Agenda and draft minutes

To receive any apologies for absence.

Apologies for absence were received from Councillors Mike Hewitson, Habib Farbahi and Rosemary Woods. Councillors Diogo Rodrigues and Gwil Wren attended online.

To approve the minutes from the previous meeting held on 25 February 2025.

The Committee was asked to consider the Minutes of the meeting held on 25 February 2025. Councillor Simon Coles proposed and Councillor Tim Kerley seconded that they be accepted as a true and accurate record and were approved.

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’.

There were none.

To consider the report.

This paper provided the Audit Committee with a report on progress from Grant Thornton in delivering their responsibilities as the Council’s external auditors.

The Somerset Council Audit Progress and Sector Update report from Grant

Thornton as at Appendix A referred to the prior year 2023-24 Financial

Statements and the plan for the current year 2024-25, the Value for Money Report for 2023-24 (including the 2 Statutory Recommendations), audit fees as set out by the Public Sector Audit Appointments (PSAA) and the audit

deliverables for Somerset Council.

Appendix A of the report also included a series of sector updates in respect of emerging issues which the Committee may wish to consider, together with some useful links and a suggested webinar for the Committee to attend.

A special extraordinary meeting of the Audit Committee was held in February 2025 to sign off the Financial Statements for 2023-24.  Due to the delay with the original production of these, and then the back stop date imposed, there was insufficient time for a complete audit, therefore Grant Thornton issued a declaimed opinion on 28 February 2025 as reported.

In relation to 2024-25, the Grant Thornton risk assessment for 2024-25 had recently commenced and the intention was to present their plan to the Audit Committee meeting on 22 May 2025.

A key focus of the work will be on the recommendations made in 2023-24 and, in particular, on the two Statutory Recommendations issued by the External Auditors in their Interim Auditor’s Annual Report for year ended 31 March 2024.

The Service Director for Finance & Procurement, Nicola Hix introduced David Bray, a senior manager in the Public Sector Assurance team at Grant Thornton, who had taken over from Barrie Morris as the account manager for Somerset Council.

During the discussion a number of points were raised and responded to as follows:

·       Audit Fees – How do they compare to previous years? – The response was that the previous year’s fees were not a direct comparison. The scale fee is broadly comparable and has increased due to inflation and a new standard fee. There will be more clarity provided and any increases have to be approved by the Public Sector Audit Appointments Limited (PSAA). This will ensure that Officers are happy that the additional work is appropriate.

·       Delay on the 2023/24 Financial Statements – How assured are we that the deadline of 30 June is achievable? – The response provided was that the 30 June is a challenge for all Local Authorities in the country. There are two categories of lease – a finance lease and an operating lease. Currently treated separately in accounts but the IFRS16 looks to bring them together. More capacity has been approved but closedown accountants are hard to recruit. Everything possible will be done to meet the deadline.

·       Private Finance Initiatives – Do valuations have to be done on every peppercorn lease? – The response provided was that hopefully common sense would prevail and do not know the impact on Local Authorities. Some  ...  view the full minutes text for item 37.

To consider the report.

This report provided an update on progress against the action plans in response to the recommendations in the Interim Auditor’s Annual Report (AAR) for 2022/23 and Interim AAR for 2023/24.

2022-23 AAR Action Plan

There were 13 Recommendations in total, 7 Key Recommendations and 6 Improvement Recommendations.  Of the 13 recommendations, 9 recommendations had been completed.  The remaining 4 recommendations had 4 actions that had been escalated and incorporated into the 2023-24 AAR action plan.  As a result of this, Audit Committee were being asked to endorse the closure of the 2022-23 AAR action plan to ensure focus on the progress against the latest action plan.

2023-24 AAR Action Plan

The AAR for 2023-24 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. 

In addition to the 2 Statutory Recommendations, the Auditor had also raised 9 Key Recommendations and 8 Improvement Recommendations addressing perceived weaknesses in the Council’s arrangements for financial sustainability, governance and securing economy, efficiency, and effectiveness. There were 33 actions in the action plan, 11 were complete and 22 were in progress.

