Agenda and minutes

Apologies for absence were received from Councillors Kansagra (with Councillor Colwill substituting), Lo and Mashari, and Independent Members Robert Cawley and Karen McArthur. 

The Chair informed Members that he had received apologies for absence from Carolyn Downs (the Council’s Chief Executive).

Members are invited to declare at this stage of the meeting, the nature and existence of any relevant disclosable pecuniary or personal interests in the items on this agenda and to specify the item(s) to which they relate.

There were no declarations of interest.

To hear any deputations received from members of the public in accordance with Standing Order 67.

There were no deputations.

To approve the minutes of the Audit and Standards Advisory Committee meeting held on 26 July 2018 as a correct record.

To approve the minutes of the Audit and Standards Committee meeting held on 26 July 2018 as a correct record.

It was RESOLVED that the minutes of the previous meeting of the Audit and Standards Advisory Committee, held on 26 July 2018, be approved as an accurate record.

It was RESOLVED that the minutes of the meeting of the Audit and Standards Committee, held on 26 July 2018, be approved as an accurate record.

To consider any matters arising from the minutes of the previous meeting.

External Audit Report on grants and returns 2016/2017

(Item 9 from the minutes of the meeting of the Audit Advisory Committee on 20 March 2018)

It was noted that a written update on the implementation of the action plan created by the Housing Benefit Team to address the findings of the External Audit Report on grants and returns 2016/17 had been circulated to all Members.

Report on i4B Holdings Ltd and First Wave Housing Ltd

(Item 8 of the minutes of the minutes of the previous meeting)

The Chair informed Members that Eugene Sullivan (Former Independent Advisor the Committee) had sent his comments related to aligning the risks for i4B Holdings Ltd and the Council to Carolyn Downs (the Council’s Chief Executive) and Conrad Hall (the Council’s Chief Finance Officer) who would provide a response.

Independent Advisor to the Committee

The Chair informed Members that Mr Sullivan had resigned due to ill health. The Committee placed on record their appreciation of the support he had provided to the Committee throughout the years he had served as an Independent Member and an Independent Advisor.

Members discussed the value Independent Members added to the wide range of topics discussed by the Committee and were in unanimous agreement that the vacancy that had been created following Mr Sullivan’s resignation must be filled. It was noted that there were four Independent Members who had joined the Committee following its merger with the former Standards Committee and who supported Elected Members by providing a different perspective and robust challenge to the matters considered by the Committee. Therefore, a preference for a person with commercial operational background who had a solid finance understanding was expressed. Furthermore, Members pointed out that it would be preferable for the Independent Adviser to live within commutable distance from the Council so informal discussions with Members and senior officers could take place as and when necessary.

Paul Dossett (Partner, Grant Thornton – External Audit) acknowledged that Independent Members added value to audit committees and noted that a financial management code for Chief Finance Officers which was drafted by the Chartered Institute of Public Finance and Accountancy (CIPFA) contained a section on the effectiveness of audit committees and emphasised the importance of self-assessment.

Althea Loderick (the Council’s Strategic Director of Resources) added that the specification of the role could be shared with professional head hunter companies which specialised in recruiting non-executive members with specific qualifications as this would provide a good opportunity to source the right type of candidates.

Mr Hall noted the contents of the discussion and said that he would make the necessary arrangements to start the recruitment process, the structure of which would be agreed in consultation with the Chair and the Vice-Chair of the Committee.

RESOLVED that:

(i)            An Independent Advisor to the Committee would be recruited;

(ii)          The Chief Finance Officer, in consultation with the Chair and the Vice-Chair of the Committee, would design the recruitment process and would make the necessary arrangements to initiate it. 

2017/18  ...  view the full minutes text for item 5.

The Council’s external auditors, KPMG, produced a report following completion of the audit of accounts and an Annual Audit Letter. The letter is intended to identify any changes to the accounts, unadjusted mis-statements or material weaknesses in controls identified during the audit work. It also provides the findings from the value for money conclusion for the year.

The Chair informed the Committee that Andy Sayers (Partner, KPMG – the Council’s former external auditor) had written to him and read out the contents of the Mr Sayer’s email. He reminded Members that it was requirement for the Committee to consider the Annual Audit Letter 2017/2018 which contained a summary of the ISA260 report discussed at the meeting on 26 July 2018. The Committee heard the accounts for the last three years had not been fully signed because of an objection related to the Lender Option Borrower Option (LOBO) loans (page 23 of the Agenda pack). The Chair noted that at the previous committee meeting Mr Sayers had said that he expected work on the objection to have reached the final stage by October 2018. However, where provisional views had been issued by other Local Authorities, queries had been raised in relation to the consideration of certain case law. Therefore, KPMG would be takinglegal advice as to whether the points that had been made had merit and should be reflected in KPMG’s work on the objection.

Paul Dossett (Partner, Grant Thornton – External Audit) commented that there had been other local authorities with inverse floating LOBOs whose audits had not been certified closed. 

