Agenda and minutes

Governance & Audit & Standards Committee - Friday, 21st January, 2022 2.30 pm

Venue: Council Chamber - The Guildhall, Portsmouth. View directions

Contact: James Harris on 023 9260 6065  Email: james.harris@portsmouthcc.gov.uk

Webcast: View the webcast

Items
No. Item

1.

Apologies for Absence

Minutes:

There were no apologies for absence.

2.

Declarations of Members' Interests

Minutes:

There were no declarations of members' interests.

3.

Minutes of Meeting held on 5 November 2021 pdf icon PDF 294 KB

RECOMMENDED that the minutes of the meeting held on 5 November 2021 be approved and signed by the Chair as a correct record.

Minutes:

RESOLVED that the minutes of the meeting held on 5 November 2021 be approved and signed by the Chair as a correct record with the following amendment:

 

Page 2, Para 6 - the addition of the word 'one' in the penultimate sentence to read as follows: "………included on Planning Committee agendas which only had one objector.

4.

Portsmouth City Council Audit Results Report: Year ended 31 March 2021 (updated January 2022) pdf icon PDF 5 MB

Report to follow under separate cover.

 

Portsmouth City Council's Audit Results as updated January 2022 - for noting.

Minutes:

(TAKE IN REPORT)

 

Helen Thompson and David White from Ernst & Young introduced the report which presentedPortsmouth City Council's updated audit results for the year ended 31 March 2021 to the committee for information.

 

The draft had been presented to the committee at its meeting held on 24 September 2021 and the work was now complete apart from small queries in respect of going concern, along with some general procedures required by the ISAs, remaining internal review processes and some audit conclusion procedures.  The audit had taken longer to complete than usual due to an additional level of scrutiny following the 2019 audit and a pressure on capacity.

 

The committee was updated on the previous outstanding issues of significant risk which had moved on since September 2021.

 

Valuation of Lakeside North Harbour Asset

 

The internal valuation specialists’ review of the valuation of Lakeside North Harbour had concluded that each of the ten assets comprising the Lakeside campus were within the expected valuation range. Therefore, there were no identified issues with the valuation of Lakeside in the financial statements.

 

Valuation of Investment Property and Land and Buildings (valued using EUV & FV method

 

Large samples of investment properties, land and buildings were tested with two audit differences identified.

 

For one investment property asset the valuer used a yield which was outside the benchmark range based on national comparators, resulting in a lower than expected valuation. The remaining investment property population for similar assets was reviewed to gauge the overall effect of this issue and calculated a projected overall understatement of the investment property balance of £964k. 

 

For one land and buildings asset, the valuer had miscalculated the internal area for the building, resulting in an overstatement of property, plant and equipment of £1.47m.  It was noted however that a further individual asset difference resulted in an overall net below the trivial level at a £0.24m understatement, which did not impact the overall audit opinion.

 

Two differences in methodology which did not form material issues for the accounts were identified:

 

Purchaser costs had not been separately allowed for in valuations performed by the internal valuations team; however, they formed part of the overall yield consideration. External Audit recommended that these be considered separately going forward.

 

Management fees had been allowed for separately in valuations performed by the internal valuations team. The expectation was that these would usually be incorporated within the yield and it was recommended that this be considered going forward.

 

Valuation of Land & Buildings valued at Depreciated Replacement Cost (DRC), and Housing Revenue Account (HRA) properties

 

A substantial sample of land and buildings assets valued at depreciated replacement cost, along with 20 HRA Beacon properties. There were no matters to report regarding Housing Revenue Account valuations.

 

For one land and buildings asset, the valuer had used the incorrect asset life in the valuation calculation, resulting in an understatement of PPE of £1.71m.

 

It was noted that the net impact on PPE of this difference and the one reported on previously represented a £0.24m understatement, which was trivial and therefore did not impact the overall audit opinion.

