Transcript

Welcome to this important meeting of the Royal Bar of Greenwich's Audit and Risk Management Panel. Please be advised that this meeting will be recorded and posted on the Council's YouTube channel. Can all those speaking ensure you switch on your microphone before addressing the meeting and remember to switch it off when you've finished speaking? So, first item I have is apologies for absence. And we have apologies for Councillor Sullivan, who's at the Local Planning Committee this evening. Urgent business, there's no... Sorry, Councillor Williams. Just an apology from myself, Chair. I'm down to speak on two items at the said Area Planning Committee as well, so I will be leaving at one point of the meeting and then hopefully rejoining you once those items are done. Thank you. Thank you very much, Councillor Williams, noted. I've received no urgent business. Declarations of interest. Does any member have any personal or financial interest to declare on any items on the agenda? No? I see none. Minutes. Are members happy to agree the minutes of the last meeting, which have been circulated? Agreed. Thank you. Thank you. Then we move on to the substantive items, then. The first one is the statement of accounts. No, we did consider the draft statement of accounts, I think, at our last meeting, and this is the final statement of accounts. Do you, before we move on to the external auditor, Damien, do you want to say anything on the statement of accounts? I'll keep it brief, and as you say, obviously, there's been consideration before. Obviously, the draft accounts themselves were provided to four business hours on the 12th of July of last year, and the panel considered those draft accounts. It's meeting on the 22nd of July. They've also been considered by cabinet. The draft pension fund accounts have also been through the pension fund investment administration panel last year as well. There was also the public inspection of those accounts, which is as required by regulations, which took place between the 15th of July and 23rd of August. So, what we have in front of us tonight is, obviously, after the work that's been undertaken by our new external auditors for VisMassas, and that report on, you know, that work will be sort of outlined momentarily. Just my personal reflections before handing over is, I mean, you know, this is year one of a new relationship. My personal reflections is that it has been constructive, cooperative in nature, and it's worthwhile remembering that councils up and down the country are facing some extremely challenging sort of conditions at the moment. I'm very pleased to say that upon successful issuing of the opinion for the accounts, which will take place later this week, that Greenwich will be in the fortunate minority of those councils that will have met the government's deadline. There will be those reaching into the hundreds, potentially, who may not. So, I'm very grateful to the work that has been undertaken, certainly by the staff within the finance team, others around the council as well, and my thanks also to the audit team as well. But I'll pass on to Suresh and the team who are behind me. I'll pass on to Suresh Patel, our external auditor from Fulvus Massars, and Tom Greensill, and maybe you'll introduce your other colleague as well. And if you could also just clarify when we will get the final audit report, as there are still some, particularly on value for money, still seem to be some areas outstanding. Thank you, Chair. Thank you, Chair. Good evening, everybody. Tom and I are joined by our colleague, Lydia, who's done a substantial part of the audit. She was interested to see what happens at the panel, so where she's coming along to observe. Let me start, I suppose, by giving you the headlines, and then Tom will take you through a bit of detail. As the director of finance has said, we are proposing an unqualified opinion on the council's accounts, an unqualified opinion on the pension fund accounts. Anecdotally, across London, there'll be more councils receiving what are called disclaimed audit opinions in order to meet this 28th of February date that the government has put in place in terms of publishing accounts. So you will be, as Damon nicely put, in the fortunate minority of having a clean audit opinion. And we do thank the finance team for their help and assistance in what, you know, what is a challenge in first year engagements. Every first year engagements always has challenges. I think it's fair to say we originally planned to complete the audit of the council by January. We did that for the pension fund, and we reported to the pensions committee in early February, and you've got the report there. And that essentially is now complete and ready for sign off. I think it's fair to say the council has been frustratingly taking longer for all concerned to get the last probably 10% over the line. That's probably a combination of us being a bit stretched elsewhere in terms of other audits that we're trying to get done by the end of February. I think that's a fair thing for me to say to you, and I'm happy to say that. I think also obviously trying to finish off an audit when finance staff are doing budgeting and preparing information for, obviously, council, which is really important tomorrow. Again, never an ideal time to do an audit. But as Damon said, the cooperation has been good from both sides. It's been a good constructive relationship. We will sit down when the dust has settled and have a little bit of a lessons learnt. I think from both sides there's things that we can do differently, be clearer on expectations to ensure that next year the process is far quicker, particularly the last, as I say, so our whole 80-20 rule, that last 20% are getting the audit over the line. In terms of the value for money work, since we issued this report, we have now completed that work and we will be issuing our final report at the same time as we issued the audit report. Essentially, what you've got in the report today around value for money, those two areas around financial sustainability and the fire safety matters that were previously reported by your predecessor auditors, we will be taking the view that they will continue to be matters that we need to report under our value for money responsibilities. The only other thing I would say is that it might look like there's a lot more issues and misstatements that we're reporting this year, which partly is because of, again, a year one audit. So I suspect we've probably turned over a few stones that maybe hadn't been turned over for the last few years. That happens naturally with an audit team that's been doing the audit for a number of years. We have a slightly different approach. Whilst we follow the same standards, auditing standards, inevitably there are differences