Agenda, decisions and minutes

Governance and Audit Committee
Thursday, 14th March, 2019 10.15 am

Venue: Committee Room 1 - City Hall, Bradford. View directions

Contact: Fatima Butt - 01274 432227 

Items
No. Item

51.

DISCLOSURES OF INTEREST

(Members Code of Conduct - Part 4A of the Constitution)

 

To receive disclosures of interests from members and co-opted members on matters to be considered at the meeting. The disclosure must include the nature of the interest.

 

An interest must also be disclosed in the meeting when it becomes apparent to the member during the meeting.

 

Notes:

 

(1)       Members may remain in the meeting and take part fully in discussion and voting unless the interest is a disclosable pecuniary interest or an interest which the Member feels would call into question their compliance with the wider principles set out in the Code of Conduct.  Disclosable pecuniary interests relate to the Member concerned or their spouse/partner.

 

(2)       Members in arrears of Council Tax by more than two months must not vote in decisions on, or which might affect, budget calculations, and must disclose at the meeting that this restriction applies to them.  A failure to comply with these requirements is a criminal offence under section 106 of the Local Government Finance Act 1992. 

 

(3)       Members are also welcome to disclose interests which are not disclosable pecuniary interests but which they consider should be made in the interest of clarity.

 

(4)       Officers must disclose interests in accordance with Council Standing Order 44.

 

Minutes:

In the interest of transparency all those who were Members of the West Yorkshire Pension Fund disclosed an interest.

 

Action:            City Solicitor

52.

MINUTES

Recommended –

 

That the minutes of the meeting held on 24 January 2019 be signed as a correct record (previously circulated).

 

(Fatima Butt – 01274 432227)

Minutes:

Resolved-

 

That the minutes of the meeting held on 24 January 2019 be signed as a correct record.

53.

INSPECTION OF REPORTS AND BACKGROUND PAPERS

(Access to Information Procedure Rules – Part 3B of the Constitution)

 

Reports and background papers for agenda items may be inspected by contacting the person shown after each agenda item.  Certain reports and background papers may be restricted. 

 

Any request to remove the restriction on a report or background paper should be made to the relevant Strategic Director or Assistant Director whose name is shown on the front page of the report. 

 

If that request is refused, there is a right of appeal to this meeting. 

 

Please contact the officer shown below in advance of the meeting if you wish to appeal. 

 

(Fatima Butt - 01274 432227)

 

Minutes:

There were no appeals submitted by the public to review decisions to restrict documents.

54.

AUDIT STRATEGY MEMORANDUM 2018/19 - CITY OF BRADFORD METROPOLITAN DISTRICT COUNCIL pdf icon PDF 70 KB

The External Auditor will submit the Audit Strategy Memorandum (Document “AI”) which sets out the audit plan for 2018/19. The document:

·         describes the approach to the audit of the Council’s financial statements;

·         includes the assessment of the significant risks of material misstatement in the financial statements; and

·         outlines the proposed testing strategy to address the identified risks.

The Audit Strategy Memorandum also sets out the approach to the Value for Money work, sufficient to enable External Audit to form a conclusion as to whether the Council has made proper arrangements for securing economy, efficiency and effectiveness in its use of resources.

Recommended-

That the Committee considers and approves the Audit Strategy Memorandum for the City of Bradford Metropolitan District Council for 2018/19.

                                                                        (Mark Dalton – 0113 3878735)

 

 

 

Additional documents:

Minutes:

 

The External Auditor submitted the Audit Strategy Memorandum (Document “AI”) which set out the audit plan for 2018/19. The document:

·         described the approach to the audit of the Council’s financial statements;

·         included the assessment of the significant risks of material misstatement in the financial statements; and

·         outlined the proposed testing strategy to address the identified risks.

It was reported that External Audit had also identified significant risks of material misstatement relating to:

·         management override of controls – which was common to all entities subject to audit.

