The Opening the Books project was launched by the Mayor in July 2022 to improve the Council’s understanding of current financial risks and to work towards a sustainable financial future. The project has had a number of facets including the commissioning of a series of reviews by Worth Technical Accounting Solutions. The resulting reports were presented to Cabinet with the recommendation that the Audit and Governance Committee be asked to debate them at a future meeting. The reports are being shared in full under the Mayor’s openness and transparency ethos with nothing hidden. The recommendations made by Worth TAS are accepted in their entirety by the Council and are set out in the action plan in Appendix F. It is recommended that progress against these recommendations is monitored by the Audit and Governance Committee through to completion.
The Committee reviewed a report set out on pages 17 – 110 of the agenda which presented the Opening the Books Review project including the reviews commissioned by Worth Technical Accounting Solutions and the subsequent recommendations.
Jane West, Corporate Director of Resources and Section 151 Officer introduced the report for members. Cabinet had referred the report to the Audit and Governance Committee for review and ongoing monitoring of the 76 recommendations.
Peter Robison and Paul Boyce, Worth Technical Accounting Solutions (Worth TAS) gave their presentation to the Committee on the Opening the Books Review. The presentation can be viewed on the webcast recording here: Audit & Governance Committee - Croydon - Civico.
The Cabinet Member for Finance, Councillor Jason Cummings welcomed the detailed nature of the report which provided a clear plan for the implementation of process improvements going forward.
The Committee queried the timeframe of the review and to what extent improvements had been implemented in the 2023/24 budget setting process. Worth TAS advised the review captured a point in time, with the work taking place over 5 days in August 2022. The review focused on the 2022/23 budget setting process and social care budget setting and performance. It did not review the 2023/24 budget or budget setting process.
The Committee queried whether Worth TAS believed the robustness of capacity and capabilities had improved within directorates. Worth TAS noted the strengthened finance team resourcing and the recommendation for continued prioritisation of this. A high level of personal accountability and responsibility from officers was present in the social care review, ensuring management of budgets and delivery of savings or alternatives.The social care budget process and monitoring was now felt to be in a normal position, facing similar challenges as other local authorities.
The Committee queried whether there was overlap between the RIPI and Opening the Books actions. Officers advised the Worth TAS report’s recommendations were more detailed than the RIPI action points and had all been accepted. An action plan report and tracker would be brought to the June 2023 committee meeting.
Cllr Cummings noted the statement on reserves included in the budget by the S151 Officer and highlighted that building reserves would result in further borrowing and therefore impact the Council’s revenue budget. Increasing reserves was a long-term aim once the Council was in a financial position to do so.Officers noted challenges in ascertaining the exact level of reserves without previous years’ accounts being finalised. In 2023/24 the general reserve fund would remain at £27.5 million.
The Committee discussed the optimism bias cited in previous budget setting processes. Officers advised the current approach was to plan for the worst-case scenario. Best and worse-case scenario planning had been included in some 2023/24 budget setting processes but there was still work to implement this practice across all directorates in future years.
The Committee queried whether the budget setting issues were competency or culture based. Officers advised they appeared culture based. Progress had been made, with greater involvement of officers and improved openness in the 2023/24 process.
In response to questions around the quality of data used in the current budget setting process, officers advised the quality data work including systems integration was ongoing. The 2023/24 budget was supported by clearer data and clarity within directorates than in previous years. The Council did not expect to conduct another opening the books exercise in 2023/24.
The Committee raised concerns about the issues cited within health and social care budget setting presentation. Worth TAS advised this had been in relation to processes pre 2021 and these issues were no longer apparent during the review. It was highlighted that some of the predicted service demands in the MTFS were not in line with national trends e.g. numbers of children in social care and hospital discharge levels.
In response to questions about the previous best case scenario approach to budget setting, officers advised optimism bias was not usual in accounting practice and this had resulted in the historical budget inaccuracies and £49 million of adjustments required.
The Committee queried the strategy of selling assets to raise income if there were no properties left to sell. Councillor Cummings noted the differences in Croydon’s structural debt compared with elsewhere e.g. in Slough. Croydon did not have a comparable value of assets, with previous debts not having produced saleable assets and the Council was therefore in conversations with central government about writing off a proportion of debt. The ongoing £100 million asset disposal programme was noted. Worth TAS advised that property sale and lease back would cost more money and compound issues.
At the request of the Committee officers agreed the future monitoring reports would include prioritisation of the recommendations.
The Committee RESOLVED to:
2. To agree to monitor the implementation of the recommendations from the reports