Agenda and minutes

To receive any apologies for absence

Apologies were received from Mr Frank Cassidy.

To note any changes to the membership of the Committee

Members were informed that Mr Frank Morgan would be substituting for Mr Frank Cassidy for this meeting only.

There were no declarations of interest made on this occasion.

There were no items on the agenda which required the exclusion of press and public.

To confirm as a correct record the minutes of the meeting of the Committee held on 17 September 2020 (copy enclosed).

RESOLVED that,                 the minutes of the previous meeting held on 17 September 2020 be confirmed as an accurate and complete record.

To consider a report from the Chief Legal Officer (Monitoring Officer).

Members considered a report from the Chief Legal Officer (Monitoring Officer) which presented the final draft of the Annual Governance Statement. The Chief Legal Officer (Monitoring Officer) reminded members that the draft version of the Annual Governance Statement had been considered at the previous meeting of the Audit and Assurance Committee on 29 July 2020. The Chief Legal Officer (Monitoring Officer) informed members that there had been no change since the publication of the draft Annual Governance Statement and the assessment remained that the Council had no significant governance issues.

Members were informed that the Annual General Statement must be up to date at the time of publication and therefore they were being asked to agree in principle the Statement until the External Audit Opinion had been received. Any implications the External Audit Opinion may have for the Annual Governance Statement would be considered at the meeting of Audit and Assurance Committee due to take place on 27 November 2020.

Members sought clarity regarding the £30 million COVID-19 grant funding mentioned within the report. The Director of Finance (s151 Officer) stated that of £40 million total funding £10 million was ring fenced specifically for infection control and it was the remaining £30 million general grant which was being referred to as part of the report. It was AGREED that some further text be added to the Annual Governance Statement to ensure the distinction between funding streams was clear.

The Engagement Lead – Grant Thornton explained that though the Annual Governance Statement could not be finalised until the date of the External Audit Opinion he was able to inform members that they were not intending to seek any further changes to the Annual Governance Statement.

RESOLVED that,                

1)    Members approve in principle the final Annual Governance Statement of Cumbria County Council for 2019/2020 before its publication on the Council’s website.

2)    Members note that the Leader of the Council and the Chief Executive will sign the Annual Governance Statement prior to publication.

To consider a report from the Director of Finance (s151 Officer).

Members considered the Accounts Overview 2019/20 report from the Director of Finance (s151 Officer) which was published as part of the supplement to the agenda.

The Director of Finance (s151 Officer) began by explaining that Grant Thornton had now substantially completed their audit work for the Cumbria LGPS and would present their Audit Findings Report for the Fund at Agenda Item 10. The audit for the Council as a whole was still ongoing and the final Audit Findings Report for the Council’s accounts, together with the audited Statement of Accounts, would be presented to the meeting on 27th November.

The report before members at this meeting provided a comprehensive explanation of the current position on the audit of the Draft Cumbria County Council 2019/20 accounts as at 13th November 2020. It also presented for members’ consideration the Cumbria Local Government Pension Scheme (LGPS) Letter of Representation and the Statement of Accounts for the Port of Workington Accounts 2019/20. The Director of Finance (s151 Officer) asked the Committee to ensure they were content with the information contained within those sections of the report before determining the recommendations.

The Director of Finance (s151 Officer) highlighted the significant challenges presented by the pandemic upon the production of the accounts, and the Annual Governance Statement 2019/20, as well as for the auditor in conducting the statutory audit. Deadlines had been amended by government regulations and both the Council and the auditor had been compliant with these changes.

RESOLVED that,

1)    The contents of the report be noted;

2)    The matters set out by Grant Thornton in the Audit Findings Report – Cumbria Local Government Pension Scheme Audit 2019/20 (Agenda Item 10) be considered and noted, in particular:

                               I.        The headlines (Page 331)

                             II.         Significant Findings (Page 337 to 339)

3)    Management’s decision not to adjust for the item raised in the unadjusted misstatement section of the Cumbria Local Government Pension Scheme Audit Findings Report, be approved (page 343);

4)    The Letter of Representation on behalf of the Council in respect of the Cumbria Local Government Pension Scheme be approved to enable Grant Thornton to issue their audit opinion on the accounts and authorise the Director of Finance, as the Council’s Section 151 (Local Government Act 1972) Officer to sign the letters (Agenda item 7b page 53 to 56).;

5)    The Cumbria County Council Accounts 2019/20 as at 13^th November in readiness for the meeting on 27^th November (Agenda Item 7c page 57 to 238), were considered.

