Agenda and draft minutes
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Items No. Item
Apologies for absence
Apologies received from Councillor Charman and Forward. Councillor Chowney substituted for Councillor Forward.
Declarations of interest
Personal- Works in the housing industry
RESOLVED- (Unanimously) that the minutes of the meeting held on the 22 January 2020 be approved.
The Assistant Director Financial Services and Revenues (Chief Finance Officer) presented a report to enable the Audit Committee to scrutinise the Treasury Management activities and performance of the last financial year.
The report reviews 2019/20 and generally before the main impact of the COVID-19 crisis. The current crisis has highlighted that good treasury management remains critical. The Council, as a result, has been able to maintain effective management of its money, services and reserves. The Council’s money has been available when required. This has been achieved through the adopted policies and strategies the Council currently has. It is recommended that the policies and practices are not changed for the year - as they are currently proving to be effective.
In the year there was £12million of capital expenditure of which £9 million was financed through borrowing. The council had a small under borrowing position at year end. Paragraph 19, table 4 shows a breakdown of the loans the council has taken. In terms of investment returns, the performance was better than estimated. The interest rates are still at historically low levels but there was a 1% hike in borrowing rates in October 2019 for the PWLB (Public Works Loan Board). The council has not borrowed anything in advance of its need and has not borrowed since the interest rate hike.
The COVID-19 crisis did impact on the investments with CCLA e.g. property Fund. Paragraphs 48, 49 and 50 talk of this impact. These investments are recovering their Capital values and the Council continues to obtain a good revenue return from the dividends – there is no intention to sell these investments.
Within the report there are also details of the investments we have been making including details of the loans to the Hastings Housing Company.
The councillors thanked him for the delivering a detailed report.
Councillors asked about Hastings Housing Company. HBC are lending money for them to buy housing. The company are not repaying the capital loans but have been repaying the revenue loan advanced. When the company started, they were, as expected, in a deficit. They are now in a financial position repay the loan. The interest rate payable by the company is a market rate and this requirement is beneficial to the council as this is higher than currently obtainable in the market.
Councillors asked about the PWLB rates. These rates are set by the Debt Management Office based on policy from central government. The PWLB has a limit on the borrowing they can give out. They raised the interest rates to reduce the levels of borrowing – particularly for purchasing investment properties. The government is currently reviewing how the PWLB is working. There is hope that the rates will drop. The Council’s property portfolio continues to perform well – although a number of tenants are facing difficulties.
Councillors asked about where the council has lent money to other authorities. We lend to other authorities, on a short-term basis when cash flow permit; this is cost-effective for ... view the full minutes text for item 91.
(Tom Davies, Chief Auditor)
The Chief Auditor presented a report to inform the Audit Committee of the key findings from the housing audit.
The Housing department experiences changes rapidly particularly with debt due to the pressures of homelessness provision. The Chief Auditor will produce a follow up report to these recommendations for the Audit committee at March’s meeting. Senior management response to this report had been positive.
The report makes recommendations and advises on the priority that they should be looked at. There are no urgent priorities but there are 2 important and 6 action points.
The report talks about the challenges the software system has caused in terms of the auditing processes. The current software being used by the housing department is a standalone system. This means that it doesn’t take to any of the other IT software in the Council. This has caused issues in the data collection and tracking which is necessary for activities such as collecting of monies and tracking of tenant financial updates.
Councillors were advised that this had led to the report showing no figure for the rent guarantor system.
ACTION: Chief Auditor will check with the external auditor and get the figure for the rent guarantor system. This will be circulated to audit committee members be email.
The IT software incompatibility has caused for many manual processes to be set up instead to ensure the correct actions and controls are in place. There had previously been issues trying to reconcile the money present in bank accounts with the data from the housing department this has since been resolved. The housing officers are keen to make positive changes and welcomed future training for this.
Councillors enquired whether the project management tools had been used when purchasing this software. This would have picked up on the incompatibility of the software. Councillors were advised that the project management tools would have highlighted this, but they were not in place during the time of this purchasing. It is unlikely that this would happen now as lessons have been learnt. This report helps reminds people that the right controls and correct planning needs to be in place.
1. That the Audit Committee accepts the report.
Reasons for Recommendations
To monitor levels of control within the organisation.
