Agenda item

Report of the External Auditor

Andrew Smith and Joanne Taylor, representing the Council’s External Auditors Grant Thornton, presented the Auditor’s Annual Report focussing on arrangements for Nottingham City Council covering the financial years 2020/21, 2021/22 and 2022/23. The following information was highlighted:

a)  The report highlights a number of significant weaknesses and a number of recommendations made. The report covers several key areas.

b)   The report sets out in detail progress made by the Council on the recommendations made by Grant Thornton in previous years.

c)  There has been some positive movement in some areas such as the Covid-19 response, procurement, and risk management, where good arrangements had been in place.

d)  The external debt position has remained static from the start to the end of the reporting period.

e)  OFSTED have rated the Council’s children’s services as inadequate despite the service receiving higher levels of investment when compared to its nearest statistical neighbours.

f)  As previously reported, misappropriation of funds between the Housing Revenue Account (HRA) and General Fund had been discovered.

g)  There had been various other issues surrounding governance processes such as incorrect handling of client money through the appointeeship function.

h)  Overspends have occurred in each year of the reporting period.

i)  The programme to dispose of capital assets and generate receipts to fund the Council’s Transformation Programme was slower than anticipated.

j)  External consultants were brought in to assess the control environment and their conclusions were not positive.

The following points were raised in discussion:

k)  The Committee commented that large parts of the Council’s external debts had been supported as it allowed the funding of the expansion of the City’s transport network. The S151 Officer explained that the Council does continue to reduce the amount of overall debt in-line with the Voluntary Debt Repayment Policy and that it did have a large amount of external debt when compared with peers due to the supported debt that assisted in funding infrastructure as well as commercial debt that brought an income. The Council’s external debt was complex.

l)  Members agreed that the increased levels of funding for children’s services reflected the challenging local context which the City found itself in including demand and market sufficiency. An improvement board is targeting improved Ofsted rating.

m)  The Committee received assurance from the Corporate Director of Finance & Resources that the misappropriations of funds is a matter that has been fully addressed. Control measures and practices are now in place to ensure it does not occur again, and plans for reimbursements between the respective areas have been made which have been signed off by the Improvement and Assurance Board (IAB).

n)  The Committee received assurance from the Corporate Director of Finance & Resources that incorrect handling of client money through the appointeeship function has been resolved and the majority of that money either returned to individuals or where appropriate the Treasury.

o)  Members were reminded that the predominant driving force for the Council requiring Exceptional Financial Support (EFS) has been the increased demand and costs for social care for children and adults.

p)  The Committee received assurance that the asset sales trajectory does not present a risk to the level of transformation investment that the Council can afford to make.

q)  The Council has made good progress on implementing the recommendations made in the Ernest Young (EY) report but accepts the Finance vacancy rate is a concern, progress across these issues and the control environment will be outlined in further detail in the Financial Improvement Plan update.

r)  The Committee and Portfolio Holder for Finance agreed that more foresight could have been included in the report due to the progress the Council has made recently. The External Auditors commented that this report outlines the position statement up until October 2023 and that recent progress made will be outlined in the 2023/2024 Value for Money Report and considered by Members.

s)  The Committee discussed the delays to the signing off of the accounts and the factors behind them. There was a consensus that delays had been caused by both the Council and the External Auditors due to the volume of issues.

t)  There still remains some uncertainty in regards to the backstop dates for resolving the outstanding accounts.

u)  The Committee expressed disappointment that the Council’s Audit Committee had not been consulted prior to the issuing of the Section 24 Notice by Grant Thornton and queried why concerns had not been raised in meetings which the External Auditors had attended. Andrew Smith, Grant Thornton, commented that there was no requirement to consult the Audit Committee when issuing a statutory recommendation, however, would endeavour to consult the Committee if time allowed either at a full meeting or informally with the Chair.

The Committee noted the report.