Audit and Governance Committee - Thursday 4 December 2025, 4:00pm - Cotswold District Council Webcasting

Audit and Governance Committee
Thursday, 4th December 2025 at 4:00pm 

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  1. Councillor Jon Wareing
  2. Councillor Nigel Robbins
  3. Councillor Nigel Robbins
  4. Tyler Jardine, Officer
  5. Councillor Nigel Robbins
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  1. David Stanley, Deputy CEO
  2. Councillor Nigel Robbins
  3. Councillor Nick Bridges
  4. Councillor Nigel Robbins
  5. Christopher Bass
  6. David Stanley, Deputy CEO
  7. Councillor Nigel Robbins
  8. David Stanley, Deputy CEO
  9. Councillor Nigel Robbins
  10. Councillor Helene Mansilla
  11. Councillor Nigel Robbins
  12. David Stanley, Deputy CEO
  13. Councillor Nigel Robbins
  14. Councillor Len Wilkins
  15. Councillor Nigel Robbins
  16. David Stanley, Deputy CEO
  17. Councillor Len Wilkins
  18. David Stanley, Deputy CEO
  19. Councillor Nigel Robbins
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  1. Officer
  2. Councillor Nigel Robbins
  3. Councillor Helene Mansilla
  4. Officer
  5. Councillor Nigel Robbins
  6. Councillor Len Wilkins
  7. Councillor Nigel Robbins
  8. Councillor Len Wilkins
  9. David Stanley, Deputy CEO
  10. Councillor Len Wilkins
  11. Councillor Len Wilkins
  12. David Stanley, Deputy CEO
  13. Councillor Nigel Robbins
  14. David Stanley, Deputy CEO
  15. Councillor Nigel Robbins
  16. Councillor Len Wilkins
  17. Councillor Nigel Robbins
  18. Councillor Helene Mansilla
  19. Officer
  20. Councillor Nigel Robbins
  21. David Stanley, Deputy CEO
  22. Councillor Nigel Robbins
  23. Christopher Bass
  24. Councillor Nigel Robbins
  25. Officer
  26. Councillor Nigel Robbins
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  1. David Stanley, Deputy CEO
  2. Councillor Nigel Robbins
  3. David Stanley, Deputy CEO
  4. Councillor Nigel Robbins
  5. Councillor Nigel Robbins
  6. Christopher Bass
  7. Councillor Nigel Robbins
  8. David Stanley, Deputy CEO
  9. Councillor Nigel Robbins
  10. Councillor Helene Mansilla
  11. David Stanley, Deputy CEO
  12. Councillor Nigel Robbins
  13. Councillor Helene Mansilla
  14. Councillor Nigel Robbins
  15. David Stanley, Deputy CEO
  16. Councillor Nigel Robbins
  17. Councillor Tony Dale
  18. Councillor Nigel Robbins
  19. David Stanley, Deputy CEO
  20. Councillor Nigel Robbins
  21. Councillor Jeremy Theyer
  22. David Stanley, Deputy CEO
  23. Councillor Nigel Robbins
  24. Councillor Nigel Robbins
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  1. David Stanley, Deputy CEO
  2. Councillor Nigel Robbins
  3. Webcast Finished

Councillor Jon Wareing - 0:00:01
Councillor Nigel Robbins - 0:00:06
Good afternoon everybody and for those talking online, this is the platform for the government
committee. Sorry, we are a couple of minutes late, but we are at least now. We are now
Councillor Nigel Robbins - 0:00:27
at least fully quarrered. Thank you for that assistance. Are there any apologies

1 Apologies

Tyler Jardine, Officer - 0:00:44
Councillor Nigel Robbins - 0:00:49
for absence? Thank you chair we've had no apologies and no substitutions. No
substitute members therefore. Are there any declarations of interest we need to
know about. There are not, it appears, in which case we can look at the minutes of the

2 Substitute Members

3 Declarations of Interest

previous meeting on the 30th September. We can start with page 5 and page 6. Please flag

4 Minutes

up any differences, errors, omissions.
And page seven.
And page eight.
And page 9.
Page 10 was the Treasury Management Report.
We have one of those today.
Page 11, the Counter -Ford and Enforcement Report.
Page 12, Page 13, the Counter -Ford and Enforcement Unit Investigation, which of course is a significant
item in the external auditors report which we will come to and if you haven't
well I'm sure you have read it but pages 24 and 25 are really quite significant
that's in their report page 14 and page 15 in which case hands raised please if
I'm sure you're happy with the minutes.
Oh, right, okay.
They're the only ones who were there at the time.
So be it.
Yes, you're abstaining, fine.
Thank you.
Are there any public questions?
I think not.
We've not been made aware of any.
Are there any member questions?

