Agenda and minutes

To receive any apologies for absence.

Apologies were received from Councillors Norman Cavill and Simon Carswell. Apologies were also received from Independent Member Lindy Jansen Van Vuuren. Councillor Martin Lovell was the substitute for Councillor Simon Carswell and Councillor Barry Clarke was the substitute for Councillor Norman Cavill.

These will be considered at the next Audit Committee meeting in February 2025.

The minutes of the previous meetings will be considered and approved at the next meeting of Audit Committee.

To receive and note any declarations of interests in respect of any matters included on the agenda for consideration at this meeting.

(The other registrable interests of Councillors of Somerset Council, arising from membership of City, Town or Parish Councils and other Local Authorities will automatically be recorded in the minutes: City, Town & Parish Twin Hatters - Somerset Councillors 2023 )

There were none.

The Chair to advise the Committee of any items on which members of the public have requested to speak and advise those members of the public present of the details of the Council’s public participation scheme.

For those members of the public who have submitted any questions or statements, please note, a three minute time limit applies to each speaker and you will be asked to speak before Councillors debate the issue.

We are now live webcasting most of our committee meetings and you are welcome to view and listen to the discussion. The link to each webcast will be available on the meeting webpage, please see details under ‘click here to join online meeting’.

Public questions were received from:

·       Andrew Lee

·       David Orr

·       Nigel Behan

The questions and responses provided are attached to the minutes in Annex A.

To consider the report.

This report provided an update on progress against the action plan in response to the Key Recommendations and Improvement Recommendations in the Interim Auditor’s Annual Report for 2022/23.

The Committee was asked to consider the progress that had been made.  As a key component of the Council’s governance framework, the Audit Committee had a responsibility to monitor progress of action plans in relation to the Auditor’s Annual Report to the Council.

There were 13 Recommendations in total.  Of these, 7 Recommendations had been completed. The remaining 6 Recommendations and associated 6 actions were set out in the report.

The Service Director Finance and Procurement,  Nicola Hix presented the report, saying that progress had been made and that all actions had been updated and validated by Finance. Evidence to show that an action is completed is always required by Finance before signing off as completed and this evidence can be provided to the Audit Committee upon request. She also advised that it was necessary to move one action from “Completed” to “In progress”.

Committee Members then raised several points for discussion including:

·       Staff training requirements to respond to the Ombudsman – Training is underway and timely responses to the Ombudsman will improve.

·       Outstanding actions to be completed by due date or March 31^st – Reassurance given that action owners are confident of meeting the due dates.

·       Improving economy efficiency – More benchmarking is proposed although not much benchmarking data is currently available from unitary councils.

·       Children’s Transformation programme – Risks and mitigations to achieve this were explained

The Chair then read the recommendations and Members were all happy to note the report.

RESOLVED

The Audit Committee agreed to note the progress made against the actions in relation to the Key Recommendations and Improvement Recommendations.

To consider the report.

The report detailed the Auditors’ findings on arrangements in place at the Council to secure economy, efficiency, and effectiveness in its use of resources during 2023/24. It included 2 Statutory Recommendations in relation to serious concerns over the Council’s financial sustainability that had been issued to the Council by its External Auditors Grant Thornton, exercising their powers under Schedule 7 of the Local Audit and Accountability Act 2014.

The Audit Committee was asked to note the Auditor’s Annual Report and the 2 Statutory Recommendations together with the proposed management response that would be considered by Council on 12 February 2025. The Committee was also asked to note the 9 Key Recommendations and 8 Improvement Recommendations and endorse the proposed management response and actions.

The Service Director Finance and Procurement,  Nicola Hix presented the report, reminding Members of the 2 Statutory Recommendations that would need to be considered by Full Council in February 2025. These were:

Statutory Recommendation 1 (SR1)

The Council should develop detailed savings plans at pace to deliver the savings targets set out in the MTFS in order to reduce reliance on one-off resources and rebase the Council's budgets to a financially sustainable level. To support the development of a sustainable budget the Council should also:

•         identify additional savings to minimise the use of reserves, ensuring that sufficient levels of reserves are maintained to mitigate the significant levels of financial risk the Council is facing.

