(a)

for the benefit of new Members to the Audit and Governance Committee a brief overview was provided on the Council’s pension transaction: in 2019 the Council undertook a transaction that was designed to reduce the pension deficit and the impact of the contributions to the pension deficit on the general fund. The transaction involved the purchase of shares in a specifically-designed company, which then used that money to reduce the pension fund deficit. From an accounting point of view, Grant Thornton as the Council’s Auditors, didn’t agree with the Council’s approach to the transaction. Grant Thornton did a review in 2021 of the governance upon making decisions around complex and innovative schemes; the results were reported back to the Audit and Governance Committee and the Council put in a process of how to deal with complex accounting matters;

(b)

it was highlighted that the Council had taken advice on the accounting treatment from CIPFA, however Grant Thornton didn’t agree with that advice. Both the Council and the External Auditor had taken legal advice as to how the transaction should be accounted for and the legality of various decisions. In 2023 the two legal parties reached an agreed position however it did involve further discussions and complications with the pension fund. The Council have accounted in their 19/20 accounts in a way that spreads the cost of the investment over a 20 year period however Grant Thornton didn’t agree that was the correct accounting approach – discussions were still ongoing;

(c)

different solutions to the accounting approach for the pension deficit transaction were contained in the external auditor’s report however that was a decision for the Council; officers were keen to close this matter off within the next few weeks so that the subsequent years audits could go through the audit process. The value for money work undertaken as part of the 19/20, 20/21 and 21/22 audits had all been completed;

(d)

The conflict between the Council and the External Auditor was one of accounting treatment – Grant Thornton had one view regarding how the payment into the pension fund should be discharged and, with advice, the Council has a different view. The  ...  view the full minutes text for item 5.

(a)

the Internal Audit End of Year Report provided  a summary of the Council’s performance against the Internal Audit Plan that was approved by the Audit and Governance Committee in March 2022. It highlighted the key areas of work undertaken and a summary of some of the main findings and an overall assurance opinion which was a ‘reasonable’ assurance;

(b)

‘Reasonable assurance’ was a good standard of assurance – there were 4 assurance opinions – reasonable assurance was the second from the top. To provide the top level of assurance, substantial assurance, was considered unrealistic for any council in the country to achieve;

(c)

officers assessed the key controls that were operating and from that work provided individual reports to managers; there was an assurance opinion for each piece of work. One such piece of work focused upon Delt services – a lack of engagement was recognised and reported upon related to their patch management work. This issue was raised with the Section 151 Officer and CMT – in terms of their processes and software, everything was in place that expected to be however the focus was now upon if anything was different and how those exceptions were managed;

(d)

the chart at the bottom of page 41 in the agenda pack provided a brief breakdown of the assurance opinions provided across the Council on pieces of work throughout the year.

(e)

in terms of the hand/arm vibration audit work it was highlighted that internal audit were not health and safety specialists so they were not able to undertake health and safety audits – that was the responsibility of the Health and Safety department and specialists. Internal audit became involved when issues were flagged by the HSC and officers were asked to assess processes in place. Three separate pieces of work had been undertaken regarding the hand/arm vibration work and not any other area of health and safety. Recommendations from work done by Internal Audit was regarding systems and processes specifically.

(a)

the Internal Audit Charter and Strategy was submitted to the Audit and Governance Committee on an annual basis; there was a requirement by the public sector internal audit standards to define the purpose and responsibility of internal audit – that was set out in the Audit Charter. The Audit Strategy set out how the service was delivered in accordance with the Charter and best practice and regulatory requirements;

(b)

this document was last presented to the Audit and Governance Committee in July 2022 where it was agreed; four minor changes have since been made which were identified in the document via tracked changes – these included the change to the year, a change to the tense of some text, the fact that a new partner had joined Devon Audit Partnership team and an update on the qualifications held by Devon Audit Partnership.

(a)

the Counter Fraud Services Annual Report detailed a summary of the work completed over the past 12 months and demonstrated good governance by Plymouth City Council to address counter fraud risks and threats. The report provided assurance to the Council as well as the citizens of Plymouth that the budgets were being protected and funds spent wisely. Fraud was an ever present and ever growing threat however officers were doing their best to protect the Council, its officers and the interests of the public;

(b)

the savings detailed in the report were consistent with the trend of previous years however the way work was approached was slightly different in that a lot of work was going in to checking records and protecting the public purse;

(c)

It was emphasised that a lot of the work undertaken to protect the public purse was based around the fact that the Council had a finite resource to provide public services and that had to be spent on those that required it. Every pound that was saved through the work of the Counter Fraud Services Team was money that could go back into front line services;

(d)

the team went back to assess work that was put in place to apply CIPFA best practice; the report at appendix 1 demonstrated a good response. Internal Audit and the Counter Fraud Team and Devon Audit Partnership worked closely together to provide integrated assurance;

(e)

the National Fraud Initiative was ongoing and statistical information would be provided at the next meeting of the Audit and Governance Committee; there were a few thousand matches to come back which would need to be checked. Some of those matches would be low value and others would be more significant. This bi-annual exercise also increased the resilience to Data Protection Act requirements;

(f)

several fraud investigations were still ongoing and several allegations had been dealt with; as financial pressures were increasing, fraud activity was also increasing.