5 Public Questions

6 Member Questions

7 Treasury Management Mid-Year Report

In which case, let's dive into Item 7, the mid -year report from Treasury and Management,
which looks at the performance of our investments. And I'm going to hand over to our Deputy Chief
Executive.
David Stanley, Deputy CEO - 0:03:37
Thank you, Chair. I'll do a short introduction, and we have Michelle Burge with us, who has
supported Sian and myself with this report.
Apologies for the format of this report.
This is one of the prescribed reports that CITFA,
Chartered Institute of Public Finance and Accountancy,
have required councils to produce for quite a
considerable amount of time.
We produce the treasury management strategy in
January of each year for the forthcoming financial year.
We then produce the half -year report and then
we produce the out -term report.
On top of that, you get quarterly reports
in between the strategy and the out -term being produced.
So this is the half -year mid -term report
on Treasury management activities.
The executive summary, which is on page 19 of the pack,
contains quite a few numbers,
some of them more exciting than others,
but suffice to say that so far during the course of the year
that the Council has benefited from an improved level
of investment returns on its Treasury management activities
than it budgeted for.
That's largely down to two things.
One, the level of investment balance that we have available
during the year has remained higher
because as we've collected Council tax and business rates,
we haven't spent all elements of the budget
in the same profile.
So we do retain higher levels of balances in the first half of the year than we do tend
to in the second half of the year.
And secondly, the stickiness of interest rate decisions.
So whilst the Bank of England have been reducing the interest rate, although they didn't reduce
it at their meeting in November as widely anticipated, so the current Bank of England
base rate remains at 4%.
The way in which we make our investments through money market funds and through the debt management
office, those interest rates have remained above our expectations.
So we've maintained a level of investment income significantly above the budget position.
So table one at the end of that section gives you a summary of the treasury management position.
So in terms of short -term borrowing,
that's the balance that remains on the abundance loan,
the climate bond that this council took out
three years ago or thereabouts,
where we're paying investors a return on that investment,
but utilising a half million
towards climate change activities,
which have included the installation
of electric vehicle points
and the installation of solar panels
on the roof of Trinity Road.
Other than that, there's no other borrowing
the council has undertaken,
and that's more of an investment decision
rather than undertaking borrowing.
The council's maintained its long -term
and short -term investments.
So you can see by the end of the period, 30th of September,
the net investments total was just over 30 .5 million
at 30 .81 million.
Section three of the report,
so I'm deliberately glossing over section two
because that tells you what treasury management is.
And I think by now, most members will have
a fairly good idea.
But section three sets out the borrowing position.
So we haven't taken any borrowing out
during the course of the year.
And at the current time, we have no intention
of undertaking any borrowing for the remainder of the year.
Clearly that'd be kept under review if events change.
The investment performance is set out in section four
of the report with table three,
setting out the opening balance, the assessment of the balance that was
invested as at the 30th September and the income percentage returns that was
achieved on those investments up to that point averaging out at around 4 .16 %
which is a reasonably good level of return given where the Bank of
England base rate currently is. There's further explanation of the investment
position in table 4, which is on page 24 of the PACS, and also on to page 25.
There's reference in section 5 of externally managed funds.
That's what's collectively called the pooled funds, plus cash plus fund, and the housing
real estate investment trust REIT.
So we hold longer term investments that are there for security and liquidity and yield,
which are maintaining a level of return mixed with our shorter term investments.
There's reference there to the statutory override on IFRS 9.
So those of you with a reasonably long memory may recall there was a risk that the statutory
override that existed on the accounting for pooled funds was due to end on the
31st of March 2025. That has now been extended for a period of time until 2029
but that doesn't cover any new pooled fund investments that might be taken out
after the 1st of April 24 but given all our investments were taken out
significantly before April 24 we will benefit from this statutory override for
of seeable future.
Table five sets out in more detail how those externally managed funds have performed.
And there are some numbers there that you may wish to ask questions on, so I'm not going
to cover them now.
And then as you move towards the back of section five, for those of you with a colour pack,
or those of you with black and white, we're about in the middle of that graph that sets
out Cotswold District Council's investment returns versus the average or all of our incloses
clients. So we're about slap bang in the middle but you'll see that graph is relatively flat.
There's a little bit of a higher level of return over on the far left and there's one authority
with quite a low return over on the far right but other than that everyone's at a reasonable level
and given the interest rate for environment we're in where we've had relatively stable investment
interest rates, although the Bank of England base rate has been reducing, will give rise
to that. And then the final section of the report,
Section 6 and 7 set out the compliance position. Pleased to say we've complied with the Treasury
management strategy, so we've kept within the prudential indicators, and that's what
the rest of the report then covers off. But as ever, happy to take any questions, as would
be Michelle and some of the detail that you may have.
Councillor Nigel Robbins - 0:10:30
Michelle is here to answer any questions. Are there any comments or questions, please?
Councillor Nick Bridges - 0:10:40
I just wanted to say I've read it. It was very detailed. I was very impressed.
I did spot two typos. On page 25 on the table you've got diversified spelt wrong.
and in the Annex A there's in 1 .3 there's a percentage missing as a gap so the
August reading was down something percentage from 3 .8.
Councillor Nigel Robbins - 0:11:13
Thank you so much. Are there any further comments on the tables or yes
Chris, please.
Thank you, Chair.
Christopher Bass - 0:11:23
David, you have to forgive me, because I think I might have asked this question before.
It may have been back in time, so I'm going to just ask it and tell me if I'm repeating myself.
When I look at Table 5, the pooled funds, and I compare the initial investment to the current fund value,
a lot of them are showing lower. So they've lost value. The principal has lost value over time.
If I compare that to thinking about like my own personal investments, right, if we invest our savings
and the principal is declining, even though we're getting a dividend, we probably wouldn't be very happy with that investment.
So how should the committee think about
the drop in the principal?
David Stanley, Deputy CEO - 0:12:05
It's a very good question. So as that table shows, the council
invested 12 .5 million of its cash balances in a number of different
long -term investments. The value of those investments has gone up in some cases,
gone down in some cases, but the overall position as at the 30th September is
eleven point six eight six million compared to the twelve and a half
million investment. So other things being equal if we cashed those investments in
today or as at the date we wouldn't get back as much as we put in but the
Council has had dividend payments over the period of its investment period that more
than compensates for that loss. The issue with pooled funds is you hold them for the
longer term. So the decision that was taken to make investments in pooled funds was back
in the days when the interest rate was at rock bottom. The Council had quite significant
cash balances and in common with many authorities we're seeing miserly returns of less than
0.1 % on those cash balances. So in order to ensure that there was a diversified investment
portfolio and to make sure that there was a return on that cash balance, the decision