 

·         The high degree of estimation uncertainty relating to the valuation of:

 

-       property, plant and equipment; and

-       pension liabilities

The Audit Strategy Memorandum also set out the approach to the Value for Money work, sufficient to enable External Audit to form a conclusion as to whether the Council had made proper arrangements for securing economy, efficiency and effectiveness in its use of resources.

It was reported that External Audit will report the findings in relation to the risks outlined to the July meeting of the Committee through the Audit Completion Report.

In response to a Member’s question it was reported that the valuation of the Local Government Pension Scheme relied on a number of assumptions, most notably around the actuarial assumptions, and actuarial methodology which resulted in the Council’s overall valuation.  There were financial assumptions and demographic assumptions used in the calculation of the Council’s valuation, such as the discount rate, inflation rates and mortality rates.  

 

Resolved-

 

That the Committee considered and approved the Audit Strategy Memorandum for the City of Bradford Metropolitan District Council for 2018/19.

 

Action:           External Auditor

                                                           

55.

EXTERNAL AUDIT PROGRESS REPORT pdf icon PDF 72 KB

The External Auditor will submit Document “AJ” which updates the Committee on progress with the 2018/19 audit and highlights key emerging national issues which may be of interest to the Committee.

 

Recommended-

 

That the Committee notes and considers the External Audit Progress report (Document “AJ”).

 

                                                                        (Mark Dalton – 0113 3878735)

Additional documents:

Minutes:

The External Auditor submitted Document “AJ” which updated the Committee on progress with the 2018/19 audit and highlighted key emerging national issues which may be of interest to the Committee.

It was reported that overall the audit work was on track and there were no significant issues arising from the work to date that needed to be reported to the Committee.

 

Members were informed that details of the work completed and on-going since the last Committee meeting included:

 

·         Documenting systems and controls.

·         Walkthroughs of the key systems.

·         Updating the IT risk assessment.

·         Controls testing, including general and application IT controls.

·         Early substantive testing of transactions (including income and expenditure, payroll, journals and property, plant and equipment); and

·         Updating the Value For Money risk assessment and early work in response to the significant VFM risks identified within the Audit Strategy Memorandum ie delivering financial sustainability over the medium term and Ofsted’s inspection of Children’s Social Care Services.

 

It was reported that in addition External Audit continued to liaise with Senior Officers, considered key agendas and papers and liaised with Internal Auditors to share knowledge and ensure that there was no duplication.

 

Resolved-

 

That the Committee noted and considered the External Audit Progress report (Document “AJ”).

 

Action:           External Auditor

 

                                                 

 

56.

WEST YORKSHIRE PENSION FUND AUDIT STRATEGY MEMORANDUM 2018/19 pdf icon PDF 69 KB

The External Auditor will submit Document “AK” which sets out the plan for the external audit of the West Yorkshire Pension Fund for the year ended 31 March 2019.

 

Recommended-

 

That the Committee considers and approves the Audit Strategy Memorandum for the West Yorkshire Pension Fund for 2018/19.

 

                                                                        (Sharon Liddle – 07881 283343)

Additional documents:

Minutes:

The External Auditor submitted Document “AK” which set out the plan for the external audit of the West Yorkshire Pension Fund for the year ended 31 March 2019.

 

It was reported that the document:

·         described External Audit’s approach to the audit of the Pension Fund’s financial statements;

·         included External Audit’s assessment of the significant risks of material misstatement in the financial statements; and

·         outlined the proposed testing strategy to address the identified risks.

External Audit had identified significant risks of material misstatement relating to:

·         management override of controls, which was common to all entities subject to audit;  and

·         the high degree of estimation uncertainty relating to the valuation of unquoted investments.

Members were informed that External Audit would report their findings in relation to the risks outlined to the July meeting of the Committee through the Audit Completion Report.

 

In response to a Member’s question it was reported that in relation to the risk in relation to Management override of controls detailed in Section 4 of the report that Management at various levels within an organisation were in a unique position to perpetrate fraud because of their ability to manipulate accounting records and prepared fraudulent financial statements by overriding controls that otherwise appeared to be operating effectively,  Due to the unpredictable way in which such override could occur there was a risk of material misstatements due to fraud on all audits.

