The Audit and Governance Committee convened to discuss key financial and governance matters, including the Treasury Management Annual Report, the External Audit Plan, and the Annual Governance Statement. The committee approved the Internal Audit Strategy and Charter, as well as the Draft Internal Audit and Counter Fraud Plans for 2025/26. Councillor Nidhi Mehta was appointed Vice-Chairman of the committee.

Treasury Management Annual Report

The committee reviewed the Treasury Management Annual Report 2024/25, which covers the council's investment, borrowing, and capital expenditure for the past financial year. Councillor Robert Carrington, the new Cabinet Member for Finance, presented the report, highlighting a strong investment income performance of £10.5 million, which was £5.7 million over the annual target. This was attributed to capital slippage, particularly regarding sealer, higher than expected interest rates, and one-off large income receipts. No new borrowing was undertaken in 2024/25, and interest costs were lower than the target by £2.5 million.

A key point of discussion was the capital expenditure and net financing need, which showed a variance due to the requirements to bring the council's balance sheet right-of-use assets in line with IFRS 16¹. Dave Skinner, the Director of Finance, clarified that this was an accounting adjustment with no underlying impact on the financial resilience of the council. Councillor Martin Tett raised concerns about the potential increased costs of delayed capital schemes and the impact of high-needs over-expenditure on cash balances. Councillor Carrington assured the committee that these factors are considered in the capital adjustment strategy and the Medium Term Financial Plan (MTFP).

Councillor Stuart Wilson sought clarification on the operating leases adjustment under IFRS 16 and its consequences for the balance sheet and revenue projections. Dave Skinner explained that there was no real revenue benefit from it, and he offered to provide a worked illustration for the committee.

Councillor Alex Collingwood questioned the flexibility in changing the mix between banks, local authorities, money market funds, and property funds, as well as the amount held in overseas banks. Dave Skinner clarified that the council uses MUFG, formerly LINC, as an independent financial advisor to assess overseas banks and that the strategy is to maximise returns within agreed criteria.

Councillor Tett raised concerns about the Dedicated Schools Grant (DSG)² deficit and its impact on future finances, which Selena, whose last name was not provided, confirmed was on the risk register and visible to the Cabinet. Councillor Chris Chilton expressed surprise at the £30 million Lender Option Borrower Option (LOBO)³ loan still in place and questioned the stress testing and risk modelling within treasury. Dave Skinner explained that the PWLB rates are fixed, and stress testing is done on future borrowings. Councillor Chilton also questioned the benchmarking of investment performance against Sonia and other local authorities. Councillor Chris Poll questioned the prudence of reducing the PWLB and the holdings in banks. Dave Skinner explained that there is a balance between flexibility and longer-term investments, and early repayment of PWLB loans incurs a premium.

Councillor Wilson suggested revisiting the treasury management strategy, and Councillor Matthew Walsh requested a briefing on the number of people in the treasury management function and its costs, which Dave Skinner confirmed was a lean operation with one dedicated post plus parts of other people's time.

External Audit Plan

KPMG presented the Final External Audit Plan 2024/25, outlining the audit scope, materiality, and identified risks. Harry Organ from KPMG highlighted significant audit risks, including the valuation of investment properties, management override of controls, and the valuation of post-retirement benefit obligations. Philip Kent from KPMG detailed the value for money risk assessment, focusing on adult social care, home to school transport, education, children's services, and transformation projects.

Councillor Tett raised concerns about the lack of proper audits in recent years and how KPMG would address past issues. He also questioned the frequency of asset revaluation and the valuation of assets within the Ailsbury Vale Estates joint venture. KPMG assured the committee that they would follow up on internal control points raised by previous auditors and would address the valuation of joint ventures.

Councillor Collingwood sought clarification on the inclusion of SEND and DSG in the audit risks, to which KPMG clarified that these areas were being looked at from a value for money perspective, and that the statutory override in place for DSG meant it did not have a bearing on financial reporting.

Councillor Chilton questioned the materiality threshold and how small, repeated financial failings would be addressed. KPMG explained the use of performance materiality and the review of processes for tender waivers.

Councillor Collingwood sought assurance that the management override of controls risk would address the processes in place. KPMG clarified that the risk specifically related to financial reporting.

Councillor Walsh questioned the increase in audit fees, which KPMG attributed to changes in audit standards and the need for a fully resourced audit.

Annual Governance Statement

The committee discussed the Annual Governance Statement 2024/25, with Councillor Wilson questioning the practice of quoting from the council's own annual report and suggesting the inclusion of comments from outside organisations. Councillor Wilson also suggested adding proposed government legislation on planning committees and local government reform to the action plan.

Councillor Alan Sherwell raised concerns about the scrutiny of the Aylesbury special rate. Dave Skinner clarified that the rate is only applicable within Aylesbury and is transparently presented in the budget setting process.

Councillor Tett questioned the persistent red-rated internal audit items and the lack of an updated risk management strategy. Selena clarified that the risk management strategy had not been updated deliberately, but that the frameworks underneath it had been continuously reviewed and updated.

Councillor Tett also raised concerns about the impact of the government's proposed funding review and the regionalisation agenda.

Audit and Governance Committee Annual Report

The committee discussed the Audit and Governance Committee Annual Report to Council 24/25, with Councillor Collingwood noting that the report did not necessarily reflect the nuance of previous discussions on waivers and breaches.

Internal Audit Strategy and Charter

The committee approved the Internal Audit Strategy and Charter, with Councillor Chilton questioning whether there were enough resources to do the job fully.

Draft Internal Audit Plan

The committee discussed the 25/26 Draft Internal Audit Plan, with Councillor Collingwood questioning how it was planned within the year and what happens when things come out of left field.

Draft Counter Fraud Plan

The committee approved the 25/26 Draft Counter Fraud Plan, with Councillor Collingwood requesting an update on the new case management system.

Appointments to the Risk Management Group

The committee noted the appointments to the Risk Management Group.

Work Programme

The committee discussed the work programme, with Councillor Collingwood requesting updates on the fraud plan, waivers and contract management, and the final park trust.