was taken to invest in poor funds. Now over a longer term period, let's say five to ten
years, you would expect some ups and downs. The key point in terms of the decision that
that the council may need to take is if it needed to reduce its cash holding in those
funds for whatever reason, at the moment, broadly speaking, it might get less back than
it paid for. But what we've seen and what we get from Arlene Close is a view that the
performance of those funds, particularly over the last 18 months, they've recovered a lot
their initial losses. So the broad expectation is that we'll be in a position where those
funds are back to the 12 .5 million, but there may be some outliers within that. The usual
advice we get from Arlene Close when we ask them around, well, should we go – take an
example. If you look at the second line down on table 5, Schroder's income maximiser,
9 .5%, nice number.
Should we move all of our money from the next line down the
CCLA cautious multi -asset income fund,
because it's only earning half a percent,
advice from Arlene Close would pass performance is not a good
indicator of future performance.
You're holding it for the long term.
As long as you can afford to hold it for the long term and
you don't need cash tomorrow, then those dividend returns are
contributing into the investment income that we're reporting through to cabinet
and supporting the overall budget of the council but we're mindful and have
through prudent set aside in an EMR reserve allowed for some losses on that
investment because of that statutory override that wasn't going to continue
so we do have set aside an amount of money should there need to be a decision
that council needs to reduce its cash balances that that wouldn't pull through
into the bottom line of the budget.
Councillor Nigel Robbins - 0:15:30
So broadly speaking, we sit tight until we see
some real wobbles.
How long would it take for us to extract our
commitments to some of these investments if we
really felt we were unhappy?
David Stanley, Deputy CEO - 0:15:50
Largely depend on the type of pooled fund or the
type of investment we've got.
So, if we look at, for example, the CCLA property fund.
CCLA have all their money in property.
If we were the only investor seeking a return on money,
that might be possible to reduce,
but the property fund won't hold lots of cash.
So, if we're asking for a significant amount of cash back,
what might have to happen is the fund might have to sell
an asset, and as you may appreciate, the fund needs to have a buyer for that asset to actually
generate that cash. There might be a period of time. If there's a queue of investors seeking to
take their money out of a particular fund, there might be a waiting period. And there has been in
the past, not necessarily with any of the funds we've got, but you have heard of other investment
funds where there's been a rush to pull money out and they've almost said stop
we're not going to allow anyone else to pull that money out. Most of the
investment types we've got will be diversified in terms of their liquidity.
So there would be a process we would go through to serve notice to seek
repayment of that and that could be relatively quick for some of them it
could be relatively slow but there is a cost in exiting. Again because I'm more
familiar with it with the CCLA fund, there will be a administrative cost to us of exiting
some of those pooled funds. There's a cost to going in because of the legal paperwork,
there's a cost to coming out. So it's not something to take lightly, but it is something
we're conscious of in terms of our longer term financing of both the council's revenue
budget, but also its capital programme. Because if you look at the level of return that the
getting across its investments, say 4%, the cost of borrowing externally is, let's say, 5 .5%.
Does it make sense to borrow externally a higher rate than you're generating on your internal funds?
That's one of the challenges we'll have over the coming 12 months.
Thank you, David. Councillor Mazzola.
Councillor Nigel Robbins - 0:18:09
Councillor Helene Mansilla - 0:18:13
Thank you, Chair. So I suppose that that begs the question that,
Let's say that they pulled funds drop. How much could that cost to the council and
Is the Treasury Reserve big enough to cover that?
Thank you
Councillor Nigel Robbins - 0:18:31
Over to David again, I think
David Stanley, Deputy CEO - 0:18:34
So what we've got set aside in an earmark reserve and I'll cheque with Michelle
I think off the top of my head is about three hundred fifty thousand which we've set aside
Given the performance on the treasury management position so far this year, there may be a need to transfer more to that reserve, but that will largely depend on cabinet's decision -making process and the overall wider position on the council's revenue budget for that to be taken into account.
But you'll see in terms of on the second from right column, there is that gain loss in relation
to the initial principle that was invested.
And what you'll see is with that level of set aside that we've got in the Nearmark Reserve,
that would cover one, maybe two reductions of that level, but it won't cover the whole
portfolio.
You'd need the 813 ,196.
Now, the argument there is, is it prudent for the council to set aside 813 ,000 in reserve
to cover that risk, or could it utilise some of that money doing other priority spend activities
that is of a benefit to the wider residents of the area?
So there's a balancing act there in terms of wanting to mitigate the risk to what is
the real decision going to be around this?
Are we going to suddenly say we need to pull our 12 and a half million out and crystallise
the £813 ,000 reduction or is it going to be more of a staged, slower withdrawal in
a targeted way where you're withdrawing cash where that loss isn't coming through and that
requires some careful planning over the next two years and clearly that would largely depend
on the need we have for both internal and external funding of the capital programme
and the day -to -day revenue position.
Councillor Nigel Robbins - 0:20:32
Councillor Len Wilkins - 0:20:37
Councillor Wilkins. Thank you. How long have we held these? We should be
looking for a long -term investment so we held these for years? Many? Five?
Councillor Nigel Robbins - 0:20:49
David Stanley, Deputy CEO - 0:20:50
I believe we've held most of these investments since around 2018.
2018, so around seven or eight years.
Ordinarily you would say five to ten years is that
window of holding.
Within that period you can do a review of have we got
the investments in the right place?
Are they diversified enough?
Are we comfortable with some of that risk that is
inherent with that longer term type of investment?
So it is something we can undertake with our
Arlen Close's support is do that review of how is the performance of the fund done over
the point of acquisition of those funds to where we are now and what's that total term.
So it's something that Arlen Close are able to support us with quite quickly because they've
got all that data there.
And I think it would probably be useful to bring that back to you as a separate report.
I would suggest in April rather than January because you're going to get the Treasury Management
strategy, but we can, within that strategy that you'll
receive in January, include that piece of work around the desire
for this committee to receive updated information on
performance of the funds with a view to a review of their
overall position over the financial year.
Councillor Len Wilkins - 0:22:09
So really we're looking at a snapshot where if you take it
over seven years, you've had seven years' loss of interest,
or sorry, dividends.
David Stanley, Deputy CEO - 0:22:19
Yes, so over the period we would have accumulated dividends of, I don't know the number, let's say it's a million pounds.
Let's say our capital loss is £813 ,000. Overall the council has seen income greater than the loss.
But it will be much more than that because you can see the level of dividends we've had in the first quarter of the current financial year.
Sorry, the first half is about 215 ,000.
So there's more that will have come through
over that period of time.
Clearly, our holding period has included
that difficult period of COVID where a number of the funds
may not have paid dividends and where the value
of those funds dropped quite significantly.
But over the longer term, I'm reasonably confident
to say that the level of dividend has exceeded
the lost position that's shown currently on that table.
Councillor Nigel Robbins - 0:23:12
Thank you David. We're going to give you a bit of a rest now because we're moving on to the next item.
It's good to have Alex with us from Bishop Fleming.
Would you like to introduce your report?