in our approach. So, again, we're probably asking questions that maybe either haven't been asked before or maybe haven't been asked recently. We don't think it's evidence of any systematic weaknesses in the Council's financial reporting arrangements. Like I say, it's more the fact that we are auditing to a level of granularity, particularly on property, plant and equipment, which I'm sure you'll be familiar with in past auditor's reports. But essentially, if we had concerns over the actual adequacy of your financial reporting, we would include it in our report as a matter that you as a committee need to be aware of. But as I say, we're not in that position. So overall, despite the lateness of where we want to be, it's a positive report from us. There's things that we can build on for next year, but we are in a relatively good place. I'll let Tom just take you through some of the key details. I think it's important for you as a committee to be aware of. Thanks, Suresh. I'll take the report as read and I'll focus on a few of the matters that we need to look at. So if we turn first to page seven of the appendix, this is the status of the audit. Since writing the report, we've made some very good progress. So the evaluation of property, plant and equipment testing is completed. So we tested a sample of 83 assets. In addition to the six errors that we noted on the general fund, we've also noted another four in that sample. So that brings the total overstatement to 6.63 million in the additional errors found, in addition to the understatement of the 429K noted in the report. The HRA non-dwellings testing tested 18 sample items. There were no further errors noted in that sample. So that is the three errors identified in this report. Bringing the total known and projected misstatement to an understatement of 2.1 million. And the HRA dwellings testing is also completed. And there were errors on four items. The net impacts of the total known and projected misstatement there was an understatement of 3.4 million. Excuse me. The journal entries testing has been completed and there are no matters arising, which we need to bring to your attention. In the payroll testing, there were no adjustments to report to the committee, but we are raising a control recommendation, which we'll come on to. The other income and expenditure testing is completed. In the income testing, we found a 13.6 million classification adjustment, which has been made moving incorrectly classified fees charges and other service income to grants and contributions. And that relates to the better care fund income. And it doesn't have any impact on the surplus or deficit on provision of services. In the expenditure testing, we noted a 3.96 million overstatement of expenditure and creditors. These items are in the report later on as we found them since. And that relates to the proposal of a direct award, which had not yet met the criteria for expenditure recognition. And so we will note those in the ACR follow-up letter. The IT general controls testing has now been closed down as well. On the next page of the report, so that's page eight. We are still wrapping up the final technical review procedures in discussion with the council. And we expect to have that submitted and cleared by tomorrow. The events after the reporting period will be wrapped up and confirmed when we sign the audit report. So we get confirmation that nothing has changed which shouldn't be included in the financial statements. The whole of government accounts work, we haven't received instruction from the NAO as to which components will be sampled. And so we can't complete this work yet, but that won't stop the audit opinion. As Suresh says, the value for money work is completed and we're planning to issue our commentary at the same time as the signed audit opinion. Moving on then to page 12, which is the significant findings. The first of which is management override of controls. So as reported in our audit strategy memorandum, in all entities this is presumed risk. Because management at various levels within the organisation are in the unique position to perpetrate fraud. And that's because they have the ability to manipulate accounting records and prepare fraudulent financial statements by overriding controls. Which otherwise appear to be operating effectively. So we address this risk by performing audit work over the accounting estimates impacting amounts in the financial statements. We've considered consideration of identified significant transactions outside of the usual course of business. And then we've performed risk analysis over journal entries in the general ledger. We've given an analysis of the work performed below, which we can't go into too much detail because we're not allowed to disclose the criteria that we use. But you may be interested in looking into that information. As mentioned before, there were no items to bring to your attention. So there was no indication of fraud or management override of controls. In terms of the, on the next page, page 13, the valuation of property, plant and equipment. The council owns over £3 billion of property, plant and equipment. And the code requires that the carrying value should reflect the appropriate fair value at year end. Because of the high value of the balance and also the inherent subjectivity. And number of different inputs and assumptions into making valuation estimates. We consider this to be a high, a significant risk. And we address that by reviewing the approach the council takes to establish what those estimates are. We have used our own internal valuations expert to look at the approach taken by the council's valuers. We've assessed the valuers qualifications, objectivity and independence. And we've reviewed the methodology used as well as the underlying data and assumptions. So I will come onto the errors later and I've given you a summary already. So if we move forward a page, that gives you the breakdown of the number of assets tested. So we tested 132 assets across the different categories of the council's assets. If you turn over to page 15, we come onto the net defined benefit valuation, which is the pensions estimate. So again, this is a very significant estimate in the council's financial statements. There is an inherent amount of complexity in those calculations because it includes discount rates, inflation rates, mortality rates. And there's a lot of scope for error and it's also quite a subjective estimation. So we address the risk by reviewing the controls the council has in place over the information. The council sends to the scheme actuary and the fund administrators. We also assess the skill, competence and experience of each fund's actuary. We challenge the reasonableness of the assumptions, including the CPI, the discount rate and other