To present to the Audit and Governance Committee the External Auditor’s Annual Report 2024/25 for information and discussion. 

N.B: Papers to follow.

The Director of Finance (DOF) introduced the report. The following principal points were noted:

·       The annual auditors report is a review of the arrangements that have been put in place under three key themes, financial sustainability, governance and the three ES - economy, efficiency and effectiveness in the council’s use of resources. The report outlines against each of those criteria the recommendations made, and any weaknesses identified in arrangements.

·       No significant weaknesses or improvement recommendations were found in respect of financial planning arrangements.

·       Key recommendations had been raised in respect of the dedicated school’s grant (DSG), and control of capital expenditure to ensure there is effective oversight and governance around major projects.

·       An improvement recommendation had been raised in respect of financial sustainability that related to the delivery of savings in the previous financial year.

·       Governance arrangements had received a green rating against all themes.

·       Positive improvement within children’s services were highlighted and it having downgraded from a red rating to amber.

The Value for Money Manager (VMM) highlighted the significant improvements in children’s services as reflected in the recent Ofsted report and in its reallocation from red to amber in his annual report. The dedicated schools grant (DSG) deficit which is a national issue effecting all council was highlighted and the council’s need to continue to work with schools, education providers and the DfE through the SEND and AP Change Programme to support the management of cost pressures in the High Needs Block. GT as a firm were actively lobbying the government for this issue to be addressed.

In response to committee questions, it was noted:

1.     The VMM felt local authorities needed to make “more noise” around the DSG and to make national government better understand what the issues were.

2.     The Cabinet Member Finance and Corporate Services (CMFCS) confirmed that cabinet were already lobbying MPs, and working with the Rural Services Network (RSN), County Council Network (CCN) and the Local Government Association (LGA) to raise concerns.

3.     A deputy section 151 officer with significant experience in DSG had been appointed within the finance team.

4.     Government intervention was required but the council were being proactive and taking control of the elements they could by reviewing its deficit management plan and joining the plan up with the capital program to consider how to increase efficiency.

5.     At quarter 1, £5.9 million (50%) of the £11.9 million brought forward savings had been delivered with a further £4.6 million (38%) forecast to be delivered in year; £1.4 million (12%) remained at risk and with focused activity underway to resolve or mitigate in year. The delivery of savings in full and on time is critical to ensure the 2025/26 revenue outturn position is balanced and to prevent further pressure on future years’ budgets. Progress on delivery of savings and mitigations would continue to be monitored.

6.     The potential risk to the budget with Herefordshire being 1 of 43 locations central government had selected for a new project on health care to help keep people out of hospital and in their own home was discussed.

7.     No recommendations had been made around partnership working but there was scope to broaden the framework.

The committee noted the report.