Agenda and draft minutes

Apologies had been received from John Chesshire and Councillor June Nelson.

It was noted that the Cabinet Member for Finance & Transformation had also given his apologies.

None.

Members referenced the Committee’s previous request for a breakdown of prior year accounting adjustments, to which a response had been circulated to Members yesterday. Members noted that the response did not fully address the original query.

Members highlighted an example relating to the writing out of overdrawn reserves, noting that variances in the General Fund activities exceeding earmarked reserves had been discovered in 2022/23 and 2023/24 and as this was not permitted under accounting standards, required adjustment. Members sought clarification on the year in which these issues had occurred; who the auditors were at that time; whether the auditors had missed this or had deemed it immaterial; and the financial consequences of not addressing these matters in the relevant year, including any additional costs incurred. Officers would provide a response outside of the meeting.

EY confirmed they had reviewed the adjustments and shared the audit perspective:

• The negative reserve adjustment had occurred in 2022/23 and 2023/24, both years where the audit opinion had been disclaimed. Audit procedures were therefore not completed over reserve balances.
• The second adjustment related to the bad debt provision. This was noted in the 2023/24 audit results report, which had raised a control recommendation for the Council to look at bad debt provision.
• The third adjustment concerned Minimum Revenue Provision (MRP), which dated back several years. Assurance had been drawn from opening balances, and due to its immaterial value and sampling approach, it was unlikely to be detected in sampling.

Further clarification was provided that the bad debt provision related to the current year (2024/25), although based on an aged debt profile.

The Chair noted that responses to these questions should be provided by the end of January to allow consideration before the next Audit Committee in February 2026.

Members queried the accuracy of dates on page 4 and requested clarification by email.

No further comments were raised, and the minutes of the previous meeting were agreed.

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

Officers presented an update on the Governance Review Improvement Plan (GRIP), which brought together strands of governance and financial improvement arising from internal and external audit recommendations.

Workstream 1 – Financial Governance

A wide range of actions and initiatives had commenced since the previous meeting, and all Section 24 recommendations were now incorporated. New spend control measures were being introduced, and the Council was undertaking a robust process for setting the 2026/27 budget, including a thorough review of proposals for savings and growth. Officers had conducted extensive reviews of the financial position, savings, growth models, and key accounting procedures. Although the financial position had deteriorated, officers reported improved clarity regarding the Council’s current situation and future direction. Discussions with MHCLG regarding Exceptional Financial Support (EFS) were ongoing. Additional work had been undertaken on cash flow modelling, capital programme review, and improvements to the audit position for 2024/25. Progress had also been made on reducing the in-year Dedicated Schools Grant (DSG) deficit.

Workstream 2 – Directorate Governance

Progress in directorate governance during the second and third quarters had included the rollout of an aligned business and financial planning template across the organisation, with all plans approved by Corporate Directors. Internal audit exercises were underway to review these plans. A corporate tracker had been established to record business decisions and governance arrangements. The Corporate Management Team reviewed workforce, performance, finance, risk management, and projects monthly, with similar processes mirrored at other management levels. Senior managers participated in regular meetings and governance training, including a masterclass session. The governance structure had been refined to reflect best practice and internal and external audit recommendations, with boards such as the Capital Board and Workforce Improvement Group reporting to the Corporate Management Team and the Chief Executive.

Workstream 3 – Constitutional Governance

Members were updated on the independent review of the Council’s Constitution and wider governance, commissioned from Lawyers in Local Government (LLG). An initial draft report had been received and was under review, with a meeting scheduled to discuss its constructive suggestions. Any proposed constitutional changes would be brought to Council for decision, and Members would be kept informed.

Members asked about optimism bias in budget setting. Officers explained that multiple levels of review had been implemented to ensure proposals were substantiated, with robust templates and iterative challenge processes involving both officers and Cabinet Members. Monthly monitoring via an app had been established, requiring senior managers to report on savings progress, with sign-off and challenge at Director and management team levels. Growth models were also being reviewed. This ensured a more robust process than had been in place previously.

All working papers had been documented to provide evidence of delivery and address risks or delays. Officers acknowledged that while predictions may not always be accurate, the process for making them was now much more robust than in previous years.

Members asked about clarity on the financial position and when there would be an optimum level of clarity. Officers noted  ...  view the full minutes text for item 174a

Officers showed a presentation on the Finance Modernisation Programme (FMP), explaining that the programme had been initiated to improve accounting & control, budget monitoring, Oracle EPM (planning and budgeting tool) and Oracle ERP (main Oracle system). Progress had been made across the four key areas, with significant changes implemented and further improvements planned for the next phase.

