Transcript

I'm assessing against these are the standards in terms of how Ian and his team have interpreted the standards and then deployed them here. So I'm pleased to report that in terms of the nearly 80 of these that I've done, the Wolverhampton team comes in the top quartile and that's usually a space reserved for the larger teams and probably some of the private sector teams that are delivering against these standards. I think the crux of that is twofold probably because there's an established internal audit team here that know what they're doing and then they have put in place an effective means of communicating with the clients both at the planning stages and at the reporting stages and that always forms the the basis of a good outcome for internal audit. I think that is evidenced though by the client feedback, which I received from a 92% return to the survey that I commissioned. In local government, the level of interest is normally around 60 to 70 percent. So the fact that 92% of the people that we contacted for involvement with the survey shows that they are at least interested and probably also value the operation of internal audit within the council and the other clients. There are those specific areas for development and they mostly come about not only because of the standards as they sit at the moment, but also because the new global internal audit standards are coming into force in 2025 and therefore they reinforce some of the messages that are already in the public sector internal audit standards, particularly around engagement with stakeholders in their widest form and reflection upon management's objectives in the areas that are subject to review. So putting expectations right at the front of the audit process saying what do what do we expect in terms of assurance from the internal auditors in terms of achieving operational or strategic objectives. Yeah, so in terms of good practice the first four bullet points that are shown on the next slide relate basically to the putting the measures in place upon which including internal audit can rely. Sorry, can I just pause you there whilst we try and get the slides up? I'm really sorry. Whilst you're doing that perhaps it's a good point for me just to I thought I might be able to get away with it, but clearly not. I'm sorry for being late, but I would like to declare an interest that relates to Birmingham International Airport. This is subject to this report and I just want to flag it up. I know it's ad nauseum, but I'm sorry for being a bit late. Thank you Councillor. I'll make sure that's noted. You It's not working at the moment the slide show so I've asked for the slides to be shared afterwards via email if that's okay. Yeah, if we continue, yeah. Thank you chair. So the first four bullet points that I was going to talk about are really about the methodology that the team has put in place in order to determine how to deliver internal audit and monitor the outcomes. So I think in terms of the charter the internal audit manual that is in place it establishes a good basis for internal audit and that's across all clients. So there is then a documented methodology in terms of discussing what the clients require from internal audit and the outcomes in terms of the findings and the risks that the organization is exposed to. Ultimately, as I said, the team can be judged by the excellent feedback which it receives and the feedback that I've summarized within the report shows that the team is approachable, flexible and client focused in terms of what it is providing. So that's a good outcome and a good basis for moving forward in terms of compliance with the enhanced standards that will apply from next year. There are a number of areas where I've particularly focused the report in terms of developments that the team should focus upon in future and most of those surround alignment with the clients risk management framework and what the client is expecting in terms of assurance from the internal audit team. And that comes in the form of agreeing with management what the objectives are for the area to be reviewed rather than the internal audit to determine what it wants to achieve from the audit and then linking the planning and the outcomes of the audit to the significant risks as expressed within the client risk management frameworks. One of the things that is consistent within local government is that the risk management systems don't help internal audit in every case insofar as the new standards expect a determination on what inherent risk is and residual risk is in order that internal audit can focus upon the both the controls and the assurances within its work and provide an opinion in relation to that both at an operational level and within the annual opinion which links to the annual governance statement. So in summary, I've highlighted five areas that the internal audit team should focus on for the future. Those are consideration of the expectations of stakeholders in the widest possible sense. So what does the community out there expect of the council and therefore what should the internal auditors have in mind when they're engaging within some of these audit reviews. Reflecting on the management objectives in those areas in communication with the client base. Working with their clients to enhance risk management systems both at a strategic level and at an operational level because all too often what we find as internal auditors is when you go to have that opening discussion with the manager risk isn't documented in any form that's usable and we have to start from almost a zero base. So progress in that area would be beneficial particularly if it can focus upon significant risk and that is risk in its widest sense not just financial. And then finally where these assurances do exist whether they be at a second line of defense or at a third line of defense recognize those within our internal audit work in order that the team therefore can bring the assurances available both within its work and within the annual governance statement. I thought that would be a reasonable summary to start with but if anybody has any detailed questions be happy to answer them. Thank you Robin. Before I open up the floor to the members I think it'd be useful if you had any comments on this report from Ian. Thank you chair, thank you Robin. Just to update the committee we've been given a report based on Robin's findings and what I propose to do is just you be a copy of that report to all the committee members but also we're going to produce an action plan to address the recommendations in the report which I'll provide an update regularly at our audit and risk committee meetings. Just one question, Robin, regarding, I think in your presentation you just mentioned that there's five key areas where there could be some more work done and in the report it states on page 67 section 3.4 that there are a number of recommendations that have been made. Do you know specifically how many recommendations have been made or could you give some examples perhaps of some recommendations which would help us to deliver in those five areas, which you mentioned in the report? You can count them quickly. It's probably 15 recommendations in total. But as I say the key recommendations are around aligning significant, the understanding of significant risk within internal audit with the clients understanding of what significant risk is. So if you have a five by five risk matrix for instance of impact what I'm talking about is thinking that the highest levels of risk within that matrix are the things that internal audit should be focusing upon rather than what might be the lower end of that matrix because those are generally the lower operational risks to the organization and that sort of thing runs through the planning through the fieldwork and through the reporting stages. Thank you, I'm just going to bring in Councillor Appleby. Thank you chair. Just a few quick comments, obviously Robin, thank you very much for that report and when the slides are circulated around the Committee it would be good to have a look through those. But just to put on record thanks and well done to Ian and the team for this report. Obviously, if we've got an action plan that you're in the process of developing it would be good to see that come to Committee shortly as well. And we'll absolutely no doubt keep it to implementing those and support you along the way. So, thank you for that Ian. Thank you. Thank you chair. And Councillor Bateman. This is a bit like Turkey's voting for Christmas, but there is an issue that relates and every time I've declared an interest in terms of Birmingham International Airport. But to add to the understanding of what's taking place within the parameters of what I can say as a board member. I think it would really be good for audit to have at least one report a year that that relates to what we can and talk about, can give and talk about. Just to add something to what comes across the table. Not