To consider Grant Thornton’s Financial Resilience Report.

19.1           Attention was drawn to Grant Thornton’s financial resilience report, circulated separately at Pages No. 1-30, which set out the value for money findings in respect of financial resilience work. Members were asked to consider the report.  

19.2           Members were informed that Grant Thornton produced this report as part of its value for money conclusion work. The report demonstrated the evidence obtained to make the assessment and was produced on a red, amber, green basis; whereby red was high risk; amber had potential risks and/or weaknesses; and green was where arrangements met or exceeded adequate standards. The overall conclusion reached was that the Council had adequate arrangements in place to secure financial resilience.

19.3           The Audit Manager referred Members to Page No. 7 which set out the conclusions in the four areas of: key indicators of performance; strategic financial planning; financial governance; and financial control. Two of those areas, key indicators of performance and financial control, had been assessed as amber, which meant they were adequate but there was scope for improvement, and the other two were green. In terms of key indicators of performance, the main reason for the amber rating was the budget overspend for the last two years as it was considered that this did not demonstrate good performance. In addition, the sickness absence rate had not been on target. The financial control risk area looked at budgeting, savings, risk management and resourcing. This area was amber partly due to the impact of overspending in the last two years and also due to the fact that the risk register had not been submitted to Committee for review, although it was understood that this had subsequently been done. The audit also recognised the size of the Finance Team and the difficulty experienced in covering staff absences. The risk area in relation to strategic financial planning was rated as green. There were a couple of comments within the body of the report which related to the lack of public consultation on the 2013/14 budget and the fact that the Council needed to improve its scenario planning which it was hoped would negate the overspend on its budget. In terms of financial governance, overall there were strong arrangements in place which meant the risk was also rated as green.

19.4           Pages No. 8-11 set out the recommendations made in respect of each area of review along with the management response in each case. Grant Thornton was happy that it had sought responses and that the responses received were adequate to ensure improvements in future.

19.5           During the discussion which ensued, a Member felt that it should be noted within the report that the 2012/13 budget deficit had not been solely due to underperformance on savings targets but rather was largely due to a third party not following through on an agreed arrangement and this had not been within the control of the Council. In response, the Engagement Lead explained that inevitably things would change throughout the year after the budget had been set. However, he felt that the Council would benefit from improved scenario planning so that, if an element of the budget was not delivered, the Council had another option, or if there were year on year overspends, a more prudent approach was taken. In respect of the current financial year, the Finance and Asset Management Group Manager explained that in the first quarter the Council had been in line with budget predictions and the early indications for the second quarter suggested a small surplus. However, there was still a long way to go in delivering the more difficult elements of the savings plan. It was understood by Officers that any elements of the budget which involved a third party needed to be more clearly highlighted in future with the risks set out explicitly. Officers were currently working on problem solving and scenario planning and this would be submitted to Members in due course.

19.6           In addition to the concerns raised about the need to include a note that some of the previous deficit in the budget was due to the withdrawal of a third party, another Member also felt that somewhere within the report there should be reference to any areas that were due to a change in Government thinking. In response, the Engagement Lead indicated that the withdrawal of the Primary Care Trust’s investment had been noted within the body of the report as this was a detailed point and had not been considered appropriate for inclusion within the Executive Summary, however he would be happy to look at this again should Members so wish. Members agreed that whilst this was a detailed point it was an extremely important point and accordingly it was

                  RESOLVED          That Grant Thornton’s financial resilience report be NOTED but                              that an amendment be made within the Executive Summary to                                make reference to the withdrawal of the Primary Care Trust’s                            investment being one of the reasons that the Council’s budget                            had been in deficit in the previous year.