Transcript

Well, good evening, everyone, and welcome to the first meeting of this municipal year of the Audit and Risk Management Panel. My name is Councillor David Gardner, and I'm the elected chair of the panel, and it's my first meeting as chair, and now obviously it's been separated from the chair of overview and scrutiny. Good evening, Councillor Hyland. So it might just be useful if we just go round and introduce ourselves. We've all got nameplates, but... So to my right is the committee clerk, Daniel Wilkinson, and then we've got Tom Greensall from Mazars, who will be our auditors out of the PSA framework going forward, and we've got Dr Susan Blackhall, who's the vice-chair and is long-standing public service to Greenwich, both on this committee and the standards committee. We have Brendan Costello, who's our assistant director for governance and audit, including internal audit, which is hence being here tonight, Julian Gokul, the business manager in the finance team, who I know also does pensions, I sit on pensions board, and then we've got Hitesh Jalapra, who is the interim assistant director for finance, substituting tonight or deputising for Damon Cook, who's on holiday or on leave, and then we've got Councillor Lade Olugbemi, a member, and also we've just been joined by Councillor Denise Hyland, who is the cabinet member for finance and resources. So thank you very much, everyone. If we go through the agenda then, we are being recorded and this will be posted on the Council's YouTube channel. So if you are going to speak, please could you switch on your microphone before addressing the meeting and remember to switch it off when you've finished speaking, and you'll be aware that this meeting has been deferred from its original date in June. So originally we were cancelled at quite very short notice, it took me by surprise the day before, we were due to meet on the Wednesday 19th of June because of the general election, and then last week a member of this committee asked to delay because we were due to meet last Wednesday because of the Euro semi-finals, which I'm sure many of us watched, but that member thought it wouldn't be good to go ahead on the night of the European semi-finals, so we've moved it back a week. So thank you for those that have come along and we will do meet again next Monday, which is the original scheduled meeting, and there's a training session before the meeting. Right, moving on with the agenda then, I've had apologies for absence from Councillor Sullivan and Hartley and most recently from Councillor Nick Williams who has a cold. Are there any other apologies for Damon Cook? No, we haven't heard from Councillor Maye. I've not been informed of any urgent business. Does any member have any personal or financial interest to declare on any items on the agenda? I see none. So the minutes, we've got a new panel here, so I did attend the last meeting though as an observer, have people had a chance to read the minutes and are they happy to agree the minutes? I've had an email from the previous chair, Councillor Burton McDonald, to say that she was happy with the minutes. People happy on that basis to agree the minutes? Thank you. So then moving to the substantive items on the agenda, firstly we have the draft work programme. The purpose of this report is to note the terms of reference for the panel which are in our constitution and to approve the work programme for the municipal year. So I'm going to propose that we have rolling reports on those cases not implemented following internal audit. I'm going to propose a deep dive report on the capital programme, which is one of the reasons I stood and Councillor Sullivan is very keen to lead on that and would just be interested in members' ideas. Obviously, a capital programme was something that was pinpointed in the last Grant Thornton external audit report and we do have a role within our terms of reference to keep an eye on the capital programme and make comments, obviously it's for cabinet to determine and it's been going a long time now. There is an asset management review, so are there any thoughts or questions on the draft work programme from members? Are people happy, members happy, if we do conduct a deep dive on the capital programme and ask Councillor Sullivan to lead on that? Yeah, he's got quite a lot of experience in this field, the previous leader of Lewisham and so forth, good. So are members happy, therefore if there are no comments are members happy to approve the work programme with that addition? And we'll fit that in having talked to Councillor Sullivan and obviously to Damon relevant officers. Which moves then to item 6, which is rather scared me, the audit and risk management panel self-assessment and evaluation and the purposes report to note the various updated SITFA guidance, the SITFA, do we all know what the SITFA is, yes, good, got a number of SITFA members around the table I'm sure, consider the SITFA position statement of guidance and carry out the recommended self-assessment and evaluation. I advise members that training is required as part of being a member of the panel and the training is timetable for 5pm on Monday. I appreciate that isn't suitable, particularly for working people, so that will be recorded and therefore people can watch it online at a time which is convenient to them. Okay, Brendan, were you going to open on this item, audit and self-assessment and evaluation? Yes, just got a couple of notes, Chair, just to bring to members' attention. You've introduced it for me anyway, actually, to be honest with you, but the report's recommended the panel undertakes the evaluation during the next couple of months and as you were saying earlier, the report was initially supposed to come in June, so we're about a month behind that as such, so the plan is still to try and undertake the evaluation, undertake the review with yourself, Chair, and the panel members, but bearing in mind we've slipped back a month, there may be some potential for slippage as to whether or not we can get it back to September's meeting, really, I think. Thank you, Brendan. Are there any comments or questions from members? I just wondered what's the process for preparing this, who does it, because it seems quite extensive. Brendan, do you want to answer that? Do the finance team