Agenda, decisions and minutes

To receive any apologies for absence.

Apologies were received from Cllr Andy Sully (substitute Cllr Mike Rigby) and Cllr Lee Baker (substitute Cllr Mike Stanton).

Cllr Simon Coles left the meeting at 12pm

Cllr Simon Carswell left the meeting at 1pm

Cllr Mike Rigby left the meeting at 2pm

To approve the minutes from the previous meetings:

26 October 2023

14 December 2023 (Extra ordinary meeting)

The minutes of the Audit Committee meeting held on 26 October 2023 were agreed upon, with the amendments as below, and signed by the Chair.

Cllr Simon Carswell attendance – in attendance virtual.

Minute 43: 

Amend the sentence:

The S151 Officer affirmed the importance of communication, it was suggested that the proper response be sought from central government as the central government placed Somerset Council in this position.

To read:The S151 Officer affirmed the importance of communication with central government.

Minute 45:

add the amended recommendation:

Cllr Tim Kerley proposed amendments to the South Somerset District Council audit findings. 

The Audit Committee delegated authority to the chair to sign off the accounts, subject to there not being any material change to those accounts 

The minutes of the Extraordinary Audit Committee meeting held on 14 December 2023, were agreed upon and signed by the Chair.

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 no declarations of interest made at the meeting.

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’.

To consider the report.

The Audit Committee noted the Strategic Risk Management Update and appendices.

The Audit Committee received a strategic risk management update for Somerset Council from the Strategic Risk Manager, Pam Pursley.

The Strategic Risk Manager highlighted that the report covered the strategic risk position up to January 2024; summarised the movement and breakdown of the current 18 strategic risks, the proactive controls, reactive actions, including: the movement in ORG0062 health and safety management and the review in April 2024, the removed risks ORG0076 as the required LGR staff savings not achievable against expectation and ORG0077, the risk that new structures are not affordable and that both risks will be reassessed taking into consideration the work of the transformation programme.

The Audit Committee asked a number of questions and made a number of comments which were responded to at the meeting, as follows:

•        The request for inherent risk to be included in future updates to the Committee and the JCAD report – the Strategic Risk Manager undertook to amend the report to include the risk by the next Audit Committee meeting 28 March 2024

•        Expression of concern regarding the need for improved reporting across the strategic risk register to give assurance to Audit Committee that actions are in place, including: the proactive controls and reactive actions, mitigating and management of risks reporting,  the review and implementation of target dates reporting and monitoring, accountability of officers not meeting targets and organisational culture,  explanatory notes as to why targets are not met, the need for clear presentation of position and pathway to targets, improvement of Equality Impact assessments and a Council direction of travel statement. Executive Director for Corporate and Resources and Strategic Risk Manager undertook the action to address these concerns.

•        Resource and time capacity for reporting of risks and the limited corporate risk management staffing resources for Somerset Council with recognition that services are responsible for updating the risk register.

•        That the sustainable MTFP remains a significant risk, the effect of the control measures put into place, work and actions completed across the Council – The Executive Director Resources and Corporate Services, Jason Vaughan, and the Deputy Leader of the Council and Lead Member for Resource & Performance, Cllr Liz Leyshon, advised that it is clear that under the current financing model for Local Government the Council, in its current form,  is not financially sustainable and the need for urgent reform of the funding mechanism for Local Government is required. Additionally, that ongoing financial support from the Government will be required due to the cost of delivering services increasing significantly faster than the income the Council receives particular in relation to social care.

•        The transformation programme, including the One Somerset Business savings and the revised program in response to the Council situation and the consideration of interdependency scores in relation to the restructure and reshaping of the Council.

•        Strategic risk ORG0061 delivery of climate emergency and the limited resource and potential impacts of not recruiting. The Strategic Risk Manager undertook to share the risk report with Executive  ...  view the full minutes text for item 63.

To consider the report.

Reviewed the Councils Financial Emergency governance arrangements summarised in the report.

The Committee received a report from the Interim Head of Governance & Democratic Services, Scott Wooldridge.

