Meeting Details

The Committee will consider a report which asked that it note the 2024/25 Draft Statement of Accounts and agreed to the publication of the accounts on the Council’s website by 31 of July 2025, to begin the Public Inspection Notice for the 2024/2025 Accounts.

Councillor Cufoglu attended the meeting and addressed the Panel pursuant to the provisions of Meetings General Procedure Rules 4(1). He observed that there appeared to have been a typographical error on page 25 of the agenda document which listed fly tipping and not temporary accommodation. Additionally, in relation to business rates and debts, he noted that the Portfolio Holder had written off bad debts for the fourth time since May, and sought assurance that business rate collection remained satisfactory. The Chair of the Committee assured Councillor Cufoglu that the fly tipping reference in the accounts would be checked, and advised him to liaise with the relevant Portfolio Holder in relation to business rate collection as a performance issue.

Anna D’Alessandro, Interim S151 Officer, attended the meeting to present the report and assist the Committee with its enquiries. The Council’s Finance Team had worked extremely hard to deliver the draft accounts, the timing of which represented an improvement on previous years. The Committee was well aware of the difficulties which had been faced, together with the disclaimers from years prior. There were still improvements to be made, and the Committee was asked to note an error in the accounts in relation to Member’s allowances which would be changed prior to publication as it was a material error, as the actual figure for Member’s allowances was substantially smaller. The Annual Governance Statement would be simultaneously published on the Council’s website with the accounts, which was correct procedure.

In response to questioning from the Committee, the Interim S151 Officer confirmed that:

- Money which had been allocated for projects in the Council’s capital programme would be used to generate interest where possible, and details of the Council’s use of funds were contained in its Treasury Management Strategy;

- The format of local authority accounts was set by the Charter Institute of Public Finance and Accountancy (CIPFA) to allow comparison between different authorities;

- Asset depreciation was recorded in the Property Plant and Equipment note (note 14) in the accounts, which displayed the balance sheet depreciation figures. These figures were also recorded in the comprehensive income and expenditure statement, although not as a separate line.

The Committee noted that income associated with the Council’s garden waste collection scheme had been higher than anticipated, had this additional income been accompanied by a raise in expenditure, and was there a surplus position? It further noted that there had been a transfer out of the Gosbeck Reserve, and sought clarification on what this had related to. The Interim S151 Officer would provide additional information on these points to the Committee following the meeting.

A Committee member welcomed the improvement in timescales for the production of the draft accounts, however, considered it necessary to recognise that the detailed audit which would be delivered would be the first for a number of years. Although it was accepted that an audit opinion would not be possible to attain in relation to the accounts which were before the Committee, he suggested that the recommendation proposed in the Officer’s report be amended to contain wording which acknowledged that the accounts may see some substantial material adjustments before they were finalised. Discussions had taken place around fair valuations made on assets, particularly assets within the Northern Gateway development, and the valuation of leisure assets in this development had been written down from £31m in the preceding year, to £0 this year. Could the Committee be provided with the narrative which supported the calculation which had been made under IFRS 16?

Emma Larcombe, Audit Director, KPMG, attended the meeting and was invited to address the Committee by the Chair. She wished to echo comments which had been made at the meeting which had highlighted the huge improvement in the operation of the Council’s Finance Team and its relationship with KPMG. Work on the audit would commence on 11 August 2025, and the majority of planning work and key enquiries related to the value for money (VFM) element of the audit had already been completed. In terms of the accounts, the Committee heard that IFRS16 would provide a significant area of focus, and the Valuations Team of KPMG were expected to provide close scrutiny in this area. It would not be possible to provide a clean audit opinion this year, however, it was anticipated that by February 2026 KPMG would be in a position to provide significantly more information than had been the case in previous years. The Interim S151 Officer advised the Committee that despite the disclaimed audit opinion, it would still be possible to demonstrate that significant improvements had been made with the accounts. The Committee was pleased to note that a full audit would be carried out, and recognised that the reason for a disclaimed opinion was the lack of previously audited accounts for the preceding few years.

In response to questioning from the Committee, the Interim S151 Officer confirmed that benchmarking the Council’s reserves against other local authorities had not taken place, however, the Council found itself in a strong position. Reserve levels had been kept high, and it was therefore possible to use these strategically, supporting a range of options in the run-up to local government reorganisation (LGR). Additional information relating to the delivery of social value in procurement would be provided to the Committee after the meeting.

Turning to housing revenue account (HRA) accounting, a Committee member had been aware that the Chair of the Council’s Scrutiny Panel had requested sight of the Savills model for the HRA which had been provided to the Council, and he urged Officers to simply provide the model in its current state, and not to allocate any additional resources to this area.