everything is obviously up for speaking, because it's a private company and there are issues though about. But I do think it would be worthwhile for the authority to have at least one report a year from its representative about the direction of travel and the issues. As it says in this report, it's a significant it's a significant and material investment. I just think it would be helpful for us in kind of throwing a few stepping stones in this fast flowing stream of public investments. So a private invest, public-private partnership and investment. So that we what you know, you know at the time that we give a report. Because at the moment that doesn't happen except when we have bad news and it's the press that gets on to it and talks about the bad news issues. I just think it would be a good thing to do. I'd be happy to hear what the officers say. But that's my that's my view as I sit here today. So I'm just thinking because there are the outside bodies as well, so we've got you recruit and Wolverhampton Home. I'm just going to bring David to touch on that. Yeah, so that's a really good point and I'll probably pick quite a bit of this up in my next report on the annual governance statement, Councillor Bateman, because actually about the linked bodies. And I think it's a fair challenge in relation to some of those which is slightly less sort of linked than others. You know, for example the airport, I think there probably ought to be some form of report coming forwards on a regular basis. So I will cover that off. It's got its own audit arrangements. So in a sense it's like and it's more an investment in some senses than one we have direct control over. But I will pick that up and when I could sort of report back on the annual governance statement in a moment. So we've done an awful lot of work on those. So we've got more direct control over in relation to the trading companies. But I've we've done quite a lot of work on the other ones, too. But I will I will cover that and commit to bring a report back here on it, which I'm more than happy to do. I think it's really I know it's always been chaired that your line and previous chairs to that that transparency and showing what's been happening Is that is the key and I intend to do to make sure that I can help support that It's great. It's gonna bring in Councillor Bracken bridge Thank you chair In relation to page 67 3.4. I do think it's a bit of a broad statement to say There's a number of recommendations to report of made. I think you answered this around 15. So just a general question. Is there a form of severity notification or tool out of these recommendations So are some of the recommendations vital to be brought in or would there be a number where are just general recommendations that you've made? Thank you, I mean I use a scale of red amber green So all of the recommendations that are in the report are either green or amber So there's there are no areas that I think that you are not compliant in full stop So the areas that are graded yellow are areas where you should make some developments in order to fully fully comply Rather than generally comply and then the green areas are those where I've suggested that Ian give some consideration to whether there can be improvements made in that area because then they're not major areas of adherence to the Thank you and councillor Collins what Thank you chair Yeah, I'm really pleased with this it's it's really encouraging I mean, you know, I'm just reading the value for money arrangements It's part of our work We consider whether there are any any risks of significant weakness and the council's arrangements for securing economy efficiency and effectiveness and its resources and no It's the reports that attach to this it is yes chair Do we have any further comments or queries I Don't see any hands up so I move that the recommendation as detailed in the report be noted on a thank you Robin for bringing this for conducting the the the the assessment, but is the I recommend that the the report is Detailed not get mixed up. Sorry. I move that the recommendations are detailed in the report be noted. Is that seconded? Seconded all those in favor say aye That is carried. So I'm gonna go back to the decision items again now So when I went to item seven, I think that's where some of the confusion started from so I apologize for that So we're gonna go back now to item five So for item five so gonna call upon David Thank thanks very much chair, so I'm just gonna go through the annual governance statement which is on page 11 onwards of your pack and essentially, as you know, this is a really important part of the Accounts effectively and it's the the aspect that setting that and the council has got good governance arrangements Or or whether or not it has and ultimately identifying any governance weaknesses So this is particularly important in terms of the council's compliance with its best value duty and the local government act 1999 And what I was going to do chair if that's okay is just sort of spend about five or ten minutes just going through the annual governance statement just identifying where there are some some areas where I think there's some really good assurance and areas where we will be sort of focusing in in the next year in terms of looking at the improvements that could be made so Obviously a lot of work goes into this one of the key things is actually looking across all of the other forms of assurance So there are lots of it isn't just reports that come to this committee But also to to other committees big governance and ethics be at the scrutiny panels scrutiny board Planning committee all of the other places as well So this report looks at all of those across that across the whole looks at the transparency and looks at actually How are those systems working? What it then does is also go through the the risk register a strategic risk register and look at those and indeed various other documents including the financial management code the the council's governance code And actually we ultimately then look at how is how is it been done? In the last financial year and up until the date the accounts are signed off. So The overall assessment is that the the arrangements for the governance framework in the way in which it's been managed are are in a good place The this is on page Page nine of your report onwards. I saw a page 22 of your report onwards it in particular Looking at the financial sustainability governance and and the improving efficiency economy and effectiveness One of the you know, really important aspects of good governance is is as we've just heard having a really strong internal audit Service so internal audit should be that early warning service that actually identifies problems in advance And things can be done So one of the things that I've been really pleased about the last couple of years is the way internal audit is being used It's being used to actually Deliberately scrutinize the strategic risk register to go through it and actually try and proactively find issues. So those can be addressed Rather than as sometimes happens in some places it's almost used to Give it to give a sign off on things rather than to actually try and look for problems the other thing I think that's worked really well has been the Significantly improve transparency in terms of performance reporting Alongside budget and risk through the scrutiny arrangements at this authority. So this is a page 24 onwards there's been very much focus on making sure that each of the scrutiny panels looks at their area under the our city our plan with that we'll focus on delivering for Outcomes for our city and our residents and then they do a deep dive on not just the budget but also the performance framework the 60 plus indicators set out in the our city our plan approved in sort of February March each year alongside the budget and they then sort of you know, do it a proper study in those areas and that outcome focus is Definitely been a bit for a significant improvement in scrutiny in the last few years, which again I think is positive The other one I just wanted to mention because it is an issue that I know has been mentioned in a number of times here Is equal pay as we know in many other places in terms of governance? Equal pay has been a challenge in other authorities You one can never say never but I would say we are structurally sound on equal pay That's not just being the assessment of internal audit who we asked it to do a review because it's on a strategic risk register but also external legal advice when we ask them to do a review of internal audit and a review of the position and their advice so again One of the things that it commits here is that we will be doing an annual review on that based on the level of risk That is taking place in local government at the moment on on equal pay the other underpinning all of this is that duty under The local government at 1999 in order to to secure best value interestingly government