To seek the view of the committee as to whether the draft Annual Governance Statement (AGS) for 2023/24 properly reflects the internal control environment the council is operating in and the appropriateness of actions identified to improve governance arrangements. 

The Head of Strategic Finance (HSF) presented the draft Annual Governance Statement (AGS) for 2023/24, the key points included:

·       The AGS is a document that the Council is required to publish as part of the council’s statutory accounts and is a retrospective document which reports on the effectiveness of the governance arrangements and the internal controls that have been in place during the year ended 31st of March 2024.

·       The report is prepared by reference to the seven core principles of good governance as identified by CIPFA, and the statement identifies the arrangements and activities that have been in place during the year, as well as areas where the council’s arrangements could be strengthened. These areas will form an action plan and an update on the progress in delivering those actions will be presented to this committee in late autumn.

·       The report is informed by director Assurance statements, a review of compliance with laws and regulations and the work and opinion of both internal and external audit.

·       The document will be tested by Grant Thornton, as part of their audit work and the final version will be brought to this committee at the meeting in September.

The Cabinetmember for Finance and Corporate Services (CMFCS) and the Chairperson expressed their gratitude to the Director of Resources and Assurance, Head of Strategic Finance and their team for their collaborative efforts and hard work ensuring the production of the accounts on time. 

In response to committee questions, it was noted;

1.     It was explained that Improvements to governance arrangements for council business ventures as included at page 42 was referring to the arrangements through the shareholder committee and the council’s governance in respect of those shareholdings.

2.     The HSF would consider the wording currently used with regards to Political Groups Consultations and whether there was an opportunity for the arrangements to be strengthened as referred to on page 42.

3.     The HSF to consider the wording used with regards to “positive risks” as referred to on page 45.

4.     In relation to loss of corporate knowledge it was explained that this was a key consideration for the corporate leadership team through the workforce strategy. The CMFCS assured the committee that knowledge had not been completely lost and that colleagues had been encouraged to record processes and procedures prior to their departures.

5.     It was explained that the report takes each of the seven core principles and outlines what activities are currently in place and identifies those areas where arrangements could be improved. These are include in an action plan with specific tasks and an owner for each activity identified. This plan will be presented to this committee to be monitored in future periods.

6.     The inclusion of interactive links similar to those included within the council’s delivery plan to be included within the action plan would be explored.

7.     In terms of the activity that is taking place during the year, the council’s external auditors review this document and the updates provided by the council on each activity and confirm that they believe this is accurate throughout the year.

8.     The CMFCS was comfortable with the approach to strategic risk and thought it was logical, sensible and worked well. With the departure of the current lead officer, it would provide an opportunity for it to be readdressed once the new director was in post.

9.     The HSF explained that the council receives funding for schools via the dedicated schools grant (DSG) and that there was an increasing gap between the amount allocated and the amount required linked to increasing demand and complexity of need. The DSG deficit is accounted for as an unusable reserve on the council’s Balance Sheet, as permitted via statutory instrument which will remain in place up to March 2026; beyond the period of the statutory override, any balance on the DSG unusable reserve will transfer back to the council’s Earmarked Reserves. The deficit currently sits at 6.1 million. The council is committed to identifying actions to mitigate the DSG deficit, through the Deficit Management Plan, to reduce the potential impact on the council’s overall financial position. It is managed as part of the medium term financial strategy risks and it is monitored on a monthly basis by financial budget monitoring and reported to cabinet quarterly. External auditors have also been monitoring as part of their value for money (VFM) work.

10.  The HSF explained that usable reserves are those reserves that can be spent on future services and include general reserves as well as those earmarked for specific purposes. Unusable reserves arise as a result of statutory or accounting adjustments and cannot be used for expenditure on services.

11.  It was highlighted that this was a national issue and that Herefordshire was in a much better position in terms of the deficit compared with other local authorities. It was noted that Herefordshire were collaborating with other councils, sharing knowledge and experience and within children’s services.

RESOLVED

That:

a)    the committee determined the draft annual governance statement in Appendix 1 properly reflected the risk environment the council is operating in and that areas where controls could be strengthened were appropriate.

Action(s)

2023/24-028 The HSF to consider the wording currently used with regards to Political Groups Consultations as referred to on page 42. and “positive risks” as referred to on page 45.