Agenda item

The Section 151 Officer provided the Financial Compliance Report for Members’ consideration.

The Financial Compliance report began in January 2023, following the Section 24 reports which set out how the Council complied with its financial legislative requirements.  One of the legislative reporting requirements the Council had not achieved was the delivery of the 2020/21, 2021/22 and 2022/23 Statement of Accounts, which resulted in the issuing of a Section 24 Statement for the Council.  Redditch Borough Council (RBC) were also issued with a Section 24 Statement for the same non delivery of these accounts.  Following the issuing of the Section 24 Statements and a review of why the Council were issued with the Notice (undertaken by a Task Group of this Committee), the decision was taken to increase the frequency of Audit Committee meetings to six times a year until the Council had rectified its accounts.  With the Council having provided its accounts as per the “backstop legislation” up to the 2023/24 financial year requirements, it was proposed that the frequency of Audit Committee meetings revert to quarterly.  It was important that the processes that were put in place following the issuing of the Section 24 Statement continue via the quarterly Financial Compliance Report.

The 2024/25 budget was approved at Council on the 21^st February 2024.  Table 2.7 of the report sets out the finance legislative requirements up to March 2025, showing that the Council was compliant in terms of delivery and timescales.  The report also set out the plethora of financial reports and strategies that were required to be formulated and complied with.

The key returns which had not been delivered were the Revenue and Capital Outturn forms for 2021/22 and the VAT returns.  Significant work had been undertaken by the Council’s Tax advisors PS Tax in liaison with His Majesty’s Revenue and Customs (HMRC) in order for the Council to return to normal VAT reporting and final version working papers had been provided to HMRC on the 19^th December 2024.

The Council’s position on the key Closure deliverables were as follows:

·         Closure 2020/21

o   Reported as per the 5^th December Audit Committee and Disclaimer Opinion received and approved.

·         Closure 2021/22

o   Reported as per the 10^th December Audit Committee and Disclaimer Opinion received and approved.

·         Closure 2022/23

o   Reported as per the 5^th December Audit Committee and “Disclaimer Opinion” received and approved following the completion of the public consultation period on the 7^th January 2025.

·         Closure 2023/24

o   Draft accounts were placed on the Council’s website on 15^th January 2025.  The Council complied with the 2023/24 Backstop requirements for consultation.

o   An opinion from Ernst and Young would not be received until the onboarding process had been completed.

The Assistant Director of Finance and Customer Services presented the 2023/24 accounts for Members’ consideration as follows:

·         The Expenditure and Funding Analysis in the report showed the outturn position revenue overspend was £1.954m which had moved by £1.150m since reported previously. 

Key movements related to:

o   £360k additional spending relating to agency costs in Finance.

o   £470k Housing Benefit costs associated with Bed and Breakfast.

o   £200k costs for the Local Elections.

o   £150k expenditure for Artrix Business Rates.

·         Capital outturn showed a £7.1m underspend against a budget of £11.1m with a £4m spend which was due to delays in the commencement of projects and slower spend than anticipated.

·         Comprehensive Income and Expenditure Statement for the year ending 31^st March 2024 showed Community and Housing GF Services had a reduction in income for 2023/24 mainly due to covid grants.  Other operating expenditure had a reduction in losses on disposal for non-current assets in 2023/24.  Surplus of Deficit on revaluation of Property, Plant and Equipment had decreased due to a normal year in terms of revaluing.

·         Movement in Reserves stayed approximately the same, moving from £11.159m to £11.014m.  Balances had increased from £13.104m to £13.520m.

·         Balance Sheet Current Liabilities had increased by approximately £7m, mainly for short-term liabilities and short-term creditors due to borrowing from RBC.  Provisions decreased due to business rates appeals.  Other long-term liabilities related to Pension issues and revalue of opening balances.

