The Governance and Audit Committee of Cardiff Council met on Tuesday, 24 March 2026. The meeting focused on the council's financial health, internal audit progress, risk management, and treasury management strategy. Key discussions included the 2025/26 Statement of Accounts, the 2026/27 Internal Audit Plan, and the Treasury Management Strategy for the upcoming financial year.

Economic Development - Directorate Control Environment Update

Neil Hanratty, Director of Frontline Services, presented an update on the control environment within the Economic Development directorate. He outlined the directorate's responsibilities, which span economic development, major projects, parks, water and leisure, the Cardiff Harbour Authority, the council's estate, health and safety, and waste management and regulatory services. The directorate comprises approximately 1,070 permanent staff, with a significant number of additional cleaning staff. Hanratty detailed the upcoming restructuring of the directorate, which will see Development and Regeneration, and Planning and Transport move into the new structure, while Waste Management, Recycling, Parks, and Cardiff Harbour Authority will move to the new Director of Frontline Services.

Regarding the control environment, Hanratty reported that over the last three years, 20 audits had been undertaken, with 19 completed. There were 167 recommendations in total, with 6 completed, 47 remaining open, and 7 in draft. Two long-standing recommendations, dating back to 2021, relate to asset management in waste and recycling services, focusing on improving asset management arrangements and developing an asset management strategy. These have been delayed due to other priorities, but the intention is to deliver them through the depot and infrastructure project, with a new asset management post to be recruited by the end of the month.

The risk register for the directorate shows 16 managed risks, with 12 having a residual rating of red or amber. Priority themes include reduced external funding (Shared Prosperity Fund, Local Growth Fund), general budget pressures, compliance and regulatory requirements, staff retention, and difficulties filling vacancies requiring specific skills. Three risks have been escalated to the Senior Management Team (SMT): ash dieback, road park dam safety, and the UK Emissions Trading Scheme. Three corporate risks remain unchanged from the previous year: compliance with health and safety inspections in buildings, non-compliance with corporate health and safety arrangements in buildings, and recycling performance targets.

The Senior Management Assurance Statement indicated a downgrade in three areas and an upgrade in one. Areas for improvement include partnership working, ensuring mandatory fraud training is prioritised, and better utilisation of single impact assessments. Long-term sickness absence, completion of mandatory training (particularly for non-office-based staff), and an improved approach to project initiation were also highlighted. External assurance activities include ongoing engagement with Audit Wales, particularly regarding their waste management follow-up, with a number of recommendations remaining open. The report also outlined the approach to managing major projects, including a streamlined PRINCE2 version, funding via bids to the Investment Review Board, a business case process, and weekly team meetings, monthly major projects meetings, and monthly senior management meetings for escalation and reporting. Complaints handling is managed locally using the Halo software, with complaints reviewed at service area management team meetings and contributing to quarterly SMT reviews and the annual report.

Finance Update Including Resilience Issues

Chris Lee, Corporate Director of Resources and Section 151 Officer, presented a finance update, highlighting the 2026/27 budget and the ERP project. The council's final settlement was a 4.2% increase, slightly below the Welsh average. The budget gap was just under £23 million, to be closed through a 3.9% council tax increase and savings of just under £15 million, achieved through efficiency and service change. No major service cuts were proposed. Schools received a 4.2% increase, totalling over £14 million, with additional funding bringing the total increase to over £19 million. The budget was balanced without reliance on reserves, providing resilience.

The Shared Prosperity Fund and Local Growth Fund will see a £3.312 million reduction in LGF funding, with SPF reset between capital and revenue leading to a revenue reduction of £6.929 million. The budget strategy supports transition base and one-off funding, more than doubling that available through LGF alone, with £6.958 million for 2026/27 compared to £3.200 million LGF allocation. An allocation of £4.5 million from the Financial Resilience Mechanism (FRM) is available for one-off spend in 2026/27.

Regarding the Real Living Wage, the difference between the assumed 4% increase and the announced 6.7% resulted in an additional £0.450 million for council-employed staff and an estimated £3.4 million for commissioned services, particularly in social care. Both have been accounted for within the agreed 2026/27 budget. The Real Living Wage is difficult to predict, but generally tracks around 2% above CPI. For 2027/28, a 5.5% increase is assumed, with headroom given due to the cap of 3% above CPI.

The Medium-Term Financial Plan (MTFP) for 2027/28 to 2030/31 indicates a challenging financial position, with total pressures of over £227 million and likely funding of around £61 million, leaving a cumulative gap of over £167 million. Even with an assumed 3.95% council tax increase, savings requirements of over £124 million are projected over the four years, with £33 million needed in 2027/28 alone. The plan outlines strategies for efficiency, service change, income generation, early intervention, partnership working, productivity savings, capital investment for revenue savings, and tight revenue budget control.

The ERP replacement programme has reached the implementation procurement stage, with approval granted by Cabinet on 19 March 2026.

Statement of Accounts 2025/26: Accounting Policies and Timescales

Anil Hirani presented the report on the Statement of Accounts for 2025/26, outlining timescales, accounting policy key changes, and potential future impacts. He noted that Cardiff Council was one of nine local authorities in Wales to meet the required timescale for preparing and signing off accounts. The target for 2025/26 is to be one month earlier, with draft accounts to be approved by 30 September and presented to Full Council by 24 September. A key change in the 2025/26 CIPFA Code is the introduction of indexation for property, plant, and equipment valuations, moving to a five-yearly revaluation cycle with annual indexation. Hirani also mentioned ongoing work with audit partners to improve the 2025/26 accounts and noted potential future code changes, including sustainability reporting requirements. The committee congratulated the team on their performance in the previous year.

