Agenda item

Paper to follow.

The committee considered the report which set out the latest draft Statement of Accounts 2023-24, an update on the Audit of Accounts 2023-24 and the Interim Completion Report from Ernst and Young (EY), the council’s external auditors. The committee noted that legislation had been introduced relating to back-stop dates for local authorities to publish audited accounts (28 February 2025 for 2023-24). EY confirmed that they had not been in a position to obtain sufficient evidence to be able to conclude that the financial statements of the council were free from material and pervasive misstatement before the backstop date and had therefore anticipated issuing a disclaimed 2023-24 audit opinion. However, EY had also received four objections, from a local elector, on the 2023-24 financial statement and until these had been considered by EY, the final external audit opinion could not be given.

It was noted that the appointment of EY as the council’s external auditor had been a late appointment and that the 2023-24 audit did not commence until October 2024.

EY presented their interim findings to committee. Significant weaknesses were identified in the council’s arrangements relating to the financial sustainability. The council’s Medium-Term Financial Strategy (MTFS) was not sustainable without central government support and therefore, the council was at risk of issuing a S114 notice in the future.

Further significant weaknesses in arrangements for 2023-24 were noted in the following areas:

-       Ofsted Inspection Report: the findings of the Ofsted and improvement notice issued by the Secretary of State was evidence of significant weaknesses in arrangements.

-       Corporate Challenge Peer Review: the Peer Review identified a number of significant issues and proposed a series of recommendations. The council’s subsequent action plan identified 73 actions and whilst the council was responding positively to the issues identified, the findings of the peer review represented significant weaknesses in arrangements for 2023-24.

-       Head of Internal Audit Opinion: During 2023-24, the Head of Internal Audit concluded that the overall opinion on the council’s framework of risk management, governance and internal control was ‘Limited’. The findings of the report provided evidence of significant weakness in arrangements.

-       Annual Governance Statement 2023-24: The AGS identified that there were arrangements in place for the council to identify governance issues and to establish plans to address relevant areas. However, the AGS identified weakness in arrangements for 2023-24 in respect of partnership working.

The committee noted the 2024-25 backstop date (28 February 2026) and were pleased that colleagues from EY would be meeting the council’s finance team to ensure that both EY and the council were prepared for the 24-25 audit. This preparation will include reviewing the data and information required by the new auditors, and how it is extracted and shared in a format that best meet the needs of EY.

The committee raised concerns in relation to bank reconciliations which had not been prepared on a regular basis during 2023-24 and agreed that timely complete of bank reconciliations was a fundamental control measure that should be completed monthly. It was confirmed that reconciliations were now completed as a matter of routine and were up to date for 2024-25. The committee were pleased to note that a number of permanent positions within the finance team had recently been filled.

The committee sought further information relating to the four objections that had been received. EY confirmed that the objections received related to governance and until these objections had been formally considered, work on the 2023-24 audit could not concluded. It was anticipated this work would be completed, in March. The findings of the review of objections would then be shared with the objector and council, who would have an opportunity to respond before with the final opinion is issued. The findings of the review would be shared with the Public Sector Audit Appointments Ltd, for information. It was noted that the disclaimed opinion on the 2023/24 accounts would have effects on the audit reporting for the following two years of accounts, after which the council would expect to receive unqualified audit opinions again.

RESOLVED:

That the Audit and Governance Committee

1.    Note the latest Draft Statement of Accounts for 2023/24 (Appendix B) – reflecting the revisions in relation to IAS19 Pensions (December 2024).

2.    Note the Interim Audit Completion Report (Appendix A) for the year ending 31 March 2024.

3.    Note that the management responses to the Interim Audit Completion Report will be reported to the Committee at the next available opportunity.

4.    Note that the Interim Executive Director of Resources (S151) is required to publish a statement of explanation on the Council’s website by the backstop date 28 February 2025.