Agenda item

The Interim Director of Finance presented the Finance Recovery Plan – Update for Members’ consideration. The report set out the processes the Council had been following to rectify a deterioration in its financial position and processes due to the impact of the implementation of a new financial system in February 2021 during the Covid-19 pandemic period.

A Finance Recovery Programme was put in place from April 2022 to start to rectify the situation. This was reported at the Cabinet meeting that took place on 12^th October 2022.       

These issues built on comments from the External Auditors relating to 2019/20 accounts, which were only approved in the Autumn of 2021 and the subsequent issuing of the Section 24 Recommendation on 31st October 2022 due to non-delivery of the 2020/21 Statement of Accounts. It was particularly noted at that time that significant issues within the working papers submitted to the External Auditors relating to the 2019/20 accounts had been highlighted.

Cabinet was informed that the Council continued to move forward with the rectification procedures and the following processes had already taken place or been implemented:

·       As discussed earlier at this meeting, the CPC took place in March 2023 and was a joint review with Redditch Borough Council. The associated Action Plans included a Finance Action Plan which met the CPC’s recommendations.

·       The commissioning of a root and branch review by the Audit Task Group on how the Council arrived at the Section 24 Notice. The Task Group met a number of times in February and its findings were initially presented to Audit, Standards and Governance Committee on 9th March 2023. The outcome of this Task Group had been a number of recommendations which had been approved and implementation had commenced.

·       The inclusion of a standing agenda item at each Audit, Standards and Governance Committee meeting which reviewed progress against these recommendations and national and local deadlines. Any exceptions or issues highlighted by Audit, Standards and Governance Committee would then be reported to Cabinet.

The Interim Director of Finance explained that the timeline for next steps was as follows:

1.     Closure of the Accounts for 2020/21 - the agreement of treatment of take on balances would now take place in early July 2023 as a significant amount of testing was still required by the External Auditors.

2.     Provision of Draft 2020/21 Accounts to External Audit – This would take place in July 2023.  This, however, was dependent on confirmation from the External Auditors that they had approved the Council’s take-on balances work, as highlighted above. Members were informed that the External Auditors were having issues in how they need to test the transactional data due to their “normal” models not working on our data.

3.     The commencement of the 2020/21 External Audit – July to September 2023 – this, it was explained, was an estimated date.

4.     Sign Off of 20/21 Accounts - November 2023

5.     Closure of Accounts for 2021/22 –planned to be signed off by May 2024

6.     Closure of Accounts for 2022/23 - planned to be signed off by November 2024

It should be noted that at the recent LGA Conference it was highlighted that over 500 Council Audits relating to 2021/22 and before were still to be completed by the Auditors.  This remained a significant issue for the sector.

In terms of the key financial returns, Members were informed that within the previous week the Capital Outturn Reports for 2020/21 and 2021/22 had been submitted.  However, the key returns that had still not been delivered were the Revenue Outturn forms for 2020/21 and 2021/22 and the VAT returns.  Although, it was confirmed that the Government now allowed these returns to be completed based on estimates, the level of uncertainty due to the Cash Receipting issues previously experienced meant these could not be completed until the External Auditors had signed off the Council’s take on balances and the Council had provided the draft accounts to External Audit.

It was also noted that during the weekend of 8^th – 9^th July 2023, the Council had moved to the latest version of the TechOne System (23A) which would give improved functionality. As a result of this new version, a series of updated finance training would be rolled out to Officers.

In terms of Procurement, the following was highlighted:

·       The new ‘No Compliance No Order’ process had been live for one month. Although some issues had been experienced with TechOne it was hoped that these would be resolved with the upgrade on the system.

·       Many departments were now proactively getting quotations for lower value works.  Currently, the predominant issue was concerned with training which, it was reported, was being resolved.

·       The number of contracts in place was growing regularly and the Council was confident that this process was having a positive effect.  Eventually, it was hoped that the Council would find itself in a position where the number of orders being processed was minimal.

·       A spreadsheet was being collated for requests with no contracts and discussed with teams going forward. 

During consideration of this report, Members queried why there seemed to be so may delays in the auditing of accounts nationally. It was confirmed that there were capacity issues being experienced in this sector. Particularly as there was not as much money available in the public sector as the private sector.

The potential increase of Audit fees was raised, and it was confirmed that this was likely in the future, potentially from £70k to £110k. However, it was confirmed that would be a possibility to challenge any increase in Audit fees as these had to be agreed by the Public Sector Audit Appointments (PSAA).

Members questioned what the outcome would be if the Statement of Accounts were not agreed by the External Auditors. It was reported that there could be a disclaimer provided on the accounts, however this was not ideal.

Reference was made in respect of Appendix 1, which contained the recommendations from the Audit Task Group. It was queried whether in future these could be presented in such a way that it would be easier to identify what recommendations had been implemented and those that were outstanding. Officers agreed to look in this for future reports.

RESOLVEDthat

1)    Progress made on the financial recovery be noted including:

o   Delivery of the Statutory Accounts

o   Delivery of Statutory Financial Returns

o   Improvements in the Control Environment

2)The work still under way to move back to a best practice operation and the associated timetable for completion of this work, as contained in this report, be noted.