Transcript

Well, good evening, everyone. Welcome to the second meeting of the Audit and Risk Management Panel for this municipal year. I'm Councillor David Gardner. I'm the chair of the panel. And I'm very pleased to say that this evening we have a full attendance. So could I welcome Councillor Lade Olugbemi, Councillor Christine May, Dr. Susan Blackall, Councillor Matt Hartley, Councillor Nick Williams, Councillor Dave Sullivan, and it's also like to introduce Damon Cook, the director of finance, and very pleased to see Jonathan Meek, our external auditor from Grant Thornton, whose last appearance at the Audit and Risk Management Panel. And we've got our clerk, Daniel Wilkinson, and it's good to see other officers, and Councillor Ivis Williams also in attendance. So that means I have received no apologies for absence, as we're all present. I've not been notified of any urgent business. Does any member have any declarations of interest? I see none. Then we move to the substantive items on the agenda. And the first and most substantive item is the annual audit letter and report for 22/23. So that is over a year ago, in terms of financial years. And that's going to be introduced by Jonathan Meek of Grant Thornton. Do you want to say a few words first, Damon? Yeah, no, I'm just going to keep it brief anyway. And it was just to set the context, which I think, I think you've done some of that already. So just to bear in mind that this is the 22/23 annual audit letter. We are sort of at least one financial year down the line from there. And just to sort of bear in mind that obviously the assessment's done at a point in time. That is now sort of a while ago. And whilst obviously there's going to be a number of questions arising, you know, from the report itself. I think it's just worth bearing in mind that we are a long way down the line. A lot has happened. A lot of positive things have happened since that point. But I'm sure we'll come to those sequentially. And I'll hand over to Grant Thornton. Thank you, Damon. Yes, so I'm Jonathan Meek, Associate Director in Grant Thornton's Public Service Advisory Practice. I've sit for qualified accountant with a background in public sector audit. I will sort of declare right now I've not been closely involved in this work. My colleagues who delivered this work for Grant Thornton have all taken this week off on holiday. So I have been parachuted in to deliver this report to yourself. So I'll answer the question, any questions to the best of my ability, but there might be a need for us to come back if there's any clarifications that I'm unable to answer. But I have been briefed. So yes, as set out, I'm here to present our annual audit report for the 22-23 financial year, which is our final year as auditors, external auditors of the council. So the purpose of this report is to detail our assessment of the council's arrangements for securing value for money across three core areas. Financial sustainability, which relates to the planning of resources to ensure adequate finances. Governance around the council making appropriate decisions in the right way. And improving economy efficiency and effectiveness. So improving the way the council delivers its services. We present our overall findings across each of these three areas and have raised recommendations as appropriate. And I'll deal with each of the areas in turn. But if you refer to page three of our report, you'll see that between our 21-22 annual audit report and our 22-23 annual report, there was a negative movement in our assessment of arrangements in so much that across financial sustainability and improving economy efficiency and effectiveness, we raised significant weaknesses and associated key recommendations, which I will come to shortly. Across governance, there has been no movement from our assessment across the two, but we still have raised improvement recommendations. So I'll cover each of these sections now in turn, starting with financial sustainability. And we identified a significant weakness in the council's arrangements for securing financial sustainability. The reason for us identifying this significant weakness is the challenging financial outlook that the council had in 22-23. And also the approach taken by the council to mitigate overspends against the budget in that year. So in 22-23, the council delivered 25.1 million overspend on services, but this was mitigated through one-off measures, including the use of reserves. This falls off in 21-22, where the breakeven position was once again achieved through one-off measures. Repeated use of one-off -- So in our view, repeated use of one-off mitigations, especially the use of reserves, is not a sustainable financial strategy for the council to take, and we've raised the significant weakness in relation to that. Also, with regards to the medium-term financial outlook of the council, the point of our review, the MTFS indicated that the council be facing a cumulative budget gap of $50.4 million. Subsequent updates to the MTFS has revised that gap, most recently in March 24 to $54.2 million. This is a very challenging -- In our view, this is a very challenging outlook for the council. It's mitigated to some extent by the fairly substantial level of reserves that the council held or holds at the point of our review. However, as previously mentioned, the use of reserves to mitigate budget overspends and deliver a balanced budget is, in our view, not a sustainable strategy. And the council needs to deliver substantial recurrent savings over the 12 months to avoid the reserves rapidly depleting and, at the point of our review, putting the council in a position of risk, potentially, by 2526. On that basis, we've identified a significant weakness in the council's arrangements for securing value for money and raise a key recommendation that the council -- and this refers to both officers and members -- must acknowledge the gravity of the medium-term financial outlook and take far-reaching action to restore a sustainable financial position. The development of a robust, deliverable savings scheme is essential, and further details in this recommendation, along with management response, can be found on page 7 of our report. And I will mention here that Damon mentioned previously that, obviously, this was referring to the arrangement in '22-'23, so we acknowledge that the council would have made steps to address these recommendations into subsequent financial years and, obviously, the current financial year. So that context is important. Also, with regards to financial sustainability, we noted that the council had difficulty in developing and delivering savings plan, and we've raised an improvement recommendation. We recommend that monitoring reports of cabinet should include a more detailed analysis of savings development and more specific commentary on savings delivery. This will support the council's efforts to implement greater robustness in accountability and delivery of savings plans by the services. Further details can be found on page 19 of our report. We do, in our report, acknowledge the key areas of financial pressure faced by the council in terms -- most specifically, that the homelessness pressures and social care, both across adults and children. And it's vital that the council continues to take mitigating actions to reduce pressures being faced in these areas. Our second improvement recommendation regarding financial sustainability relates to the housing revenue account. Our recommendation is that the council must review its HRA planning in the medium term and take effective action to restore it to a sustainable position and protect the minimum working balance. Further details on this, including management comments, can be found on page 20 of our report. So, moving on to the second area where we've identified a significant weakness in the council's arrangements in securing economy -- and that's securing economy efficiency effectiveness, which we refer to as the three E's. And this specifically relates to the regulatory notice issued by the regulator of social housing with respect to the identification of failure to meet minimum service standards. We acknowledge that this regulatory notice was a result of a self-referrer by the council, and that the council is also taking steps to resolve recommendations of the notice. But it is a Grant Thornton firm-wide national approach that any local authority subject to regulatory notice has a significant weakness in securing arrangements for achieving value for money. Further details of our recommendation can be found on page nine of our report. With regards to improving economy efficiency effectiveness, we've also identified two improvement recommendations. One is a governance review around council companies to ensure that they're getting value for money. And page 39 of our report provides more detail on that, and that the council should undertake a planned procurement review as quickly as possible in order to address issues identified in procurement and contract management procedures. And page 40 of our report provides further detail on that. The third and final layer of our review for value -- for the council achieving value for money is governance. And we've not identified any significant weaknesses in the arrangements, but we have identified six improvement recommendations. Further details on these recommendations can be found on page 26 to 34 of this report. I do not propose to go into those in any detail, but 26 to 34 details are improvement recommendations in relation to governance. So, as I said, we're conscious that our findings relate to the 22, 23 financial year, and the council's made steps to address a number of the recommendations made. And we report -- but also in the report, we do note that at the point of our review, there were some prior year recommendations that had not been addressed. And we encourage, even though we are no longer for 23, 24 onwards the external auditor of the council, that those recommendations are acknowledged and addressed to ensure that the council has robust arrangements that any future auditor will be subject to assessment. And that concludes the presentation of our annual audit report for 22, 23. I'm happy to take any questions. Thank you. Thank you very much, Jonathan. Clearly, it's a very important and serious report. Just in terms of timing in relation to what Damon said, obviously the report is for the financial year 22, 23, but the report was signed and delivered this month in July 24. And obviously the audit process always involves a significant dialogue, particularly with management and hopefully or the audit committee as well. And I just wondered certainly in terms of the recommendations and the review of the implementation of last year's recommendations, whether the conversations and the narrative around that dates from the end of April 23 or whether it's more recent in dates from when the report was done in July 24. So to what extent has this report taken account of developments and improvements towards those meeting, those concerns during 23, 24? Yeah. So with regards to that, I think it's best to refer to the management comment section, which is where my understanding and Damon will be able to answer this is it was quite robust discussions between our audit team and council officers with regards to the findings and the management comments quite clearly detail the steps that the council has taken. So in terms of the arrangements, our report is very much referring to the arrangement 22, 23, but the management comments and updates with regards to that are much more timely. Damon. Yeah. So I think if we go to either sort of page 21 of the pack or page five of Grant Thornton's report, depending on, sorry, page 20 of the agenda or four of the audit report, in there there's reference to things like say the quarter two budget monitoring reports, you know, presented to cabinet, which was still towards the end of 2023. So of course that's quite backward looking at that point and only sort of presents where we were sort of part of the way through that particular financial year. The comments, the management sort of comments can be found later on, which are on page 24 or page eight of the audit report. And in there, as was said just now, this is the more sort of timely sort of aspect of it, which says, well this is now what's happened. And in here it talks about the process for setting 24/5. So you can see the slight disconnect we have with time periods here. We have a report which is talking about arrangements in 22/3. Yet we're able to actually comment on processes that are now sort of happening for 24 -- well, happening for 24/5 at the time that this report was sort of being finalized. And that's where we saw a very robust response, again, from both counselors and officers. And as was identified was the need to make sure that, you know, we've got, you know, everybody playing their part. If you look on the management comments themselves, there are a number of sort of subsections on that particular page. The first part actually outlines the fact that within the process over-programming of savings were put into place. So this wasn't just about sort of getting to grip with, you know, what the problem was, but actually saying, you know, we're going to try and go further here. The second point actually shows the fact that this was actually approached as much of a joined-up effort, as was referenced, counselors and officers. So the ground strategic leadership team, which is basically -- it's the cabinet and the senior officer team met very regularly, you know, throughout that period to ensure that the savings process, you know, was delivered. In terms of sort of overall sort of quantum as well, I mean, the overall process of 118 proposals come forward that were agreed with a value of 33.7 million. That's a fairly significant number, you know, that's -- you know, you're in the sort of ballpark of 10% of the council's net budget. So in terms of the council responding to the problem, yes, it did. Did people work together to, you know, to come up with proposals? Yes, they did. And are we now getting on with the job of it? That's all to be sort of played out now, you know, and the monitoring reports will be coming through the cabinet process in a normal way and will also include as well as the normal budget information, there will be the necessary tracking information on all of those savings and how they're progressing and being delivered. Thank you, Damon. So I've got a number of members have indicated they've got questions or comments. I saw Councillor Williams and then Councillor Hartley. Thank you, Chair, and thank you, Damon and Jonathan, as well for that report. Just a point of clarity more than anything, and it might be one for you this, Damon. When did officers first get sight, because I know we talked around it, of the recommendations and the findings to start acting upon them? Was there a particular point last year where you might have seen a draft? As the Chair says, it was published July. I'm just trying to understand when officers would have had sight of the findings to respond. Thanks. Yes, I can't recall offhand exactly when the first draft come out, but there has been significant sort of to and fro, you know, on that process. Just to come back. So roughly like as a quarter Q3 last year, Q2 last year, roughly? It will be towards the end of the year, bearing in mind this -- bearing in mind it's got to be around sort of late summer, something like that. Councillor Hartley. Thank you, Chair. Thank you for attending and for the report. I've just got an initial question for Jonathan, if I may. It feels like the sort of obvious question that we as a panel should be asking is about this sort of top line statement that the auditors have given. The Council's members and senior officers must acknowledge the gravity of the medium-term financial outlook and take effective far-reaching action to restore a sustainable position. And bearing in mind Damon's point about timeliness and development since, some of which are noted in the report, could I just ask for Grant Thornton's opinion on what you have seen since the recommendations have been made, you know, based on your experience working with lots of authorities, would you now say that Councillors and officers have acknowledged the gravity of the situation? Yes, I'll try and answer this to the best of my ability. So that, as you say, is very much focused on the 22, 23 arrangements that there was in the view of sort of our work, there was reliance on one-off savings. And I daren't use the word complacency, but the fact that the Council has got significant reserves meant that the pressure facing some other councils that are in a similar financially challenged position, but without that reserves wasn't necessarily being realised by the Council. I think as Damon set out in the management comments, there's been clear steps to develop both the governance and the detail behind the savings program that are much more sustainable and reduce a reliance on one-off. So I'd say that, again, through the management comments and the response from management, I think the robust discussions that were had there's definitely been a progression in the right direction since the 22, 23 findings. Is that something we would expect that as councils continue to face the financial challenges they are, and particularly in your instance with homelessness and the pressures that that is placing on the budget, that there are mitigating actions that are being taken and the gravity of that financial situation is definitely much more the forefront. Okay, thank you. And I've got a follow-up question on the management response to that key recommendation. So a question to Damon, or indeed Councillor Hyland, whoever's best placed to answer it. I was surprised not to see more about rethinking services in the management response because reading the detail of the auditor's comments in several places, I would say the report is sort of quietly and politely damning of the progress at this point in time, this snapshot in time, that had or hadn't been made on rethinking services. And in particular, there's comments about the digital strategy, you know, to pull one out. We have some concerns that rethinking services and the digital strategy have received a significant level of investment but has reached a mature stage without delivering the significant savings that were intended for it. So at this point in time, it hadn't come up with the goods. And so could I just ask why that hasn't been addressed more fully in the management response and perhaps for a comment on that? Yeah, that's fine. I think we refer to that, again, page 24 or page 8, depending on which version you're going for, subsection 6, where 30 of the proposals, i.e., over a quarter of those are actually of a rethinking type. So that, in addition to, if I recall, coming to scrutiny some months ago as well, actually sort of detailing the profile of the work and the profile of the delivery of those types of savings. What we're looking at there was effectively, you know, a delay in those savings. But those savings actually coming through. So they will come through. They will come through later than expected. But when they do, they're recurrent, i.e. they will occur each year. And potentially will even surpass the original target that was actually set when that digital strategy was first created back in 2020 when we were in COVID. Okay, so final follow-up then, if I may, Chair, thank you. So it talks in here about, the auditors talk about reform being needed. It uses the word reform of the Rethinking Services Program. Can I ask Damon, when he considers what's been introduced in the last year since this report, does he consider that that is the reform that has been, you know, sort of pointed to in this report specifically on Rethinking Services? And if we go back to the digital strategy, we are at the end of that first four-year cycle. So we're actually in sort of in the process at the moment of redrafting, reassessing what's happened over that first four-year period with a view to learning from that and creating the next sort of four-year cycle. So we are in that sort of process of, you know, sort of reiterating, you know, what that looks like going forward and what's realistic and what's achievable. Okay, I've had an indication that Councillor Ives-Williams wanted to ask a question, but firstly I'll ask further questions from members of the panel. Councillor Nick-Williams wants to come back. Are there any other panel members who had questions on this? Councillor Nick-Williams. Thank you, Chair. Just a quick one really. Point three on the management response about savings delivery being monitored on a monthly basis with a hope for the first one coming to cabinet this July is my read. Is that still on track? And has it -- I guess there's a cabinet tomorrow -- sorry, on Wednesday. So will that be coming to that cabinet? Thank you. That's -- no, the cabinet on Wednesday will be looking at the out-turn and statement of accounts for last year. The first monitor for the year will be coming afterwards. So that will likely be the September one. Okay, so -- So just to reiterate what it says in there in terms of like the monthly scrutiny by GSLT is that's happening. But the first revenue monitor was meant to be for July. We're now saying it will be September. Yeah, okay, fair enough. And