Decision status: Recommendations Approved
Is Key decision?: No
Is subject to call in?: No
The Committee received for information the external auditor’s Interim Auditor’s Annual Report for 2023/24.
Officers from Grant Thornton explained that their new approach to examining the Council’s value for money arrangements was in line with the National Audit Office’s Code of Practice. This focussed on an assessment of the Council’s arrangements for Financial Sustainability, Governance and Improving Economy, Efficiency and Effectiveness and in the context of the Council’s receipt of a non-statutory Best Value Notice from the Department for Levelling Up, Housing and Communities in December 2023. The Notice had expressed concerns that the Council had borrowed 71 times its core spending power as at 31 March 2023, and commercial income, mainly from an investment property portfolio built up using borrowing represented a substantial revenue source for the Council and was being used to support core and discretionary services.
Grant Thornton had made one key recommendation and two improvement recommendations in respect of financial sustainability. This was because they had identified what they described as ‘significant weakness’ in those arrangements. The key recommendation which had been taken on board was that, for future years, detailed scenarios for investment property income returns should be included in the medium-term financial plan with clear reporting to Corporate Management Committee on savings achieved. The detailed management comments to this were noted.
With regard to improvement recommendations for financial sustainability, Grant Thornton considered a greater level of external consultation should take place around budget setting with clearer disclosure in the budget identifying statutory and discretionary services. Officers confirmed that this was a work in progress but that an increased level of reporting on savings was taking place in line with the adoption made in July 2023 of a new process for identifying and approving proposed savings and efficiencies and reporting on them to Committee. The second improvement recommendation concerned the 30-year Capital Programme and the reliability of forecasting over its life. It was noted that the Council had committed to use the receipts from the sale of debt funded investment assets to pay down borrowing rather than to fund new asset purchases. This did run the risk of limiting the Council’s ability to raise capital receipts to fund other projects.
In respect of Governance there were no significant weaknesses identified and one improvement recommendation had been made. This was to question the appointment of Officers and Members to the Council’s subsidiary companies. However, Officers considered that a change in appointments was unnecessary owing to the findings of a recent external review which would be reported to the Corporate Management Committee which oversaw these arrangements. Instead, additional governance measures would be introduced such as clear written roles and responsibilities, a ‘conflict of interest’ policy, Director training and other improvements to the governance framework.
There were three improvement recommendations concerning improving economy, efficiency and effectiveness. First, scrutiny of corporate key performance indicators should revert to the Corporate Management Committee, which had been implemented. Second, clear terms for extending an improvement notice to one of the Council’s Housing Contractors should be made because their targets had not been met. Officers were continuing to monitor this closely and would take appropriate action within the terms of the contract if appropriate. Last, Grant Thornton had recommended that waivers should be reported regularly to the Standards and Audit Committee to include the number of waivers, contract values and reasons for the waiver. As noted by the Chair, this had already been agreed and the next annual report was due in March 2025. In response to a discussion about contracts and waivers, Officers agreed to expand the annual report on waivers to include analysis of the top ten areas of spend. The process of securing a waiver on contracts by the Officer Procurement Board was explained and agreed to be robust and transparent.
The Section 151 Officer agreed to bring a progress report on the implementation of Grant Thornton’s key and improvement recommendations at six monthly intervals, the next one being due in January 2025.
There was a debate around savings, noting that the first savings report had been considered by the Overview and Scrutiny Select Committee in March 2024 and that quarterly budget monitoring for 2024/25 would be taking placed with enhanced disclosure on statutory and discretionary spend being included in future budget preparation.
Officers from Grant Thornton were thanked for their report and Members looked forward to sight of the final Auditor’s report in due course.
Report author: Ade O Oyerinde
Publication date: 02/08/2024
Date of decision: 17/07/2024
Decided at meeting: 17/07/2024 - Standards and Audit Committee
Accompanying Documents: