The Audit and Standards Committee of Staffordshire County Council met to discuss the Annual Auditor's Report for 2024 and 2025, presented by KPMG. The report is still in the risk assessment phase, with a final version due in February. Councillors sought assurances and clarifications on the report's findings, particularly regarding financial sustainability, governance, and the council's response to an Ofsted report.

Annual Auditor's Report

KPMG presented the draft Annual Auditor's Report [Annual Auditors Report 202425] for the financial year, noting that it was still indicative and subject to change. The report provides an overview of the audit's outcome, covering both financial statements and value for money (VFM).

Robert Fenton from KPMG stressed that the report was required by the Code of Audit Practice to be presented by 30 November. He clarified that while the financial statements work was ongoing, the final report would be presented at the February meeting.

Key points from the report included:

• Other Powers: No public interest reports, judicial reviews, or advisory notices were necessary.
• Value for Money: The report highlighted a risk around governance, specifically the council's response to the Ofsted report and the implementation of its action plan. This was identified as a risk, not a weakness, with further assessment needed to determine if it constitutes a significant weakness.

Questions and Clarifications

Councillors raised several questions regarding the report:

• Statutory Requirements: Councillors sought assurance that all statutory requirements in the Local Audit and Accountability Act 2014 and the Code of Audit Practice would be met by the deadline. Robert Fenton confirmed that a version of the report would be presented by 30 November.
• Resources and Capacity: Councillors asked for confirmation that KPMG had the necessary resources to complete all outstanding audit work by the statutory deadline. Robert Fenton clarified that the deadline for the Annual Auditor's Report was 30 November, with all financial statements and VFM work to be completed by the end of February 2026.
• Information and Access: Councillors asked for confirmation that the council had provided all necessary information and access in a timely manner. Robert Fenton noted that management had been slow in providing a value for money questionnaire, and that improvements were needed to complete more work in advance of the 30 November deadline.
• Financial Stability: Councillors sought clarification on statements within the report that indicated the council was well-run and financially sound. Robert Fenton confirmed that the governance arrangements and financial updates were indicative of a well-run authority.
• High-Needs Block Deficit: Councillor Matthew Wallens asked for a breakdown of the interventions planned to address the £53.6 million deficit in the high-needs block¹ and the expected reduction each action would deliver. Rachel Spain, an officer of the council, directed him to the Schools Forum papers, where the deficit mitigation plan is approved. She noted that the plan would reduce the deficit but not eliminate it completely due to current funding and demand levels.
• Ofsted Report Risk: Councillor Francis Chiwariro asked about the worst-case scenario regarding the risk associated with the Ofsted report. Robert Fenton explained that KPMG would assess whether the council had appropriate arrangements in place to deliver the action plan. A failure in the council's ability to act on the plan could be considered a weakness.
• MTFS and Reserves: Councillor Matthew Wallens requested a reserves-free MTFS² model to show the true structural financial position. Rachel Spain referred to the MTFS report from February, which includes a Section 25 statement on the robustness of reserves, and noted that an updated MTFS would be presented to the cabinet in due course.
• CQC Rating: Councillor Jeremy Pert noted a factual inaccuracy regarding the CQC³ rating, stating that he participated in an inspection of adult social care in February, where the council was rated good . Robert Fenton agreed to review this and incorporate it into the report. Councillor Pert also sought clarification on the ratio of usable reserves to net revenue expenditure in social care, asking what it meant in terms of spending and factors considered. Robert Fenton agreed to elaborate on this in the final report.
• Benchmarking: Councillor Andrew Clissett asked about benchmarking against other councils, particularly those in difficult situations like Birmingham and Nottingham, and what control practices could be learned. Robert Fenton explained that benchmarking was primarily focused on value for money profiles, and that the council should consult with peer organisations to identify lessons learned.
• Integrated Performance Report: Councillor Thomas Baker questioned whether savings and cost reductions should be itemised separately in the integrated performance report. Robert Fenton did not express a strong opinion, stating that it was sufficient as long as the committee could make effective decisions based on the information provided.
• Ofsted Improvement Plan: Councillor Matthew Wallens asked which improvement actions were overdue and what obstacles were preventing timely progress on the Ofsted improvement plan. Robert Fenton stated that this was currently being assessed and could not provide specific details at that time.
• Financial Sustainability: Councillor Simon Tagg highlighted the council's ability to underspend while maintaining service delivery and increasing reserves, and asked if this reflected robust financial management. Robert Fenton confirmed that the underspend was indicative of robust management and that no risk of weakness had been identified.
• Audit Conclusions: Councillor Francis Chiwariro asked if the report was a good indication of the direction of the audit conclusions and if there would be any surprises in the final report. Robert Fenton confirmed that there should be no significant changes in the conclusions around financial sustainability.
• Auditor Capacity: An unnamed Councillor asked about the capacity of auditors nationally and how Staffordshire compared to its neighbours in meeting requirements. Robert Fenton stated that the council was on a journey to rebuild assurance and that while there was still work to do, the sector was moving in the right direction.

Closing Remarks

Robert Fenton thanked the committee for their questions and contributions. The next meeting was scheduled for 9 December.