Agenda and draft minutes
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Apologies for Absence
To receive any apologies for absence.
Apologies were received from Councillor Story, Councillor Bowden attended the meeting as substitute.
To receive any declarations of interest.
There were no declarations of interest received.
To consider the draft accounts for 2019/20.
Adele Taylor, Director of Resources, explained that the accounts included the period up until 31st March 2020. The report gave an indication of where RBWM was, while the accounts had been published on the website since early August so that the public could inspect them. Deloitte, the external auditors, had also provided an update at the end of the report.
Andrew Vallance, Head of Finance, said that RBWM had been rated to provide high quality services whilst providing one of the lowest council tax bands outside London. Overspend was mainly due to parking shortages and a decline in parking income, while revenue and benefits had overspend due to Covid and the need for additional housing benefits. There had been an increased cost of temporary accommodation and RBWM had received grants totalling £8 million, with around £1 million of this being used to cover the costs of Covid. In the general fund, money was moved from the budget into the reserves, RBWM had to take money out of the reserves last year to balance the budget.
On the expenditure statements, there had been a revaluation as there had been a change in the fair value of investment properties. Every three years, the pension fund was reviewed and this year the fund had been reviewed; there was a slight improvement as a result. Short term borrowing had increased to cover and fund the capital programme while there had been a positive increase in cash flow, which had increased to over £7 million.
Councillor L Jones raised a number of points, she said that in the report it was claimed that 74% residents were satisfied but the last survey was conducted in 2018. There was lot of narrative about the 19/20 financial year, but she was interested to know how RBWM would have got to this point without Covid. She asked how much the grant was and how this had affected cash flow. Councillor Jones noted that RBWM was its own insurer and whether this meant that the figures detailing this in the report were a risk. Councillor Jones also queried about risk assessments; how each risk was managed, the processes and procedures, and how does a risk come about.
Adele Taylor said that she would check the date regarding the resident satisfaction survey. For Covid, it was about understanding the impact and the need to identify the significant effects it would have on future finances. The Medium Term Financial Plan was being revised and once this was complete it would form part of the accounts. There were a number of claims outstanding on the insurance but RBWM would not necessarily pay out in these areas. An item on Risk Management would be coming to the next meeting of the Audit and Governance Committee.
Andrew Vallance said that RBWM had insurance for high value losses, which did defer some risk. Ruth Watkins, Chief Accountant, said that the first Covid grant had been received in-year, with £1.8 million of that ... view the full minutes text for item 3.
To consider the report.
Andrew Moulton, Assistant Director of Governance at Wokingham Borough Council, explained that the report would normally come earlier in the year but it was important to consider with the accounts. There was a shared audit service between RBWM and WBC, which provided audit services across the two councils. Andrew Moulton hoped for a positive relationship with the committee so that the service could continually improve.
Catherine Hickman, Lead Specialist Audit and Investigation, explained that the report summarised the work of the Shared Audit and Investigation Service (SAIS) for the 2019/20 financial year. The purpose of the report was for the Head of Internal Audit to report annually on the council’s internal control framework. The report summarised the key headlines arising from work during the year and Appendix A(I) listed the audits undertaken to form the overall opinion, the position of the audits at 31 March, the audit opinions given and with those audits falling into the second lowest category of audit opinion being summarised in the main report. Catherine Hickman summarised the work of investigations which included a successful proactive Business Rate/Exemption Relief exercise where over £174k was identified as being billable to the charge payer. A recent Regulation of Investigatory Powers Inspection by the Investigatory Power’s Commissioners Office resulted in a positive outcome for the council. A review of the SAIS’s conformance with their professional body’s Public Sector Internal Audit Standards (PSIAS), undertaken by CIPFA in 2018 resulted in the Service achieving the highest category of opinion and this had been maintained through annual self-assessments against the Standards. The recommendation for members to consider was to note the progress that had been made in achieving the 2019/20 Audit and Investigation Plan.
A resident had requested to speak on the item. Mr Hill noted that there had no instances of fraud or irregularity but asked what would a member of staff or resident do if they suspected fraud.
Catherine Hickman explained that there was a whistleblowing process in place which was there to be used if it was needed.
Councillor L Jones asked if there was a timetable for the actions that were outstanding on full compliance with the PSIAS. Regarding the audit plan, she asked if it was the right mix and also questioned a number of deferments that were stated in the report and the reason for them.
Catherine Hickman said that there was an action plan produced each year with regard to the PSIAS through an annual self-assessment process, and Andrew Moulton added that the Committee may want to consider an item on compliance as part of their Work Programme.
Councillor Price said that one of the key implications of the report was that there was confidence that public funds were being used effectively. She believed that this had not happened and asked what lessons had been learnt by the shared audit service.
