Meeting Details

The Committee considered a report requesting that it consider the Combined Audit Planning and Completion Reports and the Value For Money Conclusion from the Council’s Auditors, BDO, agree to the Chair signing the Letter of Representation; and Approve the Accounts for 2020/21, 2021/22 and 2022/23.

Andrew Small, S151 Officer, attended the meeting to present the report and assist the Committee with its enquiries. He considered that the Committee was very familiar with the detail contained in the Officer’s report. The Committee heard that the current position represented an exceptional set of circumstances, repeated in the majority of Councils in the country, as all Councils had been working to resolve the backlog of audit opinions to meet the governments backstop date of 13 December 2024, which had recently passed. The backstop date had been introduced to try to provide a resolution to the current audit position and assist the conclusion of accounts. The Committee had been presented with 3 years’ worth of opinions and accounts which needed to be approved and signed off. It was important to note that the Council, in common with large numbers of Councils across the country, was receiving a disclaimed opinion from its auditors. A disclaimed opinion in this instance was the governments solution to the audit backlog, with auditors not having had the time to form a detailed opinion. However, even a disclaimed opinion was an opinion once this had been received from the auditors, and as this was accompanied by the accounts as well as an opinion from the Council’s S151 Officer that these accounts were true and fair, the expectation was that the Committee would sign the accounts for publication. The S151 Officer wished to stress to the Committee that it was not being asked to vouch for the accuracy for the accounts, and all the Committee was being asked to do was to accept the S151 Officer’s opinion, receive the auditors’ reports, including the Value For Money (VFM) report, and to approve the accounts for publication to the Council’s website. The opinion which had been provided did not reflect on the individual Committee and Councillors themselves, but was simply a necessary step to move beyond the current backlog and regain a position where full audit opinions could be provided, although this was likely to be a number of years in the future. The decision which was in front of the Committee was straightforward; it had been presented with the accounts, together with the audit opinion and the statement of the S151 Officer that these accounts represented a true and fair position, and the necessary action was for the Committee to approve these.

The Chair advised the Committee that it was faced with a unique set of circumstances, and it would be usual for the Committee to fully consider only a single set of fully audited accounts each year. However, due to a set of circumstances beyond the control of the Council or its auditors over the preceding years, the Council now found itself in a similar situation to many others across England, and the Committee now had a duty to consider the accounts which had been placed before it before reaching a decision.

A Committee member noted that although the Committee may deal with this item relatively quicky at this meeting, it was very important to note that the accounts had been considered in great detail as they had been presented to the Committee in various formats several times, leading to significant discussion around them. As a result, the Committee was very aware of the situation, but it did have a responsibility which had to be taken very seriously, and it was formally proposed that the suggested decision which was contained in the Officer’s report be amended to include additional wording which sought to clarify the Committee’s position. This additional wording had been circulated to the Committee prior to the meeting. The Chair of the Committee echoed the remarks which had been made, and agreed that the Committee had considered the accounts at its meetings as well as during private briefings and a meeting with the Council’s external auditor, BDO. Although it was likely that a final decision would be reached efficiently at this meeting, this was not a reflection of the overall time and effort that Councillors and Officers had dedicated to considering the accounts and the best way to proceed.

The recommended decision which was before the Committee was that it:

1. Consider the Combined Audit Planning and Completion Reports and the Value For Money Conclusion from the Council’s Auditors BDO;

2. Agree to the Chair signing the Letter of Representation; and

3. Approve the Accounts for 2020/21, 2021/22 and 2022/23.

It was proposed that the recommended decision be amended to read:

1. The committee has considered the Combined Audit Planning and Completion Reports and the Value For Money Conclusion from the Council’s Auditors BDO;

2. The committee agrees to the Chair signing the Letter of Representation; and

3. The committee approves the accounts for the years ending 31 March 2021, 31 March 2022 and 31 March 2023.

With the addition of the following passage:

4. The Committee notes that the auditors have been unable to form an opinion on the accounts for Colchester City Council ended March 31 2021, March 31 2022 and March 31 2023 due to reasons outlined in their report. The Committee expresses their disappointment and concern at this situation whilst noting the considerable efforts of the auditors and CCC finance team. Consequently ,the Committee is unable to conclude that Colchester City Council’s financial statements presented to them for the years ended 31 March 2021, 31 March 2022 and 31 March 2023 as a whole are free from material misstatement and further conclude as highlighted by the auditors that the possible effects on the financial statements of undetected misstatements arising from this matter could be both material and pervasive.

