Agenda item

The purpose of this report is to share the report of the auditors, Grant Thornton, with the Committee, share background information and a report of the actions being taken in light of the audit report and other matters arising. 

This report has been prepared on behalf of the Council’s Shareholder Board by the secretary to the Board.

Declarations of interest:

None

Witnesses:

Thomas Ball, Manager – Grant Thornton

Andy Mack, Engagement Lead – Grant Thornton

David McNulty, Chief Executive

Sheila Little, Director of Finance

Susan Smyth, Strategic Finance Manager

Key points raised during the discussion:

1.    It was noted that the Shareholder Board was responsible for the oversight of companies in which the Council held shares, including Surrey Choices, and that its role may be scrutinised by the Council Overview Board.  The responsibility of the Audit & Governance Committee was in relation to the impact on the Group accounts of the Council.

2.    The Chief Executive commented that whilst the Shareholder Board was deeply disappointed by the governance failures identified, he was pleased that Grant Thornton felt that the issues were being adequately addressed by the company.  This reflected the fact that more rigorous processes had been put in place, particularly in relation to financial management.

3.    In response to a challenge about whether the business model adopted for Surrey Choices was the most appropriate, it was reported that unit costs for the service had been reduced.  Some innovation in the approach to service delivery had been introduced, and the profile of the workforce was now more reflective of the clients they were working with.  Also, there had been some growth in the services provided for other councils, which meant that Surrey Choices was less reliant on County Council funding.  The Shareholder Board was sufficiently reassured about the basis of the business model and the recovery plan, and believed that there were strong prospects for future growth.

4.    The Annual Business Plan for Surrey Choices was being presented by the company to the Shareholder Board in March/April 2016.  This was expected to include the resolution of the increased volumes under the block contract with Adult Social Care.  The Shareholder Board would then be able to determine whether the concerns had been fully addressed.

5.    The Committee requested that the Annual Business Plan be shared with the Committee after it had been approved by the Shareholder Board.

6.    Concern was expressed about whether the governance failings should have been picked up earlier, and the Chief Executive commented that the processes in place to identify issues of concern (ie internal and external audit) had operated as they should have done.  The Committee noted that immediate changes were made to the financial support within the company and that the Surrey Choices Managing Director was taking a more pro-active role to significantly improve the company’s governance processes.  The Deputy Chief Finance Officer had been appointed to be a Director of the company to provide strategic advice, and the company was being supported by the advisors to the Shareholder Board.  The company would progress the recruitment of a new Chief Financial Officer for Surrey Choices.

7.    In the light of the concerns with Surrey Choices, the Committee agreed to recommend again that a financial expert from the Council should be appointed to serve on the boards of the Council’s trading companies in a non-executive capacity.  Officers commented that the Council’s limited resources meant that it would not be practicable for a senior finance officer to fulfil that role on the board of each company and that Council employees would not necessarily have the required level of commercial experience.  Decisions would therefore best be made on a case-by-case basis.

Action/Further information to note:

The Surrey Choices Annual Business Plan to be shared with the Committee after it has been approved by the Shareholder Board.  [Recommendations Tracker ref: A2/16]

RECOMMENDED:

That a financial expert from the Council be appointed to serve on each of the boards of the Council’s trading companies in a non-executive capacity.  [Recommendations Tracker ref: A3/16]

[The Committee adjourned from 11.22am to 11.26am]