Agenda and minutes

RESOLVED:  That Councillor Rachel Burgess be elected Chair for 2024-25.

RESOLVED:  That Councillor Stephen Newton be elected Vice Chair for 2024-25.

To receive any apologies for absence

An apology for absence was received from Sandeep Vig.

To confirm the Minutes of the Meeting held on 7 February 2024.

The Minutes of the meeting of the Committee held on 7 February 2024 were confirmed as a correct record subject to the following amendments and signed by the Chair.

P6 – ‘The Chair queried whether the opinion would only refer to areas that had not been completed and was informed that this was unlikely.’

P7 – ‘Councillor Newton questioned whether officers could commit to providing the necessary resource to close out the 2021/22 audit, should EY reconsider their position. The Assistant Director Governance Finance commented that he could give this assurance but with a caveat, as this was reliant on providing the right evidence for EY.’

The Chair took the Committee through the Actions.  It was noted that many had now been completed.  The Chair indicated that those that had been completed would be retained on the action list for one further meeting, but updated to highlight that they were no longer outstanding. 

It was noted that the Public Sector Audit Appointments and Financial Reporting Council had been contacted, and Members updated by email. 

An appendix to the Corporate Risk Register highlighting where risks had been removed, had now been added to the most recent iteration.  Reference being made to the Social Care Future in the risk relating to adult services, remained outstanding. 

The Chair and Mike Drake had met with finance regarding the frequency of a hard close.

Councillor Newton asked whether adult social care would be included in the audit plan.  The Head of Internal Audit and Investigation indicated that it would be taken into account when producing the next audit plan.

It was noted that Members had received a written update in relation to the External Audit.  Councillor Newton asked whether there was any further update following the change in government.

To receive any declarations of interest

Councillor Stephen Newton declared a Personal Interest in item 8 Corporate Risk Register on the grounds that he and his wife were foster carers.

To answer any public questions

A period of 30 minutes will be allowed for members of the public to ask questions submitted under notice.

The Council welcomes questions from members of the public about the work of this committee.

Subject to meeting certain timescales, questions can relate to general issues concerned with the work of the Committee or an item which is on the Agenda for this meeting.  For full details of the procedure for submitting questions please contact the Democratic Services Section on the numbers given below or go to www.wokingham.gov.uk/publicquestions

In accordance with the agreed procedure the Chairman invited members of the public to submit questions to the appropriate Members.

Question

Given that six months have elapsed since the last meeting, can you tell me, please, if EY have now issued Disclaimer Reports for either or both the 21/22 and 22/23 audits, as back in February it appeared all too evident that that was imminent?

Answer

The short answer is no. 

At the last Audit Committee meeting it was explained that a proposed approach and timelines to address the backlog in the audit and the closure of Local Authority accounts was being consulted on.  Just to give the background for anyone that does not have it, the proposals included a “backstop date” by which auditors would have to provide a modified or disclaimed opinion if the accounts had not been fully audited.

There was also at the same time a technical consultation on the proposed changes to the code of practice to support the changes.

The outcomes of those consultations have not yet been published and due  to the dissolution of Parliament in May and the election, these proposals have not yet been considered by the new Government. 

The latest position was set out by the National Audit Office (NAO) on 24 June in their supplementary guidance note (SGN) 04.  I would just like to read that so that you have got the full picture.: 

‘Auditors will be aware that on 22 May, the Prime Minister called a general election for 4 July.  As a result, Parliament was dissolved on 30 May. This means that the proposals consulted upon by the NAO and DLUHC (Department for Levelling Up, Housing and Communities) respectively for changes to the Code of Audit Practice and the introduction of statutory publication deadlines for audited accounts (‘backstop’ dates) cannot proceed until a new Parliament is formed and the new government has had the opportunity to consider whether it wishes to proceed with the proposals. 

Until then, auditors should continue to follow the current Code of Audit Practice.  Where auditors are planning to complete audits, they should continue to make every effort to do so and as soon as possible. 

As information on the new government’s policy for local audit in England becomes available the Comptroller and Auditor General will keep the need for further guidance under review.  He will also consider the timetable for a new Code of Audit Practice which will have to be in place by March 2025 as the current Code reaches the end of its five-year life. 

Until the new government has a policy position on the future of local audit in England it is not possible to provide any further clarity to auditors on next steps above and beyond what is set out in this note.’

In the meantime, as presented at this committee tonight, EY (our outgoing auditor) have completed and are presenting their Value For Money initial assessment for the period through to 2022/23 – there is no further work on those years accounts planned until any changes I have described, are confirmed and implemented. 

As part of the  ...  view the full minutes text for item 6..1

To answer any member questions

There were no Member questions.

To receive the Wokingham Borough Council Value for Money Interim report years ended 31 March 2022 and 31 March 2023.

The Committee received the Wokingham Borough Council Value for Money Interim report years ended 31 March 2022 and 31 March 2023.  The report detailed the work undertaken on the Value for Money arrangements.

During the discussion of this item, the following points were made:

·       Janet Dawson, EY, advised the Committee that the report set out the areas that EY had assessed for 2021/22 and 2022/23, in terms of any significant risks of identified weakness in the three areas that were required to be reported on.

