cost significantly less than £1m, with planning permission for the works to go ahead expected to be granted in the near future. It was hoped that these works would be completed by the end of April 2025. The CNG enabling works did have a slot booked, and the Council was in communication with Essex County Council (ECC) Highways to seek the appropriate permission for these works to go ahead as a matter of urgency. The Council had designed a scheme for this site and contractors were ready to start work, but the situation was out of the Council’s control and every avenue was being explored with ECC to expedite matters. The Committee heard that work with Unison with regard to a pay offer was ongoing, and the potential budgetary pressure of this offer would be an additional £350,000. Councillor Cory, Portfolio Holder for Resources, attended the meeting remotely, and, with the permission of the Chair, addressed the Committee. He offered assurance that the CNG project was moving forward, and he believed that this would be on track for further development in the summer of 2025.

The Committee noted the Reserve which had been created to guard against Turnstone losses, however, this income had to be represented on budget papers to reflect the true picture.

A Committee member raised the issue of extra costs associated with the Local Plan due to items which had been rolled over being paid for from the current year’s budget. It was noted that the Council was holding large sums of money for third party capital projects which had not yet been spent, was the Council able to keep any interest generated on these sums? The Deputy S151 Officer confirmed that any interest generated was kept by the Council. The Chief Operating Officer confirmed to the Committee that a budget had been carried forward year on year in the General Fund budget in respect of the Local Plan, on the basis that this would need to be spent at some point on the significant preparatory work which was needed for the Local Plan. This was arguably not the most efficient way to deal with this, and one-off payments could instead be taken from the Council’s Reserves. The Deputy S151 Officer offered assurances to the Committee that the consequences of rolling forward budgetary items were neutral in accountancy terms, so no harm had been done. The accountancy practice had been streamlined recently to clarify the position.

The Chair wished to request that Cabinet consider not whether the current Capital Programme was affordable, as it had already been budgeted for, but whether or not the programme for 2024/2025 was deliverable.

A Committee member sought to understand how the reported income and expenditure operated in practice, having struggled to reconcile the values which had been provided in the Officer’s report in respect of the reduction of Capital Programme costs and income interest with the differential which had been quoted. The Deputy S151 Officer would refer this question to the Finance Team to determine whether there had been an error in the Officer’s report.

With regard to the Turnstone development, a Committee member questioned the detailed analysis for the Turnstone project which had been provided and which stated that significant pressure from Northern Gateway Turnstone had been recognised, however, in terms of financial reporting to the Committee this seemed vague. It was considered that greater detail should be provided to help the Committee understand the specific pressures which were present. He had been alarmed to hear that some of the costs which had been mentioned in the report were going to be charged directly to the £4m reserve which had been reported to the Committee in September 2024, and considered that it appeared that the Council was running 2 sets of accounts; the accounts which were reported to the Committee, and another set which consisted of a Reserve being charged for a loss. It was suggested that the Committee should be considering all the finances of the Council without having a hidden leger process in the background, which was essential to understand the position in budgetary and Q2 outturn terms.

The Deputy S151 Officer wished to make it very clear to the Committee that the Council did not operate 2 sets of accounts. With regard to the reporting of spending and Reserves, this naturally flowed through the report which was before the Committee. The Council had only reached Q2 reporting, and every financial movement would be reflected in this report. Should shortfalls emerge, then these would be met by the allocated Reserve, and it was confirmed to the Committee that no charges had been made to the Reserve yet during the current financial year.

A Committee member considered that in the presentation of the HRA in the Officer’s report, too much had been placed into Capital Finance Costs, and requested that interest, profit and depreciation be reported as separate figures. It would also be useful to use a format which showed what the management costs were, and a breakdown of the HRA management costs had been requested previously as it was considered that these costs were too high.

In respect of the Turnstone Reserve, it was essential that it was very clear that all transactions were made through the income and expenditure account, and even if money hadn’t been spent this should feature in the outturn forecast for the sake of transparency. What was required to ensure that capital expenditure started to be made? Although interest generated on unspent funds was beneficial, costs associated with the projects were increasing, and it may be that as a result of this schemes became unaffordable in the future. Although it was pleasing to see the removal of rollovers from the budget, a culture change was needed in the Council to encourage capital expenditure. If it was considered that proposed capital expenditure was worthwhile, then this needed to be implemented.

