The Governance & Audit Committee of Carmarthenshire Council convened on Friday 10 July 2026 to review the pre-audit statements of accounts for the Council, the Dyfed Pension Fund, and Burry Port Harbour. The committee also received updates on the Internal Audit plan, discussed Audit Wales reports on capital planning and urgent and emergency care, and reviewed the Council's Contract Procedure Rules.

A significant portion of the meeting was dedicated to the pre-audit statement of accounts for Carmarthenshire County Council, which highlighted a £9.3 million overspend in departmental expenditure, with social care and schools being particular areas of concern. The Council's general fund balances had decreased to £15.4 million due to these pressures, leading to a discussion about the sustainability of the current financial trend. The committee also approved retrospective movements to earmarked reserves, including transfers to the Major Development Fund, MEP Capital Funding, and the City Deal/Pentre Awel Reserve. The Dyfed Pension Fund's pre-audit statement of accounts showed a healthy growth in net assets, reaching £3.995 billion, with a surplus of 128% funded. The Burry Port Harbour financial statement indicated a net cost of £97,000 for the year, fully funded by the Council, with fixed assets totalling £1.48 million.

The committee received an Audit Wales report on capital planning, which identified areas for improvement in how councils explain their objectives, understand asset conditions, and demonstrate value for money. Recommendations were made for both councils and the Welsh Government to enhance these processes. An Audit Wales report on urgent and emergency care in the West Wales region highlighted ongoing challenges with delayed discharges, impacting patient flow and emergency department waiting times, despite partners understanding the need for improvement. The committee also reviewed the Internal Audit plan updates for 2025/26 and 2026/27, noting a 90% completion rate for the former and a positive start to the latter. The annual Internal Audit report for 2025/26 provided a reasonable assurance opinion on the Council's governance, risk management, and control framework, though it flagged ongoing concerns regarding the financial sustainability of schools and children's services.

Updates were provided on the Council's Contract Procedure Rules, with Version 7 presented for approval, incorporating changes to align with the Procurement Act 2023 and Procurement (Wales) Regulations 2024. The committee also received an update on Welfare Cards, noting significant progress in strengthening controls and achieving a reasonable assurance rating from Internal Audit. Finally, the committee reviewed its action log and signed off the minutes from its previous meeting. An exempt report concerning financial or business affairs was also considered in private.

CARMARTHENSHIRE COUNTY COUNCIL PRE-AUDIT ANNUAL GOVERNANCE STATEMENT 2025-26

The committee reviewed the pre-audit Annual Governance Statement (AGS) for 2025-26. Helen Pugh, Head of Revenues and Financial Compliance, presented the statement, noting that it complies with statutory requirements and reflects the Council's commitment to good governance. The AGS indicated a High assurance level regarding the Council's corporate governance arrangements, with no fundamental control issues identified. However, it did highlight significant ongoing governance issues concerning the financial sustainability of schools and children's services, with persistent overspending presenting a material risk to the Council's financial resilience. The statement outlined priorities for 2026/27, including enhancing performance information sharing, strengthening the alignment between financial planning and strategic objectives, and maintaining a focus on cyber security and organisational resilience. The committee discussed the need for robust recovery plans to address the financial sustainability of schools and children's services, and the potential implications for the Council's overall financial position and reserves. The committee was assured that these issues were being addressed by senior management and were being challenged through established governance arrangements.

CARMARTHENSHIRE COUNTY COUNCIL PRE-AUDIT STATEMENT OF ACCOUNTS 2025-26

The pre-audit statement of accounts for 2025-26 was presented by Randal Hemingway, Head of Financial Services. The statement revealed that the Council's Council Fund net expenditure was above the original budget for the year, resulting in a transfer of £1.755 million from balances. Schools' delegated budgets also saw a transfer from balances of £7.7 million, contributing to an aggregate school deficit of £9.561 million. The Housing Revenue Account (HRA) reported an overspend of £1.954 million, largely due to increased repairs and maintenance costs. The Council's general reserves stood at £15.497 million, with earmarked reserves totalling £139.358 million. The committee noted the significant capital expenditure of £154.1 million during the year, financed through borrowing, capital receipts, grants, and reserves. A key concern raised was the unsustainable trend of overspending in schools and social care, which, if not addressed, could impact the Council's financial resilience and ability to deliver strategic priorities. The Section 151 Officer confirmed that, despite these pressures, the Authority was not currently at risk of issuing a Section 114 notice. The committee also retrospectively approved movements to and from earmarked reserves, including transfers to the Major Development Fund (£2 million), MEP Capital Funding (£3 million), and the City Deal/Pentre Awel Reserve (£4 million).

