Meeting Details

Meeting Summary
Governance and Audit Committee
25 Feb 2025 - 18:00 to 20:00
Occurred
  • Documents
  • Attendance
  • Visitors
  • Declarations of Interests

Documents

Agenda

Part A
1 Welcome and Announcements
The Chairman will welcome members of the public and Councillors and remind everyone to use microphones at all times when they are speaking. The Chairman will also explain action in the event of an emergency, mobile phones switched to silent, audio-recording of the meeting. Councillors who are members of the committee will introduce themselves.
2 Substitutions
Councillors will be asked to say if they are attending on behalf of a Committee member who is absent.
3 Urgent Items
The Chair will announce if there is any item not on the published agenda which will be considered because it is urgent and will explain the reason for the urgency.
4 Declarations of Interest

Councillors will be asked to say if there are any items on the agenda about which they have a disclosable pecuniary interest which would prevent them from participating in any discussion of the item or participating in any vote upon the item, or any other registerable interest or non-registerable interest.

 

5 Minutes of Previous Meeting
The Councillors will be invited to confirm that the minutes of the meeting held on 26 November 2024 and 3 December 2024 are a correct record.
484
RESOLVED that: The minutes of the meetings held on 26 November 2024 and 3 December 2024 be confirmed as a correct record. 
6 Have Your Say! (Hybrid Council meetings)

Members of the public may make representations to the meeting.  This can be made either in person at the meeting or by joining the meeting remotely and addressing the Committee via Zoom. Each representation may be no longer than three minutes.  Members of the public wishing to address the Committee must register their wish to address the meeting by e-mailing democratic.services@colchester.gov.uk by 12.00 noon on the working day before the meeting date.  In addition, a written copy of the representation will need to be supplied.


7 Shareholder
The Committee will consider, in its role as the shareholder committee for Colchester Borough Homes, a report which demonstrates the Council's regulatory compliance across a variety of areas, and which is monitored by the Regulator of Social Housing. 
485

The Committee considered, in its capacity as the Council’s social housing landlord Committee, a report which demonstrated the Council's adherence to the Regulator of Social Housing’s (RSH) expectations.

 

Chris Wait, Director of Assets (Housing) for Colchester Borough Homes (CBH), attended the meeting to provide an update and to assist the Committee with its enquires. It was important that the Committee noted that performance had been reported to the Operations and Performance Committee of CBH on 18 February 2025, and no concerns had been raised. CBH had been working towards 100% compliance of 2 key metrics, asbestos and electrical safety, and it was believed that this would be achieved by the end of the current financial year. Turning to void properties, a high number of voids had been experienced over the last quarter, with 110 properties being vacated, however, performance remained high when compared to peers of CBH. Property repairs had been another area of focus, with 89.61% completed on time, just below the target of 90%. Contractor performance had been the reason that the target had not been achieved, and following careful consideration of the position, an action plan had been put in place to address this.

 

Geoff Beales, Strategic Housing and Assurance Manager, attended the meeting and drew the attention of the Committee to Appendix 2 to the Officer’s report which was before it, which contained a set of landlord performance targets for 2025/2026, together with tables illustrating in-year performance. This suite of key performance indicators (KPIs) would provide monitoring of the arms-length management organisation (ALMO) and certain regulatory requirements for 2025/2026. As had been previously agreed, there would be 3 areas of performance monitoring; performance of the ALMO, compliance with legislation and regulation, and customer satisfaction, together with a tenant satisfaction survey which was to be carried out at end of the summer 2025, in accordance with the requirements of the RSH. A number of the KPIs appeared on the Council’s corporate dashboard, and in conjunction with these indicators for monitoring the compliance and safety areas reports would continue to be provided to the Committee during 2025/2026 to provide assurance on Council regulatory compliance in this area. Transactional surveys would be carried out following repairs, and it was important to note that these surveys were different to the tenant satisfaction surveys which were perception surveys.

 

Philip Sullivan, Chief Executive, CBH, attended the meeting and advised the Committee that contained within the report which was before it was a regulation update, including an update on complaints and Ombudsman cases. An updated work plan had been provided which took account of the steps taken following the mock inspection which had been carried out by Savills in the preceding year on adherence to the regulatory framework. Additionally, relevant audit outcomes had been provided and additional audits for expectations for landlord services had been incorporated into the internal audit 2025/2026 work plan which would be approved by CBH’s Finance and Audit Committee.

 

Esme Cole, Chair of the Board of CBH, attended the meeting and advised the Committee that the report which was before it detailed the assurance that had flowed through the Committees of CBH and up to the Board. She wished to highlight that the terms of reference for the CBH Committees and Board had been updated to ensure that there was a streamlined process of delivering assurance to the Committee. Extensive resident engagement had been carried out and CBH was meeting the Regulator’s expectations. Continuous opportunities would be provided for residents to engage, including the Tenant Scrutiny Panel which reported directly to Board, and which had carried out 3 ‘deep dives’, 2 of which had been signed off and closed, and the third, relating to the lettings experience, would be reported back to Board in 6 months’ time. There had been significant focus on risk, and the Regulator’s Sector Risk Profile had been reviewed in the context of the Strategic Risk Map of CBH. The Finance and Audit Committee had carried out a detailed assessment of stock quality and had been satisfied that the Risk Register reflected this. A number of action plans had been put in place, to address issues such as the disparity in performance between in-house contractors and outsourced contractors, together with tenant satisfaction measures.