The Interim Head of Governance & Democratic Services presented the report, making reference to the presentation that had been published with the report, highlighting: the appropriate leadership and governance arrangements for command control and coordination in response to the financial emergency and the number of actions taken to address the forecast overspend in the current year and the budget gap for 204/25 including; alongside monthly reporting of budget monitoring position to scrutiny and executive, the financial emergency work streams, strategic teams - strategic gold, tactical silver operations bronze, the control and spend boards and the adult social care and children's social care panels.

The Audit Committee asked a number of questions and made a number of comments which were responded to at the meeting, as follows:

•        The actions taken to mitigate the financial emergency, including the initial response, the identification of the budget gap and formation of several internal control boards to manage expenditure and recruitment.

•        The recruitment pause protocol and recruitment and retention of staff through the restructure and reshaping of the Council and the impact on areas of the Council, and the retention of critically essential posts.

•        The continued reinforcement of the no order no pay policy, the work to address the submission respective orders – the Service Director Finance and Procurement, Nicola Hix, advised of the positive effect of the spend boards across the Council and that the boards to remain in place with a focus on consequences and escalation of non compliant services and officers.

•        Commercial and procurement controls process and the governance framework of VFM through Council policy, procedures and assurance systems.

Following consideration of the officer report, appendices and discussion, the Audit Committee reviewed the Council’s Financial Emergency governance arrangements and was assured on the mitigations being progressed.

To consider the report.

The Audit Committee reviewed the Balance Sheet Review and to receive a progress report at the next Audit Committee meeting – 28 March 2024.

The Audit Committee received a report from the Executive Director – Resources and Corporate Services, Jason Vaughan.

The Executive Director Resources and Corporate Services introduced the report, highlighting: the action to undertake a financial sustainability and resilience review of Somerset Council in the light of 2022/23 statement of accounts for the five previous Councils, the governance and financial risks and that the review had been undertaken independently, and introduced a Consultant who is assisting the Council, Peter Robinson, to present the report.

The Executive Director and consultant presented the report highlighting: that overall the review found that the new Council was relatively well placed as at 1 April 2023, and summarised the significant factors contributing to the financial emergency and comparisons with other Councils; that the report identified a number of issues for the Council to consider, summarising the recommended 27 areas of action, with some actions addressed and in progress; that a report setting out progress on the 27 actions to be presented to the Audit Committee for consideration on 28 March 2024; the importance of looking forward as a new Council and being financially resilient;  and the recognition of the increased workload to sign off legacy Council accounts.

The Committee recognised and acknowledged the increased workload and amount of work being undertaken across the finance team and the Audit Committee.

The Audit Committee asked a number of questions and made a number of comments which were responded to at the meeting, as follows:

•        The Committee welcomed the report and opportunity to aid Councillors to be more informed of Somerset Council’s inherited issues and the mitigating actions to address these.

•        The large amount of content and possible requirement for a further meeting to discuss areas of concern. The Executive Director Resources and Corporate Services undertook to provide a further update at the Audit Committee meeting on 28 March 2024, including the governance route of the actions and recommendations, and his availability to answer any questions and queries in more detail post meeting.

•        The analysis of revenue income, the low level of fees and charges with comparator Councils and the potential opportunities moving forward.

•        The 5% general fund working balances and the separation in the report of reserves held for partners.

•        Net operating losses and investment properties debt charges.

The Chair invited the Lead Member for Economic Development, Planning and Assets, Councillor Ros Wyke, to comment on the implementation and ongoing work of the Council’s asset disposal strategy process and programme of disposals.

The Lead Member for Economic Development, Planning and Assets advised the Audit Committee of the work being undertaken following the approval of the  asset disposal strategy pre vesting day, highlighting: the Executive Sub Committee work, the constraints of a difficult property market and the careful work to move at pace with external partners,  the work with unions and staff, an update on three properties in West Somerset and Bridgwater House; the Government one public estate approach and the work with colleagues taking  ...  view the full minutes text for item 65.

To consider the report.

The Audit Committee noted the Somerset Joint Auditor’s Annual Report and recommendations and requested further Management responses to be improved and strengthened and considered at Audit Committee 28 March 2024.