assumptions used there. And then we carry out a range of substantive procedures on the relevant information. We have also documented our consideration of the asset ceiling, which was applied to the pension asset and resulted in the net liability. And have assessed the AFRIC 14 issue and documented our considerations. That's quite technical as a point, but there were nothing that we need to bring to your attention here. There was one issue which came up and that was on the review of the breakdown of the employer contributions per the IS-19 report by scheme participants to the source payroll data. And we noted a discrepancy of 1.5 million, which was caused by a formula error on the underlying spreadsheet workings. On review, the actuaries confirmed that that was an error and in response, a subsequent IS-19 and actuarial report was provided to the council. And that has resulted in a cumulative understatement of 4.1 million pounds to the net defined liability, which was disclosed on the balance sheet. And we've included further details in our section on errors. There were no other significant findings to bring to your attention in that section. If we move now to page 18, sorry page 19, we've raised some internal control recommendations. So, all of these control recommendations were around where we think there's a need to address the deficiencies in the internal control. There were no significant deficiencies, but this does mean that these need to be addressed in order to strengthen the internal control and enhance business efficiency. Okay, I will skip over some of these and move to the summary of misstatements. So, the first misstatement is the pension fund liability misstatement, which was previously mentioned. I won't go into further detail as I've already elaborated on that one. The second was the, where we were doing creditors testing. We identified a sample item of 228K, where there was only the delegated authority to spend monies for the rent of the residential home, rather than the contractual obligation. And so, therefore, that shouldn't have been recognized as a creditor. I should explain here that in these unadjusted misstatements, they include projected misstatements, which is where we take the percentage error in the population which we have tested, and we apply that against the larger population to give an estimation of what we think the error would be as a whole. And in this case, it's 3.963 million. The next, we've got a range of land and buildings valuations errors, which we've grouped into sections based on the asset category. Most of these was because of the inputs. There were some errors in the inputs which had been used. So, the first one, there was an understatement, because the total land area of a site had been used instead of the gross internal area. The second one had identified an overstatement of 139K, because a car park land had been identified as a building rather than land, resulting in the asset being overvalued as construction costs were included. The third one was an understatement of 254K, where the valuer had based the value on five flats rather than six, which would have been appropriate. And then we found the projected area, which is this segment of the error, the actual factual errors here have been adjusted for, was 1.282. I won't repeat that error in the adjustments, as it's the same for these. The next error is on the general funds valuation testing. Again, some of these are because of the inputs, and some are because of some of the data that had been used in the calculation. So, in the first instance, the valuer had missed out obsolescence data in their calculation on the spreadsheet, which is similar to depreciation, but with a few different twists. And it means how quickly a building is becoming obsolete, and that reduces the value of a building. So, in here, they'd missed that off completely, and that caused an overstatement of the asset. The second one was overstated by 1.04 million. We challenged the measurement of the floor plan and the obsolescence factor on this one, and again, we found variances. On the next one, there was an understatement, again, because of missed floor areas and land areas. I won't go through all of them, but I will let you read those in your own time. Moving on to the adjusted misstatements. The first two items are because of where we were agreeing the trial balance through to the statement of accounts. We noticed that there was a discrepancy in the trial balance in the accounts. There was a double accounting of interest income, and so those needed to be reversed out. The impact on the CIS of both of these is nil, and it's just moving these items between lines. So, that won't have an impact on the surplus or deficit. Again, we've got the other side of the land and buildings transactions, which is errors three, four, and five. These are the factual errors rather than the projected misstatements. So, these have been corrected in the financial statements. And finally, in assets held for sale testing, we identified a sample item didn't meet the classification requirements to be held as an asset held for sale, and we consider that it should have been held as a surplus asset. The value of that was 24.8 million, and that has been adjusted for in the financial statements. I will pause there after probably droning on a bit too long for any questions. Thank you, Chair. Thank you very much for that very detailed and quite granular report, which I had read. So, just before I open it up, I wasn't absolutely clear. Obviously, we've got full Council tomorrow evening. Your report is on the agenda there. But when will we have the final audit report, including the value for money element? So, I think we're just working with the Council to finalise some final bits in the actual final accounts. Once we get that, we will issue a final audit report with the value for money commentary. So, two weeks, three weeks? No, no, it has to be done by Friday. The plan is to get it done tomorrow. So, we might have a slightly different report tomorrow at full Council or an addendum? I don't know if, Damien, you want to come in? But we weren't proposing to reissue a report, Chair. We'll issue what's called a follow-up letter, which essentially says the things that we said were outstanding today have now been completed, and there's the final kind of changes that we've audited. Damon, did you have any comments at all on the auditor's report and the timing issue? No, not particularly. I mean, it's obviously a fair reflection. And as was mentioned, obviously, the deadline effective brick wall is this, you know, end of this week. So, it will need to be sort of signed off and we're now in a sort of position where, you know, having sort of overrun, it does become quite difficult on both sides where sort of Council