Officers reported that the benefits of the programme would be realised by budget holders, the finance function, and the audit process. For budget holders, the changes would affect how they interacted with financial systems and would be supported by targeted training. The finance team expected reduced friction and improved reliability and clarity of financial data, enabling better analysis and forecasting. The audit process would benefit from enhanced transparency and higher quality working papers. Budget submission templates for capital projects for the budget year for 2026/27 had been introduced to enhance consistency.

Next steps included a refresh of Oracle EPM and addressing the backlog of finance system issues.

Members noted that progress had been made, and asked what challenges and risks remained. Officers acknowledged that fixing the system required specialist support, which had been secured. Officers also emphasised the importance of user engagement and training to ensure budget holders understood their responsibilities and could provide robust forecasts. Governance arrangements around the FMP and Oracle systems had been strengthened, with regular monitoring and risk management in place.

Members noted the need for more information regarding threats and barriers to success and requested more information on the struggles encountered and how these were being overcome. Officers noted that future reports could provide a clearer analysis of strengths, weaknesses, opportunities, and threats. It was suggested that Grant Thronton could present to the Committee to offer further insight. This would be discussed with the Chair.

Officers confirmed that Phase One had concluded and that contracting for Phase Two was underway, with a report due to go to Cabinet. It was noted that not all objectives from Phase One had been met, with some deliverables carried forward to Phase Two.

Members requested clarification on the reasons for these shortfalls, the impact on costs and timelines, and the measures in place to ensure successful delivery by March. Officers noted that it was a yearly programme in order to have everything delivered by the end of the budget year. The work was reviewed regularly and changes were made as necessary.

Members referred to the budget monitoring reports scheduled for each Select Committee and noted that the Health & Social Care Select Committee had not received one in November. It was clarified that this had been a decision of the Chair of that Committee, as they would be holding an additional meeting in December.

Questions were asked about the clarity of budget lines and the pace of improvements. Members highlighted the importance of accurate information for decision-making and scrutiny, and sought assurances that issues such as blurred budget lines would be resolved promptly. Officers explained that improvements in transparency and reporting were ongoing.

Questions  ...  view the full minutes text for item 175.

Officers showed a presentation on the results of the 2025 staff survey. The survey had been conducted throughout June and was open to all permanent staff, agency and casual workers, and part-time employees, but excluded school staff. The survey was primarily completed online, with paper copies provided for staff without regular access to digital devices, such as those working in waste services.

Officers reported an 8% increase in response rate compared to the previous year, with good representation across most Council directorates. The results showed positive improvements, with all but one question demonstrating significant progress since 2024. Engagement levels had risen notably in several directorates.

Key findings included:

• 95% of staff understood how their role contributed to the Council’s objectives, a 14% improvement and significantly above external benchmarks.
• 94% of staff felt clear about what was expected of them, an 11% increase and also above external benchmarks.
• 93% of staff felt treated with dignity and respect, 10% higher than the external benchmark.

Officers highlighted that there had been an 8% increase in staff confidence that action would be taken as a result of the survey. Improvements were noted across almost all demographic groups, with a 63% overall response rate. Survey data was broken down by directorate and team, enabling tailored action plans at both Council-wide and team levels.

The six main areas assessed – engagement, enabled, connected, safe, supported, and action – were all above external benchmarks and had improved since the previous year. Officers acknowledged some areas for further improvement but noted that even these areas had improved and were close to external benchmarks. Action plans had been agreed by the Corporate Management Team (CMT) and communicated to staff. Initiatives included improved staff communications, regular engagement sessions, enhanced technology and work environments, and a focus on inclusion and wellbeing. Managers were being equipped to support staff mental health, and efforts were underway to reduce sickness absence.

Members highlighted the importance of staff feeling valued, noting that only 55% of respondents felt valued by the Council. Members expressed a desire to see improvement in this area, recognising the hard work and dedication of Council staff.

Members asked about a previous survey by CIPFA which had highlighted low morale in the finance team. Officers explained that while the presentation did not show specific scores for the finance team, they could provide a summary of those results separately.

The Committee acknowledged the positive progress reflected in the staff survey results.

RESOLVED: That the Audit Committee noted the results of the staff survey

Officers presented the external audit update on accounts.

In 2023/24, there had been 216 disclaimed audits, which represented 46% of all Councils in England. Only six audits had been completed for 2024/25 out of approximately 400 councils by the end of September. The low completion rate was attributed to the extensive work required to rebuild financial processes following previous disclaimed opinions. It was noted that, given the Council’s two consecutive disclaimed opinions, it was likely that it would take another two years to achieve a clean audit opinion, which was consistent with the national situation.