The Chair confirmed that he had shared the Committee’s concerns about the Turnstone development and had ensured that in-confidence briefings had been provided to keep the Committee up to date with the position. He further assured the Committee that if there was a need for any further involvement of all Councillors then he would ensure that this took place. In respect of city-centre development, it was noted that the majority of schemes were extremely complex in nature and involved other parties, and although the Council may wish to proceed at pace with projects, this was not always possible.

The Chief Operating Officer advised the Committee that the Council had a team of dedicated staff driving projects forward, however, it was common to be reliant on partners who were not able to deliver at the pace the Council wished. The Council had a really robust project management process, with resources and teams allocated to projects which also involved governance and member oversight. Invariably when problems had been encountered, this had been due to the complexity of working with partners, particularly ECC Highways. A Committee member suggested that when considering capital projects, the projects for which the Council was solely responsible be separated from those projects which were dependent on third party support. However, it was important to remember that the capital budget was the Council’s responsibility, and a real drive was needed to deliver this for the benefit of the city.

Noting the debate which had taken place, the Chair repeated his earlier suggestion that Cabinet be asked to consider what in the current capital programme was deliverable in the remainder of the year.

The Deputy S151 Officer noted the comments which the Committee had made with regard to report presentation, and would give these careful consideration as anything which would improve transparency of the Council’s finances would be welcomed. With regard to Reserves, it was hoped that the Committee would acknowledge the greater clarity which had been provided recently, and the Finance Team was committed to carrying out further analysis as part of the Q3 reporting which would be presented to the Committee. It was very difficult to project the outturn on earmarked Reserves, however, most of the big Reserves were predictable to a degree. In terms of the Business Rates reserve it was necessary to remind the Committee that all business rates income came in via the income and expenditure accounts and always had done in accordance with proper accountancy practice. It was necessary to be extremely clear on this point to provide assurance to the Committee. The Council also maintained a Business Rates Reserve to protect itself against fluctuations in the business rates retention system. Because the Council had been successful in business rates collections in recent years, it had been receiving large returns from business rates retention. The surplus of £4m the previous year had not been unexpected, and in terms of developing the emerging draft budget for 2025/2026 the amount which would be build into the base budget was significantly higher than had been present in recent years so in the future figures would be more closely aligned.

Councillor King, Leader of the Council and Portfolio Holder for Strategy, attended the meeting and, with the permission of the Chair, addressed the Committee. He wished to address the sentiment about the drive and determination, and the need to get capital spending going. It was unacceptable that the Council was spending at its current rate and this was a concern to him. he had sought to take as much of an active role as possible to share the personal experience which he had in this area. The Council had to have a culture which was rooted in realism and not in optimism, however, this was complicated by the fact that the bidding process for funding was inevitably separate from the project delivery. He was personally invested in seeking what could be done to add extra drive and realism to forecasts to ensure that in future years the Council was closer to where it should be in terms of getting the capital programme funding spent.

A Committee member sought assurance in relation to something he had read several times in the General Fund revenue budget variance analysis relating to overspend forecast on employee costs due to not having had sufficient vacant posts. This was a concern as the budget appeared to be based on the assumption that members of staff may leave their employment, allowing the Council to make a financial saving, and if this did not happen then this would lead to overspending. The Chief Operating Officer advised the Committee that the Council typically had a staff turnover rate of approximately 10%, and across a large workforce posts would inevitably remain unfilled for a time. There was a recognition in the budget that there would be a gap between posts becoming vacant and new post holder being appointed.

Returning to the discussion around the Council’s Reserves, a Committee member reminded the Committee that at a previous meeting, it had been considering an outturn position which indicated that the Council would have a deficit of approximately £4m, whereas in fact this deficit had ended up being only £600,000. Was it possible to ensure that the bottom line figure from the income and expenditure account matched the changes in Reserves whether Reserves were added to or depleted at the end of the financial year. This was important to provide transparency and clarity. The Deputy S151 Officer understood the request that had been made but reminded the Committee that it took a backwards focus when considering the accounts, and it was not considered that there would be any unforeseen issues at the end of the financial year.