A Committee member wished to second the proposal that had been made to the Committee, considering that what had been proposed was a good way to draw matters to a close. The Council needed to focus its attention on the current set of accounts, and allow its Finance Team to concentrate on delivering key objectives for the people of Colchester. He further considered that the VFM report which had been received represented good value for the Council.

Further wholehearted support for the proposal was offered by another Committee member, who believed that it was now necessary to move forward with audits and the government had been right to draw a line under what was, in his opinion, a shameful moment for the whole local government sector. As the Council looked to the future and attempted to obtain a clean audit, it should consider writing to the Chartered Institute of Public Finance and Accountancy (CIPFA), and he certainly intended to do this, as he believed that CIPFA should have taken action to resolve the situation years ago. He believed that the proposed resolutions number 3 and 4 would be added to the accounts so that the public could see that the Committee had approved the accounts as it was required to do, but it also shared the concerns which had been expressed by the auditors themselves. Although it was too late to add anything to the accounts, it was important to note that the accounts did not disclose the Canada Life lease arrangement which was in place in relation to the Northern Gateway development, and it should be minuted that the Committee wished this to be included in the 2023/2024 statement of accounts. This suggestion was supported by the Committee, which was content that its concern be noted in this way, and consideration be given as to how to accommodate the implications of the Northern Gateway development in future accounts, subject to the appropriate accounting rules.

Aphrodite Lefevre, Key Audit Partner for the Council’s external auditors BDO, attended the meeting remotely and addressed the Committee. She explained that it was quite unusual to receive 3 sets of accounts at a single meeting of an Audit Committee, together with 4 reports from the external auditors. The Committee heard that 3 of these reports were, in fact, virtually identical with only minor differences between the years and the materialities which had been used. BDO had been required to communicate with the Council its audit strategy, and this was contained within the initial 3 reports which were the combined planning and completion reports. The reports identified the risks which had been identified, however, a full risk assessment had not been carried out and therefore other risks may remain. The audits had been performed in line with guidance which had been issued by the National Audit Office (NAO) and the Financial Reporting Council (FRC), and this guidance included some minimum procedures such as reviewing the accounts. The reports which had been presented to the Committee contained information about the work which had been carried out on VFM, with greater detail contained in the final report, which was the auditors annual report. The Committee’s attention was drawn to the Management Representation Letter which was contained in each of the 3 initial reports, and this would require the Committee’s approval for this to be signed prior to BDO issuing its audit opinions.

The final report which had been presented to the Committee was the auditors annual report which summarised the results of the 3 years in a combined report, which had been agreed in order to expedite the work which had been required on the VFM. The scope of the work was set out over the Council’s arrangements in securing economy, efficiency and effectiveness and its use of resources. The scope of the work had changed in 2020, so that auditors no longer offered a conclusion, but provided a greater commentary, and where significant weaknesses in arrangements had been identified then recommendations had been made. In the light of thew audit backlog and the desire to clear as many audits as possible, the NEO had reduced this scope for the preceding 3 years, and the criteria that had been considered had reduced. The report which was before the Committee explained the work which had been carried out, and the overall conclusion of this work had not identified that there were any significant weaknesses to report.

The Committee indicated unanimously that it was in favour of the amended recommendation which had been proposed at the meeting, and that the issue which it had raised around the Northern Gateway (Turnstone) development be noted in the minutes of the meeting.

Additionally, a Committee member believed that points numbered 3 and 4 of the proposed recommendation would be entered into the printed accounts and so form a matter of public record. Clarification on this point was sought from the Key Audit Partner, BDO, who advised the Committee that she did not believe that the statement that the Committee wished to make could be included in the published statement of accounts, and would only be in the public domain as part of the minutes of the meeting. The accounts were the responsibility of the S151 Officer, and were based on templates with specific wording which indicated what had to be included in the statement of accounts and what could not be included. She was uncertain where it would be possible to include the proposed statement in the accounts.

A Committee member advised the Committee that the draft 2022/2023 accounts which had been presented to it contained a statement; “these accounts were approved by the Governance and Audit Committee at the meeting held on 17 December 2024”, and this was where the Committees proposed statement, contained at point 4 of the amended recommended decision should be placed. He could not see any argument for the proposed addition not being incorporated into the accounts, considering that this section of the report was the Committees, and was therefore open to the Committee to change.

