Agenda and minutes

To receive any apologies for absence.

Apologies were received from Cllr J Wright and also Cllr A Wyer who was substituted by Cllr F Letch.

Committee to note the protocol for holding remote meetings.

The protocol for remote meetings was noted.

To receive any questions relating to items on the Agenda from members of the public and replies thereto.

Mr Nick Quinn, a local resident, stated that his questions concern: Agenda Item 12 – Grant Thornton Findings 2019/20.

Firstly; on page 21 of the report, at the bottom of the ‘Findings’ column, the auditors refer to ‘3 Rivers Governance Reports’ and ‘the 17 recommendations approved by Cabinet’.

The Auditors state that the most critical of these recommendations is:

“That 3 Rivers Developments Ltd suspends any new site purchases and the commissioning of work relating to sites where construction has yet to be started, until the appointment of new Directors, in accordance with recommendations 3 and 4, has been completed and their subsequent updated business plan has been approved”.

They continue: “For clarity, recommendations 3 and 4 relate to the recruitment of a Finance Director with construction industry experience to replace Mr Jarrett, as soon as possible, and a suitable Director or Non-Executive Director with regional property development experience to complement and strengthen the existing board arrangements”.

My question on this section is:

If the Auditors were confident that these recommendations are suitable to be made in an open report - why did Audit Committee judge, at their last meeting, that they should be withheld from the Mid Devon Public?

Secondly; on page 27 - in the ‘Impact of Unadjusted Misstatements’ section, the Auditors make reference to the agreed settlement of a ‘longstanding contractual dispute’ which is likely to cost the Council around £600,000.

The loss of £600,000 will have a significant impact on the Council finances this year and it will, no doubt, affect the Mid Devon Council Tax payer.

My question on this section is:

In the light of this loss - Will Audit Committee be asking for any actions to be taken?

The Chairman thanked Mr Quinn for his two questions and stated that he would begin by responding to the first question:

The meeting held on the 23rd June 2020 was a special Audit meeting to consider the 3RDC governance review documents.

The report was some 122 pages in total and encompassed an amount of detail that is considered exempt, this included details of commercial confidentiality and personal data.

The approach taken was consistent with that taken across all MDDC meetings when considering part two discussions, that being committee are asked to consider the item to be discussed and to decide if they wish to hear the item in part two.

At the meeting of the 23rd June this was the approach taken by myself as chair and after a round table discussion committee voted to hear the report in part two.

This was again consistent with the discussions and outcomes at the Cabinet and scrutiny meetings that had previously considered the same reports.

With regard to the second question, the Chairman stated that, save for the fact of settlement and the amount, the details of the dispute are subject to a settlement agreement – and therefore confidential. 

This was a longstanding contractual dispute which could have resulted in high-risk, high stakes litigation.  The  ...  view the full minutes text for item 29.

Councillors are reminded of the requirement to declare any interest,

including the type of interest, and reason for that interest, either at this

stage of the meeting or as soon as they become aware of that interest.

Cllr A Wilce declared a personal interest in that he had asked a question with regard to the 3 Rivers Development Company at the last meeting.

No other interests were declared under this item.

Members to consider whether to approve the minutes as a correct record of the meeting held on 23 June 2020.

The minutes of the special meeting held on 23 June 2020 were confirmed as a true and accurate record.

To receive any announcements that the Chairman may wish to make.

The Chairman informed the Committee that the Devon Audit Partnership had met virtually on 14 July 2020. The Chairmanship of this group was undertaken on a rolling basis each year. In the previous financial year he had been the Chairman but this had now passed to Cllr George Gribble from Devon County Council. He and Cllr A Moore would continue to attend future meetings as the Mid Devon District Council representatives.

The Cabinet Member for Climate Change will be present to assist the Committee in understanding what actions have been identified as easy to do, what maybe more medium term, plus any high investment opportunities whilst also recognising the severe restrictions on the Council’s budget.

The Cabinet Member for Climate Change had been invited to attend the Audit Committee to provide an update and to explain what actions had been identified as ‘easy to do’, what may be more medium term, plus any high investment opportunities whilst also recognising the severe restrictions on the Council’s budget.

