Agenda item - Ernst & Young Audit Results Report 2014/15

Report of Ernst & Young (copy attached).

1)            That Members note the findings set out in the 2014/15 Audit Results Report..

31.1      The Committee considered a report of Ernst & Young that summarised the findings of the 2014/15 audit that included key messages arising from the audit of the financial statements and the results of work undertaken to assess the council’s arrangements to secure value for money on its use of resources. Representatives from Ernst & Young stated that they were in a position to give an unqualified opinion of the council’s financial statements. A unqualified opinion would be issued for the council’s value for money arrangements as Ernst & Young were satisfied that the council had put in place proper arrangements to secure economy, efficiency and effectiveness in its use of resources however, sufficient progress had not been made in identifying the savings required to demonstrate its ability to secure a stable financial position over the medium term.

31.2      Councillor Morris noted that the report highlighted that £2.2 million as the sum owed to the council in relation to Coin Co International PLC entering administration. Councillor Morris stated that this figure had been reported as higher in other documents and asked the reasons behind that.

31.3      Simon Mathers clarified that this figure was reported as £2.2 million in this report as it exclusively covered the 2014/15 financial year.

31.4      Diane Bushell stated that whilst she was generally satisfied in the actions and progress taken by the council on ensuring value for money, she asked Ernst & Young if they were of the view that there was room for improvement.

31.5      Paul King clarified that stated that Ernst & Young’s opinion that the council was taking reasonable action and making reasonable progress was a general statement and there would always be areas for improvement. Simon Mathers added that whilst Ernst & Young could not give absolute assurance, their audit had found nothing of specific concern and there was always scope for improvement in any financial practices and arrangements.

31.6      Councillor Sykes noted that Brighton & Hove City Council was a statistical outlier in terms of high demand in a number of areas of work, for example mental health services and planning applications, and asked if unit costs for service provision were used in benchmarking as well as per-capita costs.

31.7      Paul King confirmed that Ernst & Young used a range of indicators including unit cost and all determined that Brighton & Hove Council were high value in terms of cost in these areas.

31.8      Councillor Druitt asked for clarification on the acknowledgement that the council delivered to budget but that there had also been a reduction in its reserve funds.

31.9      Simon Mathers stated that the council had delivered to budget and that £2.4 million of reserves had been earmarked for the General Fund to support budgetary pressures. The overall level of usable reserves available to support spending was reducing and had done so by £10 million between 2013/14 and 2014/15.

31.10   Councillor Taylor expressed his disappointment that the council had not reached its value for money targets and his concern at the current £8.7m budget deficit. Councillor Taylor asked if there were any lessons the council could learn to improve in the future.

31.11   Paul King stated that councils were taking a range of options to meet the challenges of budget reductions. For example, some were examining methods of high returns, some were considering increases to their fees and charges, and others were adopting shared service agreements.

31.12   The Interim Executive Director of Finance and Resources stated the council were mindful of effective financial planning and one measure put into place was for a four year budget strategy agreed at Policy & Resources Committee in July 2015.

31.13   The Chair stated that the £8.7m budget deficit was a matter the Committee took very seriously although she had been assured that the measures put into place would go some way to resolve the issue.

31.14   Councillor Sykes noted that there was a continued increase in demand upon services alongside severe central government budget reductions and the council needed a clearer, more coherent response to those issues.

31.15   Diane Bushell requested assurance on the measures the council were undertaken to reduce the current budget deficit.

31.16   The Interim Executive Director of Finance and Resources stated that the matter was ongoing and the council were continually reviewing measures to reduce the deficit. Strong financial controls had recently been put into place and a cross-party budget review group had been put into place providing oversight.

31.17   RESOLVED-

1)            That Members note the findings set out in the 2014/15 Audit Results Report.