 

A Committee member referenced the Energy Performance Certificate (EPC) target for properties, was it the case that properties which were relatively easy to improve to a C rating would be dealt with first, meaning that achieving the target became more difficult and costly over time as properties became more difficult, or not viable, to improve? How many properties was it considered viable to bring up to a C rating, and what was the timescale for this work? Considering the review of the Council’s Housing Revenue Account (HRA) which was currently being undertaken, it was suggested that in the future less funding was likely to be available to support the excellent service which CBH currently offered. Would this mean that some of the targets which had been set in terms of tenant satisfaction would need to be re-evaluated, or was it considered that these would remain achievable?

 

The Chief Executive, CBH, advised the Committee that at the current time, 87% of properties had an EPC rating of C or above, and approximately 700 properties had a rating of D, approximately 50 with a rating of E, and 1 with a rating of F. Social Housing Decarbonisation funding had been secured to target the properties most difficult to improve to a C rating, and the Head of Asset Management, CBH, was confident that 100% of properties could be improved to a C rating by 2030. If, however, a property was unable to meet this rating then a pragmatic solution would be considered. In terms of the future of the HRA, the comments of the Committee were accepted, and it was assured that a workshop was being arranged for all Councillors and CBH Board members in the near future to provide scrutiny and awareness. The Chief Executive, CBH, wished to highlight the Council’s investment strategy in existing homes, and considered that this had been very strong over recent years, which meant that there was a high level of Decent Homes Standard compliance. It was anticipated that discussions at the workshop would consider investment strategy in the medium and long term future, and if there was a scaling back from the current investment strategy then this could have a knock-on effect on tenant satisfaction, requiring some adjustment of metrics in the future.

 

The Committee examined the issue of reletting properties, noting that CBH had performed in the upper quartile in this area when compared to peers, which was commendable. How was the target of 73 days for the re-letting of a property in 2024/2025 calculated, and what were the strategies and timeline for even greater improvements to be implemented?

 

The Strategic Housing and Assurance Manager explained that the target of 73 days had been a new target which had been based on benchmarking information , however, in reality performance had exceeded this figure throughout the year.

 

The Director of Assets (Housing), CBH, confirmed that a number of steps were already being taken to decrease relet times, including ensuring that a contract supplier was in place and working to targets which had been set, and that there were sufficient staff to deal with voids. Directors of CBH worked to provide the necessary support to staff to ensure targets were met, however, at the current time every landlord was experiencing a greater associated void costs. Pre-tenancy checks were being carried out to ensure that tenants understood what was required of them to clear a property and leave it leave it in good standing. In terms of continuous improvement, targets were being constantly re-assessed to seek greater efficiencies, and although improvement targets had not been set, these would be kept under review.

 

The Committee was concerned about void re-let times, and was conscious of the impact that these had on families awaiting rehousing, as well as the financial pressure on the Council caused by the need to fund temporary accommodation. The Chief Executive, CBH, accepted the points which had been made and confirmed that the proposed targets for the forthcoming year were better than current targets, however, this was an area of discussion that he would be happy to take up with the Portfolio Holder for Housing to provide reassurance to the Committee that targets set were realistic but challenging. The Committee confirmed that it would welcome seeing some stretch targets at future meetings.

 

A Committee member was very impressed with the information which had been provided in the Officer’s report, considering that there had been a huge improvement in the clarity of the presentation of this information which greatly assisted the interpretation of the data. He considered that members of the public looking at the data would also be able to understand this, and he had been able to see clearly that CBH had been making year-on-year improvements across most performance targets. One area which had been highlighted was that working days lost to sickness had risen, what was the reason for this? The Chief Executive, CBH, confirmed that several colleagues had been on long term sickness, which had affected this figure, however, this situation had now been resolved and so the figure would come down in the future. The Chair of the Board of CBH confirmed that this issue had been raised at the last Board meeting, as it had been a glaring performance metric. Assurance was being sought through staff surveys, and the Board would look at this issue again in the future. The Committee considered that it would be helpful to receive more information on both long and short-term levels of sickness, together with the cause of the sickness, in the future.

 

The Committee noted that in the past there had been suggestions that the benchmarking work which had been carried out may not have been comparing similar figures, were the comparison that had been made based on genuine figures which could be trusted? The Chief Executive, CBH, confirmed that CBH used the organisation Housemark to obtain benchmarking figures, because this was the pre-eminent sector benchmarking organisation for landlords and local authorities, and the figures which had been provided were accurate. A Committee member considered that the figures demonstrated that relative performance looked very good, and CBH should be congratulated on improving its performance in this way. It was, however, also noted that the number of people presenting to the Council as homeless was rising, and although this was out of the Council’s control, was this trend continuing? The Chief Executive, CBH, advised the Committee that this trend was continuing, and the number of households which had been assisted with temporary accommodation between March 2024 and January 2025 had increased by 36%. Although CBH had been innovative in accommodating these households, pressure continued to be intense.