During consideration of the report, Members discussed the following:

• Members requested an update regarding the tax rebate from HMRC. – In response Members were informed that delays were due to several queries and assurances required but work was progressing.  Members also queried details of when the last rebate had been claimed and how BDC envisaged future reporting would be carried out. – Members noted that past reporting had been carried out on a quarterly basis but future reporting, as of April 2025, would be monthly.
• Members queried why there was no budget included in Election Services for 2023/24. -  Members were informed that as Elections were held every four years, funds would be taken out of the general reserve.
• It was queried if the issues with BDC’s financial reserves were a national or local issue. – It was reported that the financial issues were typically from Covid, with services for 2020/21 and 2021/22 not being delivered which had also affected the following years productivity.
• Members requested that Risk Workshops included in the report could be explained further. – It was explained that the Risk Workshops were a requirement regarding the Corporate Strategy to assist Members to understand the boundaries in terms of the decision-making process.
• Members highlighted a typographical error on page 32 of the agenda which read: “InterimAuditors AnnualReport on BromsgroveDistrict Council2021/22 &2/22/23” which should read “InterimAuditors AnnualReport on BromsgroveDistrict Council2021/22 &2022/23”.
• Members referred to the report in which it stated that in February the Council had approved an increase of the Key Decision Level from £50k to £200k.  Members queried if consultancy fees were included as part of the reporting in the section. – The Section 151 Officer responded that if the fees were over the required thresholds, consultancy fees should have been included.
• Challenges with the onboarding process for the new external auditors Ernst and Young was noted and Members queried if the issues related to the Local Authority’s signing of the non-disclosure agreement. – It was explained that difficulties had occurred as Members had been approached directly by the external auditors, however, Members were reassured that outstanding forms would be chased and progressed.  Members were also informed that compliance checks would also be a future requirement for Member’s consideration.
• Members requested a further explanation regarding the £868k overspend for Financial and Customers Services, with salary underspends due to vacancies which were offset by additional agency costs.  - In response it was explained that costs were due to the issues with filling permanent posts.  Out of 850 substantive posts, approximately 100 posts were covered by agency staff through Opus, mainly within Housing, Planning and Finance which was a national issue.  However, posts were being filled by permanent staff, with a turnover rate of 7%.
• Pressures relating to the Artrix for business rates of £150k was raised by the Committee. – Members noted that BDC had been liable for business rates costs when the building was dormant but as the building was occupied, BDC would not be liable for future costs.
• Members also queried and requested a further explanation for the Planning, Regeneration and Leisure Services including additional costs for NWEDR, in Development Management due to Professional Fees overspend of £261k. – The Section 151 Officer agreed to provide a breakdown of costs to Members.
• Members requested what BDCs liability and risks were over the next few years concerning employees’ possible unwillingness to join the Council’s pension scheme? – In response the Section 151 Officer agreed that it had become a significant issue over the past years.  Directors of Finance across Worcestershire held a meeting at the end of December 2024 to discuss the risks for Local Authorities.  During the meeting it was discussed that the Government had loosened the length of time funds were required to be solvent.  Members also noted that Tranche 1 of the budget for BDC included a £200k increase in budget, however, the full amount may not be required.
• Members noted that Spadesbourne Homes accounts were filed up to September 2024 and queried why accounts hadn’t been filed up to March 2024, in line with the other accounts prepared. – Members were informed that there had been some difficulties with Spadesbourne Homes trading within the required financial year and had issues with the contract being signed by Bromsgrove District Housing Trust (BDHT).  However, the accounting period would be reviewed for future reporting.

RESOLVED that:

1)    That the Committee note that the 2022/23 Accounts, following delegated approval, have been signed off.

2)    That the Committee note the position in relation to the delivery of the 2023/4 Accounts.

3)    Following the delivery of receipt of “Disclaimer Opinion’s” from the External Auditors for the 2020/21 and 21/22 Accounts, as approved at the Committee meeting on the 5^th December, the subsequent “Disclaimer Opinion” of the 22/23 Accounts on the 3^rd  January and the provision of the 2023/24 Accounts for Public Consultation on by the 17^th January 2025 as per the backstop regulations, that Audit, Standards and Governance Committee meetings revert to being quarterly in nature.

4)    The ongoing process for inducting the Council’s new External Auditors, Ernst and Young, be noted.

RECOMMENDED that:

Cabinet is recommended to approve the following:

5)    Any areas of concern within this key compliance report for consideration.