resources are looking at budgets, as was mentioned earlier, and audit resources are looking at other audit jobs as well. But, I mean, all sides are committed to ensuring that this gets over the line safely. Right, can I open it to members then, if you take Councillor Williams first and then Councillor Hartley. Thank you, Chair, and thank you for the very detailed report, as the Chair mentioned. It was a broad question, really, more for my curiosity. But how did you find, in terms of the asset valuation error rate, does that compare, in your experience, to other Councils? Granted, other Councils are very different, but did it feel quite a large error rate or pretty standard across the board? Thanks. I think, compared to some of the other Councils, it was a bit higher than we're used to seeing. Often, we do have valuation errors, I think, because of the size of the portfolios which are being revalued and the complexity of the valuations. It is something that we are used to seeing and we do frequently report on them. Often, there will be two or three. I think there was a larger number, but, again, that might be because of the way we stratified our sample on this audit. And we changed our approach slightly to look at more unusual movements to bring about riskier valuations. So, that might be reflected in those results. Councillor Hartley. Thank you, Chair, and thank you again for the summary of the report. I had a couple of questions about the significant weakness in arrangements around financial sustainability. So, as you referred to earlier, Suresh, this is obviously, in some ways, a repeat of your predecessors' finding of this area of significant weakness. And you've noted, in particular, the use of 14.6 million of general fund reserves in 2023-2024 as clearly not sustainable. You said that, you've kind of noted that the Council's budget for the following two years includes, you know, it doesn't include a significant use of reserves. And I was just reflecting that as a committee, you know, going into 2023-2024, that was also the case then. And that the pressures then materialised and general fund reserves were used. So, my question is, you know, how concerned would you be if the Council finds itself in that position again of having to use general fund reserves? And what, could you give us some sense of your level of concern if that were to happen in 2024-2025? Thank you, and thanks for the question. You're not alone in having this kind of audit reporting in respect to financial sustainability. I suspect the majority of Councils, particularly in London, have got similar reporting. I think we start getting concerned when it becomes an issue that doesn't get resolved. So, as you rightly said, 2023-2024, you weren't meant to draw down reserves, but you clearly had to. 2025-2026, you're planning not to again. If you do start doing that as part of your in-year reporting, then we would seek to kind of understand why and what the impact is having on your overall general, your unallocated general fund balance. That's probably the key one. Whilst it's unsustainable to keep drawing down general reserves, at least you've got some. Some authorities have now depleted those, you know, those other reserves. So, you're not on that scale, but clearly I think another year or two of a similar kind of activity then we would then seek to probably escalate our reporting. Okay, thank you. That's helpful. And then my second question is around the additional work that you are doing at PACE on value for money. You've said in the report in front of us that one of the things you're reviewing in particular is the process of setting and monitoring savings as well as evidence of implementation. I suppose my question is, could you give us a sense? I appreciate you're not able to understandably give it in writing because the work is ongoing, but could you give us a sense of what recommendation you're likely to make? Is it going to be a significant departure from what we would expect from last year's audit, for example? So, we have finished that work. I haven't got the word in front of me actually, but it's a slightly different tweak, but it's pretty much a similar type of focus in terms of recommendation. We will provide you detail of what we actually did to support that recommendation in the commentary that we provide. I don't know if you remember that from last year, but you get a commentary. And that is essentially us looking at the relevant internal meetings that were had to both set and then monitor the delivery of those savings, the granularity of those processes. Because we're looking at the arrangements that you have to do that rather than have you delivered per se. So, it's the arrangements that we look at and we articulate that in the commentary. Thank you. So, that's helpful. So, my comment chair would be, you know, there's a lot of work that the council has put in to improve those arrangements. But it sounds like we're getting a broadly similar recommendation to the previous audit. So, that seems to me to be very material for us as a panel and material for full council tomorrow. And I just wonder whether there is any opportunity for us to have something in writing at full council so that all members can take a view on that. Because given the financial pressures we're under, the efficacy of those arrangements is absolutely crucial. And I think if the recommendation is broadly the same as last year, I think members of full council ought to be aware of that because that may prompt questions to Cabinet about those arrangements. I don't know if you have a view, chair, about how we might do that in the short timescale available or whether Damon's got a view. Okay. I know that Damon did want to come in. But I just wanted, I did have a question also on the issue of the draft EFM recommendation on sustainability. I mean, in 2023, 2024, our reserves were down, I think, roughly 14 million, weren't they? We went into reserves. But we still have, I think, 19 million, which is uncommitted. Obviously, there's over 200 million altogether, but the rest are earmarked. And I just wondered, you know, obviously, you don't want to carry too many reserves. And it could be prudent. And we have asked this question. I mean, there is a question for you here, really, in terms of how that compares, because we are obviously very, I was reading today the government guidance and the SIPFA guidance on reserves. And we seem to be, you know, broadly within that. I don't think we're an outlier. And I think we are very conscious of the need to maintain reasonable reserves. But it's useful to get your comment on that, because I'm not sure that we are alive to that issue. But I'm not sure that the situation is that different from last year. So I might like to comment on that. And also on Councillor Hartley's point