Agenda item

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The External Auditor from Ernst and Young presented the Value for Money Interim Report for years ended 31^st March 2021, 2022, and 2023. The External Auditors explained a requirement of the Local Audit Reset was the Value for Money report be completed. He outlined the report included an Executive Summary, Value for Money Commentary and Appendices.

He referred the Committee to the page 22 of the agenda and highlighted the External Auditors are required to be satisfied the Council has proper arrangements for securing economy, efficiency, and effectiveness use of resources. He confirmed a conclusion or opinion is not issued and where significant weakness were identified this would be reported by exception in the Auditor’s Report on the financial statements.

He added the criteria set out in the appendix ensured this complied with requirements of the 2020 Code of Audit Practice and the Auditor Guidance Note 3. 

The External Auditor referred to page 23 and 24 which outlined the risks procedure which identified the significant weaknesses. He brought to the Committee attention the one risk identified and therefore a significant weakness was the arrangements to publish the statement of accounts for 2020/21, 2021/22 and 2022/23 as the deadline was not met.

He provided assurance to the Committee the 2022/23 accounts were now published and on the Borough Council’s website.

The External Auditor brought to the Committee’s attention, section 2 of the report, page 26 set out the high-level summary arrangements. He added the findings on page 29 related to the ability to publish the accounts and explained the 2020/21 and 2021/22 did not include property, plant and equipment or Investment Property valuation transactions. He added there was delays to some of the year end bank reconciliations.

He explained to the Committee, appendix A provided further details on the arrangements and appendix B was the recommendation made and the response from management.

The Chair thank the External Auditor for the report and invited comments and questions from the Committee.

Councillor de Winton referred to page 29 and 38 which outline the external auditors concern of the cash figures and the report stated this could be materially misstated, he sought clarification that now the 2022/23 accounts had been published this was no longer a concern.

The External Auditor advised as the audit had not been carried out on the 2022/23 accounts so the issue had not cleared but they would look at it as part of the audit of the 2024/25 accounts.

The Assistant Director Resources and Section 151 Officer then provided further explanation and background to the issue and that this was now up to date with a full working paper prepared to support the auditor when they come to review this going forward.  

The Chair, Councillor Ryves referred to page 37 which stated one of the controls was the quarterly budget monitoring report were presented to the Audit Committee however this was not presented since March.

The Assistant Director Resources and Section 151 Officer provided clarification that the Value for Money Report covered the financial year 2020/21, 2021/22 and 2022/23. She added the monitoring reports were published to all members throughout the period and the latest report was then presented to Audit Committee. She referred to review of the Audit Committee Terms of Reference and explained that this was changed as they did not have powers to make decisions on financial matters and the reports would go through Cabinet going forward.

Councillor Dark referred to page 32 and specifically the last 3 paragraphs which outlined the budget, expenditure, funding, funding gap and net contribution to the general reserve fund for 2020/21, 2021/22 and 2022/23. He sought clarification that a funding loss was expected but there was contribution to the reserve fund for 2022/21 and for 2021/22 and 2022/23 there was a further contribution to the reserve fund than expected.

The External Auditors confirmed funding was put into the reserves fund during the years 2020/21, 2021/22 and 2022/23.

Councillor Dark sought further clarification on the wording on page 33 around the review of the Council’s reserves fund in 2022/23 which resulted in the release of £3 million was set aside to for investments in proposals and to meet the funding gaps.

He stated that his understanding was the £3 million would be used for proposals to generate a revenue stream and not to fill the funding gap.

The External Auditor advised the wording would be reviewed as understood that it could be mis-interpreted.

The Portfolio Holder for Finance, Councillor Morley confirmed the £3 million was still in the reserve funds and it was being considered as part of the transformation programme and would be used to improve the balance sheet of the Borough Council.

The Chair, Councillor Ryves sought clarification if the £3 million was for cutting costs or for generating revenue.

Councillor Morley confirmed it was reserved for an opportunity which could be for generating revenue or transformation and cutting costs.

The Chair, Councillor Ryves sought further clarification that the £3 million could be released if needed or if the reserve was protected.

Councillor Morley responded that it could be released but dependent on the criteria.

The Assistant Director Resources and Section 151 Officer added the funds could be released if there were no funds available to close the funding gap and a decision would need be taken in these circumstances but the intention was for the £3 million not to be used for that purpose at this point in time.

Councillor Devulapalli drew the Committee’s attention to page 33 which referred to the pandemic and sought clarification on the commitment to pay upfront pension contribution was reversed.

The Assistant Director Resources and Section 151 Officer explained that in 2020 there was a commitment as part of the medium-term financial action plan, that the opportunity would be taken to pay the pension contribution up front. She added the pension contribution was an annual payment for a period of 3 years where an actuary evaluated what the contribution to the pension fund would be. The Assistant Director advised the decision was taken to make the payment upfront to take advantage of a discount.  However, due to the pandemic and the uncertainty of the impact of the financial sustainability of the Council annual payments were reinstated to retain funding in case it was needed for cashflow purposes.

Councillor Dark thanked Officers for the report and the format in which was easy to read and appreciated the work which went into the report.

The Assistant Director Resources and Section 151 Officer referred to appendix B, page 42 which included the response from management. The Assistant Director explained the issues which were raised had been addressed and the accounts for the period had been brought up to date. She provided an update on the fixed assets register which was now up to date, the 2023/24 draft statements of accounts were in the position to be published shortly.

RECOMMENDATION: The Committee received and noted the Value for Money Interim Report for years ended 31^st March 2021, 2022, 2023.