Agenda, decisions and minutes

1.1  Apologies for absence were submitted on behalf of Councillor Gregory.

2.1  There were no declarations of interest.

RESOLVED:

To agree the minutes of the previous meeting as a correct record.

RESOLVED:

To agree the minutes of the previous meeting as a correct record.

RESOLVED:

To note the content of the report.

 4.1 Lucy Nutley thanked the Council’s finance staff for their work during the audit that was carried out remotely with a number of technical issues arising. She referred the Committee first to the Local Authority Fund, with a lengthy list of outstanding items. The deadline had been extended to the 30^th November. The key message was that the proposed opinion on the accounts was unqualified but included an emphasis of matter in that it was not a modification of opinion and centred on land and buildings. The value for money was also proposed to be unqualified. On Government accounts instruction had not yet been issued by the NAO but when they were the work would be carried out relatively quickly. There had been no objections to the 2019 accounts.

The significant risks were:

· The presumed risk of management over ride of controls. No issues had been identified to date

· Fraud and error in revenue recognition. No issues had been identified to date

· Land and building valuations – emphasis of matter / Incorrect index rate used for a number of depreciated replacement costs valuations – accounts update

· Defined benefit liability valuation – assurance awaited

· Management judgement NNDR appeals provision

4.2 Lucy Nutley referred to the internal control recommendations raised including the index rates used for valuations that needed a big adjustment. There was also a recommendation on the use of suspense accounts. In relation to value for money work there was now a new code of audit practice.

4.3 Lucy Nutley told the Committee that Covid-19 only had an impact on the Council’s operation, governance and finance in the last two weeks of the 2020 year and did not feature heavily in the conclusions. 

4.4 Next steps included completing outstanding matters. There would be a need to work through the LPFA assurance. The updated accounts needed to go through a second stage review. The Audit Completion report would be reissued prior to sign off.

4.5 The Chair referred to the importance of the internal controls strengthening measures in place and value for money at the present time ensuring that the Council was a going concern. He referred to work with Councillor Rennison and Scrutiny to look at ways to adjust and develop the MTFS and that this was reassuring. 

4.6 Lucy Nutley reported on the Pensions Fund Audit Completion Report. An unqualified opinion was envisaged and a consistency report would be issued on the Pension Fund which had an end of November deadline. She referred to a number of outstanding items as listed. The investment confirmation was significant and an emphasis of matter as an updated valuation had been requested for the property fund that the fund had invested in. The risks included:

· The presumed risk of management over ride of controls. No issues had been identified to date

· Difficulty in valuation of level 3 investments due to Covid-19 

4.7 The Chair asked if the Pensions Committee consider before sign off. Michel Honeysett told the Committee that the report would  ...  view the full minutes text for item 4.

RESOLVED:

1.  To approve the Council’s 2019/20 Statement of Accounts prior to the audit opinion being issued.

2.  To approve, in its own right, the Annual Governance Statement contained within the Statement of Accounts.

5.1   Michael Honeysett introduced the report on the accounts for 2019/ 20 for approval by the Audit Committee prior to the issue of the audit opinion by the external auditor. The main financial statements showed the Council continued to manage its finances in line with the resources available. The final report on the accounts would be circulated to members of the Committee prior to sign off.

5.2   Michael Honeysett highlighted the following matter:

·  The regulations required completion of draft accounts by 31 May but because of Covid-19 the deadline was pushed back to 1 August 2020 for 2020

·  Accounts had been produced by mid-june and published

·  The deadline for approval by audit opinion was now 30 November with a certificate soon after

·  An unqualified audit opinion was expected

·  A balance of £15m maintained on the general fund

·  HRA general balance reduced to £11.2m from 15m in the previous year

·  Further reserves of just over £5m

·  Locally managed schools balance reduced by £1.76m to just over £13m

·  Earmarked reserves of £11.6 to the general fund

·  Overspend on the general fund in 19/20 of 9.3m covered by collection funds and grants received

·  Implemented the savings necessary for 2019/20 financial year to help balance the accounts

·  Net assets of over 3  ½ billion pound with the biggest element, buildings land and property

·  Provisions for known liabilities and details of contingent assets and liabilities

·  The collection fund account: Council tax surplus for 2019/20 of £2.7m/A deficit on the business rates collection fund of balance of  £692,000

5.2 Michael Honeysett referred to the Council’s subsidiary companies in the areas of housing and regeneration and for mixed use development. Two of those companies had been grouped.