about whether it's possible to have something more tomorrow. Okay, so I think there's a few points here. I think the first thing is to look back at 23-24 and understand that there is actually a difference between 23-24 and what's happening in 24-5-5-6, and so on. In 23-24, there was a planned use of reserves in setting the budget. And then, you know, on top of that, then some further use of reserves on top of that. Whereas if we look at 24-25, the planned use of reserves was significantly lower. We look at 25-26, which we're in the process of setting tomorrow night. The use of planned reserves is next to nil. It's so small, it's unmeasurable. So there is a very marked difference in the approach in terms of setting the budget between a planned use of, you know, a large sum of reserves and not. Now, at the end of the day, if something happens during the year and we have to deploy risk reserves, then that's, you know, then so be it. Subject to taking all other actions that are possible. So I think we are in a slightly different environment. And, you know, having heard the messages before and, you know, we've adapted our approach. And I think if members were to look at other councils setting their budgets for 25-26, there are some quite interesting reliances on reserves in setting their 25-26 budgets. As I say, our one for next year, it's pretty small. It's nearly, nearly zero. In terms of the other points, there's reference made to the 19 million. That's the general reserve that is untouched. That remains, in our view, an appropriate sum to be held given all of the risks. In terms of the overall value of our earmarks reserves, is it too high, too low? So, again, it has to be measured against, well, what are you holding those reserves for? Some of it will be about risk and some of it will also be about planned sort of events. Now, risk as we know, you know, if we think about sort of funding over the last sort of couple of years, we've really only been sort of receiving sort of single-year settlements. That gives a higher degree of uncertainty in terms of the council's sort of financial position. So, that actually, you know, sort of leads you to sort of, you know, making sure that you're accounting for that by holding sort of appropriate reserves. Now, obviously, we'll see what happens as we move forward with the potentially multi-year settlements and whether that can sort of help going forward. But I think the final point, I'm sorry, and in terms of sort of benchmarking as well, when we look across London, and again, as I say, you have to remember not every council is exactly the same. The risk profiles and, you know, service delivery, et cetera, et cetera, will be different from council to council. But when you actually look at that list across London, if you look at that on a sort of proportionate basis of, you know, reserves against, you know, sort of revenues, we're in the herd. We're not at the top, we're not at the bottom. So, it doesn't feel that we're an outlier there. I think the very final point was going back to the issue about is there a note potentially for council tomorrow night? I mean, certainly by all means, I'll defer to colleagues behind me if appropriate. But the note that's in the report, bearing in mind this is the report that accompanies the statement of accounts, provides an early indication of what might appear in the annual audit letter, which is due to come next month. That is still work in progress, it is draft, and I don't know, my personal opinion would be, well, it's not the final product. It is a paragraph out of what will be, you know, a fairly substantial report. Do you want to go ahead at this point and, you know, make a point on something that is draft and not substantive, would be my point. But by all means, please, please defer to audit colleagues. Thank you very much, Damon. I mean, I think the way I'm minded on this is that we, as a panel, we note the statement of accounts and the audit report in terms of value for money and the sustainability in terms of the financial sustainability and reinforce our view that the 19 million is broadly appropriate for our financial needs and that shouldn't be further eroded. And we look forward to the final DFM report. Is that the members happy with that? Good. So, are there any other questions that members have on the external auditors report? No, I had one in terms of the missing zero on page 32, which you didn't mention. Just to show I read the report and just wondered how that happened, which is, I suppose, more a question for Hitesh or Damon, really. But congratulate you, obviously, on finding that. But a million pounds is quite a difference, isn't it? It's, I mean, at the end of the day, it's a disclosure. So, it doesn't, it's not part of the tabulation of adding up the incoming expenditure or the balance sheet, any of the primary sort of statements. It is a note to those accounts, which can, from time to time, have typographical and other errors. So, if there are no other comments from Audit Committee members, are we happy to, oh, sorry, Councillor Harding. I'm so sorry, Chair, I missed my opportunity. Thank you. I just had a question about the 24.8 million pound asset that was at some, there's a kind of different perspective on whether it was held for sale or not. And I just wondered if we could ask what that asset, what feels like a reasonable question, is what that asset was and why that difference of perspective arose between the council and the auditors. So, if I'm right, this is a parcel of land which was being, going to be developed. And so, there was a set of phases that were part of that project. And at certain phases, then things would be sold off. However, that phase completion step was over 12 months from the date of the balance sheet. And there were a few other factors within the relevant financial standard, IFRS 5, which we considered. And it didn't meet those criteria either, where it could still be held as an asset held for sale, even if sales not likely within, sorry, my voice is going, within 12 months. And hopefully that answers up. I can give more detail in written response if wanted. That's fine. I think you've satisfied that it's a timing issue from the sounds of it to meet that technical criteria. Okay. Thank you, Chair. More of a technical issue, really. And I know from other bodies that the issue with valuation of assets is something which often is challenged and is highly new. I think there are some assets which are very difficult to value. You know, what value would child house have, for example? You know, what other potential uses has it got and so forth? And there clearly is, or parks or highways and so forth, very, very difficult to value. And obviously there is significant changes in some sectors in terms of valuation as well. So thank