(g)

national statistics specified that between 4-6% of budgets were lost through fraud; control through social care budgets and reviews may not happen as regularly as they could due to high demand and high pressure in that area of work and it was likely that this increased the risk of fraudulent activity.

(h)

savings described in the report were either cashable or non-cashable; for example, savings for council tax fraud would be cashable and that would be immediately billable resulting in someone having to pay. However if fraudulent activity was found with someone subletting a social housing property then the person would be removed from the property and the house would be put back on the social housing register for a new tenant. The Council could then place someone in that property instead of paying for emergency accommodation for example – that money would be  ...  view the full minutes text for item 8.

(a)

the deadline for producing the draft statement of accounts moved back to 31 May in 2023; in the first year of Covid it was produced at the end of August and then the following two years it was produced at the end of July. The Council was unable to produce the draft accounts by the 31 May 2023 deadline and instead published by 20 June 2023 alongside a lot of other local authorities. It was estimated that approximately only 30% of local authorities produced their draft statement of accounts by the deadline;

(b)

the reasons for the delay in publishing the draft statement of accounts were set out in the report; officers had to rely more on real-time data rather than estimates that would have been used when officers previously published the draft statement of accounts for the May deadline, as auditors were unhappy with estimation techniques and wanted the Council to rely more on actuals. In addition to that, a late issue arose in relation to a valuation that was undertaken in October 2022 – this resulted in changes having to be made to the 2021/22 accounts to be flowed through to the 2022/23 accounts;

(c)

the Council now had 4 financial years of accounts that were not audited; any agreed amendments couldn’t yet be brought to Committee. As each year progressed those amendments, if any, would be progressed;

(d)

the report referred to the Council’s balance sheet and information upon assets and liabilities. There was currently a positive balance sheet and the majority of that was down to the revaluation of the pension fund which had a positive impact upon the Council’s balance sheet.

(e)

the report was a retrospective look back to 2022/2023; the impact on the Council’s accounts as a result of recent fuel costs would be reported in the 2023/2024 budget report that was likely to be submitted to Council in the first quarter of the financial year;

(f)

a ‘material impact’ was specified as being £7m or over;

(g)

the statement of accounts was open for public inspection; as of yet it was considered that no-one has requested to view the accounts;

(h)

un-useable reserves could not be used for revenue spending; they reflected things such as movement in property values so there was a revaluation reserve, a capital adjustment account which reflected movements in depreciation. There was also a collection fund adjustment account – they were all used to reflect the international financial reporting standards on outturn position and were not useable for the council’s business. An adjustment had to be put through the accounts so that the Council could be compared to other organisations;

(i)

the working fund balance was not earmarked but useable reserves could be earmarked for a purpose. They could be put aside for voids; previously £20m had to be moved  ...  view the full minutes text for item 9.

(a)

the report provided an update on treasury management activities for 2022/23 and was presented to comply with the CIPFA code of practice and to discharge the Council’s statutory duty;

(b)

key messages from the report included:

o    

the treasury management position - the Council’s borrowing at the end of March 2023 was £565m;

o    

the balance sheet summary as part of table one sets out where the Council’s capital financing requirement offsetting where it’s got its useable reserves;

o    

the Council’s net borrowing of £565m was an increase of 11 million from the previous year;

o    

action taken to mitigate against interest rate risk where additional borrowing was taken out through the Public Works Loan Board – the counter side of that was reducing short term borrowing. This primarily was to address the interest rate risk;

o    

at the start of 2022 the Council could secure short term borrowing (PWLB borrowing) at a lower rate than at the end of the year after numerous Bank of England increases;

o    

the average rate presented for short term borrowing reflected the net impact of the transactions that had been put through with the interest rates swap arrangement; if the Council hadn’t had the interest rate arrangement then the Council’s short term borrowing would have been in excess of 2%;

o    

table 3 set out the various investment activities, there was no significant movement between the long term investments. Short term investments with money held in banks and call accounts had reduced partly reflecting the use of treasury management to fund the treasury cash flow;

o    

the external context affecting the 2022/23 treasury management activities included global inflation and base rates and the impact of that. The base rates at the start of the year was 0.75% whereas at the end of the financial year it increased to 4.25%;

o    

the final part of the report focused upon the prudential indicators; these were set in 2022 and incorporated in the treasury management strategy which was included in the February 2022 suite of documents for budget setting. The indicators were a control and good practice on how the council planned to undertake its borrowing and investment.

o    

the first indicator highlighted that the Council hadn’t complied with the planned spread of borrowing between fixed rate and variable rate borrowing arrangements. The Council took mitigating action in 2022/23 to secure in more borrowing long term through the Public Works Loan Board than was initially planned.