·       Across both years EY had not identified any risks of significant weakness in the arrangements that were in place across financial sustainability, governance, and improving economy, efficiency, and effectiveness.  In addition, no actual significant weaknesses had been identified.

·       Janet Dawson explained that EY did not look at whether Value for Money had been achieved but that the Council had the arrangements in place to achieve Value for Money, in terms of governance structures, making approaches, who was involved in key decisions, risk analysis, risk monitoring and mitigation.

·       In terms of financial sustainability EY considered how the Council managed the risk of financial sustainability, budget process, financial monitoring, and whether key decisions were taken at key points which could undermine financial sustainability.  

·       The report was an interim report looking at arrangements up to 31 March 2023.  Janet Dawson explained that it was interim due to there being an open reporting responsibility around the audits.  KPMG would be looking at how robust the current value for money arrangements were.  It was expected that the report would be finalised once a clearer understanding of the legislation as to how delayed audits were to be dealt with, was in place. 

·       Mike Drake commented it was a broadly positive report.  He asked about the reporting responsibilities of the Head of Internal Audit and if anything in this area could be different.  He went on to note that the report commented that further strengthening of the finance team could be done, and asked how EY felt that this could be achieved.  Finally, Mike Drake asked about the process around valuations and properties.  Janet Dawson indicated that she would provide a written response to these queries.

RESOLVED:  That the Wokingham Borough Council Value for Money Interim report years ended 31 March 2022 and 31 March 2023 be noted.

To receive the Wokingham Council Audit Plan 2023-24.

The Committee considered the Wokingham Council Audit Plan 2023-24.

During the discussion of this item, the following points were made:

·       Ed Mills, KPMG, introduced himself as audit manager for the Wokingham audit, from KPMG.

·       With regards to materiality, Ed Mills explained that the provisional materiality set for Group was £12.3million, but KPMG audited to £9.2million, and would report any misstatements above £615,000 to the Audit Committee. 

·       Ed Mills detailed the areas of significant risks that KPMG would focus on, including pensions, land and building valuations and fraud risk from expenditure recognition.  Non-capital expenditure being inappropriately recognised as capital, was highlighted as another risk.

·       The Value for Money risk assessment would be completed in due course.  A Value for Money risk assessment would be brought to the September Committee meeting.

·       The Committee noted the statement of independence.

·       Councillor Jorgensen commented that £9.2million for materiality seemed high for a council such as Wokingham.  Ed Mills responded that materiality was set on a percentage of the metric which was felt most important to the Council.  This had been set on expenditure.  The methodology for setting materiality was broadly similar across audit firms.  Errors above £615,000 would still be brought to the Committee’s attention.

·       Councillor Newton sought clarification around the different materiality levels.  He was informed that the £12.3million was the level to which KPMG would ask the Council to amend their accounts or a qualified opinion would have to be issued.  £9.2million was the level to which KPMG asked the Council to make adjustments to.  Anything between £615,000-£9.2million would be reported to the Committee but would not result in a qualified opinion.  The Chief Accountant added that from a Council viewpoint, if there were errors or differences below the £615,000 and the Council agreed those adjustments with KPMG, they would be put through the accounts.

·       Mike Drake referred to file reviews and asked whether EY had shared their files yet and if file reviews had yet been undertaken.  Ed Mills stated that meetings had been had with EY.  Whilst no file reviews had taken place yet, they were timetabled to be undertaken prior to the start of the audit.

·       Mike Drake queried whether the fact that there was likely to be a disclaimer in the audit opinion on the opening balances was a reporting risk.

·       It was noted that Lease Standard IFRS 16 was due to come in, in 2024/25.  Mike Drake asked whether this would be considered as part of the 2023/24 audit.

·       In terms of fixed assets KPMG was in discussions with management around valuations.  It had a valuations specialist team. 

·       The Chair asked for further detail on the risk of a disclaimed opinion.  Ed Mills stated that it was hard to discuss at this stage.  It was anticipated that the relevant legislation would not make Parliament until September/October.  It was not expected that the backstop would change significantly, and that there would be a high chance of disclaimed opinions in the previous years.  Nevertheless, additional guidance from the NAO about  ...  view the full minutes text for item 9.

To consider the Corporate Risk Register.

The Chief Executive presented the Corporate Risk Register.

During the discussion of this item, the following points were made:

·       Four risks had reduced or been removed: Corporate Governance, Education Provision, General Election and the Place and Growth Procurement.

·       With regards to the risk regarding Cyber Security, details of the controls and mitigating actions had been removed from the publicly available version.  The risk needed to remain high on the Council’s agenda given the worldwide IT failure in the previous week.  The Committee was assured that the Council had not been directly impacted by this.

·       The risk around mainstream education provision had been reduced.  However, at a recent Overview and Scrutiny Committee meeting the issue of potential changes around tax changes for parents whose children were in private schools, which may impact whether some kept their children in private schools or not, was raised.  This might create a further demand on secondary provision in particular.

