Agenda and draft minutes

Democratic Services opened the meeting by asking for nominations for Chair.

A nomination was received for John Chesshire, which was seconded and agreed.

RESOLVED: That the Audit Committee appointed Mr John Chesshire as Chair of the Audit Committee for the 2025-26 municipal year.

Democratic Services asked for nominations for Vice-Chair.

A nomination was received for Councillor Nick Denys, which was seconded and agreed.

RESOLVED: That the Audit Committee appointed Councillor Nick Denys as Vice-Chair of the Audit Committee for the 2025-26 municipal year.

Apologies had been received from John Chesshire.

None.

RESOLVED: That the minutes of the previous meeting be agreed as a correct record

The Chair opened the item by thanking EY and officers for their reports and moved straight to questions.

The Chair referred to the Independent Auditor’s Report, which noted that there was a significant weakness in the authority’s arrangements to identify and manage risks to its financial resilience and asked what had led EY to that conclusion. The DSG deficit was larger than the Council’s available reserves and this was a factual concern. Budget deterioration had occurred during the year, with a significant overspend. Weaknesses in baseline budgeting and demand forecasting had contributed to the overspend. The Medium-Term Financial Plan (MTFP) for 2024/25 included a steep increase in required savings. EY clarified that external auditors reporting a significant weakness in financial sustainability was a serious matter. EY would present an interim report at the next meeting to update on progress.

Members asked officers how this had happened and how it can be avoided in future. The Medium-Term Financial Strategy was based on four key elements: funding, demand-led growth, savings, and corporate items. Root causes identified included: demographic pressures in adult social care, children’s services, and temporary accommodation; inaccuracies in demand modelling; and delays in housing stock expansion which had reduced expected savings. Mitigation measures included: the launch of a Financial Improvement Programme; collaboration with external partners for benchmarking and process review; and increased focus on worst-case scenario planning.

The Committee requested a report from officers at the next meeting to update on financial risk assessment procedures and budget-setting methodology.

The Chair referred to the Independent Auditor’s Report, which also noted that there was a significant weakness in the authority’ arrangements with regards to the way the authority records, processes and reports on the information it holds, which undermines the ability of the authority to take proper informed decisions, manage its risks and meet its statutory deadlines, and asked how EY came to this conclusion.

Evidence for this included the delay in the production of the draft accounts and the inspection period not taking place in line with statutory requirements; Internal Audit’s limited assurance opinion citing poor data quality and reliance on manual records; and difficulties experienced by EY in completing the 2023/24 audit.

Officers acknowledged that routine officer-level governance was increasingly focused on financial recovery. Democratic governance processes (such as delegated authority sign-offs) remained intact. A comprehensive governance improvement programme was underway, including a “Five Pillars” review by Grant Thornton, and integration of Oracle systems to streamline data and improve transparency.

Officers presented that ‘governance’ had been used as a general point, though the main governance challenges were related to finance structures, systems and processes, including processes for budget monitoring.  Officers explained there was a finance improvement programme underway, supported by Grant Thornton, who will implement best practice. Officers also explained the wider non-finance related governance work underway across the Council and proposed a training session for the Audit Committee on financial governance and all other governance. It was suggested that this training be conducted before the next meeting. Inviting  ...  view the full minutes text for item 145.

Members highlighted that the report referred to limited capacity at a senior level. Officers clarified that this was in relation to governance arrangements. A significant amount of time in 2024/25 was dedicated to Zero-Based Budgeting and star chambers. This focus impacted senior-level capacity but was necessary for financial recovery and service efficiency.

Members highlighted that there were fewer assurance reviews and asked if this related to available resources. Officers noted that the shift to advisory work was intentional, supporting transformation rather than reiterating known issues.

Members asked about steps taken to address issues. It was important to note that 2024/25 was a big year of change, with lots of reviews, and looking at new ways of working across services and directorates. This included the Zero-Based Budgeting and star chamber sessions. There had been developments made during the year on performance data. The Chief Operating Officer had presented to the Committee previously and there were now approximately 130 performance dashboards developed to improve data visibility.

The next step was around implementation of these new ways of working, and this was underway. In relation to performance data, this included pulling out key indicators and building these into a cross cutting strategic level dashboard. A draft of this was due to go to Cabinet. Members asked if this could be shared with the Audit Committee too, officers would look into this.

Officers further advised that just because there was a no assurance opinion did not mean that work was not underway. During 2024/25 officers looked at lots of data and went into lots of detail on the finances. A Governance Rapid Improvement Plan had been launched.

The internal audit opinion of ‘no assurance’ was noted. This referred to the formal structure of governance. Officers expressed optimism for future improvement but stressed the need for evidence before changing the opinion.

