This meeting included discussion of a number of topics relating to the financial performance of the Council. These included the state of the 2023/24 accounts, the progress of the 2024/25 budget and savings plan, and a Treasury Management Update for the first half of 2024/25. The meeting was also scheduled to include discussion of Internal Audit progress, Risk Management, Income and Debt Management, and the Scheme of Delegation to officers.

Update on Annual Statutory Financial Statements

This was scheduled to include discussion of the status of the external audit of both the Council's own finances and those of the Worcestershire Pension Fund for the year ended 31 March 2024.

The external audit was still ongoing at the time of the meeting, having begun in September 2024. The Committee was provided with draft audit findings reports for both the Council and the Pension Fund.

The statutory deadline for publication of 2023/24 Local Authority Audited Accounts is 30 September 2024. As previously noted by Committee, the deadline was not achievable for Worcestershire due to the national backlog in local government audit.

The report states that the external audit had identified a number of necessary amendments to the draft accounts for both the Council and the Fund. The report stated that the Committee was being asked to consider the following:

The Committee considers whether there are issues arising from the Reports to draw to the attention of the Council

The Committee was also scheduled to be asked whether they wished to receive any further reports about the external audit findings.

The report included an update about the Accounts and Audit (Amendment) Regulations 2024, which came into force on 30 September 2024. These regulations require the audited accounts for 2023/24 to be signed off and published by 28 February 2025. It was noted that:

It is expected that the audit will conclude and that the Final Accounts pack can be signed off before this backstop date, however it is a risk to bring to Committee attention.

The report was scheduled to be accompanied by the draft [Letters of Representation (WCC)][au2024 12 06 Update on Financial Statements - App 1 - Letter of Representation WCC 2023-24] and [Letters of Representation (WPF)][au2024 12 06 Update on Financial Statements - App 2 - WPF 2023-24 Letter of Representation] for the Council and the Pension Fund. The Committee was scheduled to be asked to authorise the Chief Financial Officer, Phil Rook, to sign the Letters of Representation on behalf of the Council once the audit was completed.

Monitoring of Savings Plan 2024/25 and Budget Pressures for the Council

The Council approved a budget for 2024/25 in February 2024, which included a savings target of £37.2 million net. The Audit and Governance Committee was monitoring the delivery of these savings.

The report was scheduled to include discussion of the performance of the Council's finances in 2023/24, noting:

The biggest overspends were largely for services for the most vulnerable residents in the areas of adult and children's social care, and home to school transport.

The report also notes the continuing financial pressures for the Council, stating:

Members will be acutely aware of the financial pressures that continue to face local authorities particularly upper tier authorities with responsibility for social care.

The report includes a [Savings Tracker][au2024 12 06 Monitoring of Savings for 2024-25 6 December 2024 - App - Savings position] showing the status of each saving at the end of September 2024. The Savings Tracker stated that £6.3m of the savings were rated as red, meaning there was significant risk of non-delivery. The report states:

The Senior Leadership Team and Chief Officers have been instructed to find alternative, achievable savings proposals where there are current gaps in delivery

The report was scheduled to include discussion of the national picture of local authority finances, with particular reference to the work of the County Councils Network. The report states that:

Last year, 19 local authorities received Exceptional Financial Support (EFS) worth £1.5bn, with many in the sector suggesting that this is not sustainable and makes it difficult for councils to improve their debt position.

The report also mentions the Autumn Budget announcement, noting that it provided £1.3bn of additional funding for local government for 2025/26. The report noted that:

From a Worcestershire perspective this is not marginally different in what we were forecasting in our MTFP (excluding the increase in employers NI) so does not solve or improve the impact of the Councils’ current financial issues which are increased demand and cost on Children’s and Adults Social Care, SEND and Home to School Transport.

Internal Audit Progress Report

The Committee was scheduled to be provided with an update on the work of the Council's internal audit service.

The report explains the role of Internal Audit, stating:

The role of the Council’s Internal Audit service is to enhance and protect organisational value by providing independent assurance, advice and insight into the Council's risk management, governance, and internal control processes.

The report states that:

Based on the work Internal Audit have completed and the direction of travel with the implementation of previously reported actions and the position of ongoing initiatives e.g. risk management development, Constitution review the overall corporate governance assurance level is considered to be ‘needs improvement’

Eleven reviews were reported as completed, including the Supporting Families Quarter 2 grant certification, and the review of the Record of Officers' Executive Decisions. The Supporting Families grant funding is a national programme to support families with multiple problems that could lead to negative outcomes for the children. ¹

The report mentions a number of schools whose finances had been audited, including Blackminster Middle School, The Forge School Secondary Short Stay School and St Anne's CofE Primary School. The report notes that the schools' responses to recommendations made by internal audit had been slow. For example, Blackminster Middle School had been advised to close its Funding Account and transfer any remaining funds to its official bank account. The report states:

The school is in contact with the bank regarding the action, but the bank has been slow to respond.

Internal Audit was scheduled to report that it had also been asked to carry out some advisory work, including a review of policies and procedures for the Performance Team, an independent examination of the 2023/24 Kidderminster Educational Trust accounts, and a focused school audit at an unnamed school.