you. Could I thank you if there are no further comments from members. It's a shame we don't have the final report this evening, but we are where we are. So thank you for all the work that you've all done on this and look forward to seeing you tomorrow night for Council. And with that one comment we made and then hopefully again in future at the Audit and Risk Management Panel. Thank you very much. Oh, Councillor Babatola, did you have anything you wanted to say? Sorry, Councillor Babatola, because he is the Chair of the Pensions Investment and Fund Committee and Administration Committee. And obviously there were some comments in relation to that audit as well. Yeah, I just want to say we've seen this report ourselves and my panel, which the Chair is a member, are scrutinised as far as we can do. I just want to use this opportunity to thank you and the officers that, you know, you are able to provide this report. And I believe we'll have a clean health bill for that. So thank you very much. Thank you, Chair. Right. So members, happy to note that report then and thank you very much. And we can move on to, you're free to leave, but you're also free to stay if you wish. We move on then to the next item on the agenda. Again, very substantial, Treasury Management and Capital Strategy. And this is to consider the Treasury Management and Capital Strategy for the coming financial year. And refer any comments that we have to full council. I think, Hitesh, you're going to lead on this. Or Damon. Oh, which one? I'm happy to say a few words about way of introduction. So I'm very aware that all the committee have seen the sort of media update as well. So all the committee members are pretty familiar with this. But just a quick headlines. This is just setting out the 25-26 MTA, sorry, Treasury Management Strategy. And also, it's also setting out the sort of statutory requirements around prudential indicators, MRP, and the series of appendices attached as well, where you've got the whole capital strategy documents. You've got Treasury Management Strategy and prudential indicators, etc. So I'm not going to say more than that, but because you've seen this before, there's a lot of detail in here. No doubt you will have questions for us to answer as well. Indeed. Did you want to add anything, Damon? Probably a couple of points. I mean, the capital program sort of sums up to about $362 million. There's a relatively modest sum of capital bids of sort of $2.4 million. Those capital bids are in there in support of the Council's medium-term financial strategy in terms of delivering aspects within that strategy, especially around sort of delivering ongoing savings into the future. Borrowing, which is obviously the financing of last resort, remains affordable and enables the Council to deliver on its corporate missions. But there's no sort of change in our risk profile or appetite from any of the reports, which members have seen in the past and obviously this report is in the usual format. Thank you very much. Before moving to my questions, any questions from members on this report? Councillor Hartley. Thank you, Chair. Just one question about the figure that kind of leaps out the report of 5.4, this resource deficit of £30.3 million over the 10-year period. That in the absence of alternative funding will give rise to increase in underlying borrowing need or CFR. Could you just help us understand that figure a bit more? And also what the alternative funding sort of refers to? And whether £30 million, is that a material change from previous years? Or is this largely what we were expecting? So, in actual fact, the first answer is yes, it is actually less than what we've actually had in the past. So, the deficit is slightly lower. And basically, with any sort of capital programme, there are peaks, there are troughs, slippage, you know, all sorts of things can happen with that. And basically, we will sort of manage, you know, as best as we can over the period. Now, ultimately, we will make the most efficient use of our resources that we possibly can. So, where we have capital grants, et cetera, and we will apply those in the first instance, et cetera. And we continue to manage the programme on an ongoing basis. So, you know, I think we first set out almost like the 10-year horizon. I think the first one was in about 2019. So, members will be familiar with the sort of format that sits within this report. And as I said, that number has actually sort of come down compared to what we reported in previous years. So, we will continue, you know, to keep the capital programme under review. The requirements that are needed for next year are built into the budget. They're built into the MTFS over the next sort of four years. But in particular, they are built into the revenue budget for next year. Thank you. Just looking around. I had a few questions. So, on the Treasury management, I was just slightly concerned about the use of LOBO, lender option, borrowing option. And the commentary on this from the DLGLC select committee a few years back about how they have teaser rates and how many councils have had their fingers burnt on LOBO loans. And particularly those that have gone for what's called inverse floaters. And I just wondered whether we were alive to some of the risks involved in significant exposure to LOBO loans, as opposed to the more traditional inter-council PWLB and internal borrowing. No inverse floaters, no snowballs either. And none of the very low starter rates, none of those were engaged by this council. Very much alive to the risks. Basically, the borrowing that was undertaken, we take a sort of diverse approach to this. So, there are a number of sort of more vanilla transactions, which will be straight borrowing from the PWB, which is on the day that you make contact is, you know, that's the rate you've got. And some of those were a proportion of borrowing and a manageable proportion was some of those sort of LOBOs. But as I say, none of the what are termed exotic variety. So, for example, the ones that the council would have undertaken would have potentially had maybe a three to four year fixed period to start with, an option to sort of refix at that point. If the lender pushes the rate up, council can just repay. Or if not, it rolls over for another three to four years. All of this was plotted out to ensure that there was a good distribution over the years, not too much that was exposed for a refinancing risk with any one particular year. It's also worth noting that over time, some of the organisations, some of the banks that were lending that have actually sort of exited the market and effectively they're actually converted now to fixed loans. So, hopefully that helps allay some of the concerns. So, just a couple of other questions from me. I see nobody else at this