5.3 Michael Honeysett referred the Committee to the Annual Governance Statement that required to be approved in its own right. Among other matters the Statement updated on the four significant issues that identified 2018/2019 and how they were addressed in 2019/20. It had picked up on four significant government issues:

·  Covid-19

·  Cost pressures in adult and children services

·  Issues relating to the Ofsted inspection

·  Housing Contract Management

5.4 Councillor Clare Potter asked about how FRC audit work in 1918/19 and the areas not deemed to be at a required standard such as valuations of pension fund assets, capital grants and completeness of expenditure.  She said that Mazars had said that this did not have any significant impact and had been addressed in 2019/20. Councillor Potter asked how these matters had been satisfactorily addressed. Lucy Nutley told the Committee that in relation to building, plant and equipment the FRC had set out a schedule detailing where it considered that insufficient work had been carried out. All those comments were included in the audit programme. FRC comments on capital grants and completeness of expenditure was incorporated into work carried out in the current year. In relation to the valuation of Pensions fund assets it was recognised that the work carried out for the Pensions Fund was not sufficient for the Local  ...  view the full minutes text for item 5.

RESOLVED:

To note the update on the Council’s financial position.

6.1 The Chair stated that there now concerns around long term government support for local government which had developed over the previous month. The Committee would need to review the corporate risks faced in light of any changes. The Chair had also asked for a report on IT following the recent outage and because it was one of the corporate risks that the Council faced.

6.2 Ian Williams presented on the overall financial position highlighting the following:

· Chancellor may move budget to January with the current threat of a second wave of COVID-19

· The spending review would be three years for revenue and four years for capital – Hackney would submit its own submissions by 24 September

· A review of business rates and business rates revaluation

· Third tranche of funding had been received of £3.5m

· Total support received approximately £21m

· Details on the scheme for compensation for loss of income had been recently circulated

· Guidance circulated on collection fund deficits

· Overspend on the General Fund of £64m with £61m relating to COVID-19

· Compensation for loss of income was £9.575m

· Pay award proposals slightly above what was budgeted for

· Pressure on the HRA in the current financial year with proposals to balance the budget for 2021/22

· The position on schools continued to be challenging behind the headline increases. The Council would continue to manage the local schools formula but beyond that there were proposals for the government to manage this centrally

· High needs funding continued to be a challenge. Hackney will benefit from additional £730m in high needs funding in 2021/22

· A number of schools recording significant schools deficits

· Work to review latest forecast and end of July position

· Further review to challenge agency spend

· Deep dives into emerging cost pressures including on PPE spend/ Rough sleeping/ council tax/ business rates rent/ capital etc. 

· 2021/22 Forecast budget position: range of forecasts in the face of uncertainty

· Structural impact of Covid pressures on MTFP currently under review

· Forecast on revised 2023/24 gap - £51.161m

· In relation to the Pension Fund, funding levels had dropped significantly between late february and late march, from 95% to 7.5.8 %. The fund was now recovering to levels nearing 90%

· Next steps:

- Continuing review of the use of agency staff

- Review of the capital programme

- Continuing review of the underlying assumptions in Covid-19 related forecasts

- Challenge of budget and essential spend

- Budget setting timetable

- Staff engagement

- Future of the Finance Scrutiny and Audit Group 

6.3 Councillor Rennison reported to the Committee on next steps. She told the Committee that the Council’s position was largely stable but that there may be increasingly worrying headlines over the coming weeks. Work would be ongoing with other Local Authorities to call for additional government funding. In relation to compensation for income shortfall, the government was asking for costs to be shared. Councillor Rennison confirmed that one of the greatest risk was any government decision on local government funding. Going forward, everything was evidenced based  ...  view the full minutes text for item 6.

