To consider the report of the External Auditors (Grant Thornton).
The Director External Audit (Grant Thornton) referred to the new approach to the value for money assessment which changed in 2021 introduced by the National Audit Office to a much broader scope of work using the three pillars of
She advised that, rather than report by exception, they now had to offer a more detailed narrative statement giving positive assurances as well as those areas which require attention and scope for improvement. She also referred to the three classifications and recommendations that could arise from the work that they undertake as part of the assessment including:-
On that basis, she drew Members’ attention to the Executive summary of the report and identified three possible areas with scope for further improvement of the existing arrangements. It was not uncommon in this first year of the new regime to have a baseline assessment where there are a number of recommendations and it is consistent from findings from many other local authorities. She referred to one area of significant weakness relating to the governance arrangements of Exeter City Living. The recommendation was set out which included along with the potential impact on the authority, the management response and action being taken to address that particular matter.
The Director Audit responded to the following Members’ comments –
· company directors had a specific legal duty to act in the best interest of that company, and there may be an issue for officers in that position who may be expected to hold and challenge the company to account. She had no concerns over Member representation. The Director Finance contributed to this discussion and confirmed that he along with the Corporate Director were no longer Directors of one of the Council’s companies, Exeter City Living.
The Director Finance confirmed that the review of the governance of external companies was underway and he would enquire on the timeframe for the process from the Leader and the Chief Executive & Growth Director. Following some discussion, a proposal to ensure the Chartered Institute Public Finance and Accountancy (CIPFA) Guidance was taken into consideration in the review of governance arrangements for Exeter City Council was made. It was anticipated that the report on the outcome of the review would be made to the Executive and then Council before coming back to the Audit and Governance Committee.
The Director External Audit stated that their report had included a factual interpretation of the current regulations relating to what should be included in the Minimum Revenue Provision (MRP) calculation, which has an element of interpretation by some authorities. The proposed consultation should make this clearer. Capital loans to third parties should be in the spirit of what they were intended, and incorporated as part of the MRP calculation. The Director Finance had met with the Government’s Capital Financing team and discussed this issue. He understood the challenge that the Government has in relation to ensuring all Councils were properly addressing this issue and protecting future taxpayers.
The Director External Audit stated that when delivering value for the tax payer it was important to focus on the important risk areas, identifying the lowest level of tolerance. The starting point was an authority’s Risk Register and reviewing the significance of the risk to the organisation of the high value areas which often support the Council’s strategic objectives. She invited Members to make a case for any areas of key risk for future focus of their value for money assessment.
The Audit and Governance Committee noted the report and added two further recommendations:
(1) to ensure the options as set out in the Chartered Institute Public Finance and Accountancy (CIPFA) Guidance are taken into consideration in the review of governance arrangements for Exeter City Council companies; and
(2) Audit and Governance Committee to receive a report on the approved Governance arrangements once adopted by Council.