Decision Maker: Audit and Governance Committee

Outcome: Recommendations Approved

Is Key Decision?: No

Is Callable In?: No

Date of Decision: February 24, 2025

Purpose:

Content: At the Chairman’s invitation, External Auditor, Grant Thorntonintroduced this report stating the following: ·       Headlines were given on page 4 of the report.  ·       This audit was always expected to be a difficult one, particularly in meeting the backstop for providing assurance. ·       It was felt that officers had produced the best set of accounts they could, particularly as they had produced 3 sets of accounts one after the other.  ·       This was a unitary authority pulling together legacy information from several different councils.  ·       Officers had been very co-operative and they had decided to work on areas of most value to the Council.  Things that most impacted on decision making.  ·       The backstop had been discussed in previous accounts and they had only provided a disclaimer on the accounts.  This was standard across the country because it would take a while to gain assurance.   ·       Key areas where they had struggled were highlighted on page 5 of the report.  These included issues with short term credits and getting information on Section 106 agreements.  ·       A statement of the current situation was also provided. ·       Significant amounts were highlighted on page 9 of the report where they had struggled to get information on journals purely because there were a number of systems involved. ·       Page 10 of the report showed accounting policies for fees and charges where they had no concerns and income recognition. ·       There had been a lot of work undertaken with income and council tax which they were happy with.  They had however struggled to get all the evidence required in relation to grants. ·       Expenditure had also been reviewed and the sampled sizes had been bigger that year. ·       They had tried to reduce materiality in the current year.  They were only partially through testing of credits but had tested 707 items of expenditure.  ·       They had struggled with internal recharges but this was the case with every council they had audited.  Officers had reasonable recharges but these needed to be taken out of the accounts when it was all pulled together or it would lead to a gross expenditure issue. ·       Work had begun with land and buildings and investment properties but this had not been completed because they felt they were better focussing time on cash and debts because this would have the most impact on the Council. ·       The Council’s systems were very complex because they came from legacy councils so a new benefits system had been introduced and the external auditors were happy with how it had been implemented. ·       They had experienced some issues with the valuers with regard to council dwellings.  ·       Much had been undertaken around pension liability. ·       A lot of time had been spent on cash and there were a number of legacy accounts so it was difficult to reconcile them.  ·       There were also a large number of debt balances from time to time and they had not received all of the information they required.  There was a lot to do and they would focus on cash in the next year’s accounts. ·       They had got a long way through testing of employee benefits.  ·       There was a variance in VAT and the Council had been in discussions with HMRC for some time regarding this.  ·       Information on what they had been able to test and where they weren’t able to test was provided from page 20 of the report.  Whilst they had got through a lot of samples they had been unable to provide an overall assurance because they still had some samples outstanding. ·       The current situation with the balance sheet was provided on page 22.  they had made good progress through the year and would focus on building the assurance in this respect.  1.        2.      In answer to queries on the report the following was confirmed: ·       It was felt the backstop would remain for the future.  For the 2024/25 accounts it was 25 February 2025.  After that it would move to November but it would take the Council some time to get qualified accounts issued. ·       The backstop did not necessarily draw a line under the previous accounts. As the opening balances for 2024/2025 were provided by the 2023/2024 accounts so comparative figures would have to be shown in each until they got to a position of being happy with the opening balances.  The only way to get assurance on opening balances was to go back and re-do all of the audits. ·       Physical cash seen in services on paper needed to be supported by cash that could be seen in the bank accounts. ·       Balances would have originated from the starting point of the borough councils.  Assurance would have to be taken from these balances.   So the problem was in being able to identify all of the accounts of the borough councils.  Cash records showed long term and short term borrowing so that was difficult to work out.  ·       Although auditors had identified areas of concern in the accounts, some comfort could be taken from the fact that the external auditors also noted all of the hard work of officers and that the accounts were the best that could be produced in the circumstances.  ·       The Council was attempting to get back to being able to report things in a timely manner.  Someone undertaking a task could leave and the person who took over did not know the current situation with the task.  Timely reporting made the Council more accurate and provided greater assurance and that was the position they aimed for.  ·       There were many reasons for the position the Council was in.  