The Committee noted that delivery of budgets and contact monitoring had been identified as areas of audit focus in relation to Value for Money.

RESOLVED that the contents of the Annual Audit Letter 2017/2018, be noted.

The report updates Members on recent treasury activity.

3.            2018/2019 Mid-Year Treasury Report 

Sawan Shah (Finance Analyst at Brent Council) introduced the report which provided an update on Treasury Management Activity in the first half of the 2018/19 financial year. Mr Shah spoke of the economic background in the United Kingdom (UK) and said that the economy had been recovering in the second quarter of the financial year following very low growth in the first quarter and had been growing at roughly the same pace as the economy of the European Union (EU), with growth in the United States of America (USA) had been stronger. Although the latest figures showed that inflation had dropped to 2.4% and wages had grown by around 3%, the impact of the UK leaving the EU continued to cause uncertainty.  

The Committee heard that there was no new borrowing required over the course of the current financial year and the Council’s long-term debt had been reduced slightly. Furthermore, Brent continued to qualify for borrowing at ‘certainty rate’ until 31 October 2018 and an application for the period November 2018 to October 2019 had been made (paragraph 3.9 on page 29 of the Agenda pack).

Mr Shah advised Members that the Council’s Capital Programme continued to be funded by internal borrowing and that a report on cash flow borrowing had been considered by Cabinet. A significant amount of capital expenditure had been allocated to one of the Council’s wholly owned investment companies – i4B Holdings Limited – and the New Accommodation for Independent Living (NAIL) scheme.

An Elected Member who was in attendance at the meeting enquired whether it could be possible to repay the Council’s debt earlier than scheduled. Mr Shah explained that repaying the current long-term borrowing portfolio and then borrowing money at the current interest rates (which were lower) was possible. However, Daniel Omisore (Head of Finance at Brent Council) highlighted that the main disincentive to repay the Council’s debt at the moment was the fact that the Local Authority would have to pay significant premiums which would not be financially viable. He referred Members to paragraph 3.13 of the report (page 30 of the Agenda pack) which contained an example of the cost the Council would have to cover had it decided to repay just one of its loans early. Brent would owe a 26% premium on the value of the loan before the cost of re-financing. The aims of this were to compensate the lender and to act as a penalty.

This led to a wider discussion on Brent’s Borrowing Strategy which had been approved by Cabinet in September 2018. Conrad Hall (the Council’s Chief Finance Officer) pointed out that interest rates since 2010 had been under 1%.  Historically this was abnormal. Although some commentators are of the view that it is the new normal. The view that the Council had taken was that interest rates in short and medium term were more likely to rise than not. Therefore, the report presented at the previous meeting of the Committee  ...  view the full minutes text for item 7.

The paper provides the Audit and Standards Advisory Committee with a report on progress in delivering Grant Thornton’s responsibilities as the Council’s external auditors. It also includes a summary of emerging national issues and developments that may be relevant to Brent as a local authority.

Sophia Brown (Senior Manager, Grant Thornton - External Audit) introduced the report which provided the Committee with an update on progress in delivering Grant Thornton’s responsibilities as the Council’s external auditors. Ms Brown noted that the paper also included a summary of emerging national issues and developments that might be relevant to Brent. She said that Grant Thornton had finished planning their work for the 2018/2019 financial year audit and directed the Committee’s attention to the audit timeline included in the report (page 48 of the Agenda pack). Paul Dossett (Partner, Grant Thornton – External Audit) and Ms Brown had met with Conrad Hall (the Council’s Chief Finance Officer) and his team and representatives of Grant Thornton would visit the Council in the beginning of November 2018 with the aim to understand key processes. 

The Committee discussed the Brent Council – Reserves: Key Performance Indicators table included in the Council’s Reserves and Balances section of the report (page 50 of the Agenda pack). Ms Brown highlighted that this part of the paper related to the discussion on the 2018/2019 Mid-Year Treasury Report (for details, please see minute item 7) and she said that the table reflected the Value for Money discussions Grant Thornton staff had with other London boroughs and, therefore, provided a good comparison on a number of indicators. In response to a Member’s question, Ms Brown confirmed that the data included in the table had been calculated on crude basis and further analysis would be taken as part of Grant Thornton’s work on Value for Money.      

A Member who was in attendance at the meeting enquired why the Council did not spend its reserves. Mr Hall explained that the data provided represented point-in-time information. He reminded Members that although there had been delays associated with the capital programme, work had been taken place to consider ways of accelerating it and to ensure that expenditure could catch up with delivery. In his view, the Council had taken the right decision to save funds generated from the Community Infrastructure Levy (CIL) and spent it on transformation capital investment rather than on multiple small projects. Furthermore, Mr Hall emphasised that the fact that the Council was holding up to money was not concerning as  the Council’s reserves would normalise in a few years’ time and, in fact, the Local Authority might need to borrow money to fund the capital programme.