(c)

the way the Council operated its treasury management function was to link borrowing to cash flow; where the Council received grants in advance the Council was able to delay the need to borrow money. The rate swap arrangement was protecting £75m of the Council’s short term borrowing to a favourable rate. The ongoing review of the capital  ...  view the full minutes text for item 10.

(a)

Thurrock Council and Woking Council were two examples in the media whereby Council’s had got themselves into financial difficulties. The report attached to the agenda detailed that it was a report of public interest as everyone could learn lessons from it. The link to the 110 page report was contained in the agenda; it was highlighted how things could quickly fall apart with poor governance;

(b)

as discussed earlier in the meeting, Grant Thornton’s External Auditor’s governance review was undertaken and as a result of several recommendations, the Council had changed its governance proposals to its own transactions;

(c)

the power the Government had when Councils were experiencing trouble was demonstrated in the report. In this instance Commissioners were sent to Thurrock who effectively had taken the role of the Chief Executive and looked at the whole senior management structure.

(d)

the benefits that might be achieved by undertaking a peer review with another council in order to assess and seek assurance that the Council’s governance and audit functions were working as they should so as to avoid a situation faced by Thurrock Council:

(e)

that the council’s governance arrangements and functions would not support a repeat of what happened at Thurrock Council however it was considered that the basis of what they were trying to do was similar to Plymouth. Both councils bought assets to receive a return on the yield from those assets. Plymouth City Council however ensured that any asset bought was in the Plymouth postcode boundary and therefore a benefit would be achieved not just financially, but also in jobs growth and regeneration opportunities. Plymouth City Council was a lot larger than Thurrock and over a decade had spent £279m in that approach, but those assets were within the city and had an experience asset management team.

(a)

the Council had recently received confirmation the Department for Business Energy and Industrial Strategy that they had completed their work on post payment assurance for the Covid 19 Business Grants;

(b)

the Council administered business grants from March 2020 to March 2022 working with eight different grants schemes to develop. The Council developed its assurance process as it went along, similar to most Council’s across the country; officers were reassured to receive confirmation that of the checks and balances that they had done, they hadn’t identified any grants that were incorrectly granted;

(c)

the Council had paid out just under £96m in grants over the two years; 93% of the funding received was paid out. This figure wasn’t 100% as where it was considered discretionary it was paid out the grant in full, however subsidy rules affected other payments;

(d)

during the process there were over 50 officers working on business grants in terms of the application process, through to the assurance verification the Council was internally audited and received a reasonable assurance rating.

(a)

the number of strategic risks currently being managed totalled 23; there were 8 red risks (the report detailed 7 and this was incorrect). The red risks referred to council expenditure exceeding resources, a pension fund accounting issue, the demand and complexity of demand in children’s services, cyber security, IT supply chain constraints, workforce constraints in adult social care, the SYDS approval body (sustainable drainage system approval body) and a risk of financial instability with CaterEd;

(b)

of the 8 red risks, there was planned scrutiny around the council’s budget and resources over the course of the next 6 to 9 months as the budget was prepared for February 2024; the pension fund accounting remained a discussion at the Audit and Governance Committee; the demand and complexity of children’s services was being reviewed by scrutiny specifically with regards to improvements that needed to be made following the recent Ofsted inspection; IT supply constraints and cyber security was listed as an item due to be considered at scrutiny in the near future; social care workforce constraints was under review by the Health and Social Care scrutiny committee; there was currently no scrutiny planned around Suds or CaterEd;

(c)

there was a new risk on the strategic risk register regarding the capacity within the senior leadership team in particular reference to statutory officers; there was an interim Section 151 Officer, an interim Monitoring Officer and several other gaps in management across the council. Mitigation was listed in the report and detailed the recruitment underway. A Chief Officer’s Appointment Panel was scheduled earlier in the week and there was due to be another at the end of the week;

(d)

there were 111 risks on the operational risk register, this number had reduced since the last time it was submitted to committee as there were a number of duplicate risks and some that were considered sufficiently mitigated. The operational risks related to children’s services, health and safety risks linked to trees, asbestos, data security, recruitment, home working and school transport budget;

(e)

Members were asked to consider if they wished to include any of the risks specified in the report on to the Audit and Governance Committee work programme for future consideration with the understanding that some scrutiny was underway in the scrutiny function of the council’s governance structure.

