Agenda item

The Head of Finance and Investment had produced a covering report to assist Members with the context and understanding of the annual audit work, and the report that had been submitted by the External Auditors.  Auditors from Forvis Mazars were in attendance to present their annual report.

It was explained that assessment work in relation to the Council’s systems and arrangements for securing value for money on the use of resources within the organisation had been concluded.  This covered the period from 1 April 2023 to 31 March 2024.  The annual report presented the main findings on the audit work undertaken to date; the findings of the report provided an updated assessment of the Council’s Value for Money arrangements.

The report noted that the previous external auditor, Ernst & Young LLP (EY), had issued statutory s24 recommendations for the 2022/22 and 2022/23 financial years in relation to the Council’s Value for Money arrangements in August 2023.  These were reported to Council in September 2023 and addressed through a Corporate Governance and Improvement Plan (CGIP) and s24 Action Plan.  Progress against these plans had been regularly reported to Council and the Audit Committee. 

Due to the change in the appointed external auditor, with effect from 1 April 2023, EY did not undertake a follow-up audit of the Council’s response to its s24 recommendations, and therefore there would be no specific report made to close down those recommendations by EY.  The Forvis Mazars report for 2023/24 therefore superseded the 2021/22 and 2022/23 report produced by EY in relation to the assessment of the Council’s VFM arrangements.

The Forvis Mazars audit work had assessed the Council’s arrangements in place during 2023/24 and, where appropriate, considered the progress made up to the date of issuing the report.  Forvis Mazars had audited the Council’s VFM arrangements and identified weaknesses (qualifications) in relation to all three elements of the audit assessment: financial sustainability; governance and improving economy; and efficiency and effectiveness.  Recommendations were made to the Council in respect of these weaknesses.  However, no statutory s24 recommendations had been issued as part of the report.  Given the significance of the report, it would also be reported to the next Council meeting on 15 January 2025.

A management response to the recommendations set out the progress made during 2023/24 and to date in delivering improvement in the VFM arrangements.

The report also covered other matters that the external auditor felt appropriate to report to the Committee as part of their work related to the financial year 2023/24; this covered the opinion on the financial statements.  For the Council, this was expected to be disclaimed in line with the accounts for 2021/22 and 2022/23.  For the Teesside Pension Fund, work was progressing well and was expected to be completed by the statutory backstop date of 28 February 2025.  The report also gave information around significant risks, the control environment, and audit fees for the financial year.

During discussion, several points were raised, as follows:

·        A Member referred to governance arrangements and queried whether there was sufficient capacity to deliver the 2024/25 audit on time.  In response, it was explained that interim agency staff were currently being retained to support the permanent team.  The interim staff would remain in post beyond March 2025 to enable the accounts to be audited by the backstop date.  It was indicated that a draft departmental structure and related reinvestment bid had been produced, though permanent recruitment could not take place until the Council budget had been considered.  However, work had already commenced in respect of the 2024/25 accounts.  It was noted that there would be challenge for the finance team to support the 2024/25 audit; additional resources would be required.  It was highlighted that the interim Director of Finance would be leaving the authority shortly; the post would be advertised on a permanent basis.  A short discussion ensued in relation to the high number of interim roles and the hopeful transference of these into permanent positions in the future.

·        A Member referred to the Council’s Transformation Programme and queried how this was progressing.  In response, the Committee heard that significant progress had been made within the last year, where enormous financial challenge had needed to be met with the greatest of urgency.  It was acknowledged, however, that there was still significantly more work to do.  The importance of ensuring that Elected Members were fully informed and involved in the Transformation Programme was highlighted; a training programme to assist with this would be devised.  The Director of Finance advised that the draft 2025/26 budget report considered by Executive on 4 December 2024 presented a balanced budget; the final financial settlement amount was currently awaited.  It was felt that the savings identified were achievable and would meet the Medium Term Financial Plan (MTFP). The Committee discussed exceptional financial support; income management; and use of reserve funds.

·        A Member referred to the Q2 monitoring report and some savings that had yet to be realised; transformation in Children’s Services and Adult Social Care was highlighted.  A query was raised in relation to home to school transport and the costs around that.  In response, it was indicated that £3m had been allocated to the SEND budget for 2024/25 for this.  A short discussion ensued in relation to children in care and the management of complex cases.

·        In response to a query regarding Council Tax, additional housing and income generation, Members heard that this was included in MTFP modelling / forecasting.

The Chair thanked the auditors and officers for their reports and contributions to the meeting.

NOTED