The report was introduced by the Service Director for Finance and Procurement, Nicola Hix, and presented by Sian Kenney, the Financial Gov and Policy Lead.

During the discussion a number of points were raised including:

·       How much progress is made on the recommendations before being escalated? In response Members were advised that the 4 in progress from 2022/23 are 50% and 60% complete and were carried forward to 2023/24. Meetings are held monthly with action owners to check on progress.

·       Request that the carried forward actions on the action plan are clearly indicated in the report.

·       Concern that the target date for completion of the DSG is only 1 month away. Is this achievable? Councillor Heather Shearer advised that it has been worked on for some time and there is a revised DMP (Deficit Management Plan). This will be put in place after 1 April when the restructure is finalised.

·       10% progress of the transformation plan is due in February 2025. Will this be adjusted? Members were advised that it would be different had the Council been able to set the budget without using one-off monies. £11.4m of government capital monies are to allow young people to stay at home and attend mainstream schools. Appendix G sets out the strategy for the transformation and the percentage will rise rapidly.

The recommendation within the report was proposed by Councillor Simon Carswell and seconded by Councillor Lee Baker. It was unanimously approved.

RESOLVED

To endorse the closure of the 2022-23 AAR action plan, given that remaining action in progress had been escalated and incorporated into the 2023-24 AAR action plan which was being monitoring by External Auditors, Statutory Officer Board and Audit Committee.

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.

Within the attached SWAP Update report was a summary table of the current position with regards to P1 and P2 recommendations by directorate.  Details of all P1 recommendations were summarised in the SWAP Report at Appendix E of the report.

The following table summarises the movement in the position of recommendations since quarter 3’s update to the committee:

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

SWAP Audit’s Assistant Director, Alastair Woodland presented the report. He highlighted some of the main elements of the report including the removal of the Community Learning Partnerships from the plan as it was being disbanded. Also, the new Highways contract in 2024 had an operational risk assessment of Medium, with 14 recommendations of which 2 were priority 1.

Regarding the follow up audits, he highlighted that some work had progressed with the Children not in School and Children Missing Education audits regarding school exclusion data and that as a result, both these were going to be tracked. The Climate Change Strategy follow up audit has a lot of actions still in progress and will be checking to ensure they are recorded. He continued that there would be a separate report coming to the May committee on the Counter Fraud.

He drew Member’s attention to the Homes England Compliance Audit Programme work that had been undertaken in relation to the North Taunton regeneration phase A. He advised the committee the Homes England Compliance Audit report had now been released and was circulated to audit committee members prior to this meeting. The Homes England Compliance Audit Report concluded a green rating and there were no ‘non-compliance’ recommendations that the authority had to address. This was an improvement on previous Home England Compliance Audit outcomes.

When signing off a Priority 1 recommendation, he assured Members that all evidence had been gathered to show that the issue had been resolved. There were a number of Priority 1 recommendations relating to the structural changes at the Council, due on 1 April, so this will be monitored closely.

During the discussion a number of points were raised including:

·       When is a follow up done on the highways contract? Members were advised that regarding the Priority 1 recommendations, when confirmation is received that it has been completed, SWAP ask to see the evidence. When they think the risk is significantly reduced, they would follow it up and list it on the follow up action tracker. Priority 1 recommendations are always followed up immediately.

·       One Member raised  ...  view the full minutes text for item 39.

To consider the report.

This report presented the proposed Internal Audit Plan for 2025/26 and the Internal Audit Charter.

The Internal Audit Charter was a formal document that included the internal audit functions mandate, organisational position, reporting relationships, scope of work, types of service and other key specifications.  In accordance with the Global Internal Audit Standards in the UK Public Sector the Audit Committee was required to approve the Internal Audit Charter.

The Assistant Director at SWAP, Alastair Woodland, highlighted some of the key aspects of the Plan and Charter. Adding that the purpose of the Charter was how the Council would function operationally and the Plan was a more detailed document that outlined the specific steps, resources, and timelines needed to achieve the goals outlined in the charter.