do this, or who takes part in it? Strictly speaking, it's the panel that conducts the self-evaluation, but obviously I'll be there to support and guide, and so will my colleague Vivian Izichi, so we can undertake, we've already undertaken a draft review, and we've sort of assessed where we are as an organisation with the panel, but really, strictly speaking, it's for the panel to self-assess themselves, so the plan is obviously I'll meet with the Chair, we'll agree a way forward, the panel will work either together or individually to do the self-assessment, we can compare notes with where we've got, and we'll agree a format with the panel and report back to the September meeting, hopefully. Thank you. That answered my question. Thank you very much. I think my take on this is obviously we're a fairly new ARI panel, in some ways our role has been slightly strengthened and given more independence, and therefore, although you were on the previous panel, weren't you, Dr Blackhall, I think the rest of us are new, so it's going to be quite difficult therefore to look at our effectiveness when we're relatively new and before we've had the relevant training and so forth, yes. Don't you say we can do this in September? The original plan was to have it completed by September. You and I were to meet and agree how we would do that. Whilst I can provide some guidance and assistance and some support, it really is for the panel to conduct that, so again, we were going to meet in June, we were going to meet after the meeting in June and agree a way forward, there's a month's slippage. It's not that detailed, the assessment, in really, I think. Yes, I think it might be simpler than it looks, like fingers crossed, but if we don't make September, obviously we'll have to do it at a later meeting, and that was one of the things I should have said with the draft work programme as well, I mean, it really is a draft, because as you've seen, we've changed dates already, and likewise, the contents of each meeting can move around and there can be new items or we can move something back or whatever, so we'll try for September, if we don't, it will have to be the next meeting afterwards, I think. I think the important thing is that we actually conduct the review. Thank you very much, and I think it's actually a very thorough exercise to do, I mean, having looked at it a couple of times now, and I also think that CITFA produced excellent guidance. So if there are no further comments or questions on that, are members happy to note that report on self-evaluation, which brings us then to internal audit and audit four, the annual performance report, and this is to note the performance in relation to the delivery of our internal audit plan for the last financial year and to note the head of internal audit opinion on the soundness of the control environment in place as one of the overall assurance assessment provided as part of the annual governance statement, and again, Brendan, this is your bag. Thank you, Chair. I'll just highlight a few points really just in the report rather than going through it in any detail. Table 1 on page 126, I think, in the bundle, it's details that the target for the draft report completion has not been met, and I know you've been on the panel before, Chair. It's probably the lowest performance we've achieved, I think, since we introduced the figures. If you look at paragraphs 5.9 to 5.13, that'll explain the reasons behind that. Page 130 for Dr. Blackwell, there it is, 4.8 out of 5 for the questionnaires, which is quite pleasing really. I think it's higher than last year, I can't remember off the top of my head. Page 130 also details the annual head of internal audit report, which, again, details 89.2% of the areas reviewed by internal audit were demonstrating a satisfactory or a high level of control. We didn't complete as many audits as we wanted to complete by the end of the year. That figure is based on finalised reports rather than draft reports, so it may have been, although it's a good level of assurance, it may have been even higher had we been able to get some more of the draft reports to the finalised point. The last comment I would make, page 137, details that the London Borough of Bromley has chosen to exercise this option to extend the anti-fraud partnership to the end of this financial year. At some point later in the year, we'll be meeting with Bromley to see how they want to proceed moving forward, but it's been a long-standing arrangement that we'll have to enter into another partnership or another contract from April, if we're successful. Thank you very much, Brendan. Are there the reports before us? We've all had a chance to read it. I mean, I have one or two questions. Are there any questions from members to the internal audit performance report? I'm just interested just to understand the reasons for the low performance, the low delivery, if you like, of the programme for last year. To what extent was that due to the capacity of the internal audit team and vacancies or sickness, and to what extent was it due to, and this is referred to actually in the report, due to time delays from the relevant directorates where you were conducting the internal audit reviews? Thank you, Chair. Yeah, it's a mixture of a lot of things, really. I've tried to put that in the report. Obviously, we've had one member of staff who unfortunately is in long-term sickness absence, and that individual, for example, would have undertaken some of the school reviews, which would have been done quicker, would have been completed, et cetera. They've had to be given to other members of staff to make sure that they get done within the timeframe, so we've lost some resources there. We've also had, and it touches on the next item as well, but we've had an internal audit apprentice. That involves auditors actually mentoring and looking after that apprentice. We've got another apprentice who's due to start later on in the year. We're just going through a recruitment process for that at the moment. And again, it's a double-edged sword, really. I would say, as a panel, you would want us to find, want us to make sure that we're diligent and we find areas that are problematic and we help management put those right. The counter side of that is that those audits become more complex and