Agenda item

Council will be invited to consider recommendations on this subject made at a meeting of the Executive Committee immediately preceding the Council meeting on 5^th December 2023.

This matter was also considered at a meeting of the Audit, Governance and Standards Committee held on 23^rd November 2023.  An extract from the minutes of that meeting will be published in a supplementary pack for consideration at this Council meeting.

The Council considered a recommendation from a meeting of the Executive Committee which had been held immediately preceding the Council meeting on 5th December 2023 about consideration and receipt of the External Auditor’s report 2020-2021 and 2022-2023. The report had also been considered and endorsed at a meeting of the Audit, Governance and Standards Committee held on 23rd November 2023 and an extract from the minutes of that meeting had been published for consideration. 

The Leader of the Council confirmed that the Executive Committee meeting immediately preceding the Council meeting had endorsed the recommendation from the Audit, Governance and Standards Committee that Council accept the Section 24 Statutory Recommendation and that Council review the recommendation and endorse the actions included in the management responses which formed the rectification process required by legislation.

The Council had received the Interim Auditor’s Annual Report from its External Auditors Grant Thornton for 2021/22 and 2022/23. The report set out progress since the 2020/21 Report and contained an updated Statutory Recommendation with the key reason being the non-delivery of the 2020/21 and subsequent financial statements. 

In introducing the item, Councillor Luke Court, Portfolio Holder for Finance and Enabling, outlined the background to the contents of the Auditor’s report.  The Council had received a Section 24 Statutory Recommendation, 6 Key Recommendations and 13 Improvement Recommendations in the 2020/21 Interim Auditor’s Annual Report. The Section 24 Statutory Recommendation was due to the issues the Council encountered in the implementation of a new financial system in February 2021 and its knock-on effect in terms of staff retention, delivery of the 2020/21 and subsequent Accounts, delivery of 2021/22 in year monitoring, and delivery of Government Returns.

In the 2022-23 Report, the Auditors had noted progress being made by the Council towards delivering the 2020/21 accounts.  The Portfolio Holder referred to other examples of improvements since 2020/21, including the cash receipting system and reconciliations relating to this due to be completed by the end of the year, and the rollout of finance training.  A Task Group had been set up in Bromsgrove to identify the underlying issues for the delivery of the Section 24 Statutory Recommendation in February 2023.  The Task Group’s Report was reviewed, and its recommendations accepted by the Redditch Audit, Governance and Standards Committee.

However, the Section 24 Recommendation around the delivery of the 2020/21 accounts was still in place and had been extended to the subsequent accounting periods now outstanding.  Of the 6 Key Recommendations in the 2020/21 report, one serious weakness remained in relation to opening balances linked to the budget.  Of the 13 2020/21 Improvement Recommendations, 9 had been fully or partially addressed. 

There was one new Key Recommendation linked to Organisational Capability and Capacity.  The Council was working to mitigate this through the implementation of the Workforce Strategy and £150k of funding had been allocated to this. 

Councillor Court thanked the Finance team and the Audit, Governance and Standards Committee for their work in dealing with the actions coming from the Notice and Recommendations in the report.

Councillor Ian Woodall, the Chair of the Audit, Governance and Standards Committee, reported on that Committee’s consideration of the report.  In doing so he also praised the Finance team for its work in addressing the actions required from the Section 24 notice and the Auditor’s report.

Councillor Woodall stated that he considered there were risks to the whole Council if the Auditors decided to issue qualified accounts, and that the Auditors had suggested that the Council was financially exposed in the medium to long term, especially in terms of the capital budget.  He made suggestions about how the Council could address the main concerns that he had about the situation.  These included considering a moratorium of capital projects and a review of current committed capital in terms of potential risk; setting up a cross party working group to review the introduction of the Tech One system and ensure progress was made with its implementation, and that the Executive Committee should consider a regular ’State of the Council’ report to maintain close monitoring of the Council’s financial position, including implications arising from increasing homelessness.

During consideration of the Auditor’s report, the following were the main items discussed:

·       Other members thanked the Finance team for their hard work in undertaking the actions identified from the Auditor’s report.

·       Although progress had been made in addressing the late submission of accounts an implication of them not being completed was that the Council could not be certain of its balances when making financial plans.

·       Some members expressed the view that a suggestion made during debate that the Council was at risk of a Section 114 Notice was inaccurate.  The Auditors Report included a statement that the budget was based on robust assumptions.

·       The status of the current Section 24 Notice was queried, in particular whether it was a new, second notice.  The S151 Officer clarified that the External Auditor had stated at the Audit, Governance and Standards Committee meeting that technically this was a new Notice.  However, subsequently the Auditor advised that the legislation did not state what to do if a previous recommendation had not been addressed. 

·       In response to a comment, the S151 Officer also clarified the current situation regarding the £6m cumulative budget gap referred to at page 48 in the report.  The Medium-Term Financial Plan was built on robust assumptions.  The table referred to set out the gap at the start of the time period covered by the reports, but this had now been addressed. The Portfolio Holder subsequently reported that the budget gap was currently around £100k. 

·       The view was expressed that the impact of the pandemic on the Council during the period covered by the report should be acknowledged.  For example, this had affected the capital programme where there had been slippage.

RESOLVED that

the Section 24 Statutory Recommendation is accepted and that Council having reviewed the recommendation, endorse the actions included in the management responses which form the rectification process required as per legislation.