None received.

Members are reminded that they must declare their disclosable pecuniary interests and other registrable or non-registrable interests in any matter being considered at the meeting as set out in Appendix B of the Members’ Code of Conduct and consider if they should leave the room prior to the item being considered. Further advice can be sought from the Monitoring Officer in advance of the meeting.

Members were reminded that they must not participate in the discussion or voting on any matter in which they have a Disclosable Pecuniary Interest and should leave the room prior to the commencement of the debate.

The Minutes of the meeting held on the 27 September 2024 are attached for confirmation. 

Contact Michelle Dulson (01743) 257719

RESOLVED:

That the Minutes of the meeting of the Audit Committee held on the 27 September 2024 be approved as a true record and signed by the Chairman.

To receive any questions from the public, notice of which has been given in accordance with Procedure Rule 14.  The deadline for this meeting is 12noon on Friday 22 November 2024.

A public question had been received from Mr Frank Oldaker in relation to the North West Relief Road.  The Head of Policy and Governance read out the question and the Executive Director of Resources (Section 151 Officer) read out the response.

A full copy of the question and response provided are attached to the web page for the meeting.

To receive any questions from the public, notice of which has been given in accordance with Procedure Rule 14.  The deadline for this meeting is 12noon on Friday 22 November 2024.

There were no questions from Members.

The report of the Headteacher is attached.

Contact: Reuben Thorley (01588) 638257

The Committee received the report of the Headteacher of Bishops Castle Community College which outlined the actions taken by school leaders and the monitoring by Council Officers.

The Chairman expressed the concerns of the Audit Committee about the time it had taken the college to comply with the requirements of the audit as it had been going on for almost a year and he hoped that the Headteacher was in a position to assure the Committee that the situation had been resolved to its satisfaction.

The Headteacher (Mr Thorley) introduced and amplified his report.  He drew attention to the Action Plan and management responses to each item and he confirmed that progress was reported back to the Governors on a regular basis. He explained that there were some items still to be addressed including the fundamental recommendation that ‘a full review be completed of the financial management of the College by an independent body’.  He stated that they had so far been unsuccessful in commissioning an independent body to carry out the review despite approaching a number of bodies and it was proving difficult to ensure cost effectiveness.

In response to a query, Mr Thorley confirmed that ‘school leaders’ referred to himself as headteacher, the Business Manager who was responsible for implementing the Action Plan and the Resources and Personnel Committee who oversaw the action plan and held them accountable for it.  Members felt that one of the problems could be that there needed to be one leader who took responsibility, rather than generic ‘leaders’. 

A brief discussion ensued around the failure to find an auditor for the accounts.  In response, Mr Thorley explained that they had tried 8 different organisations including the local authority, but they either did not have the capacity, or the cost was felt not to be an effective use of funds.  The Committee felt that they did not have a choice but to have their accounts audited whether cost effective or not.

In response to a query, Mr Thorley assured the Committee that the Governors had had oversight of the issues which had occurred over a number of years and he addressed the issue of the College’s historic deficit which was being paid back over a number of years, as agreed with the local authority and he informed the committee of the steps that had been taken to reduce the deficit including reducing staff and the curriculum offer. 

Members congratulated the College on its ‘good’ Ofsted result but were concerned that if the College converted to an academy that the local authority would pick up the deficit.  Mr Thorley clarified that the local authority would only pick up the deficit if the College was forced to academise because it was in special measures, but if it became an academy of its own accord, it would take the deficit with it.  Having looked into the possibility, they were unable to become an academy as the Trust did not want the deficit.

RESOLVED:

To note  ...  view the full minutes text for item 58.

The report of the Executive Director of Health is to follow.

Contact: Rachel Robinson (01743) 258918

The Chairman informed the meeting that this report was being deferred to the additional meeting in December.

The report of the Executive Director of Resources (Section 151 Officer) is attached.

Contact:  James Walton (01743) 258915

The Committee received the report of the Executive Director of Resources (Section 151 Officer) which provided Members with an economic update for the first six months of 2024/25, along with reviews of the Treasury Strategy 2024/25 and Annual Investment Strategy, the Council’s investment portfolio for 2024/25, the Council’s borrowing strategy for 2024/25, any debt rescheduling taken and confirmed compliance with Treasury and Prudential limits for 2024/25, as agreed by Full Council.

