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Agenda item

External audit letter - financial sustainability (G4464)

Purpose: to inform members that Grant Thornton (GT) have written to the Council about concerns on financial sustainability. The letter is shared with the committee to consider and provide questions to the external auditors or management of the implications of the letter.



Joseph Holmes introduced a report (Agenda Item 6), which informed Members that the Council’s external auditors, Grant Thornton had written to the Council about concerns relating to financial sustainability.

In response to a query from Councillor Jermey Cottam, Sophia Brown of Grant Thornton commented that the letter had been written directly after reviewing the Council’s finances of Quarter One, 2023/24, and the significant deficit identified at that time. Sophia Brown noted that she was now tracking the deficit position and had received a Quarter Two report from Joseph Holmes that day which showed that it had almost halved. 

Councillor Paul Dick queried whether the deficit had reduced due to planned or real savings. Sophia Brown commented that she had referred to the planned outturn for the end of the year. It was noted that there was still a risk to the Council as a deficit position would impact the Council’s reserves.

Councillor Dominic Boeck requested clarification as to what a Capitalisation Directive entailed and the implications for the Council. Joseph Holmes explained that it was the process whereby a Council approached Government to request funding in the form of capital money, which if granted, could also be used for any revenue purpose. The money would then be paid back to the Government either similarly to a normal loan or through sale of capital receipts. It was clarified that the process could be used in order to avoid a section 114 report. Joseph Holmes explained that a Minister would write a letter that he ‘was minded to’ lend the Council a certain amount, DHLUC would then visit and review the Council and report back to the Minister and either recommend to allow the release of funds or not.

Councillor David Marsh commented that there was nothing within the report, which Members did not already know. Sophia Brown was encouraged by this noting that it was not the case in every local authority. Sophia Brown explained that as an external auditor it was not her job to predict financial behaviour, but to ensure that a balanced budget was being set. It was explained that the letter had been sent due to the extent of the deficit and the impact on the Council’s reserves.

Councillor Erik Pattenden suggested that it would have been useful to have received the letter in July rather than September. Sophia Brown explained that the delay had been due to the timings of financial reporting, and Joseph Holmes clarified that the Quarter One report had only been published at the end of August.

Parish Councillor David Southgate queried the implication of the Council’s reserves reducing from £7m to £3m. Joseph Holmes explained that he was obliged to write to Council annually recommending a minimum level of reserves. It was noted that it was a Council decision as to whether to take the advice or to decide on a level below that suggested by the s151 Officer. Joseph Holmes explained that CIPFA had historically suggested a reserve level of 5%, but that there was no set minimum requirement.   

RESOLVED that: Governance Committee noted the letter.

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