then what cadence will that revenue monitor -- okay, I get that it's being monitored monthly, but the actual revenue monitor, that full detail, how regularly will that be presented to cabinet? So again, that follows the same. So there's a quarterly monitor that goes to cabinet. So the first one, I think as we said just now, will be in September. And then the second one, I can't recall when that's going to be, but obviously that is for the period ending, so 30th of September, and that will follow in due course. And again, with the necessary analysis of the savings. But all the while in between, that monthly analysis is going on, you know, between offices and the cabinet. Thank you. So just one or two questions from me, if that's all right. Like other members, I've read the report thoroughly, so thank you very much. It is very important. I -- the recommendations there in relation to the audit and risk management panel, obviously we have already implemented some of the recommendations from 21, 22 in that we have a more -- a chair that's not also chair overview and scrutiny. And we're having more training, a whole program of training. But yours -- the suggestion is we have more independent members of ARM, and just wondered if you could perhaps expand on that in terms of best practice elsewhere, in terms of CIPFA code and so forth on audit and risk management. And where we might draw these independent members from, if we were to go down that path. Obviously it would probably be the next municipal year if we did. I'm also interested in the recommendation, I think it's IR9, about council companies. And the increased risk of lack of transparency and conflicts of interest and suggesting a review there. And wondered, again, if you could mention what best practice there is from elsewhere in terms of council companies. Another area of interest to me, sorry to throw questions at you, is around the -- what you call, I think, the misalignment of budgets. But in -- I think in last year's report you talked about there were some items on the budget, like no recourse to public funds, which are hardly on the budget, but they happen every year. And it's always an overspend or parking and moving traffic contravention income is always a larger amount than actually is realized. And treasury management, the surplus in treasury management is not in the budget. So there are items like that which were mentioned in last year's report. And I wondered, and this I suppose is also a question for Damon, whether you're now happy that that has been addressed, and Damon, whether you're happy now that the budget is more realistic and everything is catered for. Yes, I'll try and take those questions in turn. So the first one around the audit committee. We've seen elsewhere where councils have had two independent members on their audit committees to try and bring in an outside perspective. But also sometimes that is to bring in a skill set that might necessarily not be in the panel. So we've seen other councils where they've had former external auditors actually sit or internal auditors sit on as independent members to bring skill sets that might not necessarily be there. I do apologize, I don't know the skill sets of this audit committee. So I don't know if that's something that would be needed. But in terms of best practice, that's what we've seen other councils do with regards to independent members. Then the second question reminded me with regards to -- The recommendations on council companies and the review thereof and your statement on them. Yes, so ultimately best practice is for councils to be -- they've got companies to be fully aware and fully cited on the operations of that company. You'll see from other councils that have always been in the news that issues have emerged when the council has lost focus and lost control almost of the operations of a company. So if you think back to Nottingham City Council and Robinwood Energy, that was very much the council that had lost sight of what the company was trying to deliver and that came at a significant financial cost to the council. So it's really just having a tight understanding and control of what the council is delivering to make sure that aligns also with the overall strategy of the council and what was almost set out to achieve at the start. Because actually if there's a drift away from delivering what the council set out to achieve, maybe there's a potential to divest from that. Because if it's not achieving the outcomes that council wants, then there is a risk. And that's sort of in relation to that. And then remind me on the third point around budgets. It was about the misalignment that the budgets don't always reflect what we know will be the actual income or the actual spend in some respects. And I mentioned some particular items which were also identified in your 21-22 report and commentary. Bear with me a second. It's not one that I was briefed on. So let me just have a quick look and I can come back on that one. David. Yeah, I'll take a couple of things. Can I just go for a point of clarification from an earlier question? The one that was puzzling me was when did we first see the document? There's two documents that come out from the external auditor as you go through the year. No, three if you include the plan at the very beginning. When you go through the accounts process of, you know, submitting them to audit, you'll get an audit findings report. I think it was that that I was thinking about at the time. Because that particular document, I've traced it back, probably didn't come out until about November. The annual audit letter, which is this one, is actually in this year. And I can't trace back that I've seen it probably before about February or March. So just a point of clarification on that one. Then on the other aspects. So in terms of the realignment. So within the budget for this year, the budget process, which was set in March of this year, there was a significant deficit recovery line that's in the budget, about 19 million. Which was about realigning those budgets, so the ones that were mentioned around sort of parking, you know, recourse and things like that. Substantial most treasury management as well. So you had a number that were basically suggesting they had insufficient budget. You had treasury management, which was effectively generating a surplus. So all of those have been realigned. And again, so when we come to see the quarter one, that will be very clear to see how that has been ironed out. Great. That's very heartening. Right before we come to Councillor Williams, back to Councillor Hartley then. Thank you, Chair. I just wanted to ask about the follow-up of previous recommendations section in the report. So there are six, by my count, recommendations that haven't been addressed from previous years. And the report talks about the auditor's surprise at that. I wondered if we could ask the cabinet member and/or Damon to comment why that is the case. And, you know, is that going to be addressed? You know, when we sat here in 12 months' time, can we expect those previous recommendations to have been caught up with? All right. Could I ask if