The Executive Director of Resources (Section 151 Officer) introduced and amplified his report.  He informed the Committee that in terms of relative performance, there was £22m held in investments and £311m held in borrowing, which was not a high level of borrowing and had been coming down over the last few years as borrowing was paid off as it matured and had not been replaced.  In addition, when borrowing had been required for the capital programme, they had internally borrowed, and he explained the reasons for doing so.  This had however led to those cash balances being significantly lower than 2-3 years ago and so they would be looking to undertake external borrowing (in the order of £100m) over the remainder of this financial year, which was in line with the Treasury Strategy and Prudential Indicators, and not as a result of the Council’s financial position.

In response to a query, the Executive Director of Resources (Section 151 Officer) reiterated that the borrowing being undertaken was to externalise existing borrowing that had been undertaken internally based on the capital programme approved by Council and he reassured the Committee that there were no plans to borrow speculatively outside of the Capital Programme/Strategy. 

In response to a query, the Executive Director of Resources (Section 151 Officer) explained how the £0.977m savings on interest payable had been generated and confirmed that the saving was not over the length of the loan but just in this financial year.  He thought that this figure was included within the £1,059m referred to in paragraph 5.3 of the report but that he would check and confirm to the Committee.  He explained that routine changes to the Authorised Boundary were reported to the Audit Committee as well as Cabinet and Council along with an explanation of why they were changing.  It then allowed Council to agree the Mid-Year Strategy which authorised the change in the Authorised Boundary.  He went on to explain that although there was a degree of delegation a change of any magnitude would need Council approval.

In response to a further query, the Executive Director of Resources (Section 151 Officer) agreed to provide Members with a written explanation of the calculations done by the Treasury Team in terms of the Capital Finance Requirement (CFR).  There was some confusion as the amount being borrowed was less than the CFR figure and the Executive Director of Resources (Section 151 Officer) explained that the Council would not necessarily borrow the full amount of the CFR.

Following a question about how the Medium Term Financial Strategy (MTFS) could  ...  view the full minutes text for item 60.

The report of the Executive Director of Resources (Section 151 Officer) is attached.

Contact: James Walton (01743) 258915

The Committee received the report of the Executive Director of Resources (Section 151 Officer) which asked Members to review and comment on the self-assessment of good practice questionnaire attached to the report.  The questionnaire allowed Members to assess the effectiveness of the Audit Committee and to identify any further improvements that could be made which would improve the Committee’s overall effectiveness.

There were three areas of partial compliance as set out in Appendix A of the report for which there was a proposed Action Plan however, given that the Council had its elections in May 2025 and there was a high likelihood that there would be a change to the Audit Committee membership, the areas of partial compliance needed to be addressed over a longer period of time.

In response to a query the Executive Director of Resources (Section 151 Officer) explained that the Committee had the opportunity to have completely unfettered access to External Audit and although that had not happened, the opportunity was there.

A query was raised about whether there was any learning to be had, specifically for the Audit Committee, from those authorities that had issued section 114 notices.  In response, the Executive Director of Resources (Section 151 Officer) explained that where Section 114 notices had been issued, there had been some debate around the financial and governance elements that had driven the authority to issue the notice.  So, for example, was it a case of not enough money, or bad decision making, or something in between.  If the discussion is around bad decision making and the governance processes around that, you automatically look to External Audit and the Audit Committee.  He agreed that there were lessons that could be learnt, that there was advice and public interest reports that External Audit had provided on the back of that and that there was opportunity in terms of the Audit Committee’s work and programme that could be pulled together and look at.

From Shropshire Council’s point of view, the Audit Committee had the opportunity of looking at some of those governance issues contained in the External Auditors reports later in the meeting and he felt that there were recommendations within those reports that the Council needed to address but there was also a role for the Audit Committee to play to ensure that they were seen through and were acceptable and an appropriate plan to be taken forward.

It was agreed to identify some of the learning and best practice from other authorities along with any learning that External Audit may identify and share this at a future training session which could then be built into the self-assessment.

The Executive Director of Resources (Section 151 Officer) clarified that the Council were not looking to issue a section 114 notice as it was not in a position where it needed to do so.

RESOLVED:

To approve the self-assessment of good practice attached at Appendix A and D having identified any errors or amendments required.

The report of the Head of Policy and Governance is attached.