 

A Committee member confirmed that he had complete assurance that targets were being monitored, and any issues taken seriously, demonstrating that necessary systems were in place and the governance at CBH Board level was functioning correctly. However, he considered that there were areas which were not being examined, and that the Committee should not limit itself to an overview of CBH as the managing agent, but should consider the whole HRA, including the asset as well as the income statement. He remained convinced that there was an issue with how repairs had been accounted for, and despite the assurances he had received the Council did not have an external audit to verify the position. Was it possible to ask that someone from CBH had an overview of HRA accounting, and that there was some governance around this area? Additionally, he considered that the benchmarking figures which had been provided varied from what he had seen in the HRA accounts, and he was unable to reconcile these. Were the figures which were submitted to the benchmarking organisation CBH figures, or the whole of the HRA figures? It was suggested that there were areas which required greater scrutiny in the future. The Chief Executive, CBH, confirmed that he had tried to be fully transparent in terms of CBH and non-CBH costs, and what they related to, and had asked Savills to specifically challenge CBH on its management costs, in addition to the feedback which would be received as a result of the ongoing HRA review.

 

The Committee wished to understand how CBH had been considering the imminent local government reorganisation (LGR), was the Board looking at this and how would the likely impact on CBH be reported to the Committee in the future? The Chief Executive, CBH, advised the Committee that discussions around LGR were relatively new, and the implication of this were being considered broadly, as well as for housing. A key consideration for CBH was to identify the correct solution for the tenants of Colchester and beyond. The Board of CBH was alert to the coming changes, and had shared information with Council Officers to ensure that the right direction could be taken for residents.

 

The Committee considered that LGR was no longer a hypothetical situation, and it was important that the Board did crystalise what the function of CBH was and why it needed to exist, as the reality was that LGR was likely to take effect in 2 years’ time, and it was important that the Board was prepared for this as it may be the case that the Council was merged with other local authorities who took a different approach to housing. The excellent work of CBH was recognised, and it was important that these high standards were carried into a future organisation. The Chair of the Board of CBH assured the Committee that the Board was passionate about ensuring that change was prepared for, and this was why the issue of LGR had been raised already at Board level.

 

RESOLVED that:

 

- The performance update contained in the Officer’s report and Appendix 1 be noted;

- The Quarter 3 complaints update, service improvement example and Ombudsman cases detailed at Appendix 3, be noted;

- The Landlord Assurance Workplan 2025/26 provided at Appendix 4 be noted;

- The additional regulatory assurance being provided by CBH’s Board and Committees for Quarter 3 be noted.

 

 

8 Core
The Committee will consider a report setting out the Council’s actual Treasury Management activity for the second quarter (Quarter 2) of 2024/25.
486

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 2024/25, which had been considered by the Committee on 18 June 2024, and had been subsequently adopted by full Council on 17 July 2024.

 

Slippage on the Capital Programme had led to a major re-profiling within the Budget Proposals for 2025/26, and had been contributing to a supressed need for External Borrowing, with overall Borrowing declining by £4m from £151.6m to £147.6m during the first 9 months of the year.

 

Treasury Management Investments had fallen by £12.9m, from £25.6 million to £12.7 million, since the start of the financial year, and the managed reduction in Investment balances was further suppressing the need for External Borrowing.

 

Performance against Treasury Management Indicators was contained within the report, 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 in that Total Cash Available within 3 Months had temporarily fallen to £12.751m at the Quarter end, which was below the Target Balance of £20.0m. A council the size of Colchester had millions of pounds pass through its books on an almost daily basis, so strict adherence to this Indicator required a robust Cash Flow Forecasting process. The Council had demonstrated in the past that it had been adept at having access to sufficient Instant Access funds to avoid a net overdrawn position with the Bank, but could perhaps do a little better in managing the interrelationship with Short-term Investments. This topic had been flagged for a review by the Council’s internal auditor in the coming year.

 

A Committee member noted that the report indicated that a loan from the Public Works Loan Board (PWLB) was listed as having an interest rate of 8.875% which seemed incongruously high compared to other listed loans, if this was correct would it be sensible to try to pay this loan off? Loans taken out from Barclays were also noted, what was the reason for these loans? It was noted that the Council was holding significant amounts of money in grants related to the Town Deal, and although it was understood that some of this money had been drawn down, how were these sums accounted for and how was the money held or invested prior to spending it?

