Agenda item

The Committee received an update from the Finance Manager on progress made for the Financial Compliance Report. 

The key points being summarised below:

• Value Added Tax (VAT) returns were being restored following extensive work with tax advisors.
• Whole of Government Accounts (WOGA) required remapping, with work scheduled for 2026–27.
• A cash receipting reinstatement project was underway.
• Significant progress had beenachieved since the Section 24 Notice.
• Audit of the 2024/25 was expected to be completed by the statutory backstop date.

After the presentation Members discussed the following:

Extensive discussions were held regarding the £125m misallocated income over the period from 2020/21 to 2023/24 accounts.

The following questions were raised:

• Clarity of the situation for the misallocation of income? - In response Members were informed that themisallocated income had been banked correctly but coded incorrectly. 
• Whether income had been incorrectly passed between Bromsgrove and Redditch Councils. – In response the Finance Manager informed the Committeethat the majority of the monies did go to the correct individual Councils, however, theywere not allocated to the correct code.
• Concerns of past issues with the Tech One system were raised which had caused delays with manual checks having to be carried out.  Members queried if the £125m misallocated income related to suspense accounts.  – It was explained that the Council were hopeful that with the reinstallation of a cash receipting system, that similar issues wouldn’t happen again and that the Council should see improvements going forwards.

• What were the impacts onthe Medium-Term Financial Plan (MTFP) at the time and what about future mitigations? – The Committee were informed that the MTFP had not been destabilised because income had been received, just mis-coded. With the reinstatement of a new cash receipting system, this should help with picking up errors for future reconciliations.
• Timelines for cash receipting system reinstatement?  - Officers were unable to provide a specific timeline but Members were assured to note that suspense account balances had reduced from 424,000 entries to 46 entries, totalling misallocated monies to date of £538,000, which was a major improvement.
• How would the Council beassured that the issues would not happen again? - A parallel run of the new cash receipting system would occur before full go live, which was hoped would be in place by the next meeting in April 2026.

Other questions raised by Members were as follows:

• How was the Council ensuring accuracy given the staff turnover issues and how was the Council coping with the transitions of the new external auditors Ernst and Young (EY)?  - The Section 151 Officer reassured Members that EY were highly regarded external auditors and were seeking high levels of assurance from the Council which was significant and would cause considerable work to the Finance Team, but the Committee could be assured that all risks would be thoroughly considered.  The Section 151 Officer also assured Members that with EY on board, she was happy with the progress of the suspense account irregularities, with staff working extremely hard to rectify the issues and was hopeful that future issues of this nature should be significantly reduced. 

The Section 151 Officer suggested that Recommendation 1 of the report should be reviewed by the Committee and perhaps could not be fully assured for the auditing of the 2023/24 and 2024/25 accounts.  Following discussions the Chairman suggestedand the Board agreed that the recommendation regarding assurance on auditing of 2023/24 and 2024/25 accounts be deferred.  However, the Committee confirmed assurance on progress against the Section 24 Notice as a suggested alternative recommendation.

RESOLVED that

1)    The Committee were assured regarding the current position in relation to the progress made for the previously issued Section 24 Notice.

2)    The Committee were assured in relation to the position for the other financial indicators asset out in the report; and

3)    The Committee were assured in relation to the position on the Financial Stability Plan.

RECOMMENDED to Cabinet that

4)    Assurances regarding the auditing of the 2023/24 and 2024/25 accounts would be deferred until the Audit, Standards and Governance Committee could gain further assurances from the external and internal auditors.