To present to the Audit and Governance Committee the External Auditor’s Annual Report 2021/22 for information and discussion.

The Director and the Public Sector Assurance VfM Specialist, Grant Thornton UK LLP presented the ‘Auditor’s Annual Report on Herefordshire Council 2021/22’, Appendix 1 to the report, the key points included:

i.             The report focussed on the arrangements in place during the financial year 2021/22, with an acknowledgement that various matters had moved on in the intervening period.

ii.            Attention was drawn to the headline auditor judgments (agenda page 271) in respect of the criteria: financial sustainability (no significant weaknesses identified; no improvement recommendations) / governance (no significant weaknesses identified; two improvement recommendations) / and improving economy, efficiency and effectiveness (three significant weaknesses identified in 2020/21 remain).

iii.          Attention was also drawn to the explanatory note on recommendations (agenda page 304) which identified: there were no statutory recommendations; there were three key recommendations; and there were a number of improvement recommendations.

iv.          The level of reserves had been considered as part of the financial sustainability criteria.

v.           In terms of the significant weakness ‘Failure to meet the statutory needs of children within its Children’s Social Care Services’, it was acknowledged that the council had made this its highest priority and was working with the Commissioner for  Children’s Services on actions to deliver improvements.

vi.          In terms of the significant weakness ‘Not effectively contract managing its public realm contract’, the report reflected some of the improvements that had been made.

vii.         In terms of the significant weakness ‘Continuing to contract with a dormant company’, there was a need to document clearly how the council would manage any risk.

viii.       The improvement recommendations for governance (agenda pages 286 – 287) included a suggested single record of all external regulator and internal audit priority recommendations, and suggested consideration of the appointment of independent members to the Audit and Governance Committee.

The Director commented that the appointment of independent members was good practice, particularly to address any gaps in skills and to provide further challenge, but acknowledged potential issues in terms of recruitment.  The committee briefly discussed the potential skills and experience required from independent members.

The Chairperson suggested that a report be prepared on the criteria for independent members, with analysis of the situation in similar local authorities.  It was recommended that this be added to the work programme for the committee for its September 2023 meeting.

ix.          The improvement recommendations for improving economy, efficiency and effectiveness (agenda pages 294 – 295) included the suggested consideration of the County Plan 2020-2024 and its supporting delivery plan to ensure they take account of the Children’s Services Improvement Plan, and a suggested review of the governance arrangements for Hoople Ltd.

x.           Attention was also drawn to the follow-up of previous key recommendations (agenda pages 296 – 300).

The committee discussed elements of the annual report, the principal points included:

1.           Further to point vii., there was a discussion about the position with Balfour Beatty Living Places and it was confirmed that, informed by internal and external legal advice, the council was satisfied with the arrangements and with the documentation provided.

2.           Further to point v., the Public Sector Assurance VfM Specialist commented on the reliance upon the evidence provided by the Commissioner for Children’s Services.

3.           Further to point vi., the Public Sector Assurance VfM Specialist noted that improvements had been made to procurement and contract management arrangements during 2022/23 and effectiveness would be tested.

4.           Further to point viii., the Head of Strategic Finance commented on the potential to consider how priority recommendations were presented to the committee.

5.           It was questioned whether the workforce strategy should be included in the work programme for the committee.  (Note: see minute 14 (Work programme) below)

Resolved:

That the committee has reviewed the external auditor’s report, has noted its findings and recommendations, and has considered the management responses.