Agenda and draft minutes

There were no apologies.

There were no declarations of interest.

The minutes of the meeting held on 22 January 2025 were approved and signed as a true record.

These must be received no later than 12 noon on the seventh working day before the date of the meeting

There were none.

Report of external auditor, Bishop Fleming

TO FOLLOW

Nathan Coughlin of Bishop Fleming, appointed auditor for 2023-24, introduced the report as published. He highlighted the following points:

• Due to Grant Thornton giving a disclaimed opinion for 2022-23, a disclaimer opinion has been provided for 2023-24. This reflects that the prior year accounts, opening balances and comparatives were not audited so Bishop Fleming have not been able to take assurances over these areas. Assurances will be built back over financial statements, balance sheets and reserves going forward.
• Financial statements were signed off by Grant Thornton in December which created a tight deadline for the backstop date in February. Initial focus has been on the balance sheet as this reflects the financial position as of March 2024.
• A number of areas on the balance sheet have not been examined, primarily relating to valuations. In agreement with management, full valuations will be carried out at March 2025 year-end. Work has been carried out on additions and disposals.
• Detailed testing has not been carried out on the consolidation but underlying testing has been carried out around Cheltenham Borough Homes (CBH). Bishop Fleming are also the external auditors for CBH so have assurance over the related numbers and will be comfortable when this is reviewed next year.
• There was little value in spending significant time on assessing the value of investment in Gloucestershire Airport. Greater clarity on the valuation that can be achieved will be available next year due to its commercial sale, which will be included in the group financial statement.
• There’s a lack of clarity across the sector on how to build back assurance on the reserves due to the number of reserves and the complexity of the accounting treatments. A number of technical leads and accounting firms are working with the Financial Reporting Council (FRC) on how to progress beyond this position. A technical solution is expected to emerge in the next year.
• There are some minor amendments and cosmetic changes still required to the accounts which are being carried out by management to ensure they are as correct in terms of the Accounting Standards as possible by the deadline. Approval is sought subject to these changes so that the documents can be signed later in the week.
• One area of significant adjustment is connected to the accounting for the pension fund. A very complex accounting area that has moved over recent years, particularly in relation to net asset positions in the balance sheets. The actuaries first calculation of the council’s share showed a net position of £9m but after the application of an asset ceiling, which takes into account additional contributions in the future, the scheme’s overall deficit results in a negative valuation. That final adjustment takes it down to a technical accounting liability of £24m. There was also a £1m unfunded pension liability which needs to be recognised within the balance sheet.
• Minor control recommendations have been made, reflecting that things are generally well controlled throughout the organisation.
• He thanked the Finance Team for their level of engagement  ...  view the full minutes text for item 5.

Report of external auditor, Bishop Fleming

TO FOLLOW

Nathan Coughlin of Bishop Fleming, appointed auditor for 2023-24, introduced the report as published. He highlighted the following points:

·         The Value for Money report had not been exempt as part of the backstop in the previous year and had been submitted to the Committee by Grant Thornton. Bishop Fleming have reviewed their findings and carried out their own assessment.

·         They considered three key areas in their assessment – financial sustainability, governance, and improving economy, efficiency and effectiveness. A baseline review has been carried out of core processes and arrangements in place for each area which had not revealed any significant weaknesses. Future years will dive into some areas in greater detail.

·         A risk based approach to the audit has been taken with a risk assessment carried out at the start, which considered points raised by previous auditors, minutes and regulators’ requirements.

·         Whilst no significant weaknesses were identified, a number of recommendations have been made. Three were previously recommended by Grant Thornton and have been partially implemented. Three new recommendations have been made by Bishop Fleming, two of which, risk management and procurement, were already in the process of being revised and improvements made. The final recommendation relates to the need for continued careful monitoring and increased scrutiny of the level of debt in the organisation due to the risk and level of projects that are ongoing.

The following responses were received to Members’ questions:

·         The slight concerns around borrowing highlighted in the report relate to difficulty in getting clarity on short-term borrowing against the Housing Revenue Account (HRA). Significant work is being carried out on the longer HRA plan which will ensure the council is not borrowing against the replacement of components. Additional concern was raised around the level of short-term borrowing with interest rates higher than they were both in the short and longer term. A number of councils have reported higher budget outturns than projected due to interest rates remaining higher than expected but this also leads to significant borrowing being more expensive, especially with short-term fixed rates.

·         Officers are comfortable with the council’s net budget requirements of just over £20m approved by the Council as gross turnover is far higher than this due to the HRA. There is around £200m in borrowing which is split relatively equally between the General Fund and HRA. The borrowing against the HRA is considered reasonable when divided across the properties owned by the council. They recognise that the concerns raised by Bishop Fleming reflect challenges due to wider factors including high interest rates, the war on Ukraine and cost inflation (particularly within the building trade). This has not been adequately offset through the rent increase, due to the calculation taking place in September, when the Consumer Price Index (CPI) was lower than has been seen since. Significant scenario testing will be carried out on the HRA and Members may need to make difficult decisions on how to balance the three big financing demands on the HRA – new build, achieving decent  ...  view the full minutes text for item 6.

Report of Gemma Bell, Director of Finance and Assets (Deputy S151 Officer)

TO FOLLOW

The Director of Finance and Assets introduced the report as published. She highlighted that this is the final draft of the 2023-24 statement of accounts, initially published at the end of May 2024. All the adjustments included in the external auditor’s report have been completed. A number of cosmetic changes remain which will be completed during the week to allow the accounts, subject to the committee’s approval, to be signed and published with the external audit disclaimer opinion by the backstop deadline. No further material changes are expected. The Director of Finance and Assets and the Chair thanked the Chief Accountant, the Finance Team and Bishop Fleming for their hard work and collaborative approach to completing within such a challenging time frame.

Members’ noted some potential errors within the tables on pages 64, 67 and 70. They agreed that the Finance Team would review these figures and make any changes required but that it was not necessary to delay the approval of the accounts prior to this work being completed.

RESOLVED (Unanimously) THAT:

1. They noted the final draft of the statement of accounts 2023/24; and

2. Subject to any material changes to the accounts between the committee date and the backstop date of 28 February 2025, authority has been delegated to the Chair of the Audit, Compliance and Governance Committee to sign the final accounts and management letter of representation 2023/24.

There were no other items or urgent business to be considered.

To be confirmed   

The next meeting is scheduled for 28 May 2025.