released guidance in July 2023 Which we took a sort of a self assessment on that to governance and ethics committee on how we were Complying with that that in turn that guidance has now just been finalized In May and we'll be going back to governments and ethics It probably would have done at the committee meeting due on the 4th of July but for obvious reasons it won't be because the 4th of July something else is now happening the What it does is it goes through each of those sort of themes and We did a self assessment on those and where we thought the council was and generally was in was in a good place on that And we believe that it is meeting those duties of best value. And again for me, that's showing that transparency. That's all been published It's it's detailed and actually shows that the council is Regularly looking to find where there might be issues and being comfortable with the uncomfortable to try and improve its its arrangements so I Won't go through all of the items you'll be pleased to hear but I just want to pause briefly on linked bodies because again It's a point that councillor Bateman made and I think it's really important one in view of the issues that have taken place in other places in other local authority, so this council's got a Arrangement Governance policy in relation to linked bodies, which was approved by the governments and ethics committee in November 2022 What essentially it says is those count those? Bodies that the council owns which are trading companies or or or similar to that It will do a deep dive every three years to see how those arrangements are working and every year at least once a year A report will go to the relevant scrutiny panel And in addition the executive and the opposition leader will be updated on a regular basis approximately six weeks on performance budget and risk for each of those bodies and That that's happened and taking place which I'm pleased about the shareholder board Was already in place for WV living that's now in place for you recruit and effectively also for Wolverhampton homes the Each of those being looked at carefully What I would say is it's one where there's a the latest deep dive was taking place was in relation to you recruit Which is the council's recruitment agency as you'll see from the report page 31 page 30 and 31 A an options appraiser was presented to cabinet in May looking at Essentially looking to wind up you recruit because it's no longer trading. It's not actually effectively trading in its sense it's rather simply providing a passport through to a recruitment agency and instead we will be cutting out the middle person and Doing using a framework arrangement to directly contract with a recruitment agency To to actually reduce that that trading aspect if you're no longer trading you don't need the company We then look to wind up and we think we can probably get a better deal financially as part of our Sort of ongoing efforts to improve our financial sustainability without using you recruit So that's why that regular view is a really good process It was right at the time, but actually now things have moved on and actually there are some really useful framework Agreements out there which we can which we can access So just want to give that assurance that I'm pleased that that's happening again the Constitution's regularly updated So the one which I was just going to quickly cover off is the items from 22 23 progress. That's page 33 onwards so again the medium term financial strategy again It is one of the the key areas for action and as you'll see there's a lot of work continues on that It's also identified in 23 24 The items identified along with probably every single authority in the country I'd be surprised if there wasn't an authority that was including there in TFS as part of their annual governance statement and Actually making sure that it's got a sustainable Way forwards to make sure that the books balance and actually that it's meeting its obligations whilst also being fiscally prudent Also, there's update in relation to the the procurement and contract management again. That's on on the list civic halls and capital programs That was previously on there. But as we all be aware that the halls is now concluded. We've now got a really tight project Advisory group and a project process also linking into scrutiny with regular reports of scrutiny on those large capital regeneration projects so that there is Assurance that those projects are where possible done on time or budget on scope and in compliance with councils rules and Aims of objectives set out in the council plan Climate change was on there in terms of the 22 23 But positive if that's due to a previous even total audit but very positively a follow-up Internal audit report confirmed in February earlier this year that the recommendations have been successfully implemented And that that was now moving in the right direction indeed. What's been reported through to scrutiny? retention and recruitment Along with the other local authorities and indeed the private sector that remains to be a challenge But actually there are some real positives growing our own is one of the ways in which we can reduce that need for Expensive gap filling and is also one of the ways in which we can make sure that we can Provide opportunities from those within our own city, which is really good So the items for 24 25 that are on the list there are and the MTFS so ID the ones we've looked at Procurement compliance and contract management again on there. We've made some real progress We've got that the new procurement acts coming into force in October 2024 also gives us an opportunity to to really make sure that we're getting the right bang for our buck and we're getting the right level of specification in our contracts the other item which was on there was the Internal audit precise recommendation. So external orders recommended that we had an external assessment Completed and indeed as we've just heard that's been done improving recruitment and retention remains on there that risk was reported to this committee in November and again work is going on on that and then the other one is just there has been an internal an increase in a number of areas with non-compliance on non serious data breaches and some of the people-related paperwork and some of essential training and appraisals That is to be expected when things are really tight and busy But actually again, we've got to make sure we've got the right processes in place And I want us to do more work just to make sure that those those obligations are being met. I'm confident They are I think it's a lot of cases It's actually a timing issue in terms of paperwork, but we are pushing hard to make sure that that's done I will pause there checks on my fly spoken for about 10 minutes and then obviously answer any questions But give assurance to the committee my conclusion is that there is good governance in place And we've got a lot of good processes and practices that actually give me that assurance and indeed There's an awful lot of transparent reporting which I think is critical for our residents and indeed for the councilors to have that assurance Thank you, David. I think counts of Collins were it was this the item I wanted to come in on no I'll put my mic on just for Formalities. I was just a bit what it was is when I was going through that report the Gt1 followed straight through okay, and there was no covering report for that GT and we normally have to cover import. Don't move I've got nothing to say on that one though. Do you have any other comments or queries questions? I'm relating to I know touched on it non-compliance page 43 of our pack and I believe it's page 19 of the report. So it states there's been an overall increase I just wondering is that an increase on a previous increase or is it increase on the previous deck of this report? It relates to 2023 2024 This would be interesting to know what happened prior to 2023. Is it an increase on an increase? so either just wondering is there a trend and I Have to quantify how much of an increase there's been Do we know if there's any variation between directorates departments or roles? and I'll just interesting because I have been reading recently that Some of the issues which were highlighted in here like with the data breaches training Some reports have been saying that they have those kind of incidents have increased as working from home has increased as well There's wondering if there's a correlation between people working from home or perhaps training at home that that you picked on perhaps So really good questions, I'll go in reverse order so and what should give assurance to the committee is there is Really? I am confident. There is good compliance overall in relation to data protection so an annual report goes to the governance and ethics committee on information governance to actually give that assurance and the level of Reports to the Information Commissioner are really relatively low