 

It was reported that in relation to the risk relating to the valuation of  unquoted investments, the values included in the accounts were those provided by fund managers which were based on Net Asset Value or capital statements. This resulted in an increased risk of material misstatements.

 

In response to a Member’s question it was reported that External Audit set a level of triviality  for individual errors identified  (a reporting threshold) for reporting to the Committee. Based on External Audit’s preliminary assessment of overall materiality, External Audits proposed triviality threshold of £4m.  If the total errors identified amounted to £4m they would be reported to the Committee.

 

Resolved-

 

That the Committee considered and approved the Audit Strategy Memorandum for the West Yorkshire Pension Fund for 2018/19.

 

Action:           External Auditor

 

                                               

 

57.

MINUTES OF WEST YORKSHIRE PENSION FUND (WYPF) JOINT ADVISORY GROUP HELD ON 31 JANUARY 2019 pdf icon PDF 61 KB

The Council’s Financial Regulations requires the minutes of meetings of the WYPF be submitted to this Committee.

 

In accordance with this requirement, the Director of West Yorkshire Pension Fund will submit  Document “AL” which reports on the minutes of the meeting of the WYPF Joint Advisory Group held on 31 January 2019.

 

Recommended –

 

That the minutes of the West Yorkshire Pension Joint Advisory Group held on 31 January 2019 be considered.

 

                                                            (Rodney Barton – 01274 432317)

 

Additional documents:

Minutes:

The Council’s Financial Regulations required the minutes of meetings of the WYPF be submitted to this Committee.

 

In accordance with this requirement, the Director of West Yorkshire Pension Fund submitted  Document “AL” which reported on the minutes of the meeting of the WYPF Joint Advisory Group held on 31 January 2019.

 

Members discussed and sought clarification on some of the items in the minutes.

 

Resolved –

 

That the minutes of the West Yorkshire Pension Joint Advisory Group held on 31 January 2019 were considered.

 

                                                           

 

 

58.

EXCLUSION OF THE PUBLIC

The Committee is asked to consider if the item relating to the

minutes of the meeting of the West Yorkshire Pension Fund

Investment Advisory Panel meeting held on 31 January 2019

should be considered in the absence of the public and, if so, to

approve the following recommendation:

 

Recommended –

 

That the public be excluded from the meeting during the

consideration of the items relating to minutes of the West

Yorkshire Pension Fund Investment Advisory Panel meeting

held on 31 January 2019 because the information to be considered is exempt information within paragraph 3 (Financial or Business Affairs) of Schedule 12A of the Local Government Act 1972.  It is also considered that it is in the public interest to exclude public access to this item.

 

Minutes:

The Committee was asked to consider if the item relating to the

minutes of the meeting of the West Yorkshire Pension Fund

Investment Advisory Panel meeting held on 31 January 2019

should be considered in the absence of the public and, if so, to

approve the following recommendation:

 

Resolved –

 

That the public be excluded from the meeting during the

consideration of the items relating to minutes of the West

Yorkshire Pension Fund Investment Advisory Panel meeting

held on 31 January 2019 because the information to be considered was exempt information within paragraph 3 (Financial or Business Affairs) of Schedule 12A of the Local Government Act 1972.  It was also considered that it was in the public interest to exclude public access to this item.

 

59.

MINUTES OF WEST YORKSHIRE PENSION FUND (WYPF) INVESTMENT ADVISORY PANEL HELD ON 31 JANUARY 2019

The Council’s Financial Regulations requires the minutes of meetings of the WYPF be submitted to this Committee.

 

In accordance with this requirement, the Director of West Yorkshire Pension Fund will submit  Not for Publication Document “AM” which reports on the minutes of the meeting of the WYPF Investment Advisory Panel held on 31 January 2019.

 

Recommended –

 

That the minutes of the West Yorkshire Pension Fund Investment Advisory Panel held on 31 January 2019 be considered.

