This meeting covered a wide array of topics, but the most significant were the half-yearly report on treasury management, the future provision of internal audit services, a report on school improvement in Newport, and an update of the corporate risk register.

Treasury Management

The Cabinet was scheduled to receive a report on treasury management activities undertaken in the first six months of the financial year 2024/25.

The report describes how the council has continued to invest and borrow money, including a £10 million loan from the Public Works Loan Board (PWLB)¹ and three temporary loans totalling £15 million. The report suggests that the council is planning to borrow further money in order to replace existing loans that will mature in the next year, as well as to fund its capital programme.

The report notes that the council's strategy is, where possible, to fund capital expenditure using existing cash balances (referred to as internal borrowing ). The report acknowledges that this may not be possible in the short to medium term as the level of reserves are being utilised as intended and because of the maturing loans mentioned above.

The Council’s current strategy of funding capital expenditure is through the concept of ‘internal borrowing’, where the Council seeks to use its existing cash balances to afford its capital expenditure prior to taking out external borrowing

The report suggests that interest rates will continue to be monitored and that the council will work with its treasury advisors to identify the optimum time to undertake any new borrowing.

The report also provides an update on the level of investments held by the council and notes that it is compliant with the prudential indicators set for 2024/25, with one exception relating to the treatment of lease costs.

Long Term Provision of Internal Audit Services

The Cabinet was asked to consider the Head of Finance's recommendation to join the South West Audit Partnership (SWAP)¹ for the long-term provision of its internal audit services.

The report describes the difficulties faced by the council in recent years with staffing its in-house internal audit function. It describes how five staff members left the six-person team in a six-month period in 2023, leaving only junior auditor roles filled. The report notes that the council has since tried but failed to recruit staff to fill middle and senior roles and that its attempts have often been met with no applicants.

The report suggests that the Council’s interests were better served by securing an external arrangement for its internal audit provision , noting that:

• The current in-house team is too small to allow for professional development opportunities or career progression
• The lack of specialists in the team means that it lacks resilience and expertise in areas such as fraud-related work
• The council has successfully used SWAP to provide interim audit services in the past, and they were able to quickly understand the council's challenges and bring in experienced resources as needed.

The report goes on to weigh up the pros and cons of tendering for a private company to provide audit services against joining a public sector audit partnership. The report concludes that a partnership arrangement would provide solutions to the drivers for change and would offer the following benefits:

• The council would retain an interest in the partnership
• A partnership would be less likely to have issues around transferring staff
• A partnership with a public sector ethos would be more focused on the needs of the council.

The report then goes on to compare the services offered by SWAP and a developing partnership in South Wales. The report concludes that both partnerships would be able to provide at least the same amount of audit effort as the existing in-house service and that both partnerships offer improvements over the existing arrangement because of their size and the range of specialisms they offer. The report notes that SWAP has one team of nine staff who are not linked to any specific partner but who are available to help fill resourcing gaps to ensure continuity of service.

In this context here though, they provide added resilience to their partner clients by being also deployed to fill resourcing gaps across all their partners to ensure continuity of delivery, where needed.

The report describes SWAP as very mature , noting that it has been established for 20 years, has around 25 clients and 80 staff and have grown to be the largest local government specialist internal audit provider in England/Wales .

The report notes that both partnerships use audit management and reporting software, but that only SWAP's system allows partner clients to access documents and reports in real time and to provide feedback.

It utilises specific audit management and reporting software which audit/partners can access in real-time – partner client’s access to the system is available to share documents, provide feedback, access reports and update agreed actions.

The report goes on to describe how SWAP has a well-developed added value offer from specialists in areas such as IT auditing, strategic and operational fraud, and data analysis, compared to the South Wales partnership, which only offers an IT audit specialism. The report then describes some specific examples of SWAP's recent development and innovation work, including:

• The development of a one-page audit report
• The early adoption of new technologies such as Automation, Natural Language Processing (NLP)² and continuous assurance provision
• The development of a generative AI assistant (GAIA) that has been shortlisted for an Audit & Risk award
• The development and implementation of "Combined Assurance and Healthy Organisation Reviews checks as a highly effective way to identify critical areas where assurance or procedures could be improved in their businesses, as well as recognising areas where potential efficiency savings could be made”.