for an authority our size in relation to those The the issues are more that they're lower level. They're minor and there's a Really sort of detailed Trajectory, which I can get get get circulated showing what those levels are the latest reports being produced And that breaks it down by department by area. I think often it's people in a rush making mistakes So it is when I mean low level it is things like where an email has been sent to a number of external recipients They should be put into the blind CC. They've been put into the CC Sometimes that can be problematic and could even lead lead to a a report to the Information Commission's office But generally not it's generally lower level. It's still not acceptable and needs to be addressed Do I think it's based on increase and on increase? No, I think it's just something to be aware of and be mindful of and therefore Once we're aware of it something we can do about something we can do something about so I've also had Other instances where people have failed to what a good example is people are it have been An increase in the number of people failing to follow the correct rules in relation to a contract award They're still pretty low level there you know Below the the average and non-compliance within the sector But I want to nip it in the bud before it gets any worse. And actually that's where Making it why I'm making you aware as a committee Then helps give strength to my my elbow when I go back and actually push it hard And indeed I'm more than happy to bring a report Later in the year just setting out what the issues were where we're going and where I think we are in relation to it It doesn't is nothing that causes me Real concern, but it's just worth Bringing to your attention and I need to bring so attention of the of the council that I think this is an area where the Council needs to improve and we will do that Thank you. Yes, I think human error is always gonna be inevitable especially when you weren't working under time constraints But different staffing levels are where they should be in the areas where there's perhaps more of these errors like errors occurring Sorry, what I'd say is I think It's often Well, I was generally on turn on days protection the level of training has been really good So the level of compliance and training has been really good and where we've had issues with information Commission's office In fact, all the people who breached those rules had been trained It was just for whatever reason it slipped their mind at that particular moment and for me Yes, people are busy but actually sometimes they just need to pause and work out what the greater risk is and the greater risk is Often that non-compliance so we just need to keep that message out And I think it's that regularity of messages something that we're doing a lot on and again that that continues and also with counselors Thank you. It's gonna bring council Appleby Thank you chair Thank you, David for that report just on The procurement piece that's been identified now. We've had on previous meetings this Discussed and there's been issues Before we've spend being sent towards Amazon business accounts Potentially where the spend was high enough for it to be awarded through a proper and compliant tender Is that still the case? We're finding at the moment with this current the current issues or is it gone a little bit wider than that? And just another point the council's corporate plan our city our plan Is that due for review and revision this year? Thank you So The issue on the Amazon corporate account believe that's been addressed. So the the issue the it's actually some sometimes where people haven't They haven't followed perhaps That the strict rules below, you know, just between 10,000 25,000 for a tender. It's that sort of level It's below the what? Replaced the oju it's it's below that level, but it's actually following our own rules So again, I just want us to be really rigid on it and actually strong because actually that's good for accountability financial accountability I don't see it as a Particular concern but I see it as something that I would keen to nip in the bud because actually again It's it's providing that assurance that we're following the market and also it helps with the Wolfhampton Pound So we've changed the rules recently to to ensure that those below threshold levels Actually, we have to get local quotes in and actually making sure we follow that help support local Wolfhampton Pound Which links into the RCT our plan challenge you may counsel that will be importantly one of the the Markers for performance performance indicators in there is is number of businesses We do business with locally and that's reported on regularly those Indicators and indeed the whole of the RCT our planner refreshed every single year at for council And that's really important to me because actually setting the indicators actually working out what the council wants to achieve Alongside a revised budget and a revised risk framework makes an awful lot of sense So you've got performance budget and risk being looked at at the same time and regularly refreshed and reviewed so it is the intention certainly will be for it to come back to full council in February 20 25, sorry, February 25 Thank you and Councillor Bateman It would be remiss not to mention on page 41 the Managing budgets and pressures Statement and I Think we've been expecting a tough Municipal year. Well, it's the start of our municipal year. I think it's probably the right time just to say that this kind of indicates how tough life's going to be in managing and Assessing that read strategic risk and They are big sums and The last thing the local authority Really requires and needs is to have those kind of roll open and land With with no time for really for maneuver. So I think in relation to the audit and risk committee I think we do need to keep a close eye on The potential for that those are big sums. They're 25 to 26 27.1 million rising to 32 Point six million for 26 27 and we all know how fast time flies We need to be very much aware as I'm sure the local authority is but we need to be aware of the implications and Setting our course as a as a corporation Through the municipal year and And for new members, you know, but that is it that those are big figures. They're not easily they're not easily Massaged or persuaded to go away what likely they'll be added to as the as the as the time goes on if the National situation in terms of the economy doesn't change And change quickly. So for me, I think this is the The most important statement on the paper in relation is but about the warning That's here about the implications for the authority going into the future we've done well in the past and we've managed to balance budgets and that without raising too many of those reserve pots and some people would like to send those pots reduced even more I Think for us. It's the what's what's coming is Is the issue for us we need to be on top of it as it arrives not kind of get lost behind and then find that we haven't got the maneuverability to get out of Whatever it is. We need to get out of somebody needs to be doing some work and and I know they are but with regard to the How we do how we start to try and tackle that deficit as it as it starts to mount No, I agree we've used some of these some that they're eye-watering It's definitely something we have to keep a close watch on MTFS it is on the strategic risk register register So I think as an audit committee definitely some top time in the year If not, if definitely a when I think I think we might be one of the risks that we call in To have a deep delve into and look a bit further It's gonna bring in James as well Thank You chair council Batman absolutely spot-on this is a really important really important strategic risk in terms of Staying safe and staying financially sustainable I can assure the committee that lots of work is going to get ahead of the game and make sure we've got that maneuverability In terms of decision making so absolutely are we are we going to wait until next February? To bring forward options in terms of some significant savings as part of the budget now so I can provide assurance that actually cabinet and full council will be getting an update throughout the year in terms of options and Considerations to make to make sure that we've got that maneuverability. We've got that decision making well in advance of February's budget report which will obviously nail everything down in terms of the 25 26 budget and updates the medium-term financial strategy So lots of work going on to furnish members with options and decisions as part of that budget setting process But absolutely, but taking into considerations the need to do that as early as possible Bringing David Patterson as well Thanks, so just just absolutely support James said it's spot-on and previously that the previous government had already put in a requirement as part of the budget settlement for Each council