Andrew Moulton said that the team were committed to learning and wanted the service to provide reassurance to both members and residents. Adele Taylor ... view the full minutes text for item 4.
To consider and approve the updated plan.
Andrew Moulton explained that the committee had an opportunity to shape the work of the team as the 2021/22 plan would be coming to the committee for consideration early next year.
Catherine Hickman said that the 2021/21 audit plan was approved by the Corporate Overview and Scrutiny Panel in February 2020. With Covid having an impact this plan had been put forward to refocus audit and investigation activity over the remainder of the financial year. The report contained the original plan along with the revised areas, and the team were seeking approval from the Committee for the revised plan.
Councillor L Jones said that there were deferments of key partners detailed in the plan and believed that their viability could be a risk. She wanted to understand the decision making process which led to a deferral.
Catherine Hickman said that if the Committee felt that the team had not got the right balance then this was their opportunity to be involved in the process.
Councillor Sharpe said that the Serco contract needed to be reviewed by internal audit.
Catherine Hickman said that all these areas could be taken into account but if new audits were to be added into the plan, then other audits would need to be taken out as the team are working within their capacity.
Councillor Hilton said that to him the deferrals made sense, the CIPFA report that was brought to Corporate Overview and Scrutiny had an action plan in place.
Adele Taylor said that officers would be able to take away the suggestions from the Committee.
A named vote was taken to approve the plan along with the suggestions that the Committee had made to officers on the revised plan.
RESOLVED UNANIMOUSLY; That the Audit and Governance Committee approved the updated 2020/21 Audit and Investigation Plan.
To consider the above titled item.
Russell O’Keefe, Executive Director – Place, said that members had requested this item on the Nicolson’s Shopping Centre valuation was added to the agenda. RBWM owned approximately 50% of the freehold on the centre site. In 1985 RBWM let a 150 year lease on its freehold, because of the terms of that lease in addition to the poor performance of shopping centres over the last few years the ground rent the Council had received on that lease had been very poor including as low as zero in recent years. In regards to the lease over the Council’s part of the freehold and the freehold on the rest of the site (the other approximately 50%) that had changed hands a number of times. In February 2019, Tikehau Capital in partnership with Areli Real Estate purchased the lease that the Council originally let in 1985 and the other half of the freehold that the Council does not own from the receivers of the previous owners. The lease that was originally let includes the ability for the person who holds the lease to redevelop the site without approval being unreasonably withheld by the freeholder (the Council on its part of the site). That ability to not unreasonably withhold approval is as the Council as a freeholder, that does not affect its ability as a planning authority. The Council also owned a building called Central House, which was a vacant 1970s office building, the Council bought back the leasehold in 2017 for approximately £2.5 million. This was done to facilitate the redevelopment of the car park and regeneration of the surrounding area.
Following negotiations with Tikehau Capital and Areli Real Estate and the relevant approvals the Council entered into a conditional sale agreement with their company called Denhead for the sale of its freehold interest in the shopping centre site, (the part they didn’t own as they already had a long lease over the Council’s freehold and the other half of the freehold), and also Central House. That was for a combined fee of £6 million (£1 million for the Council’s part of the freehold for the shopping centre and £5 million for Central House). Those negotiations and that decision were informed by an independent valuation, a section 123 report, carried out by Lambert Smith Hampton. That was to ensure the Council got best consideration for its interests.
A valuation was carried out by another set of surveyors, called Knight Frank, which was referenced in the planning information submitted by Denhead, the company owned by Tikehau and Areli, as part of the financial viability assessment. That valuation was an existing use valuation that covered the shopping centre as a going concern, the whole site including the lease the Council let in 1985 as well as the freehold they had already bought from the receivers. In regards to the Council’s interests they were valued by the section 123 report by Lambert Smith Hampton which values the Council’s interest not the rest of the site ... view the full minutes text for item 6.
To consider the Committee’s work programme for the remainder of the Municipal year.
To include consideration of items scheduled on the Cabinet Forward Plan.
Adele Taylor said that the Redmond Review had been recently published, which was a review on local authorities internal and external audit. It had also been suggested that an update on the internal audit action plan could be added to the programme. Adele Taylor said that agenda balancing would be looked at as the programme for the November had a significant number of items.
Councillor Price said that as the RBWM Property Company was only incorporated once it was a certain size that it may be something the committee would want to look at later in the year. Adele Taylor said that in the CIPFA action plan this was mentioned and was therefore something that Corporate Overview and Scrutiny could pick up.
Councillor Sharpe said that the Fraud Policies Refresh item could be moved to February along with the Key Risk Report. The Chairman said that officers would go away and look at the agenda for November.