The Committee discussed the possibility of a reduction in business rates provided to the Council, together with a reduction in core funding from central government. The Interim S151 Officer confirmed that relatively little information was yet known in relation to the ongoing current consultation around fair funding reform, which would consider the relative needs of local authorities, and the redistribution of funding. The Council’s core grant money would be reduced, and the collection and distribution of council tax would also be affected. The biggest impact for the Council would be in relation to business rates which formed a significant proportion of money received and retained. Although the final position would not be known for some months, planning for the future had already taken place, and a Business Rate Reserve was in place to provide some cushioning against the reduction. Consultation with a company, LG Futures, who were experts in the field, would take place to assist with budgeting for 2026/2027.

The Committee discussed the position with regard to useable reserves, and the impact of earmarking reserves on residents, in the light of the likely income reduction of income. The Interim S151 Officer assured the Committee that efficiencies would be found as part of Council’s transformation process which would reduce the need to call on reserves, and which would leave the Council in a better position that other local authorities which had not taken similar steps. The Committee considered that it would be useful for a briefing to be delivered following Officer’s meeting with LG Futures, and the Interim S151 Officer would seek to provide one over the coming months once the position became clearer.

In discussion, the Committee considered the Council’s ‘Fit for the Future’ scheme, and sought to understand the level of savings which this scheme had delivered, where were these savings identified and reported? Richard Block, Chief Operating Officer, attended the meeting and advised the Committee that all savings were reflected in the accounts, and the net result was shown as part of the final outturn figure. Fit for the Future was reported through the management accounts and quarterly budget reporting which was presented to the Committee, but savings were not explicitly identified as this was not how the reports were presented. The Interim S151 Officer agreed with the Committee that it would be useful if savings could be identified, although this would not be in the financial accounts, only the management accounts. The Audit Director, KPMG, advised the Committee that VFM reporting in the future would also provide assurance in respect of savings which the Council had made.

RESOLVED that:

- The 2024/25 Draft Statement of Accounts be noted and published on the Council’s website by the 31 July 2025 to begin the Public Inspection Notice for the 202425 Accounts, subject to the revisions to the accounts and narrative as agreed by the Committee, and recognising that the audit may bring material changes to the accounts.

The Committee considered a report which provided it with an overview of the Council’s risk management activity which had been undertaken during the financial year from 01 April 2024 to 31 March 2025.

Hayley McGrath, Corporate Governance Manager, attended the meeting to introduce the report and assist the Committee with its enquires. An annual report was presented to the Committee, followed by a 6-month interim update later in the municipal year. Risk Management was one of the Council’s Key governance processes, and sought to understand the areas of potential risk which the Council may face in the future, and which had the capacity to affect the delivery of key services. Strategic risks were considered as high-level risks over which the Council potentially had little control, while operational risks, such as health and safety risks, were managed by individual service areas. All identified risks were set against the objectives of the organisation and were reviewed by the Council’s Senior Leadership Board (SLB) on a monthly basis. A Risk Management Strategy set out how risks were managed at a high organisational level, and was the responsibility of Cabinet. The Leader of the Council was passionate that risks were appropriately managed. The current Strategic Risk Register, together with a revised Risk Management Strategy were before the Committee, and it was asked to approve these documents, prior to their referral to Cabinet and then Full Council, as part of the Council’s Policy Framework.

The report which was before the Committee also set out some of the work which had been undertaken in relation to risk management over the preceding year. Although the Council’s risk management processes had been in place for some time, it was recognised that further work was required to determine how much risk the Council was prepared to accept as an organisation, which was an area which had been highlighted by the Committee in the past. Accordingly, work had been undertaken earlier in the year, supported by Committee members, senior Councillors, SLB and risk consultants to determine what the Council’s risk appetite was. The usual risk categories, known as PESTLE categories (political, economic, social, technological legal and environmental risks) had been considered and criteria had been set for the level of risk the Council was prepared to accept for each of these categories. A Risk Appetite Statement had been prepared which had been approved by the Council’s Leadership, and was now used as part of all the Council’s risk documentation.

The attention of the Committee was drawn to the Strategic Risk Register which was before it, and which set out key strategic risks, of which local government reorganisation (LGR) was foremost. This risk was not only concerned with the final position of Colchester City Council, but recognised some of the risks which were being experienced already such as pressure on staff resources and morale, and uncertainty for the future. Cyber security had also been identified as a key risk, which was anticipated to become more serious in the future. The Corporate Governance Manager had met with the Council’s Interim Head of Digital who was passionate about cyber- security, and would be keen to attend a meeting of the Committee to provide a presentation on this topic later in the municipal year, in a workshop environment prior to a Committee meeting.

