Decision: The minutes of the meeting Wednesday, 26 May 2021 of the Governance Committee were approved as a correct record.

Members are reminded of their responsibility to declare any pecuniary interest in respect of matters contained in this agenda.

If you have a pecuniary interest you must withdraw from the meeting. Normally you should leave the room before the business starts to be discussed. You do, however, have the same right to speak as a member of the public and may remain in the room to enable you to exercise that right and then leave immediately. In either case you must not seek to improperly influence a decision on the matter.

No interests were declared.

To receive and consider the report from external auditor Grant Thornton

The Governance Committee welcomed Michael Green, Grant Thornton to present the 19/20 financial statements.

The report was undertaken against the backdrop of the Covid-19 pandemic with the audit being performed remotely. This created a challenge but was overcame using technology.

The delivery of the Audit Opinion was imminent, it was anticipated to be an unqualified opinion on the statement, with an emphasis of matter paragraph. This would direct attention to certain aspects of the financial statement to ensure understanding of the issues and circumstances of the valuation of land and buildings.

In addition to the financial statement, a Value for Money Arrangement was performed. In 2019/20, two significant risk areas were identified around financial sustainability and the purchase of Logistics House

The work on financial sustainability was concluded and there were no findings or issues to report. The financial statement due to be closed after the finaisiation of the Logistic House purchase. The audit certificate would be given at the same time as the opinion on the financial statement once work had formally closed and the audit certified.

No statutory duties had been exercised.

The audit was performed to materiality level of over £1,000,000, any errors or misstatements identified over £51,000 were to be reported back to the committee. Any errors within the renumeration disclosure over £20,000 would be reported back to the committee. There were no errors in that area.

The significant audit risk that was identified for the year was Covid-19. Within the report, the impact was detailed and outlined the procedures performed in response. There were no other issues or concerns arising from Covid-19 to report.

A standard risk that featured in all audits was management overwrite of controls, which is adjustments to the financial statement that could potentially manipulate the statement. The auditors performed numerous procedures against the risk and there were no matters or concerns to raise to Committee.

A further risk was around the improper revenue recognition. Due to the Council’s income stream, it was easy to verify and difficult to manipulate in a fraudulent manner. Multiple procedures were performed, and no issues or matters required bringing to the Committee’s attention.

It was highlighted that the delay to the Financial Statement was due to issues with the valuation of land and buildings. There were some material adjustments identified and the value of properties had reduced by £10 million. The valuer valued at cost, instead of the CIPFA code guidance to value assets in use. The approach was challenged, and the council engaged the new valuer who delivered the revised figure that resulted in the adjustment.

There was significant risk around the valuation of the net pension liability, this was underpinned by numerous estimates, judgments, and assumptions with a greater risk of error than other areas of the Financial Statement. Assurances were received from the Lancashire Pension Fund, and no issues or misstatements were identified other than the material uncertainty.

Logistics House was a focal area of the audit. The property was purchased by the  ...  view the full minutes text for item 21.G.32

To receive and consider the report from the Director of Finance.

Louise Mattinson presented the Statement of Accounts 2019/20. Prior to the Governance Committee Members underwent training that explained the accounts in further detail. The Statement of Accounts had experienced delay and it was expected to have been published 30 November 2020. ­

It is a legal requirement to produce, present and approve the accounts to demonstrate accountability to the public, residents, businesses and central government. The Statement of Accounts is a snapshot point in time from the 31 March 2020.

One adjustment to be processed which related to the rental income through to the 31 March 2020 in respect to Logistics House.

Decision:

1.         That the Committee should approve the audited Statement of Accounts for 2019/20 (Appendix A), subject to any amendments which in the opinion of the Director of Finance (Section 151 Officer) are minor in nature, such minor amendments to be defined as non-material to the financial position of the authority. The Director of Finance will exercise this delegation in consultation with the Chair of Governance Committee. In the event that the Director of Finance is of the opinion the amendments are material to the financial position of the authority, Governance Committee will be reconvened to approve the new Statement of Accounts.

2.         That the Committee should authorise the Chief Executive and Chair of Governance Committee to sign the Letter of Representation (Appendix B).

