Agenda item

The Committee considered the Revised Annual Governance Statement for 2023/24 and 2024/25 presented by the Director of Finance and Section 151 Officer.

The key points were highlighted as follows:

• Updates were requested by external auditors Ernst and Young including four key additions:
  • Disclaimer audit opinions
  • Section 24 statutory recommendation
  • VAT compliance issues
  • Future governance implications

• The purpose of the reporting was to ensure statements accurately reflected governance weaknesses and risks.

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

• When would the review of the financial system be completed by? – In response Members were advised that there were no fixed dates, however, a project plan was being developed.
• Should the finance system issue remain as a corporate risk? – Members were advised that this would be considered as a specific corporate risk.
• Some Members expressed the view that the report highlighted fundamental historic issues with limited clear actions and timelines.  Members also pointed out the importance of the reported issues to be addressed prior to the Local Government Reorganisation (LGR) with concerns of reputational damage. – In response the Committee were informed that the July meeting would give Members an opportunity for challenge for the Final Statements of Accounts for 2023/24 and 2024/25 and Draft Statement of Accounts for 2025/26 and there would also be a consolidated action plan provided in the Annual Governance Statement for 2026/26.
• The Chairman requested further clarity on a point stated in the report which related to the disclaimer of opinions, indicating a significant weakness in financial governance and assurance arrangements during 2023/24. – It was explained that delays were due to key staff shortages, however, a Financial Services Manager and Chief Accountant were in place which would assist with future accounting.
• Members requested clarity whether disclaimer opinions could continue indefinitely? – Members were informed by the external auditors Ernst and Young that typically, as shown in documentation from the National Audit Office, years of disclaimers occurred prior to improvement, however, disclaimer opinions should lead to eventual progression to qualified and then unqualified opinions.
• Further clarity was requested regarding three audit returns within the reporting with assurance of “limited”.  – In response Members were assured that the specific debts would be reviewed in more detail.
• The portfolio holder expressed the view that the Council should focus on moving forwards and was encouraged that the Council was moving in a more positive direction with the newly recruited Section 151 Officer in post.
• Was the Section 151 Officer confident that resources and skillsets within the Finance Department were sufficient to proceed future accounting within the Council? -  In response the Section 151 Officer explained that further recruitment was underway, however, capacity had improved but further development was required.

RESOLVED that

1) The Committee were assured of the revised Annual Governance Statements for 2023/24 and 2024/25 as attached at Appendix 1 and 2, particularly the additional wording highlighted in red;

2) The Committee were assured of the significant governance issues identified since the original accounts were produced, and the additional assurance now included in the revised AGS documents in response to the external auditor’s request; and

3) The Committee approved the revised Annual Governance Statements for inclusion alongside the Statement of Accounts for the relevant financial years.