8 External Auditors Annual Report 2025/26

Thank you, Chair.
Officer - 0:23:28
So the report that you've got in front of you is what's known as the Auditor's Annual Report.
and that's one of the reports that we are required to provide to you under the National
Audit Office's Code of Audit Practise. You may be wondering why it is in draught. Towards
the beginning we talked about it being a draught report and some areas being outstanding and
that is purely a timing issue. We're required to actually bring this report to you as those
and the
Principally this report covers what is known as the value for money commentary because
we do two key areas. One is the audit of the accounts and one is the VFM work that we actually
do. This report as I say, principally covers the VFM aspects. But because it is deemed
to be the annual report from your auditor, it also touches on the accounts areas as well.
I'm going to turn straight to page 13 of the report that you have in front of you. Hopefully
we have all got the same page, which is the exact summary.
If I give you a brief update on the accounts work before I go into the BFM work, we had
sets out the findings from our accounts work and obviously the idea is to bring to you
those findings before you then approve the accounts and then the opinion can be given.
Unfortunately we have lost some staff on our side and that's meant that we've lost some
momentum in terms of the accounts audit. But we will be bringing that report to the next
meeting, which I think is in January. So that is our intention. So we will still be aiming
to give an unmodified opinion because we have done some audit work and we haven't found
any significant issues and obviously we will be giving the opinion before the backstop
date because obviously we don't want to go there in terms of a disclaimed opinion. So
we are focusing very much on those audits that have not been, had disclaimed opinions
in prior years to obviously keep that continuity in terms of clean opinions. So there is nothing
to report to date from the accounts audit. In terms of the VFM arrangements then, so
we're required to look at three key areas under the Code. Financial sustainability,
governance and improving the three E's, economy, efficiency and effectiveness. And obviously
there are specific areas that have been chose by the NIO for fairly obvious reasons I think
in terms of the public sector. Key issue around financial sustainability, I think in local
government, you know, every day almost we pick up something in terms of issues
around local government accounts. I think this week there was something around
Gloss City as accounts. Governance, because obviously this is public money
that you're spending, so there is an expectation that there are good
governance arrangements in place and improving economy efficiency and
effectiveness and that's about you having those arrangements in place to
ensure that you are getting value for money, again because it's public money.
I think the other thing to just mention is sometimes there's some confusion about we
are purely just looking at arrangements.
So we're not actually saying you're getting value for money, we are saying you have those
arrangements in place to ensure that you've got financial sustainability, good governance,
et cetera.
So as I say, turning to page 13 then, so what we've used is a traffic light system in terms
of those three areas.
For financial sustainability, we have said we have not identified any significant weaknesses.
We have not made any recommendations for improvement in those areas.
Significant weaknesses are defined by the code and governance notes as well.
I will come on to that when we start talking about the governance.
In governance, we have said that we deem that there is a significant weakness and again
I will go into that in a bit more detail in a minute. We have made a recommendation to
address that particular weakness and we also note that there are two prior year recommendations
that have been made that are still ongoing. They may have partially been addressed but
at the moment we don't feel they have been fully addressed. I think the other thing to
mention is that we are purely just looking at the arrangements in 24, 25. So anything
that happens beyond the 1st of April this year, we will consider in terms of our report
and reporting on that, but actually we are just looking at the arrangements in that particular
year. And then in terms of the final area, which is the three Es, we haven't identified
any significant weakness in the Council's arrangements and we haven't made any recommendations
for improvements. So I'm mainly going to focus in what I say around the governments, because
that's probably the area that you're most interested in, I assume. Obviously, I'll take
questions at the end if that's okay, Chair. In terms of the governance, so we've raised
an issue around the procurement arrangements that were in place during 24 -25, and that
was principally on the back of the CFEU investigation that came to the last audit committee. You
may ask why do you consider it to be a significant weakness, no money was actually lost as a
result of it that we are aware of. The reason we have assessed it as a significant weakness
is because the issues that came to light were perpetrated, if that's the right word, by
senior individuals within the authority. Sometimes that can be an indicator that maybe there
an issue around the culture and that's probably something to look to maybe
consider. Obviously I'm fully aware you've now got an action plan in place,
there will be some training for officers and I understand some training for
members has already happened as well and that's good. So obviously when we come
back to look at this for this year hopefully we'll be able to kind of look
at it and say yes you had an action plan, you've addressed it, there's no more
issues around this particular area. So that's why we've said it's a
significant weakness and we do go through an internal process to actually assess whether
we deem it to be a significant weakness or not. A significant weakness at the end of
the day is an auditor judgement. It is a judgement made by the audit team but we do have processes
in place within the firm to just make sure that I'm not going out and saying something
that perhaps one of my peers would say something slightly different. So we do have that sort
of that checking challenge process, if you like, within the firm.
So that's principally what I was going to say in terms of this particular report.
There's quite a lot of detail in there and I'm happy to take any questions.
Councillor Nigel Robbins - 0:30:40
Councillor Mancilla.
Thank you, Chair.
Councillor Helene Mansilla - 0:30:48
In terms of the witnesses, what do you need to see from us over the next year to be able
to say that the procurement witness is fixed?
That's a good challenge. What we will be looking at is when we come to do this work for 25 -26
Officer - 0:31:13
because I keep remembering which order I am actually in.
We will be coming back to officers and saying,
okay, we had an action plan in place,
because our recommendation really is saying,
implement your own action plan,
which I know sounds a bit of a nonsensical recommendation,
but we couldn't think of anything
that really just encapsulated anything grander.
So we will be coming back and saying,
okay, you have this action plan,
what have you done to address that?
There were various different actions in there.
What have you actually done?
So you said that you were going to do member training.
Has that member training happened?
Perhaps who attended as well,
because obviously if only one member turned up,
maybe that wasn't a great training session.
But also there was training for senior procurement staff as well.
So again, we would be looking to,
what have you actually done to address those issues?
Probably talking to internal audit
to see if they've done any work around procurement,
and also to the Counter Fraud Unit as well
to see if they have done anything,
and sort of follow up if you like.
So if we are looking for that sort of thing,
it's not our role to investigate
and get into the detail,
it's more about how have you, you've got this issue,
how have you gone about addressing it.
I suppose one of the things I should have said,
and I apologise for not saying it,
is if nothing else what this proves
is your whistle blowing policies are actually in working.
So I think that's a real positive.
Councillor Nigel Robbins - 0:32:41
Yeah, Councillor Wilkins.
Thank you, Geoff.
Got a few questions.
Firstly, are we expecting any more problems with procurement from previous negotiations?
Councillor Len Wilkins - 0:32:54
Councillor Nigel Robbins - 0:32:56
Well, I'm going to hand over to David on this one.
Councillor Len Wilkins - 0:33:04
So the report that this committee had was an investigation into three particular procurements
that involved the former leader of the council.
I am reasonably confident and comfortable that the arrangements that are in place around
the vast majority of the procurement the council's done
David Stanley, Deputy CEO - 0:33:29
over the past few years has been robust.
So we do have through public support from them
around procurement, there is a senior business partner
with response to the issue for procurement.
There is a commissioning and procurement board
and particularly I suppose in relation to the action plan
that's been referred to following the introduction
of the new procurement act earlier this year in February, we have rolled out procurement
toolkits on the council's intranet site. Kieran and the team delivered training to a room
full of officers a couple of weeks ago. I provided member training last Friday. For
those of you that weren't able to make the training in person, a recording is available
on the members portal and I would encourage you all as part
of your festive preparations to watch that.
Maybe not on Christmas Day but certainly Boxing Day if you're