there's any in particular you want to overlook and we can probably -- Yeah. I mean, a general comment on why there are six, I suppose, is the first question. But an example would be the one I'm probably, in a way, most worried about, I suppose, is recommendation four, which is this long-running thing about delays in management, acting on internal audit recommendations, which is kind of being this topical and has come up recently. So to take that as an example, but also the general point, if you could address. We did actually, just for your benefit, you were on holiday, Councillor Hartley, but this was an issue we raised at last week's audit committee with the head of internal audit about internal audit reports and the implementation of the review recommendations. And we have asked for a more granular schedule to come back to this committee. Thank you, Chair, in which case I'm more interested in the general point, you know, why are there six recommendations on here that haven't been acted on? It's more of a process question, I suppose, for Damon. Yeah, I appreciate the general question. I think it's more a case of dealing with them on a line-by-line basis in terms of, you know, whether they needed a, you know, almost like a completely robust response, or there was something that is going to be dealt with as a matter of course by something that's actually coming up. So I know the Chair has mentioned about asking for some additional information, in particular, around those internal audit items. At the officer level, we've actually stepped up arrangements whereby there is now effectively an escalation process and also a reporting process at the most senior level in the organization now. So where we find that things have not happened as they were reported to have intended to have happened, then they are flagged and reported. Okay, so just on the general process point, then, I'm hearing from your answer that some of them are more important than others, and that's the kind of reasonable kind of, you know, assessment of when you look at the recommendations. So just, for example, recommendation eight about updating a centralized version of the register for gifts and hospitality. I can totally understand that looking at these recommendations, you would put that at probably the bottom of your list. I think that's totally reasonable. But who makes that decision, and what kind of scrutiny is there of that decision? Because if we're actually saying, well, we're knowingly not implementing this recommendation, it feels like that should be documented, that decision, and subject to scrutiny. I mean, as I said, we've taken it line by line, but there's a risk-based approach to these things. And so for things like, say, contract standing orders, for example, if, you know, if you were looking at, well, there was a recommendation, so if something needs updating, the new Procurement Act legislation coming in says, well, we need a fundamental rewrite anyway. So are we going to do the minor tweaking, or are we going to do the big bang approach? We're going to invest the time and do the big bang on that. Thank you. So understanding orders invite Councillor Ives-Williams to ask a question. Do you want to come forward and use the microphone next to Councillor Hyland? Thank you. Thank you, Chair. And just out of -- just so you know, because I am the chair of the organisations and the communities scrutiny panel, when I read the report, I -- it's of interest to me. Most of my questions have been answered. I came here with five questions, one around the rethinking services. I'm satisfied with the answer that has been given by the officer. You've already asked in terms of the related companies, because I think that needs attention. But Councillor Hartley just asked about the recommendation, and when I read the report, the report does mention the 2020, 2021, and 2122 recommendation, where the auditor was not satisfied in terms of how we respond to recommendations. I know that Councillor Hartley just posed a question to Damon in terms of how -- what assurance can we be given in that we will adopt or we will try as best as possible to implement these recommendations. So I just want to urge officers and members that we need to adopt a culture that promotes compliance and good governance, because I think most of the action points or the recommendations which were recommended as improvement were around governance. But my main point, which I think that's the only question that's not answered really, is to the panel. Best -- you asked about best practice. Some other councils has best practice where the audit panel have a tracker of improvement recommendation. And I just want to ask this panel, because most of these items, they are of interest to my panel. Is there a way to have some tracker or follow-up from this panel for these sorts of recommendation? As we have the new auditors coming in, we don't want to see -- it would be embarrassing to see some of these recommendations. So I just want to ask the panel if that is something that can be considered in terms of tracking and following up on these recommendations. Thank you, Chair. Thank you very much, Councillor Williams. I mean, that was something I've actually made a note of, that in terms of moving forward, rather like with the internal audit review recommendations where we've asked for a tracker, which I have in other audit committees I sit on, I thought it might be useful to have a tracker, or at least a report of the external audit recommendations from at least 22, 23, and 21, 22. And to come back to this panel with a report on the -- now, obviously, there will be some recommendations which have been superseded. One is mentioned there. Some recommendations which, for various reasons, cannot be implemented or are not a priority to be implemented, like the gifts and hospitality one, but at least to have some explanation as to why they have not been implemented or what's being done to implement them I think would be useful. I just seek the views of members of the panel, so that would be useful to have a report and a tracker of the external audit recommendations. Agreed? Good. Are there any other comments or final questions from members of the panel on this report? Councillor Williams. Just to say thank you for the thoroughness of it, and also when can we expect the next one, I suppose, to see what is the cadence of these reports for someone new to me? Would it be this time next year or further on? We did last -- we had the programme for the 23/24 audit with Fervas Mazars, and I think memory is that's due in January. Is that right, Damon? Yeah, the audit is not likely to commence until about September, so January is the working assumption at the moment. But I think as most of the audit firms are sort of wrapped up in sort of some catch-up audits at the moment. So that's playing a bit of havoc with some of the scheduling. Councillor Hartley. Thank you, Chair. If I could seek your advice. I don't have any further questions or comments on the report, but I do just have something to propose in terms of comments back to full council. Do you want that now or later? If it's on this