Agenda item

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, including an organisation-wide system of control.

The Chair commented that it was always going to be a difficult year for the Council but that it was important to reflect on the progress made so far including approval of the 5 Councils accounts. He acknowledged that it was a very comprehensive report and recognised the issues raised but pointed out that some things are beyond our control. So, although the Report may look bleak the Council is heading in the right direction in many areas. The Lead Member for Finance, Procurement and Performance, Councillor Liz Leyshon, added that although it was challenging to read, she wanted to thank Grant Thornton for providing a clear, coherent and constructive report and which would set the Council on the right path.

Committee Members then raised several points for discussion including:

·       Will the Target Operating Model be fit for purpose in 2029/30? – In response, Members were advised that the operating model would drive how services are delivered but when there is a change in service standard a new operating model would be used. We need further savings in the transformation programme and to change our activities and how we operate, hence the operating model. It is recognised that there is a lot of work to do but that there is a projected green risk score should the recommended actions be agreed and delivered

·       Concern that staff have the sufficient skills to mitigate against the risks – Members were advised that all budget managers would receive additional training so that they would know what was expected of them. Where overspends were forecast, mitigation measures were expected. Progress in these areas would be looked at in the 2024/25 report and there would be more work done with Officers to ensure that this is reported in a more timely manner.

·       What is the effect on the Council’s reputation with having 2 statutory recommendations issued in this report, and will they affect the provision of external funding from the Government? – Members were advised that these used to be rare but are becoming more frequent. The hope was that going forward there would not be any more statutory recommendations but that would be dependent upon the Council being able to make difficult decisions. We have made it extremely clear to the Government that without their additional funding, the Council will have to issue a S114 notice. The external auditors are reporting on the lack of a sustainable budget but although we are confident that we have the support to move forward it needs to be at pace.

The Chair then summed up and asked Members if were happy to note the recommendations and the statutory recommendations in the report.

RESOLVED

The Audit Committee agreed to:

1       Note the Auditor’s Annual Report and the 2 Statutory Recommendations together with the proposed management response that will be considered by Council on 12 February 2025.

2   Note the 9 Key Recommendations and 8 Improvement Recommendations and endorse the proposed management response and actions.