finding the TV choice is somewhat limiting.
But I think the issue that is being highlighted here as Alex
has said is one around culture and particularly around the
circumventing of the controls that are already in place to
ensure that procurement is done properly.
We had a commissioning and procurement board today
where we looked at a number of procurement issues,
including for example, options around the procurement
of the cashless parking that we have at our car parks.
We currently have a provider pay by phone.
That contract is due to expire.
And we were looking at ways in which
that could be procured within the Council's contract procedure rules and the wider Procurement
Act 2023. So I'm confident that those cheques and balances, those internal controls and
mitigating controls are in place. I think what's been highlighted both in the external
auditors report and in the report that came to you as a committee was where those controls
were circumvented and the nature of the individuals involved were able to do that.
That's something the action plan will address.
Councillor Len Wilkins - 0:35:58
A few of us were concerned that we had these three incidents and no action has been taken against any individuals,
presumably because as a resource there's a weakness.
Were you surprised no further action was taken or isn't that a fair question?
Because if it isn't, I'll withdraw it.
And I'll just make a comment on, I suppose, whether a further action was taken.
The two officers involved are no longer employed by the council.
The leader at the time is no longer a leader.
So, their ability to influence and circumvent those controls is no longer in place.
So, whilst you may have a view or a view could be expressed that no action was taken about
against the individuals, two of those individuals are no longer in the employment of the council.
And I think that, in terms of what action would be appropriate, is limited for what
this council could do.
But I think what you've got in terms of the report that was presented to this committee,
the action plan that was put in place, the commitment from the corporate leadership team,
the commitment from Cabinet and all members to adhere to the procurement contract procedure
rules should give you the level of assurance that you're seeking that action has been taken.
What we've not done is taken the individuals that were subject to the investigation and
taken action against them but the Council has put in place quite a
considerably robust action plan that is addressing those issues.
Councillor Len Wilkins - 0:37:40
Thank you. I'm not in favour of wearing hair shirts but does this
committee have any degree of blame for this happening? I mean we are auditing
governance. There's been a failure of governance. Is any of this blame or
should any of this blame come our way?
David Stanley, Deputy CEO - 0:37:59
Councillor Nigel Robbins - 0:38:01
David Stanley, Deputy CEO - 0:38:03
In terms of the role, it is not the role of members nor of the committee to ensure that
each and every bit of procurement is done according to the rules. You can't, as a committee
and members cannot, put themselves in that position. It is for the role of officers in
the Council to ensure the contract procedural rules, the financial procedural rules, the
wider constitution is adhered to.
The question that I think is more appropriate for the committee to ask themselves is were
you as a committee getting the right level of assurance that those internal controls
were robust and where they haven't been robust, are you assured that there is an action plan
in place that with demonstrable milestones and reports back on progress that provides
you that assurance. To me, the issue isn't has the committee been remiss in its oversight
of that because it's not your job to have oversight of every piece of procurement, but
you do need the assurance that the cheques, balances, mitigation controls are robust.
There will be a way in which you can demonstrate that through the review of the annual governance
statement that will be coming to a future committee.
Councillor Nigel Robbins - 0:39:22
And also, if I may say, at the next meeting,
we'll be revisiting the counter -fraud report.
But it's our job to make sure that the controls are in place,
the rules and procedures are there to stop this
from happening.
It can't necessarily, we can't legislate against individuals
personally breaking those rules.
To be fair, Chair, it's only since you became Chair that the word governance will be now
Councillor Len Wilkins - 0:39:51
added to this committee, which might explain things.
Councillor Nigel Robbins - 0:40:18
Councillor Mancil, your turn.
Just continuing with governance by moving topics.
Councillor Helene Mansilla - 0:40:27
Alex, you have flagged that some governance actions are still not done.
At what point, and one of them I think is about to be closed or closed, at what point
Does that become a serious problem in your view?
And what timetable do you expect us to work to?
Thank you.
Again, good question.
Officer - 0:40:55
I might look to officers to answer the timescales part of that question.
In terms of when does something sort of tip over, I think it depends.
I suppose that's a typical audit answer, isn't it, to anything.
It depends on the issue that was raised, the recommendation that was raised in the first
place and the severity, how important we felt it was.
Some of the improvement recommendations are just that.
They are about making things better as opposed to there being significant areas that you
needed to focus on.
If we felt that there was no traction on any of these particular issues, then we might
start to think well actually does that then start to indicate a significant
weakness within the council and it sometimes and we have seen it where
sometimes recommendations are just not addressed they're piling up and then
actually maybe that again is a bigger issue because it's not just about
improving the fund you know the MTFS or adding in some you know something in the
risk register actually there's that inertia within the council to actually
do things and improve things and address audit recommendations.
So I don't know neither of the ones that we outstanding have we deemed to be
their
particular issues that were you know concerned about obviously again, they are improvement recommendations that were made in previous years.
I think we'd hope that they would they would get closed down as soon as possible.
In terms of timeline as I said, we're going to look at offices in terms of whether they've got particular plans to
address some of these. Obviously we'll continue like a dog with a bone. We'll keep following
them up until they're actually sorted.
Councillor Nigel Robbins - 0:42:46
You can come in David, but I would certainly expect an issue of this magnitude really to
be in the corporate risk register which we are going to be discussing because it's in
your report anyway and it's the next item on the agenda.
David Stanley, Deputy CEO - 0:43:04
Thank you chair, just in terms of I suppose some of the wider points in the recommendations
in Bishop Fleming's report.
So there is a current year issue which we've been discussing around governance around procurement,
but there are two issues reported by the predecessor auditor that were marked as ongoing.
One was around the frequency of the review of the strategic risk register.
I think that's kind of covered in the report that follows.
it is in the council's constitution that this committee will receive quarterly updates on the
strategic risk register and I know in
conversations with the leader when he was the deputy leader and cabinet member for finance. There was a concern I suppose that that
reporting into cabinet as well wasn't quite as visible as it needed to be and there's a recommendation in
this the following report that covers that. In terms of the other issue around the self -assessment of the effectiveness of the audit
Governance Committee.
What I would be saying in terms of to be able to demonstrate
that we've responded positively to that recommendation, we do
need members of this committee to engage in the
self -assessment process.
That would be something that Lucy, Kate, the Director in
Southwest Audit Partnership will be starting in the new year.
So it does require a level of engagement from all members of
to make that self -assessment effective.
The previous year updates have indicated that a self -assessment
exercise was started but not complete, and that was largely
due to low level of engagement, which made it rather, not
pointless, but rather difficult to draw a conclusion on the
effectiveness of the committee.
So that's kind of, I suppose, the feedback I've got on those
two ongoing outstanding actions.
some of them have been outstanding for a period of time and I think you'll find on the strategic
risk register that there's a proposal that will give you assurance as members of this
committee that you're going to see far more regular updates in line with the constitution.
Chris.
Councillor Nigel Robbins - 0:45:12
Christopher Bass - 0:45:16
Just one notable absence from the report really. There's no adjustments to the accounts being
requested by the auditors which I think highlights what a fantastic job the
finance team have been doing in recording transactions and presenting
the financial statements.
Councillor Nigel Robbins - 0:45:33
Officer - 0:45:41
I see Michelle blushing. I was just going to say I hate to burst your bubble but we haven't finished the audit yet.
At the moment there are no significant issues that we bring to your
attention but yeah when you obviously when you get the audit completion report
which will be in January then they might have something there I'd be disappointed
if you don't find anything. Are there any other questions or comments please
Councillor Nigel Robbins - 0:46:04
otherwise we can move on to item 9 which is very much tied in with the