The Chair noted that the Committee had agreed to the amended recommendations, and suggested that it leave the matter of whether or not recommendation 4 could be included in the published statement of accounts to the Council’s Head of Governance and Monitoring Officer, S151 Officer and the Key Audit Partner, BDO, to determine. If there were regulatory reasons preventing the addition of the statement then the Committee would have to accept this, but if it was possible to include the statement then this should happen, and it should be left to Officers to determine whether there was any way to include or reference the decision of the Committee in the accounts.

A Committee member considered that if there was a rule which stopped the Council from writing its own report and forcing the Committee to give approval to something which it did not wish to approve then this should be explained at the current meeting, in order that the Committee could make a decision at the meeting. He was not content that this decision be left to Officers, and was deeply unhappy with the situation. Other Committee members understood the frustration which had been expressed, but acknowledged that if it was not possible to include the wording which had been requested, then this would have to be accepted by the Committee, even if this outcome was undesirable.

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 had heard the concerns which had been raised by the Committee, and wish to propose a way forward in the hope of mitigating these concerns. It was suggested that if it did not prove possible to include an additional statement in the accounts, that the Council issue a public statement recording that the accounts had been approved and explaining the Committee’s position on the matter which would then form a record which was very much in the public domain.

RESOLVED that:

1. The Committee considered the Combined Audit Planning and Completion Reports and the Value For Money Conclusion from the Council’s Auditors BDO;

2. The Committee agreed to the Chair signing the Letter of Representation; and

3. The Committee approved the accounts for the years ending 31 March 2021, 31 March 2022 and 31 March 2023.

4. The Committee noted that the auditors have been unable to form an opinion on the accounts for Colchester City Council ended March 31 2021, March 31 2022 and March 31 2023 due to reasons outlined in their report. The Committee expressed its disappointment and concern at this situation whilst noting the considerable efforts of the auditors and Colchester City Council’s Finance Team. Consequently, the Committee was unable to conclude that Colchester City Council’s financial statements presented to them for the years ended 31 March 2021, 31 March 2022 and 31 March 2023 as a whole were free from material misstatement and further concluded as highlighted by the auditors that the possible effects on the financial statements of undetected misstatements arising from this matter could be both material and pervasive.

And that:

5. If it did not prove possible to publish the statement number ‘4’ above in the Council’s accounts, then Colchester City Council would issue a public press release recording that the accounts had been approved and explaining the Committee’s position on the matter, to form a matter of public record.

The Committee considered a report which invited it to review the implementation of the actions highlighted on the 2023/24 Annual Governance Statement (AGS), which had been reported to the Governance and Audit Committee in June 2024.

Hayley McGrath, Corporate Governance Manager, attended the meeting to present the report and assist the Committee with its enquiries. The Committee heard that as part of the statement of accounts, the Council was required to produce a self-assessment of how the organisation had been governed during the financial year in question. The AGS had been reported to the Committee in June 2024, and part of this report had been an Action Plan which considered areas of the Council’s governance arrangements which could be improved.

There had been 4 items included in the Plan:

1. The self-assessment against the Chartered Institute of Public Finance and Accountancy (CIPFA) Financial Management Code, which had been carried forward from 2022/2023, and which was still outstanding. The delay had been caused by resourcing issues, but this action would be completed as soon as possible.

2. External Audit Implications, which had been carried forward from 2022/2023 and which was to be reviewed by the Committee at its current meeting, which had taken place.

3. The letter written by the Council’s Monitoring Officer to Colchester Borough Homes (CBH) concerning issues which had been raised during 2023/2024. CBH were now providing regular updates to the Committee through a strengthened reporting process.

4. Internal audit recommendations in respect of the Council’s procurement function. The recommendations had been included in the ongoing review of the Council’s procurement process and when this had been completed it would be reported back to the Committee.

A Committee member understood that the difficulties which had been experienced with the Council’s procurement system had been associated with aggregated spend across the Council where the same supplier was used by different areas of the authority. Given the complexity of the systems in place, was it possible to have an update on how this work was progressing? The Corporate Governance Manager confirmed that the procurement review was ongoing, and that procedures in relation to the auditing of transactions had been improved to include monthly reporting, to ensure that spend levels were not breached.