The Council’s accounts had been submitted on 22 September. The public inspection period had taken place, during which four detailed sets of queries had been received from the public, including two face-to-face meetings. Officers were working through these queries. Government guidance had been received during the process, but it had arrived too late to influence the current audit. The majority of the audit had been focused on transactions within the year, rather than opening and closing balances. The volume and nature of queries had changed week by week, and officers were actively working with external auditors to address them. All external audit items and samples needed to be completed before Christmas to allow EY to complete their governance processes after the holiday period.

Officers emphasised the importance of improving the audit results report, which covered 36 to 38 areas reviewed by external auditors. In the previous year, 20 areas were rated red, 10 yellow, and six green. The aim was to increase the number of positive ratings in the current audit. Looking ahead, officers had begun preparations for the next year’s accounts, including a ‘soft close’ at the end of September, with the goal of reducing queries and ensuring a smoother closure process.

EY reported that audit testing had been underway for five to six weeks. The quality of working papers and supporting documentation had improved compared to the previous year. While some minor delays had occurred, these were being managed and were not expected to impact overall delivery. No significant findings had emerged so far, and only minor differences were being addressed with management. Nothing material to the financial statements had been identified at this stage.

The next Audit Committee meeting was scheduled for February 2026, at which the audit results report would be presented, summarising key findings, audit differences, and control recommendations. The National Audit Office required all local government auditors to issue an annual report, even if the audit was incomplete, by the end of November. A draft auditors’ annual report was with officers for factual accuracy checks, with the intention to issue it before 30 November.

Members asked whether sufficient immediate action had been taken to comply with recommendations issued in July under Section 24, specifically regarding the Council’s understanding of its current financial position and the need to prevent further depletion of reserves. EY noted that work was ongoing and that their view would be reflected in the forthcoming report,  ...  view the full minutes text for item 177.

It was noted that the Cabinet Member had given his apologies.

RESOLVED: That this item was removed from the agenda

Members were reminded that this report had been considered at the previous Audit Committee, at which it had been decided that Members wished to make amendments. Amendments had now been made, and the report was brought back to the Committee for approval.

Members approved the report.

RESOLVED: That the Audit Committee approved the Draft Audit Committee Annual Report for 2024/25 before the report is presented to Council.

The Committee considered the risk management and strategic risk reports.

It was noted that, following the previous meeting, the timing of these reports had been changed, resulting in more up-to-date reporting. The data for the current report was taken from 03 November.

Members commended officers for their report.

Members asked for further information on the EDUSEN0006 risk, which related to school safeguarding. Officers would provide an update outside the meeting.

Relating to the HLBC0006 risk, Members noted that the deficit on the general fund had increased by £5.8 million in month 6, according to the Cabinet report, and that the potential need for Exceptional Financial Support (EFS) could approach £80 million. The Chair recognised that the risk had been highlighted but did not expect officers to respond.

Councillors asked why the risk rating for HLBC0006 had changed from A1 to C1. Officers explained that there were two different risks: the strategic, cross-cutting risk (owned by the Corporate Management Team and currently rated C1), and a separate short-term operational financial risk rated A1. The strategic risk rating reflected the wider work being undertaken to address the Council’s financial position, including actions related to EFS. Officers also confirmed that significant work was ongoing to resolve the situation, including discussions with the MHCLG. Officers would provide a written response.

RESOLVED: That the Audit Committee noted the reports and level of assurance received.

Officers introduced the Internal Audit Progress Report.

Members queried how vacancies within the Green Spaces service had led to internal control issues, asking which controls were affected and what level of debt was at risk. Officers advised that the Green Spaces audit had identified significant organisational changes at senior management level, including a new Director for Environment and new Heads of Service. These changes had resulted in delays to processes such as budget setting and the savings programme, which had been left to more junior and operational staff during the transition. This was a known area of risk and was targeted for review by Internal Audit. A clear action plan had been agreed with the service, and monthly monitoring meetings were now in place with Internal Audit attendance to ensure actions are implemented and risks addressed.

Members asked whether the draft directorate business and financial plans would be shared with the Committee. Officers confirmed that draft plans were not shared, though the finalised version would be presented at the next meeting.

RESOLVED: That the Audit Committee noted the IA Progress since the last Committee meeting

Members commended officers for their work.

RESOLVED: That the Audit Committee noted the Counter Fraud Progress Report for 2025/26 Quarter 2

Members considered the work programme.

That the Audit Committee noted the dates for Audit Committee meetings