The Audit Wales representative reported on the Wales Audit Office (WAO) Financial Sustainability Assessment which had been undertaken to assess the sustainability of councils’ short to medium-term financial position, which included a focus on the financial strategy of each council as well as reviewing some key financial indicators of each council’s financial position in relation to:

• performance against budget;
• delivery of savings plans;
• use of reserves;
• council tax; and
• borrowing

The Audit Wales representative informed the Committee that it had undertaken the assessment as it had identified financial sustainability as a risk to councils putting in place proper arrangements to secure value for money in the use of its resources. This was in part informed by recent experiences of some English councils, knowledge of the financial situation in Welsh Councils and the general trend of decreasing resources for local government, combined with rising demand for some services.  She informed the Committee that Audit Wales did not have significant concerns on this Council’s financial position and that the Council has a strong financial position, but aspects of financial planning and its Medium Term Financial Strategy would benefit from strengthening and had reached the following conclusions:

·     The Council’s Medium Term Financial Strategy would benefit from strengthening in some important areas.

·      In recent years the Council has underspent all its annual budgets and it also expects to underspend its 2019-20 budget.

·     The Council has a good track record of achieving most of its planned savings.

·         The Council has a high level of useable reserves.

·         The Council has a good track record of collecting its council tax.

·     The Council has a relatively low level of borrowing and interest costs and has not sought any new long-term loans since 2012.

The Chief Officer – Finance, Performance and Change informed the Committee that the financial position and sustainability of the Council had changed greatly during the pandemic.  Claims to the Welsh Government are being submitted each month, with some claims being paid at the rate of 50%, with the Council having to fund the remaining 50%.  A report was being submitted to Cabinet forecasting a £3m overspend for the first quarter.  The Interim Deputy Head of Finance informed Cabinet that a number of claims for additional costs and loss of income had been submitted to the Welsh Government, although it was not known whether the Council would be reimbursed for the claims submitted.  She stated that income from car parking and Council Tax had reduced and more claims had been received for Council Tax and Housing Benefit support.  She informed the Committee it was difficult to predict the financial impact on the Council in future years.

The Audit Wales representative informed the Committee that this piece of work had been conducted before the pandemic and that further work on the financial sustainability of Councils will be undertaken on the impact of the pandemic. 

The Chief Officer – Finance, Performance and Change informed the Committee that cash flow is being managed and the Welsh Government is endeavouring to reimburse the Council as promptly as possible, with payments being received for business rate grants.  Payments for social care staff were anticipated to be made during August.  She stated that the Council can rely on short term borrowing, but the Council is taking a very prudent approach. 

The Committee expressed concern at the lack of recommendations made by Audit Wales in its report and that the comments made were open to interpretation and whether the Council’s position in relation to the reserves it held was seen as a positive or a negative.  The Audit Wales representative informed the Committee that a decision had been made by Audit Wales not to include recommendations at this stage, but recommendations would be made in a national report which had been delayed due to the pandemic, but would be available in August 2020.  She stated that the Council has financial resilience in terms of its usable reserves.  

A Member of the Committee referred to the findings of Audit Wales and asked for an explanation in relation to the improvements suggested to the MTFS.  The Chief Officer – Finance, Performance and Change informed the Committee that it was about linking finance with performance, which many public bodies find difficult to produce value for money unit costs and is something to strive for.  She stated that the Corporate Plan is linked with the MTFS and there is a need to get activity levels associated with cost but also to look at benchmarking to try and see whether value for money is being delivered and to see effectiveness.  There was a need to use analytics and to discuss with Audit Wales how they can help us with achieving that in terms of benchmarking and how objectives are better linked with the cost of delivering those.  The Audit Wales representative informed the Committee that conversations had taken place with officers on savings planning and how the budget gap in the MTFS will be met and how the Council can strengthen the MTFS.  The Audit Wales representative also informed the Committee that the national report will be ready in August 2020 and that it had been working with Section 151 Officers and the WLGA on the report. 

RESOLVED:            That the Committee noted the WAO Financial Sustainability Assessment Report.