6)    The Cumbria Local Government Pension Scheme Accounts, be approved, including the additional wording to be included in note 22 as detailed at appendix 1 to the report, on behalf of the Council. (Agenda item 7c page 239 to 315).

7)    The Port of Workington Harbour Accounts 2019/20 be approved on behalf of the Council (Agenda item 7e page 317 to 327).

8)    The Director of Finance, as the Council’s Section 151 (Local Government Act 1972) Officer be authorised to sign the Cumbria Local Government Pension  ...  view the full minutes text for item 84.

Members considered the Letter of Representation – Cumbria County Council which provided the auditors with the assurance that their audit had been based upon the complete financial picture up until the date of its signing and that the accounts were in full compliance with the statutory requirements for their production.

The Director of Finance (s151 Officer) provided further detail on the content of the Letter of Representation and highlighted to Members that an updated version would be presented to them at the 27 November 2020 meeting when the external auditor had finished their work on the Council’s accounts.

The Committee received the letter of representation to the Engagement Lead of Grant Thornton regarding the Cumbria Local Government Pension Scheme (LGPS). The letter was provided in connection with Grant Thornton’s audit of the financial statements of Cumbria LGPS for the year ended 31 March 2020.

The Senior Manager – Pensions and Financial Services recognised that the external auditor would be providing further detail regarding the outcome of the Audit Findings Report for the Cumbria LGPS but noted that their report contained no recommendations and stated that the accounts were produced to a very high standard with good supporting documents.

It was highlighted that there had been some immaterial differences found between value of assets captured in the accounts and the subsequent values received from investment managers after the accounts had been produced. It was explained that this often happened due to timing of the receipt of information from the investment managers. However, because the value of the difference was less than 0.1% of the total investments of the Fund it was judged to be highly immaterial.

An explanation of the impact of the COVID-19 pandemic on the investments of the Fund followed, which provided members with the detail of an amendment to be made to the disclosure in the accounts which could be found at Appendix 1 of the report.

Assurances were sought regarding the net pension liabilities of the Council as a contributor to the Fund. The Director of Finance explained that the valuation of the Pension Fund was fully costed by the Fund’s Actuary through the actuarial valuation process but, to comply with International Accounting Standards (IAS), the Council accounts showed the net pension liability as calculated in accordance with IAS 19.  The IAS 19 calculation differs from the actuarial valuation – for example in relation to the assumptions made about the expected performance of investment assets – and can therefore produce a different result. Members were assured that the Council’s contribution rate was set by the Fund’s Actuary to ensure that the Council’s pension fund liability was covered and that there was a fully costed plan to meet those liabilities over the expected 13-year period.

The Vice-Chair asked whether the possibility of a third wave of COVID-19 had been accounted for and was reflected in the expectations of the Fund. The Senior Manager – Pensions and Financial Services stated that the investment strategy was currently being reviewed to ensure that what had been previously agreed was still appropriate. The Director of Finance (s151 Officer) added that updates were provided to employers on an annual basis at the Pension Forum and that the Fund worked closely with its Actuary and Investment Advisors to seek to ensure that employer contributions remained as consistent as possible.

Members considered the Draft Statement of Accounts 2019/20 for Cumbria County Council as at 13 November. The Director of Finance (s151 Officer) introduced the Draft Accounts and detailed the key headlines but explained that the audited Statement of Accounts 2019/20 would be considered at the meeting of the Audit and Assurance Committee that would take place on 27 November 2020.

(To Follow)

The Director of Finance (s151 Officer) introduced this item by providing an update on the Statement of Accounts 2019/20 and explained that the Council’s audited Statement of Accounts 2019/20 would be considered at the meeting of the Audit and Assurance Committee that would take place on 27 November 2020.