 

For the population of land and buildings assets valued at depreciated replacement cost the internal valuer had not allowed for professional fees as expected within the valuation calculations performed in 2019/20 and 2020/21.

This had resulted in a total calculated £3.97m overstatement of PPE.

 

Valuations had included a contingency amount, which specialists felt was against best practice and had resulted in an underspend of just under £4m.  The net impact of these two factors was therefore trivial and did not impact the overall audit opinion.

 

It was advised that professional fees should be included, and contingency fees excluded, from depreciated replacement cost valuations going forward.

 

Pension Liability Valuation

 

In the report presented in September 2021 work was expected from the internal pension specialists to provide assurance of the model used by the actuary to calculate the valuation.  Work had now been completed with no matters to report.

 

In closing, it was confirmed that the Public Sector Audit Appointments (PSAA) had determined the 19/20 the fee with a variation £48,112.  It was expected that the 20/21 audit would be completed in the coming weeks and the committee would be advised of the 20/21 fee at a future meeting.

 

In response to a question, it was confirmed that whilst there had been some mathematical human error in respect of the property misstatements, this had only been identified in two of a very large number of samples tested and did not give cause for concern going forward.

 

In reply to further questions, it was hoped that an update on fees for 20/21 could be given at the March 2022 meeting, although this wouldn't be the figure agreed by PSAA.  In respect of the capacity of Ernst & Young in the longer term it was explained that recruitment and retention was an issue being addressed and some further thinking would be undertaken nationally around simplifying processes for both councils and external auditors. 

 

RESOLVED that the committee NOTED the report.

5.

Corporate Performance Report - Q2 2021/22 pdf icon PDF 130 KB

To report any significant performance issues arising from Q2 2021-22 performance monitoring to the Governance and Audit and Standards committee and highlight areas for further action or analysis.

 

RECOMMENDED that the Committee:-

 

(i)  Note the report in the revised format; and

(ii) Agree if any further action is required in response to performance issues highlighted.

Additional documents:

Minutes:

(TAKE IN REPORT)

 

Kelly Nash, Corporate Performance Manager introduced the report which reported any significant performance issues arising from Q2 2021-22 performance monitoring to the committee.

 

In response to a question regarding a lack of morale across of some staff it was explained that there were differences across departments and the results of the recent employee survey were being analysed.  The results of this would be presented to the Employment Committee in due course.

 

In respective of collaborative working, this was seen as a real benefit which arose during the pandemic and was something that the council was keen to continue with going forward.

 

The Corporate Performance Manager agreed to provide a response in respect of a question seeking an update on building project management support into adult social care core staffing.

 

RESOLVED that the committee NOTED the report in the revised format.

6.

Internal Audit Performance Status Report to 10 January 2022 pdf icon PDF 128 KB

The purpose of this report is to update the Governance and Audit and Standards Committee on the Internal Audit Performance for 2021/22 to 10 January 2022 against the Annual Audit Plan, highlight areas of concern and areas where assurance can be given on the internal control framework.

 

Recommended that the Governance, Audit & Standards Committee notes:

 

(i)             the Audit Performance and results for 2021/22 to 10 January 2022; and

(ii)           the highlighted areas of concern in relation to audits completed from the 2021/22 Audit Plan, including follow up work performed.

Additional documents:

Minutes:

(TAKE IN REPORT)

 

Elizabeth Goodwin, Chief Internal Auditor introduced the report which updated the Committee on the Internal Audit Performance for 2021/22 to 10 January 2022 against the Annual Audit Plan, highlighted areas of concern and areas where assurance could be given on the internal control framework.

 

She advised the committee that work was on target to enable and influence the annual audit opinion.

 

In reply to a question in respect of cost of living increases and the impact on council tax debt collection it was anticipated that there might be a small upward trend in the longer term due to this whilst the situation settled.

