Agenda and draft minutes

Audit and Risk Committee - Monday, 21st June, 2021 2.00 pm

Venue: Committee Room 3 - Civic Centre, St Peter's Square, Wolverhampton WV1 1SH

Contact: Fabrica Hastings  Tel: 01902 552699 or Email: Fabrica.Hastings2@wolverhampton.gov.uk

Media

Items
No. Item

1.

Apologies for absence

Additional documents:

Minutes:

There were no apologies for absence.

2.

Declaration of interests

Additional documents:

Minutes:

Councillor Clare Simm and Councillor Craig Collingswood declared an interest as members of the West Midlands Pension Fund Committee.

3.

Minutes of the previous meetings pdf icon PDF 324 KB

[For approval]

 

 

Additional documents:

Minutes:

That the minutes of the previous meeting held on 8 March 2021 be approved as a correct record.

4.

Matters arising

[To consider any matters arising from the minutes]

Additional documents:

Minutes:

There were no matters arising.

5.

Accounting Estimates for the West Midlands Pension Fund pdf icon PDF 131 KB

[To receive a presentation on accounting estimates for the West Midlands Pension Fund.]

Additional documents:

Minutes:

Rachel Brothwood, Director of Pensions, Darshan Singh, Head of Finance and Tom Davies, Assistant Director – Investment Strategy, provided a presentation on the key accounting estimates for the West Midlands Pension Fund, that would be included within the Council’s financial statements this year.

 

The West Midlands Pension Fund’s annual Statement of Accounts for 2020-2021 are prepared and the audit arranged in conjunction with Grant Thornton. The Fund’s Accounts are prepared under the same guidance applicable to the City of Wolverhampton Council, ’The Code of Practice on Local Authority Accounting in the United Kingdom for 2020-2021’.

 

The Committee were advised that the Fund faces complexities when valuing some of the Fund’s assets and liabilities at year end and the key areas where the Fund’s valuation measurements, are based on estimation techniques in the absence of independently verifiable and objective pricing sources are valuation of level 3 investments, calculation of pension liabilities and estimation of accruals.

 

Where applicable, the Fund employs external experts to obtain accurate estimates when independent pricing is unavailable. For example, a Royal Institute of Chartered Surveyors – specialist firm, would assess the value of direct property holdings held by the Fund and the calculation of the pension liabilities is performed by a qualified Actuary in a professional Actuarial firm.

 

For other ‘Level 3’ assets such as Private Equity holdings, the valuation at year end is often estimated from the last valuation report received during the year rolled forward to end of March based on cash flows to and from the Fund’s assets.

 

In response to a question on the Fund’s local investments within the region, the Director of Pensions confirmed these included harder to value assets such as Direct Property holdings and loans to local SME and projects, noting there was both regional focus and initiatives undertaken to enhance value within the portfolio, for example through developing enhanced environmental credentials on some assets, which would be reflected in valuations over time.

 

The Committee were advised that internal oversight processes include scenario stress tests to assess long-term economic circumstances, based on individual assets. 

 

Resolved:

That the presentation provided by the West Midlands Pension Fund on key accounting estimates be noted

6.

Assessment of Going Concern Status pdf icon PDF 146 KB

[To receive an update on the assessment of going concern status.]

 

Additional documents:

Minutes:

Alison Shannon, Chief Accountant, presented the Assessment of the Going Concern Status. The Committee were advised that the Council is required to compile its statement of accounts in accordance with the CIPFA Code of Practice on Local Authority Accounting.  In accordance with this code, the Council’s Statement of Accounts is prepared assuming it will continue to operate in the foreseeable future. 

 

The Committee were advised that the main factors identified within the assessment of going concern status consisted of;

Current financial position;

Projected financial position;

Governance arrangements;

Control environment in which the Council operates.

 

The Council’s Going Concern Assessment showed in Appendix 1 outlined the Council’s current financial position, which was a positive outturn position for 2020-2021 with a net contribution to the general fund of £651,000, as presented to Cabinet on 16 June 2021. The Committee were advised that the Council were able to set a balanced budget for 2021-2022 without the need to use general fund reserves but is faced with a projected budget deficit of £25.4 million from 2022-2023 rising to £29.5 million from 2023-2024. 

 

Claire Nye, the Director of Finance reported that for the period reported, the Council is confident that it remained a going concern but requires a longer- term funding strategy from Government in order to develop a longer-term sustainable plan.

 

The Chair commended the audit team on the positive work done during the pandemic to support the public and businesses.

 

It was agreed that Director of Finance, would provide Councillor Andrew McNeil with further details regarding the increase on the general fund and reserves.

 

Resolved:

  1. That the Assessment of Going Concern Status be noted.

That it be agreed that Director of Finance, would provide Councillor Andrew McNeil with further details regarding the increase of the general funds and would provide more detail.

7.

Review of Compliance with the CIPFA Financial Management Code pdf icon PDF 460 KB

[To receive an update on the review of compliance with CIPFA financial management code.]

 

Additional documents:

Minutes:

Claire Nye, Director of Finance, presented the report on the review of Compliance with the CIPFA Financial Management Code.

 

The new Financial Code 2019, introduced by CIPFA, places increasing focus on the management of the Council’s finances. The Committee were advised that the Council is required to demonstrate that it is working towards this code and will be fully compliant by 2022. The Committee were presented with the first literation of the self-assessment on the Council’s performance against the Code. The Committee were advised that the new Financial Management Code is a useful tool that demonstrates good practice and assurance across the Council’s financial management.

