Agenda and minutes

There were no apologies.

There were no substitute members appointed.

To receive any declarations of interest from Members in respect of business to be transacted on the agenda.

There were no declarations of interest made by Members.

To confirm the attached Minutes of the meeting of the Committee held on 26 September 2024.

The Minutes of the meeting held on 26 September 2024 were approved as a correct record for signing by the Chairman.

To consider the attached report of the external auditors, Grant Thornton.

The Key Audit Partner (Grant Thornton – external auditors) presented the Audit Findings Report for the year ended 31 March 2021 to the Committee. The report provided detail of the work carried out by the auditors (in consultation with the Council) prior to the statutory backstop date that had been imposed by Government of 13 December 2024 by which time all outstanding audits had to be concluded regardless of the position or completion of the audit.

At the meeting of the Governance Committee in March 2024, the Committee supported the decision of the auditors and the Council to issue a disclaimer opinion for the 2020/21 audit given that officers had considered that putting further input into the 2020/21 audit was not cost effective and there remained a risk that the work would not be completed before the statutory backstop date, which at that time was September 2024.

The Audit Findings 2020/21 report set out the detail of the audit work where there had been progress – it included the work undertaken, the auditor’s findings, and the key areas which remained outstanding at the point the audit was paused. The Key Audit Partner drew Members’ attention to the following areas of the report:

·             The auditor’s understanding and audit findings in respect of the significant risks identified – detailing some areas where work had been completed and some areas not completed due to the time constraints of the statutory audit backstop.

·             Other matters that came to the auditor’s attention during the course of the audit included that the cash and bank reconciliations as at 31 March 2021 had not been provided by the Council to the auditors and still featured in the disclaimer audit opinion the auditors intended to give.

·             The Action Plan – the recommendations given and intended to give as a result of the issues identified based on the work that had been completed.

·             The Audit Adjustments – this was not a complete record but was based on the work carried out when the audit was paused.

·             The Value for Money (VFM) findings and the VFM interim report issued in December 2022 which, at that point, did not identify any significant weaknesses although noted the implementation of the general ledger system.

The Key Audit Partner advised the Committee that a better understanding of the problems of the general ledger system was identified through the financial statements work and subsequent VFM work in the audits for 2021/22 and 2022/23, which had been reported to the Committee. These weaknesses, including cash and bank reconciliations, were relevant to the audit opinion the auditors intended to give for 2020/21 financial statements.

The report also included a Management Letter of Representation which set out what the auditors were going to seek from officers before issuing the audit opinion, including the draft disclaimed opinion.

To consider the attached reports of the external auditors, Grant Thornton.

The Key Audit Partner (Grant Thornton – external auditors) presented the Conclusion of the Audit for 2021/22 and 2022/23 and Draft Disclaimed Opinions for 2021/22 and 2022/23 report to the Committee. This was a short form position statement due to having not undertaken any detailed work on those years to be able to confirm the accuracy of the financial statements. It was a requirement of the Auditing Standards to report certain matters to the Governance Committee before an opinion could be issued and was the reason for the short form report.

Included in the report and brought to Members’ attention was the management draft letter of representation in respect of the financial statements for 2021/22 and 2022/23 and the intended audit disclaimer opinion the auditors intended to issue for both years. Both disclaimer opinions were required to be issued by 13 December 2024.

The Strategic Director (Finance and Housing) was invited to respond to this report and to the Audit Findings Report 2020/21 and Draft Disclaimed Opinion for 2021/22. His response highlighted some of the key issues from the previous four years from the Council’s perspective and provided some updates to the findings. It was stressed that none of these issues changed the underlying financial position of the Council.

·        In 2022/23 only 1% of audit opinions were published. Not one body was responsible for local authority audits and stress in the system was evident as far back as 2017/18 with a shortfall of audit capacity and led to some delays in the Council’s audit although there were other substantial issues identified in the auditor’s findings.

·        Amongst the common causes of the backlog was an intense focus on the valuation of fixed assets and pension fund liabilities.

·        Audit and local authority staff retention - insufficient staff resources, staff turnover and levels of inexperience amongst the staff.

·        The valuation of fixed assets with particular regard to Maison Dieu and Dover District Leisure Centre and the significant debate around these assets led to some of the delays in the audit of the accounts.

·        The backstop dates and some of Dover’s accounts being disclaimed. A risk remained when considering the 2023/24 accounts as auditors would need look into earlier balances to verify the opening balances and may recreate a backlog.

·        The delay in the completion of the 2020/21 audit and that in July 2021 the auditors presented a progress report that stated it would not complete the 2020/21 audit until January 2022. This was then signed off 11 months later than anticipated in December 2022.