9 Corporate Risk Register

recommendations in Alex's report which case you forgot more on just on pages
is 24 and 25 in her report. They're the key bits. So let's move on to the corporate risk
register. Thank you, Chair. So the report that you have
David Stanley, Deputy CEO - 0:46:33
in front of you is the corporate risk and opportunity register. This committee received
to the policy at their meeting on the 27th of May.
And we did undertake to bring forward,
I suppose at a future meeting,
the risk strategy as it currently is drafted.
So we've called it the strategic risk register
that's included in the annex.
What the covering report sets out on pages 38 and 39
is a little bit of background to refresh your memories
that the policy set out.
The Council's risk appetite is cautious, so we want safe delivery of options that have
a medium degree of risk and potential reward, and we want to have tight corporate control
over change.
So that's our risk appetite.
We use a five by five scoring matrix that's shown on page 40.
Anything that scores in the red is clearly a significant risk
that needs to be mitigated.
Anything that scores orange is a bubbling under emerging risk
that could go in a different direction.
Anything in green we kind of tolerate in terms of the risk
is well known, well quantified, and the mitigation actions
are in place.
What the report sets out on page 40 under paragraph 3 .3 is a
very high level summary of the number of risks we've got.
Two were scored as red around cybersecurity and health and
safety compliance.
Two are scored as amber around financial sustainability and
local plan delivery.
Three further were scored as amber with a slightly lower
number around contract failure, corporate plan delivery,
civil contingency.
And five were scored as green.
team. The annex to the report is the strategic risk register as it was reviewed by the corporate
leadership team on or around the 17th of September of this year. And that involved a corporate
leadership team, which is the chief executive, myself, the monitoring officer and the director
of communities in place, locking ourselves in chief executive's officer's room for a
hours and we built the strategic risk register from the ground up. So whilst
there has always been a strategic risk register that the council has had, when
we were reviewing that earlier in the calendar year, we didn't feel those risks
were reflecting the risk to the council. They were in some cases reflecting the
risk to service delivery partners such as Public Renewby Case. We wanted to make
sure that the risks we were capturing, scoring, and seeking
to mitigate were the strategic risks that affect the council,
the risks that are most likely to land the council in trouble
or result in someone being in front of a judge or result
in significant reputational damage.
Those are the risks, and rather than going through them
in detail, I think it's probably better to open
that up to questions.
Thank you, David.
Councillor Nigel Robbins - 0:49:41
You may have put yourself in a locked room, but if you did that,
then you would have been quite unaware of the major risk that
we've been talking about this afternoon in our previous
meeting, which is the risk that people will flout
the procurement rules.
And I'm quite surprised not to see something in this risk
register along those lines.
It may only be a temporary risk because you've, you know,
you've put the plug in the bottom of the basin.
But I would have expected to see some reference to it there,
and I don't in any of these, although there is something
about risk to reputation, which clearly those breaches were.
David Stanley, Deputy CEO - 0:50:28
Fully take that point, and I, what I was very conscious
on reviewing the risk register prior to publication is
it didn't include anything around procurement.
Also what I didn't want to do was retrospectively add that
into the risk register as a late entry and say that it had been
considered in there all along.
It is an absolutely valid point.
I think if we were doing the scoring given what's been
highlighted, it would probably be an amber score with
mitigation in place through the action plan to reduce that down.
So I think I take the point that in the next update that the
corporate leadership team will do to the risk register over the coming weeks.
We will include a new strategic risk around procurement.
Given what the action plan has got around mitigating controls, it might be a time -limited
one, but clearly the feedback that this committee will get in April on the delivery of the action
plan will be key to addressing that risk and ensuring it's adequately mitigated and the
score is accurate.
Councillor Nigel Robbins - 0:51:31
And as we have the leader of the council here, I'm sure he'll be nodding in agreement.
A slight nod, yes, okay, good.
Thanks very much.
Councillor Nigel Robbins - 0:51:51
We want to endorse the proposal that we should include the risk
register in our regular meetings.
We've said four times a year, I think, haven't we?
Quarterly, at any rate.
So if there's nothing else to comment, could people raise
their hands and you've got a comment.
Chris, we'll hear you first.
If I may, thank you.
Thank you, Chair.
Christopher Bass - 0:52:20
Just thinking about the contractor failure risk,
I was just thinking about the risk mitigation, because it
feels like that's quite a big risk to the council with some of
the significant sizes of the contracts that are outsourced.
The mitigation is around the D &B alerts, which is based on historic information.
So just trying to work out if there's something more proactive that can be done to protect the Council from contractor failure,
or at least have something in place to help if contractor failure were to happen.
Good question. Thank you.
Councillor Nigel Robbins - 0:52:51
David Stanley, Deputy CEO - 0:52:53
In terms of how we have assessed that risk, we have in the previous box set out for three
of our key service delivery partners, publica and freedom leisure, we have in place quite
well established and robust meetings with them through either operational forums, shareholder
forums, regular monthly meetings in terms of performance. So I think in terms of
understanding the nature of contractor failure, certainly for Yupiko and
Publica, will be interesting given that they're tech companies to which the
council is a shareholder. So we do through, I suppose, our shareholding of
Yupiko and Publica. We're acutely aware of the risk of failure in terms of
operationally, I think given there is no financial risk
transfer between the council and publica
and the council and new Biko, we are on effect.
We pay for the service that we specify.
With freedom, that's less well established.
There is a 10 year contract in place with freedom.
We have regular quarterly performance meetings
both on the culture and leisure side
that identifies issues in terms of,
have we got the right service, responsiveness around the cleanliness of the leisure centres,
are we getting the right number of people through the door at leisure centres is the museum before
me. The bit around Dun and Bradsheet alerts is primarily around everything other than those
particular contracts. They tend to be of lower value but I do always look at Dun and Bradsheet
alerts in the sense of it's backward looking and particularly when we're doing the procurement
activity and looking at the award of a contract to a
new supplier whilst we get to the Dun & Bradsheet, we
also want the management accounts and the forward
forecast of the financial health of that company.
So the Dun & Bradsheet alerts are a useful
additional control, but they don't replace that
engagement that you need to have with suppliers on an
ongoing basis where you're curious about their
financial health, but we do do a lot of that due
diligence through that procurement process.
Councillor Nigel Robbins - 0:55:18
Are there other questions? Yes. Councillor Mancilla.
Councillor Helene Mansilla - 0:55:23
Thank you, Chair. I have two questions. Would you like me to proceed with the questions or wait after the vote?
No.
For the top risk, like cyber and health and safety, when were the last properly tested in practise?
Do you know? We don't know.
I'll answer this as best as I can.
David Stanley, Deputy CEO - 0:55:53
I think if John Chawton, who's our lead officer for ICT, was in the room, they are tested
every second of every day in terms of the robustness of the cybersecurity position they've
got.
There is far more that is batted away in terms of cybersecurity issues than ever makes its
way through.
So I think it's tested every day. What I couldn't give you assurance on is the
wider scale testing that goes on as part of the pen testing, some of the more
technical bits around the ICT provision. It may be worth this committee having
an exempt type report, an exempt type of conversation with John
Shorten to understand that a little bit more, but it's very
difficult to give members specific assurance to say,
we've covered off all the cybersecurity risks apart from
that one over there, we're a bit worried about that.
We don't tend to want to put that into the public domain.
