Agenda item

Georgia Jones, Key Audit Partner, presented the report.

Under the National Audit Office Code of Audit Practice, the external auditors were required to consider whether the Service had in place, proper arrangements to secure economy, efficiency, and effectiveness in its use of resources.

As reported, the audit was substantially complete, and the auditors expected to issue an unqualified audit opinion following the Audit Committee meeting subject to receipt of the management letter of representation and final quality procedures.

The auditors had made some improvement recommendations and had identified a significant weakness which had resulted in a key recommendation arising from their work on the Authority’s value for money arrangements to secure economy, efficiency, and effectiveness in its use of resources. This key recommendation and management response was set out on Page 144 and 145 of the agenda pack as follows:

-        Recommendation – The Authority needed to ensure it maintained a robust framework of financial governance to ensure risks to financial resilience and sustainability were adequately monitored and controlled. The Authority should: Develop a plan to address its general reserves position and its current use of reserves to balance its financial position. It needs to set out how its General Fund will be brought to a level that mitigates the risk to future financial sustainability; and Continue to take steps to contain expenditure and deliver sustainable savings.

-        Management Comments – The Authority set its 2023/24 budget during a period of extreme financial uncertainty: at the time facing potential industrial action and an unsettled pay award dating back to the previous July. Having one of the highest levels of usable earmarked reserves and general reserves across all fire authorities, the Authority was in a strong financial position and the budget was set with the high expectation that the general reserve would be able to absorb the financial impact of the pay award, which it ultimately was able to. Other funding options were available such as reducing the capital programme commitments that would not have reduced reserves, but this strategy ensured there was no impact on services or the capital ambitions of the Authority. It was accepted that in setting the 2023/24 budget, a longer-term budget gap was forecast which would result in further reductions in the general reserve without additional funding or cost reductions. The Authority now had greater certainty on its capital programme costs and, at the time the report was written, expected the Authority to set its 2024/25 budget that planned to address the long-term general reserve forecast position.

Members noted that from the management comments that the external auditors were satisfied this key recommendation had been addressed in setting the budget for 2024/25. The Director of Corporate Services confirmed that the budget gap identified in the Medium Term Financial Strategy (MTFS) had been addressed as part of setting the 2024/25 and the general reserve remained at £1m above the minimum level of reserves for the five-year period of the MTFS.

Resolved: - That the Committee noted the management comments and endorsed the report.