Agenda item

To present the report of the Head of Audit and Risk.

The report of the Head of Audit and Risk providing an update as of 30 November, 2022 on the audits completed since the previous update to the Committee in September, 2022 was presented for the Committee’s consideration. The report also set out the current workload of Internal Audit and its priorities for the short to medium term going forward. Members of the Committee were provided with copies of the three pieces of assurance work completed in the period in relation to Financial Resilience (Reasonable Assurance); Cash Handling at Cyswllt Môn (Reasonable Assurance) and Council Tax and Non Domestic Rates Refunds (Reasonable Assurance) under separate cover. A fourth report in the form of a Climate Change Health Check was issued by Zurich Municipal Risk Engineers who were commissioned to review this area of the Council’s work in order to help it gain a better understanding of the key risk exposures and improvements required to manage this risk and to support the Council’s objective of achieving net zero status by 2030. The health check report was the subject of a separate agenda item.

The Head of Audit and Risk highlighted the Financial Resilience assurance report as a key area and an identified strategic risk on the corporate risk register, and she explained that the internal audit review had sought to establish whether the Council has adequate arrangements in place to manage the implications of real term funding reductions to ensure that it continues to achieve its priorities and delivers quality services. The review found that within the scope of its control, the Council does have a framework of effective controls in place to manage the implications of real term funding reductions but despite this, it is clear that the Council faces difficult decisions over the next two years due to the current challenging and unpredictable economic climate. This conclusion was reached on the basis that the Council operates an effective budget monitoring process as well as a policy to retain 5% of its net revenue budget in general reserves which helps mitigate against financial risks; it has a fully developed Medium Term Financial Plan which projects the Council’s likely resource requirements and funding availability over a two year period, and it has outlined a number of key financial performance indicators which are tracked through the quarterly corporate scorecard. However, the Council could benefit from utilising CIPFA’s five indicators of public sector financial resilience as shown in Appendix 1 to the review report in order to help it assess its longer term financial resilience.

The Committee considered the internal audit update report and in the context of the Financial Resilience review the issue of school reserves was discussed, specifically whether excess balances held on school budgets can be transferred and used elsewhere. The Director of Function (Resources)/Section 151 Officer explained  the process for managing school surplus balances and confirmed that schools can retain an underspend on their annual budget unless the figure exceeds a 10% threshold and the school is not able to demonstrate that it has plans to use the surplus. In that case the Authority would be able to claw back any funding above the threshold and all such funding would be returned to the schools budget to be re-allocated through the funding formula meaning that schools with little or no reserves cannot be targeted for support. Schools have balances for a number of reasons for example to manage unexpected circumstances and fluctuations in expenditure. The funding formula can be affected by the size of a school’s pupil population be that a reduction or expansion in number; where a school in any one year is reducing in pupil numbers, it is reasonable that it should draw on its reserves to smooth the impact in the short-term.

It was resolved to note Internal Audit’s assurance provision and priorities going forward.