RESOLVED:

To note the update on the progress in respect of the ‘deep-dive’ to be carried out by the Audit Committee, focusing on the development of the capital budget, its monitoring and the profiling across financial years.

12.1  Ian Williams introduced the report on the intention to carry out a deep dive into Capital budget monitoring.

12.2  Councillor Potter asked for an update on the previous deep dive on insourcing.  Ian Williams reported that the Council had taken on Board all he matters raised in the report and a number of options would come forward in the coming months to CPC to potentially insource a number of Council services when necessary work has been carried out and it was considered that it was the appropriate course of action. Councillor Rennison confirmed that these matters were being taken forward.  The Chair stressed the need for Audit Committee oversight of these developments. The control over core services had been reinforced by COVID-19 and by how the IT function has worked and has been resilient.

RESOLVED:

To note the update on the progress in respect of the ‘deep-dive’ to be carried out by the Audit Committee, focusing on the development of the capital budget, its monitoring and the profiling across financial years.

RESOLVED:

To note the update on the work of ICT for the Covid-19 response and the august IT outage.

8.1 Rob Miller reported on the COVID- 19 response and the august IT outage, highlighting the following:

· Supporting services, including, support for rapid shift to home working and the vulnerability and potential impacts of COVID-19, Virtual Council meetings

· Supporting Residents, including to access a wide range of council services

· Tools to support vulnerable residents

· Developing partnership working

· Responsive and resilient service

· Working with public health on a local contact and tracing system/ developing virtual meetings/ support to home based workers

8.2 The Chair considered that the response had been impressive by IT and those in other areas of the Council, commending partnership working. He referred to the value of having strategic capability in-house.  Councillor Lynch commended the holistic approach taken by IT to the pandemic and asked that congratulations be passed on to teams. 

8.3 Councillor Spence asked for an update on when residents would be seen, face to face at the Service Centre and any planning arrangements in place. Rob Miller reported that face to face contact had recommenced in the Service Centre. Registrars was the first to open. The main atrium had been colour coded and a one way system was in place with temperature checks and face covering provided. Work was ongoing to have the Service Centre as a place to provide a face to face service for other Council services. In response to a question from the Chair, Rob Miller told the Committee that attendance in the Service Centre varied and when he visited recently he had seen 10-20 residents. A lot of people came in when dealing with the backlog of birth registrations. The Committee congratulated staff on good work in this area.

8.4 Councillor Odze said that it was a long route to go to the Google Suite and the migration had been very difficult. He thanked IT for its support.

8.5 Rob Miller reported on the IT outage in August, highlighting the following:

· Unplanned and un-notified work by the network provider caused failure of the Council’s new data storage infrastructure

· Internally hosted systems: Major impact

· Most key systems recovered within the first two weeks

· Work was ongoing to ensure that all systems are recovered and performing normally

· Next Steps:

- Complete recovery work

- Complete lessons learning review

- Work with BCP team to support review of business continuity plans

- Develop work plans for implementation of lessons learned

The Committee thanked staff for good work and stressed the need to have systems in place to protect the Council and also to react appropriately to any IT difficulties and that the lessons were learned. The Committee asked for a report back on these lessons learned in overseeing IT systems.

 Action: Rob Miller

RESOLVED:

To note the update on the work of ICT for the Covid-19 response and the august IT outage.

9.1 Ian Williams referred the fact that this would be Michael Honeysett’s last Audit Committee and thanked him for his support over the past ten years, during challenging times and wished him all the very best in the future. The Committee thanked Michael Honeysett for his work and a distinguished contribution to the Council.