This meeting was scheduled to receive an update on a range of audit and financial issues. The committee were also scheduled to consider a report on partnership governance and receive a progress report from its external auditors, Forvis Mazars.¹

Direct Payments

The committee was scheduled to receive a report from Veritau, the Council's Internal Auditors, on its audit of Direct Payments. The report, which was prepared for information, is highly critical of arrangements for Direct Payments. The auditors identified three key issues, all of which have been classified as either 'critical' or 'significant' using the auditors’ risk rating system.

Firstly, Veritau found that Middlesbrough Council is failing to comply with the law in relation to reviewing Direct Payments.

The Council is failing to comply with legislative requirements in relation to the review of direct payments.

- Veritau, Direct Payments Internal Audit Final Report, 27 November 2024

The report states that there is a backlog of 102 overdue reviews. There is no formal policy in place to manage the backlog.

The auditors also identified 'critical' weaknesses in the Council's arrangements for monitoring Direct Payments to ensure that the money is being used appropriately.

Thirdly, the auditors found that the Council does not monitor Direct Payments where family members are employed to provide care to identify and prevent fraud. This was also classified as a 'critical' risk.

The report contains details of actions that have been agreed with management to address the issues identified.

Partnership Governance - Annual Assurance Report

The Committee was scheduled to consider a report on the Council's arrangements for assessing whether its key partnerships are operating effectively. This is a standing item on the Audit Committee work programme.

Partnerships are key to the Council achieving its strategic objectives and their importance will inevitably increase in the coming years.

- Middlesbrough Council, Partnership Governance – Annual Assurance Report, 12 December 2024

The report explains that Middlesbrough Council is a member of a number of partnerships, all of which are subject to an annual health check. The Partnerships reviewed this year, and their risk ratings, are listed in the table below.

The partnership with the highest risk rating is the Tees Valley Combined Authority (TVCA). This follows the publication of a report in 2023 that identified a number of governance issues.

Internal Audit and Counter Fraud Progress Reports

The committee were scheduled to be provided with a progress report from the Council's Internal Auditors, Veritau.²

The progress report summarises the current status of all the audits included in the 2024/25 Internal Audit Work Programme. This includes details of audits that are in progress, audits where final reports have been issued, and audits that are planned to commence later in the year.

The report also includes a summary of the key findings arising from audits that have been completed. These include audits of:

• Social care transitions
• IT asset management
• The use of agency staff by Children's Services.

The progress report also provides an update on counter fraud work.

This includes a summary of:

• Work to prevent and detect fraud.
• Collaborative working with external agencies.
• The outcome of fraud investigations.

The report explains that between April 2024 and November 2024 the Counter Fraud team investigated 77 referrals of suspected fraud. This work helped to identify £83k of loss due to fraud, error and debt evasion.

Treasury Management – Mid Year Review – 2024/25

A report on the Council’s treasury management performance for the first six months of the 2024/25 financial year was prepared for discussion.

The report explains that Middlesbrough Council is a net borrower, meaning it needs to borrow money to finance its capital programme. For example, the capital programme for 2024/25 was originally expected to cost £88,549m.

The report explains that the Council has an under-borrowed position, meaning it has been using cash reserves to fund its capital programme. This is often done to generate savings as investment returns are generally lower than interest rates on borrowing. The under-borrowed position has reduced during 2024/25, partly as a result of a £5.2m reduction in the Council’s reliance on what is known as ‘exceptional financial support’ from central government. The report explains that this is due to the Council achieving its planned capital receipts from asset sales. However, capital expenditure is now forecast to be significantly higher than originally planned, at £72,546m. This is due to an increase in grants and contributions received during the year.

The report sets out the Council’s total debt and cash investments. The Council’s total debt outstanding as at 30 September 2024 was £249.300m, compared to a Capital Financing Requirement of £305.707m.

Internal Audit Consultation Report 2025/26

The committee were scheduled to consider a report on the arrangements for developing the 2025/26 Internal Audit work programme.

Internal audit provides independent and objective assurance and advice on the Council’s operations.

- Middlesbrough Council, Internal Audit Consultation Report 2025/26, 12 December 2024

The report explains that Veritau use a risk-based approach to deciding which audits are included in the work programme each year. This involves looking at 11 key assurance areas as well as the Council’s strategic risks and corporate ambitions. Veritau also seek the views of the Audit Committee on which areas should be given priority.