 

                                                            (Rodney Barton – 01274 432317)

 

Minutes:

The Council’s Financial Regulations required the minutes of meetings of the WYPF be submitted to this Committee.

 

In accordance with this requirement, the Director of West Yorkshire Pension Fund submitted  Not for Publication Document “AM” which reported on the minutes of the meeting of the WYPF Investment Advisory Panel held on 31 January 2019.

 

Members discussed and sought clarification on some of the items in the minutes.

 

Resolved –

 

That the minutes of the West Yorkshire Pension Fund Investment Advisory Panel held on 31 January 2019 were considered.

 

                                                           

 

60.

TREASURY MANAGEMENT STRATEGY STATEMENT, MINIMUM REVENUE PROVISION POLICY STATEMENT AND ANNUAL INVESTMENT STRATEGY 2019-20 pdf icon PDF 361 KB

 

The Director of Finance will submit Document “AN” which reports on the Council’s Treasury Management Strategy, Minimum Revenue Provision Policy and Annual Investment Strategy for 2019-20.

 

Recommended-

 

That the details in the report be noted and Document “AN” be referred to the 19 March 2019 Council meeting for adoption.

 

                                                (David Willis/Lynsey Simenton – 01274 432361)

 

Minutes:

The Director of Finance submitted Document “AN” which reported on the Council’s Treasury Management Strategy, Minimum Revenue Provision Policy and Annual Investment Strategy for 2019-20.

 

It was reported that the Treasury Management Strategy for 2019-20 covered two main areas:

 

Capital Issues –

·         The capital expenditure plans and the associated prudential indicators

·         The minimum revenue provision (MRP) policy.

Treasury Management Issues –

·         The current treasury position

·         Treasury indicators which limited the treasury risk and activities of the Council

·         Prospects for interest rates

·         The borrowing strategy

·         Policy on borrowing in advance of need

·         Debt rescheduling

·         The investment strategy

·         Creditworthiness policy; and

·         The policy on use of external service providers

Members were informed that the above elements covered the requirements of the Local Government Act 2003, the CIPFA Prudential Code, Ministry for Housing, Communities and Local Government (MHCLG) MRP Guidance, the CIPFA Treasury Management Code and MHCLG Investment Guide.

 

It was highlighted that Members of the Committee were provided with training in line with the CIPFA Code which required the Section 151 officer to ensure that members with responsibility for treasury management received adequate training in treasury management. The Council’s Treasury Management Adviser, Link Asset Services provided training to Members of the Committee earlier today.

 

Members were informed that the table at 2.1 of the report summarised the capital expenditure plans and how they were financed either by capital or revenue resources.  Any shortfall of resources resulted in a funding borrowing need.

 

It was reported that the capital expenditure plans set out in Section 2 provided details of the service activity of the Council. The treasury management function ensured that the Council’s cash was organised in accordance with the relevant professional codes, so that sufficient cash was available to meet this service activity and the Council’s capital expenditure plans. This would involve both the organisation of the cash flow and, where capital plans require, the organisation of appropriate borrowing facilities. This strategy covered the relevant treasury/prudential indicators, the current and projected debt positions and the annual investment strategy.

 

The overall treasury management portfolio for borrowing and investments as at 31 March 2018 and 31January 2019 was shown in paragraph 3.1.

 

Members were informed that within the range of prudential indicators there were a number of key indicators to ensure that the Council operated its activities within well-defined limits.  One of these was that the Council needed to ensure that its gross debt did not, except in the short term, exceed the total of the CFR (Capital Financing Requirement) in the preceding year plus the estimates of the following two financial years.  This allowed some flexibility for limited early borrowing for future years, but ensured that borrowing was not undertaken for revenue or speculative purposes.      

It was reported that the Council complied with this prudential indicator in the current year and did not envisage difficulties for the future.  This view took into account current commitments, existing plans, and the proposals in the budget report. 

Members were informed that the Council was currently maintaining  ...  view the full minutes text for item 60.