The meeting on 27 November 2020 would also consider Grant Thornton’s External Audit Findings – Cumbria County Council 2019/20 as well as the Council’s response to those findings and the Letter of Representation. The final draft of the Annual Governance Statement would also be brought back to the next meeting to consider any implications that may have arisen from the Audit Findings Report. There would be a supplementary agenda published containing these reports which would be released publicly by Wednesday 25 November 2020.

The Engagement Lead – Grant Thornton then provided an update on the progress of the External Audit Findings Report which is covered in Minute 87a.

Members considered the Statement of Accounts which provided a summary of the overall financial position of The Port of Workington. Members were reminded that it was the responsibility of Cumbria County Council to present a separate statement of accounts for the Port which demonstrated fully the compliance with the Harbour Act and the Companies Act in respect of the reporting for the Port.

The External Auditor was able to perform the required limited review on The Port of Workington accounts and the Engagement Lead stated that there was nothing that needed to be brought to the attention of those charged with governance.

The Director of Finance (s151 Officer) described in detail the specific accounting needs of this particular asset and gave assurances to members that if it became necessary to adopt a more formal process of accounting for the Port then the finance team would comply with requirements. A question was raised around the depreciation charge to which the Group Finance Manager- Corporate Accounting explained that the depreciation had been on land and buildings and had been met centrally by the Council. A discussion then took place regarding one member’s view that the Council was subsidising the Port, it was AGREED that this concern be raised in the appropriate forum.

(To Follow)

The External Audit Findings Report for the Cumbria County Council accounts 2019/20 would be considered at the dedicated meeting of the Audit and Assurance Committee on 27 November 2020.

The Engagement Lead – Grant Thornton provided an update on the progress of the External Audit and stated that he anticipated giving an unqualified and unmodified opinion on the financial statements but explained that there would be a material uncertainty in terms of the Council’s share of the property in pooled funds (LGPS) and other property and land.

Further to that an unqualified opinion regarding Value For Money (VFM) was also expected and at this stage the Engagement Lead would not be proposing to exercise any of their statutory duties.

The Engagement Lead from Grant Thornton provided a detailed account of the contents of the External Audit Findings Report for the Cumbria Local Government Pensions Scheme 2019/20.

Members were reminded of the challenges faced by both the Council Finance team and the External Audit team in producing the audited accounts. The overall proposed opinion was unqualified and unmodified with the only issue raised being the direct and indirect held property valuations and the uncertainties raised. This was a national issue due to the volatility of property valuation in the current climate. The External Auditor agreed with the judgement that the 0.1% difference was immaterial, but it was above the threshold that meant it had to be reported to those charged with governance.

The External Audit fee increases had been agreed with the Director of Finance (s151 Officer), it was explained to members that this was due to additional costs of £4,600 because of the implications of COVID-19. These increases, in their view, reflected the minimum amount possible and were still subject to the committee’s approval and the approval of the Public Sector Audits Appointments Limited.

The Engagement Lead thanked all of those involved in the production of the audited accounts and praised the standard of the accounts and supporting statements.

To consider a report from the Group Audit Manager.

Members considered a report from the Group Audit Manager which provided a summary of the work of Internal Audit in the three months to 31 October 2020.

The Group Audit Manager informed members that there had been 6 completed audits in the three months to 31 October. Of the 5 which were risk based 2 had been assessed as providing substantial assurance and 3 were found to provide reasonable assurance, including 2 follow up audits.

In addition to the risk assessed audits there had also been considerable work carried out as part of the COVID-19 Fraud Risk Assessment.

Internal Audit had also been involved in:

·         completing work on 6 grant claims (a total of 8 grant claims certified in the year)

·         provision of admin support on the Multi-Agency Information Cell (MAIC)

·         representation of the Finance Directorate on Silver Command during COVID-19 outbreak

The Group Audit Manager provided an update on the status of the agreed 2020/21 internal audit work plan which included 51 reviews. He reminded members that this was slightly less than the reviews planned for the previous year and that this had been a conscious decision to reflect the impact of COVID-19 in terms of resources and time available until the Head of Internal Audit Opinion is given for 2020/21.

