Agenda item

Report of the Corporate Director of Finance and Resources

Shabana Kausar, Director of Finance, presented a report on the progress made against the Council’s Finance Improvement Plan (FIP) since the last reported position to the Committee in March 2024. The following points were raised:

a)  As of the end of May, 85% of the improvements set out in the FIP have been delivered and embedded. Of the remainder, there is only a very small proportion where delivery activity has not yet begun (or has been put on hold). Where this is the case, this has largely been due to a lack of resources being available, so work is underway to increase capacity where needed.

b)  A Financial Accountabilities Framework was launched at the end of March to set out the responsibilities for budget management, planning, monitoring and reporting, and it constitutes a robust mechanism for ensuring financial accountability amongst managers. Delivery of the Framework has been aligned to the individual performance review process in terms of ensuring that managers are properly accountable for their budgets, and mandatory training is in place.

c)  The Financial Controls Remediation Project has been introduced to address any weaknesses in the Council’s financial control environment. Work is currently taking place in the three key areas of ‘Purchase to Pay’, ‘Record to Report’ and the ‘Segregation of Certain Financial Activities’ (which ensures that all ring-fenced funds are properly transparent in terms of their budgeting). An external report has been completed on the Council’s approach to managing ring-fenced budgets and, although there has been good delivery of key controls, there is still a great deal of improvement work to be done to ensure that a mature control environment is fully embedded. Ultimately, there is a close focus so that improvement work is monitored effectively and that arising learning is properly implemented.

The Committee raised the following points in discussion:

d)  The Committee asked what work was being carried out to ensure that the Financial Accountabilities Framework was being implemented effectively at all levels. It was reported that a great deal of the activity controlled by the Framework was not new, but that there are now better measures in place for the establishment of expectations and the monitoring of delivery. Proper risk management processes are in force, along with a full review process at all levels to monitor progress and respond to any arising issues. Recording and reporting take place on a continuous basis so that the Finance function has strong visibility of the current budget position, so corrective action can be taken rapidly if areas of potential overspend arise.

e)  The Committee queried whether all budget managers fully understood the management tools that were available to them. It was explained that the Chief Executive and Corporate Directors delegate budgets within directorates, and work to ensure effective forecasting and proper control. Finance has a strong focus on engaging with directorates to ensure accurate budget forecasting and the effective management of budget risk. There is a need for constant training and improvement in the financial literacy of budget managers, but the level of financial oversight is now much greater than it was before.

f)  The Committee asked how the FIP was being resourced to ensure that real improvement was properly embedded. It was set out that a long-term, strategic and full-system approach had been taken to ensuring the effective resourcing and embedding of the FIP. Improvement plans are in place in individual areas to ensure that there is proper interface between the directorates and the Finance function. Focused monitoring is taking place to review the delivery progress of the unachieved savings backlog as part of the current budget requirements. There is capacity within the Finance team to respond to challenges as they arise, and to ensure that the right tools and methodologies are available to managers so that they can exercise proper budgetary control.

g)  The Committee asked whether the current Spend Control processes were operating in a timely way, and how they were reflected in the Financial Accountabilities Framework. It was explained that the Spend Controls are a temporary measure designed to address a specific set of circumstances, so they sit separately to the Framework. Due to the volume of decisions being taken in the Council on a daily basis, the Spend Controls can cause delays to normal processes of approval. However, refinements have been made to ensure that the Spend Control process operates as swiftly as possible, with proper mitigations established against perverse outcomes. The Spend Control position is kept under constant review so that a suitable future exit strategy can be developed.

h)  The Committee considered that a proper reflection process should be undertaken as to how the Council’s 2024/25 budget was developed, and its conclusions used to help inform how the Audit and Scrutiny functions should be engaged effectively in the development of the 2025/26 budget.

Resolved:

1)  To take assurance from the governance arrangements in place in relation to the delivery of the Council’s Finance Improvement Plan.

2)  To recognise the specific improvements delivered since the last update to the Committee in March 2024 (as set out in Section 3 to the report).

3)  To take assurance in the progress being made on the following finance-related activities:

·  the Statutory Accounts for 2019/20 to 2022/23 (as set out in Section 4 to the report);

·  the Financial Accountability Framework (as set out in Section 5 to the report); and

·  the Financial Controls Remediation Project (as set out in Section 6 to the report).

4)  To request that a reflection process is undertaken as to how the Council’s 2024/25 budget was developed, and its conclusions used to plan how the Council’s Audit and Scrutiny functions will be engaged in the development of the 2025/26 budget in a meaningful way.