Zero-Based Budgeting was a discovery exercise to understand service operations, effectiveness and inefficiencies. Members asked if the Zero-Based Budgeting process was complete. Officers clarified that this had been a starting point. Next stages would involve fixing issues and developing new ways of working. Emphasis was placed on collaboration and cross-service improvements.

Members asked if Internal Audit had sufficient resources. Officers confirmed that they did and noted that the focus shifted to advisory work aligned with transformation.

The Internal Audit plan remained flexible to accommodate emerging risks and external assurance sources. Some reviews had been deferred or replaced with higher-priority items.

Members asked if removed reviews would be revisited. Officers clarified that this would be based on priority and availability of other assurance sources to avoid duplication.

Members also asked about the alternative assurance on utilisation of housing stock. Officers noted a review by the housing regulator.

EY noted that they viewed Internal Audit’s opinion of ‘No assurance’ as very significant. It was a serious matter when no assurance can be provided over the internal control risk management and governance frameworks. It was reiterated that a detailed report on risk assessment and budget control will  ...  view the full minutes text for item 146.

The Chair referenced the previous minutes suggesting a letter be sent to colleagues with overdue or red risks without actions. It was confirmed that this had been raised with CMT. By year-end, overdue risks had significantly reduced from 61 to 34, with most remaining risks being low risk. One red risk was reviewed shortly after the responsible officer returned from leave.

The new system has shifted accountability for risk management to individual services and directorates. Previously, risk management was centralised under a risk officer, which created a conflict of interest when the role was merged with internal audit. The system was introduced as a cost-effective alternative to reinstating a dedicated risk officer.

Members commended the arrival of the Head of Internal Audit for the improvements they had overseen.

Members highlighted the importance of departments maintaining ownership of risk management. A new Corporate Governance Group had been established to oversee governance arrangements and risk register KPIs. Risk data was being integrated into performance dashboards to enable directorates to monitor and act on risks more effectively.

Members asked about any progress on the insurance valuations risk. This was being addressed by the Asset Governance Group. Officers would email an update to Members.

The Housing Landlord Service risk remained high due to an ongoing inspection by the housing regulator. Compliance was strong in areas like health and safety (e.g. fire doors, gas checks). Weaknesses were in resident engagement and communication, which were being addressed through a detailed action plan.

Members asked what had caused overdue and red risks. This included timing issues and officer leave.

Members asked how to ensure continuous risk management. This would include oversight by the Corporate Governance Group and performance dashboards.

RESOLVED: That the Audit Committee noted the Risk Management Annual Report and progress to improve the risk management arrangements.

Members asked if the review of the risk regarding the ability to deliver a balanced budget in the short and medium term had been completed. CMT had reviewed this risk as part of the strategic risk update. Strategic risks were maintained within the Council’s risk management system and were owned by members of CMT. CMT conducted a full review and update of all strategic risks at the end of the reporting period. Strategic risks were being integrated into a new cabinet performance dashboard. This integration will enable more frequent and proactive monitoring of risks. The dashboard will allow CMT members to engage with risk data on a continuous basis, improving responsiveness and accountability.

RESOLVED: That the Audit Committee noted the Strategic Risk Report and provided feedback on the content and level of assurance received.

The Chair commended the Counter Fraud team for delivering nearly £11 million in savings over the past year. The Committee expressed appreciation for the team’s continued impact and effectiveness.

Members asked if there were any areas to expand into. Officers confirmed plans to expand counter fraud efforts in adult social care, particularly around direct payments and commissioned care. The team also intended to expand further into children’s services (e.g. Section 17 and UASC), which had been deprioritised due to housing pressures. The structure now allowed for broader coverage across both areas.

Data projects in adult social care were expected to begin in Q2. Early results may be available by the end of Q2, with more complex investigations taking longer to complete.

Members asked about providing services to other authorities as a means of raising revenue, and whether this had been considered. Officers noted that this had been considered, however other authorities often preferred doing things internally. Members commended the Counter Fraud team’s performance compared to other authorities and suggested this this could be a good time for any such opportunities. It was noted that officers were also exploring internal applications of their skillset, such as debt recovery.

Members raised concerns about the low number of identified ‘beds in sheds’ cases. Officers clarified that the Counter Fraud team’s remit was limited to identifying properties for Council Tax and Business Rates purposes. Some related issues fell under planning and private sector housing teams. The Counter Fraud team did not have right of entry. Plans were in place to increase focus on this area without compromising other high-value activities.

RESOLVED: That the Audit Committee:

1. Noted the Counter Fraud Annual Report for 2024/25; and

2. Suggested any comments/ amendments

Members considered the Work Programme.

The Chair noted that he had requested an addition for the next meeting.

RESOLVED: That the Audit Committee:

1. Noted the dates for Audit Committee meetings; and

2. Added an update item on financial risk assessment procedures and budget-setting methodology for the next meeting;