Agenda and minutes

General Purposes & Audit Committee
Tuesday, 23rd July, 2019 6.30 pm

Venue: Council Chamber, Town Hall, Katharine Street, Croydon CR0 1NX. View directions

Contact: Michelle Gerning
020 8726 6000 x84246  Email: michelle.gerning@croydon.gov.uk

Items
No. Item

23/19

Disclosure of Interests

In accordance with the Council’s Code of Conduct and the statutory provisions of the Localism Act, Members and co-opted Members of the Council are reminded that it is a requirement to register disclosable pecuniary interests (DPIs) and gifts and hospitality to the value of which exceeds £50 or multiple gifts and/or instances of hospitality with a cumulative value of £50 or more when received from a single donor within a rolling twelve month period. In addition, Members and co-opted Members are reminded that unless their disclosable pecuniary interest is registered on the register of interests or is the subject of a pending notification to the Monitoring Officer, they are required to disclose those disclosable pecuniary interests at the meeting. This should be done by completing the Disclosure of Interest form and handing it to the Democratic Services representative at the start of the meeting. The Chair will then invite Members to make their disclosure orally at the commencement of Agenda item 3. Completed disclosure forms will be provided to the Monitoring Officer for inclusion on the Register of Members’ Interests.

Minutes:

There were none.

24/19

Urgent Business (if any)

To receive notice of any business not on the agenda which in the opinion of the Chair, by reason of special circumstances, be considered as a matter of urgency.

Minutes:

There were no items of urgent business.

25/19

Brick by Brick Audit Report pdf icon PDF 83 KB

The draft Brick by Brick Director’s Report and Financial Statements 2018-19 are attachedat Appendix 1.

 

Additional documents:

Minutes:

The Head of Operations introduced the Brick by Brick Audit Report and informed the meeting that the report was a draft from 2018. The report was in its final stages and was ready to be signed off.

 

Officers informed the Committee that the Director’s Report on the audit of accounts had two restatements, which covered a fifteen-month period. This was due to the amendment of the financial year. The change helped prepare the group statements in a straightforward manner.

 

A loss of £744,952 was recognised for the period. This reflected sale revenues and the fact that some properties had not yet reached their completion stages, and therefore their value was not able to be released until all the sales were completed. It was the objective to achieve these sales during 2019/20.

 

Officers further summarised that all expenditure related to operating expenditure, which was budgeted for and remained variable. This covered the amount reported within the statement. Some expenditure had to be accounted for and it was recognised that the sales revenue was coming through this year.

 

In response to questions raised by Members, officers clarified that the statement of comprehensive income was an example of the balances, which were all payable to the London Borough of Croydon.

 

The statement of financial position highlighted the total assets in their current form which represented the working progress and investment that was due to be completed.

 

With regard to income revenue, officers confirmed that potentially next year the Council would see the true cost and profit achieved through the completion of a single Brick by Brick scheme with a turnover of £10million.

 

In response to questions raised by Members in relation to their confidence in the independent audit report, officers explained that this was in its draft form. Officers clarified that the Council was 100% the shareholder, and the audit report, which was in draft and formed part of the accounts, would be finalised by the end of the month. The Council Solicitor explained, in relation to the legal sign off, that there would have to be a major relevant impact to be part of Committee consideration; to say there was no legal implication meant there were no major legal factors that the Committee needed to consider. As such, there were no direct implications and the report was signed-off.

 

In relation to questions from Members in relation to significant penalties on the contracts and how they were reflected in the accounts, officers informed the meeting that material factors relating to each scheme were detailed in  working progress. The evaluation work was completed and the penalty was reduced from when the scheme would be completed. This was reviewed as a bigger profit. Further, officers stated that this was to be clarified in the reported profit against the scheme.

 

Members asked how depreciation of housing would be measured given the turbulent housing market issues. Officers explained that depreciation related to the buildings that were purchased and recorded as a cost within the sale  ...  view the full minutes text for item 25/19

26/19

Financial Performance Report pdf icon PDF 297 KB

This report presents to the Committee progress on the delivery of the Council’s Financial Strategy.

Additional documents:

Minutes:

The Director of Finance, Investment and Risk (S151 Officer) introduced the report and informed the meeting that the annual report was the outturn position for 2018/19. Part of the report was presented at Cabinet in July 2019, and this report provided a more detailed position for the Council and on its capital position.

 

Officers shared that the executive summary detailed an over spend of £5.466 million which was made up of small amounts of pre-exceptional and exceptional overspend.

 

The analysis of the departmental variances showed that the total departmental overspend finished with £6,998 million in the year, which was more than budgeted. The overspend was mainly as a result of placement costs for looked after children and children with disabilities.

 

The report highlighted the Council balances and reserves where officers noted that the General Fund balance was not stable. Currently the service had seen a demand increase. Officers highlighted that the Council had a General Fund balance of £10.4 million as of 31 March 2019 and earmarked reserves of £14.2 million, which would fluctuate in years to come.

 

Officers highlighted that the capital programme for the Council was £449 million. There was an underspend of 21% which resulted from slippage within the delivery of the scheme. The department was optimistic for change in the New Year.

 

Officers highlighted that the housing revenue account had an underspend of £736k which would carry forward to 2019/20 budget.

