Agenda and minutes

There were none. 

To approve the record of the meeting held on 28 September 2023.

The record of the meeting held on 28 September 2023 was agreed and signed by the Chairman as correct.

The Chairperson will announce any late items which do not appear on the main agenda but which she has agreed should be considered by reason of special circumstances to be specified in the report.

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 presents the interim findings of the Council’s External Auditors, Grant Thornton, in their audit of the Council’s arrangements to secure economy, efficiency and effectiveness in the use of resources during 2022/23. 

The Head of Corporate Accounts introduced the report and highlighted that Councils across the country had experienced significant delays in completing audits within statutory timescales. In response the Government had proposed a deadline for all outstanding audits to be completed by March 2024.

In Medway the position was that the Statement of Accounts and Audit findings report for 2020-21 had been completed in October 2023. The draft Statement of Accounts for 2021-22 had been published and it was planned to publish the draft statement for 2022-23 by February 2024.

The Head of Corporate Accounts informed the Committee that it would not be possible for the external auditors and Medway Council to complete the audits for 2021-22 and 2022-23 by the March 2024 deadline set by government within the available resources. As a consequence, it had been decided that the audits for those two years would not take place, however this value for money audit had been published. This would enable the Council and external auditors to undertake the work required for the 2023-24 audit and complete and it within the statutory timescales.

The Engagement Lead, Grant Thornton reported on progress related to the 2022-23 value for money audit. The interim audit identified a significant weakness in the Council’s arrangements to ensure financial stability due to the overspend against the budget in 2022-23, forecast overspend in current financial year and the identified budget gap in the Council’s medium term financial plan of £38m in 2024-25 rising to £71million in 2027-28. The audit noted the positive steps the Council had taken in response and the financial difficulties faced by Councils nationally. The report made two key recommendations in relation to the identified weakness:

1. The Council to urgently address the current year forecast overspend and secure a pathway to medium term financial stability and;

2. The Council should introduce monitoring of savings proposals and scenario testing for medium term financial planning.

In relation to governance the audit recognised the actions that have taken place in relation to Shareholder Boards and membership of the Audit Committee. The decision not to produce statement of accounts for 2021-22 and 2022-23 was a significant weakness in the Council’s arrangements and made a key recommendation to the Council to publish draft accounts for 2022-23 by February 2024.

In relation to economy, efficiency and effectiveness, there had previously been a significant weakness in related to the performance of Children Services. The audit recognised the improvements made as evidenced by the recent Ofsted inspection and concluded there was no significant weakness in relation to economy, efficiency and effectiveness.

The following issues were discussed:

Non-Completion of audits for 2021-22 and 2022-23 - in response to a question whether there were any practical implications to not completing an audit of the statement of accounts for two years including potential issues regarding credit worthiness, the Chief Operating Officer informed the committee there would be unlikely to be any impact on the Council’s access to credit since this issue was faced by many  ...  view the full minutes text for item 397.

This report seeks Members’ views on the appointment of an Independent Member(s) to the Audit Committee.

The Head of Democratic Services introduced the report and highlighted the Committee had previously considered the issue in June 2021 and decided not to recommend an Independent Member be appointed to the Committee. Subsequently CIPFA had published a position statement in 2022 which advised Audit Committee’s should include an independent member in its membership.

Members then debated whether to recommend to Council the appointment of an Independent Member to the Audit Committee.

It was the view of some Members that it was not clear what benefit an independent member would bring to the Committee in addition to the advice they received from officers and external auditors.

A Member expressed concern that an Independent Member would undermine the democratic mandate of the Committee. The Chief Operating Officer commented that CIPFA’s view was that an Independent Member would bring an additional skill set to the Committee.

The engagement lead, Grant Thorton explained CIPFA’s reasoning for their position was that the Independent Member would supplement the knowledge and experience of the Committee, they should provide continuity outside of the political cycle and have a non-political focus.

Members supported the view that the role of an independent member would be to provide advice and if one were appointed, they would not have voting rights on the Committee.

A Member noted that whilst it would be matter for Council to consider the potential cost of an Independent Member, they were reassured that the report noted the cost to other authorities was low.

Decision

1.     The Committee recommended to Council an Independent Member be appointed to serve on the Committee on a fully non-voting basis.

2.     The Committee recommended Council to ask the Independent Renumeration Panel to consider whether payment of an allowance to an Independent Member would be appropriate and if so, at what level and to make recommendations back to the Council on this matter. 

3.     The Committee agreed that a further report on the recruitment process for an Independent Member be submitted to the next meeting, once Council has approved the principle of appointing an Independent Member to the Committee.

This report gives an overview of treasury management activity since 1 April 2023 and presents a review of the Treasury Strategy approved by Council on 23 February 2023.

The Head of Corporate Accounts introduced the report and highlighted the Council was forecast to under borrow by £6.8m which was an improvement on the position at quarter one. This was due to borrowing not being required as quickly as previously forecast. The Council continued to only borrow for the purposes of capital investment.

Investment had continued to grow in line with expectations, however property funds were excluded from this. Property funds had not performed well in the period though had previously performed well in the past.

The following issues were discussed:

Lothbury property fund - concern was raised relating to the position of  Lothbury  Property fund and potential exposure to a £1.5m cost were the scheme to close. The Chief Operating Officer confirmed that if the cost was realised it would be an additional budgetary pressure. The fund remained hopeful of securing a merger and the Council recently voted to defer the closure of the fund for that purpose.

Debt Maturity Profile – A Member noted there was a large amount of debt scheduled to mature in the next year and whether a review of the best course of action in relation to the debt maturity profile was required in light of the current high interest rates. The Head of Corporate Accounts agreed, all options would be considered but the Council did not want to lock into longer term borrowing currently when advice was that interest rates may well be lower in two years. This would form part of the Treasury Management Strategy.

The Chief Operating Officer added that the Council retained the ambition to smooth debt maturity profile and projections were for interest rates to drop significantly over the next two to three years.

Members commented that the Council continued to favour a mixed and cautious approach.

Decision

The Committee considered the report, noted its contents and noted that the report will also be referred to Cabinet and Full Council.