A Committee member expressed his disappointment at some of the comments which had been made at the meeting suggesting that the Council was running 2 sets of accounts and that its staff lacked the dynamism to deliver projects. The Council had a dedicated workforce, and benchmarking figures showed whether its performance was good or bad. The Chair acknowledged the concerns raised, but reminded the Committee that it was essential that its members were able to ask questions and comment on whether an aspect of the Council was operating in the way that they believed it should.

A Committee member wished to make an additional recommendation to Cabinet stating:

- Insofar as it is permitted by accounting standards, all transactions fall within the orbit of the income and expenditure account, and no transactions will be taken out of usable Reserves without providing this information to Councillors, notwithstanding that this would require a confidential section in the income and expenditure account.

The Deputy S151 Officer sought to explain to the Committee that the report before it already contained much of the information requested, including the projected balance of the HRA Reserve. What had not been presented was the movement in the General Fund earmarked Reserves which would come forward in Q3.

RESOLVED that:

- The General Fund revenue position at the end of Quarter 2 (30th September 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) be noted.

- The General Fund capital position at the end of Quarter 2 (30th September 2024) for 2024/25 be noted (inc. Appendix D) be noted; and

- The Housing Revenue Account revenue position at the end of Quarter 2 (30th September 2024) for 2024/25, including actions proposed to ameliorate the position, where significant variances have been identified, be noted; and

- The Housing Revenue Account capital position at the end of Quarter 2 (30th September 2024) for 2024/25 be noted.

RECOMMENDED TO CABINET that:

- It consider which items in the Capital Programme were deliverable within the current financial year.

- Insofar as it is permitted by accounting standards, all transactions fall within the orbit of the income and expenditure account, and no transactions will be taken out of usable Reserves without providing this information to Councillors, notwithstanding that this would require a confidential section in the income and expenditure account.

The following members of the Committee requested that it be recorded that they had abstained from the vote on this recommendation:

Councillor Paul Smith

Councillor Sam McLean

Councillor Sean Kelly

The Committee considered a report which set out the Council’s actual Treasury Management activity for the second quarter (Quarter 2) of 2024/25.

Chris Hartgrove, Deputy S151 Officer, attended the meeting to present the report and assist the Committee with its enquiries. The Committee was reminded that the report which was before it provided an update on the adopted Treasury Management Strategy for 2024/2025 which had been considered by the Committee in June 2024 prior to adoption by Full Council in July 2024. The Committee was asked to note that due to tight Committee deadlines, the report had been drafted almost immediately after the end of Q2 in October, and this meant that some detail would need to be updated in the Q3 report to reflect the emerging draft budget for 2025/2026.

The Committee heard that slippage on the Council’s Capital Programme had contributed to a suppressed need for external borrowing, with overall borrowing declining by £4m during the first 6 months of the year. Treasury management investments had also fallen by £9.2m during the period since the start of the year and the managed reduction in investment balances was further supressing the need for external borrowing.

Performance against treasury management indicators was also presented to the Committee, and targets had been met in nearly all cases with the only exception being the Liquidity Risk Indicator where there had been a short-term technical breach when total cash available within 3 months had fallen to £11.4m at Quarter end which was below the target balance of £20m. The Committee heard that strict adherence to this indicator required a robust cash flow forecasting process and although the Council was adept at having access to sufficient instant access funds to avoid a net overdrawn position, it could possibly do a little better in managing the interrelationship with short term investments. Treasury management was a topic that had been flagged for review by the Council’s Internal Audit function, although the Deputy S151 Officer stressed that he was not aware of any significant issues in this area.

In response to a question form the Committee, the Deputy S151 Officer confirmed that the reason for the breach of the indicator which had occurred was unforeseen cashflow, and this was what internal audit would consider. It was stressed that the Council had not gone into overdraft, but it was hoped that a greater understanding could be obtained of how to better meet the indicators in this area through fine tuning of the Council’s processes.