stage. I'm just looking at the Annex 4 on the flexible use of capital receipts on the capital strategy. And we've questioned in the past on the delivery of, obviously, it's invest to save effectively, where we're using capital to modernise or improve the efficiency of different services. And we, in the end, realise a significant saving by that efficiency, which is outlined there for March 2013. And I just wondered, it would just be helpful if there's more granularity on what has been achieved so far and what is projected to be achieved by year by year. Well, there have been questions in the past about how effective these are and how well they actually delivered the projected savings. This is page 109 of the overall papers, page 46 of this report, Annex 4. Essentially, we can see some of the answers to that within the Annex itself in terms of what the initial sort of projection, you know, for those sort of savings were and what those revised figures are in the final column. So, obviously things start off as an estimate before sort of engaging in the process. The reality will quite often be something different. But I think what we're demonstrating there is that we've got potential to sort of over, as a whole, over-deliver on what some of those initial expectations were. Some of those will be unders, some will be over, but net, we're talking about potential over-delivery. So, there was one other thing I was going to raise, if I might. Yeah. Page seven of the capital strategy report on objectives. I thought it's slightly amiss that we didn't mention – it references other council strategies, and we don't reference the – yeah, we don't reference our carbon neutral plan at that point. It is referenced down in the weeds, but it's not referenced in terms of overall – our overall asset planning is underpinned by a range of strategies, surely carbon neutral target must be critical to that. And indeed forms, you know, obviously informs a transport strategy as well as other strategies. Yeah. Can I have to have a flip through? I thought there was reference in it. I appreciate we might be moving on to another item, but I'll have a look in the background. Thank you. Paul? Councillor Williams. If you could – and I'm unclear if this is something that we could actually recommend, that there needs to be a higher, a greater reference to the carbon neutral plan, or whether this is just a report of what the current position is. But I certainly feel that needs to be given higher status within our capital strategy. Okay. Page eight. Yeah. Page eight. Property asset strategy. The last item there talks about assessing against the council's carbon neutral agenda. Yeah. But within property asset. Yeah. Yeah. Obviously it affects vehicles, it affects transport strategy, all sorts of things. Yeah. The document itself, if you sort of move to sort of page 13, within the – sorry, page 12 of the 47, quite clearly sets out, you know, in terms of other council policies, you know, that this – the carbon neutral plan is going to have a significant impact, you know, on the capital strategies and plans of the council. Okay. Okay. Are there any other comments from members on the treasury management plan and capital strategy? No? Well, in that case, we'll make no comments on that and note the report. And thank you very much. So, if we could move into our final item, which is strategic risk register. And I think this is you, Brendan, and Vivian. Thank you, Chair. I'll just try and do a brief introduction. This report presents the strategic risk register and a progress update on the work undertaken to further embed risk management across the council. At the September meeting of the panel, the risk register was an item. It was last reported then. The panel asked for consideration to be given to having a full matrix for each risk. And so, we reached out and worked with the software providers on that and hope the current format addresses members' questions and other members' comments. In terms of the register itself and the contents, there's no new reported risks in this cycle. The trends are pretty much unchanged apart from one, I'm not sure which number that is. It'll be risk number 11, corporate management 07, cyber security and data breaches. That's a downward trend. The net score has been revised from 15 down to 9 due to the completion of the mitigation actions. And there's two appendixes I'd like to draw your attention to. Appendix D presents a report following external desktop review of the strategic risk register and the toolkit, both of which were presented to the panel in November 23. And the review focused on advancing the council risk management effectiveness and maturity. And on the piece of work around embedding risk management, this report also presents an update of the key actions undertaken in the year, including those from the external review. And that's Appendix E. Thank you very much Brendan. Any questions to Brendan or Vivian? Councillor Hartley. Thank you and thank you for the report. I just wanted to follow up on an issue I raised previously around the external review conducted by GOAT risk solutions and we had a conversation about how the conflict of interest there would be managed because we're effectively, the council had commissioned a review from a supplier. Could you just clarify how we managed that conflict of interest? So for example, just to bring that to life. Some of the recommendations in that desktop review talked about increasing the number of users on the system. Clearly that's in GOAT's interest as the supplier of that system to the council. So you took it away previously and said that some thought would be given to how the council would manage that conflict or perceived conflict. So just an update on that would be helpful to satisfy the panel. Thank you. Yeah, thank you for that question. So yes, like I said last time that we would look at the conflict. So the recommendations, specifically the one you've mentioned around increasing the number of users. We've got capacity to increase the number of users for the council's purposes. So we've got risk champions across the council and one of the recommendations also from that was to get the risk champions departments to take responsibility. So at the moment we already have capacity for that because that's how we've kind of built the structure of the system. I hope that answers the question. Yes, thank you. I mean I'm all for squeezing value from suppliers and it seems like we've probably done that in getting their expertise. I just thought it was important that we document that risk, that conflict was identified and managed. And so I just wanted to give you an opportunity to do that. Thank you for explaining. Thank you. So obviously it's very welcome news about the reduction in the assessment in terms of the risk