item, then now, yes, please. And thank you. It's not -- I just wanted to seek colleagues' views. You asked the question, Chair, about the auditors' recommendation that we consider the current membership of audit and risk management panel, and it feels like every time we see an annual audit letter, the stakes go higher and higher, and I just wonder whether we might choose to comment to full council our view on that. My own view is that we should -- we already have the benefit of an independent member, which we're grateful for, but as the stakes get higher and higher, I wonder whether, you know, my view would be that we do need further independent members of audit and risk management to help us as lay elected members who are not experts by any stretch to scrutinize what's in front of us. So I wanted to seek yours and colleagues' views on that suggestion. Well, I mean, thank you very much. As this is a recommendation that's come from the external auditor, I certainly would favor that. I would favor the idea of having someone with -- who is a qualified auditor, if possible, which I'm sure we have many within the borough. But -- and that would be as an independent, non-voting member. But I'm -- and obviously, we can only make a recommendation. It would need to be full council that agreed it, probably for the next municipal year. But open to other views that members have. Councillor Williams? I think, to be honest, it seems eminently sensible. My only concern would be -- and we'd have to look at the detail of the cost and the remuneration for that additional member. We undertake it as part of our duties as councillors. And we welcome the external input from Dr. Blackhall as well. But I think that would just have to be looked at would be the only caveat in these times, I think. But I'm never one to say we need less expertise. I think we're beyond the tide of experts phase now. So let's -- yeah, in principle. Great. Thanks. Dr. Blackhall. Just for clarity, I'd like to say that I am not an expert. I'm vice chair of this panel because I am chair of the standards committee. It just so happens that my former career was in business. So I understand something about accounts and money. And that's helpful. But this is very complicated. And I don't pretend to be an expert. And so would certainly welcome if it were possible. And particularly if you could get someone who would do it as, you know, most of our independents do is largely as a voluntary thing. That would be great. Thank you. Councillor Hyland, on this matter, yeah. Thank you. Whilst I've sat on trust as trustee, and we often have people with legal expertise and financial expertise, always a good thing. However, Grant Thornton actually made an error in this report in the sense that they thought we had no independent members. And we had to go back and say, actually we do. We'll have Dr. Susan Blackwall. So yeah, they hadn't intended that we should expand the number of independent members just simply that we should have independent member, bracket says. Completely down to you panel, and I totally, utterly get the point. Thanks. Right. So in the light of that, you still want to make a recommendation that the council considers. Something like council considers appointing a second independent member to the -- non-voting independent member to the audit and risk management panel that could provide with the necessary financial expertise. I think that's very eloquently put, Chair. And yes, and thank you for the clarification. Understood, but I think the point stands. You're right, Chair. Is that okay, Councillor Williams? Would just like to, because that is news to me from the clarification, seek Grant Thornton's view, whether one is enough or would they encourage more too. So whilst we have some expertise in the room, let's listen to it, which is what we're proposing to do. So I'd be keen to Grant Thornton's view in light of what Councillor Hyland's just disclosed. Thank you. Yes, I think we do acknowledge that there was a mistake in the report, and that was part of the robust discussions that took place. The purpose of independent members is to provide that expertise that might not be in the room. So in some cases, it can be done with one independent member. Councils I've seen that have implemented it have two independent members. And again, one of those independent members has got relevant financial skills. One of them has got business backgrounds and not necessarily the exact financial expertise. But yes, so that expertise in terms of the financial is important. And I think it's important there not to conflate independence and expertise, right? Because Dr. Blackhall's just said you're not an expert in it, so the recommendation would be that they are independent but also an expert, I think, in that field because that's probably what we're now lacking when it comes to like, I think, thank you, so. Thank you. I think that clarifies and that's very helpful. Are all members happy then that firstly we recommend that we have a tracker report on the external audit recommendations for the last two years on implementation of those recommendations. And secondly, that we ask full council to consider having appointing a second independent nonvoting member with the relevant accountancy expertise. Yeah. I think it would be great if we could find out what the cost implications are first. Just in case there's a need for remuneration, if there are any financial implications, it would be great to find that out first before we make the recommendation to full council. So would you like to add to that recommendation something like subject to any financial implications? Yeah. Yeah. I might just say though to Dr. Blackall's point and to your point, Chair, we have a borough full of extremely credentials, talented people and I think we could, I'm sure we could find a public spirited local resident with the relevant expertise. But I agree with the point, including it. So if there are no further points, are we happy with those recommendations to note the annual audit letter? And could we pass on our thanks to Grant Thornton to your audit partner and director for all your work over quite a number of years as our auditors. We've been very, I mean despite the problems over the last couple of years and post-COVID and so forth, I think compared to the PAC as it were, we've been very fortunate to have Grant Thornton as our auditors. And while we no longer sign off our accounts and have our audit letter already on the end of July as we used to, it's still well ahead of most local authorities. So thank you very much and if you could pass that back to your firm and all the best for the future. Thank you. You're welcome to stay as a member of the public or you can leave. Yes, thank you very much. Thank you. So moving on then to the next substantive item, which is from 2022/3 to 2023/24 and we have the draft statement of accounts, which will also be going to full council I think on Wednesday evening. Damon, are you going to present this? Briefly. So basically you have the statement of accounts, the draft statement of accounts for 2023/24 in front of you in the usual format for those that have been