She explained that the emerging Climate Plan had passed through the Environment PDG and it was hoped that the final version would be brought before the Cabinet next month. This plan looked at where the Council was now within the context of the Council’s finances and examines what it would cost to make small changes right away. She was in regular contact with different Council departments where changes could be made and this work had already thrown up some opportunities.

The Plan also set out an approach where by an opportunity was examined in terms of what the benefits could be and what the financial cost would be to the Council.

There was a great deal of collaborative work taking place across Devon and a Citizens Assembly was planned for 2021.

As a priority, carbon literacy training would be taking place across the Council in areas such as housing and waste collection. Currently there were lots of conversations taking place regarding cycling and walking and they were working with the Solar Together Scheme.

Additionally a large part of the work in this area centred around the communication of all these initiatives. Plans and opportunities needed to be relayed both in terms of what the Council was doing but also what was happening in local communities to push this agenda forwards.

The Group Manager for Corporate Property and Commercial Assets explained that the Emergency Action Plan had been considered by the Scrutiny Committee in June and that there was a tracking process within the document to monitor the progress of actions within the plan, for example, identifying the ‘end of life’ of particular assets such as old boilers that could be replaced by gas boilers that could also be run on hydrogen.

Grant funding was being applied for to help improve the housing stock with a view to reducing our emissions on our housing stock, enhancing the assets energy efficiency further. Procurement and the supply chain was also being examined as part of this process. He reiterated the point that all officers would be trained and he informed the Committee that the website would be constantly updated regarding the actions taking place.

Discussion took place regarding:

·         How the Leisure Centre recharging scheme was going? It was explained that the electric recharging points were very well used. Monthly data could be circulated to Members. This was an important element in trying to encourage green travel within the district.

·         The comment was made that it was vital to look at the ‘whole life’ costs of introducing new initiatives, for example, the manufacture of a hydrogen boiler took three times the amount of energy than a traditional type, although the long term benefits  ...  view the full minutes text for item 33.

Initial verbal discussion to take place as to whether there are adequate checking procedures in place for the administration of Covid 19 grants undertaken by this authority.

The item had been brought to the Committee as a result of the Chairman attending a DAP meeting and needing his Committee to discuss whether, given the amount of money involved, there were adequate checking procedures in place for the administration of Covid 19 grants undertaken by this authority.

The Group Manager for Revenues and Benefits informed the Committee that approximately 1,700 grant payments had been made using a system called Spotlight which was the Government recommended tool and was free. The Group Manager for Performance, Governance and Data Security had signed the Council up to the National Fraud Initiative (NFI) to help identify fraud in this area. The results so far had been extremely favourable with just a few applications being identified as a potential risk. This Council’s approach had been to request more information from an applicant than the Government had required it to do prior to payment.

The Council had been pushed by the Government to release grants as quickly as possible. The Government had also issued guidance on how it wanted fraud tracked with any instances needing to be reported back to central Government.

In the initial stages of Covid 19, fraud had been rife but had now settled at a national average of between 3 to 5%.

Discussion took place with regard to:

·         The amount paid out, which totalled circa £22m and this included both primary and discretionary payments.

·         Large rather than small batches would be processed through the NFI system which would help to reduce costs.

The Deputy Chief Executive (S151) wished to place on record his thanks to the Revenues and Benefits team and also the Economic Development team for all their hard work in recent months. Most people had received their grant within 24hours of applying for it. The Chairman also requested that the thanks of the Committee be taken back to the relevant teams.

To receive a report from the Group Manager for Performance, Governance and Data Security providing the Committee with an update on performance against the Corporate Plan and local service targets for 2020-21 as well as providing an update on the key business risks.

The Committee had before it, and NOTED, a report * from the Group Manager for Performance, Governance and Data Security updating it on performance against the Corporate Plan and local service targets for 2020/21 as well as providing an update on the key business risks.

The contents of the report were outlined and a brief discussion took place regarding:

·         The data before the Committee presented the first results for the 2020/2021 financial year.

·         The Environment and Climate Change splits were identified within the report.

·         Recommendations in relation to an external review of the 3 Rivers Governance Arrangements appearing to be behind schedule in the risk mitigating actions. This was partly due to the limitations of the SPAR system which was the software used to record performance data. However, the Leader informed the Committee that the Cabinet would be monitoring all 17 recommendations made regarding this issue. There would be no hold up but due to the large number of recommendations it would take some time to work through them.