from cyber security. What's your sense of the overall, I mean where in other bodies I'm on the audit committee of that there's an overall risk score so you can sort of track it from time to time. And I just want to know what your overall sense is of the, you know, taking a longitudinal view of the current risk level over the council. That's really a question that I think is for GMT to answer. I think it would be though they owned the strategic risk register rather than myself and Vivian as officers. I think if I'm true to say, I think we've been focused more in the last years we were criticised and this panel criticised us for the nature of the risk register and how it was structured and how it's format and its content. So we've really been largely trying to embed risk management across the organisation and to try and modernise the approach and how that risk register can be seen and demonstrated to members, including members of the panel really. So I think most local authorities will be facing the same risks. I think that's fair to say. I think even this evening we've touched upon other areas. I know we like to benchmark but most local authorities will be facing the same type of risks and I wouldn't imagine the scores would differ greatly between local authorities in most of those key areas. If I just add to what Brendan has said, it's every local authority I guess at the moment is kind of at the same place. So when you think about risks around finances, every local authority in the country will be looking at that as a red risk because that is the current situation we have. Overall also risk is around the future events that could happen and when we look at the landscape, I mean it is pretty much what it has been for some time and I think it will continue to be that way in terms of finances, in terms of demand, in terms of supply and the ability of councils to continue to provide services. So I think that kind of explains why it's pretty much at the same level and looking at other councils which we've done as well, they're kind of pretty much at the same level. So there might be little differences but the high risks are the high risks and they are consistent across the board. Thank you very much. Thank you very much and thank you for the work you've done in taking on board the comments we made previously. There was a matter of detail I spotted when I had the coloured version in front of me earlier today, which was around one of the actions, which was a workforce plan, which I think was a red, which presumably means there's been some delay on the workforce plan. Is that right? I don't know whether Damon or Councillor Hyland wanted to comment on what's essential in terms of our productivity and in terms of getting the best use of our limited resources and also the morale and motivation of our staff, which is important for productivity. There's been a significant delay in that, is that right? Can we just start with the reference point in the report and go from there? Is that possible? So it's in Appendix A and risk reference number 14, I believe. Okay, so within the appendix, so for those that are looking online, it's page 26 of 30 on the online version, which is Corp GMT 02 Capacity Workforce Planning. I think there was reference made to there being a red item. The red was one particular action in there, which was a review. Certainly internally within the organisation, this has moved on certainly in the last sort of month or so. So we have started to sort of have conversations certainly at sort of GMT level and certainly informally with others as well about the shape of that. And I don't recall immediately the timeline, but we are looking to bring forward the workforce strategy in the coming months. So there is no hold up. It is definitely moving. I unfortunately can't commit to a timeline because I don't actually have that detail in front of me at the moment. Well, thank you very much. It's important. It's not just about productivity, but it's also about areas within the council, particularly specialist areas such as, you know, surveyors, social workers and quite a few others where it's often very difficult to recruit because we don't pay the rates that people can get elsewhere. And therefore we have to rely, because as statutory services we have to rely on a significant number of interims or agency staff, which has been far more expensive. So the review of the workforce strategy I think was meant to address some of those issues. So it is very important in terms of our finances as well. Yeah, I mean, that's not to say there aren't other actions that are underway, which are having positive effects as well. For those fortunate enough to either attend or see the overview and scrutiny, pre-scrutiny meeting regarding the budget, will have actually seen sort of an interplay regarding agency sort of work within the council. And it was noted there that there is actually a significant reduction in sort of spend on agency workers. Certainly reviewing the last sort of quarter information, I can see that that is down compared to the same quarter a year ago. A lot of that is down to some enhanced sort of recruitment controls that we've got in place. So we now have sort of weekly meetings, you know, which is reviewing the recruitment activity across the council to ensure that we've got good oversight of what is sort of happening and ensuring that appropriate decisions are being made, the correct levers are being pulled to effect the changes that we need. So whilst the workforce strategy itself may not have come out into the open at this point, that's not to say that there aren't other pieces of work going on behind the scenes. You know, we've still got actively moving sort of apprentices through the system. We had the apprentices graduation only a couple of weeks ago, seeing a significant number of people, you know, successful in their ventures there. And, you know, a number of other sort of HR related sort of steering groups across the council, ensuring that, you know, HR related matters are sort of being assessed, looked at and dealt with. But as I say, the actual strategy itself will be forthcoming. Thank you very much. That's good to know. Are there any further points on the strategic risk register? Well, could we thank Brendan and Vivian very much for the work you've done on this in meeting the points that we made? And continuing to keep that overview. Obviously, as you say, it's a GMT ownership, but it's important that we have it captured and that we can look at it in the round as well as interrogate specific issues which are highlighted. So, thank you very much. So, thank you very much. We're happy to note that report. Note it. If there are no further items, so can I thank everyone for attending and wish everyone a safe journey home. Thank you. Thank you.