The Chair welcomed the Director and PSA Head of Audit Quality - Regulation, Audit Grant Thornton UK LLP, Barrie Morris, and the Value for Money Senior Manager, National VFM Team, Grant Thorton, Dan Povey.

The Director and PSA Head of Audit Quality - Regulation , introduced the report, highlighting: the issues identified from the review of the former five Councils;  the identification of seven significant weaknesses and the number of improvement recommendations and key recommendations; that the report covers the period and the year ending the 31 March 2023, with additional appropriate updates recognising the significant progress and actions that the Council has taken; and the current satisfied opinion that the Council is moving in the right direction.

The Value for Money Senior Manager , presented the report, highlighting: the main themes across financial sustainability, governance, economy, efficiency and effectiveness; the seven key recommendations and the reporting of overall significant weakness with financial sustainability.

The Audit Committee asked a number of questions and made a number of comments which were responded to at the meeting, as follows:

•        Does this organization have the capacity and maturity to undertake a system wide transformation program at scale and pace, given the evidence of the slow pace in the last 18 months and in the auditor’s words, there is not significant pipeline savings identified and that if the budget gap remains at the current levels, Somerset Council will have negative reserves by 2025/26?

•        What should this Committee do to record their concerns and stress them to the Executive?

In response, the Executive Director Resources and Corporate Services, Jason Vaughan, advised on the concerns set out in the budget report on maturity, pace of delivery and risks to be considered at the Executive meeting 7 February 2024. The Director further explained staff savings and transformation activities that have taken place and the challenge of the approach to transformation and recommended that the report be forwarded to Executive to be considered as part of budget report.

The Chair responded that it was for each member the Audit Committee to make an assessment on capacity and maturity, and clarified the action taken by the Audit Committee in response to the Financial Emergency and requested that the Transformation Programme report be considered at the Audit Committee meeting 28 March 2024 to provide understanding, clarity and assurance of the governance arrangements of the transformation programme. The Chair further commented on the scale and pace of the work required, the enormous challenge to set future budgets and the need for Government support.

During debate the following was discussed:

•        The local and national impacts and factors contributing to the financial emergency – The Deputy Leader of the Council and Lead Member for Resources & Performance, Cllr Liz Leyshon, paid tribute to the finance team for all of their hard work, the work that has taken place to find a local solution and the need for a national solution to Local Government funding.

•        The progress on delivering the £  ...  view the full minutes text for item 66.

To  consider the report.

Approved the Statement of Accounts as attached in Appendix 1 for

Mendip District Council for 2022/23, or delegates approval for the

accounts to the Executive Director of Resources and Corporate Services

in conjunction with the Chair or Vice-Chair, once any outstanding matters

have been resolved.

Page 227 Agenda Item 8

b) Approves the amended Annual Governance Statement for 2022/23

attached at Appendix 2.

c) Notes the Audit Findings report from the external Auditors Ernst &

Young as per Appendix 3

d) Approves the signing of the letter of representation as per Appendix 4.

The Chair welcomed Kevin Suter, Ernst and Young LLP.

Kevin Suter presented the findings of the external auditors Ernst and young LLP audit results and clarified that the report presented the unqualified audited accounts for mendip District Council for 2022-2023; commended the team for producing a good quality set of accounts and that the external auditors have no significant concerns.

The Audit Committee asked a number of questions and made a number of comments which were responded to at the meeting, as follows:

•        Acknowledgment of work pressure of the finance team and the positive presentation, outcomes and easy to read report.

•        Cllr Ros Wyke, former Leader of Mendip District Council, thanked the external auditors and the Council’s Financial Services for their hard work on the production of the accounts.

•        Planning and growth services and the accounting of and reporting of the Glastonbury Town Fund.

•        The five Council Capita contract and services supplied.

•        Statement of Accounts governance route – the Interim Head of Legal, Jill Bryon, to confirm the governance route.