Note: Report * previously circulated; copy attached to the signed minutes.

To receive a report from the Group Manager for Performance, Governance and Data Security presenting the Committee with the finalised Annual Governance Statement and Action Plan (Appendix A) and accompanying Corporate Governance Framework (Appendix B) for 2019/20.

The Committee had before it a report * from the Group Manager for Performance, Governance and Data Security presenting it with the finalised Annual Governance Statement (AGS) and Action Plan and accompanying Corporate Governance Framework.

The contents of the report were outlined and consideration was given to:

·         Feedback had been sought from Members at a training session in July.

·         Section H was new and had been inserted to take consideration of Covid 19 implications on governance and the Council’s response.

·         Clarification had been provided within the Statement about Part II business and meeting recordings. However, discussions were on-going with Members about the treatment of Part II reports going forwards since it was felt that ‘other limited circumstances’ had not yet been fully identified. A question was asked as to what percentage of business had actually been undertaken in Part II? An answer would be circulated to all Members after the meeting.

·         Members had requested that the majority of reports presented to them in the future would be in Part I with any Part II information presented in a separate appendix.

·         The AGS now had an update in relation to equalities and it included reference to the appointment of a new Cabinet Member with responsibility for Climate Change.

·         Mention was also made of the fact that the Executive arrangements of the Council were currently under review.

·         The Main Accounting system had received a good audit although the internal audit of the Development Control system for monitoring S106 agreement had identified the need for improvements.

·         The Corporate Risk Register would closely monitor risks in relation to 3 Rivers.

·         The Action Plan would monitor the roll out of the HR ‘Evolve’ programme and the new Appraisal and Competency processes.

·         The Corporate Governance Framework column in relation to ‘Periodic Documents’ now included Register of Interests and Statement of Community Involvement. Also under ‘Contributory Processes’ the Equalities Forum and Net Zero Advisory Group were included.

·         Phishing emails presented a considerable risk and should not be opened but forwarded to the IT security email address and then deleted.

RESOLVED that the Annual Governance Statement be approved and that the Leader of the Council and the Chief Executive sign the Statement as per the statutory guidance.

(Proposed by the Chairman)

Reason for the decision:

Regulation 6(1)(a) of the Accounts and Audit Regulations 2015, require an authority to conduct a review at least once in a year of the effectiveness of its system of internal control, and to include a statement reporting on the review with any published Statement of Accounts. Regulation 6(1) (b) of the Accounts and Audit Regulations 2015 require that for a local authority in England the statement is an Annual Governance Statement (AGS). The AGS must be signed by the Leader and Chief Executive and be published with the Statement of Accounts.

Note: * Report previously circulated; copy attached to the signed minutes.

To receive a report from the Deputy Chief Executive (S151) presenting the final version of the annual Statement of Accounts to Members.

(To follow).

The Committee had before it a report * from the Deputy Chief Executive (S151) presenting the final version of the annual Statement of Accounts highlighting any areas which have been amended since the draft accounts were published on the website and presented for external audit in June.

The Deputy Chief Executive (S151) outlined the contents of the report and provided the following summary of the main points:

He stated that here were four reports that need to be jointly considered; the AGS; the accounts; the Audit Findings Report from Grant Thornton and the Letter of Representation, supplied to Grant Thornton.

He continued….we are now arriving at the conclusion of the annual audit process. In a separate agenda item to be discussed you will hear from the external auditors, Grant Thornton, when you will be asked to consider their Audit Findings and the Letter of Representation.

·         The statements themselves are on pages:

o   44 being the Movement in Reserves Statement

o   46 being the Comprehensive Income and Expenditure Statement

o   47 being the Balance Sheet

o   & 48 being the cash flow

·         These statements account for the General Fund, the Housing Revenue Account and the Collection Fund.