(Tom Davies, Chief Auditor)
The Chief Auditor presented a report to inform the Audit Committee on its annual review of the effectiveness of Internal Audit.
The original Audit schedule contained several audits which would have produced reports. Due to COVID-19 this has not been possible due to the audit officers needed on projects such as helping with the various COVID-19 grant schemes.
Councillors understood why things have been delayed. The COVID-19 scheme has meant that distributing the money to the community has been time critical and needed accurate recording and monitoring of these processes.
The Chief Auditor advised the committee that the Head of IT is helping with a report that deals with cyber attack risk. Other Local Authorities had been subjected to cyber attacks that had caused severe consequences. The council uses many software systems which has caused the need for this audit.
The committee were made aware that the Chief Auditor has approached other local authorities that have had an event that has caused severe consequences in a bid to gain lessons learned from this. The Chief Auditor hasn’t received much information largely due to the local authorities being legally advised not to comment.
1. That the Audit Committee Report to Council 2020 is approved for presentation to Council
Reasons for Recommendations
Regulation 6 of the Accounts and Audit Regulations (England) 2015 requires relevant bodies to conduct an annual review of the effectiveness of its system of internal audit and for a committee of the body to consider the findings.
(Tom Davies, Chief Auditor)
The Chief Auditor presented a report to Audit Committee to consider the revised internal audit plan for 2020/21.
The report contains a table of the amended Audit work programme for the year. The original work programme had been approved for the year in the Audit Committee held on 12 March 2020. Since then COVID-19 crisis had occurred and there has not been enough capacity to discharge the plan. The revised plan has taken out the emerging risks and value for money work. Business recovery was one of the audits that was deleted but the council has now gone onto pass this test. Checks are still being carried out and internal reviews will still be conducted where time permits.
The Councillors enquired about Audits involvement and responsibilities towards the COVID-19 grant schemes. The grant schemes were a system that was quickly put together. Audit responsibilities towards this is having a grant assurance program for this. There is an audit plan that documents what controls are in place and the processes the council are using. There is a danger that if the wrong payment was given out that the government might penalise the by not toping up the additional monthly payments we receive unless we can show we have taken the necessary precautions. Before payments are authorised both the Audit and Finances departments will do checks. Local knowledge pays a key part in knowing what local businesses are in the area and helps prevent successful fraudulent payments. The council also receives referrals from banks and other local authorities. At present the council is only aware of one incident of fraud which Legal and Revenues departments are working on.
There is an Audit plan to look at the Syrian refugee scheme. This scheme had previously had large deficits due to not getting back money owed from the government. There could be other areas in the scheme that need auditing as the scheme involves many different departments. There is limited capacity within the council’s audit team at the moment so this may need to be audited externally. Currently the audit team are looking at the scheme profiling the risks and profiling.
1. That the Audit Committee approves the revised Internal Audit Plan 2020-21
Reasons for the recommendations
To ensure that proper financial management arrangements and controls are in place and operating effectively in the Council.
The impact of Covid19 since lockdown on 23 March 2020 has diverted Internal Audit resources away from planned work particularly towards government grant assurance. It has therefore become necessary to reduce the planned work and focus just on the core audit coverage for the remainder of the 2020-21 year.
Accomplishment of the revised plan will bring the council totally up to date on coverage of its cyclical audit work.
Notification of any additional urgent items (if any)
The Chair took the opportunity to thank all the council’s team for their hard work during the COVID-19 crisis.
The Chief Finance Officer raised the high impact of being inundated with government returns. Normally there would be final accounts from the external auditors for audit committee unfortunately they haven’t been able to produce these. It is hoped that the accounts will be ready for Januarys committee. This delay is affecting other pieces of work. The foreshore accounts have not been completed and the Charity committee AGM has had to been postponed. Without the final accounts from the external audit it will also be hard to set a definitive amount for the reserves.
The councillors asked whether the level of reserves was healthy or would a S144 notice would be issued. The Chief Finance officer assured councillors that even with a further lockdown the council would be in a healthy position. The Government has stepped up and issued more money to help councils with the loss of income caused by the COVID-19 crisis. Income compensation schemes look set to repay lost car park income by as much as 75%. This financial year for the council looks good but future years need consideration with circumstances such as the rise in homelessness costs and not knowing if there will be additional grants to support these costs. This makes future planning a lot more difficult.