DYFED PENSION FUND PRE-AUDIT STATEMENT OF ACCOUNTS 2025-26

Randal Hemingway, Head of Financial Services, presented the pre-audit statement of accounts for the Dyfed Pension Fund. The net assets of the Fund saw a significant increase of £420.8 million, reaching £3.995 billion, primarily due to strong investment performance. Total contributions and transfers in were £123 million, while benefits and payments to leavers amounted to nearly £138 million. The Fund's investment mix showed a substantial holding in equities (69% or £2.7 billion), with significant investments also in property and corporate bonds. The report highlighted a maturing of the fund, with the number of pensioners outpacing the growth in active members. The actuarial valuation indicated the Fund was 128% funded, showing a strong financial position that had allowed for a £5 million reduction in employer contributions for Carmarthenshire in the 2026-27 budget. The committee noted the Fund's success and its position as potentially producing the lowest contribution rate among Welsh pension funds.

BURRY PORT HARBOUR FINANCIAL STATEMENT 2025-26

Randall Hemingway, Head of Financial Services, presented the Burry Port Harbour financial statement. Following the surrender of the lease by The Marine & Property Group in April 2025, the Council resumed direct operations of the harbour. This change resulted in significantly different financial figures compared to the prior year, with leasing income replaced by direct birthing income and the introduction of staffing costs. The fixed asset valuation also doubled due to a change in valuation method from a leased asset to an infrastructure asset. The net cost of the harbour activities for 2025-26 was £97,000, fully funded by Carmarthenshire County Council, with fixed assets totalling £1.48 million. The committee received the statement for approval.

AUDIT WALES REPORTS

7.1 THE BUILDING BLOCKS? CAPITAL PLANNING IN COUNCILS IN WALES

Randal Hemingway, Head of Financial Services, presented the Audit Wales report on capital planning. The report acknowledged the significant capital investments made by councils despite challenging financial environments but identified opportunities to strengthen planning arrangements and improve the demonstration of value for money. Key findings included that councils do not always clearly explain the intended outcomes of their capital investments, nor do they always have a complete picture of asset conditions, making prioritisation difficult. Challenges were also identified with national funding arrangements, particularly short-notice grant funding, and a general lack of emphasis on evaluating whether projects have delivered their intended outcomes. The report made one recommendation for councils, focusing on reviewing capital planning arrangements with an emphasis on asset condition and outcome evaluation, and two recommendations for the Welsh Government concerning grant funding processes. The Council's management response indicated acceptance of the recommendation and outlined planned actions and responsible officers. The committee noted the report and the management response.

7.2 WEST WALES REGION - URGENT AND EMERGENCY CARE: FLOW OUT OF HOSPITAL

Joanna Jones, Head of Integrated Community Services, presented the Audit Wales report on urgent and emergency care flow out of hospital in the West Wales region. The report found that despite patient flow being a key aspect of partners' plans, high numbers of delayed discharges continue to negatively affect urgent and emergency care services. Increased demand complexity, capacity constraints, and weaknesses in discharge planning were identified as key barriers. The report made 15 recommendations, four directed at the Health Board, nine jointly with local authorities, and two specific to local authorities. Joanna Jones provided an update on the management responses, highlighting positive progress in increasing community capacity, particularly in reablement services, and the embedding of a well-established hospital discharge process in Carmarthenshire. Challenges remain, including workforce recruitment and retention, reliance on short-term grant funding, and limited digital integration between health and social care. The committee noted the report and the management responses.

INTERNAL AUDIT PLAN UPDATE 2025/26 AND 2026/27

Helen Pugh, Head of Revenues and Financial Compliance, presented the Internal Audit plan update. She reported that the 2025/26 plan was 90% complete, with the remaining audits in progress. The 2026/27 plan was also on track, with 12% completion against a 10% target. The report highlighted a change in format to align with Global Internal Audit Standards, aiming for a more strategic overview. Significant issues identified included a three-star issue in the Egni Sir Gâr report and concerns relating to foster care. The committee welcomed the improved format and the progress made in management responses to audit recommendations. The report also detailed staffing capacity, noting the retirement of a senior auditor but the successful recruitment of a replacement. The committee noted the update.