In terms of health and safety, this is around, this risk is included on the strategic risk
register because of an internal audit report that was published probably about 18 months
ago that said the Council cannot demonstrate its compliance on a number of health and safety
issues.
So whilst the Council could say it was compliant, it had undertaken the various assessments
required around Legionella disease testing and so on and so forth, the
recording of that in the council's terrier system wasn't complete. So whilst
officers could say yes it's been done, we know it's been done, that record wasn't
there. That's why it scored relatively highly because until that compliance
piece of work, which I know the strategic head of housing, property and assets has taken
a very firm line with the team on, that is going to remain that way until we're absolutely
confident that there is the regularity review that is being documented and evidenced in
the relevant system to provide that level of assurance.
Councillor Nigel Robbins - 0:58:22
If I could just say, at our last meeting, this cropped up,
and it was explained that much of the deficiency was because
there wasn't, there hadn't been sufficient regular oversight
of the leisure and freedom contract.
Okay, that was how that became more significant
in the risk register.
The other thing about cybersecurity, if you look
the work plan. We've got John Charlton coming next time in January and as long as we can
survive the period between now and then I think we should hopefully we get the reassurances
we need about the processes that have followed to protect us. He'll probably bring a report
of some kind, won't he, to that meeting.
Councillor Helene Mansilla - 0:59:15
The second question is regarding the report itself.
When we start looking at this register, how would you make sure that we see clearly what's getting worse and what we're doing about it?
Councillor Nigel Robbins - 0:59:36
We need a colour printer for sure.
If I may, Chair.
David Stanley, Deputy CEO - 0:59:42
So on the final column that's shown in Annex A, it's blank.
It's deliberately blank because this is in effect a new strategic risk register.
At the next update, you will see an arrow either pointing to say it's the same, pointing up, pointing down.
So you'll get that visual thing, and we'll try and do that in a
way that the arrow is so big you don't have any ambiguity
which way it's pointing.
The other bit that will be in there is around when the risk
was last reviewed.
So at the moment the risks were last reviewed when this
strategic risk register was pulled together in September.
It's the regularity of those reviews that will be important.
And the important thing to stress, I use financial
sustainability as an example.
That risk may not budge much between, let's say,
now on the 17th of December when we get the local government
finance settlement.
But it could be that that risk doesn't budge for two
or three years.
The risk stays the same score.
Even if it's staying the same score,
what you want to see that it's been reviewed.
So it's absolutely appropriate to review it every couple of
months, every quarter, whatever that frequency is,
but not to just leave it and say, well, it's not changed,
we're not going to update it.
It does need to.
Is the definition still relevant?
Is the mitigation action still relevant?
Are there references to us saying part of the mitigation
was to do something in 23, 24?
Clearly that hasn't been something updated.
So there will be some helpful indications on the actual
spreadsheet and we'll try and do it in a way that we can make
available a colour copy or do it in a way that we can print it in
grey but be absolutely clear what's happened and highlight
when it was reviewed and the direction of travel.
And clearly there's that summary on the front that tells you
where the collection of risks are, but most importantly what
you've identified as a committee is the risks that aren't there.
So you've identified procurement is a risk that isn't there,
so that will be one that will be added to the
strategic risk register.
But understanding how things are sitting above and below that,
because this is only the strategic risks,
there are comprehensive risk registers that each service is
required to keep and maintain.
And there is a process in which services can start to flag risks
that they feel are appropriate to make their way onto the
strategic risk register.
So again, I'll give you an example,
which is for the purposes of the committee will be made up.
There will be one on the finance risk register around,
let's say Treasury management activities.
If that was getting very difficult to mitigate because
there was only Michelle that was able to do anything on Treasury because everyone else
wins the lottery on Friday and goes away, that I would be escalating as a more strategic
risk. The mitigation may be get more people in, spread some of that separation of duties
out more widely across the council, but there is a process in place where that can be escalated
up. So understanding what's bubbling under might be a useful thing for the committee
to understand what risks aren't on the register, are there comprehensive service risk registers
that underpin this.
Councillor Dale.
Councillor Nigel Robbins - 1:03:03
Thank you. I apologise for not using the speaker's name.
Tony, can you put it on there? Tony's heard that there's a bit of a mic, fix it up, otherwise
you won't see it.
Let me move over a bit, if I can.
There goes the book work.
Okay, that's better.
Is that okay?
Right, okay.
Councillor Tony Dale - 1:03:24
Yeah, the...
It's very clear and obvious within the report, as it should be,
that the risks of cybersecurity, broadly speaking, are well documented
and we have seen the impact on other local councils,
both Gloucester City and Tewkesbury more recently.
Having read a book recently by a guy called Tim Berners -Lee,
that a few of you might know of,
his biggest concern for the future,
for after all, probably one of the hundred far sighted,
far seeing men of this century,
is both the ability for good,
that the AI opportunity represents and the risk for ill use and ill purpose.
Nothing within the report, unless I lost it buried in the detail of cyber risks, genuinely
talks about how artificial intelligence for good and for ill may impact on the Council,
even in the relatively short few years we have remaining.
and I can only earnestly implore the chief executives and the executive suite
to at least reflect with John Cholton on how AI may both positively and
adversely impact the council. I fear just because we have not yet heard of the
worst outcome of AI on a local authority does not yet mean there is not one
Councillor Nigel Robbins - 1:05:06
David Stanley, Deputy CEO - 1:05:14
pending I assure you there is. Thank you Tony. If it helps as some assurance the issue of
how the council uses artificial intelligence has been subject to some discussion in the
governance group that we run within the council.
And I know there is a AI policy that has been developed
that might be coming towards cabinet in the future
to sign off.
That sets out, I suppose, the rules of engagement around AI,
what's appropriate to use AI for,
but also what is not appropriate to use,
what information should go into AI
and what information shouldn't.
And in terms of, I suppose, the ICT position
that John Chorton would take is the sandboxing of that AI application in a
way that makes sure that what we're doing with it is carefully controlled
and can be maintained within the wider cybersecurity position the council's got.
So not taking private information and bunging it into any available AI machine
and hoping it comes out with the right answer but it is going to become more and
of a challenge around AI because whilst we may have a position that says we're
going to use it for these particular things, our residents will start to use
it and start to challenge us around well you should be able to do things quicker
because of AI. So we've got to be quite adaptive to that but aware of the risks
as you've pointed out that AI can be used both for positive reasons but also
Councillor Nigel Robbins - 1:06:54
for negative reasons. Thank you for the question, very important. Are there any
Councillor Jeremy Theyer - 1:07:04
other comments or questions? Yes, Jeremy. Just on reliance and democracy, just in
the follow -on action if required there's a spelling mistake or I think it is
because it says 11 months prior to vesting day so once a member is voted
in 11 months time we all have to buy vests and wear vests or is that supposed to be voting?
David Stanley, Deputy CEO - 1:07:29
It's a word that's a term around local government reorganisation. The new councils will vest
on the 1st of April so that's known as vesting day.
Councillor Nigel Robbins - 1:07:58
Are we in a position where we can support the recommendation now to make
sure that the strategic risk register appears at least
quarterly before the Committee of Audit and Governance.
Are we in that position?
If so, raise your hands.
I think we're unanimous.
Thank you very much.
Councillor Nigel Robbins - 1:08:28
Well, finally, we've got the work plan.