would produce what's called a productivity plan by the end of July and we've already got ours pretty much lined up So that would would be ready to go to scrutiny. Obviously things have slightly changed with the general election so we would already plan for that to go to scrutiny board for a consideration alongside the regular reporting on Performance budget and risk that already takes place with scrutiny board by cabinet. So You're absolutely right council payment really important but also important that as James said and I'm really pleased that this authority isn't waiting until February Next year to actually getting in place measures now to try and make those changes that we need To and again working closely with auditors to share those plans, too So you can have assurance the auditors can have assurance and the committee can have assurance That this authority will manage those financial risks, which every local authority is facing we are not alone, but it really important that the authorities on the front foot and Councillors make the decisions at the right times Bringing councillor bracken bridge Thank you chair Absolutely echo what you've just said I think nationally of course there is a background of unprecedented levels of financial distress on all local authorities So to just get a bit more specific after what I've just heard Compared to authorities of similar size to our authority. How are we doing nationally? Well in regards to managing budgets and pressures in the budget I'm just gonna bring in James. Yeah, it's a really really good question, but a really complicated one. So how How does one measure financial sustainability and financial regularity One of the ways is audit opinion So you're up-to-date on your audit opinion and we've got an update on that later because absolutely been able to demonstrate to key stakeholders that You're on your numbers. You know your numbers your reporting numbers. You've been very transparent about that is Important and there's a huge sector challenge in that so comparatively in that space. I think we're doing very very well I'll leave it to Andy our external auditors to bet you on that later That's one part of it. I think in terms of delivering against budget. I think we have got a good track record. So in terms of delivering against budget and some of the audit external auditors commentary on our financial management has been very positive in that space and you'll see in the audit findings report later on in the agenda, there's some positive commentary in terms of our approach to reserves our approach to hitting our Budgets, so it's a it's a very good question. Is there a reliable table Somewhere that you can point and go, you know, that's accurate. No, there's certainly been some recent off log kind of distributed the Times has recently reported some data, which is absolutely not a reliable measure of financial resilience or sustainability anything but So I would say in terms of delivering against budgets certainly what I've seen in the sector compares well to accounts opinion compares well in terms of history of Keeping reserves a good level in terms of 5% general fund, you know relatively well I think some other councils are probably in a stronger position in terms of reserves Councillor Bateman referenced that I think some particularly district councils compared to the Budgets have got healthier. You could say healthier levels just maybe disproportionately such but we good at managing reserves We make sure that we report very very transparently in our reserve So I think on most measures we're doing well the challenge that the sector is facing is to continue to perform and to remain financially financially sustainable and strong and viable in In the context of increasing demand increasing costs and reduce funding So but I think a track record puts us in a good in a good position Thank you, do you have any further comments questions Don't see any hands up so I move that the recommendations as detailed in the report be approved. Is that seconded? All those in favor say aye those against say no That is carried Item six it was agreed that this item be deferred and we'll bring it back to the committee in July the 22nd Item seven we had brought be moved up. So we're jumping straight from item five to item eight So this would be on page 69 of your agenda pack and there was also a supplementary item. So we're going to have a Update from ground forward at Grant Thornton, which consists of two reports. So hold on Adam Smith to deliver the report Thank you chair, it's Andrew Smith. Sorry. Yeah, that's fine So yes, there's two reports. I'll start with the one that's in the main part, which is the 22 23 Audit finance report which starts on page 51 of the pack Members may recall you saw an earlier version of this in the January meeting of this committee That this report at that time was probably about 95% complete So what I'd rather than represent the report in its entirety I will just focus on the kind of key changes that have been made to this report since Since January and but it probably is worth just going back over the the key headlines Just just to ensure that they're they're not miss so in terms of the accounts opinion the audit is now concluded and has been signed off it was done so in in April and the Financial statements audit opinion wasn't qualified. So we provided essentially a clean opinion upon the the published Audited a set of financial stems prepared by the council, which is obviously a good result for the council There were some changes to the audit Mistatements that we've got in this report from the January version and I will just take you through those and so the in terms of adjusted errors I these are mistakes that we identified which The council did correct in the the audited set of accounts there was one additional misstatement that we identified relating to the valuation of Plant property and equipment assets and mainly London building assets And we did identify through the work that our own valuer did to look at the work of the council's valuation That we identified an issue around the the location factor which is about the valuations used and that are very specific to Wolverhampton so that was adjusted for in the accounts in that Related to a 2.6 million movement in the valuation of the council's London buildings In the adjusted misstatements and there were a couple of new On adjusted errors that we identified subsequent to the January meeting one related to our work around Cut-off testing of expenditure. This is where we're looking for expenditure That's taken place around the year end to make sure it's been recorded in the correct financial year in this case Should it have been in 22 23 or 23 24 and we did identify a few payments And that had been accounted for in the wrong year. Some of those were revenue related. Some of them were capital related and that ultimately led to a five million five point seven million pound adjustments estimated adjustment to creditors and four four of million of which was Capital related and the rest was revenue related the council didn't adjust for this But that's in our opinion was appropriate because this is an estimate based upon an extrapolation that we do Based upon the sample testing that we did and we wouldn't necessarily expect the council to adjust for any Estimated errors in the accounts and more importantly this was still immaterial to the overall numbers in the accounts the other unadjusted error that we identified again related to The valuation of London buildings and this related to source data that been input and used as part of the valuation Prepared by the council and this would have led to a four point nine million pound adjustment to the accounts again The council hasn't adjusted for that. And again, that's on the basis that it was an estimate and again immaterial to the overall council's position So we were satisfied with these two issues not being adjusted for in in the accounts There were also two new recommendations that we added to the report since January So one of them rights to declarations of interest. We we did identify through the work that one of the One one officer hadn't fully declared all the interest in council-owned companies Which the director on which for completeness should have been on the register and which is published by the council So we have made a recommendation to make sure that all the register of interest is is fully complete And then we also included a recommendation which related to the London buildings assets Valuation again, and this was about the professional fees assumption that's used as part of the valuation a single rate is used 15% for management fees this will include all your professional fees like your architect fees your planning fees, etc We we believe that there shouldn't be a single rate use for every single asset because some assets that you build are relatively simple and therefore the fees may not be at 50% where they'll be some of our assets which