take more time and more results and means that some of the other audits would have to slide to be able to accommodate those. The other thing I should say, and I was going to touch upon it in the next report, we do have a shortage of staff. One of the good sides of that is that we report an underspend in the budget and we contribute towards the underspend. The bad side of that, obviously, is that sometimes we struggle to get our audits completed. Without going on too much with the next item, we have gone through a recruitment process and we will have more auditors later on in the year, so the plan itself will be extended and I don't think we'll have the same problem for this financial year. Thank you. I want to congratulate you on exceeding the productivity target for the second year, with 83% compared to the total 80% of actually time on the job as compared to other non-direct time. That's really good. I wondered how that compared to, if you like, industry performance across internal audit teams and external or internal audit providers. Is 80% a normal benchmark or is that just something that we've decided is appropriate? When we set the target initially, we did some benchmarking, but I'd have to be honest and say we don't do a great deal of benchmarking anymore. It's one of those things that's gone to the side, really, I'm afraid. So I couldn't give you a definite answer as to whether that's a good level of performance in comparison to other organisations, but certainly when we set the target of 80% initially, we wanted to set something that was achievable, but something that did push us to make sure it wasn't just a target we would make every year. And as you can see from 21, 22, we didn't make the target that year. Part of that obviously was part of the pandemic and COVID, but normally we make the target, but 83% for a target of 80% isn't too bad. Thank you. I've got one more question on the substance of the report, but I don't want to dominate. Do other members have any questions on this report? Dr Blackhall. I suppose it's just a general question, really. You know, from my experience of the panel and the reports and things, there seems to be a very good planning process in place to decide what the internal audit should be doing, and recommendations have been made to specific directors as to what they should be doing, and you follow those up. But there seems to be a kind of growing, underlying failure in some areas for the director to actually deliver on what was agreed and to report back on time to give you the information that you need, and this appears to be increasing the risk of the council failing to deliver on its strategic plans, financial plans. And I just wonder whether it's the responsibility of this panel or not. I'm not sure and would be happy to be advised on that, but is there anything we can do to help improve that? Or what should be done? Is the result of this failure to follow up because people are incapable of doing it, the targets have been set too high, there's no resources, or not enough resources on their part? I don't really know, but it's very worrying. Yes, I'd agree with some of what you said. I mean, you may recall we had officers back, it wasn't the last meeting, it was a meeting prior to that, and obviously they were saying that they were struggling, there's staff in those, there's other implications, there's a backlog and they're catching up. It is a problem for internal audit to get the... I'm not going to sugarcoat it and say it's not a problem. It is genuinely a problem for us sometimes to get information back from some of the directorates and some of the teams, and that causes us problems. But there is a role for the audit and risk management panel to play, but we're following very much an escalation plan, and I think it may be in the next item actually. What I've done is I've gone to the Greenwich management team and I've said, Look, this is a problem and we've experienced a problem. I need you to take ownership of that and to make sure that that doesn't happen." So we've changed the processes somewhat so the Greenwich management team will become involved, particularly where it's a limited assurance. The team at Greenwich management are going to receive that limited assurance report and they'll see the actual plan and they'll see the recommendations. And whether that's a naming and shaming scenario or not, I don't know, but the idea being is it's gone to GMT, then there should be a greater emphasis on getting that information and that stuff back to the auditors.

Can I just comment on that? I mean, I saw elsewhere the setting up of the GMT and all that sort of thing, which seemed very good. Will we get any feedback on how progress is being made to reduce those issues? Sorry, I didn't turn my mic on. The short answer is yes. Many years ago, we had a similar problem. It's not a new thing, it's a recurring thing. And when it was Councillor Stanley, I think, that was the chair, I had to go to him and say, Look, you need to speak to the chief executive and you need to speak to the directors because it's not happening. So that's the escalation policy. So we try with GMT and if it doesn't work, then it comes back to the arm panel. The arm panel would speak to, you know, directors. I think just generally in the current financial situation, with the risks that are involved across the board really, many things that are not necessarily in the council's control, it's really important we do our bit to minimise this and get the cost down. Yes, no, I quite agree. And I would say that anyway. But GMT, we're quite responsive at the meeting, certainly, to make sure that we're all going to take it forward. Thank you very much, Susan. Lara. I'm struggling to hear. Is it possible to just move a little bit closer to the microphone, please? And if you could just kindly project your voices, please, thank you. Okay. So, I mean, I think that's a very important point that Susan was making. I mean, this wasn't my question, but do you think that there is value in us making a recommendation that the directorates do need to prioritise internal audit reviews in a timely fashion? Do they get advance notice of the plan? They know when they're going to be reviewed. Do they need to give it more priority? Rather, like, you know, children's services would for