The report was scheduled to include an update on the Council's participation in the National Fraud Initiative (NFI). The NFI is a data matching exercise run by the Cabinet Office that helps councils to prevent and detect fraud. The 2022/24 NFI data matching exercise was closed, and Internal Audit were scheduled to report that all of the key matches had been investigated.

Internal Audit were scheduled to report that the upload of data for the 2024/26 data matching exercise had been completed, but that:

The data provided by some of the Servies was not best quality and there is an expectation of a potential fine due to this.

The report also includes discussion of the Council's Anti-Fraud, Bribery and Corruption Policy. The Committee was scheduled to be informed that:

A new counter fraud page is being developed for the website which will include the new Strategy along with links to other key documents and advice to help to protect residents, staff and the organisation.

The report was scheduled to include discussion of the results of a self-assessment carried out by the internal audit service in September 2024. The assessment used the Global Internal Audit Standards, and found that the service was in general conformance with the Standards, with some areas of partial conformance, and one area of non-conformance.

The area of non-conformance was in relation to the use of the outcomes of third party assurance work. The report states that:

Internal audit is committed to use the work outcomes of other assurance providing organisations. For transparency, a formal listing and those organisations and how their work relates to and is relied on is required.

The report concluded with a summary of the progress of Internal Audit, noting that the team continued to develop, but that it was still transitioning following a reorganisation and the loss of a Finance Business Partner role earlier in 2024. The report states:

The team currently has an establishment of 6.7 full time equivalent staff. We are continuing to make the necessary adjustments to compensate for the loss of a Finance Business Partner post as part of the corporate savings that took place in March 2024.

Review of the Council's Officer Scheme of Delegation

The Committee was scheduled to be asked to consider a review of the Council's [Officer Scheme of Delegation][au2024 12 06 Review of Officer Scheme of Delegation - Appendix 2 - Scheme of Assignment of Responsib]. The Officer Scheme of Delegation is the document that sets out what decisions can be made by officers, and what decisions must be made by Councillors.

The review was carried out by two unnamed Principal Lawyers in the Legal Team, who consulted with all Strategic Directors and Assistant Directors.

The report noted that the current Scheme of Delegation was last updated in July 2024 following the deletion of the post of Strategic Director of Commercial and Change.

The Committee was scheduled to be asked to recommend the adoption of the revised Officer Scheme of Delegation at the Council meeting on 13 February 2025.

Risk Management

The report was scheduled to include discussion of the latest Corporate Risk Report, noting that it had been developed using Microsoft Power BI. The Committee was scheduled to be provided with an extract of the report, including:

an exception report for the corporate risks flagged as red, and those flagged as amber and deteriorating, for Q3 2024/25.

The report noted that the Corporate Risk Register contained 25 corporate risks. Corporate risks are those that affect more than one department.

Of the 25 corporate risks, 9 were classified as Service Failure (Statutory or Otherwise), 7 were classified as Harm/Duty of Care, 3 were classified as Reputational Including Scandal or Corruption, 3 were classified as Financial Impact, and 3 were classified as Breach of Law/Legislation.

The report noted that 3 of the corporate risks were flagged as red, meaning that they were out of tolerance, and that 1 of the 15 risks flagged as amber was deteriorating.

Income and Debt Management

The Committee was scheduled to be asked to note a report on Income and Debt Management.

The report noted that the collection of income continued to be very challenging. At the end of October 2024 the debt in progress was £22.3m, 63% of which related to Adult Social Care client contributions.

The report was scheduled to include discussion of the use of the Midcall phone payment system. The Midcall system allows customers to make payments to the Council securely over the phone, and had proved to be popular with Adult Social Care customers.

The report also mentions the top 20 debtors to the Council, including an unnamed local authority who owed £1.6m, an unnamed Educational Institute who owed £1.5m, and an unnamed commercial organisation who owed £1.5m.

The report concluded by noting that:

Senior council officers continue to work with the education sector, Council and NHS debtors to obtain payment.

Treasury Management Update Quarter 2 2024-25

This item was scheduled to provide the Committee with a treasury management update for the first half of 2024/25.

The report began by noting the economic context for the Council's treasury management activities, stating:

The economy’s stagnation in June and July points more to a mild slowdown in GDP growth than a sudden drop back into a recession.

The report included an update on the Council's investment portfolio. The report noted that the Council held £75.5m of investments at 30 September 2024, having held £85.9m at 31 March 2024. The report also noted that the return on the investment portfolio for the first 5 months of the year was 5.16%. The report also states:

Gross income from treasury investments for the first 6 months of the financial year was £1.8 million.

The report included discussion of the Council's borrowing activity, noting that it had taken on £35m of new loans, but that £36.8m of existing debt had matured. The report noted that the Council had £553.5m of outstanding debt at 30 September 2024, with an average interest rate of 3.608%.

The report stated that the Council would need to re-evaluate its borrowing strategy because of a potential change in interest rates.

The report also included discussion of the Municipal Bond Agency, stating:

It is possible that the Municipal Bond Agency will be offering loans to the wider local authorities’ market in the future.

The report noted that the Council was comfortably within its Treasury and Prudential Limits for 2024/25.

Work Programme

The final item on the agenda was scheduled to include discussion of the Committee's work programme for the next 12 months.