Councillor John Hartshorne – other council business

Councillor Steve Young – unwell

Councillor Malcolm Wood – other council business

None.

To confirm the minutes of the meeting held on 14 July 2017

The minutes from the meeting held 14 July 2017 were agreed and signed by the Chair.

Although it was not included on the agenda, the Chair of the Committee agreed that the exclusion of the public, Statement of Accounts 2016/17 – exempt information, and the re-admission of the public should be considered as a matter of urgency in accordance with Section 100b(4)(b) of the Local Government Act 1972. The decision could not wait until the next meeting of Audit Committee, as members of Audit Committee now required exempt information on the statement of accounts in order to make an informed decision.

RESOLVED to exclude the public from the meeting.

RESOLVED to note the exempt information.

RESOLVED to re-admit the public for the remaining agenda items.

Report of the Strategic Director of Finance

Geoff Walker, Chief Financial Officer at Nottingham City Council, presented a report on the statement of accounts for 2016/17, highlighting the following points:

(a)  the external auditors have completed the audit and reported their findings in the report to committee. As part of the audit, KPMG require the Council to present a management representation letter to confirm that the Statement has been constructed accurately and on appropriate basis and that relevant and complete disclosures have been made. The Statement of Accounts was approved by Strategic Director of Finance Geoff Walker and handed over for audit from 12 June. The report to committee is to give some high level information.

(b)  there are new reporting requirements for 2016/17 which has resulted in significant presentational changes to the accounts. These are designed to make the statement more user friendly, effective and understandable. The cost of services in the Comprehensive Income and Expenditure Account (CIES) is no longer based on the standard headings in CIPFA’s Service Reporting Code of Practice (SERCoP), but is now presented by portfolio to align to internal reporting.

(c)  there is some additional information contained within a new expenditure and funding analysis note. Some items have to be removed before council tax can be calculated, so the report takes out all the items which cannot be included, to arrive at the figure chargeable for council tax;

(d)  the narrative report replaces the explanatory forward on previous statements of account, and helps to set the scene;

(e)  therehave been some minor amendments to the draft version of the statement of accounts, which was published on the Nottingham City Council website in June – the changes have been agreed with KPMG and incorporated into the final version. There have been no changes to the key financial statement which impact on the General Fund or Housing Revenue Account. The figures on the balance sheet between short and long term debtors have been reclassified to align them to the PFI (Private Finance Initiative) model used;

(f)  the figure showing a revaluation gain for council dwellings is now shown separately as an exceptional item, this is just an accounting entry and does not represent any available extra funds;

(g)  there have been some minor changes in the notes to provide further clarity, and the group accounts are yet to be received.

RESOLVED to delegate authority to the Chair of Audit Committee to:

(1)  formally sign off the statement of accounts 2016/17 once the information on the group accounts is complete;

(2)  sign the draft letter of representation.

Report of KPMG

Tom Tandy and Tony Crawley, from external auditors KPMG, presented their report to the Committee, highlighting the following points (page numbers refer to pages within the supplementary agenda pack):

(a)  page 176 lists those issues still outstanding, including resolution of the impact of estimated pensions data, which is further detailed on page 180. There has been a particular issue whereby estimated data being used may present too wide a margin of error. Every 3 years the pensions data is evaluated country wide. Nottingham City Council’s scheme is run by Nottinghamshire County Council. Data was requested for 3 years to 15/16 and the actuary then completes a member by member analysis and updates the viability, which then sets contribution rates from 17/18 onwards. Because of an issue between Nottingham City Council and Nottinghamshire County Council systems, estimated data was used for 15/16. The actuary initially appeared to be comfortable using estimated figures, but it became apparent that there was a significant difference between estimates and actual figures. KPMG then brought in their own actuary to assess the issue, and to clarify whether the difference in the estimate will cause a material impact to the actual figure. An answer is expected in the next few days;

(b)  no issues have been raised from citizens. Electors can challenge accounts and asks questions but nobody has. A certificate can now be issued to close the audit, and an unqualified value for money conclusion produced;

(c)  page 181 sets out the risk of the significance of the subsidiaries of the group accounts, following on from discussion at the July 2017 meeting of the Audit Committee. One of the components had significantly increased, and KPMG assessed all components and group members to see if there were any other significant components. Given the significance of growth, RHE (Robin Hood Energy) will need to be monitored, and Nottingham City Council colleagues have kept KPMG informed on these developments. KPMG have liaised with BDO (auditors) and need them to confirm their procedures, which will be closed off alongside the auditors’ statement;

(d)  also detailed on page 181 are 2 standard risks. KPMG look at 2 areas: fraud risk of revenue recognition, and management override of controls. These are not usually issues within the public sector, as the motivations do not exist as they do within the private sector, but these risks are an audit industry standard and so must be addressed;

(e)  page 182 details other areas of audit focus – issues which do not qualify as a significant risk but are still important. The income and expenditure account has been revamped, and as a result it looks quite different. Last year’s figures have also been revamped so as to provide some comparative figures;

(f)  on page 183, further detail is provided about property valuation of Nottingham City Council housing stock. The government has applied a discount value to council tax dwelling of 42%, an increase from 34% for the previous year. This has led to a significant revaluation  ...  view the full minutes text for item 24.

Report of the Director of Strategic Finance

Shail Shah, Head of Audit and Risk at Nottingham City Council, presented a report on the annual governance statement 2016/17 to the Audit Committee, and circulated an updated copy signed by the Leader and Chief Executive (attached to the minutes). The interim Annual governance statement came to the Committee in July, and as a result of comments changes were made in the section about the response to the Grenfell residential tower block fire. An additional statement was added on the advice of KMPG, to explicitly state that Nottingham City Council has complied with the CIPFA guidance on the role of the Chief Finance Officer.

Tony Crawley of KPMG indicated that he had reviewed and was satisfied with the annual governance statement as part of the external audit.

RESOLVED to thank Shail for the report, and approve the annual governance statement 2016/17.

Report of the Strategic Director for Finance and theCorporate Director of Strategy and Resources

Jane O’Leary, Insurance and Risk Manager, presented an update to the Committee on the corporate risk register. The report shows those risks which have de-escalated from the risk register into departmental risk management at 2.5, and those which have escalated from departmental risk management onto the corporate risk register at 2.6.  Work is currently taking place on the quarter 2 register, and will be reported to the next meeting of Audit Committee. This work includes discussions which took place at the July meeting about governance arrangements for wholly owned companies.

RESOLVED to:

(1)  thank Jane for the update, and note the risks identified on the corporate risk register.

(2)  select SR13 Social Care Sustainability for review at a future committee meeting.

Report of the Director for Strategic Finance

Shail Shah, Head of Audit and Risk for Nottingham City Council, presented a report on the terms of reference for the review of best practice in company governance. A good discussion took place at the July meeting, covering the scope of the planned review. Work has started and an update will be presented to the November Audit Committee. Governance arrangements need to be in place ahead of approving group accounts again this time next year.

RESOLVED to thank Shail for the update, and approve the proposed terms of reference for the review of best practice in company governance, as detailed in appendix 1 of the report.