an Ofsted inspection or adults, social care certainly would for a CQC inspection. Should an internal audit review have a similar level of priority? I think, to be honest, Chair, I've raised it with GMT. I think we should probably give that some time to see if that does the trick. And if it doesn't, rest assured, I'll be back to see you. And ask for it to be raised again. So, members, happy to leave that there for the moment and come back if it persists as an issue. So, my question was actually around anti-fraud performance. So, I'm very interested in this. And I'd just like to understand a bit more, I mean, we've obviously got a number of areas highlighted in terms of your investigations on anti-fraud, which is excellent. But what do you think is the most sizable area where there's fraud within the Council? And how do we, and is there a particular growing, an area of growth in fraud? And that may be an observation, not just in this authority, but other authorities. And I've got a particular interest in blue badge fraud. Having witnessed someone last night in my ward actually getting out of their car and passing a blue badge to someone else. Challenging them and they said, what the hell's it got to do with you? Stupidly, I didn't take a photo of the registration number or anything like that. But I just wondered if you could give a bit of flavour of how you conduct the blue badge anti-fraud reviews and what mechanisms are in place on that. You're specifically talking about blue badge. Firstly, in general, I wonder what the largest area in value in terms was for fraud and were there any particular growth areas? And then I was asking specifically about blue badge, which may not be by far the biggest area. The key area, if we were still investigating housing benefit fraud, I would say housing benefit fraud would be the most prevalent area. We've had an historic problem. As you know, you've been on the panel before. The Department for Work and Pensions now investigates benefit fraud. And I don't think I'd be out of step with my other colleagues and other local authorities. And so I don't really think it's given the same priorities as it was when it was a local authority responsibility. So I think benefit fraud is still a key issue. It doesn't seem to be on anyone's agenda at the moment. After that, I think, depends what you mean when you mean, you know, the most important or the biggest loss to the council would be housing tenancy fraud. So we still look at housing tenancy fraud. There's a team in housing, the unauthorized occupation team, who still do some good work there, et cetera. It's one of those areas where it's a bit like painting the fourth bridge, if that's still a thing now, I don't know. But we've got over 22,000 council tenancies. Most reports will tell you that 5% of those are fraudulent. I've got to say I don't agree. I'd say it's less than that. I'd say it's probably 2% or 3%. Anytime that we've done some proactive work or we've done some other exercises, we normally hit about 2% to 3% of those that were fraudulent. Back in the day, we used to have a team that used to go out and physically knock on doors. They only found 2% or 3% of that. Direct payment fraud is problematic. It's very difficult to get to the bottom. So in some areas, the only way you can do that is actually physically observe a person who isn't as disabled or hasn't got as many difficulties as they say they have. So they could be quite labour-intensive, quite resource-intensive. Most of those people will have a genuine illness or a difficulty or some sort of disability, but they're just exaggerating that or they're making payments to someone they shouldn't be making payments to. So they're always quite difficult to do. The Blue Badge cases, it's interesting that you asked that question because obviously we do work for Bromley as well. We sort of operate two different approaches. Bromley, it's far more... They put far more... I'm trying to find how I can say this politely. It's a big thing for Bromley, Blue Badge fraud. It's constantly pressurised for us to make sure there's a prosecution. You know, yes, there's some precautions, yes, there's some warning letters that go out, but predominantly the push is to prosecute as many people as possible. That costs quite a bit of money. You don't get the money back from that. You know, a fine goes to the court, you might get some costs, but it won't be the cost that it's cost you to take someone to it for a prosecution. But Bromley are very keen to get that message out there. Same here at Greenwich, but we don't have as many cases as Bromley would have. The Blue Badge misuse, again, it can be quite difficult. You've seen that individual, but you don't know who that individual was. You don't know which one of those individuals was the badge holder, if they were the badge holder. So in previous times, we would have someone that would park their car. You'd need to have something to confirm that they were there on their own and the badge holder wasn't with them. If there's no CCTV or the CEO hasn't witnessed the car, you know, parking up, it's difficult to do something in those instances. So the focus now tends to be on badges that have already been reported stolen or lost or their counterfeit badges. So that's what we tend to focus on. So the CEOs or, sorry, the civil enforcement officers or someone from parking will tell us, there's a PCN, penalty charge, now it's been issued, but by the way, we've checked, and this Blue Badge belongs to someone, it's reported as stolen or whatever, and then we'll try and pick the pieces up from there. But they are very, so I've got officers who are investigating really complex internal fraud maybe, like the Lyft engineer job or investigating a housing fraud or a right-to-buy fraud, and I'd say they're exercised as much by the Blue Badge frauds as they are with those because it's very difficult to ascertain what the next course of action is. It's very difficult to see whether or not it's in the public interest to prosecute. So we've got quite a lot of them, and I'd like to say they're quite simple and they're quite easy, but they're not really, and they do take up quite a bit of resource. I'm not sure that's answered your question, Chair, I'm afraid, sorry. Thank you. Thank you very much. Maybe on the agenda for another day. So do members have any other questions or comments they want to make as a result of this report? I see none. So thank you very much, Brendan. Obviously, if you keep us in touch on performance, and as you know, I'm interested also to see some sort of table of the recommendations from reviews and to what extent they've been implemented or when they haven't been implemented, there may be a good reason why they've not been implemented from the reviews because that's the key, really. There's no point having a review if the recommendations from it are, you know, widely ignored, but I assume that's not the case from the report. So are members happy to note that report? Noted, thank you, which brings us to the internal audit plan for the coming year. And again, that's over to Brendan. Okay, I'll just go through some brief highlights again. That's the standard annual report will be advisory of the plan. We like to have some flexibility in the plan for contingencies, but there has, I think, Grant Thornton did make a comment before they left about we need to increase the internal audit resources. The plan as it stands in that item was constructed based on the resource level that we had at the time of writing the report, and I think I've highlighted that we could use a framework arrangement to fill any potential shortfalls in coverage. Page 159, referred member to recruitment exercise that was ongoing at the time of writing the report. I'm pleased to say that we've been successful at recruitment and we'll have three new experienced internal auditors starting with us in the next few weeks. I haven't got an ETA on exact start dates, but it should be in the next few weeks. And that should mean three things for the plan. Firstly, the level of productive time should increase. We should be able to have a bigger coverage of the plan. We shouldn't really be able to be looking to use the framework agreement. And again, we should be able to extend the coverage and add some other reviews that are not currently detailed in the plan. So I've given you the internal audit plan, but again, pretty much that's almost in draft format because it is going to change when the new members of staff start, I'm afraid. And again, as with the anti-fraud work, members have received quarterly updates on the progress against the plan. And I'll have to give you another item at another meeting. Councillor Wood, we've changed the plan to show you what's included, I think. Thank you very much. Are there any questions or comments in relation to the plan for 24/25? I see none, so thank you very much. I was just going to ask that over 35% of our spend, it may be slightly more than that, in health and adult services, but they're only 6% of the days in the 24/25 plan. Is that because most of the areas there have been reviewed recently? Or does it just reflect the scope or the nature of the spend? I can't answer that specifically, but I think you'll find that there are some areas where we are obliged or mandated to conduct a review, particularly the material systems. So whilst I may have 770 days, there's a large block of that days that's already accounted for. So you then have to risk assess as to what areas you can include to make sure you're getting those areas with the highest risk. So you may well find, when I come back later in the year, that it won't be 50 days or 66 days or 6.5%. It will be a significant amount more because we've been able to add some additional work in there that we can't include at the moment. Are there any further points on this report? No. In which case, are members happy to note the plan? Yeah, thank you very much. Then we come to the external audit plan. So welcome Tom from Mazars and Tom Greensill, our new external auditors under the PSA framework. This is a very important item. So over to you, Tom. Thank you, Chair. I'll take the report as read. But if we could turn first to, I think in your PACSIS page, 180. As we've just mentioned, the audit team has changed slightly. So I'll be taking Stuart Frist's place as the engagement manager. The rest of the team is remaining the same. If we move on to page 184, this outlines the audit scope approach and the timeline. And so we have a slight change for you to note in that the field work is now starting in September. And we'll run to January as already planned. And that's as a result of another client being ready for audit. And we've had to make some movements with teams around. But it shouldn't pose any difficulties to delivery as expected in January. The next page is 187, where we outline our significant risks and our key judgments. The first of those is the management override of controls, which is a mandatory significant risk on all external audits. And that's because of the unpredictable way in which such an override could occur. So management at various levels within an entity are in the unique position to perpetrate fraud. And that's because they can manipulate the accounting records and prepare fraudulent financial statements by overriding controls that otherwise would appear to be operating effectively. That isn't to say that we think there's a particular risk of it at Greenwich, but we identify it as one across all of our audits. And so the way that we'll address that risk is through performing audit work over the accounting estimates, journal entries and significant transactions outside of the normal course of business or that we otherwise would consider to be unusual. And we'll carry out also completeness checks to make sure that all of the data has been included and verify the information that's provided by the entity. The second significant risk that's been identified is the valuation of property, plant and equipment. As the council has 3 billion of property, plant and equipment, the code requires that the carrying value should reflect the appropriate fair value at year end. And because of the way that PPE is valued, there are a number of assumptions with inherent subjectivity and a lot of these are complex as well. And that means that there's a risk of material misstatement on this balance. And council dwellings are the most valuable asset, which are 2.9 billion of the 3 billion of PPE. And these are valued using a beacon valuation process, which is slightly different to how a normal valuation would occur. So