•        ensure all planned savings are delivered, and where they are not that mitigating savings plans put in place.

•        establish an appropriate culture of financial accountability and ensure managers have sufficient skills to manage the financial resources for which they are responsible.

Statutory Recommendation 2 (SR2)

The Council should develop the overarching transformation business case and detailed business cases for individual workstreams that will deliver service transformation and contribute to delivering the Council's ambitious savings targets. The funding required to deliver transformation, and the new target operating model, should be identified and a funding plan developed. This should be undertaken at pace in order to deliver the savings required to balance the 2025/26 budget.

Barrie Morris and Dan Povey from the external auditors Grant Thornton, gave more detail on the recommendations. They advised that it was an interim auditor’s report but that the substance of report would not change during the next month. Recommendations had been made against 3 areas of the financial code. One area was Financial Sustainability which was where the 2 statutory recommendations were and also 4 key recommendations. It was important to mitigate against the risk of the service restructure and also strengthen some of the modelling and forecasting in the Children’s Services budget. More mitigating actions were required for the deficit in the Dedicated Schools Grant (DSG). The trajectory on the cumulative deficit was concerning. They recognised that the Council had engaged early with the auditors by highlighting the challenges that if faced and declaring the financial emergency. The report included 4 key recommendations in Governance,  ...  view the full minutes text for item 20.

To receive a verbal update from the External Auditor and S151 Officer.

Barrie Morris from the external auditors, Grant Thornton, was invited to give a verbal update.  He said that the 2023/24 accounts were impacted by late delivery but were provided on 15 January 2025. The public consultation would complete at the end of February and a backstop would begin then. It was hoped to gain assurance in 2024/25 which would mean a full audit of the 2023/24 and 2024/25 accounts at same time, which would take a lot of resource. Discussions were ongoing and they were unable to commit to anything or use Council funds until they are sure it could be done.

The Chair thanked Grant Thornton for their continued help with the completion of the audits and 11 legacy council accounts and acknowledged the huge amount of progress made, and although the Council had not yet completed the full audit for 2023/24 it was one of on 49 councils out of 400 that had been able to deliver the accounts. He requested that the Committee be kept updated of any potential slippage in meeting the 30 June 2025 target for the 2024/25 draft accounts.

There were no questions from the Committee so Members resolved to note the update.

To consider the report.

This report provided an update on Internal Audit activity since the last meeting, including the outcomes of completed Internal Audit work, especially where there was limited or no assurance over the governance, or risk management, or control arrangements of those activities reviewed.

Members of the Audit Committee were asked to note the position of the 2024-25 Internal Audit Plan and consider any significant governance, risk and control weaknesses identified in the report.

The report stated, while the Council had arrangements in place during 2023/24 to regularly update and report on the scale of its financial challenge, it had not moved quickly enough to develop a pipeline of savings plans and other mitigations to fully address the financial challenges.

While a Financial Strategy had been developed to deliver savings over the medium term and the transformation programme had been brought forward, the Council had to rely on £81.4m of one-off resources to balance the 2024/25 budget, including £36.8m of reserves and £36.9m in government support.  Reliance of this scale on one-off resources represented a significant weakness in arrangements to ensure financial sustainability as reserves were eroded and no longer available to provide financial resilience and one-off measures impacted on the budget gap in future years.

The April 2024 Medium-Term Financial Strategy provided a financial strategy to produce a range of savings from £47m to £116m but there were significant risks in delivering the scale of savings required and if the budget gap for 2025/26 was not fully bridged through recurring savings, there was a risk further reserve contributions or urgent cuts to services would be required. 

Committee Members then raised several points for discussion including:

·       The direction of travel to recover auditors’ assurance – Members were advised that although good, there were still some pieces of work to complete and that a stable workforce was an essential internal control. The auditors liaise with Service Directors to ensure nothing falls off the radar.