Corby and East Northants had been a couple of years behind in their audits, the old County Council was late in being signed off and a previous external auditor had not been a great help in this respect.  It had been a difficult year but the issues were now known and could be focussed on.  It was also thought Central Government could make some changes in audit going forward. ·       Grant Thornton had plenty of capacity and had deliberately downsized the number of audits undertaken to ensure they kept this capacity. ·       Timelines, practices and systems were set up to ensure an audit could be delivered.  Whilst they did not have every piece of evidence in the way they wanted it and when they wanted it the Council had a good team who the External Auditors would continue to work with. ·       Disaggregation was an issue that would no longer exist in the following year and they were confident of meeting the deadlines. ·       The Council had several legacy bank accounts and in the past these had been kept to keep things simple.  However, this had posed some problems in reconciling some of the transactions.  ·       The IT Audit Results Report for 2023/2024 showed all of the IT systems in scope.   A lot of this work went back to the harmonisation of the legacy systems and new cash system had been implemented that year.  A new system for council tax had also been implemented.  Once all of the legacy systems were fed into the new system it would be reviewed.  For this reason the assurance was shown in yellow but the external auditors had no concerns in this respect.  ·       A number of systems had not been looked at that year including Care First and Revenue and Benefits.  The revenue and benefits system were now on one system and the legacy financial systems could now be turned off.  They should all be shut down by the end of June with a short time of overlapping between the old and new system to ensure all benefits were received.  3.        4.      The report was proposed by Councillor Paul Marks, seconded by Councillor Bert 5.      Jackson and unanimously accepted by all. 6.        7.      In relation to the Auditors Annual Report the external auditor stated the following: ·     The Council was in a similar position to most councils.  Issues were shown in the Council’s Medium Term Financial Plan and by 2025/2028 the gap could be as much as £28million.  This was an area of focus with the Council delivering savings plans but still requiring some of the reserves.  At some point the Council should be able to get back into financial balance without the need to use reserves. ·     It could also be seen from the dedicated schools grant that some schools were beginning to go into deficit.  This had to be resolved.  The Council had started to work with the Department for Education (DfE) but there was no magic formula to correct this issue.  ·     Another key challenge was the Northamptonshire Children’s Trust.  Whilst a lot of work had been undertaken to get this out of deficit it did continue to be in deficit.  There was a need therefore to look at more transformational work in greater detail.  ·     Page 203 set out their view of governance around housing.  There had been an improvement in getting accounts to the External Auditors and that needed to continue.  Other aspects of governance and risk management were all there and it was felt they were working effectively.  ·     Page 205 showed how the Council was managing KPI’s and there were no issues there.  ·     There was a need to focus on housing.  The key recommendation needed to 8.   discuss a stock condition survey and form a realistic action plan.  There was still a lot to be undertaken to ensure there were no unsuitable homes in 9.   Northamptonshire.  Maybe private providers of homes could be given greater 10.         prominence as it posed a key risk in the organisation. ·     Educational healthcare plans was something for the Council to focus on as well. ·     Finances still presented a challenge and transformation plans needed to be worked on to ensure governance was effective.  ·     A performance board had been set up to look at this as part of a transformation plan.  It was not just necessarily the Council’s issue but shared amongst everyone in the Council.  They were making good progress in the Northamptonshire Children’s Trust, were regularly monitoring this and reducing some of the deficits they had been seeing.  More funding was something they needed to lobby for.  Some things they did not have control over but there were some action plans that would come through the Medium Term Financial Plan process.   ·     An improvement board had been set up to address some the issues that had been seen in the housing stock.  Some of the queries they did not have the ability to resolve but these would be seen in future reports.  There were many areas that were moving in the right direction, just not in time to be included in this report.  ·     Whilst it was correct to look at statutory and non-statutory services when making savings, the Council did also have some discretion in providing those services.  Some things could be done differently to currently. ·     It was also noted that lobbying Central Government on behalf of schools was the only way to make changes to the Dedicated Schools Grant as the Council had no control over this. 11.    12.  This report was proposed by Councillor Mark Jelley, seconded by Councillor Paul Marks and unanimously accepted by all.   RESOLVED that:  the Audit & Governance Committee Receives: 1)    the draft Audit Findings Report for the financial year 2023/24 and draft Disclaimer Opinion (Appendix A to the report); 2)    the IT Audit Results Report 2023 (Appendix B to the report); and 3)    the Auditors Annual report 2023/2024 (Appendix C to the report)