A Committee member noted a new borrowing forecast of £144m had been reported if the Council’s Capital Programme was to go ahead, and that this borrowing would likely be at interest rates of over 4%. He did not consider that the figures which had been provided in the Officer’s report to support this calculation were recognisable from the balance sheet, and he sought to understand the position in terms of normal cash flow, if this was possible. Additionally, was it possible for the Council to borrow at the rates which had been quoted in the repot to fund such a large capital programme?

The Deputy S151 confirmed that the method of presentation of the figures in the report was common to local authority accounting presentation. It was important to consider the context of the potential borrowing of £144m, as this figure would reduce in Q3 because of the revised Capital Programme on the Housing Revenue Account (HRA). With regard to the forecast interest rates, these had only been released on 11 November 2024 and so were not embedded in the figures provided but were embedded in the emerging draft budget for 2025/2026. It was worth reiterating that the Council would benefit from a discounted certainty rate on all Public Works Loan Board (PWLB) rates.

In spite of the assurance which had been provided by the Deputy S151 Officer, concerns remained for a Committee member that too low a borrowing rate had been assumed, and therefore and therefore the Council was investing in a manner which would lead to unnecessary financial pressure. It was for this reason that it was essential that appraisal rates were reviewed in line with current market conditions.

In discussion, the Committee considered the information which had been provided in the Officer’s report concerning loans which had been taken out by the Council. In response to questioning from the Committee the Deputy S151 Officer confirmed that it was possible to borrow money to repay a pervious loan, and a Committee member requested that, if possible, the loans which the Council had taken out to repay other loans were highlighted in future reports. Additionally, it was noted that the Council had leant approximately £9m to Havering and Middlesborough Councils whilst borrowing this amount from Barclays Bank at the same time, had the loan from the bank been taken out to finance the loans made to local authorities?

By way of response, the Deputy S15 Officer confirmed to the Committee that the Council did not borrow money to lend on, and that similar loan amounts were coincidental. Borrowing from a bank rather than the (PWLB) would have been as a result of independent treasury management advice which would have been received at the time. The Committee noted that the loans which had been taken out from Barclays were Lender Option Borrower Option (LOBO) loans, which had the potential to cause issues for the Council, was it possible for an indication to be given which loans were LOBO loans in future reports?

RESOLVED that:

- The Treasury Management Quarter 2 Update 2024/25 which had been presented in the Officer’s report be noted.

The Committee considered a report requesting that it note the draft Statement of Accounts 2023/24, prior to the completion of the external audit process.

The Chair of the Committee reminded it that the statement of accounts which had been published on the Council’s website was in draft form, and the Committee would be afforded the opportunity to examine the accounts in greater detail at a meeting early in the new year.

Emma Larcombe, Audit Director of KMPG, the Council’s external auditors attended the meeting and addressed the Committee. It was good to see these accounts published, but as the Committee had been advised previously, KPMG would not be completing a detailed audit on these accounts. There was a backstop date at the end of February and a broad disclaimer opinion would be issued on these accounts, however, a number of elements of work would need to be completed prior to the issue of this disclaimer. A further key aspect of work to be undertaken was in relation to the Value for Money (VFM) Opinion which was also required to be provided before a disclaimed opinion could be issued. There was a lot of work to do, but it was hoped to get engagement with the Council in the next few weeks to get this started, and it was hoped to be able to report to the Committee in the New Year. The Chair confirmed to the Committee that a mutually convenient time and date would be arranged for the Committee to meet with KPMG in private.

Chris Hartgrove, Deputy S151 Officer, attended the meeting and advised the Committee that the accounts had been published on 22 November 2024, and although this had been significantly later than anticipated, the Committee was reminded that the Finance Team had produced 3 sets of accounts over the past 14 months, and this was the first time that the Council had been up to date in terms of published accounts. This position was undesirable, but progress was being made.

A Committee member noted that the suggested decision in the Officer’s report requested that the Committee note the draft statement of accounts, however, he had not received sufficient time to review the document. He therefore proposed that the wording of the Committee’s resolution be amended to state that the Committee noted the publication of the draft statement of accounts pending a detailed review at the latest before the end of the financial year.

The Committee enquired whether the Audit Director of KPMG could provide any further information in relation to the audit, and a Committee member suggested that he had not been aware of the possibility that a disclaimed opinion would be issued by KPMG. What was preventing the conclusion of the audit, and what was it considered likely that the proposed disclaimer would say?