The Group Audit Manager reminded members that in September 2020 he reported to the Audit and Assurance Committee that as a result of delays in starting the 2020/21 planned work, and staff providing wider support to the Council, the COVID-19 outbreak would continue to have an impact on planned work in the 2020/21 audit plan. The Audit team would continue to seek to recover this position up to the date of the Head of Internal Audit opinion on 31 May 2021. It was recognised that Internal Audit would need to, where possible, move the timing of some audit reviews around as a result of key service staff availability due to them dealing with COVID-19 issues.

The Group Audit Manger highlighted the need to continue to work with DMTs and Assistant Directors to progress work in the 2020/21 audit plan whilst remaining flexible and sensitive to the demands being put on those parts of the Councilwhich are considered frontline in responding to COVID-19.

The Group Audit Manager told members that the Chartered Institute of Internal Auditors recognised that the impact of the COVID-19 outbreak would continue to be felt during 2020/21 and the challenges and potential impact this would have on delivering the Head of Internal Audit Opinion for 2020/21. At a CIPFA Special Interest Group meeting on 14 October 2020 the issue of the need for guidance on Head of Internal Audit Opinions for 2020/21 was flagged and it is hoped that this issue would be considered at the CIPFA internal audit planning update webinar.  

The Group Audit Manager concluded by stating his view that Internal Audit continue as planned by seeking to obtain appropriate coverage across the directorates to be able to deliver the 2020/21 Head of  ...  view the full minutes text for item 88.

To consider a report from the Director of Finance (s151 Officer).

Members considered a report from the Director of Finance (s151 Officer) regarding the draft Treasury Management Strategy Statement. The report advised that the CIPFA Treasury Management Code and Prudential Code required the Council to determine its Treasury Strategy and Prudential Indicators on an annual basis in advance of the new financial year. The draft Strategy in Appendix 1 of the report would be presented to full Council in February 2021 for review and approval.

The draft 2021/22 Treasury Management Strategy contained no changes of substance to the 2020/21 strategy approved by Council in February 2020.  However, members were informed that a number of further technical updates would be made to the report before being presented to Council in February 2021. These included updating the report for the most up to date interest rate forecasts and investment / long term borrowing position and the inclusion of the Prudential Indicators 2019/20 to 2025/26 which would incorporate the treasury management implications of the capital programme that was recommended by Cabinet to Council in February.

The Senior Manager - Pensions and Financial Services reminded members that the primary function of the Treasury section within the Finance team, was to manage the cash flow planning (both in the short and longer term) to ensure that the Council could meet its revenue and capital spending obligations.

An overview of the strategy was provided which set out the parameters of the treasury management activities during the year with regards to investments and borrowing it also included details of the Council’s Prudential Indicators, Minimum Revenue Provision statement and the economic context.

The proposed borrowing strategy for the next financial year was to remain consistent with the current strategy, with a continuation of using cash balances to cover internal borrowing and taking tactical decisions regarding external investments when considered appropriate. Members were reminded of the key principle of the Council’s strategy which was to borrow only to finance long term capital spend and not in advance of need purely to generate a return.

The proposed investment strategy would also remain unchanged. The Senior Manager – Pensions and Financial Services summarised the strategy by stating that priorities would remain security first, then liquidity and then yield. She set out how the priorities would be achieved through robust counterparty selection and the setting of limits.

The Senior Manager – Pensions and Financial Services highlighted that the Council’s Prudential Indicators reflected both affordability and sustainability and stated that the Council’s Minimum Revenue Provision policy would also remain unchanged.

The Chair thanked the Senior Manager – Pensions and Financial Services and summarised the findings of the members training session held on 18 November regarding the Treasury Management Strategy. The Director of Finance (s151 Officer) provided further assurance to members that the Council’s Treasury Management responsibilities were taken very seriously and that decisions on borrowing were only ever taken with great caution. The Chair said the strategy had proved very successful in previous years and had meant that the Council had fared very  ...  view the full minutes text for item 89.

To note the Forward Plan for the Audit and Assurance Committee and agree any additional items (copy enclosed).

The Chair confirmed that the topic of the Deep Dive for the January meeting of Audit and Assurance would be ‘Winter Pressures’.

The next meeting will be held on 18 January 2021 at 10:30am via Microsoft Teams.

The next meeting of the Audit and Assurance Committee would take place on 27 November 2020 via Microsoft Teams.