Agenda item

Purpose: To consider the Draft Auditor’s Annual Report for the year ending 31 March 2025 from KPMG (external auditor).

Jonathan Brown presented the KPMG Draft Auditor's Annual Report 2024-25 (agenda item 6).

The following issues were raised in the debate:

·       Members asked about the reasons for the worsening DSG deficit. It was explained that demand for services was outstripping the funding received.

·       KPMG was asked whether any findings related to financial control, demand management or weaknesses in forecasting in Children and Family Services and SEND. It was confirmed that recommendations did not link to those areas specifically, as the audit covered combined numbers.

·       Members raised concerns about the Transformation Programme and its ability to deliver net savings. The Council had been unable to find alternative providers to run its Care Homes or Resource Centres.

·       There was a question about the status of work on management override controls. It was confirmed that work was ongoing to look at journals, with a handful of items outstanding. Work was expected to be completed before the end of February.

·       Members asked about use of the sliding scale used throughout the document. It was explained that this was intended to show whether the council's approach was cautious, neutral or optimistic. For example, the council's valuations of land and buildings were slightly on the optimistic side, but still within an acceptable range.

·       Members noted the use of a blue square with an exclamation mark to denote significant audit risk, but suggested this could be confusing if not reserved for particularly serious issues.

Action: KPMG to review the use of symbols where there was limited risk.

·       It was requested that the two KPMG reports be presented at separate meetings in future, as reviewing both together was demanding.

Action: KPMG to consider bringing their reports to separate meetings in future years.

·       Members noted that the council's debt was approaching the total value of its land and building assets and asked if this was a problem. It was explained that these were just one category of assets and that this was not a concern. However, the level of usable reserves was considered a problem.

·       Members queried whether the forecast budget gap of £30 million (page 31) included the recent local government settlement.

Action: Officers to confirm if the budget gap included the recent local government settlement.

·       The report identified six control deficiencies and Members asked how the council compared to similar authorities. It was explained that deficiencies related to management review of expenditure and actuarial assumptions were common across councils, but the unauthorised approval of capital grants was not and this was considered a higher risk. The number of control deficiencies was slightly higher than for similar councils.

·       Clarification was sought regarding fees. It was explained that scale fees were set by the Public Sector Audit Appointments contract. The standard fee assumed that everything would be found to be acceptable, but extra fees would be required to cover additional work (e.g., auditing the payroll system), and to investigate issues uncovered by the audit.  It was estimated that the additional fees would be around £20,000.

·       Members asked when the individual responsible for the unauthorised approval of capital grants had left the council. It was confirmed that the officer left in July 2025.

RESOLVED to note the KPMG Draft Auditor's Annual Report 2024-25.