·        The correcting of Technology One (TechOne) (the accounting system) had to be a priority as if left uncorrected would have caused the backlog in bank and VAT reconciliation to have continued to grow. This was now operating correctly although there was the backlog of four sets of accounts to deal with. The Council accepted there had been problems with these reconciliations.

·        VAT returns were raised by the auditors in March 2024 and all VAT returns were now complete up  ...  view the full minutes text for item 34.

To consider the attached report of the external auditors, Grant Thornton.

The Key Audit Partner (Grant Thornton – external auditors) presented the 2023/24 Audit Progress Report and Interim Findings to the Committee. 

Based on receipt of the 2023/24 draft financial statements there had been a change to the materiality levels that had been previously presented to the Committee in the indicative audit plan issued in September 2024. The revised figures shown in the report were what were now being used in the audit of the 2023/24 financial statements and based on these findings the financial statements materiality benchmark had been reduced further from what was the already low level at the planning stage of the audit.

An update on each of the significant risks had been provided in the report. ‘Management override of controls’, ‘risk of fraud and error in revenue recognition’, and ‘risk of fraud and error in expenditure recognition’ were all standard risks expected for any authority.  A significant risk was identified specifically for Dover around bank reconciliations – these were still not up to date and the March 2024 reconciliation was expected to be completed by February 2025.  Whilst ‘valuation of land and buildings and valuation of investment properties’ was also a standard risk for authorities an expert had been appointed for Dover to review the valuation methodology in use as at 31 March 2024. The expert’s report concluded that the valuation methodology employed previously could not be evidenced as being compliant with the requirements of the CIPFA Code of Audit Practice and the Royal Institute of Chartered Surveyors (RICS) and it had been agreed with management that no further work would continue in this area. The Strategic Director (Finance and Housing) reported that the Council would now be looking to employ external valuers for future years’ accounts.

Value for Money work was progressing as were the areas of testing of samples. Members were advised that work in the sample testing was being undertaken already - Employee Benefit Expenditure testing was well progressed and where samples had been cleared, no significant errors had been found to date. Unless something unexpected came up, resourcing was available to conclude the testing by the end of February 2025.

Further areas highlighted included the IT Audit Findings which Members would be presented with a separate report in more detail and, Journal Entries, which were identified in the IT Audit and that further work was required to test 62 journal entries individually. These entries were submitted by a few finance staff with access to an administrator ID in addition to their personal ID. Administrator IDs were not restricted and carried a higher level of risk as they could have been posted over and above the parameters for the individuals’ role. This work was not planned and would incur an additional audit fee. The Head of Finance and Investment advised the Committee this process had now stopped (December 2025), although some entries may be seen in the 2024/25 findings prior to it stopping.

To consider the attached report of the external auditors, Grant Thornton.

The Key Audit Partner (Grant Thornton – external auditors) introduced the IT Audit Findings report. The objective of the audit was to complete a design and implementation review of the Council’s IT environment to support the financial statement audit

Members noted the issues and risks identified in the Audit Findings and in particular the two issues that received red risk (significant deficiency) ratings in the 2023/24 audit Findings Report that were: ‘inadequate control over privileged access in TechOne’ and ‘inappropriate segregation of duties as users have access to the development and the production environments’. A management response was provided and noted that in small organisations, it was necessary to have users with system access to manage, support and develop the system although work was being reviewed with TechOne to consider options to restrict access in the future.

Regarding the issue and risk identified of there being no proactive monitoring of batch tasks within TechOne, officers were working with TechOne to set up automated alerts if something was missing. Work was in progress to put processes and procedures in place.

To make the reading of the report easier for those with black and white copies of the agenda, the auditors were asked to illustrate risks by including the word of the colour alongside the coloured marker.

To consider the attached report of the Head of Finance and Investment.

The Head of Finance and Investment presented the Update to Recommendations from the Auditor’s Annual Report 2021/22 and 2022/23 to the Committee.

The Auditor’s Annual Report for the financial years 2021/22 and 2022/23 was reported to the Governance Committee in March 2024 and covered the auditor’s view on the Council’s arrangements for securing economy, efficiency, and effectiveness in its use of resources. The report was to provide an update to the recommendations from that report and to provide assurance that, where appropriate, progress had been made towards achieving the outcomes necessary to satisfy the auditor’s requirements.

