Agenda item

That the Annual Audit Letter to County Council Members be noted.

Mr. John Herniman introduced the Annual Audit Letter from the Council’s Appointed Auditor, Wales Audit Office (WAO), which summarised the work and key findings from 2012/13 in line with statutory requirements.  As reported to the Committee in September at the conclusion of the audit of the financial statements, the letter indicated that the Council had complied with its responsibilities relating to financial reporting and use of resources but found that there was further scope to strengthen its financial controls in a number of areas and that the Council faced significant financial challenge which needed to be addressed.

Mr. Herniman acknowledged that considerable progress had been made on the Medium Term Financial Plan (MTFP) and said that clear plans were needed to address the projected budget gap of £16.5m for 2014/15.  He emphasised that despite progress made, the risks and financial pressures remained and the projected longer term financial gap of £47.8m over the next few years would need to be addressed with plans put in place for the workforce, achievement of savings, monitoring of progress and implementation of backup plans, if required, to balance the budget.  Mr. Herniman went on to say that he recognised the good progress that had been made towards finalising the Single Status agreement.

In response to comments made by the Chair on significant costs incurred following the liquidation of AD Waste, Mr. Herniman was unaware of any further costs and said that WAO had been satisfied that the adjustments made had been correctly treated in the accounts for 2012/13 on which an unqualified clean audit opinion had been granted.

Mr. Paul Williams sought clarification on the WAO view on the Council’s MTFP and asked about the Committee’s role in helping to keep this on track.  Mr. Herniman replied that detailed plans were required to achieve savings and set a balanced budget and whilst it was accepted that this was being progressed, the risk needed to be flagged up.  The WAO would assess this as part of the audit in the coming year and the Committee would need to focus on the development of the MTFP along with other reporting processes in the Council as part of its work.

The Chief Executive emphasised that the scale of financial change needed was due to national decisions on funding and that the recognition to develop a resilient MTFP had previously been accepted by the Council.  Whilst Flintshire had benefited from early planning in achieving efficiencies over the past three years, in comparison to some other Councils, further efficiencies were now required to address the significant longer term challenges faced nationally by all Councils.  Plans including value for money reviews were being shared in Member workshops in December and Overview & Scrutiny budget meetings being arranged for January 2014 with an overarching view on risks to be considered by the Corporate Resources Overview & Scrutiny Committee at the end of the process for onward submission to Cabinet.

The Head of Finance reiterated that the Council recognised the challenges from the budget position which applied to all Councils in Wales over the next five years.  She gave assurances that the Council was mindful of the risks and need for long-term planning, which would be shared with Members over the coming weeks and months.

In response to a question from the Chair on liability for pension contributions on equal pay liabilities, Mr. Herniman said that this was a long-standing issue affecting all Councils.  Although legal advice obtained by the Council and other Councils differed to that of the Appointed Auditor, the WAO had agreed that litigation action (to resolve the issue) would not be beneficial and had therefore taken a pragmatic view that no further action was required.  In noting the stance taken by WAO, the Head of Legal & Democratic Services spoke of the potential for variations in legal advice and said that the Council had followed the advice of Geldards and that a choice was available to individuals.  In response to a further question, the Chief Executive said that the Council had retained Geldards as the expert solicitors engaged by a number of Welsh Councils with shared costs and that the advice had been followed successfully with no challenge from Trade Union colleagues.  As part of an update on Single Status, he advised that following approval of the Agreement at County Council on 29 October 2013, the workforce reaction to receipt of results letters had been broadly well received with enquiries being dealt with by the temporarily dedicated HR Contact Centre.  A date for the Trade Union ballot was awaited for the New Year, with implementation of the Agreement scheduled for 1 April 2014.

Mr. Williams sought assurance that there would be sufficient resources in the Finance section to carry out additional work on the budget.  The Head of Finance said that there were no concerns at the present time as work on the MTFP and budget was part of the work of the Finance division to support the organisation, however any problems with capacity would be flagged up should they occur.

The Chief Executive recognised that resources would be stretched by the changes needed to address the budget position and the impacts of Single Status on staff, with difficult decisions to be made for the capacity of the whole organisation to enable the sustainability of the future budget.

The Chair thanked Mr. Herniman and Ms. Amanda Hughes from WAO (who was not able to be present at the meeting).

RESOLVED:

That the Annual Audit Letter to County Council Members be noted.