•        The Annual Governance Statement (AGS) references to Mendip District Council and whether an explanatory note or cover report is needed to clarify events that the Audit Committee had no oversight of – Duncan Moss confirmed the AGS was considered by the former Mendip District Council and the Principal Financial Accountant, James Collier, confirmed the format presented was correct and appropriate to be signed by the successor Somerset Council senior officer / Audit Committee.

Cllr Mandy Chilcott advised that there was no disagreement with what had been presented, however, without oversight or knowledge of the history of references she felt unable to make comment, agree or disagree or support the sign off.

Following consideration of the officer report, appendices and discussion, the Audit Committee:

•        Approved the Statement of Accounts as attached in Appendix 1 for Mendip District Council for 2022/23 Report, and delegated approval for the accounts to the Executive Director of Resources and Corporate Services in conjunction with the Chair or Vice Chair, once any outstanding matters have been resolved.

•        Approved the amended Annual Governance Statement for 2022/23 attached at Appendix 2 for Mendip District Council for 2022/23 Report.

•        Noted the Audit Findings report from the external Auditors Ernst & Young as per Appendix 3 for Mendip District Council for 2022/23 Report.

•        Approved the signing of the letter of representation as per Appendix 4 for Mendip District Council for 2022/23 Report.

To consider the report.

Approve the Statement of Accounts as attached in Appendix 1 for Somerset County Council for 2022/23, or delegates approval for the accounts to the Executive Director of Resources and Corporate Services in conjunction with the Chair or Vice-Chair, once any outstanding matters have been resolved.

Approve the updated Annual Governance Statement as included within the Statement of Accounts.

Notes the matters raised and findings in Grant Thornton’s Audit Findings Report in Appendix 2.

Approve the signing of the letter of representation on behalf of the Council and Somerset Pension Fund, as per Appendix 3 and 4.

Notes the position of the External Auditors assessment of the Authority’s Value for Money (VFM) judgment.

Reasons for recommendations

As advised in the summary this is a statutory requirement to publish the audited Statement of Accounts.

Links to Council Plan and

The Audit Committee received the External Audit Findings Report for Somerset County Council 2022/23.

The Director and PSA Head of Audit Quality - Regulation, Audit Grant Thornton UK LLP,  Barrie Morris, highlighted; the audit findings report for Somerset County Council; an update on  the items that were outstanding in relation to the receipt and testing of completeness and receipt and testing of grant income; the completed  testing of the completeness of income and expenditure and the identification of some errors in relation to the completeness of expenditure, to be updated in the final report for information and confirmed that the accounts can be approved without amendment;  Appendix 2 - matters experienced by the auditors whilst undertaking the audit causing delays and the need for issues to be raised with management; commended the work of the finance team that reflects a significant degree of hard work and support by the finance officers, in particular the Interim Chief Accountant, Paul Griffin; a number of audit adjustments and the provision of an unmodified auditor opinion on the financial statements, assuming that the letter of representation is approved and receipt of the final signed version of the accounts.

The Interim Chief Accountant further added to the above points regarding Agenda item 9, Appendix 1 that the report presented was not the final audited set of accounts, as there was a last minute audit adjustment identified after the paper deadline for the final reports, the Officer confirmed the late adjustment was an income re-classification issue that did not impact on the overall level of income being reported. Due to the immaterial nature of the adjustment, and recommended that the accounts (Appendix 1) could be approved as the only change to the accounts being presented at the Committee meeting was a minor disclosure restatement.

The Audit Committee asked a number of questions and made a number of comments which were responded to at the meeting, as follows:

•        Annual Governance Statement and the look forward to improving the controls to mitigate the risks efficiently.

•        Sought assurance that management were looking to mitigate and prevent reoccurrence of delay / engagement issues – The Service Director Finance and Procurement, Nicola Hix, and the Interim Chief Accountant, Paul Griffin, provided assurance to the Audit Committee that action had been taken, with the look to improve the culture through learnings from the findings and training to be provided if required.

•        Contract management – Alastair Woodland (SWAP) to include contract management signing as part of the scope for this quarter.

•        Capital programme management – The Service Director Finance and Procurement, Nicola Hix, advised of the scheduled work to improve Capital programme reporting.