The main areas of progress were:

·        All historic sets of accounts had been published

·        The Draft 2023/24 Statement of Accounts had been completed and presented to the Governance Committee

·        Bank reconciliations had been completed to December 2024

·        VAT returns were now fully up to date

·        The financial system was now operating largely as intended

·        Project management processes for ICT projects had been improved

·        The corporate project process had been revised and was in the process of being implemented

·        Reports to Corporate Management Team on major projects were presented on a regular basis

·        Work was underway to deliver a sustainable 2025/26 budget, subject to the numerous uncertainties and risks faced by all local authorities.

In respect of Improvement Recommendation IR2, meetings between the Council and DEFRA were ongoing. The Council had provided them with more information as requested and was waiting to hear back from Ministers. The Council was continuing to push for a response and do all it could in time for the budget setting process.

Given the circumstances in which the finance team were working under with regard to resource capacity and the difficulty of the economic resources, Members thanked and congratulated the team on the progress it had made.

To consider the report of the Head of Finance and Investment.

The Head of Finance and Investment presented the Treasury Management Quarter Two Report 2024/25 to the Committee which provided details of the Council’s treasury management for the half year period ended 30 September 2024.

The Council’s investments generated a total return of 9.92% (annualised) which outperformed the SONIA (Sterling Overnight Index Average) benchmark of 4.95% and included changes to capital values in the funds which were not recognised in the revenue budget. The Council had remained within its Treasury Management guidelines and complied with the Prudential Code guidelines except for the maturity structure of borrowing and was due to short-term borrowing (under 12 months) exceeding the upper limit. To exceed this had been a conscious decision by the Finance team following advice from the Council’s treasury management advisors and was as a result of increased pressures on cash flow and the postponement of long-term borrowing for projects due to the increases in interest rates.

With regard to fluctuations in the cash-flow requirements the Head of Finance and Investment was unable to guarantee there would be no more short-term borrowing. A lot of the short-term borrowing was related to major capital projects which had been modelled to undertake long-term borrowing however, following the advice from the Council’s treasury management advisors borrowing short-term was more efficient and flexible rather than committing to longer-term loans, especially with the volatility of interest rates. The Finance team was working with the advisors to look at longer term borrowing for Housing Revenue Account projects to give more stability.

RESOLVED:   That the report be received.

To consider the report of the Head of Corporate Services and Democracy (to follow).

The Head of Corporate Services and Democracy introduced the Annual Complaints report to the Committee. The report, which documented the number of complaints dealt with through the corporate complaints process in the financial year 2023/24, was the last report in its current format following changes introduced by the Ombudsmen in April 2024 when a Joint Complaint Handling Code was introduced for local authorities. Following these changes to the code and changes to the Council’s Complaints Policy to remain compliant with the Ombudsmen’s guidance, subsequent annual reports to the Committee would contain more detailed information to satisfy a number of new reporting requirements. This would be supported by the new in-house complaint management system that had been implemented in January 2024 to streamline the complaint handling process and provide better reporting data.

The Head of Corporate Services and Democracy reported that one of the new requirements of the Ombudsmen for 2024/25 was the reporting of complaint cases opened, rather than the number of cases closed which had been the basis of previous reporting to Members and this was reflected in the report. The total number of complaints received in 2023/24 compared to 2022/23 were as follows:

The Local Government and Social Care Ombudsmen determined 5 complaints during the year, having received a total of 12 cases (the remaining cases to be reported in 2024/25 once determined). Of these, four were upheld against the Council, one was rectified before the complaint reached the Ombudsman and of the remaining two the Council completed the required compliance actions to the satisfaction of the Ombudsman.

There were two complaints for the decision of the Housing Ombudsman in 2023/24, both that were partly upheld. It was further reported that a complaint that had been opened in 2022/23 and determined by the Housing Ombudsman in 2023/24 was not upheld.

The hybrid element of a complaint against the parking service was recognised by Councillor M Bates. He was surprised by the reduction of complaints received from seven (2022/23) to one (2023/24) being aware of the number of Penalty Charge Notices (PCNs) challenged and complaints against Civil Enforcement Officers issuing PCNs. Members were advised that the appeal route for challenges to Penalty PCNs were not reflected in the complaints process and with regard to complaints relating to staff behaviour, as matters of employment these were dealt with under a different mechanism and were not within the Council’s Complaint Policy to be reported to the Governance Committee.

Members welcomed the report and the addition of graphs and pie charts to help to illustrate the data.

The Head of Corporate Services and Democracy advised that with regard to the Local Government and Social Care Ombudsman Self-Assessment, this was due to be published the following week and was to be removed from the recommendation.

RESOLVED:   That the report be noted.

To consider the report of the Head of Corporate Services and Democracy (to follow).

