Agenda item

The Portfolio Holder for Finance and Enabling presented the Joint Auditor’s Annual Report 2021/22 to 2022/23 for Members’ consideration.

The Committee was advised that the external auditor, Grant Thornton, was required to confirm that the local authority had made proper arrangements for securing economy, efficiency and effectiveness in its use of resources. This took the form of a value for money report and this was being presented for Members’ consideration.

The report detailed the progress that had been achieved since the Council was issued with a Section 24 Notice in 2022.  That Section 24 Notice had contained six key recommendations, five of which had been addressed and this was acknowledged by the external auditors.  The remaining key recommendation that had not yet been resolved related to the Council’s outstanding accounts.  There was one new key recommendation linked to organisational capability and capacity. The Council was taking mitigating action, mainly through the rollout of the Workforce Strategy.

The Portfolio Holder for Finance and Enabling commented that the Section 24 Notice remained open whilst action was still being taken on the authority’s accounts.  Whilst the external auditors had recognised that a lot of progress had been made by the Council, it was acknowledged that there was a lot more work to do, particularly with regard to the closure of the accounts.  It was anticipated that this work would be resolved by the end of the year.

The Committee subsequently discussed the content of the report in detail and in doing so commented on the following matters:

·             The hard work of the Financial Services team to remedy the issues that had caused the delays to the closure of the Council’s accounts.

·             The difficulties that had been experienced with the Council’s ERP finance system and the lessons that had been learned from this.

·             The criticisms in respect of financial governance detailed within the report and the progress that had been achieved in terms of financial and performance monitoring since this time.

·             The financial difficulties experienced by many Councils around the country and the extent to which the Government was providing local authorities with sufficient funding.

·             The £6 million shortfall recorded in a table in the report and the extent to which this accurately represented the Council’s current financial sustainability.  Officers explained that this point had been challenged with the external auditors, who had explained that the figures were based on the overall position in the previous Medium Term Financial Plan (MTFP).  However, Members were asked to note that by the date of the meeting, the Council was forecasting a gap of £100,000.

·             The suggestion in the report that the Council’s Whistleblowing Policy needed to be updated and the date when this last occurred.  The Committee was advised that the Whistleblowing Policy had last been updated in 2018 and an update would be reported in 2024.

·             The reference made in the report to the potential appointment of independent persons to the Council’s Audit, Governance and Standards Committee and the reasons why no progress had been achieved in terms of appointing independent persons in Redditch.  Members were informed that attempts had been made to recruit independent members of the Committee in recent years, but these had not been successful and it was suggested that a lack of remuneration on offer for the position might act as a deterrent.  The Constitution Review Working Party would potentially need to review this matter and the option of providing remuneration, further.

·             The difficulties that the Council had experienced with organisational capacity and the relatively high turnover of staff.  The Committee was advised that nationally, staff turnover had increased from 2 per cent, prior to the Covid-19 pandemic, to 16 per cent by 2023.  Staff prepared to work in London for a small number of days a week could receive significantly higher wages than employees based outside the capital and this impacted on recruitment in other parts of the country.

·             The external auditor’s assessment of the performance data provided in the quarterly finance and performance monitoring reports and the issues that had been identified with this data.  Members were informed that, whilst it was acknowledged that Members were receiving performance data in these reports, questions had been raised about whether the appropriate performance data was being provided for Members’ consideration. 

·             The reference in the report to feedback forms on the subject of savings proposals and what this feedback had focused on.  Officers clarified that the Council had a two-tranche approach to setting the MTFP and a feedback form was provided in relation to the savings included in tranche 1 in 2022, although no feedback had been received.  In 2023, the tranche 1 report had not contained any proposals for cuts, although it was possible there would be proposals in the tranche 2 report, depending on the Government’s financial settlement for the Council, and any such proposals would be subject to consultation.

·             The likely Government settlement for local government.  Members were advised that a 3 per cent increase was anticipated but this would be in a context of increasing financial pressures for Councils.

·             The local authorities that had issued Section 114 Notices in recent months and the targeted Government interventions that were likely to occur at those Councils. 

·             The extent to which the Council would be required to pay additional fees as a consequence of the Section 24 Notice.  Officers clarified that there were no fees that had been announced, although it was possible that the external auditors would request additional payment for any extra work required to audit the accounts.  Officers could challenge this figure should there be concerns about the level proposed.

The number of Section 24 Notices that had been issued to the Council was discussed by Members at some length, in particular whether this was an extension of the Council’s second Section 24 Notice or a third Section 24 Notice.  Reference was made to the comments that had been made by the external auditors at a recent meeting of the Audit, Governance and Standards Committee on this subject. The Portfolio Holder for Finance and Enabling explained that the external auditors had been approached for comment on this subject after that meeting.  The external auditors had provided the following comment, which was read out to Members at the meeting, on this subject:

“This S24 updates the previous recommendation that was issued 13 months ago, given we reported that recommendation was not fully complete but that some areas had progressed while others hadn’t. In that sense it replaces what was said 13 months ago in the recommendation with the latest position.”

The Portfolio Holder for Finance and Enabling commented that the external auditors had reported that there was no legal mechanism to update a Section 24 Notice so the auditors had been required to issue one. However, the auditors stated that this needed to be viewed within the context of the previous one and they had noted the progress made.

RECOMMENDED that

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