The meeting was scheduled to consider several internal audit reports, consider the adoption of new internal audit standards, review the Council’s statement of accounts for 2022/23, and review the Council’s responses to previous recommendations from its external auditors, Grant Thornton.¹

Annual Governance Statement 2023-24

The committee was scheduled to consider Sandwell Council’s Annual Governance Statement for 2023-24.

The statement begins by defining what ‘governance’ means in the context of the council.

Governance is the term used to describe the system by which the Council directs and controls its functions and relate these to its communities. It is about how the Council ensures that it is doing the right things, in the right way, for the right people in a timely, inclusive, open, honest and accountable manner.

The statement describes Sandwell Council’s system of financial management and governance, and how it has been monitored during the year. The statement is informed by internal and external audit reports, reports of the council’s Overview and Scrutiny committees, and reports of external inspection agencies like Ofsted.²

The Annual Governance Statement is made up of eight sections.

1. Introduction: Describes what the statement is for, and what period it covers.
2. Governance: Describes what governance means, and how Sandwell Council ensures that public money is properly accounted for.
3. Governance and Control Frameworks: Details the policies, processes and systems in place for ensuring good governance.
4. Decision Making: Describes the checks and balances that are in place to ensure that decisions are made lawfully and transparently. This includes a summary of the Local Government Act 2007, which empowers a single councillor to exercise all executive functions of the authority, and the council’s schemes of delegation, which set out how this power can be delegated to other people.
5. Putting the principles into practice in Sandwell: Describes how Sandwell Council has reviewed and updated its governance arrangements, following a government intervention in March 2022, which led to the commissioning of several external reviews of the Council’s operations. This includes details of the Council’s Improvement Plan, which the Statement says “incorporated all these recommendations”.
6. Key Changes and Challenges: Details recent changes that have been made to governance arrangements, including the introduction of the ‘My Councillor’ portal, which is designed to “efficiently progress councillor casework”.

7. 2023/24 Review of Effectiveness: Describes how the council reviews its governance framework. This includes details of the reports that were produced during the year by its external auditors, Grant Thornton, the Local Government Association,³ and the Chartered Institute of Public Finance and Accountancy (CIPFA).⁴ The section also details the work of the council’s internal audit service.

8. Significant Governance Issues: Summarises areas where governance arrangements were deemed to need improvement, and what action has been taken to improve them.

Internal Audit Progress Report

The committee was scheduled to consider a report on the progress of the Council’s Internal Audit service. The report summarises the internal audits that were undertaken in the six months from April to October 2024 and the assurance that was given on them. The report says that the internal audit service gave five ‘limited assurance’ opinions during this time:

• Heritage Assets (including Civic Regalia)
• HRA – Capital Budgets
• Riverside – Environmental Challenge Fund
• Highways – Taylors Lane
• Sacred Heart Primary School

A limited assurance opinion is given when an audit identifies significant issues with the Council's control environment.

The report says that the Council’s implementation of the Oracle Fusion financial management system⁵ had had a significant impact on the work of the internal audit team, and that the rest of the team’s 2024/25 work programme was being reviewed in the light of the implementation.

Internal Audit Standards Update

The Committee was scheduled to consider a report describing new standards for the work of internal auditors working for local government bodies.

Review of Grant Thornton Recommendations

The committee was scheduled to consider a report on the council’s progress in implementing recommendations made by Grant Thornton in their Value for Money Governance Review.

The report describes how the recommendations were incorporated into the Council’s Improvement Plan, and monitored alongside other changes to governance arrangements. The report says that, following the end of government intervention in March 2024,

Sustained improvement activity has been embedded into existing arrangements. Where actions on the Improvement Plan remain ‘open’ at the close of the programme, these have been mapped to existing plans and governance arrangements (for example - local, business, and corporate plans) and recorded in an Assurance Plan. This Assurance Plan will be built into the quarterly corporate performance management reporting arrangements for 2024/25 to ensure continued oversight of key workstreams whilst ensuring that the Council continues its improvement journey.

The report goes on to provide progress updates on the recommendations made by Grant Thornton in their December 2023 report.

Grant Thornton Report - Annual Audit Report 2023/24

The committee was scheduled to consider Grant Thornton’s annual audit report on Sandwell Council.

Approval of the Council's Statement of Accounts for 2022/23

The committee was scheduled to approve Sandwell Council’s statement of accounts for 2022/23.

A report submitted to the committee, describing the statement of accounts, explains that the government has introduced ‘backstop’ dates by which local authorities have to publish their audited accounts, in order to tackle a backlog of delayed accounts. The report says that the government

recognised that due to time constraints, not all audits of accounts relating to the financial years to 2023/24 would be completed in full by the 13 December 2024 and 28 February 2025 backstop deadlines.

Because of this, the report says that it was agreed at a meeting of the Audit and Risk Assurance Committee on 18 September 2024 that ‘partial’ audits of the 2022/23 and 2023/24 accounts would take place. These partial audits, the report says, would focus on “working balances and income and expenditure transactions” in order to provide assurance on the Council's ‘usable reserves’ in time for the accounts to be published by the backstop date.

The report includes an Audit Findings Report produced by Grant Thornton, which summarises their work on auditing the 2022/23 accounts. The report describes how Grant Thornton worked with the Council to agree a plan for their work, prioritising areas that were likely to be completed by the backstop deadline. In doing this, the report says, Grant Thornton decided not to undertake work on the valuation of land and buildings, because:

this area is inherently time consuming, most likely to contain errors and no information was available prior to 30 September to allow any work to be undertaken in advance of the receipt of the accounts.

The report summarises work that Grant Thornton had done on other areas of the accounts, and highlights four areas where they found issues.

1. Capital expenditure: The council had incorrectly capitalised the value of a capital grant that it had to repay after failing to meet the conditions of the grant.
2. Cash and bank: The council had overstated its cash balance by £3,600k.
3. Debtors: Grant Thornton’s work projected that debtors and income may be understated by £1,081k.
4. Creditors: Grant Thornton projected that creditors may be understated by £4,896k.

The report also says that a review of the Council’s internal controls identified several weaknesses in the Council’s IT systems and its processes for managing journals.⁶