Agenda item

The Deputy Chief Executive and Section 151 Officer presented the Financial Recovery Programme report for Cabinet’s consideration.

Members were reminded that the purpose of the report was to provide an update on progress addressing the issues that had been the subject of Section 24 recommendations issued by the external auditors, Grant Thornton, in relation to the Council in 2022.  There had been six recommendations included in the Section 24 Notice.  The Council had completely addressed five of these recommendations.  The sixth recommendation had related to auditing the Council’s submitted accounts and this was partially resolved.

Since the Section 24 Notice had been issued to the Council, a lot of progress had been made.  This included:

·             Submission of the Council’s 2020/21 accounts.

·             Completion of the 2021/22 accounts for submission.

·             Presentation of the financial outturn report for 2023/24 to Cabinet.

·             Presentation to Cabinet of Finance and Performance Monitoring Reports for Quarters 1 – 4 of the 2023/24 financial year.

·             Presentation to Cabinet of the Finance and Performance Monitoring Report for Quarter 1 of the 2024/25 financial year, included in the Cabinet agenda for this meeting.

·             Continuation of the delivery of monthly accounts training for budget managers.

·             Recruitment of staff into key roles in the Financial Services team.  This had included the recruitment of new staff since the start of 2024.

·             The presentation of a Financial Compliance report for the consideration of the Audit, Standards and Governance Committee at every meeting.

The Minister of State for Local Government and English Devolution had recently announced the Government’s expectations in terms of the deadlines for submission of local government accounts.  As part of this process, local authority accounts for 2023/24 would need to be submitted for audit by the end of February 2025.  However, there remained over 1,000 sets of accounts for Councils across England that had not yet been audited, representing roughly three sets of accounts per authority.  External auditors were struggling to complete audits of accounts in a timely fashion and unless this issue was addressed, Councils would struggle to meet this deadline.

In this context, Officers suggested that the remaining Section 24 Notice recommendation, to have audited accounts, was no longer relevant.  New external auditors, Bishop Fleming, were due to audit the Council’s accounts in future and the Council would be formally raising this issue with the auditors once they were actively working with the authority.  In the meantime, Members were asked to note that Grant Thornton had written to the Council to advise that they did not have the time to audit the Council’s 2021/22 and 2022/23 accounts, which would have implications for the future, as Bishop Fleming was supposed to start in their external audit role by auditing the 2023/24 accounts.

The Audit, Standards and Governance Committee had an important role in relation to considering the Council’s accounts prior to submission for audit.  The next meeting of the Committee had been postponed from 19^th September to 10^th October 2024, due to a clash with the date of a by-election in Bromsgrove District.  This would coincide with the deadline for submission of two sets of accounts by the authority and it was possible that consideration of both sets of accounts at the same meeting could cause confusion.  In this context, it was noted that an extra meeting of the Committee or an Audit Task Group meeting might be required to help reduce the potential for confusion within two weeks of the Committee Meeting as there was still the requirement for both sets of accounts to have been reviewed by the Public by the 13^th December 2024 which was a one month process.

The Finance and Budget Working Group had considered the report at a meeting held on 9^th September 2024.  During the meeting, Members had raised questions about the Council’s Workforce Strategy, overall Council staffing numbers and vacancy levels at the authority.  Members were asked to note that there were 40 agency staff posts at Bromsgrove District Council and 100 agency staff posts overall, although the latter figure included vacancies in the Redditch Housing Revenue Account (HRA), which did not apply to Bromsgrove.  More work was being done to link these agency staff to a report on vacancies.

Following the presentation of the report, Members discussed a number of points in detail:

·             The extent to which the Government was likely to impose penalties on any local authorities that did not submit accounts by the deadlines that had been set and whether this would be feasible in a context in which most Councils had outstanding sets of audited accounts.

·             The reasons why there were so many outstanding sets of audited accounts across the country.  Officers explained that there was a lack of capacity at a national level within the external audit sector, partly due to challenges with funding of the sector.

·             The implications arising from the previous external auditors not completing audits of the Council’s 2021/22 and 2022/23 accounts prior to the new external auditors commencing their role in support of the authority.

·             The extent to which the new external auditors would need to complete audits of the 2021/22 and 2022/23 accounts in order to start an audit on the 2023/24 accounts.

·             The potential for the Council to reclaim fees from the previous external auditors, which had had to be paid up front, for incomplete audits.

·             The possibility that the new external auditors would need to be paid additional fees in order to cover the costs of extra work arising from the incomplete audits of the 2021/22 and 2022/23 accounts.

·             The extent to which the previous external auditors were likely to have been unable to complete audits of accounts for other Councils resulting in a need to pay other authorities their fees back and the potential risk that the auditors would be unable to pay back funds to multiple authorities at the same time.  Officers explained that as members of the Public Sector Audit Appointments (PSAA), the external auditors would have to abide by any rulings from that body on paying fees back to Councils.

·             The figures associated with all of the unaudited accounts across the country.  Overall, Officers suggested that across the whole of the sector, it was likely that approximately £500 – 600 billion worth of accounts had not yet been signed off and whilst there would be compliance in 99.99 per cent of cases, there were inevitably risks attached to such large figures that would have national implications for the Government.

·             The work that had been completed already by the previous external auditors, including the Value for Money assessments which could be reviewed by the new auditors.

RESOLVED to note:

1)          Progress made on the financial recovery including:

a)          Delivery of the Statutory Accounts

b)          Delivery of Statutory Financial Returns

c)           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.