the way that we'll address this risk is we'll look at the approach taken by the valuer and we'll assess the risk of those assets which haven't been revalued at year end as well. We'll challenge the valuation methodology and we'll look at the basis which have been used for the different types of assets to make sure that they are appropriate. And then we will also assess the values qualifications, ensure that they're objective and independent and we'll perform some sample testing around the underlying data and assumptions. We may also engage the Masar's valuation team where we think there are any risks and that will be depending on the fixed asset register and those properties which have been revalued when we assess that. The final significant risk that we've identified is the net defined benefit liability evaluation. And this is because of the use of discount rates, inflation rates, mortality rates, all of which, again, come with a degree of estimation uncertainty. And so we'll address this risk by reviewing the controls that the council has in place over the information which is sent to the scheme actuary. We'll also assess the competence and skill of the funds actuary and challenge the reasonableness of the assumptions which they've used. We'll carry out a range of substantive procedures on the relevant information and on the cash flows used by actuary as part of that annual IS-19 valuation as well. Moving on from significant risk to page 194 where we're looking at value for money arrangements, in the prior year, Grant Thornton identified two significant weaknesses in arrangements. The first of these was over the overreliance on reserves and other short-term measures to deliver services. And so we'll be engaging management to assess what progress has been made in relation to the recommendations and to understand what short-term measures have been implemented since the prior year. And we will also conduct a review to ascertain whether the council has input appropriate plans for savings and ultimately address the risk of financial sustainability. This will include a review of the medium-term financial strategy, plans to monitor savings, to replenish reserves and the evidence of that implementation and also how the setting and monitoring of savings is going. The second risk is around the risk of fire and take precaution. So, we'll be engaging with management to understand what progress has been made in settling the requirements of the regulatory notice and then we'll be seeking corroborative evidence to support that work as well. And then moving on to audit fees. So, this is on page 197 of your pack. What you'll notice is the scale fee which has increased. This is as a result of the tender which was undertaken by public PSAA. And so this reflects the constraints in the audit market at the moment in terms of resource in the public sector and also it's to reset a lot of the additional work which auditors have been obliged to do since the last scale fee was set. Overall, there's been an increase of 151% in the fees across the system. You'll notice that isn't the same percentage in the fee above. For this, Mazars don't have any input into how much the scale fee is as well. If we move now on to materiality which is on page 200, I don't know how much the members of this committee will have seen on materiality before so I might give a bit of an explanation. So, the overall materiality that we've set is determined with reference to a benchmark. That benchmark is what's most useful to the readers of the financial statements. So, in the case of the Council, it's gross revenue expenditure and we've set that at 1.8% which we predict will give an overall materiality of 19.5. I must say that this report was put together before we received the draft financial statement so that will be revised. The performance materiality has been set at 60% and so we set this performance materiality which is slightly lower and that's to ensure that any errors which are picked up on don't exceed materiality overall and if it does breach this level, we will ask for the adjustments to be corrected in the financial statements. And then the clearly trivial level is the level above which we'll report to this committee. We do have a slightly lower percentage than Grant Thornton and I think we're at 5%. We set this at 3%, however, it won't be that different to what you're used to seeing. Have you got any questions on this report before I move on to the pension fund? Right. So, before we move to the pension fund, I just at this stage wanted to ask Hitesh or Councillor Hyland whether you've got anything that you wanted to add at this point before we invite members in. No, Chair, other than to thank very much, thank you for everything you've done and obviously to thank the officers for all the reports tonight and their conscientious work that they always do and just to say how much confidence we have in the finance team, especially dear old Brendan here, who I'm very proud of your work. Brendan, thank you. Thank you. Hitesh, do you have something on the external audit? Yes, thank you, Councillor. Tom and I have just met recently because he's newly appointed. On the three key risks that Tom has explained this evening, Greenwich has not had problems historically on that. In terms of some of the process in terms of where we are, obviously Mazars have got away accounts. Mazars have also gave us a list of all the prepared by client requirements and most of those, if not all of them, are with Mazars, but Tom will confirm that in the next day or two. So we're preparing ourselves for the field work in September to go as smoothly as possible. Thanks. I'm sure members are aware of this, that there has been significant issues with the public sector audit market, particularly in local government ever since the pandemic, really. As a result of that, the PSAE conducted a consultation and we haven't had results of that yet because of the general election. At least I don't think we've had the results. But I know from other audit committees I've on that many organisations struggled a few years behind. Greenwich, though, has always actually been ahead of the curve. Historically, we'd have our audit done in July. The statutory reporting deadline is at the end of September or November now? September, I think. Yeah, September. But