Internal Audit and Investigation Team - Progress Update

Chris Pyke, Audit Manager, provided an update on the Internal Audit and Investigation Teams' progress for the period January to February 2026. He confirmed no impairments to independence or objectivity. The audit plan delivery is progressing, with 19 audits in progress targeted for completion by the end of the quarter, aiming to achieve 70% of the plan. An advisory audit on Windley Road Stores has been added to the plan to provide support during a handover of responsibilities. Positively, no draft reports issued during the quarter had opinions of 'insufficient with major improvement needed' or 'unsatisfactory'.

The Investigation Team's report showed an increase in identified cases compared to the previous year, with 247 cases identified so far this year compared to 164 for the same period last year. While ongoing investigations are slightly down, concluded investigations have more than doubled. The financial value attributed to concluded investigations is lower than the previous year, but this is explained by specific case types. The team continues to provide counter-fraud advice and training, and new posts have been created to strengthen capacity.

Audit Charter and Audit Plan 2026/27

Chris Pyke presented the draft Internal Audit Strategy, Charter, Methodologies, and Summary Audit Plan for 2026/27. The report detailed minor changes to the charter and strategy, consistent with the January draft. The audit plan has been developed following an assurance mapping exercise involving all directorates. Pyke highlighted that 70% of the plan is targeted for completion, leaving 30% for flexibility. Recommendations included noting the audit strategy, approving the charter (including the committee's terms of reference), recommending these to full Council, noting the methodologies, approving specific components of the methodologies, and approving the audit plan for the year ahead. Dr. Janet Wademan raised questions about technological resources and the potential use of AI for efficiency, to which Pyke responded positively, indicating that AI is being integrated and further updates will be provided.

Audit Wales Annual Audit Summary 2025

Gareth Newell, Head of Performance and Partnerships, presented the Audit Wales Annual Audit Summary for 2025. The report confirmed an unqualified opinion on the council's accounts, issued ahead of the deadline, with no uncorrected misstatements or other significant issues. However, performance audit work identified opportunities for the Planning Service to improve service planning, reporting, and governance. Audit Wales also found that the Council lacks comprehensive arrangements to assure itself of value for money in its commissioning of services. Recommendations focused on strengthening commissioning arrangements, ensuring compliance, and conducting a review of these arrangements. Sarah Jane Byrne and Julie Reesans from Audit Wales were present to answer questions.

Audit Wales Work Programme and Timetable Update

Julie Reesans and Sarah Jane Byrne from Audit Wales provided an update on their work programme and timetable. The audit of the 2024/25 grants work is complete, with only the national adoption of foster Wales and joint committee audit remaining open. Planning and testing are underway for the 2025/26 accounts audits, with a focus on meeting the challenging 30 September deadline. Performance audit work includes a thematic review of recruitment and retention, cybersecurity, housing audit, and a local government study on capital planning. Reports on children's services and local government funding arrangements are planned for publication after the senate elections. Work on Corporate Joint Committees is postponed due to ongoing Welsh Government work in this area.

Corporate Risk Management (Q3)

Ian Allwood and Matthew Tubball presented the Corporate Risk Management report for Quarter 3 2025/26. The report detailed updates to the Directorate Risk Registers and the Corporate Risk Register. SMT approved amendments to four corporate risks: School Improvement & Attainment, Condition of the School Estate, Climate – Flooding, and Cyber Security, with target reduction dates adjusted. The 'Condition of the School Estate' risk description was widened to explicitly reference the education dimension, and its target reduction date was brought forward. The Financial Resilience risk was updated to highlight the Budget Gap for 2027/28 to 2030/31. The report also noted the ongoing review and revision of the Risk Management Strategy and Policy.

Treasury Management Strategy 2026/27

Anil Hirani presented the Treasury Management Strategy for 2026/27. The strategy covers borrowing, investments, and treasury management indicators. Key points include a single integrated strategy for the Council, adherence to Welsh Government guidance and CIPFA codes, and a prudent approach to debt repayment. The report detailed the current treasury position, economic background, borrowing strategy, and investment policy, emphasizing security, liquidity, and yield. The strategy maintains a low-risk appetite for treasury investments and outlines credit criteria based on Fitch ratings. The committee noted the strategy and provided comments for consideration in the mid-year review.

Outstanding Actions

Chris Lee confirmed that all outstanding actions were in hand, with the last two items covered during the meeting.

Correspondence

Chris Pyke presented a collation of correspondence issued by various committees for the committee's awareness. He drew attention to a letter from the Community and Adult Services Scrutiny Committee (CASSC) regarding the Responsive Repairs Unit, noting that CASSC will oversee the delivery of the Ombudsman's recommendations and refer any governance, risk management, or control concerns to the Governance and Audit Committee. The Chair proposed a recommendation to the action plan to consider an external review of complaint handling within the Responsive Repairs Unit.

Work Programme Update

Chris Pyke provided an update on the work programme, noting that control environment reports from the new directorates (Frontline Services and Strategy, Partnership and Transformation) are scheduled for the September meeting. The July meeting will focus on the Chief Executive's control environment and the annual well-being report.

The next meeting is scheduled for 7 July 2026.