·       Concern over the pace of work – Members were advised that although the pace needed to be quicker, it was recognised that the staffing restructure had a direct impact on this. The Chair added that there was a plan to start calling in Officers where there was a lack of progress particularly on P1 actions, to explain the reasons for the delayed completion of these actions.

·       The increased amount of flooding due to climate change – The auditor advised that the flood response had not been included in the climate change work. The Chair requested that going forward, flooding should be included in the report.

·       Concern that some items seem to have stalled at 90% complete for some time – Members were advised a deeper look into the reason for this would need to be carried out.

·       Have SENDs (Special Educational Needs) been audited? – Members were advised that a lot of work had been done on EHCP (Education, Health and Care Plans) and an audit update would be provided on this later in the year.

The Chair then  ...  view the full minutes text for item 22.

To consider the report.

The report set out the Treasury Management Strategy (TMS) and Capital Receipts Flexibility and Efficiency Strategy for Somerset Council for 2025/26.  It also included a Minimum Revenue Provision (MRP) Policy for 2024/25 and 2025/26.

The report recommended that Audit Committee review the documents and consider any comments and feedback to the Executive ahead of consideration by the Executive and recommended to Council at its Budget Setting meeting:

1.1     Treasury Management Strategy for 2025/26, including the prudential Treasury Indicators set out in Appendix A of the report;

1.2     MRP Policy for 2024/25 and 2025/26 as set out in Appendix B of the report;

1.3     Flexible Use of Capital Receipts Policy for 2025/26 as set out in Appendix C of the report.

The report stated that the Council’s current investment portfolio comprised of:

•         short-term, cash-based investments,

•         a Strategic Pooled Funds Portfolio with a current book cost of £112.25m,

•         non-treasury investments comprising commercial property and shareholdings in Council-owned companies

As of 31 December 2024, the Council held just over £709m of debt as part of the strategy for funding previous years’ capital programmes. The Council’s investment balance stood at just over £218.0m, made up of £105.8m cash and £112.25m of pooled funds.

The Service Director Finance and Procurement,  Nicola Hix presented the item, highlighting that it comprised of 3 key reports for the budget setting. It would then be presented to the Executive before being considered by Full Council. She acknowledged that it was quite a complex read and that it was hoped to make it easier to read with the use of tables and visual aids.

She continued that the main objective of the Treasury Management Strategy was to safeguard public money. The MRP Policy covered 2 years -  2024/25 and 2025/26 and a lot of progress had been made in developing the policy inherited from the districts. The Capital Receipts Strategy concerned the Government allowing the use of capital receipts for the transformation activity, which is not usually permitted.

In response to a questions, the Chief Finance Officer, Maria G. Christofi advised that the Finance team were constantly checking with financial advisors that the advice given was current and correct and that they worked closely with the Treasury Management team to decide what rates would be acceptable. She added that there was scope to borrow within the capital program. The TM Strategy was a forward-looking document so there were no comparisons to previous years provided. Also, that inflation rates are tracked and monitored closely.

As there were no additional recommendations, Councillor Simon Coles proposed the recommendations within the report to review and consider the report, which was seconded by Councillor Andy Sully. All approved with one abstention.

RESOLVED

The Audit Committee agreed to note the report, having given it due consideration.

Before moving onto the next confidential items on the agenda, the Chair asked the Interim Head of Governance and Democratic Services Scott Wooldridge, to explain to the Committee and those watching online, the reasons why the meeting  ...  view the full minutes text for item 23.

To consider the report.

The confidential minutes are attached in Annex B.

To consider the report.

The confidential minutes are attached in Annex B.

To review the Audit Committee Forward Plan for the remainder of the financial year.

The workplan was highlighted and Members were asked to note its content. The date of the next meeting was highlighted as 25 February 2025.

RESOLVED

The Audit Committee agreed to note the Audit Committee Workplan 2024/25 and that the next meeting date is 25 February 2025.