Agenda item

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 could be used for benchmarking, had been drafted to prescribe a set of behaviours to promote financial stability.  

Referring to the size of Brent’s reserves, Mr Hall pointed out that £12.3 million (compared to an average for London Boroughs of £19.6 million) was sufficient for an authority with Brent’s size and risks. He stressed that for the last five years the Council had not overspent on the overall budget which was favourable, taking into account the fact that there were authorities in London that had overspent by several million pounds. However, as small changes in demand or unit costs could put significant pressure on the budget, it was feasible to maintain the current level of reserves.   

Members noted that as the financial climate became more challenging, the Council would have to make significant cuts and may even need to use some of its reserves. Mr Hall explained that if there was an overspent in the current year, it would account for nearly 10% of the existing reserves (1.5 million out of 12.3 million) and would cause a significant concern. However, there would be a bigger concern if the budget for the next financial year was not balanced as this would mean that there would be a consistent gap in the Council’s finances.[1]

Mr Hall said that he had given the same advice in relation to using the Council’s reserves to the Leader and the Chief Executive and that he was prepared to revise it in case the risk of a consistent gap materialised.  

RESOLVED that:

(i)            The contents of the External Audit Progress Report, be noted;

(ii)          The contents of the discussion on the level of the Council’s reserves be noted and be reflected in the Update Report from the Vice-Chair of the Audit and Standards Advisory Committee to Full Council on 26 November 2018; and

(iii)         The level of the Council’s reserves be monitored.