 

In response to a question about the limited assurance given for home school transport it was confirmed that the issues were the same as previously identified, however improvements had been made from the previous rating of no assurance.  Improvement actions had been agreed to be implemented by March 2022 and it was agreed that a verbal update could be given at the March meeting of the committee.

 

RESOLVED that the committee NOTED:

 

(i)             The Audit Performance and results for 2021/22 to 10 January 2022; and

(ii)           The highlighted areas of concern in relation to audits completed from the 2021/22 Audit Plan, including follow up work performed.

7.

Whistleblowing Annual Report and Policy pdf icon PDF 129 KB

The purpose of the report is to update the committee on the nature and handling of any whistleblowing concerns which have been raised for the period January 2021 to December 2021.

 

In addition to this to confirm that, following the annual review of the whistleblowing policy, there are no current proposed changes.

 

RECOMMENDED that Members of the Committee:

 

(i)             Note this report and the attached Appendix A and consider whether any further action is required; and

 

(ii)           Note the whistleblowing policy, Appendix B, where there are no proposed changes.

Additional documents:

Minutes:

(TAKE IN REPORT)

 

Elizabeth Goodwin, Chief Internal Auditor introduced the report which updated the committee on the nature and handling of any whistleblowing concerns which have been raised for the period January 2021 to December 2021.

 

She advised the committee that in the past year there had been six recorded incidents which was an increase on the previous year.  There were no underlying patterns and it was encouraging that people felt able to come forward with their concerns.

 

In response to questions the committee was advised that no further details were presented to the committee, however if there were recurring process issues these may be reported.  It was confirmed that there had been no multiple reports about the same matter.

 

RESOLVED that the committee NOTED:

 

(i)             the report and the attached Appendix A; and

(ii)           the Whistleblowing Policy at Appendix B, where there were no proposed changes.

 

8.

Treasury Management Monitoring Report for the Third Quarter of 2021/22 pdf icon PDF 204 KB

The purpose of the report is to inform members and the wider community of the Council’s Treasury Management position, ie. its borrowing and cash investments at 31st December 2021 and of the risks attached to that position.

 

Whilst the Council has a portfolio of investment properties and some equity shares which were acquired through the capital programme; these do not in themselves form part of the treasury management function.

 

Recommendations

 

It is recommended that the following be noted:

 

(i)             That the Council's Treasury Management activities have remained within the Treasury Management Policy 2021/22 in the period up to 31st December 2021; and

 

(ii)           The actual Treasury Management indicators as at 31st December 2021 set out in Appendix A.

Additional documents:

Minutes:

(TAKE IN REPORT)

 

Michael Lloyd, Finance Manager introduced the report which informed the committee of the Council’s Treasury Management position as at 31st December 2021 and of the risks attached to that position.

 

In response to a question, it was confirmed that the current rate of inflation was a concern for some of the council's smaller investments, as in time it may cause them to not realise the expected return.  It was however suspected that there might be a rise in interest rates and it was clarified that the council's main investments continued to perform respectably considering the current financial climate.

 

RESOLVED that the committee NOTED:

 

(i)   that the Council's Treasury Management activities have remained within the Treasury Management Policy 2021/22 in the period up to 31st December 2021; and

 

(ii)  the actual Treasury Management indicators as at 31st December 2021 set out in Appendix A of the report.

9.

Report to Governance & Audit & Standards Committee on complaints received into alleged breaches of the Code of Conduct by Members of the Council for the calendar year 2021 pdf icon PDF 123 KB

The purpose of the report is to update Members of the Committee in relation to complaints which have been progressed within the calendar year 2021 and which allege that Councillors may have breached the Code of Conduct.

 

     Recommendations

 

(i)             It is recommended that Members of the Committee note the report.

 

(ii)           It is recommended that Members of the Committee consider whether any further action is required by them.; and

 

(iii)         It is recommended that Members of the Committee place on record their thanks to the Independent Persons.

 

All independent Persons have been contacted and provided the Monitoring Officer with feedback. The Monitoring Officer will comment at the meeting if relevant.