The Future of Newport School Improvement Services

The report details how the Welsh Government has commenced a Middle Tier Review to consider how school improvement services should be delivered in the future. The review comes in the context of a move towards schools becoming self-improving and the development of new national guidance on school improvement. The review has removed the previous expectation that school improvement services should be delivered by regional consortia.

The Middle Tier Review has removed the former ‘expectation’ that local authorities work in partnership with Regional Consortia School Improvement Partners, in traditional geographical footprints.

The report notes that Newport City Council has been a member of the Southeast Wales Education Achievement Service (EAS) since 2012. The report outlines how the EAS has already adopted a number of practices that are reflective of the new draft school improvement guidance. The report describes how EAS has adopted a collaborative school improvement model, implemented a universal work programme for School Improvement Partners (SIPs), and established a number of mechanisms to support schools to undertake self-evaluation.

The report provides a detailed analysis of the EAS' current practice in relation to the aims of the draft national guidance. The report also details feedback on EAS' services provided by headteachers in Newport, who meet as a School Improvement Group .

The report outlines three potential options for delivering school improvement services in Newport, weighing up the pros and cons of each option.

• Option 1: Remaining in a static position with the Southeast Wales EAS continuing to provide services to Newport and other local authorities in the region.
• Option 2: Continue to commission services from the EAS, making further changes to reflect stakeholder feedback and national school improvement guidance.
• Option 3: Newport reverts to a local authority-led school improvement service, offering to collaborate with other local authority partners.

The report concludes that option 2 is the preferred option, on the basis that:

• Newport schools are performing well
• Option 2 offers scope to meet the views of headteachers
• The Welsh Government does not want local authorities to work in isolation
• A standalone Newport advisory service would be more expensive than the current arrangement, risking a reduction in schools' income
• The current EAS model meets the new school improvement standards and provides economies of scale.

The report suggests that changes to the EAS to reflect stakeholders' feedback could include:

• Reviewing the EAS' company board governance model and considering alternative governance models
• Changing school improvement services to reflect changing times, educational research, national guidance and local need
• Maximising the use of Newport SIPs and schools to support other Newport schools
• Working more closely with council officers and advisory staff linked to areas such as Additional Learning Needs (ALN)¹, the GEMS scheme², attendance, inclusion and early years
• Establishing a specific Deputy Headteacher Network to help secondary schools to share best practice and support leadership development and succession planning.

Corporate Risk Register Update

The Corporate Risk Register monitors risks that may prevent the council from achieving its strategic priorities or delivering services. The Cabinet was asked to consider the second quarter update of the register, which was scheduled to be presented to the Cabinet by the Head of People, Policy and Transformation.

The report states that at the end of quarter 2 the register contained 15 risks, 8 of which were considered severe and 7 of which were considered major . The report notes that there was no change to the risk scores for these 15 risks compared to the previous quarter.

The report details each of the risks and includes information on:

• The likelihood and impact of the risk, should it occur
• Existing arrangements for mitigating the risk
• A summary of recent developments relating to the risk
• The actions the council is taking to manage the risk.

The highest-scoring risk (with a score of 25) is Pressure on the delivery of Children’s Services , followed by Pressure on Housing and Homelessness Services , which scores 20. The report describes how Welsh Government’s changes to Homelessness legislation in December 2022 continues to have an impact on the number of households that the council has a duty to accommodate and describes how demand for temporary accommodation is continuing to increase as a result of new legislative requirements, lack of affordable permanent accommodation [and] cost of living crisis .

The report describes how a Housing Transformation Board has been established to deliver changes required to the housing service. The report also details the actions the service is taking to increase the supply of temporary and permanent housing and reduce the use of bed and breakfast and hotel accommodation.

Another risk that scores 20 is WCCIS Replacement . WCCIS (the Welsh Community Care Information System)¹ is a national system used by social services across Wales. The report describes how the supplier of WCCIS will stop supporting it in 2026 and how a procurement exercise is currently underway to find a replacement system. The report suggests that the risk score remains at 20 because, although the procurement process is due to be completed shortly, the council is still in the process of developing a project team to support the implementation of the replacement system.