(a)

the number of strategic risks currently being managed totalled 23; there were 8 red risks (the report detailed 7 and this was incorrect). The red risks referred to council expenditure exceeding resources, a pension fund accounting issue, the demand and complexity of demand in children’s services, cyber security, IT supply chain constraints, workforce constraints in adult social care, the SYDS approval body (sustainable drainage system approval body) and a risk of financial instability with CaterEd;

(b)

of the 8 red risks, there was planned scrutiny around the council’s budget and resources over the course of the next 6 to 9 months as the budget was prepared for February 2024; the pension fund accounting remained a discussion at the Audit and Governance Committee; the demand and complexity of children’s services was being reviewed by scrutiny specifically with regards to improvements that needed to be made following the recent Ofsted inspection; IT supply constraints and cyber security was listed as an item due to be considered at scrutiny in the near future; social care workforce constraints was under review by the Health and Social Care scrutiny committee; there was currently no scrutiny planned around Suds or CaterEd;

(c)

there was a new risk on the strategic risk register regarding the capacity within the senior leadership team in particular reference to statutory officers; there was an interim Section 151 Officer, an interim Monitoring Officer and several other gaps in management across the council. Mitigation was listed in the report and detailed the recruitment underway. A Chief Officer’s Appointment Panel was scheduled earlier in the week and there was due to be another at the end of the week;

(d)

there were 111 risks on the operational risk register, this number had reduced since the last time it was submitted to committee as there were a number of duplicate risks and some that were considered sufficiently mitigated. The operational risks related to children’s services, health and safety risks linked to trees, asbestos, data security, recruitment, home working and school transport budget;

(e)

Members were asked to consider if they wished to include any of the risks specified in the report on to the Audit and Governance Committee work programme for future consideration with the understanding that some scrutiny was underway in the scrutiny function of the council’s governance structure.

(a)

the Annual Governance Statement (AGS) was part of the annual suite of documents submitted to the Audit an Governance Committee;

(b)

the AGS set out how the Council was ensuring that proper systems of internal control were in place. The first part of the report from pages 407 – 417 described the CIPFA principles of good governance; each principle linked to guiding documents that were being used to maintain the Council’s position against the principles and examples of how those had been used over the past year;

(c)

the second part of the document was a summary of the issues that had arisen throughout the year alongside an assurance statement and plans to address issues where appropriate. Page 419 included a response from the external auditor review and the judgement from internal audit of reasonable assurance;

(d)

the corporate peer challenge, as referred to earlier in the meeting, was described in the report; officers had progressed through the action plan and a link was provided in the agenda to the most recent progress report;

(e)

following the Ofsted focus visit to Plymouth ‘front door’ back in December 2022 an improvement board had been established and would work alongside existing governance controls in that space;

(f)

throughout 2022/23 there were several components of the constitution which were found to be sub optimal which led to misunderstanding by multiple stakeholders; the Audit and Governance Committee were to lead a constitutional review for 2023/24 with the expectation that this would be reported back to Full Council in stages trying to deal with the most pressing matters first and making those changes to the constitution as quickly as possible;

(g)

new arrangements for complaints under the code of conduct had been implemented following the approval of the new code of conduct; a new Standards Committee was now required to be established;

(h)

issues identified by the senior leadership team as part of their work around the AGS included the improvement on the recording of decisions within departments, the centralisation of governance documents in respect to the family of companies including annual reports and articles of association, departmental business plans to be reviewed as a result of the change to the vision and strategic objectives of the Council following the election in May, the reporting and collating of risk within service areas needed to be addressed.

(a)

there had been a number of issues raised over the last year in respect of the constitution with some of those issues requiring action imminently including procedures around Council, the status of the Cabinet when the Leader resigns and petition guidance. It was highlighted that the petition guidance had been in place since 2011 when the duty was first [placed upon local authorities – the duty had since been repealed therefore there was a need to consider how a local based approach could work;

(b)

work was also required to be undertaken with regards to contact standing orders and finance standing orders, and how those worked together, how those were presented both to officers, Members and the general public in a way that was understandable;

(c)

the suggestion contained within the report was to refer this matter to the Civic and Constitutional Review Group established in January 2022 – a draft outline for the review was contained within the report.

(d)

it was hoped that some changes to the constitution could be presented to the September 2023 Full Council meeting however some aspects of the review relating to contract and finance standing orders was expected to take more work so would likely be presented to Full Council in January 2024;

(e)

the Council’s constitution was in line with several local authority constitutions around the country; in 2012 when it was written in the current format it was based upon Oxford’s constitution. As part of the programme of review, and in order to ensure that the constitution was fit for purpose, efforts would be made to liaise with other local authorities. As with the code of conduct review and revision, officers would employ an expert consultant and work with the LGA to create a constitution that was accessible and good quality;

(f)

the terms of reference for the sub group was agreed at the Audit and Governance Committee in 2022; the specific plans for the constitution review were set out in the report contained within the agenda and would be circulated to Members.