Mr Dossett commented that having a planned programme that generated revenue was taking the Council closer to self-sufficiency which was in line with the Government’s vision for local authorities. He added that following the crisis at Northamptonshire County Council, the Chartered Institute of Public Finance and Accountancy (CIPFA) had been challenged to outline the actions it had taken in response to the situation. In Mr Dossett’s view, there had to be a balance between back-looking and forward-looking information and forecasting. A working group had been set up and a financial management code, which would come into force in 2020 and  ...  view the full minutes text for item 8.

The report provides an update on progress against the Internal Audit Plan for the period 1 April 2018 to 31 August 2018.

Michael Bradley (the Council’s Head of Audit and Investigations) introduced the report which provided an update on progress against the Internal Audit Plan for the period 1 April 2018 to 31 August 2018.

The Committee focused their attention on the completed audits from the 2018/2019 Audit Plan (Appendix 1, pages 65 and 66 of the Agenda pack) and acknowledged that the number of audits which had achieved ‘reasonable’ assurance had increased from previous years. However, Members raised a concern that related to the number of management actions that had been partly implemented or not implemented (Appendix 2, pages 67 and 68 of the Agenda pack). Mr Bradley explained that implementation rates had not been good in the past, hence follow up reviews were conducted. He assured the Committee that the Audit Team would revisit the status of the actions that had been highlighted.  

A specific question on the findings of the Insurance audit was raised and Mr Bradley responded that there had been one high risk finding which related to the lack of contract with the supplier. He pointed out that the issue had been rectified and added that management responses, along with implementation dates, would be provided for all completed audits listed in Appendix 1 to the report. 

RESOLVED that the contents of the Internal Audit Progress Report for the period April – August 2018, be noted.

The report provides an update on the counter fraud work undertaken in the period 1 April 2018 to 30 September 2018 (Quarters 1 and 2).

Michael Bradley (the Council’s Head of Audit and Investigations) introduced the report which provided an update on counter fraud work for the period between 1 April 2018 and 30 September 2018. The paper covered all aspects of the work of the Counter Fraud and the Investigations teams, including internal fraud; tenancy and social housing fraud; external fraud; and proactive fraud activity. Mr Bradley said that the average value of each recovered property had been adjusted to £93,000 to reflect the actual value in the Borough as per the Committee’s recommendation.[1] Members also heard that the Counter Fraud Team had led on a successful proactive exercise in June 2018 which had resulted in 11 Parking Charge Notices been issued and one vehicle towed for fraudulently displaying a cancelled Blue Badge.  

The Committee raised questions that related to fraud awareness, actions that had been taken to prevent fraud and tenancy and social housing fraud. Mr Bradley said that as part of a campaign to raise awareness of fraud, the Team had delivered a presentation to all school business managers which had been focused on type of fraud that could happen in schools. Furthermore, the Council’s policies had been refreshed, the website had been updated and assurance on controls and process had been provided to minimise the risk of fraud. Work on tenancy and social housing fraud continued, but referrals had not reached the levels experienced two years ago which was a positive indicator. The Counter Fraud Team worked closely with Housing and registered providers and poster campaign had been taking place across the Borough.

A Member enquired how an employee and their partner were able to commit fraud amounting to £280,000 and why the management action taken had been classified as prompt. The Chair informed Members that the Committee would not be able to discuss this matter further at this time due to ongoing criminal investigation. However, he noted that the case was due to be heard at a Magistrates’ Court on Tuesday 23 October 2018. Conrad Hall (the Council’s Chief Finance Officer) explained that the management action had been prompt from the time the fraud had been discovered and said that further details on this matter could be provided to Members following the conclusion of the court case. 

The Committee placed on record their gratitude to the Counter Fraud and Investigation teams for the work they had completed. 

RESOLVED that the contents of the Counter Fraud Annual Report 2017/18, be noted.

To note the Committee’s Forward Plan and agree a draft agenda for the next meeting, which would be reviewed and finalised by the Chief Finance Officer, the Head of Audit and the Chair of the Committee one month after the date of the current meeting.

The Chair directed Members’ Attention to the Committee’s Forward Plan (page 77 of the Agenda pack). It was noted that:

·         An update on the performance and management of i4B Holdings Ltd and First Wave Housing Ltd would be provided at the meeting on 5 February 2019; 

·         The ‘Risk Management Annual review and Risk Management Strategy’ item would be considered at the meeting on 5 February 2019; and

·         The ‘Strategic Risk Register’ item would be considered at the meeting on 5 February 2019.

</AI14>

<TRAILER_SECTION>

RESOLVED that the contents of the Audit Advisory Committee Forward Plan, be noted, subject to the comments outlined above.

Notice of items to be raised under this heading must be given in writing to the Head of Executive and Member Services or his representative before the meeting in accordance with Standing Order 60.

None.