are very complicated in terms of Building technical design and you'd therefore expect your professional fees to be a bit higher So we have challenged that the council on the use of a single figure across every single London building that it uses in its in its valuations So we have put a recommendation in for management to consider that going forward with the with their own value So they are the additions since January I say I'm not going to go through the rest of the audit misstatements and recommendations But again, really just to summarize on the accounts audit. We have ultimately concluded that it's an unqualified opinion therefore clean set of accounts that we're happy to sign off on and Then the other elements of the report is the value for money work This work was more or less completed in January So the had there isn't any significant changes to the report and around value for money But just for the benefit members we did ultimately conclude that there were no significant weaknesses in the council's arrangements to secure value for money And we did make recommendations which we reported back to you in January But ultimately we we are happy that proper arrangements are in place at the council So that that's the key headlines and I say I've taken you through just the key changes only more than have to take any questions That members may have on any anything in the report Do you have any questions on the first report before we move on to the second report councillor Appleby? Thank you, just a quick one. Thank you Andrew for going for the report I know previous at some some of the previous meetings We discussed where some of the recommendations that have been put forward back in 21 22 is still in progress Just in your opinion has that changed do you see in progress against some of those recommendations and if not the council and David we able to get some assurance at the there are some work in the background happening in those areas. Thank you I Think back Andrew Thank you check and yes So we do follow up as part of our life money work each year in terms of any prior year Recommendations that we've been made that report isn't in front of you And so I appreciate and the reason why you've asked the question in that report We did report that some good progress had been made across some albeit not all of the recommendations. So the ones were We weren't happy that recommendations had been fully addressed We have carried forward and we will again cover that in our twenty three twenty four work and report that back to you in the future Councillor Collins words Thank you chair, I think I've got the right report now I think there's a little bit confusion because there's no covering report for this particular paper for some reason but This is valuable information to me to this committee And hopefully to the people of Wolverhampton from an external auditor's independent opinion It offers that reassurance to us that what's going on here. He's being run properly and transparently and And that fills me with a great sense of assurance and pride I mean, I just noticed the the value for money as I sort of Mentioned a bit earlier on, you know, no significant risk of weaknesses I mean, you know, that is really good news for us and I think I'll leave it there. Thank you chair I'm bringing bring back in James. Yeah. Yeah. Thank you I just wanted to come back on the two points if I may through you chair Councillor I can give you assurance that actually clocking and monitoring delivery against the There was elements of the action plan that weren't fully delivered so I can give you that assurance and we'll report that through The planned timeline of audit committee meetings and External audit reports going forward but I can for now give it give you that assurance that we've got our eyes We've got our eyes fully on that and account just coming back and councillor Collinwood's point Apologies that the the covering report wasn't included. You're absolutely right, which I think made some confusion It was subsequently included as a supplemental paper to introduce those two items but in the delay, I think it's probably caused some confusion so apologies and in future will make sure that there is a covering report as Councillor Collinwood rightly says we thought his usual practice And we will do that apologies. It was late from my perspective that introductory report would just remind The committee around the really strong levels of assurance in terms of the 22 23 opinion. It's absolutely a clean audit opinion Sometimes you forget that we've had so many conversations about 22 23 and it came in full to the January Audit Committee. I know But it's important certainly from my perspective to re-emphasize the fact that it's absolutely clean audit opinion It's an unmodified that I think that's the right term, isn't it Andrew unmodified? value for money opinion and there were three adjustments to the to the accounts and From my perspective you can get a sense of the the level of scrutiny and rigor and technical Expertise and eyes on the account some of the detailed Exceptions and challenges to the to the valuations for example that Andrews taken so it gives you some sense of the amount of rigor of the audit which is what we want Which is what what we want, but ultimately there were three adjustments That and there was no net impact on the bottom line in terms of the draft accounts Which gives me some assurance that yes We get that rigor rigorous audit and there's some challenge around some new new and technical points and rightly So but when you step stand back from the detail the draft accounts were a good set of quality accounts so it gives me a lot of assurance and I would hope you that actually The finance team and the council more generally are very much on accounts We respect the importance of it and the we're ahead of the game in terms of the audit backlog now Which is great nationally You know six months ago only 1% of 22 23 audit opinions were completed and that I'm trying to check you get more up-to-date number I've not got a more up-to-date number but we certainly I think it's fair to say probably still in the minority in terms of Councils that are up to date on their audit opinions. We want to stay that way We want to get to the top of the pile. So we'll be focused on the 23 24 Audits and making sure that we're driving providing all the information to Andrew and his team that he needs but I just wanted to confirm Thank you, so in relation to item 8 a I move that the recommendations as detailed in the report be noted is that seconded That is carried. So we're gonna go back to Andrew now for item 8 B. This is Distributed as a supplementary items the audit plan 20 23 20 24 report Thank You chat and so yes, this is our audit plan for and the the final year that's just passed 23 24 It sets out our planned approach to both the accounts audit and our value for money work The significant risks and that we've identified as part of the audit the accounts audit are very much similar to the ones That we we identified in previous years Which is probably hopefully not too much of a surprise in terms of what they are there is a presumed risk of fraud in revenue recognition We do report elements of that because we don't actually believe that that's a significant risk for a council It's this is something that's driven by accounting standards that are largely written for commercial entities So we don't believe it's the same level of risk, but we do recognize that there is some risk in terms of expenditure recognition But again, we don't actually see that in terms of a significant risk for this particular council We do have a presumed risk around management override of control again This is very much driven by the accounting standards And this is basically essentially can management override controls to manipulate the financial position at the council Because of the position that they're in and we do do a lot of additional work around that particularly around journal entries to to the to The financial ledger and so we will be doing that work as part of this audit and that's that's in line with what we've done In previous years and then the the other risks are really kind of were there's key estimates in the account so that's the valuation of London buildings the valuation of the council dwellings and the valuation of investment properties and because they're quite complex estimates with lots of source data and there may be an accurate or assumptions that are used by by the valuers and we do a lot of detailed work around those particular estimates and Then also the valuation of the net pension liability as well again a very complex Estimate with lots of assumptions in there and again, we need to make sure and that that's reasonably stated So there the significant risks that will be and doing most of our work, you know A good chunk of our work in this coming year will be focused upon Obviously we do look at all the other account balances in the accounts