•        Adult and Children Services significant overspend budget setting regarding setting a budget lower than where it ended the previous year – The Executive Director Resources and Corporate Services, Jason Vaughan, advised of the complexity of budget reporting and the work taken place on the 2024/25 to report increased costs, demand modelling, savings.

Following consideration of  ...  view the full minutes text for item 68.

To consider the report.

The Audit Committee noted the attached external auditors (Grant Thornton) Audit Plan for South Somerset District Council for 2022/23. 

The Audit Committee received the External Audit Plan South Somerset District Council 2022/23 from the Director and PSA Head of Audit Quality - Regulation, Audit Grant Thornton UK LLP, Barrie Morris

The Audit Committee asked a number of questions and made a number of comments which were responded to at the meeting, including confirmation from  Grant Thornton that the proposed fee for the Audit Plan 2022/23 was £116, 918.

Following consideration of the officer report, appendices and discussion, the Audit Committee the Audit Committee noted the attached external auditors (Grant Thornton) Audit Plan for South Somerset District Council for 2022/23.

To consider the report.

Members of the Audit Committee are asked to note the position of the 2023-24 Internal Audit Plan (See Attached Appendix – SWAP Report).

The Audit Committee received the Internal Audit Progress Report for Somerset Council 2023/24.

The Assistant Director SWAP Internal Audit Services, Alastair Woodland, highlighted: the updated layout to the report based on some of the Audit Committee provided; summarised the limited assurance audits, noting schools have their own governance structure; that the school audit isn't included in detail due to their own governance structure and monitored through the Finance Committee at individual school; summarised limited assurance and financial controls assessment and the work taking place to provide an update at the 28 March 2024 Audit Committee; the 11 reviews currently not started, and scheduled to start this quarter; the follow-ups in progress and recommendations to be reported 28 March 2024; noted the current capacity of staff issues and the look to support officers in supporting to clear the outstanding recommendations; summary of work on coverage against strategic risks.

The Audit Committee asked a number of questions and made a number of comments which were responded to at the meeting, as follows:

•        How did Somerset Council discover high levels of unpaid placement invoices as well as the significant overspend in CLA placement costs, and why did spot placements not go through a tender process before being awarded? – The Assistant Director SWAP Internal Audit Services, Alastair Woodland to provide a written answer to the Audit Committee.

•        On going monitoring to ensure money is spent in line with grant conditions – The Assistant Director SWAP Internal Audit Services confirmed that the arrangements around monitoring grant payments have been strengthened.

•        Somerset Council embedded health and safety culture – The Assistant Director SWAP Internal Audit Services advised on the work to date and that findings to be share with the Audit Committee.

•        Aged Debt and debt and recovery management reporting to Councillors –The Executive Director Resources and Corporate Services, Jason Vaughan, advised of the Somerset Council debt management policy, monitored as part of the corporate and resources scrutiny committee, the Service Director Finance and Procurement, Nicola Hix, advised of the work taking place to amalgamate the predecessor Council systems and that the reporting in future would be to the Audit Committee.

•        Fire safety records inspection limited assurance – The Assistant Director SWAP Internal Audit Services confirmed the risk could be higher than reported, and looking at the overall governance process to be brought to the Audit Committee. The Deputy Leader of the Council and Lead Member for Resources & Performance, Cllr Liz Leyshon further advised of the recent capital approval for work on fire safety doors and the risks addressed in the upcoming HRA reports.

Following consideration of the officer report, appendices and discussion, the Audit Committee Members noted the position of the 2023-24 Internal Audit Plan.

Report to follow.

The Audit Committee noted the Capital Strategy 2024/25 report.

The Audit Committee received the Capital Strategy 2024/25 report.

The independent Consultant, Peter Robinson, presented the report, highlighting: that the Capital Strategy is a key element of the Council’s Budget Framework which must be considered and approved by Full Council prior to the start of each new financial year; that the Capital Strategy sits alongside the Medium-Term Financial Strategy and the 2023-2027 Council Plan.