10 Audit and Governance Committee Work Plan

Item 10, right at the end of your papers.
Here we are.
A risk management policy, cyber security update, treasury management strategy, and the investments
strategy for the following 12 months.
Statement of accounts and audit opinion.
This is work going on presumably all the time, isn't it, David?
David Stanley, Deputy CEO - 1:09:21
So in terms of the statement of accounts and audit opinion, Alex has outlined the position
currently on the audit, the financial statements. That will be hopefully concluded in time and
the report issued and the opinion issued in time for this committee to receive that on
the 27th of January. Just to remind members, the backstop date where these accounts have
to be signed off is the 27th of February.
So it will be well in advance of that,
but you'll note that your next available meeting
is the 9th of April.
So it is kind of we would dearly love
to get that in front of you at that meeting.
And I don't think there's any impediment to that happening.
But should that not be possible, there
may need to be a delegation to receive that opinion
so it can be signed off and received
prior to that backstop date.
Thank you, David.
Councillor Nigel Robbins - 1:10:12
Well, that's the end of our meeting.
And can I thank particularly David for his, the fullness of his responses.
Chris for your contributions.
Tony for getting you along.
That's marvellous that we can see you again.
And also for our visiting external auditor Alex.
Thank you for saying the whole meeting.
You won't always be required to say for the whole meeting.
In fact, we didn't require you, but it's been a fairly short meeting.
Sometimes they do go on a bit.
As you can imagine, you've got probably quite a lot of
experience of that, have you?
I have got quite a lot of experience, but I do actually
die because I'm at the meeting.
It's actually probably the same thing you touched on,
and I would have thought that's really important for
the person, so I would probably suggest the first discussion.
You pick up some of the contacts.
Yeah, excellent.
Well, I hope you've enjoyed the meeting.
Thank you very much, everybody.
Thank you.
Thank you.