as well It's just that that the extent of work is slightly less in terms of materiality We do report that and that you can see that on page 16 of the of the plan and materiality for for the group will be 12.5 million And for the council, it will be 12.3 million. That's a slight increase on the prior year But that's more a reflection the fact that your overall level of spend is forecast to go up very slightly And that is roughly about 1.5 percent of your overall level of spend And so that's the material to level that we'll be working to that will drive the extent of work that we do But it also drives our reporting So if we do identify errors in excess of that amount that could lead to a qualification of the the auditor opinion on the on the accounts in terms of value for money We're still doing our risk assessment work for 23 24 So we will report back separately to this committee and once that work is complete in terms of where we believe that there are risks of significant VFM Weakness, we expect that there will be a risk of significant weakness in our own financial sustainability to be honest That's probably the case for every single council up and down the country given the the level of distress within the sector And so isn't because we're overall level concerned around the reserves position of the council But it's just a recognition of the the risk that you're facing currently and you need to obviously work towards addressing that and So we will come back to the committee on that but I do expect there to be a risk of significant weakness in their own financial sustainability In terms of logistics and the audit team obviously I was I did sign off your order I obviously came at the back end of last year's order Obviously, I will remain your key audit partner going forward and cursed It will remain to be the senior manager going forward So there is community continuity in the team and in terms of the the start of the audit We've obviously done our risk and planning works I think this plan is arriving to you a bit sooner than it did last year Which I'm pleased to say and our aim is to actually report and conclude this audit much sooner Than we did last year as well as say we we signed off in April just gone for last year We're hoping that that will be November or December and this current year So a little bit later than we'd probably like but certainly a big improvement upon and 22 23 hopefully I will stop there more than happy to take any questions that members may have on the on the reports Thank You Andrews and start by bringing in councillor Bateman Last year, I think Members of the council had a bit of a shock When a sizable Article an item appeared on the television news and then was picked up and run by most of the The publications that related to our West Midlands pension funds and members not being being paid it was a it was a considerable shock to the the body of the council, maybe not to the West Midlands pension fund people, but The spillover was was quite significant And clearly West Midlands pension fund will be or will have been addressing that issue As it's gone through And They have their own auditors as as well. I accept that But Once bitten twice shy we should be here on our audit Committee and we should have no real surprises like that and I Wonder if there is a way and a mechanism That relates to the risks identified because in at the end of the day that will have been will be part and parcel of last year's report I'm quite sure or this year's report that you're just picking up on. I just would like to make sure that That we flag it here that we haven't forgotten it because it's an issue that could appear again. I know That I'm being contacted by somebody who's been retired five months and I haven't had a thing as yet so I'm waving a Flag of Communication and I ask if that communication can come to the to the to the Audit Committee at the right and appropriate time but nevertheless each could could we have that come forward because the importance of that is not just for Wolverhampton not just in terms of the of the The arrangements that we do in relation to our authorities name as Going out as the regional body that looks after the pension fund West Midlands pension fund But it's also a Huge issue for those people that do not get what they expect to get at the time They expect to get it and I think we would be Remiss as members of our Audit Committee if we didn't have an understanding of what was taking place having been Exposed to that shock last year. Yeah last year. Thank you in David There's just gonna come in on that point if that's okay chair, so Importantly the governance arrangements for the Westman pension fund are primarily through the pension committee as we know That obviously manages it but importantly the auditors report on the pension fund comes here So so I will also flag that up with the pension fund directly and the concerns you've expressed council abatement And I know you're not alone So I will I'll raise those and make sure that there's a form of update coming regularly Which I believe starts to happen below. I will chase that up And then bring back Andrew, yeah Thank you chair, yeah And I suppose just to echo David and yes that the pension fund audit report and will of it does go to the pensions committee But equally it does come back here as well And so you will have have cited that and that'll be one of the one of the issues that the the the audit team will Be looking at the pension fund that but that is actually driven by a different engagement lead on that particular one But you you will be cited on that It's noted a couple of bullet points 8th page 26 of the agenda pack page 22 of the report so the bullet points are points Actions, I suppose that the council need to take to to ensure that we minimize the risk of a delayed audit the first bullet point states that That we agree or I have to ensure that we produced a draft statement of final accounts By the deadline that that has been agreed between the council and Grant Thornton So I know that the statutory deadline it was the end of May but isn't just was interested to know what deadline has been agreed Between the two parties but I think we've agreed end of July so hopefully that's the date James is not into and but yes So because the audit was overran and went into a call and we we we discussed with the with the council What it seemed an extension to that deadline. So I think our expectation is that we'll receive draft accounts at the end of July Few it was the same dates that I had in my mind. Yeah, we've agreed the end of July Well, that's relief everyone agrees. Yeah on the same dates. Are there any further questions comments councillor Collins would I'm really pleased that councillor Bateman bought at the issue with the with the non-payment of monies to pension fund members to this committee because in doing so the public can clearly see that it is on our radar and Also the senior officers present will ensure that it is raised both that pension committee and then Back to us here at Auditing risk in terms of the report itself at item 8b. I accept everything that the External auditor has presented to us and he's any summing up really good But in time on a tradition what I would like to bring up is the fees Can't let I can't let the meeting pass by without discussing the fees can I I mean To say I watering would be sort of an understatement really just short of 580,000 pounds Now you're aware. There's a cost-of-living crisis. I assume Only joking but yeah year on year these go up significantly And I just wondered if you've got any sort of comments on that Andrew Thank You chair Andrew yeah Thank You chair. And yes, I obviously accept it. It's a sizable increase not just in terms of poems, but obviously percentage as well so I probably just need to give a bit of a Go back over the history of audit fees really and so and this fee I've not actually checked this but I'm pretty sure this so this is generally The the truth is that the audit fees were actually peaked in 2008 and then subs Subsequently after that they've been significantly reduced To a point where it was becoming unsustainable to actually deliver the audits In that in that fee envelope in indeed over the last few years. We've actually been making sizable losses on many public sector audits and So the fee whilst it has increased significantly probably doesn't actually it's probably still lower Than a level that they were in 2008 and since then there's been a huge increase in the amount of work that we need to do both in terms of complexity of newer accounting standards or changed orders instant accounting standards but equally the the expectations for our regulator as well who Will find us if we don't deliver the work to their expectations. So we've seen over the last sort of decade or so an increase in the amount of work we need to do and to the point where the the amount of hours going into this audit in the last five years has probably doubled if not more