Agenda item

To consider the document received from the External Auditor, Grant Thornton.

The Engagement Lead, Grant Thornton circulated a copy of the redacted letter and statement of reasons which detailed the outcome of a process which commenced with a member of the public who had placed an objection on the 2018/19 financial statement under the provision of the Local Audit and Accountability Act 2014. The letter detailed the issues raised to Grant Thornton, the work they had undertaken and the reporting back to the objector of the conclusion.

The Engagement Lead referred to the matter which was discussed at the last meeting of the Audit and Governance Committee. The objection related to the grant funding mechanism used in respect of the Pinhoe Community Hub.  He confirmed that since the statement of reason was issued, no further expenditure had occurred from the earmarked reserve set up for this matter. There were no other significant concerns identified in the 2019/20 financial statements as stated earlier in the meeting.

The Director Finance stated that given the issues raised over the legality of grant expenditure made by the Council, it was important that he provided some context in this regard. He referred to February 2016, just prior to the decision for the Pinhoe Community hub, when a resolution was passed at Council to allow funds from the New Homes Bonus to be spent in the following way, with a £1.1m top sliced for revenue and a sum £150,000 to be set aside for community projects. Consideration of this sum was made at the particular Committee, with £39,000 for ward grants. A report came to the Executive on 11 October 2016 with a recommendation to Council on 18 October to approve a sum of £100,000 as Exeter City Council’s contribution to a new community hub planned for Pinhoe. There were no conditions attached to the approved sum.

A Member asked a number of questions which the Engagement Lead, Grant Thornton responded in the following terms:-

·                he acknowledged the comment on the £10,000 seed fund and need for appropriate records, but he would have anticipated that any expenditure through the Council would be subject to the relevant approval process as set out in the Scheme of Delegation. Not every company organisation would be able to produce a full financial statement under the Companies Act, thus making the raising and authorisation of invoices to a third party difficult.

The Director Finance also responded to the Member who was also concerned over expenditure made by the Council and having matched to submitted invoices to offer an appropriate audit trail. The purpose of the seed funding was to support the new project and enable initial payments to be made as part of that work. It would not be appropriate for the City Council to pay any of the suppliers for the Pinhoe Community led project directly. An invoice would then be made to the City Council to replenish the stake amount to continue the project.

·           from an audit viewpoint, any new grant awarded under Exeter’s grant programme should follow the process outlined for the 2019/20 financial year. The recommendations in the Statement of Reasons were to ensure there was an appropriate review of the implementation of the grant policy, with any conditions associated with the grant fund would be clearly articulated as well as the maintenance of an adequate audit trail. A post implementation review has been recommended.

·                an external audit of the grants made would depend on the size and value of the grant awarded and identified in the financial statement, and also if it was selected as part of an audit sample when they would wish to see supporting documentation.

·                the Councillor‘s Code of Conduct states that Councillors must declare any interest at Council meetings but that it was for the individual to raise. He was satisfied that there was no interest issue that should have been raised at any of the meetings.

A Member referred to this opportunity for probity, but he welcomed the opportunity for a community hub in an area of the city where this facility was needed. It was appropriate that a local authority should support such projects to help foster a community spirit. He recalled he had been involved with a similar funding exercise  for the Newcourt Community Centre with a capital grant and funding for capacity building within the community. The Director Finance added there had been other Council support from a range of funding for the new community facility at Belmont Park.

A Member thanked Grant Thornton for a thorough reporting and investigation of this matter. She hoped that the Pinhoe community hub would be a success but she still had a number of concerns. In response, the Director Finance confirmed that he was very comfortable with the approved grant funding by Members at Council and also in his role as the Section 151 officer and his responsibility to the Council tax payers within Exeter.

The Engagement Lead concluded the discussion by confirming that despite the reference to a number of recommendations contained in the letter, they had been included in the ISA 260 Audit Findings report and the contents in the circulated letter had been brought to the Members of the Audit and Government attention for noting.

The Audit and Governance Committee noted the contents of the letter.