 

Officers summarised the 9.80% increase of the value in the Croydon Pension Fund and noted that details of the treasury management which was in a good position for the financial year.

 

Officers highlighted that Cabinet approved a four-year financial strategy in October 2018. Subsequently, the service was delivering against the financial strategy, which was a part of the budget setting process.

 

In response to questions raised by Members in relation to the overspend of £5.466 million, officers clarified that the exceptional spend related to additional costs associated with Unaccompanied Asylum Seeking Children, which there was no recourse to public funds, and the impact on Universal Credit.

 

In response to questions raised by Members in relation to the overspend of electoral services, public realm and the unachievable digital advertising income target, officers explained that for electoral services the overspend was a mixture of timing and the additional costs of work scheduled in 2018/2019. For public realm and street lighting, officers explained that there were no new contracts in place and the service was managing and working with the contractor. With regards to the unachievable digital advertising income it was noted that savings were difficult to manage. Although there was a target, there were unforeseen issues.

 

In response to questions raised by Members in relation to borrowing, officers highlighted that the official borrowing figure would fall under that which has been set, as this was not nationally set. It was highlighted that for 2018-22, due to the Brexit, interest rates were favourable and did not change on the 1st April.

 

In response to questions raised by  ...  view the full minutes text for item 26/19

27/19

Audit Findings Report pdf icon PDF 89 KB

ThereportsincludetheCouncil’smanagementresponsestotherecommendations.

Additional documents:

Minutes:

The Director of Finance, Investment and risk (s151 Officer) shared the report with Members and highlighted that Grant Thornton had worked very hard with Croydon’s accounts. It was noted that work was still ongoing and near completion.

 

Officers presented two audit reports enclosed within the report, (1) the Council General Fund and (2) the Pension Fund. There were also letters of representation for both audit reports. Officers shared that the Annual Accounts were currently in their draft form and would be updated once finished and available on the website.

 

The Grant Thornton Engagement Leader spoke to the General Fund Audit report and highlighted that Grant Thornton was in a positon to provide an unqualified opinion by 31st July with no expected delay or issues.

 

Officers shared that the risk remained the same though there was more work to do. There were no issues with statutory duties.

 

Officers acknowledged the hard work of the finance team; they had produced good quality work and had responded to detailed questions between teams.

 

Officers highlighted one of the significant risks raised in the Audit Plan: - Valuation Pension Fund net liability and summarised using the McCloud Court of Appeal case ruling. This was a legal judgement that had implications for the Croydon Pension Scheme. The finance team was responsible for assessing the liability, as there was an adjustment for the transitional arrangement.

 

In relation to key judgements and estimates, officers noted that figures were reasonable and there were more figures to be accounted for. Officers were not expecting any difficulties.

 

In relation to audit adjustments, officers mentioned that the London Business Rates Pool had raised the amount in the accounts and McCloud and GMP had made an impact on past service costs. Officers further informed the meeting that the treatment of school grants was not a material figure. Officers had addressed the incorrect flaw that found one error and had undertaken some additional testing.

 

The accounts were complex and the Chair congratulated the team on the clarity and the hard work shown.

 

The Senior Manager of Grant Thornton spoke to the Pensions Fund Audit report and highlighted that the format was identical to Council Funds.

 

Officers highlighted that they had identified a few minor adjustments that were in respect of some of the disclosures in the accounts. To note further, the service was modifying the option on the pension funds.

 

Officers talked about the standard significant risks and the level 3 valuation, where there were no major issues.

 

The report revealed the main adjustments highlighting a number of projects, and noted that whilst the draft accounts were prepared, the valuations were updated, and the change in value had increased by over £7 million.

 

 

The Committee RESOLVED to:

 

§  Note the ISA 260 (International Standards on Auditing) Reports for the Council and the Pension Fund issued by the Council’s external auditors, Grant Thornton (Appendix 1 and 2 respectively).

 

§  Approve the letters of representation (in Appendix 3 and 4) on behalf of  ...  view the full minutes text for item 27/19

28/19

Annual Governance Statement pdf icon PDF 108 KB

This report details the Annual Governance Statement (AGS), for 2018/19 at Appendix 1.

Additional documents:

Minutes:

The Head of Insurance and Risk presented the Annual Governance Statement Report and highlighted that the report was part of the Annual Accounts process.

 

Officers spoke to the appendix to the report particularly to table one, which highlighted government issues identified in 2018/19. Officers noted that the issues were increasing within the corporate and red risk.

 

The Committee RESOLVED to:

 

§  Approve the Annual Governance Statement for the year 2018/19 at appendix 1 to this report.

 

§  Agree the statement on ‘outcomes’ in relation to ‘Issues raised in 2017/18 Statement and progress to date’. (Appendix 1, Table 2)

 

§  Agree the significant governance issues identified in relation to 2018/19 and the actions being taken to mitigate those risks.(Appendix 1, Table 1)

 

29/19

Exclusion of Public and Press

The following motion is to be moved and seconded where it is proposed to exclude the press and public from the remainder of a meeting:

 

“That, under Section 100A(4) of the Local Government Act, 1972, the press and public be excluded from the meeting for the following items of business on the grounds that it involves the likely disclosure of exempt information falling within those paragraphs indicated in Part 1 of Schedule 12A of the Local Government Act 1972, as amended.”

 

Minutes:

This was not required.