on the panel before. For those that have not been on the panel before, apologies, it's an exceptionally long document, but is in effectively a largely prescribed format. Basically what happens is the first part is that the council produces its draft set of accounts. It then provides those and makes those available to firstly the external auditor and the external auditor for 2023/24 onwards is Mazars Forvis. As was explained just now at Grant Thornton, that was their last year in their particular contract. So Mazars have the new arrangements, so that draft document has been made available to them and it's also available for public inspection as is required by regulation. All the timetables sort of set out within the document itself, including the inspection period. As I mentioned earlier, due to the scheduling delays that the auditors are experiencing at the moment due to having to mop up a substantial number of local authorities accounts from previous years which have not been closed, they are taking precedence at the moment and therefore those of us that are trying to close our 2023/24 accounts are going to have to wait just a little bit longer. The audit is therefore likely not really going to commence until about September. And I think as was mentioned earlier it might not be the fact that we will be signing off until into 2025 for this particular item. So you have the draft set in front of you. Once the external auditor has been through the accounts, engaged officers ask necessary questions to reassure themselves, identified any issues, any changes need to be made, et cetera. A revised set of accounts will come back to this place. And then the next item is the audit findings report, which I referred to earlier. That will be an opportunity for yourself to talk and sort of quiz the external auditor on the process, what they've found. And then subsequently to that they then go to full council for formal approval. Thank you, Chair. Thank you, thank you very much. Damon. I don't know whether Councilor Hyland, as cabinet member, you have anything you wanted to add, draft statement of accounts? Not really, thank you. I'm very happy with what Damon has said and I'd like to thank him for pulling it all together. It is what it is. Thank you. Well, thanks. I mean, obviously our role as the audit and risk management panel is principally to look in detail at the auditor's report of the accounts, rather than necessarily the accounts themselves. But it is an opportunity, which we might not have at full council on Wednesday, to ask any questions and make any comments on the draft accounts. I've certainly got one or two. But leave that open to other members. Silence. So I was just going to ask about the most significant change between 22, 23 and 23, 24 is in the housing revenue account, where gross expenditure has gone up from 120 million to 218 million, while income has only gone up by 11 million, presumably due to rent increases, which means a net expenditure on the HRA for the last financial year was nearly 83 million pounds, which is clearly unsustainable. So I wondered, presumably this is linked in with investment in Greenwich builds. But perhaps you could explain why this huge difference. Yeah, the biggest issue is just revaluation. It's the revaluation of the housing assets themselves, which resulted in a loss. There can be some very, very significant swings up and down, just depending on how they go. So that is the driving factor behind that very big difference year on year. And it was the first thing I saw when I looked at the HRA as well, so I'll admit it. So that, again, might be picked up by the auditor when they look at the valuations, yeah. Okay, no further questions or points on the -- and the overall, they were talking in the auditor letter about projected 13 million, but we're 18 million -- we were 18 million excess expenditure over income last year in the end. That was about 13 million over the budget, was it? Sorry, I think I missed the start of that sentence. Whereabouts were we? I was just comparing to Grant Thornton expectations from 20 -- from the previous year, but in essence, is it right, we were 18 million -- expenditure was 18 million in excess of income last year on the income expenditure statement, and 13 million compared to the budget. Is that about right? Could you -- would you be able to sign post to the page, and then we might be able to pick that one up? Page 97 or 21 of this report. Okay, so I found the page, and we're looking at the different sort of year on year. No, no, looking at the net expenditure. Oh, that's right, it's 22, 23, isn't it? So 23, 24, yep, sorry, my apologies, is 98 million. So if you were to take out the HRA from that, it would be 15, 15 and a half million, is that right? Yeah. Yeah, there's about 84 million on revaluation, so yeah. Thank you, thank you. Any other questions? Are members then happy to note the report? Thank you. So moving on to the last substantive item, then treasury management and capital out. Check, check, if I might just make a quick comment, sorry, on related party transactions. And generally, counselors have been really poor at responding to related party transactions. And I do feel, and I've said this to Damon privately, I do feel that there needs to be a kind of plain English letter that goes to people saying exactly what related party transactions means and where people need a declaration. And to give people some options. You know, A, I have no party related party. B, I might have because I'm a trustee of whatever. You know, because you don't always know if an organization is receiving funding from the council. Yeah? And so on and so forth. And I think then people wouldn't read it as an email and think, oh, I can't cope with this. I'll do this next week. And even after three emails from me, present company accepted, I still had to phone people and say you need to get this form back in. So I just think we need a bit of a step change on that one. All right. Thank you, Chair. Thank you. Maybe it should be like paying council tax. If you haven't paid your council tax, then you can't vote at council meetings. So if you haven't done your form, only I jest there. But members, please take note. So move to the last substantive item. And both the treasury management and the capital out report for the last financial year. And to note the recommended additional allocation of approved contingency within the priority investment program. And this is going to be presented by Damon. And on this report, we're asked if we've got any -- bear in mind, we're asked if we've got any comments that we wish to make to council on Wednesday. Damon. Okay. I mean, on this one, again, it's in the usual format. I wasn't necessarily going to sort of have a long sort of presentation on it. I've actually brought along two of my colleagues this evening as well. Sort of representing one from the capital side, one from treasury management side as well. Basically, you have the out turn report in front of you. There's one particular sort of action on there, which is about some additional contingency on one specific project. I think the other thing that's really