 

The Deputy S151 Officer confirmed that the interest rate of 8.875% provided in the report had been verified and was correct, as was the information provided in relation to loans taken out from Barclays. At the time that the PWLB loan had been taken out this rate would have been competitive, as would the loans taken out from Barclays as PWLB rates had not always been as beneficial as they were at the present time. In terms of grants received in advance, these were included in balance sheet resources within cash as a result of holding those loans in advance of spend, and this meant that the Council could delay going out to borrow externally for the purposes of the Capital Programme and enjoy the short-term benefits of receiving those loans in advance. Capital grants received as a creditor would be contained within the Council’s balance sheet at year end.

 

A Committee member had been pleased to note that interest rate assumptions had been adjusted within the budget, however, the table which had been contained in the report which provided a balance sheet summary and forecast appeared to show that the Council’s borrowing would rise over the next 3 years, and seemed to be excessively high. In September 2024, the position had been that new borrowing in 2028 would be £65.5m, however this figure had now increased to £147m, which was a huge difference in new debt. This position was fundamental to the budget, and it appeared that the Council would have to borrow £150m by the end of the 5 year period, was there a mechanism to provide confidence that these figures were correct?

 

In response, the Deputy S151 Officer advised the Committee that within the budget had been a major re-profiling of the Capital Programme which had shifted borrowing expectations significantly. As the Council delivered grant funded schemes in 2025/2026 and 2026/2027 then grant funding would be spent, and as a consequence of this the Council would have to borrow externally.

 

Turning to minimum revenue provision (MRP), a Committee member noted that MRP was one of the Council’s largest costs, and although the Council had a policy to cover these, it would be useful if, in the future, figures could be provided which would serve as a guide to where the Council had spent money and where it was being costed money. A reserves forecast had now been provided to Councillors as part of the budget, which showed that the General Fund was not being used to fund structural deficits - was he right in assuming that the Administration would either have to raise taxes or cut costs if reserves were not being used? The Deputy S151 Officer advised the Committee that this assumption was implied in the report, but the Council’s Administration had the flexibility to take a number of different measures.

 

In response to questioning from the Committee in relation to both borrowing from, and loans to, other local authorities, the Deputy S151 Officer confirmed that the Council had lent money to 2 other local authorities, and had borrowed money from 3 others. This borrowing and lending was dictated by cashflow and available rates, together with the availability of cash form tax receipts, and the demands of the Council’s Capital Programme which required spend to occur in an uneven pattern. It was confirmed to the Committee that the 2 loans which had matured in 2024 had been paid back, and the loan which was due to mature in May 2025 would be paid back. There was, as yet, no sense of how local authority loans would be treated during local government reorganisation.

 

Andrew Small, S151 Officer, attended the meeting remotely, and advised the Committee that he believed that the assets and liabilities of all constituent authorities would be transferred into any new unitary Council on the day of its formation, with the usual Treasury Management rules continuing to apply until this time. The disaggregation of the County Council would be much more complicated than allocating the assets and liabilities of the district, borough and city councils under the proposal.

 

RESOLVED that:

 

- The Treasury Management Quarter 3 Update 2024/25 (Appendix A) be noted. 

The Committee will consider a report requesting that it review and recommend for approval by full Council the proposed draft Treasury Management Strategy 2025/26 and the draft Minimum Revenue Provision Statement 2025/26.
487

The Committee considered a report which requested that it review and recommend for approval by full Council the proposed draft Treasury Management Strategy 2025/26 and the draft Minimum Revenue Provision Statement 2025/26.

 

Chris Hartgrove, Deputy S151 Officer, attended the meeting to present the report and assist the Committee with its enquiries.

 

The Committee heard that the preparation of an annual Treasury Management Strategy had been a requirement of the Chartered Institute of Public Finance and Accountancy (CIPFA’s) Treasury Management Code for many years. The report which was before it fulfilled that requirement, and in addition, in accordance with the Ministry of Housing, Communities and Local Government (MHCLG’s) 2024 Guidance, an updated draft Minimum Revenue Provision (MRP) Policy was also presented.

 

The Committee was asked to note that that, whilst Treasury Management Investments were included in the Strategy, there remained further work to be done on Service and Commercial Investments as part of the ongoing Corporate Landlord Review, and Local Government Reform (LGR). Once clarity had been achieved, it would enable the production of a more comprehensive Investment Strategy.

 

Both Borrowing and Investing had been taking place against a backdrop of relatively high interest rates; although there had been strong indications that interest rates had now peaked, with rate reductions anticipated to continue into the medium and long-term.

 

As of 31 December 2024, the Council had £147.6m in External Borrowing, partially offset by £12.8m in Treasury Investments.

 

In terms of borrowing, the Committee heard that:

 

- the Council’s Capital Financing Requirement (or “CFR”), which reflected the Council’s underlying need to borrow, continued to rise, reflecting the needs of the Capital Programme, although it should be noted that estimated actual borrowing, would remain below the CFR at all times.

 

- Outstanding Borrowing as at 31 December 2024 was presented in Tables 4, 5 and 6 of the Officer’s report. Table 4 showed outstanding Public Works Loan Board (PWLB) loans of £132.1m, with Table 5 showing short-term borrowing from other local authorities of £5.0m. Table 6 also showed outstanding borrowing of £10.5m with Banks.