The Chair of the Committee had attended a regional meeting of Audit Committee Chairs, and it had been his understanding following this meeting that Suffolk County Council were likely to be the first local authority present at the meeting to publish a disclaimed set of accounts. He reminded the Committee that it had been made aware previously that this set of accounts were likely to be disclaimed due to the preceding audit issues. The Audit Director of KPMG confirmed that she had explained the position around disclaimers several times to the Committee and to the Council, and it was the expectation of the Financial Reporting Council (FRC) that the majority of 2023/2024 accounts where the previous years had been disclaimed would also be the subject of a disclaimer. There was not enough time to deliver an audit, KPMG did not yet have signed prior year accounts and the backstop date for these accounts to be signed was 13 December 2024, with the backstop date for KPMG being 28 February 2025. No work had been undertaken yet as the Finance Team had been dealing with multiple sets of accounts and auditors, and work would be carried out to try to ensure that the VFM deadline was met. Additionally, the process of rebuilding assurance in local authority accounts was expected to take some years, and disclaimers in the future were not going to be unusual. It was considered that the difficulties had been caused by issues with the current audit system, and the Council was not alone in this. Delays to the current process had been caused by the recent general election delaying the implementation of necessary legislation, and relevant guidance had only just been issued. There was a need to focus on the 2024/2025 accounts to ensure that this audit went to plan and a normalised audit process could be followed. It would be some years before a normal audit opinion could be provided to the Council. The Commtitee heard that the VFM work was important and would provide the Committee with assurances around the processes, procedures and controls in place around financial sustainability, governance and efficiency and effectiveness, and this would be reported to the Committee. The Committee would see disclaimers presented to it by BDO, and should expect these disclaimers to be broad.

A Committee member wished to narrow down the disclaimers to try to be sure that the Council’s record keeping was working and that the accounts were connected to the records. Was it possible for KMPG to confirm that the transactions of the 2023/2024 accounts were sound, and any disclaimer related only to the opening balances? It was extremely worrying to be a member of an Audit Committee which had not had an audit report since 2020. He would write to KPMG outside of the meeting, but considered that there were some major areas which required attention, including large adjustments between the Council’s statutory figures and reserves.

Richard Block, Chief Operating Officer, attended the meeting and advised the Committee that the Audit Director, KPMG, was very keen to obtain the focus of the Council’s Finance Team and he asked that Members be mindful of this when making other requests of the Team which may serve as a distraction when work on the current audit was a priority.

RESOLVED that:

- The publication of the draft statement of accounts 2023/2024 be noted, pending a detailed review of these accounts before the end of the financial year, at the latest.

The Committee received a verbal update from the Council's S151 Officer on the progress of the external audit process.

Chris Hartgrove, Deputy S151 Officer, attended the meeting to present the update and assist the Committee with its enquiries. Noting the extensive discussion which had already taken place during the meeting, there was little to add by way of this update. To illustrate the issues faced by the Finance Team, the Committee heard that there were 4 sets of outstanding accounts for Colchester City Council, and in the context of the shared service between Colchester Epping Forest District Council, there were a further 3 set of outstanding accounts at Epping and these 7 sets of accounts were being dealt with by 4 sets of external auditors, and additionally there was a budget to prepare for each Council. There was a need to prioritise how work was carried out to ensure that a methodical approach was taken, dealing with issues in a chronological order.

RESOLVED that: the contents of the update be noted.

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

Matthew Evans, Democratic Services Officer, attended the meeting to present the report and assist the Committee with its enquiries. The Committee was asked to note the proposed changes to its work programme which had been detailed in the Officer’s report, together with the proposed removal from the Committee’s work programme of reports scheduled for 17 December:

- Equality Annual Update

- Safeguarding Annual Update

These reports would be presented to other Committees.

The Committee noted that it was to receive the final accounts of Colchester Commercial (Holdings) Ltd (CCHL) once these had been signed, and this would be in the New Year. The Committee would also receive a report containing an update on the progress made in respect of the Action Plan which had been agreed for CCHL.

RESOLVED that: the contents of the report be noted.