The Head of Corporate Services and Democracy presented the Risk Register Quarterly Update report to the Committee. The report provided an update on the Corporate Risk Register (the Register) in support of the Committee’s role (as identified in the new Corporate Risk Management Strategy) in ensuring the effectiveness of the Council’s risk management arrangements. This was the first time the Corporate Risk Register was being presented to the Committee in its new format.

The Corporate Risk Management Strategy, which had been adopted by Council earlier in the year, had been created based on best practice and had addressed the weaknesses identified in the audit of the previous version of the register. Officers provided thanks to the East Kent Audit Partnership for its input in helping to create the improved Strategy and Register.

The Corporate Risk Register was a living document which allowed risks to be identified and assessed on an ongoing basis throughout the year and where necessary, escalated and reported to the Corporate Management Team (CMT). In addition, CMT would receive a fully completed register on a quarterly basis.

Under the new strategy the Governance Committee would receive quarterly updates on any changes to the Register. In an update to the report, the Head of Corporate Services and Democracy offered to include the Corporate Risk Register on a quarterly basis also, which Members welcomed and accepted. Further to this, Councillor M Bates requested that the mitigations included in the individual risk register entry sheets (Key Risks document at appendix 2 of the report), be included in the Register also, although be summarised into a simple sentence. This was accepted by the Head of Corporate Services and Democracy who would look to include this summary in the next quarter’s Register presented to the Committee.

To further improve the reporting of the Register to Members work was to be undertaken to include a link to the Corporate Plan and a direction of travel indicator, which Members welcomed. In addition, Councillor M Bates asked that contingencies be added to those ‘red’ risks (scores of 15 or above) that remained red after mitigation. He was assured that the ‘Four T’s of Risk Control’ (Tolerate, Treat, Transfer, Terminate the risk) were already being considered during the process of evaluating the risk. In making further developments to the Register in order to show the risk control approach, this would be demonstrated on the Register as one or more of the ‘Four T’s’.

RESOLVED:   That the report be noted.

To consider the attached report of the Head of Audit Partnership.

The Deputy Head of Audit Partnership presented the Quarterly Internal Audit Update Report to the Committee. The report included a summary of the work completed by the East Kent Audit Partnership (EKAP) to the 30 September 2024.

Members’ attention was drawn to:

·        The four internal audit assignments completed and concluded: one Substantial assurance (White Cliffs Countryside Partnerships); one Reasonable Assurance (Planning Enforcement); one Limited Assurance (Creditors and Construction Industry Scheme (CIS); and one split assurance level of Limited/No/No Assurance (Cash Collection (Limited), Income (No) and Bank Reconciliation (No)). A management response was provided in the report for both the Limited and split assurances. Members were reminded that management responses were only required for those audits where a Limited or No assurance was concluded.

·        The one follow-up review undertaken of Planned Maintenance – Procurement and Contract Management, which concluded a revised Limited Assurance and the management response provided. There had been significant progress with four High Priority recommendations outstanding after follow-up and remained Limited partly due to more time needed to allow for the actions of the recommendations to become embedded in the organisation.

·        The number of audit days completed for the six-month period to 30 September 2024, which equated to 61% plan completion of the agreed number of days. As of 30 November 2024, this had increased to 76% and was ahead of schedule.

Concerning Planning Enforcement and the primary findings that gave rise to the Reasonable Assurance, the audit highlighted that there were some improvements required to ensure processes were being consistently applied. It was found the processes were robust although there were some inconsistencies in the application of these; Members requested further detail and officers would report back at the time of follow-up.

The Head of Finance and Investent reported that key actions identified as a result of the Limited Assurance for the Creditors and Constructions Industry Scheme (CIS) audit, were rapidly being addressed. The priority was on ensuring there were controls in place around bank account changes and BACS payments exceeding £30k and to ensure there was secondary authorisation by a senior member of the Finance team. Subject to working with the system provider to develop workflows and ensuring the system support was in place, these controls were hoped to be implemented quickly.

It was moved by Councillor H M Williams, duly seconded and

RESOLVED:       That, under Section 100(A)(4) of the Local Government Act 1972, the public be excluded from the meeting for the remainder of the business on the grounds that the items to be considered involved the likely disclosure of exempt information as defined in paragraph 3 of Part I of Schedule 12A of the Act.

To consider the attached report of the Head of Audit Partnership.

The Deputy Head of Audit Partnership presented the report which provided details of a restricted audit completed by the East Kent Audit Partnership during the period and that had received a Reasonable assurance opinion.

RESOLVED:   That the update report be noted.