The Audit Committee asked a number of questions and made a number of comments which were responded to at the meeting, as follows:

•        Capital financing requirement for the HRA – The Independent Consultant, Peter Robinson, advised the that the HRA is a ring fenced self financing account, with a balanced 30 year business plan.

•        miFID II explanation - Financial Instruments Directive for a professional investor.

•        The capitalisation direction and MRP, the engagement with Central Government, and the requirement for numbers to be clearer given the large figures – The Independent Consultant, Peter Robinson, to update the report to give some more background and information to the numbers provided.

Following consideration of the officer report, appendices and discussion,  the Audit Committee made comment on and noted the Capital Strategy 2024/25 report to be received by Executive 7 February 2024.

The Audit Committee noted the Treasury Management Strategy 2024/25 report.

The Audit Committee received the Treasury Management Strategy 2024/25

The Principal Investment Officer, Alan Sanford, presented the report, highlighting: that Treasury management is the management of the Council's cash flows, borrowing and treasury investments and the associated risks; that the report set out the proposed Treasury Management Strategy (TMS) for Somerset Council for 2024-25; that the report brought together the requirements of the Chartered Institute of Public Finance and Accountancy (CIPFA) Treasury Management in the Public Services Code of Practice Revised 2021 Edition (CIPFA TM Code), and the CIPFA Prudential Code for Capital Finance in Local Authorities: that as at the 30 November 2023, the Council held nearly £700m of debt as part of the strategy of funding for previous capital projects and summarised the breakdown and the expectation of further borrowing; that the Councils investment balance as at 30 November 2023 stood at just over £211m; that a review of the non treasury investments during 2023/24 had concluded that current non treasury investments do not contribute to the new Council's key objectives going forward and plans are being developed to dispose of these in an orderly manner which achieves best value for money; that debt for the general fund will be taken mainly in shorter periods to provide sufficient flexibility so that debt can be paid down as and when non treasury investments are sold or holdings in strategic pooled funds and liquidated.

The Audit Committee asked a number of questions and made a number of comments which were responded to at the meeting, as follows:

•        Investment balances reduction

•        Request for a line graph to show movement of investment and borrowing figures, to aid understanding of the wider context and the direction trend.

Following consideration of the officer report, appendices and discussion, the Audit Committee made comment on and noted the Treasury Management Strategy 2024/25 report to be received by Executive 7 February 2024

The Audit Committee noted the Flexible use of Capital Receipts 2024/25 report.

The Audit Committee received the Flexible use of the Capital Receipts 2024/25 report.

The Executive Director Resources and Corporate, Jason Vaughan introduced the report and advised of the governance route of the report and the proposed changes as part of the Financial Settlement expected from Central Government early February 2024.

The Audit Committee made no specific comments or recommendations to the Executive.

Following consideration of the officer report, appendices and discussion, the Audit Committee made comment on and noted the Flexible use of Capital Receipts 2024/25 report to be received by Executive 7 February 2024.

The Audit Committee reviewed and noted the Audit Committee workplan, and agreed the below items be added to the 28 March 2024 Audit Committee Agenda.

The Chair invited the Audit Committee to comment on the Audit Committee Workplan.

The Chair recognised the heavy and challenging workload for the Audit Committee, and Cllr Mandy Chilcott further commenting that the extremely large agenda and amount of information and consideration of manageable agendas moving forward to enable the Audit Committee to do their job properly.

The Service Director Finance and Procurement, Nicola Hix and Barrie Morris, Grant Thornton, provided an update on the two outstanding audits South Somerset District Council 2022/23 and Sedgemoor District Council 2022/23.

The contributing factors and the legal risks of not being able to set a balanced budget and the engagement with and assurance required from DLUHC regarding Council Tax and capitalisation direction.

Following consideration of the workplan and discussion, the Audit Committee reviewed and noted the Audit Committee workplan, and agreed the below items be added to the 28 March 2024 Audit Committee Agenda:

•        Transformation programme Update

•        Balance sheet Update

•        Review of MRP provision policy plan

•        Review of risk management plan

•        Somerset Joint Auditor's Annual Report – Management Responses