RESOLVED that:

- The work undertaken to implement the current Annual Governance Statement action plan be noted.

The Committee considered a report which summarised the performance of Internal Audit, and detailed the audits which had been undertaken between 1 April and 30 November 2024.

Hayley McGrath, Corporate Governance Manager, attended the meeting to present the report and assist the Committee with its enquiries. The Committee heard that it received 2 reports concerning internal audit each year. Giving an update on internal audits carried out by contractor who had provided a report setting out the audits which had been carried out in the first half of 2024/2025. It was common that fewer audits were carried out during the first half of the year compared to the second half, and this was because some of the work of the internal auditors was to provide assurance for the Council’s external auditors who used the information provided to guide their risk assessments.

The audits which had been carried out during the first half of the year were set out in the Officer’s report, and all of these audits apart from one had received a ‘reasonable’ or ‘substantial’ assurance rating. The audit which had received a ‘limited’ assurance was in relation to anti-fraud and corruption, and the Corporate Governance Manager was able to confirm to the Committee that since the publication of the report, this audit had been reviewed and the number of recommendations in relation to this audit had been reduced from 7 to 4. Although no specific issues or concerns had been raised in relation to the Council’s processes in relation to anti-fraud, the auditors had felt that greater resources were required to strengthen the Council’s anti-fraud and corruption processes. The self-assessment in relation to anti-fraud and corruption which had been undertaken would be reported to the Committee in the new municipal year.

The Committee welcomed the report from TIAA, which was comprehensive but easy to read, and it looked forward to receiving an update on the anti-fraud and corruption self-assessment at some point in the future. A Committee member noted the formal style of reporting, and while the content of the report was very useful, he suggested that it would be very helpful in the future to include some details of the stories behind the audits to provide both background information and context to the report.

A Committee member noted that the proposed homelessness audit had been moved back to quarter 4 of the year, and given the issues the Council was experiencing with homelessness requested an explanation of this delay. The Corporate Governance Manager understood that the delay had been caused by changes in the relevant team, together with changes in the ways in which the homelessness issue was being managed. It was necessary to ensure that all resources and processes were in place before the audit so that a comprehensive review and productive could be caried out of the Council’s activity in this area.

RESOLVED that:

- The Internal audit activity for the period 1 April – 30 November 2024 had been reviewed.

- The Committee had considered whether it required further review for any of the audits contained within the Officer’s report. 

The Committee considered a report which set 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 that a private meeting had been arranged between the Committee and the Council’s external auditor, KPMG, which would take place before the next scheduled meeting of the Committee on 21 January 2025. The Committee was asked to note that the report concerning the Internal Audit Plan for 2025/2026 would now be presented to the meeting scheduled for 25 February 2025, and a private meeting with the Council’s internal auditors, TIAA, would be scheduled before this meeting.

A Committee member requested a discussion around the apparent lack of redundancy which he had noted throughout the Council. He would like the Committee to be able to review some of the Council’s staffing and recruitment policies, and the way in which staff retention was approached with a view to retaining key skills within the workforce. He noted that the current shared services arrangement with Epping Council with regard to the Council’s S151 Officer was coming to an end, and the Council may find itself in a position where it did not have a S151 Officer in place. What was the approach which was being taken to prevent this?

The Chair of the Committee offered the assurance that the current S151 and Deputy S151 Officers would remain in post until the end of the current financial year, and in the meantime the administration of the Council would seek to find appropriate replacements. He was uncertain whether a wider discussion of the Council’s recruitment policies would fall within the remit of the Committee.

In discussion, the Committee noted the likely impact that Local Government Reorganisation would have on the Council’s ability to recruit, and considered that this was an issue which it was important to address to ensure that the organisation retained the skills which it needed.

Richard Block, Chief Operating Officer, attended the meeting and addressed the Committee. He considered that it was right that these issues were discussed, however, there was a need to determine the correct forum for an open discussion. Although the Council’s turnover rate had fallen over the preceding year, the need to staff key professional roles had resulted in shared service arrangements.

Summarising the discussion, the Chair confirmed that if recruitment fell within the Committee’s remit, as opposed to the Council’s Scrutiny Panel, then he was happy to facilitate a wider discussion of this, however, it was suggested that Officers consider the most appropriate way to approach this subject in the future.

RESOLVED that: the contents of the work programme as set out in the Officer’s report, be noted.