 

- Affordable Borrowing Limits had been calculated and were presented in Table 7. Both the Operational Boundary and Authorised Limit were key “Prudential Indicators” and had been calculated for 2025/26.

 

In terms of investments, the Committee heard that:

 

- As had previously been reported to it, investment balances had purposely been reduced and used either to repay existing debt or to finance the Capital Programme without recourse to additional Borrowing. A minimum investment balance of £20.0m was the core strategy recommended to maintain liquidity.

 

- A full breakdown of the Council’s Treasury Management Investments was presented in the Officer’s report in Table 8. This table showed that an overall total of 12.751m was held as of 31 December 2024.

 

- Based on professional advice from Link, Tables 9a and 9b in the Officer’s report proposed to continue with a relatively cautious Counterparty List, which maintained flexibility for Officers and eliminated riskier and more complex investments, whilst being proportionate to Investment needs.

 

The report set out the usual Treasury Management Prudential Indicators against which the Finance Team would report back to the Committee during the year ahead as was established practice.

 

Considering the affordable borrowing limits, which had been set, a Committee member noted that the level of the Council’s borrowing was significantly below the maximum limit, and questioned whether the limit was therefore an effective control. He noted that current borrowing was in the region of £140m, with further borrowing contained in the budget, was this level affordable? In the private sector it was a requirement to demonstrate the cash flow from which any loan would be repaid, however, the Council did not have any cash flow, but rather had a structural deficit rising to approximately £8.5m over the next 5 years. The Deputy S151 Officer confirmed to the Committee that the budged showed that the level of borrowing was affordable, and the medium-term financial forecast (MTFF) showed that there was a deficit which had to be addressed.

 

Andrew Small, S151 Officer, attended the meeting remotely and addressed the Committee. He confirmed that the MTFF included the impact of the Council’s Capital Programme and the borrowing associated with this, and this was part of the reason for the resulting deficit which had become a target for the administration. Because this was a future forecast, if the Council was unable to find a way of delivering the balanced budget it needed, it would have to adjust its capital financing programme to suit. The MTFF did highlight what the organisation needed to address each year, and could be adjusted according to the circumstances of the Council.

 

Councillor Cory, Portfolio Holder for Resources, attended the meeting remotely and, with the permission of the Chair, addressed the Committee. He considered that it was very clear that over the preceding 10 years the Council had been faced with deficits and had addressed these every year, and would do so again. The S151 Officer had spoken about balancing the budget through looking at the Council’s Capital Programme and consideration would be given to the balance of the cost of building and repairing homes following the conclusion of the Housing Revenue Account (HRA) review. It was likely that the Capital Programme expenditure would be reduced, together with HRA expenditure, however, other ways mf meeting the deficit would also be explored such as looking to make further savings or increase income. He wished to make it clear that the Council did have income in the form of council tax, business rates and, importantly, council housing rental income. The Council also held assets including its housing stock, and a lot of the borrowing which would be seen was related to this stock via the HRA. He assured the Committee that the administration would focus on finding the necessary balance between savings and investment to tackle the deficit.

 

A Committee member questioned at what point the Council’s Capital Programme would be adjusted to address the growing debt, which he did not consider was affordable. Every year that the Council persevered with the Capital Programme added interest to the debt incurred, and as no income was generated from this capital expenditure it was imperative that the spending was reviewed and brought under control. The 2023 budget had showed a year 5 deficit of £1.8m, but this figure was now £8.5m; how high did this figure have to go before the Council accepted that it was beyond its capacity to repay it?

 

Anna D’Alessandro, who was the Council’s incoming Interim S151 Officer, attended the meeting and assured the Committee that management of Capital Programmes was something with which she was very familiar, and the current S151 and Deputy S151 Officers had undertaken a lot of work in relation to this. She was confident that the Programme was fully integrated into the revenue programme, and noted that councils which had been unable to afford to continue to run had not incorporated MRP costs in their budgets, which was not the case here. There was a need to look at the both affordability and the deliverability of the Capital Programme, and it was suggested that many local authorities were overly optimistic in terms of deliverability, and it was necessary to find a balance between the 2 areas.

 

The Portfolio Holder for Resources confirmed that the Capital Programme had been reviewed and some of the expenditure associated with this had been reduced. Further reviews were planned as part of a rolling programme as the Council considered what it could afford in the current economy. Consideration was being given to the Council’s assets and some of these were now liabilities which would be disposed of under the Corporate Landlord Model. The review of the HRA would finish in late spring, and the Corporate Landlord Model would enable the Council to utilise its assets in the best way, to reduce expenditure and increase income wherever possible.

 

A Committee member believed that the MTFF showed that if the Council borrowed to the extent that had been stated, it would not be able afford to make the necessary repayments, and would either have to reduce its outgoings or generate greater income. He wished to suggest that the recommended decision of the Committee be amended to state that the MRP schedule as well as the MRP Statement, should be made available to all Councillors to provide greater insight into the impact that MRP had on the Council’s ability to spend.

