Agenda item

The External Auditor, Grant Thornton for BCP Council, is required to consider whether the Council has put in place proper arrangements to secure economy, efficiency and effectiveness its use of resources.

Auditors are required to report their commentary under specific criteria, namely financial sustainability, governance and improving economy, efficiency and effectiveness. They are required to report on any significant weaknesses they identify.

The 2024/25 Interim Annual Report provides the following assessment:

Two key recommendations have been raised in relation to the cumulative DSG deficit and the statutory direction in relation to SEND.

A further four improvement recommendations have been made. The Council has provided the External Auditor with management responses to all the recommendations.

The Chair amended the order of business to take this item before the Internal Audit Plan Coverage item. She explained the reasons why she had agreed to take this item as a matter of urgency as follows:

“The External Auditor, Grant Thornton for BCP Council, is required to consider whether the Council has put in place proper arrangements to secure economy, efficiency and effectiveness its use of resources. Auditors are required to report their commentary under specific criteria, namely financial sustainability, governance and improving economy, efficiency, and effectiveness. They are required to report on any significant weaknesses they identify. The External Auditor have produced a 2024/25 Annual Report which needs to be reported to the committee by the end of November. Due to conflicting demands it was not possible to submit the report within the required timescales for this committee. As Chair, I recognise the urgent deadline and have used Procedure 7.2 in Part 4D of the Constitution permitting urgent items to be added with the chair’s consent.”

Barrie Morris and Katie Whybray of Grant Thornton, the Council’s External Auditor (EA), presented a report, a copy of which had been circulated to each Member and which appears as Appendix 'B' to these Minutes in the Minute Book. The report set out the EA’s findings on the Council’s Value for Money arrangements (VFM) following audit work to date, summarised as follows:

·       Financial sustainability – A significant weakness remained for the increasing Dedicated Schools Grant (DSG) deficit, its impact on cashflow and the lack of reserves to manage it resulting in a key recommendation being made, which had been accepted by the Council.

·       Governance – No significant weaknesses found but four improvement recommendations around arrangements for treasury management, officer complaints, lessons learnt reporting and Council owned companies.

·       Improving economy, efficiency and effectiveness – A significant weakness remained for the statutory direction in relation to the SEND (special education need and disabilities) service resulting in a key recommendation remaining in place.

·       Of the five key recommendations from 2023/24, it was noted that four were partially implemented and one completed.

It was noted that the report should be considered in the wider context and compared to other councils. The EA highlighted the good progress made in a number of areas, including the significant achievement in improving the Council’s Ofsted rating from ‘inadequate’ to ‘good’. The Chief Financial Officer (CFO) and his team were fully aware of the DSG issues and were in regular dialogue with the EA and Central Government to try and address them. In other aspects it was a relatively positive report.

The EA representatives, the CFO and the Head of Audit and Management Assurance (HAMA) responded to questions and comments on the report. The CFO clarified what the Chancellor had said in her November Budget speech - that Government would take over the day to day funding of SEND costs with effect from 1 April 2028 (when the current DSG statutory override would expire). However, the accumulated deficit between now and then would be retained by the Council. What, if any, support for this would be set out within the forthcoming provisional local government finance settlement.

The EA advised that once sufficient progress had been made the key recommendation regarding the statutory direction in relation to SEND could be closed.

On monitoring VFM arrangements and whether the EA should report more regularly in light of concerns about the DSG situation, the EA advised that their role was not to give advice or propose measures but to provide support to the Council to ensure appropriate arrangements were in place. The EA had the power to make statutory recommendations, for example if a council was not taking the DSG issue seriously. It was noted that statutory reporting on the VFM arrangements was on an annual basis. However, the EA agreed to liaise with the CFO on how more regular updates could be provided if needed. The EA also agreed to review the DSG related chart on page 20 of the annual report to make the comparative data more meaningful. The EA explained that the Council was taking similar actions to other councils and should continue to scrutinise and undertake due diligence on all applications.

In questioning whether there was sufficient assurance to be able to highlight issues at an early stage, FuturePlaces governance was cited as an example. The HAMA referred to the detail provided in his draft investigation report currently under consideration by the committee, including the timescales involved and his findings. It was noted that for the EA the impact of the backstop arrangements due to the Covid pandemic had resulted in retrospective reporting. A member referred to the potential tension between expectations of proactive day to day monitoring and the more backward facing role of audit. The Committee were reminded that Internal Audit formed part of the third line of assurance in the Council’s Assurance Framework, after the first line of directors/managers and the second line of corporate oversight (including boards). It was noted that the EA had commented on ensuring the committee prioritised core assurance work and evaluated if its role should include scoping and commissioning lessons learnt reviews. The Chair reported that she had explained to the EA the value of the FuturePlaces investigation as a focussed, constructive piece of work.

Other points raised included:

• The reasons for the report being presented to the committee at a later date this year and as a late report on the agenda due to staffing issues were noted.
• The value of the recent training session on Treasury Management and a request to send all councillors the link to the recording.
• The CFO advised that the next quarterly Treasury Management report would incorporate the issues raised previously by the committee with the EA’s improvement recommendation (IR1).
• The HAMA confirmed that the Internal Audit team did contribute their professional expertise and pre-emptive knowledge when new policies, systems, etc were in development.
• A concern was raised about low levels of compliance for councillors’ mandatory training. It was noted that the Chair of the Standards Committee had been invited to attend the February meeting to talk about councillor training.

RESOLVED that Audit & Governance Committee notes the findings, recommendations and management comments in relation to the External Auditor’s Annual Report 2024/25 (Value for Money arrangements report)

Voting: Agreed with no dissent