Agenda item

Finance Improvement Plan Update

Report of the Corporate Director for Finance and Resources


Shabana Kausar, Director of Finance, delivered the report which provided an update on the Council’s Finance Improvement Plan (FIP) activity undertaken to the end of June 2023 and its plans over the next three months. The following points were highlighted:


(a)  the original FIP was presented to the IAB in January 2023 and sets out eight improvement themes:


·  strengthening financial leadership;

·  improving the approach to managing and governing the capital programme;

·  enhancing financial systems to meet user needs;

·  a well-designed and robust system of internal financial control;

·  embedding professional accounting practice;

·  capacity building and training;

·  enhancing financial strategies;

·  understanding and effectively managing its finances (social care);


(b)  a revised version mapped to the Chartered Institute of Public Finance and Accountancy (CIPFA) Financial Management Code was presented to the IAB in May as the FIP is a dynamic plan;


(c)  Appendix 1 of the report outlines specific improvements delivered to date across the eight improvement themes;


(d)  finalising the draft accounts from 2019/20 to 2021/22 is a priority for the Council. Additional team members have joined the accounts team to provide further capacity and enable progress on the draft 2021/22 accounts; 


(e)  there has been progress on the control environment with good progress experienced in the use of journals and internal recharge controls;


(f)  dashboards are in use to provide management insight and analysis on journal activity and thresholds;


(g)  the East Midlands Shared Service (EMSS) and Mastek are currently testing the required system changes to the Council’s journal authorisation rules, which will be introducing an in-system authorisation workflow for all journals with control totals in excess of £20,000;


(h)  the pausing of all recharging activity has facilitated the design and development of a new, holistic control framework for managing, accounting for and reporting recharges;


(i)  there is a now a corporate control, accounting and recording framework for grants into the Council that is embedded through finance into each directorate. The grant register has been updated. Guidance notes have been circulated to budget managers on how to process, manage and record grant funding;


(j)  two dashboards are in use by the Finance Team to cover budget management and spending controls, the latter of which provides insight into spending activities and profiles across specified subjective codes designated as non-essential spend. More dashboards for specific financial activities will be implemented;


(k)  an action plan to address weaknesses within the recording and budget monitoring processes within the Adult Social Care (ASC) budget has been created. An Oversight Board monitors the ASC’s progress against the plan;


(l)  integrating Transformation Programme finances into mainstream financial control and reporting processes has already enabled the Council to have an enhanced grip on the programme and its implications for the Medium-Term Financial Plan (MTFP). The Transformation Programme is now in its second year of delivery, with MTFP gross savings of £15.671m to be delivered in 2023/24 in addition to 2022/23 gross savings of £1.765m;


(m)the management of staffing establishments is a fundamental management control for the Council. Having robust mechanisms that facilitate the provision of effective and accurate establishment data for reporting at a statutory and organisational level is of paramount importance;


(n)  an Establishment Control project has been established and led by the Director of HR and EDI. The project is a key activity in supporting the delivery of the HR Improvement Plan and aligns with the FIP;


(o)  Price Waterhouse Cooper (PwC) have been commissioned to assess the design and operation of the establishment control across all directorates within the Council;


(p)  there is a continued imperative to ensure the council maintains a credible medium term financial strategy that addresses IAB instructions. To this end, the Director of Finance and the Corporate Director of Finance and Resources, in consultation with the Corporate Leadership Team (CLT), have formulated and presented the 2024/25 Budget Strategy approach and MTFP to the Executive Board in July 2023;


(q)  as part of the FIP, it has been important to reconsider the capacity for both finance and budget holders in preparing the in-year financial monitoring reports. In line with the recently agreed timetable, the first bi-monthly forecasting report has been presented to the Executive Board in June 2023;


(r)  the CLT receives regular updates regarding the FIP, particularly on key controls, financial processes and timetables;


(s)  a remediation project has been scoped and EY (Ernst & Young) commissioned to deliver a twelve-week focused controls remediation response. The project commenced on 12 June 2023 and is currently on schedule. There are ten areas of work which are in scope within three key themes (see Table 5.2.1 of the report). 86% of actions have been identified and 3% have been identified and implemented;


During the discussion and in response to questions from the Committee, the following points were raised:


(t)  the outturn figures for 2022/23 were validated as part of the process followed. The outturn figures are provisional, but will be audited;


(u)  there are challenges around forecasting in the ASC environment. These include the recording of changes to committed social care spending. Variations in inflationary pressures will impact the ASC budget and spending. Any variations in the outturn from provisional figures will be relatively small, but there will still be a large budget gap similar to the forecast;


(v)  all of the thirty-seven actions in the remediation project are priorities for creating a basic control environment;


(w)budget savings is a part of the day-to-day business;


(x)  there are regular meetings with EY regarding the remediation project and some actions that are indicated ‘red’ in the report can be updated to ‘amber’ as those actions have been identified by EY since the publication of the report;


(y)  there is currently no clear framework about why the Council does internal recharges, hence the need for a framework about where and why internal recharges should take place, so that there is a good understanding of impact, and recharges are only undertaken when and where it is necessary to do so;


(z)  a monitoring ‘health check’ will identify the progress of the controls being implemented. EY will develop a process for how this health check will work. Any extension of the time for the FIP would need to be based on the monitoring;


(aa)these actions are quick fixes. Permanent actions need to be development as part of the next stage of the process;


(bb)enforcement of compliance to the financial processes needs to be monitored;


(cc)some of the systematic changes identified in the FIP have already been implemented such as the journal updates;


(dd)the Committee was assured at the last meeting in June that no money has been misspent or has been incorrectly reallocated;


(ee)the start of year figures are still in a state of flux. Work is ongoing to establish how accurate these figures are;


(ff)  identifying internal drivers of fluctuations within budgeting and forecasting is a corporate priority and it is considered in the FIP and the control environment.


Resolved to note the report.

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