 

In response to a question from the Committee, the incoming Interim S151 Officer confirmed that a capital accountant had been recruited and would start work in the near future. Her priority was to provide assurance as the incoming Interim S151 Officer that the Capital Programme was affordable and deliverable. The deliverability of the Programme was of critical importance as slippage levels were high, however, a number of steps could be taken to improve this and give assurance to residents that the Capital Programme could be delivered.

 

The Deputy S151 Officer wished to draw the attention of the Committee to the budget report which would be submitted to Full Council at its meeting the next day. This report set out the MRP budget which contained a draft budget proposal of £2.525m.

 

The Committee acknowledged that the MRP schedule had been included in the budget papers submitted to Full Council, and it wished to compliment Officers on the improved presentation of what the Council had been spending on MRP and capital financing costs. It noted that the MRP Schedule did not just deal with the present situation, but predicted the forthcoming 5 years, and for this reason it was prudent for all Councillors to have sight of this to support informed decision making. The S151 Officer did not foresee any issue with sharing the MRP Schedule, and this was a matter of record he was happy to share with Councillors.

 

RECOMMENDED TO FULL COUNCIL that:

 

- The draft Treasury Management Strategy 2025/26 be approved, and;

- The draft Minimum Revenue Provision Statement 2025/26 be approved, including the Minimum Revenue Provision Schedule.

 

 

The Committee will receive a verbal update from the Council's Chief Operating Officer in respect of the progress made with the Council's statement of accounts and external audit. 
488

Richard Block, Chief Operating Officer, attended the meeting to provide the Committee with a verbal update in connection with the Council’s statement of accounts. He had held weekly meetings with the Council’s external auditors, KPMG, who were confident that they would be able to achieve sign off on the 2023/2024 accounts by the March meeting of the Committee, and hoped to provide a report in the coming weeks. Some areas were being considered in more depth and the audit was looking some distance into the past which required additional time. In terms of the financial statement audit, KPMG had confirmed that they would be issuing a full disclaimed audit opinion, and had nearly completed their work. In terms of the value for money element of the audit, all enquiry sessions had been concluded and there was additional work to do to consider areas of identified risk, which included the capacity and capability of the Council’s Finance Team, risk management including fraud risks, procurement and contract management and assets and estates, Northern Gateway and budget setting and cost savings.

 

Anna D’Alessandro, incoming Interim S151 Officer, attended the meeting and advised the Committee that she had already started looking forwards to the 2024/2025 audit planning and a key element of this was the scheduling of regular meetings between key staff and KPMG. She had already recruited to some key roles within the Finance Team, and considered that the capacity and capability within the Team was a primary risk. By the end of the following week she intended to have filled 2 technical positions in the Team, and would target the completion of a draft set of accounts by the end of June 2025.

 

In response to questioning from the Committee the incoming Interim S151 Officer confirmed that the staff she would be taking on, would be on 6 monthly contracts. It was not possible to recruit permanently as she was an interim appointment herself. Her priority was to create capacity in technical accounting which the Team was currently lacking, with her clear priority being to have a clear audit opinion going into local government reorganisation (LGR). The Committee heard that the contracts for the interim posts could be shortened or lengthened as required, and this provided excellent flexibility for the Council.

 

The Committee recognised the benefits of a flexible workforce, however, also considered that short term contracts could lead to fragility if staff chose to leave at short notice. What assurance could be provided in relation to this area of concern? The incoming Interim S115 Officer acknowledged the difficulty, and would ensure handovers were effective. It was difficult to recruit, and she had taken the action necessary to ensure that the appropriate skills were present in the Team. The Chief Operating Officer also wished the Committee to note that recruiting staff on a permanent basis was a longer process, and this had to be taken into account. It was the responsibility of the whole Council to ensure that staff were retained, and this responsibility did not just rest with the incoming Interim S151 Officer.

 

RESOLVED that: the verbal update be noted.

 

 

The Committee will consider a report requesting that it consider the overall Audit Strategy for 2025/28 to ensure that it reflects the key areas of assurance required to enable the Committee to comply with its core functions, prior to agreeing the Internal Audit Plan.
489

The Committee considered a report which requested that it consider the overall Audit Strategy for 2025/28 to ensure that it reflected the key areas of assurance required to enable the Committee to comply with its core functions, prior to agreeing the Internal Audit Plan.

 

Hayley McGrath, Corporate Governance Manager, attended the meeting to present the report and assist the Committee with its enquiries. The Committee was advised that the Strategy before it set out the forthcoming 3 years of internal audit coverage on a rolling basis over those 3 years, as well as the detailed Audit Plan for 2025/2026. Some audits were carried out every year, such as key financial audits, and the Plan provided for 300 audit days per year which included 26 days for follow-ups, management and reporting. Additionally, a set number of auditing days were allocated to Colchester Commercial (Holdings) Limited (CCHL). Key areas of the CCHL business such as Helpline and the Events Company were included in the Council’s Plan, and the Corporate Governance Manager had been liaising with the Managing Director of CCHL who intended that CCHL would train staff to carry out its own internal audits. The small number of audit days which were provided by TIAA to CCHL would then be used to verify the internal audit work which had been undertaken, as well as providing a management audit to ensure that the CCHL internal audits were of an acceptable standard. This proposed system would provide a more robust internal audit solution for CCHL, with greater coverage of its activities as a result. The Committee was asked to consider whether the areas which had been set out in the Plan and Strategy would provide it with the assurance which it required over the forthcoming years.

