To present to the Audit and Governance Committee the External Auditor’s Annual Report 2022/23 for information and discussion.

(Papers to follow).

The External Auditors Annual Report 2022/23 was published as a supplement to the agenda.

The Head of Strategic Finance (HSF) introduced the report which presents the external auditors review of the council’s value for money arrangements and closes the 2022/23 audit. The key points included:

1.     The HSF issued her thanks to the Director of Grant Thornton (DGT) and his team for the timely conclusion of the 2022/23 audit.

2.     In terms of financial sustainability, a detailed review of the council’s savings proposals for the 2023/24 budget and the work that is involved in setting that budget had taken place.

3.     In terms of the outcome of the report for financial sustainability and governance criteria, there had been no significant weaknesses identified in respect of the council’s economy, efficiency and effectiveness.

4.     It was highlighted that in use of resources external audit had identified a continuing significant weakness in respect of improvement in children's services.

5.     Attention was drawn to appendix B which gave explanation on the different types of recommendations, the following were highlighted by the DGT.

·          there were no “statutory” recommendations identified for Herefordshire;

·         1 key recommendation which was the continuing significant weakness in respect of improvement in children's services. This was an improvement from the prior year to which three had been identified.

·         A small number of improvement recommendations had been identified that were not significant. 

6.     The Value for Money Manager (VFMM) highlighted an error on page 39 in relation to the Audit Governance Committee being unsuccessful in its attempts to appoint an independent person on to the committee. The VFMM confirmed that this was not the case and had been confused with a previous recommendation for the standards panel.

In response to committee questions, it was noted:

I.       The VFMM accepted that a lot of children's services are commissioned from other bodies but the council still retains the statutory responsibility and it is the auditor’s responsibility to report on to the council. It was his view that highlighting the council’s challenges specifically within the report was not appropriate and he did not want it to become political. It was explained that these reports are fed back to the national audit office (NAO) and back to government so pressure can be exerted appropriately on government ministers or other organisations. 

II.       The DGT recognised the challenges the council faced and that certain external providers were commissioned to provide support for children with higher needs but highlighted that other councils were doing a number of different things such as providing and running facilities themselves and were achieving a quality efficient service in Ofsted’s view and that there were things within this councils control that could be put in place to be able to demonstrate to Ofsted that arrangements are satisfactory.

III.       The Director of Resources and Assurance (DRA) confirmed the two council representatives for the Hoople board are directors of Hoople limited and are not directors of Balfour Beatty, they are company directors and have all the responsibility of being a director of a limited company.

IV.       The VFMM provided an instance where a local authority had subcontracted their children’s services to a children’s trust as it had received an inadequate Ofsted inspection and had not made sufficient improvement, however it was highlighted that the statutory responsibility still lies with the council and that they would still fund the trust but would lose some form of control over how the service is managed and decisions are made. It was noted that with the progress Herefordshire was making this would not be the outcome for this council.

V.       The VFMM confirmed that generally when councils received an inadequate Ofsted rating, it does prove challenging retaining and recruiting new members of staff due to association and in order to attract a council would pay a premium but this is not sustainable and can result in budget problems. To resolve this the council is trying to make it more attractive on a longer term basis to avoid paying short-term premiums to consultants and contractors which has been found to have been successful and the director of children and families had been very positive about the direction of travel in terms of getting permanent members of staff on board.

VI.       The HSF confirmed the recommendation for the council to develop more comprehensive and integrated workforce plans to support the recently developed workforce strategy was still ongoing.

VII.         The DGT explained that the improvement recommendations would benefit the council but may require time, effort and there could be cost ramifications and there may be other areas officers believe would be more beneficial to the council to spend that resource on.

VIII.         The HSF explained that management have noted and accepted the advice from the best practice that audit had included in their report but the council had got alternative arrangements in place for addressing some of the concerns that GT had raised.

Resolved:

That:

a)    The committee reviewed the external auditor’s report, noted its findings and recommendations and considered the management responses.