Contact:  Barry Hanson 07990 086409

The Committee received the report of the Head of Policy and Governance which set out the Internal Audit Charter.  The Head of Policy and Governance introduced his report and explained that in January 2024 the Institute of Internal Auditors issued the new Global Internal Audit standards which were due to be implemented on 9 January 2025.  CIPFA were currently undertaking a consultation in relation to their new code which was due to be implemented on 1 April 2025.

Internal Audit had therefore taken the opportunity to review the mandate and charter so that it better aligned with the global internal audit standards and revised UK Internal Audit Code of Practice, leading to some minor amendments which were shown in bold, underlined and italic font.

In response to a query, the Head of Policy and Governance confirmed that he was the Chief Audit Executive referred to in paragraph 7.9 and as such, it was his opinion that was reported at year end on the internal control environment.

RESOLVED:

To endorse the Internal Audit Charter as set out in Appendix A of the report.

The report of the Head of Policy and Governance is attached.

Contact:  Barry Hanson 07990 086409

The Committee received the report of the Head of Policy and Governance which outlined the measures undertaken to evaluate the potential for the occurrence of fraud, and how the Council managed those risks with the aim of prevention, detection, investigation and subsequent reporting of fraud, bribery and corruption.

The Head of Policy and Governance stated that the strategy was available on the Council’s website alongside the ‘Speaking up about Wrongdoing’ policies for both staff and the public, and the anti-money laundering procedures and guidance.  The review identified minor changes which had been reflected in the strategy and supporting policies, procedures and guidance.

He drew attention to paragraph 8.12 of the report which set out the approved Action Plan that ensured the Council continued to protect its assets and further improve its resilience to fraud and corruption.  Section 8 of the report also provided Members with some updates on the national picture including references to some key supporting guidance and documentation.

In response to a query, the Head of Policy and Governance explained how the Whistleblowing Policy was promoted which included via online training for all staff, it was also available on the corporate intranet and was now included in the Chief Executive’s newsletter, at the request of Audit Committee.  He also discussed the protections afforded to any such whistleblowers including confidentiality.

RESOLVED:

To endorse the Counter Fraud, Bribery and Anti-Corruption Strategy along with the measures detailed within the report to manage the associated risks with the aim of prevention, detection, investigation and subsequent reporting of fraud, bribery and corruption.

The report of the Executive Director of Resources (Section 151 Officer) is attached.

Contact: James Walton (01743) 258915

The Committee received the report of the Executive Director of Resources (Section 151 Officer) which set out the review of the Audit Committee Terms of Reference.  He confirmed that no changes had been made.

RESOLVED:

To approve the revised Audit Committee Terms of Reference.

The report of the Executive Director of Resources (Section 151 Officer) is attached.

Contact: James Walton (01743) 258915

The Committee received the report of the Executive Director of Resources (Section 151 Officer) which provided an update on the approval of the 2023/24 Statement of Accounts, and particularly progress on the audit of the accounts.

The Executive Director of Resources (Section 151 Officer) informed the Committee that it had been hoped to bring the audited Statement of Accounts to this Committee but due to a number of reasons (set out in paragraph 8.3 of the report) there was still some work to be finalised.  That work was progressing, and it was expected that the audited Statement of Accounts would be presented to the 20 December Audit Committee meeting to allow sufficient time to meet the statutory deadline of 31 December 2024.

Given the slippages that had occurred in the past, Members sought assurance that officers were confident that the Statement of Accounts would be signed off by the deadline.  In response, the Executive Director of Resources (Section 151 Officer) assured the Committee that as it currently stood, he could not see any reason why they could not hit the deadline.  The Public Sector Audit Senior Manager informed the meeting that she was confident of bringing their Audit Findings report to the meeting on 20 December but that this was dependent upon receipt of the requested information and any further queries that that information may raise.

RESOLVED:

To note the progress on the audit of the 2023/24 Statement of Accounts, and that formal approval of the Audited Statement of Accounts would take place in December.

The report of the Head of Policy and Governance is attached.

Contact:  Barry Hanson 07990 086409

The Committee received the report of the Head of Policy and Governance which provided Members with an update on the work undertaken by Internal Audit since the September Audit Committee.

The Head of Policy and Governance informed the Committee that, in line with previous delivery records, 49% of the revised plan had been completed.  Revisions to the plan provided for a total of 1334 days and were targeted to provide enough activity to inform the year end opinion.  He explained that the number of days had been reduced slightly from 1347 days due to a member of the team undertaking an apprenticeship which included the requirement to allow for 20% of their time for training.