you're only starting in September. Yeah. So I just wanted to ask, Grant Thornton always did a very good job when they were our PSAE auditors. Obviously they've been rotated off now and generally they have a good reputation. EY, I know, which I chair another audit committee and they're at the other end, they've got a very bad reputation. In terms of the timeliness of their performance, I wonder where Mazars are in terms of your performance against the statutory reporting timescales? Unfortunately, since your question just before the meeting, I haven't got internet access. So I haven't been able to look that up, but I can come back to the committee with the performance if you want. Councillor Hyland, did you want to comment on this? Chair, I think, am I right that there's been a lot of delay because of the valuation of property, which has caused a lot of local authorities to be late in the production of this? Yeah, am I still on? Yeah, that's correct. So I think, in general, the expectations of auditors to look into property valuations has increased over the last few years, where resource hasn't increased and that's been compounded by the delays from COVID. And there are other areas as well where we're having to pay more attention to the accounts. And so that has made the previous reporting deadlines untenable. Thank you. Well, it would be useful to have a dialogue directly with the audit committee. And I think we'll be obviously very interested in your eventual report, but we're particularly obviously, I think, keen to see a conclusion on the timescale that you've laid out, which is by January, isn't it? Yeah. We'd prefer it earlier to meet the deadline, but given it can't be, then by the deadline is set out. So it could if there's no slippage. And it would also be good to meet the audit partner. I know he's ill at the moment, but at some point. Yeah, he'll be along to committee as soon as he can do. Thank you very much. Are there any other questions or comments on the external audit plan from members? Are people happy to note that report then? Yes, noted. Thank you. Then that brings us to the last substantive item on the agenda. Oh, right. The last item on the agenda, which is the Community Municipal Investment and Green Finance Framework. So this is to note the launch of the council's Community Municipal Investment to fund green projects, to note the Graft Green Finance Framework and to note the council be signing up to the Green Finance Institute Local Climate Bond Pledge. So when this report was first agreed, it was agreed the Audit Committee would have a look. The Audit Risk Management Panel would have a look and offer our comment. So I think, Julian, are you going to introduce this? Thank you very much, Chair. I'll briefly go over the three recommendations in the decision section of the report. The first, as you said, is the launch of the Community Municipal Investment, CMI. This was previously known as a green bond. The council set to launch this in early September through a crowdfunding platform, working with a third party provider who has done this with over 11 councils now. The council is planning to raise the initial one million, given residents and local business the opportunity to invest as little as five pounds towards this target. As you said, Chair, all boring will be ring fence for a green initiative. The second one is the Green Finance Framework. So the framework provides a foundation upon which to issue an accredited green municipal investment. It provides an overarching criteria and guidelines as to how the council will issue and manage the CMI. Please note this is an early draft and we'll go through further changes to the framework before and after the launch date. And finally, the council plans to sign up to the Green Finance Institution Pledge. This pledge is designed to support council with early stage engagement. It's non-legally binding, but instead demonstrates a commitment to taking climate action locally. One sign will be 11 councils to have made this pledge. Lastly, I'd just like to say, while finance is presenting this report, it's largely a collaborative effort across the council in order to make this a success. Happy to take any questions or comments, unless any of my colleagues want to add anything else. Any colleagues or Councillor Hyland want to add anything to the report? No? Do our members have any questions or comments, particularly interested in this report? Dr Blackall? Yes, just on page 251, where you have the table showing how much was raised for three different councils. And Hackney, I know this is currently live, so they obviously haven't reached their target. But do you know how much more time, you know, have they just started or where are they long the process? Are they likely to hit that target or are they way off? Or do you know? Thanks, good question. I don't know what the latest position at Hackney. Last time we had a look at it, I think they were close to the target. Normally it opens for three months, it's three months window, so they had a bit of time to bark and look up and send you an email. Could I just ask, maybe I've missed this in the report, but what have we determined what interest rate people investing in the bond will receive? Chair, can I try and answer the question? I think in coming up with the rate, we'll agree we're going to look at the PWLB rates, we're going to look at the gilt rates, the market conditions at the time, and that's how we're going to come up with a sensible rate. And we'll make sure, in terms of delegations, this is subject to agreement by cabinet, this is delegated to the finance director, he'll get a full briefing on the rate to be agreed, and on that briefing he'll make a decision. And I think it would be because generally you'd get up to 5%, maybe a bit more than 5% with one or two banks at the moment in bonds. So I think it, on the one hand, got to be competitive, but obviously not too costly. And it would be useful to see, I mean, there are three other local authority green bonds mentioned there, but with differing interest rates, but interesting to see whether Hammersmith and Fulhami, for example, they certainly have been less successful, but that's perhaps because it's currently live, it's behind the curve. So it'd be useful to sort of monitor and see how other