 

The Committee were advised that the assessment demonstrates our compliance with the code. The Council has good financial management, very clear lines of reporting, transparent decision making and good budget monitoring. Budget managers are responsible for reporting on their budget monitoring with support and challenge from Finance, therefore promoting ownership across the authority and a one Council approach.

 

The code however highlights a few areas which could improve our performance and where work is already underway. 

 

One area was value for money, whilst the Council does deliver on value for money, we could be demonstrated in more detail. The Council will be looking to increase the use of benchmarking and making this more visible along with embedding the performance framework approved by Cabinet in March, around Relighting Our City, and strengthening the link between performance and finance.

 

Medium Term financial planning is another area which could be strengthened. The Council assesses its resilience over the medium term, and provides robust forecasts on demand and risk, however, currently we do not have a balanced budget over the medium term. Whilst this is in part due to the uncertainty around Government funding, it is also around how the Council best operates within a changing environment.

The Committee were advised the final area was around enhancing our work around options appraisals. There is good project management framework in place, but work was underway to see how this can be more agile and flexible, to ensure that responses are actioned more quickly when required.

 

The Committee asked if this document would be shared externally. The Director of Finance advised that was being presented to Committee so to be transparent and that the Auditors would have access to this and may use it as part of their assessment.

 

Further detail regarding the elements of the waterfall-based approach would be bought to a future meeting.

 

Resolved:

That the Council’s Review of Compliance with the CIPFA Financial Management Code be noted.

8.

Annual Governance Statement pdf icon PDF 267 KB

[To receive the annual governance statement.]

Additional documents:

Minutes:

David Pattison, Director of Governance, presented the report on the Annual Governance Statement.

 

The City of Wolverhampton Council was responsible for producing the Annual Governance statement 2020-2021, to ensure that governance arrangements, Council functions and management of risk was in line with the Local Government Act 1999.

 

The Committee were advised that this financial year, the Council had demonstrated that it was within budget, practiced good governance and decision making.

 

The Committee were advised that the Council’s Constitution had been updated and presented during the Annual General Council on 19 May 2021.

The Council’s governance arrangements were adapted, and the emergency action powers was updated, to ensure streamlined decision making, relating to budget and other matters as a response to the pandemic.

 

The Committee were advised that David Pattison would provide members with a 6 - monthly update regarding the Annual Governance Statement.

 

Resolved:

That the contents of the Council’s Annual Governance Statement for 2020-2021 be noted.

9.

Grant Thornton 2019 - 2020 Annual Audit Letter pdf icon PDF 130 KB

[To receive an update from the external auditors, Grant Thornton.]

Additional documents:

Minutes:

Jon Roberts, External Auditor – Grant Thornton, presented the report on the Grant Thornton 2019 – 2020 Annual Audit Letter.

 

The Annual Audit Letter provided by Grant Thornton outlined the key findings from the work carried out at the Council for the previous financial year, ending 31 March 2020. 

 

The Committee were advised that any fee variants identified within the report resulted from more work undertaken by Grant Thornton. The Committee were advised that statutory audit fee is determined and agreed by (Public Sector Audit Appointments) PSAA, which has now been finalised.

 

The Governments lockdown restrictions imposed as a response to the pandemic forced the 2019-2020 audit to be completed using technology rather than face to face. The Committee were advised that remote working had had some positive advantages and future audits would probably be undertaken using be a hybrid approach.

 

The Committee were advised that the recommendation on the Annual Governance Statement (AGS) asked for more emphasis to be included for the wider group – the committee had received this year’s AGS at this meeting.

 

A recommendation on the Councils scrutiny and challenge of the external valuer’s report was also included. The Committee were advised that the challenge and processes have been significantly enhanced for the 2020-2021 financial year.

 

It was agreed that Alison Shannon, Chief Accountant, would provide Councillor Andrew McNeil, with the presentation from the valuers which was presented at a previous Audit and Risk Committee.

 

It was agreed that David Pattison, Director of Governance, would follow up with Councillor Jonathan Yardley, outside of the meeting regarding his query on value engineering risk associated with the Civic Halls. 

 

Resolved:

  1. That the Annual Audit Letter provided by Grant Thornton, be noted.
  2. That it be agreed that David Pattison, Director of Governance, would follow up with Councillor Jonathan Yardley, outside of the meeting regarding his query on value engineering risk associated with the Civic Halls. 

That it be agreed that Alison Shannon, Chief Accountant, would provide Councillor Andrew McNeil, with the presentation from the valuers which was presented at a previous Audit and Risk Committee.

10.

Grant Thornton 2020 - 2021 Audit Plan pdf icon PDF 138 KB

[To receive an update from the external auditors, Grant Thornton.]

Additional documents:

Minutes:

Jon Roberts, External Auditor – Grant Thornton, presented the report on Grant Thornton 2020 - 2021 Audit Plan for noting.

 

The Audit Plan for the year ended 31 March 2021 within Appendix 1, outlined the planned scope of external audit work that covered areas of risk, materiality and value for money arrangements.

 

The new approach to value for money was reassessed with the National Audit Office, to produce a new code of audit practice. The Annual Audit Letter would be replaced with an Auditors Annual Report, which would not require the Council to qualify/unqualify. Grant Thornton would continue to report on benchmarking and best practices and would provide commentary/ observations, regarding three areas of the City of Wolverhampton Council including;

Governance;

Financial sustainability;

Arrangements for improving economy efficiency and effectiveness.

 

Resolved:

That the Audit Plan 2020 - 2021 from the Council’s external auditors, Grant Thornton, be noted.