Agenda item

Gareth Mills, Director, Grant Thornton introduced the External Auditor’s Annual Report for the Council for 2020/21 which informed the Committee of the key matters arising from the audit of the Council’s financial statements, and key recommendations as part of their work in delivering their responsibilities as the Council’s External Auditor.

Members were informed that the report was a positive report and this was the first report presented to the Committee under the new approach introduced last year, following changes made to the reporting for External Auditors’ on Value for Money arrangements resulting from a review undertaken by the National Audit Office Code of Audit Practice. The External Auditor was required to consider whether the Authority had put in place proper arrangements to secure economy, efficiency and effectiveness in its use of resources.  The External Auditor was no longer required to give a binary qualified/unqualified Value for Money conclusion. Instead, Auditors reported more in detail on the Authority’s overall arrangements, as well as key recommendations on any significant weaknesses in arrangements identified during the audit.

The External Auditor’s work had focussed on 3 particular themes in relation to the Council’s arrangements in respect of Financial Sustainability, Governance and how the Council was Improving Economy, Efficiency and Effectiveness of the performance arrangements of the Council and this was a more wide ranging review to the previous VFM money conclusion. An update report would be provided to the Committee in the autumn as part of the 2021/22 Value for Money work to monitor how the Council was progressing in these areas.

PerminderSethi, Engagement Senior Manager, Grant Thornton provided an overview of the key messages from the report.

Overall, no risks of significant weaknesses and related key recommendations, including the Authority’s response to Covid-19 had been identified under the risk assessment of the Council’s Value for Money arrangements. However, the External Auditor had identified 5 suggested improvement recommendations to further enhance the Authority’s arrangements, in respect of the following areas:-

·         Financial Sustainability

Recommendation 1 - the Council should clearly identify statutory and discretionary spending in budgetary information which is provided to members and the public when setting the budget each year.

Recommendation 2 –The Council should routinely monitor the Dedicated Schools Grant (DSG) budget and implementation of the DSG deficit plan to ensure expected planned cost reductions and savings were delivered, and where slippage arises, remedial action is taken. Routine reporting should also take place to members.

·         Governance

Recommendation 3 -the Council should formulate an action plan to address the issues identified in the Ofsted inspection of the Council's Children's Services. The action plan should include clear target dates and be formally reported to Ofsted and members, and monitored routinely by senior management with regular progress reports presented to the Cabinet.

·         Improving economy, efficiency and effectiveness

Recommendation 4 -The Authority should further develop the Council's performance reporting by including performance indicators in tabular form showing the complete set of the Council's key performance indicators by service area and their current period performance, comparison from the prior period, RAG rating movement and comparison with the Council's stated targets.

Recommendation 5 - The Authority should finalise the procurement strategy which is currently being developed as soon as possible. This should set out the Council's objectives and approach to procurement.

In relation to the Council’s arrangements in responding to the Covid-19 pandemic, no significant weaknesses had been highlighted and no recommendations made.

The Council’s management had responded to the External Auditors Improvement Recommendations, which were set out at pages 11 to 21 of the report.

The External Auditors wished to place on record their thanks to the Director of Corporate Resources, Assistant Director of Finance and the Internal Audit team who had provided the External Auditors with the information required to enable them to undertake their work.

In response to a question from Kathryn Smart seeking clarity in relation to the action taken by the authority and management’s response to the External Auditors Improvement Recommendation 1, as outlined above, the Assistant Director of Finance confirmed that if in future years, the Council was unable to balance the budget an assessment would be undertaken of the statutory and discretionary spending and publish the budget proposals, however she emphasised that this was dependent on the circumstances presented at the time. She explained that previously the Council had undertaken a detailed analysis of statutory and non-statutory services which had identified challenges for the Council in categorising costs and that the cost and the extent of provision for individual services could vary. The Assistant Director of Finance confirmed that presently the Council was comfortable with the budget setting process in terms of how pressures and savings had been assessed, therefore it would continue on this basis, however, advised that in the event of further financial pressures in the future, the budget would need to be looked at more closely.

Following a further question, the External Auditor confirmed that it was at the Councils discretion with regard to what action it took to bring down the level of expenditure, or increase the level of income. He advised that based on the Council’s Medium Term Financial Strategy, the Council was managing its financial pressures and therefore the External Auditor had not felt that this was a significant issue that they would wish the Council to take action on.

The Director of Corporate Resources highlighted one key area that had emanated from the External Auditor’s report which was the Council’s status and spending in comparison to that of other local authorities. It was noted that discussions had taken place with management in the Council in relation to how this information could be utilised as a starting point for the Council to look at the reasons for the Council’s areas of high levels of spend. The Director of Corporate Resources highlighted areas the Council was already aware of, in particular, with regard to the proportion of the budget being spent on Doncaster Children’s Services Trust (DCST) and that as part of the AGS the Council was to look at how better to improve service delivery.

The Director of Corporate Resources outlined the arrangements to monitor the implementation of the actions relating to the External Auditors’ 5 Improvement recommendations. She highlighted the range of mechanisms of how these would be reported to the Committee and that implementation of the actions would possibly feature as standard monitoring reports, but would not feature as a separate report to the Audit Committee nor would be an action on the Internal Audit Work Plan.

In referring to the Improvement Recommendation 3 regarding the action plan to address the issues identified in the Ofsted inspection of Doncaster Children’s Services Trust (DCST), given the significance of this issue, the Vice-Chair asked whether External Audit would be carrying out a review of the overall governance of the programme. In response, it was confirmed that the transition of services delivered by DCST which were to come back to the Council, would form part of the External Auditor’s work in 2021/22.

In response to a query regarding the External Auditor’s benchmarking of other local authorities with regard to their levels of spend, the External Auditor emphasised the importance of the benchmarking exercise, the purpose of which was to look at the reasons for any high or low levels of spending in an Authority, which provided the opportunity for management to be challenged and to be able to provide justifiable reasons for that spend, and to take into account the output and quality of the service delivered by the Council for that local authority spend. A good starting point for the Council would be to look at what was being delivered in Doncaster and whether that was important to the public and the region. In response to a further question, the External Auditor advised that of the reports he had issued recently, Doncaster’s arrangements and recommendations were broadly in line with other local authorities and some smaller District authorities.

The Chair on behalf of the Committee thanked Gareth and Perminder for the report.

Members noted that overall the report was a positive one for the Council which had found no weaknesses in the Councils Value for Money arrangements and that effective processes and financial monitoring were in place. Despite the increasingly uncertain financial environment and challenges faced by the Council, in particular the Council’s response to the Covid-19 pandemic, the Council had maintained a good financial position and had received a positive opinion on the Councils financial stability, which had forecasted a balanced budget for the next 3 years and had not had to use its general fund revenue reserves, as seen elsewhere from other local authorities across the country. As a consequence, the Council’s general fund revenue reserves position remained healthy, the External Auditor confirmed that the future financial sustainability of the Council following recovery of the Covid-19 pandemic had been stepped down from the Annual Governance Statement, but would remain on the risk register.

With regard to the completion of the Audited Statement of Accounts for 2021/22, the External Auditor confirmed that he was confident that the Accounts would be signed off by the statutory deadline of the end of November and it was anticipated that the Value for Money work was to be completed at the end of January 2023.

RESOLVED that the External Auditor’s Annual Report in respect of Doncaster Council for 2020/21, be noted.