Agenda item

The Committee considered the External Audit Completion Report 2023/24 and 2024/25 with the key findings outlined by the external auditors Ernst and Young:

• Disclaimer opinions were given for 2023/24 and 2024/25 accounts due to:
  • Insufficient audit evidence
  • Historic reporting weaknesses
  • Audit backlog and timing constraints
• Identified significant weaknesses included:
  • Financial reporting delays
  • Enterprise Resources Planning (ERP) system issues
  • Workforce capacity constraints
  • VAT compliance failures
• Value for Money review identified governance weaknesses

During Member’s consideration of the item, the following key points were discussed:

• Members expressed their disappointment that the accounts for 2023/24 and 2024/25 had been given disclaimer options and queried if it was possible that disclaimer opinions could continue for future accounts and to consider that LGR was fast approaching? – In response Ernst and Young advised that it was likely that in the short-term disclaimer opinions were likely to continue, however, improvement was expected over several years.  Future findings and recommendations would be provided in future reports which would include a flag system to assist with requirements, demonstrating gained assurances or the lack of.  The Chief Finance Officer and Section 151 Officer assured Members that future accounts would be moving in a more stable direction.
• Were disclaimer opinions typical for the local government sector? – In response Members noted that Bromsgrove District Council (BDC) were slightly behind some Local Authorities, but it was not unique.
• Would the recommendations in the Recovery Plan be accepted by the external auditors? - Ernst and Young responded by explaining that progress would be tested in future audits.
• Concerns were raised by Members regarding the delays in previous audit provision requested by the external auditors.  – In response the Assistant Director of Finance and Customer Services explained that delays were primarily caused due to timing issues, following the external audit appointment and staffing capacity.  The external auditors added that they were encouraged by the inclusion of an Annual Governance Statement for future accounts which was outlining governance arrangements.
• What was the financial impact of capital underspends as reported and what assurances could be given for future capital spending? – In response it was advised that capital underspends were mainly due to delayed expenditure rather than savings, however, improved reprofiling of monitoring plans were in place, with quarterly reporting to Cabinet.
• Assurances were sought that adequate checks and balances would be carried out for future accounting purposes. – In response Members noted that a workforce strategy was being incorporated to ensure that the structure would be fit for purpose for future accounting purposes.
• Meeting frequency was discussed by Members to review progress management in further detail.  After careful consideration it was agreed by the Committee that this would be considered further after consideration of the project plan proposals at the next meeting which would take place in July.
• The portfolio holder requested assurances on behalf of the Committee from the external auditors that the 2025/26 accounts were in a good position for sign off? – Members were advised that with the review of adequate staff resources, targets should be met.

RESOLVED that

1) The Committee acknowledged the significance of consecutive years of disclaimed opinions and considered and endorsed, with appropriate comment the Completion Report attached at Appendix 1;

2) Requested a detailed updated Recovery Plan, including milestones and reporting arrangements, to address the recommendations raised within the Completion Report; and

3) Continue to oversee arrangements for financial reporting, including regular monitoring of progress against improvement actions and key milestones.