During the discussion Councillor Simon Carswell commented that the Charter and Plan were both very comprehensive and he would be happy to propose to approve both. This was seconded by Councillor Tim Kerly.

Members discussed various topics such as the auditor’s hours required to perform the work. Also, the Strategic Risks report seems overdue. The Charter was a little difficult to follow and would like to see tracked changes.

In response Members were advised that 1700 man hours would be required for the Audit Plan. It is not usual to provide a tracked changes report but this can be circulated if required. The Member suggested a summary of changes of the Charter, rather than a tracked changes report, which the Assistant Director at SWAP agreed to provide, along with a summary of how the 1700 man hours would be spent. The Strategic Risks report last came to Committee in November 2024. One Member  also questioned when risks regarding debt management and asset disposal would come to Committee and were advised there was a timetable of when work would be started, by quarter as projects were planned by quarter. The plan would be flexible and would be able to react to other Audit requirements.  Also discussed was the use of AI and Members were advised that AI was a hot topic at the moment and would be a massive benefit, but there was also concern that it could lead to problems.

At the end of the discussion, Members approved the proposal by Councillor Carswell to approve the Internal Audit Plan and Charter.

RESOLVED

To approve:

a.     The Internal Audit Plan 2025-26 (SWAP attached report Appendix A of the report)

b.     The Internal Audit Charter (SWAP attached report Appendix B of the report)

To consider the report.

This report provided a review of the Council’s treasury activities for the period from 30 September 2024 to 31 December 2024, which had been carried out in accordance with the Treasury Management Strategy and Prudential Limits.

The main point to note was that all borrowing and investment activities had been undertaken in accordance with the approved strategy.  All treasury activities remained within the agreed Prudential Limits set.  Accordingly, risks to the Council’s investments were managed and balanced against yield.

The Service Director Finance and Procurement, Nicola Hix, presented the report.

Councillor Liz Leyshon commented that there had been positives in month 10 and month 11 will be a provisional outturn. There is more borrowing necessary in month 11 as Council Tax is often paid over 10 months. When asked if the advise provided to the Council had been satisfactory, the Service Director, Finance and Procurement responded that they were very happy and that the contract with the treasury advisors had just been renewed for the next 3 years.

It was proposed by Councillor Simon Coles and seconded by Councillor Lee Baker to note the report. All approved.

RESOLVED

To note the end of December 2024 borrowing and investment position and that all treasury activities had been carried out in accordance with the approved Treasury Management Strategy, within the Prudential Limits, and in line with the full delegations to the Section 151 officer.

To consider the report.

The report stated, the Dedicated Schools Grant (DSG) was provided by the Department for Education to fund Somerset education provision.  Due to the nationwide trend of dramatically rising need affecting children with special educational needs and disabilities, the High Needs block was significantly overspent, with a deficit projected to rise further over coming years.

The actual, current forecast and projected DSG deficits to 31 March 2026 were shown in the report.  The DSG position was forecast to reach a cumulative DSG Deficit of £99.125m by 31 March 2026.

The drivers of cost growth were due to the way that financial liabilities were acquired, the statutory framework within the SEND system, and rising demand.

Local authorities generally were facing increased demand for funded support.  By December 2024, Somerset had issued 5,672 Education Health and Care Plans (EHCP) for pupils with SEND, which was an increase of more than 220% in the last four years.

The report went on to state a new DSG Deficit Management Plan was being developed for Executive decision and this would need to be rigorously devised, delivered and monitored.

The Plan would build on the existing DMP and Children’s Transformation Plan but further increase the level of ambition and pace with the aim of halting the rising costs and paving the way for deficit reduction.

The Report was introduced by Councillor Heather Shearer, Lead Member for  Children, Families and Education and presented by the Service Director for Education, Partnership and Inclusion, Amelia Walker.