Additional documents:

Minutes:

(TAKE IN REPORT)

 

Peter Baulf, City Solicitor, introduced the report which updated the committee in relation to complaints which have been progressed within the calendar year 2021 and which allege that Councillors may have breached the Code of Conduct.

 

He confirmed that four complaints had been processed and all had been dealt with at the Initial Filtering Panel level.  Some had involved social media posts and he advised that councillors be careful when using social media.

 

RESOLVED that the committee NOTED the report and placed on record it's thanks to the Independent Persons.

10.

Exclusion of Press & Public

In view of the contents of the appendices to the following items (11 & 12) on the agenda, the committee is RECOMMENDED to adopt the following motion should it wish to discuss the details contained within the exempt appendices during the discussions on these items:

 

“That, under the provisions of Section 100A of the Local Government Act, 1972 as amended by the Local Government (Access to Information) Act, 1985, the press and public be excluded for the consideration of the following item on the grounds that the appendices to the report contains information defined as exempt in Part 1 of Schedule 12A to the Local Government Act, 1972" The public interest in maintaining the exemption must outweigh the public interest in disclosing the information. Under the Local Authorities (Executive Arrangements) (Meetings and Access to Information) England Regulations 2012, regulation 5, the reasons for exemption of the listed appendices are shown below. (NB The exempt/confidential committee papers on the agenda will contain information which is commercially, legally or personally sensitive and should not be divulged to third parties.

 

Members are reminded of standing order restrictions on the disclosure of exempt information and are asked to dispose of exempt documentation as confidential waste at the conclusion of the meeting. Item

 

Exemption                                                                                    Para No.

 

11.  Property Investment Fund - Covid-19 Impact                              3

 

(Exempt Appendix A) *3. Information relating to the financial or business affairs of any particular person (including the authority holding that information).

 

 

12 . Procurement Management Information                                       3

 

(Exempt Appendices 1, 2 and 3) *3. Information relating to the financial or business affairs of any particular person (including the authority holding that information).

Minutes:

The Chair advised that proceedings would be kept open until such time that the committee wished to discuss the exempt appendices to the following reports:

 

(i)             Property Investment Fund - Covid-19 Impact; and

(ii)            Procurement Management Information

 

At the conclusion of the consideration of the non-exempt reports, the resolution to move into exempt session to consider the exempt appendices was passed and the committee entered exempt session.  The committee had no questions in respect of the exempt appendices to the two reports.

11.

Property Investment Fund - Covid-19 Impact pdf icon PDF 146 KB

The purpose of this report is to provide a summary of the response and impact of the Covid- 19 pandemic on Portsmouth City Council's commercial property investments.

 

This report is for noting.

Additional documents:

Minutes:

(TAKE IN REPORT)

 

Jessica Mott, Senior Asset Manager, introduced the report which provided the committee with a summary of the response and impact of the Covid- 19 pandemic on Portsmouth City Council's commercial property investments.

 

In response to a question, it was confirmed that as a landlord PCC had the discretion to offer rent free periods.

 

During the discussion the investments made by the council were commended as they had contributed to the economic stability of the council during difficult financial times.

 

RESOLVED that the committee NOTED the update report.

 

 

12.

Procurement Management Information pdf icon PDF 229 KB

The purpose of this report is to provide evidence to allow the committee to evaluate the extent that Portsmouth City Council is producing contracts for goods, works and services in a legally compliant value for money basis.

 

The report is for noting.

Additional documents:

Minutes:

TAKE IN REPORT)

 

Peter Baulf, City Solicitor, introduced the report which provided evidence to allow the committee to evaluate the extent that Portsmouth City Council is producing contracts for goods, works and services in a legally compliant value for money basis. He advised that the Procurement Manager had raised no concerns and neither had he as City Solicitor.

 

RESOLVED that the committee NOTED the update report.