In total, 15 final reports had been issued (between 26 August and 20 October 2024) containing 110 recommendations (set out in paragraph 8.5 of the report) and two draft reports were awaiting management responses.  Five reports provided reasonable assurance (33%) which was a decrease in the higher levels of assurance for the period compared to last year (60%).  This was offset by a corresponding increase in the number of limited and unsatisfactory assurance opinions (67%) compared to 40% the previous year (set out in paragraphs 8.14 to 8.16).

Three fundamental recommendations had been made, detailed at paragraph 8.13 of the report and Members were asked whether they wished for any further updates to be provided from responsible officers to a future meeting of the Audit Committee.

The Head of Policy and Governance drew Members attention to the notable increases in repeated low assurances where follow-up audits indicated that action had not been taken to address the control weaknesses identified and Internal Audit had noticed that Management were suggesting longer implementation dates for significant recommendations (highlighted in table 3).  Therefore, evidence-based risks identified by Internal Audit were not being mitigated in a timely manner and could potentially increase the Council’s risk appetite as significant weaknesses and deficiencies identified from formal audit work were unaddressed for extended periods of time.  Members were therefore also asked whether they wished for any updates to be provided from responsible officers in relation to the unsatisfactory and limited assurances detailed in Table 3.

A discussion ensued in relation to the falling levels of assurance and possible reasons for them.  The Committee expressed their concerns, that the important role of audit was not well understood and was just seen as an ‘add-on’, and they were not comfortable with the longer implementation dates being suggested.  The Chairman stated that the Committee had tried, over many years to raise the profile of audit sufficiently that managers at all levels took it as seriously as they should. 

In response, the Head of Policy and Governance explained the procedure for following up a fundamental recommendation and for agreeing management responses and an implementation date.  If within three months of the audit, then a follow up audit would be undertaken but Internal Audit were seeing an increase in the time scale for implementation, which was very much  ...  view the full minutes text for item 66.

A verbal update will be given.
Contact: Avtar S Sohal (0121) 232 6420

The Committee received a verbal update from the Public Sector Audit Senior Manager in relation to the Audit Findings for 2023/24. She informed the Committee that there were a number of areas where they were awaiting evidence from external bodies and she touched on each area in turn.

In relation to group assurances, the group accounts included a material inventory stock balance in relation to Cornovii housing who were building houses to sell and not to maintain and as such the most efficient way to gain assurance over that balance was to speak to Cornovii’s auditors and gain assurance around the work that they’ve done on Cornovii’s financial statements.  That work was in progress however should those assurances not be received in a timely manner there were alternative procedures that Grant Thornton could undertake.

Secondly, there were two external valuers where they were waiting for responses to queries and although the majority of Grant Thornton’s work was complete, they did need these responses in order to complete these areas.

The final point was around the Pension Fund assurance letters, which had been received in the last couple of weeks so that work was now complete, and the authority was working through the amendments to the financial statements.  There were other areas where evidence or explanations were awaited in order to conclude their sample testing but the majority of those were outside of the finance department, but work was ongoing to complete those areas.

The Public Sector Audit Senior Manager informed the Committee that they would be bringing the Audit Findings report to the December meeting and she had extended the audit teams’ time to ensure that these points can be looked at as they come in.  She was therefore confident that they could met the timeline if in receipt of the relevant information from the Council.

RESOLVED:

To note the contents of the verbal update.

The report of the Associate Director is attached.
Contact: Jonathan Meek

The Committee received the report of the Associate Director which provided a summary of the work undertaken for Shropshire Council during 2023/24 as the appointed external auditor.

The Associate Director introduced his report and explained that the annual report was the conclusion of their value for money work for 2023/24 and also reflected on activity that had happened since the end of March 2024.  He drew attention to the three key areas looked at, which were, financial sustainability, governance, and economy, efficiency, and effectiveness (a summary of the findings for each area was set out on pages 5 to 7 of the report).

In terms of financial sustainability, the Associate Director reported that a significant weakness had been raised in relation to the Council’s arrangements for value for money and it was noted that over the last three financial years there had been consistent overspends that had put pressure on the level of reserves, which stood at 38.8m at the end of 2023/24 and, given that there was currently a forecast overspend for 2024/25 of £35.1m, there was a risk that this could deplete the reserves to £3.7m which posed a threat to the financial sustainability of the Council. 

