Agenda item

Report of the External Auditor, Grant Thornton

The Audit and Procurement Committee considered Grant Thornton’s External Auditor’s Annual Report for the City Council for 2021/22 .

Under the National Audit Office Code of Audit Practice, the External Auditor was required to consider whether the Council had put in place proper arrangements to secure economy, efficiency and effectiveness in its use of resources and to report their commentary on the Council’s arrangements under specified criteria. Part of this work considered whether there were any risks of significant weakness in the Council’s arrangements for its use of resources. The findings were summarised in the report, together with opinions on the financial statements and use of auditor’s powers, and improvement recommendations.

The report indicated that the Council had performed well regarding financial sustainability with a record of stable financial and budgetary management. Despite the challenging environment in which it continued to operate in during 2021-22 the Council had maintained a good financial position and achieved a balanced budget; it had also put forward plans to achieve balanced budgets for 2022/23 and 2023/24. As at 31^st March 2022 it held £226m of usable reserves which placed the Council in a strong financial position and remained in a good position to manage any future shortfalls in funding.

In respect of financial sustainability, the External Auditors work had not identified any significant weaknesses in arrangements to secure financial stability of the Council. The Auditor had made improvement recommendations relating to cashflow management and publishing different financial scenarios within its budgeting reports, which were detailed in the report.

In respect of governance, the work had focussed on a detailed understanding of the governance arrangements in place at the Council, in particular on it partially/wholly owned subsidiary companies. The work found that the Council had appropriate leadership and management structures in place and its risk and control systems were appropriate. It was open in dealing with complaints and ethical and legal matters. The financial statements audit for 2019/20 was only completed on 10^th October 2023 and the 2020/21 and 2021/22 continued to be delayed. This was considered to be a significant weakness and a recommendation relating to this matter was set out in the report. With the exception of the arrangements for the preparation of the financial statement, the Council had appropriate governance arrangements in place. The report detailed improvement recommendations relating to the external assessment of Internal Audit; an independent assessment of the governance of subsidiary companies; improvements to the monitoring and assessment of strategic risks; and updates to the Council’s website with regard to information regarding its various strategies.

In respect of improving economy, efficiency and effectiveness, the Council continued to demonstrate a good understanding of its role in securing economy, efficiency and effectiveness in its use of resources, and had a clear strategic plan and performance system for monitoring progress. It was an ambitious Council and had invested in the development of the local area. It continued to face challenges in areas such as educational attainment and recruitment to key posts such as social workers and education psychologists. The Council held a portfolio of wholly owned and joint venture companies and had restructured the ownership and governance over these organisations which the External Auditor considered appropriate. Financial monitoring of the performance of those subsidiary companies had been a key focus of the new governance committee.

No significant weaknesses were identified. Improvement recommendations were set out in the report that related to cost reductions in Children’s Services and future alignment of the Procurement and Digital Transformation Strategies.

The External Auditor’s opinion on the financial statements indicated that they had not commenced work on the 2021/22 statement audit, with work being delayed due to the prolonged 2019/20 audit and the on-going 2020/21 financial statements audit. The delays and errors in the preparation of the financial statements were deemed a significant weakness in the Council’s financial reporting arrangements and could expose the Council to financial risk as well as failure to meet statutory reporting deadlines. Due to these matters the External Auditor’s concluded that the Council did not have appropriate arrangements in place for the preparation of its financial statements and a key recommendation was made on this matter. 

The Committee noted that the External Auditor concluded that Council had performed well regarding financial sustainability with a record of stable financial and budgetary management and had confirmed that no statutory recommendation was being issued. The Committee further noted that the external auditor and the Council work was progressing on the continuing work resalting to asset valuations. It was anticipated that the External Auditor’s Annual Report 2022/2023 would be submitted to the next meeting of the Committee and this would be added to the Work Programme accordingly.

RESOLVED that the Audit and Procurement Committee notes the External Auditor’s Annual Report 2021/22.