and Say at the same time we were seeing our fees be reduced almost year on year, so This fee is more a correction of fees From our perspective. I appreciate from your perspective You just see a big increase but ultimately it's because the fees were so we're actually too low and to the point where Fems were moving away from the market and not prepared to do it because they Obviously weren't commercial enterprises generally don't want to be doing audits for a loss and certainly don't want to be taking a risk for a loss So I appreciate that probably doesn't smooth The fact that the council is having to pay an increased fee But that that also gives you a little bit of insight into the kind of reasons why fees have jumped so significantly across the sector and I suppose Important context. This is the first year 23 24 of the new PSC a contract And so this this new fee isn't something we can negotiated with the council. It's set by PSC a as part of that contract I'm just gonna bring back in council Collins what I Appreciate that what you've said But just to sort of put these into context and I know you reference 2008 fees, but I mean even in your own report 22 23 the scale fee set by PSA a was 161,000 and the actual fee charged Proposed was two hundred and eighty six and now we're up to five hundred and eighty Yeah, let's Something good about the vat, but yeah, I understand because year on year I've heard this what we're doing considerably more work But that is one Oliver an increase and I just wanted you know in terms of transparency Which I'm all for and I endorse, you know, we need to keep our eye on this. Thank you chair Bringing council abatement It's just an added comment in in the one sense. I appreciate everything that you've said and and we and the worst was concerns in past years about whether or not there have been afforded companies in the In the region to do the job that we we want and require but having said that our people who paid the this Through their council tax won us to make sure that we're Giving you a hard time for your cash I think we get really good work and professional work out of it without a shadow of a doubt but I wondered whether or not you could make things that little bit more easier for us is that we end up with a Chart that actually plots the way it goes I Know that won't do much for you guys, but it will do wonders for us in the sense that we're able to identify and and report back to the people that pay these things about the about us keeping our nose to the grind so and so to speak and and that we do question these fees and they don't just arrive and we just And we just knocked them through local government is really really in huge Difficulties at the present terms in in relation to the we've just been talking about The deficits that we might have face. What will what will go in services? if you take this figure for half a million pounds and and then add the VAT to it, but that's a sizable sum and next year might be on two years on this the the The line might be even steeper than than it is now but I would like to see that down so one could see it at a glance to see the way things are moving so that we Would so that we know at some stage during the the report process so that we can see and the way it's going and and that we can marshal the right sort of arguments when we're questioned ourselves about, you know, the Local authority being a soft touch we're not in this particular case and I value the work that you do and I think the professionalism as As paid off for us in the way in which we've been able to defend some of the work even from within the council of some of the work that's undertaken by the local authority and the And the and the problems it faces, so it's not just a knock Really? We know where it's coming from, but we do deserve to be able to ask the questions and Unfortunately for you almost at your first meeting. Hey, how we're asking it and carrying it on but I would like to say You know a chart that we could easily see a bar chart easily seen where how fast it's going and then we can marshal the arguments for Defending it when we need to or if we ever we do to our residents and businesses that pay. Thank you that'd be something that would be able to To report back to us or Yes, absolutely So we I mean, I'm happy to present a kind of chart back that provides a little bit of a historical back in terms fees But equally kind of going forward But what would say is that we aren't expecting this fee to increase in the same way that it moves from previous So we're worse whilst there was a big differential between the scale fee published last year and the the ultimate fee and That was because we had to simply seek fee Variations for all the additional work that we were doing in lots of areas that would not factored into the old framework contract Our expectation is that the new contract is all priced in so we won't we are not Anticipating there being lots of fee variations to what's published from PSC a going forward So hopefully the fee that you see here will actually be the final fee and very little movement in but more than happy to kind Of report in terms of audit progress and any any changes and movements and feedbacks this committee In fact, we are required to do that in any case But we will provide absolute transparency about that and the reasons for but I'm hoping that there will not be any movement upon that fee at all She's gonna bring in James Thanks through you chair at the risk of repeating some of the points, but I think it's important to repeat them Look in terms of the sector there is a For information committed there is a national realignment of audit fees. So this is not the audit sector picking on Over Hampton City Council, I can confirm that this is a national issue It links into something called the Redmond review where a few years ago There was a whole review of the audit sector and a realization that there were increasingly kind of audit delays increasingly increases in regulation and requirements of auditors and Decreases in price over a period of time. So hey presto. What does that mean? Well, it means that Audit skills will leave in the market. So while as a director of finance, I don't like signing a check for this amount of money and I do recognize The this space and the pressures on the sector I don't think the answer is completely money related. There's a whole investment in this sector in terms of skills that nationally the local government Association and others are Increasingly looking at because we need to make sure that we have the right supply and quality of Audit audit firms in this space. I Can confirm that you know, I've just looked at the 2012 13 accounts and the audit fees were I think about 440,000 pounds so I think you referenced Andrew the 2008 year I couldn't find those in the last few seconds But that gives you some sense that audit fees 10 15 years ago were significantly higher and over a period of time They have been driven down. I can confirm that Despite all that I'll be courteously challenging Andrew on the audit fees on your behalf on our behalf I would I'm glad Andrew mentioned the fact that a lot of the Additional fees that were charged last year and now priced in in terms of some of those additional ISA requirements, etc, etc So I won't anticipate there being additional fees over and above the fee increase that's been highlighted here And I'll do all I can the finance team and others in the council to make sure we deliver You know quality draft working papers quality draft accounts that don't require lots of amendments such that It makes Andrews job really difficult in terms of if he wants to come and knock on the door and say I want some more Money, so I'll do everything I can and we can to continually in a courteous way and a respectful way in a professional way to challenge audit fees, but I did want to say that I We do recognize some of the pressures within the sector that mean that fees are Fees have gone up nationally in this space, but we'll keep an eye on it Thank You chair and this document sets out the roles and responsibilities of the audit and risk committee Particularly around areas such as governance and risk and control internal audit external audit financial reporting and accountability arrangements It's good practice that this document is reviewed annually and is still remains fit for purpose The last review of this document was done back in March 23 And just to report there's been really no significant changes to the terms of reference since then, but I have to take any questions Thank you. I think that terms of reference enabled the committee to work quite efficiently and effectively But do any members have any suggestions or proposed amendments changes? In that case I move that the recommendations as detailed in the the report be noted. Is that seconded? That is carried. Thank you everyone for your contributions That brings a meeting to the close if we can ask everyone now online to log off. Thank you