To receive and consider the report of the Director of Finance

There are 5 Charity and Trust accounts that the Council was responsible for, four have a small balance with minimum assets, the lowest at £1700 and the highest at £5400. The one exception is proceeds of sale from the free library, £130,000 assets. Very little transition occurred during the year.

Decision: That the accounts presented in Appendix A to E be approved

To receive and consider the report from the Director of Finance.

Louise Mattinson (Director of Finance) explained that prior to the Grant Thornton Audit Plan of the 2020/21 Accounts, the Council was asked a series of questions to inform the process.

Questions covered events or issues that would have an impact on the accounts for 20/21, in addition to transactions or circumstances that could lead to impairment of assets. If there was knowledge of fraud or if changes to legislation Covid-19 was significant not just financially but also on the entire operation and governance of the Council.

The financial accounts contain more than the hard cash transactions over the year. The accounts show debts and debts owed to the Council. The figures incorporated assumption and valuation for property, plant, and equipment as well as assets and liabilities.

Appendix B also presented information relating to the pension fund, its project return on investment, as all the pension fund was invested in bonds, stocks and property.

Decision: The Governance Committee, reviewed and approved the management responses to the auditors inquires, as attached.

To receive and consider the report from external auditor Grant Thornton

The Committee welcomed Georgia Jones. She confirmed to the Committee that she was taking over as Engagement Lead for 20/21.

She outlined the identified risks and the work proposed to mitigate the risks.

It was possible that the Council would have to prepare group accounts as the Council owned a property company. An assessment of the transactions would need to be completed to assess its effect on the Council Accounts. If the impact was material, group accounts would be necessary.

Identified risks were similar to 2019/20. These included management overriding control, which is a mandator risk under auditing standards. Valuation of land and buildings including investment properties and the valuation of net pension fund liability.

The materiality levels similar to last year.

2020/21 included new auditing standard which was focused on accounting estimates which increased the focus on the area of work to gain assurance. This is to ensure that all estimates are reasonably based on evidence and assessment by management.

Other areas, included in the audit scope, narrative report, governance statement, and the various other work.

Value for money

The work is not yet complete for 19/20 and the results of the audit will allow the risk assessment to be reassessed relating to value for money. If any significant weakness was discovered, the Committee will be informed.

Decision:  Report was noted.

To receive and consider the report of the Director of Finance.

Tony Furber (Principal Financial Accountant) explained that the 2020/21 was a year unlike any other. The base interest rate was 0.1%. Cash flow patterns were unusual due to the inflow and outgoings of millions for Business Support Grants.

Due to the unusual cash flow and low interest, the Council possessed more money than usual as there were fewer opportunities to use it with more competition. The situation is common for nearly all Councils.

Chorley Council typically keep money for a short amount of time which increased difficulty to meet earnings target. In 2019/20, the target was 0.75% with an actual result of 0.63%. The target for 2020/21 was 0.1% and the Council came close at 0.09%. The average daily balance was £30.8m with a total of £12740 interest earned. Base interest rates were unlikely to be changed for the foreseeable future.

The pandemic impacted other areas covered in the report. The Capital Programme was significantly impacted with a total of £9m for the year and did not reach levels expected. Of the £9m, £7m directly financed from capital receipts, grants, and revenue contributions leaving £2m for underlying borrowing requirement. Due to this, the Council did not enter into any further external long-term borrowing.

Upon question from Members, Tony confirmed that there was not a method of refinancing existing borrowing without paying a premium.

Decision: The report was noted.

To receive and consider the report of the Deputy Chief Executive

Howard Anthony (Performance & Partnerships Team Leader) presented the Strategic Risk Update. The document had been updated with what was understood to be risks. The revised document totaled 19 high risks and 7 medium risks. Of the 19 risks, 3 were new. A risk was categorised by the potential outcome if no action was taken.

The table at paragraph 15 included red lettering that indicated that words had been added, and a strike through is the removal of words.

Decision: The report was noted.

The Monitoring Officer will present a verbal report at the meeting.

No RIPA Applications were made.

To receive and consider the work programme for the Committee.

Decision: The Work Programme was noted.