sort of -- that's drawn out by the document is the very, very significant rise in investment levels year on year. So we've moved up to sort of above 300 million pounds worth of investment in a year. And of course, that's driven by we have a very well established now sort of housing program in terms of the Greenwich Builds program, also renovating the stock. But in the last financial year, we've obviously had to take actions to assist with the sort of growing financial problems. And obviously, the other attendant problems that come with the, you know, the homelessness sort of position. And that's involved actually acquiring sort of units. So there have been some substantial sort of acquisitions of units to help improve supply in that area. And in doing so, actually reduce the cost of homelessness provision. And obviously, at the same time, providing some very high quality sort of accommodation for people as well. I think broadly I was going to leave it there. If anybody's got any questions, either myself or my colleagues are happy to sort of answer. Thank you. Questions from members on the Treasury management out turn for last financial year? No. I was going to ask then, the contribution, the four million contribution to the Elizabeth line station, does that now complete our contributions to the Elizabeth line station? And does that therefore give us free up resources for other priorities? Yes. Do members have any comments they wish to add to full council on this report? I see none. Councillor Hyland? Not full council, Chair. But I'd like members to see 1.2 and just look at those figures there because you can see the amount of work the council is doing in terms of investing in new homes. And that figure could have easily got lost in the report. And so Damon and I thought it important to kind of just tabulate it there so you can actually see just the investment that this council is making. That's it. I'll just draw your attention to that, Chair, thank you. I'm conscious that this is not the report where we're looking at the capital programme. We're just looking at the out turn for the prior financial year. But nevertheless, the question I think we need to ask because of the ballooning CFR capital finance requirement for future years, which is not on the agenda tonight, what sort of, you know, this large investment, 318 million in housing, which is obviously very welcome, what level of assurance do we have that A, it will pay for itself both in terms of future rental yield and obviously in terms of the savings to the borough on temporary accommodation, which generally comes out of the general fund? Okay, so I suppose the, to start with the first question, which is obviously the larger one, and I think the place to look there are the potential indicators, which are set as part of the treasury management strategy, sorry, treasury management capital strategy each year. Within those potential indicators, they are your ultimate tests of whether, you know, your capital arrangements are affordable, sustainable and prudent. So, for example, in there you'll see one of the indicators will be about your net revenue stream. So, how much of the housing revenue account, for example, is being consumed on debt payments, for example, and making sure that that's not rising, you know, sort of too much. We also have within the HRA, you know, a number of other indicators as well, sort of pseudo-industry wide, I said industry, but local authority wide indicators, again, to make sure that, you know, some of the ratios are, you know, in step with others. The potential regime, when I talked about affordable, sustainable and sort of prudent, the potential regime is set by regulations, so we are working within, you know, a proper legal sort of framework. In terms of the other aspects of the business and sort of on the homelessness side. Clearly, the council, alongside a number of other local authorities, a significant number of other local authorities, not just in London, have found themselves in a very difficult position financially. So, with growing numbers of people finding themselves in this sort of position, but in order to, you know, address that, it's been very difficult with accommodation coming off the market. So, landlords deciding they no longer wish to, you know, either have their property or allow it to be used, you know, for those purposes, many have sold up. So, supply has disappeared almost. And therefore, the normal sort of supply and demand economic supply, so price goes up. And again, the council, alongside many others, has found itself looking for alternatives. Some of those alternatives have included things like hotel accommodation. But hotel accommodation attracts a significant premium. So, costs have risen disproportionately, you know, in that particular area and of course are quite variable, you know, as supply and demand ebbs and flows. Then, you know, the price is quite dynamic. By undertaking the measures that the council has done by acquiring units, it's managed to lock in what that cost is. So, it's not exposed to those fluctuations. And it's also, by doing so, able to sort of guarantee and secure the quality of the accommodation that is available. Councillor Bemi, did you have another question? Yes, not necessarily a question. It's more like a comment and also going totally with what Damon has said. I'm actually, my full-time job is in homelessness. And I totally, totally understand the pressures that local authorities, almost all, I cannot think of any local authority at the moment that is not struggling with the weight of the cost of temporary accommodation. One of the things I must say that I found quite creative with our council here is the fact that we're thinking ahead. Unlike most other local authorities, there's still a very heavy reliance on commercial hotels, obviously from what you said, very rightly so. A lot of private sector landlords are withdrawing their properties. And it's not going to help matters because we know that with our new government in place now, there's the no-fault eviction where most landlords are selling their properties very quickly and they're getting out. One of the things I've always advocated for is the need for us to be creative. If we're spending up to 19 million a year, why are we not acquiring properties to buy and use that? Instead of paying hotels, we use those properties as temporary accommodation. So it's a good thing and I'm really happy that we're thinking ahead. Unlike most local authorities, they're still extremely dependent on commercial hotels. It's a good move. I think we should encourage, we should support. It's about acquisition. Let's acquire. Thank you. I'm sure we'd all endorse that. But yeah, at some point it would be useful to see some of the investment cases and the figures behind this, but not for this evening. If there are no further points on the Treasury Management and Capital Outturn, are members happy to note that report with no comments to full council other than to welcome it? Thank you. Well, I think that concludes this evening's meeting. So could I thank everyone for attending and your patience and have an enjoyable summer.