·       The Chief Executive referred to Risk 5 about SEND and the financial pressures around this area.  Mitigating actions related to the opening of resource spaces and two free schools.  The Committee was informed that there was a potential delay in the building of these two free schools, as this was dependent on a number of factors.  Members would be kept updated.  In response to a Member question, the Chief Executive clarified that the schools were due to be built by 2026 and full by 2028.

·       The Committee was updated around Risk 9 which related to the Climate Emergency Action Plan.  The progress report would be taken to the September Council meeting, and the Climate Emergency Overview and Scrutiny Committee had also recently received an update.

·       The budget remained a key risk as demand for children’s and adult services increased and the complexity of this demand also increased.

·       Councillor Newton commented that some risks appeared not to be on track, and questioned whether further mitigation was required.  The Chief Executive referred to the risk around Emerging Communities, and commented that prevention was a key area of focus for the Council.  The Governance and Risk Manager and the Chief Executive explained how the update to the Corporate Risk Register was produced. 

·       Councillor Andrea asked whether recovery actions should a risk occur, were considered.  The Chief Executive gave an example of should an emergency such as a flood occur and stated that actions that would be undertaken, were identified.  The Council sought to have mitigation in place, even if it could not always control the causes.

·       Mike Drake asked whether the auditors’ value for money was an existing control.

·       Mike Drake went on to ask whether plans were in place to close the financial deficit.  The Chief Executive stated that the Council acted early in planning to meet those gaps.  Members were reminded that proposals for savings for 2025/26 would be considered at the February 2025 Council meeting, and would first be considered by Overview and Scrutiny at the end of the year.

·       It was noted that the legislation  ...  view the full minutes text for item 10.

To receive the 2023/24 Annual Internal Audit and Investigation Report.

The Committee received the 2023/24 Annual Internal Audit and Investigation Report.

During the discussion of this item, the following points were made:

·       The Head of Internal Audit was required to annually form an opinion on the Council’s internal control, risk management, and governance framework.

·       The report summarised the work of the Internal Audit and Investigation team over the 2023/24 financial year.

·       It had been concluded that the internal control, risk management, and governance framework, was substantially complete and generally effective, although some improvements were still required.  Other assurance mechanisms across the Council were taken into account in the formation of the opinion.

·       Since the production of the report three audits had been finalised – safer recruitment (2021/22 follow up audit) which attracted a category 2 opinion, capital expenditure which attracted a category 2 opinion, and also advisory work on the waste collection changes project (no overall opinion awarded as advisory).

·       Two audits, debtors and temporary accommodation, had been progressed to the draft audit report stage.  These would be reported in the Q1 progress report.

·       The high-risk concerns identified from the audits over the year, the proposed management actions and accompanying timescales, were noted.

·       An action tracker recorded, Very High, High and Medium concerns on and was shared with the Chair of the Audit Committee on a regular basis. 

·       During 2023/24 there were three audits which had attracted the Category 3 opinion – Right to buy, Information Governance, and Grazeley School.  Management Action Plans with timescales to achieve actions had been agreed.

·       The report detailed the anti-fraud activities undertaken throughout the year.

·       Audit work was also undertaken for a neighbouring unitary authority, generating income to the Council.

·       The team had, had an external review by CIPFA in July 2023 and had been assessed as having the highest category of compliance “Fully Complies” as a service against the Public Sector Internal Audit Standards.  New Global Institute of Internal Audit standards would be in place from January 2025, and work was underway to implement these.

·       The Chair sought an update on the outstanding recommendations where the date for completion had slipped.  The Head of Internal Audit and Investigation explained that follow up work had been completed regarding the safer recruitment audit, and good progress had been made, which would be reported to the Committee in the Q1 progress report.  Another target date for one concern within the reconciliation audit had been extended as the original date had been ambitious given the amount of work required to implement the agreed management action.

·       Mike Drake suggested that further clarification could be given around when deadlines were extended.

·       Councillor Jorgensen asked how the Grazeley School audit had come about and was informed that the team had been asked by Schools Finance to undertake the audit.  This had been taken from the contingency element of the audit plan.  The Internal Audit team worked closely with Schools Finance and audited schools if an issue was perceived or if an audit was requested.  Three further schools had been audited  ...  view the full minutes text for item 11.

To receive the forward programme for the remainder of the municipal year.

The Committee discussed the forward programme for the remainder of the municipal year.

During the discussion of this item, the following points were made:

·       The Treasury related items would be removed from the forward programme.

·       A report on high-risk failures in the sector had been previously considered. Consideration would be given to what the Council could learn from this, and whether a report to the Committee in future, was required.

·       Councillor Newton referred to the issues of two school children not being offered school places for September 2024, and delays in meeting the 20 week timeline for progressing Education, Health and Care Plans (EHCP’s).  He questioned whether the Committee should invite the Director Children’s Services to a future meeting to update about the provision of EHCP’s in accordance with the 20 week time limit, plans to meet this target, and how the plan was progressing.  Officers indicated that other committees such as the Children’s Overview and Scrutiny Committee also look at these areas.  The Chief Executive indicated that the completion of EHCPs were also part of the Safety Valve review.

RESOLVED:  That the forward programme be noted.