bonds have, and how important the interest rate is in terms of leveraging. Some people will give, some people will buy bonds just because they feel it's the right thing to do because they're interested in green bonds. Other people will be obviously more mindful of whether the rate, how competitive the interest rate is. And if they get a better rate elsewhere, they'll go elsewhere. Yes, thanks, and as Hitesha said, we'll definitely be monitoring that aspect of it. So we'll look at what retail bonds rates are like, but we'll also be looking at gilt rates. And as you know, interest rates forecast to move down, so we'll be keeping a close eye on that and how we peg that. But that'll be down to the director of finance to have a look at that. Yeah, but I'm certainly happy to report back to the committee. Councillor Hyland. Yes, sorry, Chair, you did invite me earlier and I missed this point. When I first saw this report, I was a bit worried, given that we're a kind of blue chip company and we want our residents to invest in this, and we don't want reputational damage about this warning, if you like, that your investment can go down as well as up. But I understand that that's an FCA condition and that obviously there is actually a fixed rate. There will be a fixed rate of return for people and that in effect, people's capital would not be at risk unless, of course, abundance went to the wall, in which case I'm sure we'd be, you know, assuring it. So personally, I probably should declare an interest because I'd very much like to invest. I think this is a really good scheme that I think we could get some really good publicity out there and allow the residents to feel that they're actively engaged in tackling climate change. Thank you, Chair. Thank you. And do you think that we have the expertise to be able to identify those projects that will bring the necessary returns? Yes. Thank you, Chair. So just to put this in context, the capital projects in terms that's geared towards this green initiative, it's already in the pipeline. The team is looking at this. What we're doing, instead of doing PW, they'll be boring, replacing the green ones boring. So when we know those projects, we have to come back and identify those specific projects that we will be funding. But this will be reported through the investor, back to the investors, so they have an update. Any further questions or comments from members on this report? Susan. Yeah, just on the issue of the interest rates, you know, a lot of people may be investing in quite small amounts. And so the difference on return across those interest rates that the other councils are using ultimately would be very small. Unless you're putting in, you know, a full is his worth or something like that. So it isn't too material. I would doubt that that variation in interest rates would make a difference to how many people invested. Well, thank you. Any further comments? I mean, I'm very keen on this and keen to be involved. Like Councillor Highland, I'm also keen perhaps to buy a bond if Council is allowed to do so. But do members have any other comments on the report? So we're happy to note that report then and to generally approve the concept and principle of a green bond. Thank you. Now, I'm conscious, I thought we'd come to the end, but I'm conscious that I cut off Maz Tom before you got to the pension fund. Which I apologise profusely and thank you for your forbearance and not bringing it up. But if you could just say a few words then about the audit of the pension fund that's relevant for this panel. Thank you. Thank you, Chair. I'll keep it relatively short and sweet because some of the detail is the same. So the timeline will be concurrent with the main audit. On page 227, we've got the significant risks and there are two which we've identified. The first is management override of controls, which is the same as for the main Council. And the second is the valuation of investments, which are at level three within the fair value hierarchy. That means where there's an input which has an impact on the fair valuation, which is unobservable. And so therefore is inherently more subjective, uncompleted, manipulated. So we'll address that risk by agreeing holdings from fund managers to global custodian reports. Agreeing the valuation to support in documentation, including investment manager valuation statements and cash flows for any adjustments made to the investment manager valuation. Agreeing the investment manager valuation to the audited accounts or other independent support in documentation, where available. And where they are available, we'll also make sure that they're supported by a clean audit opinion. That pretty much covers it apart from materiality. So unlike on the Council side, materiality is set on net assets for a pension fund as those are of main interest to the readers of the financial statements. And we've set those at 1% rather than 1.8%. The performance materiality is set at 70%, which gives headline of 15.843 and performance materiality of 11.09. Again, those will be revised and a clearly trivial threshold of 475K. I'll leave it at that if that's okay. Well, thank you very much and sorry again. I just wondered if Julian, as the officer dealing with the pension fund, whether you had anything to add? Yes, thank you, Chair. Nothing to add. Just echo what Mitesha said, we've submitted the draft set of accounts and we're working with auditors in terms of the working paper. So this will come before the pension committee as well, so you have another chance. Thank you. Do members have any questions or comments in terms of the external audit of pension fund? You're happy to note that report as well? Thank you very much. So I believe that now brings us to the end of this meeting. So I'd like to thank everyone for attending, particularly our external auditor. And look forward to seeing all the members and many others again next Monday on the 22nd, where we have training at 5pm, which will be recorded if people can't make it so they can watch it. And then we have the meeting in public at 6.30pm, and the agenda has already been circulated. And it includes the full external audit report from Grant Thornton, doesn't it? Yes, so it's going to be an important meeting. So thank you very much and look forward to seeing you on Monday.