However, work was ongoing, and the Council were seeking to address these challenges throughout 2024/25 including engaging PWC as a strategic partner and developing a financial dashboard which he commended as a very useful tool for monitoring savings and the financial challenges facing the Council and therefore felt that the Council had a good grip of the financial challenge notwithstanding that it was a particularly challenging outlook.  The 2024/25 forecast overspend and challenges for 2025/26 poses significant financial risk to the Council. 

Of the £90m of savings needed to be delivered in 2024/25, at the time of reporting, only 41% of savings had been delivered but what he was most concerned about was the 42% that had not yet been planned.  It was noted that the Council had established a Savings Delivery Group and was exploring a range of options with MHLGC with regards to addressing the financial challenges.  It was also noted that there were a number of one-off items that were required to balance the budget, and he was concerned that these did not address the long-term structural deficit and was not a sustainable approach to financial management.

The Associate Director informed the Committee that the precarious nature of the Council’s finances had been echoed in both the LGA Financial Challenge and the recent CIPFA report and on that basis felt that the risk of the Council having to issue a section 114 notice was significant.  They had therefore rolled forward a key recommendation from last year around the financial sustainability arrangements.  He explained that as some of the issues had been addressed in the previous year, they had slightly reworded their key recommendation to focus on two key areas (as set out on page 17 of his report).

Turning to governance, the Associate Director drew attention to page  ...  view the full minutes text for item 68.

The report of the Engagement Lead is attached.

Contact: Avtar S Sohal (0121) 232 6420

The Committee received the report of the Engagement Lead which set out the summary of findings, scope of the work, the detailed findings and recommendations for control improvements.  In response to concerns that the report had the word ‘Confidential’ in the top right-hand corner, the Public Sector Audit Senior Manager explained that all of their reports were marked confidential for their own purposes however she had queried whether the Committee would like the report in the public domain and was assured by the Deputy Director of Finance and IT that he was happy that the content did not include any private information.

The report was for information and it’s purpose was to underpin their opinion on the financial statements and usually formed part of the Audit Findings Report.  It also covered the Altair Pension Fund IT system.  There was nothing of concern in the report.

In response to a query around cyber security controls, the Public Sector Audit Senior Manager explained that in response to a follow up of a recommendation, they had not been supplied with evidence to say that it had been resolved so it would continue to be reviewed.  They were not saying that it had a significant impact on the financial statements audit.  The Head of Policy and Governance felt it was a question for the Head of IT in terms of providing that evidence, although there were elements of internal audit work that looked at cyber related controls but that was different to what was being requested.  It was suggested that a progress report on the Council’s cyber security controls be requested for the February meeting.

RESOLVED:

To note the contents of the report and to request a progress report on the Council’s Cyber Security Controls for the February meeting.

The next meeting of the Audit Committee will be held on the 20^th December 2024 at 10:00am

There would be an additional meeting of the Audit Committee to be held on the 20 December 2024 at 10.00am.

To RESOLVE that in accordance with the provision of Schedule 12A of the Local Government Act 1972, Section 5 of the Local Authorities (Executive Arrangements)(Meetings and Access to Information)(England) Regulations and Paragraphs 2, 3 and 7 of the Council’s Access to Information Rules, the public and press be excluded during consideration of the following items.

RESOLVED:

That in accordance with the provision of Schedule 12A of the Local Government Act 1972, Section 5 of the Local Authorities (Executive Arrangements)(Meetings and Access to Information)(England) Regulations and Paragraphs 2, 3 and 7 of the Council’s Access to Information Rules, the public and press be excluded during consideration of the following items.

The Exempt Minutes of the meeting held on the 27 September 2024 are attached for confirmation. 

Contact Michelle Dulson (01743) 257719

RESOLVED:

That the Exempt Minutes of the meeting of the Audit Committee held on the 27 September 2024 be approved as a true record and signed by the Chairman.

The report of the Internal Audit Manager is attached.

Contact: Katie Williams 07584 217067

The Committee received the exempt report of the Internal Audit Manager which provided a brief update on current fraud and special investigations undertaken by Internal Audit and the impact these have on the internal control environment, together with an update on current Regulation of Investigatory Powers Act (RIPA) activity.

RESOLVED: 

To note the contents of the exempt report.