The Audit and Governance Committee of Boston Council met on Monday 27 January 2025 to review the external audit completion report, internal audit progress, risk management, and the council's treasury management and budget proposals. Key decisions included noting the external auditor's opinion of an unmodified, unqualified audit on the council's financial statements and value for money arrangements, and approving the draft treasury management strategy and annual investment strategy for 2025-26. The committee also discussed significant budget risks, including the impact of government funding changes and the unfunded burden of Internal Drainage Boards (IDBs).

External Audit Completion Report

James Boyle from KPMG presented the final external audit completion report. He confirmed that the council's financial statements and value for money arrangements would receive an unmodified, unqualified audit opinion ahead of the statutory deadline. Boyle highlighted that this was a positive outcome, particularly given the current challenges in the local government audit market. The report detailed two additional corrected audit misstatements related to the valuation of land and buildings, and the local government pension scheme liability. Two control deficiencies were also identified, but these were not considered significant, and an agreed action plan is in place with management. Questions were raised regarding additional audit fees, with Boyle explaining they were due to inefficiencies, timeline changes, and additional audit effort required for valuations and pension arrangements. The significant increase in audit fees from £42,000 in 2022-23 to £131,000 in 2023-24 was attributed to the re-tendering of the public sector auditor's appointment contract.

Internal Audit Progress Report

Matthew Waller presented the internal audit progress report, indicating that 80% of the internal audit plan had been delivered. He highlighted positive feedback from officers on all audits conducted and noted that new global internal audit standards would be implemented over the next 12 months. The report detailed findings from recent audits, including a limited assurance finding on bank reconciliations, where issues with timeliness were identified but management action has been taken to address the backlog and implement key performance indicators. An audit on insurance also resulted in limited assurance, identifying a lack of ownership and oversight, and inaccuracies in asset records. Officers confirmed that improvements have been made, including the introduction of a new IT system for asset data and the launch of an insurance portal.

Risk Report

Suzanne Rolfe presented the quarterly risk report, highlighting two new strategic risks: the local plan, due to government discussions on planning, and safeguarding, following a review of the safeguarding policy. The report indicated no critical risks, with six high risks identified, including budget, cyber and IT, environment act and waste, and capacity. The committee discussed the need for more detailed information on employee health and well-being risks and requested further clarity on how high-risk items are being managed and reduced. The impact of Local Government Reorganisation (LGR) on all risk categories was also acknowledged.

Treasury Management Policy and Strategy

Sean Howsam presented the Treasury Management Policy and draft Treasury Management Strategy Statement, Minimum Revenue Provision (MRP) Policy Statement, and Annual Investment Strategy for 2025-26. The report detailed changes to statutory guidance on minimum revenue provision, requiring councils to make MRP charges on unfinanced equity investments, including property fund investments. This will lead to an increased MRP budget pressure on the council, starting from the 2025-26 financial year. The council's borrowing need, measured by the Capital Financing Requirement (CFR), is projected to increase to just under £20 million over the next five years. The operational boundary for borrowing remains at £15 million, and the authorised limit at £18 million. The report also outlined the council's investment strategy, including limits on non-specified investments and lending to financial institutions. The committee scrutinised the report and made comments for consideration by Cabinet and Council.

Budget Overview and Risks

Christine Marshall presented an overview of the budget, focusing on key risks. Significant concerns were raised regarding future government funding, with the removal of grants like the Rural Services Delivery Grant and the introduction of recovery grants. The council has already seen a net decrease in government grant funding. The report also highlighted challenges with the collection fund, reflecting the economic health of the area, and the potential impact of business rate reductions. Other budget pressures include pay and pension costs, a forecast reduction in investment income, and the unfunded burden of Internal Drainage Boards (IDBs), which represents a significant annual pressure on the revenue account. The capital programme, largely funded by government grants, carries a risk related to contract inflation. The committee discussed the adequacy of reserves to cover these risks, particularly in light of the unfunded IDB levy. Recommendations were made to adjust the risk ratings for various budget items, with a particular focus on the IDB levy, future funding, investment income, service changes, and business rate resets.

The meeting concluded with thanks to all officers and committee members for their contributions.