The Committee member considered that it was correct that the impact of LGR had been recognised as such a significant risk, considering that local authorities relied on Councillors and Officers to provide services to residents, and that the coming period of uncertainty had to be recognised, and its effects mitigated affectively against. It looked forward to hearing more about the work which had been undertaken in this area as the municipal year progressed.

The Committee sought to understand how the impact of the work which had been undertaken to understand the Council’s appetite for risk had been quantified; what had been the cost of the risk consultant, and how had the decisions of Cabinet been directly affected as a result of this work? The Corporate Governance Manager confirmed that there had been no cost associated with the risk consultants, which had been provided as part of the Council’s insurance programme, which provided the Council a yearly budget to spend on risk work. Councillor King, Leader of the Council and Portfolio Holder for Strategy, attended the meeting, and, with the permission of the Chair, addressed the Committee. Welcoming the questioning and challenge from the Committee, he considered that the Council’s Risk Register was a spur to better decision making. Although a direct quantification of this impact was not available, the Committee was offered assurances that although the Council would be faced with difficult decision in the near future, it was aware of the risk assessments which would inform those decisions.

Richard Block, Chief Operating Officer, attended the meeting and advised the Committee that consideration was being given as to how to structure the Risk Register to include risk appetite, enabling an explanation to be provided to the Committee as to why the Council had accepted a particular level of risk. The Corporate Governance Manager confirmed to the Committee that the Councils risk appetite would be considered by Heads of Service when making operational decisions or carrying out service reviews.

Considering the Risk Appetite Statement Development document which had been presented to it, a Committee member noted that it asserted that elected Members had a moderate appetite for risk, how could this be reconciled with external factors which impacted the Council such as the reduction in the core grant which was received from central government, together with the known reduction in business rates income which would impact the Council in the future? There would be difficulty in responding accurately to the risks inherent in this situation while the future was still so uncertain. Anna D’Alessandro, Interim S151 Officer, advised the Committee that this position was now a new one, and took place every year. Part of the problem which local authorities faced, was that the terms of the provisional settlement from central government were not always known until December, leaving a very short period of time for Councils to close their budget gaps. It was necessary to prepare for the uncertainty of both LGR and the imminent reduction in funding, and this work would begin early. The Council had the benefit of reserves which it was able to use strategically thanks to previous good decision making, and the Council’s ‘Fit for the Future’ programme sought to mitigate this risk as much as possible. The Chief Operating Officer confirmed that multi-year government finance settlements had been promised, which would further assist with budget planning through the year.

A Committee member considered that in his experience there had been a reduction in the risk appetite of Councillors, and where risk was accepted this had been in relation to the necessity of service provision with reducing resources. It was interesting to note from the Register that the score related to the risk of LGR had remained very high at 20, even following mitigation. There was a danger that the organisation fell into the trap of considering the deadline for LGR of 2028, and did not consider beyond this point, whereas it was important to ensure that a working Council remained in place after LGR to continue to deliver essential services to residents. In response, the Leader of the Council recognised the duty on Members and Officers to plan for the future in a structured way, and considered that there was cause for some optimism, with opportunities to make improvements which would impact the lives of thousands of residents.

Returning to the issue of cyber security, a member of the Committee sought clarification on whether or not training was mandatory for all staff and Councillors in relation to potential cyber security threats. The Corporate Governance Manager confirmed that training was mandatory for all staff, and testing was carried out throughout the year by way of phishing exercises. Training for Councillors was not mandatory, however, it was understood that the Interim Head of Digital was keen that this took place, and conversations with the Councils’ political group leaders was planned on this topic, which met with the approval of the Committee.

A Committee member considered that the use of artificial intelligence (AI) by both staff and Councillors should be given careful consideration, as the use of an external AI for Council business could easily lead to data breaches. It was essential that this was acknowledged internally, and staff and Councillors were offered advice setting out what was, and what was not, acceptable use of AI services.

RESOLVED that:

- The Council’s progress and performance in managing risk during the period from April 2024 to March 2025 be noted, and;

- the current strategic risk register be noted, and;

- the proposed risk management strategy for 2025/26 be noted, and;

- the submission of the Officer’s report to Cabinet to approve the risk management strategy for 2025/26 be endorsed. 

The Committee considered a report which requested that it approve the draft Governance and Audit Committee Annual Report for 2024-25, and endorse its submission to Full Council.

In discussion, the Committee suggested that consideration could be given to providing some stronger wording in relation to the finance risk which had been experienced during the preceding year, and some of the challenges which had been faced.

RESOLVED that:

- The draft Governance and Audit Committee Annual Report for 2024- 25, and its submission to Full Council.

The Committee considered a report which asked it to approve its work programme for the forthcoming municipal year.

RESOLVED that: the contents of the report be noted.