·         General Fund

o   Deficit in the year of £232k

o   General Fund balance at 31 March - £2.252m satisfying the requirement set by Cabinet in January that a balance of at least £2m should be held

o   EMR utilisation in the year £683k – after also allowing for the transfer of Brexit funding received in 2018/19 to the General Fund of £18k balance of GF EMR at 31 March was £13.688m.

o   This represents a healthy level of balances for known future expenditures

o   Details note 6 – page 61

·         HRA

o   Surplus in year was £608k

o   After this was transferred to the Housing Maintenance Fund the HRA balance remained at £2m

o   HRA also carries ear marked reserves of £18.310m

o   This includes the 30 year modernisation reserve of £14.198m. Officers are working on plans to increase the housing stock over the coming years.

o   HRA notes P113–125

·         Collection Fund

o   Mid Devon is a collection authority for council tax and national non-domestic rates (NNDR), and as such, is required to produce a collection fund account for the Mid Devon area. The Council collects council tax on behalf of Devon County Council, Devon Fire and Rescue Service, Devon & Cornwall Police and the Town/Parish Councils, as well as Mid Devon Council itself.

o   The council tax collection rate for 2019/20 was 97.8% (97.8% in 2018/19). This demonstrates how our Revenues section has consistently been effective in collecting the annual charge in extremely challenging economic times. The Non Domestic Rates collection rate was 98.8% for 2019/20 (99.3% in 2018/19

o   Collection Fund notes P126-129

·         Pension Fund – Note 21 – page 72

o   Net liability from the defined benefit obligation relating to the LGPS reduced £541k to £57.785m.

o   Fair value of plan assets £5.375m lower at £60.635m largely due to a downward revaluation of  ...  view the full minutes text for item 37.

To receive a report from Grant Thornton (the Council’s external auditors) presenting their audit findings for 2019 / 2020.

(To follow).

The Committee had before it, and NOTED, a report * from Grant Thornton summarising the key findings arising from the statutory audit of the Council’s financial statements for the year ending 31 March 2020.

The following issues within the report were highlighted:

·         The audit process had been carried out remotely, everybody involved had been very flexible and used different types of IT to progress the audit.

·         ‘Headlines’ within the report were referred to and it was stated that Grant Thornton were proposing to issue an unqualified opinion on the Financial Statements. However, in relation to the ‘Value for Money’ arrangements they anticipated issuing a qualified “except for” conclusion.

·         As was the case with a lot of council’s, the external auditors hadn’t received reassurance regarding the Pension Fund. This was still outstanding.

·         Factors in relation to ‘materiality’ were set out within the report and it was stated that the materiality percentage with regard to 3 Rivers had been revised to reflect the increased risk.

·         Covid 19 would have a significant effect upon the Financial Statements for the following financial year. There had been no significant issues to report this year other than financial sustainability in relation to loss of income.

·         Findings in relation to 3 Rivers were set out within the report.

·         Estimates and judgements in the areas of NNDR appeals and ‘Land and Buildings’ had been deemed to be ‘reasonable’.

·         A Letter of Representation had been requested from the Council. This included specific representations in relation to:

·         Assumptions regarding the impairment of loans to 3 Rivers and all remaining loans being fully recoverable

·         The preparation of the Group Accounts on a going concern basis

·         Confirmation of reasons for not processing the unadjusted misstatement set out in Appendix C.

·         Financial Sustainability continued to be a significant risk as was an anticipated budget gap for 2021/2022.

Note: * Report previously circulated; copy attached to the signed minutes.

To receive the annual Letter of Representation form Grant Thornton.

(To follow).

The Committee had before it, and NOTED, a draft Letter of Representation from Grant Thornton which was provided in connection with the audit of the financial statements of Mid Devon District Council and its subsidiary undertaking, 3 Rivers Development Limited.

It was further NOTED that this needed to be signed by the Deputy Chief Executive (S151) and the Chair of the Audit Committee once all outstanding issues had been resolved.

Members are asked to note that the following items are already identified in the work programme for the next meeting:

·         Performance and Risk

·         Progress update on the Annual Governance Statement Action Plan

·         Internal Audit Progress Report

·         External Audit Progress Report and Update

Note: This item is limited to 10 minutes. There should be no discussion on the items raised.

The following was requested to be on the agenda for the next meeting (in addition to the items already identified within the work programme):

·         Consideration of a Housing Infrastructure Fund (HIF) report as recommended by the Scrutiny Committee

·         Security issues associated with using Outlook as an email system and in particular the risks in relation to ‘phishing’ emails.