 

The Committee noted that it had enjoyed a very positive meeting with representatives from TIAA prior to its meeting, and it had made some suggestions for future areas of focus, including the impact of local government reorganisation (LGR). TIAA had been happy to arrange to meet with the Committee again in the near future.

 

A Committee member noted that the feedback which had been provided to the Committee from TIAA had been more positive than feedback the Committee had received from the Council’s external auditors. The Committee had asked whether it was possible that TIAA could provide some of the assurances which the Council had not received from its external audits, which had not been completed for a number of years. How could the Committee obtain assurance on the areas which were concerning it in relation to the Council’s accounts? The Corporate Governance Manager confirmed to the Committee that it was possible to buy additional auditing work from TIAA, which was a very large organisation which contained specialist skill sets in a variety of areas. The Council’s Audit Plans were flexible and were presented to the Committee on an annual basis, and the Corporate Governance Manager would discuss the issues which had been raised with the Council’s senior management team.

 

Councillor King, Leader of the Council and Portfolio Holder for Strategy, attended the meeting, and, at the invitation of the Chair, addressed the Committee. He considered that seeking assurance over areas of the Council’s accounts which were a cause of concern was something which the Council should be considering, as all parties sought to obtain the best assurance possible. He considered that it was appropriate for the Corporate Governance Manager to liaise with the Council’s Senior Leadership Team on this subject.

 

A Committee member understood the reasoning behind the concerns which had been raised, but did not consider that the Council’s accounts were a suitable area for the internal audit function to consider. In the report which was before the Committee, he noted that some areas, such as Members’ Allowances had not been ticked, why was this? The Corporate Governance Manager confirmed that a limited number of audit days were available, and accordingly it was necessary to use resources in a manner which would deliver the greatest benefit. Although it wasn’t possible to include everything in the internal audit, the details had been included in the Officer’s report so that the Committee could see what had not been covered. In terms of Members’ Allowances, there was an external verification of these.

 

In discussion, a Committee member noted that the Council’s anti-fraud arrangements were audited every year which was appropriate, however, cyber-security and disaster recovery had only been included in the Strategy once. He believed that both these areas should be considered every year to ensure that evolving threats were adequately prepared for. The Corporate Governance Manager would consider the request together with the Audit Manager, however, she confirmed that a cyber security audit had been carried out recently and had received a reasonable assurance rating, and disaster recovery had also recently been audited and would be reported to the Committee as part of its year-end report.

 

RESOLVED that:

 

- The overall Audit Strategy for 2025/28, attached at Appendix A, be considered and approved;

- The detailed Internal Audit plan for 2025/26 proposed at page 9 of Appendix A be approved.

 

 

The Committee will consider a report requesting that it review and comment on the Council's progress and performance in managing risk during the period April to September 2024, and that it considers and comments on the current Strategic Risk Register. 
490

The Committee considered a report which requested that it review and comment on the Council's progress and performance in managing risk during the period April to September 2024, and that it considered and commented on the current Strategic Risk Register.

 

Hayley McGrath, Corporate Governance Manager, attended the meeting to present the report and assist the Committee with its enquiries. The report which was before the Committee was its six-monthly report on risk management, which covered the period 1 April to 30 September 2024 and also set out the most up to date Strategic Risk Register.

 

It had been hoped that a report would have been presented to the Committee which dealt with key project risks, however, there had been a change of management in the project management office, and as a result of this the Council’s system for capturing risks was under review. At the current time it was not considered that the information held was in a suitable format for reporting to the Committee, however, it was hoped that a report could be presented to the Committee early in the new municipal year.

 

The Committee head that a significant amount of the work which had bene undertaken during the period covered by the Officer’s report had been in relation to strengthening governance arrangements, including the shareholder arrangements with the Committee, Colchester Commercial (Holdings) Limited (CCHL) and Colchester Borough Homes (CBH). The Corporate Governance Manager had been working closely with CCHL to ensure that the governance arrangements and risk processes were suitable. Since the last meeting of the Committee, the Council’s risk management process had been revised, updated and approved by Full Council.

 

The Strategic Risk Register had been updated recently, and some changes had been made to this. It had been felt that at the current time, the wording of Risk A was outdated, and it had been removed from the Register and replaced with a new risk which was the scale and uncertainty of local government reorganisation (LGR) proposals at a time when organisational resilience was already low. The probability for Risk I had increased in recognition of the importance of the Council’s information technology (IT) systems, and their vulnerabilities.

