Agenda and minutes

 Apologies were received from Councillors Hackwell and Nestorov.

To approve the record of the meeting held on 29 June 2023.

The record of the meeting held on 29 June 2023 was agreed and signed by the Chairperson as correct. 

There were none. 

Members are invited to disclose any Disclosable Pecuniary Interests or Other Significant Interests in accordance with the Member Code of Conduct. Guidance on this is set out in agenda item 4.

Disclosable pecuniary interests

There were none.

Other significant interests (OSIs)

There were none.

Other interests

There were none.

This report gives an overview of treasury management activity during 2022/23.

Members considered the report which provided an overview of treasury management activity during 2022-2023 and compliance with legislative and regulatory requirements.

The Finance Business Partner – Technical Accounting highlighted the Council’s borrowing did not exceed the Capital Finance Requirement (CFR).  The CFR represented the value of long-term assets not funded by from grants, contributions, revenue funding or capital receipts. This demonstrated the Council had only borrowed to fund capital expenditure. In addition, the maximum outstanding borrowing during 2022-23 was £430.7m, well below the authorised borrowing limit of £690.6m.

He advised Members that for a short period at the end of March 2023, the treasury strategy limit of £100m of debt repayable within 12 months was exceeded by £600,000 due an error which had omitted £1.1m of historic debt to Kent County Council. From April 2023, the short-term borrowing limit had increased to £150m.

The Council primarily used short-term borrowing, which was more financially beneficial than using longer term borrowing, however, the potential for interest rates rises was a known risk. Rates had risen faster than expected but were now thought to be near their peak. The Council would continue to borrow on a short-term basis in the expectation that debt maturing would be replaced with loans at a lower interest rate.

The Finance Business Partner – Technical Accounting added that return on investment had been in line with expectations, the approach outlined in the treasury strategy was to keep borrowing at a minimum which limited opportunities for treasury investment.

The value of property fund investments had fallen from £25m to £23m in the year due to a fall in value of commercial property. Whilst the value of the capital funds had fallen, the fund currently generated income of around £800,000 a year.

Members then raised comments and questions which included the following:

Financing Costs – In response to a request for further information regarding financing costs as a proportion of net revenue stream (HRA), the Finance Business Partner – Technical Accounting explained the figure was an affordability ratio and showed the Council’s interest costs were a low percentage of the total income of the Council for the year.

Income from loans to subsidiaries – A Member commented that the return of £850,000 income from Kyndi and Medway Development Company (MDC) was positive and requested a breakdown of income from the two companies. The Finance Business Partner – Technical Accounting undertook to provide a briefing note which detailed income received from loans provided to Kyndi and MDC.

Cost of Carrying Loans – In response to a question whether carrying loans and holding a balance in the bank represented a significant cost to the Council, the Finance Business Partner – Technical Accounting explained that his aim was to keep any balance to a minimum, the Council had little other than day to day cash and this reduced the cost of carry which was the difference between borrowing costs and the income from deposits.

Minimum Revenue Provision (MRP) – It was noted that  ...  view the full minutes text for item 145.

This report presents the interim findings of the Council’s External Auditors, Grant Thornton, in their audit of the Council’s Statement of Accounts for the financial year 2021/22.

The Chief Operating Officer introduced the report and informed Members that the external audit of the Council’s financial statements 2021-22 had not yet been undertaken. However, there were significant delays nationally in completing external audits and the government was consulting on proposals to remedy the delay.

The Engagement Lead, Grant Thornton reported that the work related to the Council’s 2020-21 financial statement was almost complete and would be finalised in the new few weeks.

He explained that this was the second year of reporting under the current arrangements and the conclusion had identified two significant weakness recommendations. In 2019-20 The audit highlighted a significant weakness in Children’s Services due to the results of the inspection by the regulator. The report noted the progress made in 2021-22 and the Children’s Services improvement journey but not all of those weaknesses had been addressed and the significant weakness reported in 2019-20 remained in 2021-22.

The second identified significant weakness was in governance caused by the delay in production and auditing of the Council’s annual accounts. External auditors were completing their work for 2020-21, however, there was an expectation that the Statement of Accounts would be completed within statutory timescales. This had not been possible, so it was a significant weakness.

The report also set out some improvement recommendations which had been made and accepted by management.

Members then raised comments and questions which included the following:

Delay in publishing accounts – In response to a query why the Council’s accounts had been delayed, the Head of Corporate Accounts advised 2021-22 accounts were nearing completion, however, production of group accounts created an added new workload for the team which had not previously had experience of group accounts. He added the delay in completing 2021-22 had a knock-on effect for the 2022-23 financial accounts.

The Chief Operating Officer advised there had been issues within the team which included staff sickness and turnover at a critical period. In addition, the balance from the previous year’s accounts had to be brought forward to the following year, so the delay to the previous year’s accounts had a knock on effect for the completion of 2021-22.

He explained the Council had a plan to complete the outstanding work. However, this had been superseded by the ongoing consultation the government was undertaking.

The Engagement Lead Grant Thornton provided an update on the ongoing consultation stating the government was considering imposing a deadline for completion of each year of accounts to clear the backlog. Under the proposals If enough work on the statement of accounts had been completed then the auditor could give an unqualified opinion, or if the auditor had not completed their work they could provide a qualified opinion. If work had not progressed to a satisfactory position, an extreme disclaimer opinion would be provided by the auditor. Dates had not yet been finalised, however, a deadline of March 2024 to complete accounts for the financial year 2012-22 was under consideration, with further dates for completion of the 2022-23  ...  view the full minutes text for item 146.