She advised that the critical risk would be if the statutory override was to end in 2026, which would immediately trigger the S114. The scale of the challenge was significant due to the large overspend and the pace that the deficit was forecast to grow. Children were becoming eligible for funding more rapidly than ceasing eligibility. She added that the SEND system was dysfunctional and there were significant flaws in the statutory framework putting huge strains on the Local Authority’s budgets. There was a new deficit management plan currently being developed but added there was a limit to what could be done with the legal powers of the Council. Nonetheless, Councillor Shearer advised she had signed an Executive Decision to provide 15 more SEN units.

During the discussion a number of points were raised including:

·       How is the deficit being funded by the Council? Members were advised that the Council can offset the deficit against the surpluses in the budgets of schools managed by the Local Authority. The reserves held for maintained schools are diminishing.

·       The rights of parents and children seems to outweigh the responsibility of parents. What effect does this have on the situation? Members were advised that the UK has prioritised parental preference within legislation, for example, if they don’t get the school they want, they can appeal. With Special school places, parents can take the Local Authority to court and will often win. It is this that is increasing the pressure. It is a complex situation, also being experienced in  ...  view the full minutes text for item 42.

To consider the report.

This report introduced the review of policies in Somerset aimed at the prevention, detection and reporting of fraud and corruption.  Anti-fraud and corruption work formed an important part of our corporate governance and internal control framework.  The Council had an established suite of Anti-Fraud and Corruption Policies covering;

•        Anti-Fraud and Corruption Policy 2025/26 (Appendix 1 of the report)

·       Anti-Bribery Policy 2025/26 (Annex 1) - updated

·       Anti Money Laundering Policy 2025/26 (Annex 2) - updated

·       Anti-Tax Evasion Policy 2025/26 (Annex 3) - updated

·       Fraud Sanctions Policy 2025/26 (Annex 4) - updated

·       Proceeds of Crime Act (application of) Policy 2025/26 (Annex 5) – new Whistleblowing Policy

The key messages contained within the framework of policies above remained consistent: fraud would not be tolerated; prevention was better than cure, and that where fraud is perpetrated the strongest possible actions of redress will be taken.

Also attached to the report at Appendix 2, was the Annual Counter Fraud Strategic Action Plan 2025-26.  This set out the corporate arrangements in place and actions to be taken to contribute to improved delivery of the anti-fraud and corruption policies.

The Head of Corporate Finance, Ben Bryant, advised that this was a bi-annual report and highlighted the key changes from the previous report. BB – a bi-annual report. He said that that the Money Laundering Policy had been strengthened and improvements made to the Proceeds of Crime Act. Both these would be presented at Executive before going to the next Full Council meeting.

During the discussion a number of points were raised including:

·       The CIPFA Code of Practice says the framework should include different policies. Is there one on Cyber Security? In response, Members were advised that the Counter Fraud Officer, Beth Durcan, has been working with the Chief Information Security Officer and a strategy will be forthcoming soon.

·       The Whistle-Blowing Policy and others are reviewed every 2 years. This is to be reviewed in readiness for signing off at the May Full Council meeting. There are no significant changes anticipated.

·       There are outstanding actions in the Anti-Fraud action plan due for completion in March and April. Will these be met? Members were advised that all the March actions are underway and on track. There would be a progress update in the May meeting. The Counter Fraud Officer, Beth Durcan was very focussed on delivering against this action plan at pace.

·       Considering the budget pressures, are there any additional measures being put in place to combat fraud? Members were advised that the team is very proactive and there is a zero-tolerance approach to fraud. The Counter Fraud Officer is in the process of doing a forward risk assessment in every service area of the Council to strengthen this. Payments to suppliers are checked for any duplication, the scheme of delegation and segregation of duties and an oversight by SWAP auditors all contribute to the counter fraud activities at the Council.

At the end of the discussion, it was proposed by Councillor Lee Baker, seconded by Councillor Steve  ...  view the full minutes text for item 43.

To consider the workplan.

Members reviewed the Audit workplan and made some corrections and additions.

RESOLVED

To note the Audit Committee Workplan 2024-25.