 

A complete Risk Register in relation to the impact of LGR would be created, and the Council was also working with its intended partner authorities in terms of a shared Register, but the Corporate Governance Manager was focussing on considering what the specific risks to Colchester would be, in conjunction with the Council’s Senior Leadership Board.

 

The attention of the Committee was drawn to the Register, and in particular the 2 very high risks which were outstanding, and which were LGR and IT issues. All other risks had been reduced down and was set out in the matrix which was before the Committee. A significant amount of work had taken place over the preceding 6 months in relation to the Council’s risk management processes, which would be reflected in the annual report which was due to be presented to the Committee in July 2025.

 

The Committee was pleased to note that a specific Register would be set up in relation to the risks of LGR, which was a very fast moving area. It was suggested that the 2 risks in relation to LGR and workforce wellbeing were linked, as LGR had an impact on the moral of staff and Councillors too, and there was an additional risk associated with losing key staff at such an important time. Additionally, it was important that it be noted by the Council that the Medium Term Financial Forecast remained a high risk.

 

In terms of workforce wellbeing, the Corporate Governance Manager confirmed that this had already been identified as a risk which would be the subject of further investigation.

 

In discussion, the Committee wondered how the Council, at a Member level, would be approaching LGR with a view to overseeing how this developed. Was this something which would fall to the Committee in the future, or was this an area which the Leader of the Council considered best dealt with by an additional oversight Committee? There was a need to consider how best to deal with the position as soon as possible.

 

A Committee member turned his attention to project risk management, noting that this had taken a long time to develop. He did, however, consider that the Corporate Governance Manager was trying to ensure that any project risk register became a meaningful addition to the Council’s risk framework. If projects were missed from the new register or were incomplete, then the Committee would understand this, but he suggested that was needed was a granular approach to providing information around the Council’s major projects in order that these could be assessed. Turning to the Council’s Fit for the Future project, he considered that this contained only a single large saving through the charging for garden waste collection, and a number of smaller savings which may end up being absorbed by costs pressures. Under these circumstances, was it right to continue with this programme, or was there a need to consider a much more fundamental restructuring of the Council to close the budget gap in the coming years?

 

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 advised the Committee that LGR was an issue of great importance, and was part of ongoing discussions with the Council’s Senior Leadership which were informed by the challenge of the Committee. He would keep Councillors as informed as possible and would continue to hold specific briefings for Councillors, which had been well received in the past. It would be necessary to draw on relevant experience from across the country with LGR, with a view to making the process work for Colchester. In terms of the Council’s Fit for the Future programme, he confirmed that the programme was in place, was fully structured and supported by Senior Management and the Administration, and was vehicle which the Council would use to identify savings and transformation.

 

Richard Block, Chief Operating Officer, attended the meeting and wished to commend the extremely hard work undertaken by Officers in respect of Fit for the Future, which had delivered a wide variety of significant savings. Staff had been made redundant as a result of it, and to summarise the savings of the programme as solely related to garden waste was not accurate. Councillor King confirmed that almost 90% of all targets set for Fit for the Future had been achieved.

 

The Chair of the Committee reminded it that individual Councillors had a responsibility towards staff wellbeing, and needed to be mindful of this in remarks made. It was right that the Committee robustly challenge the Administration of the Council, but it had to remain respectful while doing so.

 

In response to questioning from the Committee in respect of the mitigation which had been applied to some of the risks relating to IT, the Chief Operating Officer confirmed that penetrative testing had been carried out, together with a disaster recovery exercise. A partner authority had recently been the subject of a cyber-attack, and this had been a good exercise for the Council to work through.

 

The Committee acknowledged the need for it to be mindful of the comments which it made, and individual members wished it to be noted that no criticism of individuals had been intended by remarks which had been made. There was a need to fully address the coming LGR changes, and to give staff a feeling or motivation and purpose.

 

RESOLVED that:

 

- The Council’s progress and performance in managing risk during the period from April to September 2024 be noted.

- The contents of the current strategic risk register be noted.

 

 

The Committee will consider a report setting out its work programme for the current municipal year. 
491

The Committee considered a report which set out the contents of its work programme for the current municipal year.

 

Matthew Evans, Democratic Services Officer, attended the meeting to introduce the report and assist the Committee with its enquiries.

 

A Committee member noted that at its previous meeting, the Committee had resolved to provide a response to a government consultation in relation to the audit regime, but a response had not been submitted in time. He had submitted a response, and was disappointed that one had not been submitted on behalf of the Committee as agreed, even though the timeframe for this had been short.

 

The Chair confirmed that he had been able to have some input into the regional response which had been made to the consultation.

 

RESOLVED that: the contents of the work programme be noted.

 

 

10 Exclusion of the Public (not Scrutiny or Executive)
In accordance with Section 100A(4) of the Local Government Act 1972 to exclude the public, including the press, from the meeting so that any items containing exempt information (for example confidential personal, financial or legal advice), in Part B of this agenda (printed on yellow paper) can be decided. (Exempt information is defined in Section 100I and Schedule 12A of the Local Government Act 1972).
Part B

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