ANNUAL INTERNAL AUDIT REPORT 2025/26

Helen Pugh presented the Annual Internal Audit Report for 2025/26. The report provided a reasonable assurance opinion on the adequacy and effectiveness of the Council's governance, risk management, and control framework. However, this opinion was caveated due to serious concerns regarding the financial sustainability of schools and children's services, which remain unsustainable and present a material risk to the Council's financial resilience. The report highlighted that policies and procedures, while present, are not always consistently implemented or complied with, with underlying root causes including weaknesses in processes, clarity of ownership, and reliance on manual controls. The committee noted the report and the ongoing challenges in school finances.

DRAFT GOVERNANCE & AUDIT COMMITTEE ANNUAL REPORT 2025/26

Malcolm MacDonald, Chair of the Committee, presented the draft Annual Report for 2025/26. He highlighted the committee's extensive work throughout the year, covering financial statements, annual governance statements, reports from Audit Wales, and internal audit findings. Mr. MacDonald thanked members and officers for their contributions and commitment. He specifically drew attention to the ongoing challenges related to schools and children's services finances, emphasizing that these could not be ignored. The committee discussed the importance of conveying their views on the financial statements to the full council, particularly concerning the budget process and its time constraints. Councillor Karen Davies proposed, and Councillor Julie James seconded, that the Chair draft a strong email to the Leader of the Council and copy the Section 151 Officer and Chief Executive regarding these financial concerns. This proposal was carried unanimously. The committee then received the draft report for review.

PROGRESS REPORT: WELFARE CARDS

Melanie Janes, Assistant Support Services Manager for Children and Families, presented the progress report on Welfare Cards. The report detailed significant improvements in the administration of Welfare Cards, following previous internal audit findings. Mandatory e-learning training for all staff, independent dip sampling, monthly reconciliations, and updated guidance notes have been implemented. Internal audit's most recent review concluded with a reasonable assurance rating, an improvement from low assurance. The committee expressed satisfaction with the progress made and the increased confidence in the current controls.

UPDATE OF THE COUNCIL'S CONTRACT PROCEDURE RULES (VERSION 7)

Clare Jones and Gemma Clutterbuck from Procurement presented the updated Contract Procedure Rules (CPRs), Version 7. The revisions primarily aim to ensure compliance with the Procurement Act 2023 and the Procurement (Wales) Regulations 2024. Key updates include an increased tender threshold to £100,000 (inclusive of VAT), strengthened governance controls requiring Head of Service sign-off for above-threshold procurements, and clarified legislative duties, including those related to the Social Partnership and Public Procurement (Wales) Act 2023. The committee approved the updated CPRs and a delegation to the Head of Revenues & Financial Compliance to implement minor, technical amendments.

GOVERNANCE & AUDIT COMMITTEE ACTION LOG

The committee received the action log, which detailed the progress of actions arising from previous meetings. The majority of actions were noted as yet to be delivered, with dates for completion not yet reached. A few actions were marked as complete. The committee requested that a schedule of comments and points made from the report at the last meeting be included with the documentation received in December to provide better context for future reviews.

TO SIGN AS A CORRECT RECORD THE MINUTES OF THE GOVERNANCE AND AUDIT COMMITTEE HELD ON THE 27TH MAY 2026

The minutes of the Governance and Audit Committee meeting held on 27th May 2026 were presented for signature as a correct record. Councillor Phil Warlow proposed, and Councillor Karen Davies seconded, the approval of the minutes. The minutes were signed as a correct record.

EXCLUSION OF PUBLIC

The committee resolved to exclude the public from the meeting for the consideration of an exempt report, as it contained exempt information relating to financial or business affairs, in accordance with paragraph 14 of Part 4 of Schedule 12A to the Local Government Act 1972.

SCHOOL BALANCES REPORT

The committee received an update on the School Balances Report. The Director of Education and Leisure presented findings that indicated a forecasted deficit for the financial year-end 2025-26 had improved from £11 million to £9.7 million. However, members expressed concern that over half of the schools remained in deficit, posing a significant risk to the Council's overall financial resilience. The committee noted the report and requested a further progress summary at its December 2026 meeting.