An apology had been received from Councillor Sharon Ritchie-Simmons.  Councillor Harry Hancock-Davies substituted for her.

Members are reminded that they must declare their disclosable pecuniary interests and other registrable or non-registrable interests in any matter being considered at the meeting as set out in Appendix B of the Members’ Code of Conduct and consider if they should leave the room prior to the item being considered. Further advice can be sought from the Monitoring Officer in advance of the meeting.

Members were reminded that they must not participate in the discussion or voting on any matter in which they have a Disclosable Pecuniary Interest and should leave the room prior to the commencement of the debate.

The Minutes of the meeting held on the 26 September 2025 are attached for confirmation. 

Contact Michelle Dulson (01743) 257719

RESOLVED:

That the Minutes of the meeting of the Audit Committee held on the 26 September 2025 be approved as a true record and signed by the Chairman.

To receive any questions from the public, notice of which has been given in accordance with Procedure Rule 14.  The deadline for this meeting is 12noon on 21 November 2025.

No Public Questions had been received.

To receive any questions from the public, notice of which has been given in accordance with Procedure Rule 14.  The deadline for this meeting is 12noon on 21 November 2025.

No Members Questions had been received.

The report of the Interim Chief Executive is attached.

Contact: Tanya Miles (01743) 255811

The Committee received the report of the Interim Chief Executive which provided an initial response to the ‘limited assurance’ opinion of the Chief Audit Executive for the year ended 2024/25 and set out the steps the Interim Chief Executive and Leader of the Council were taking to strengthen the Council’s framework for governance, risk and internal control.

The Interim Chief Executive and the Leader of the Council presented a comprehensive update to the Committee on actions taken to address limited assurance findings, which included the following:

• Fortnightly statutory officer meetings (which included the Interim Chief Executive, the Chief Financial Officer, the Monitoring Officer and the Chief Audit Executive).

• Oversight of all internal audit recommendations and implementation of them.
• Weekly updates to the Interim Chief Executive and Leader on audit activity and FOIs.
• Senior Leadership Forum meetings to set clear governance expectations.
• All-staff communication emphasizing compliance with the Constitution, policies, and procedures.
• Publication of an improvement plan and a people plan focused on culture, leadership and talent, capability and capacity.
• Establishment and first meeting of an independently chaired Improvement Board.
• Review of strategic risks and reduction of overdue Freedom of Information requests (by half) and outstanding audit actions (from 181 to 33 in four weeks).

The Interim Chief Executive hoped this gave the Committee assurance on the actions taken by herself and the Leader, who took the issues extremely seriously and confirmed that they received weekly monitoring updates and she expressed confidence that these actions would restore a stronger control environment.

Members were reassured by the improvements underway but remained concerned about ongoing operational and cultural challenges. They briefly discussed the need for cultural change and agreed that continued monitoring by the Audit and Governance Committee was essential, a step welcomed by the Interim Chief Executive.

Members felt that it was unclear how well staff understood the role of audit within the organisation.  In response, the Interim Chief Executive emphasised the need to clarify expectations concerning the significance of audit processes and Freedom of Information requests and she had some ideas about how to do that and how to cascade it down to all staff, not just at senior officer level.

RESOLVED:

a.        to note the positive feedback and actions being undertaken to strengthen governance
           within the Council.

b.        to receive future updates and for the Leader and the Interim Chief Executive to attend
           Audit and Governance Committee to discuss the Improvement Plan and progress to
           date.

c.        For the improvement plan moving forward, to focus on transitioning from compliance to
           prevention, by fostering a culture change.

It was agreed to take Agenda Item 16 next.

The report of the Engagement Lead is attached.

Contact: Avtar S Sohal (0121) 232 6420

The Committee received the report of the Engagement Lead which highlighted Shropshire Council’s financial challenges and the one statutory and three key recommendations focussing on financial resilience. 

The Executive Director (Section 151 Officer) introduced the Draft Auditors Annual Report and noted that it was a regular annual item for the Audit and Governance Committee. He explained that this year’s report included a statutory recommendation, three key recommendations, and two improvement recommendations. He emphasized that while the statutory recommendation was not unexpected given the Council’s financial situation, it was serious and must be addressed.  He went on to highlight that many plans to address the issues were already in place, such as the independently chaired Improvement Board and the Improvement Plan going to Cabinet and Council.  He reported that a revised medium-term financial strategy and a capital strategy were being developed, with a pre-budget report to reset the financial position ahead of February Council.

The Chairman explained that the statutory recommendation had legal implications, requiring a meeting within 30 days to decide on actions and whether to accept the recommendations.  He stated that it was not within the Audit and Governance Committee’s remit to determine the response but that the Committee could comment and advise Council.

The Chairman stressed the seriousness of the situation, noting that statutory recommendations were rare and reflected the gravity of the issues facing the authority and he informed the Committee that he would move that the matter be referred to Council for consideration and action.

The Associate Director, Public Services Advisory (External Audit) informed the Committee that they had exercised their powers under the Local Audit and Accountability Act to issue a statutory recommendation due to the Council’s deteriorating financial position and governance weaknesses. He took Members through the detail of the statutory recommendation (set out on page 12 of the report) which included to urgently review all services (statutory and non-statutory) to identify the cost of minimum viable service provision, review all budget estimates and modelling, develop a realistic medium-term plan to reduce reliance on exceptional financial support, and immediately action internal audit recommendations on budget monitoring. 

The report also raised three key recommendations (set out on pages 13 to 15 of the report) around improving savings delivery and reducing optimism bias in savings targets, to address the increasing Dedicated Schools Grant (DSG) deficit and to address the persistent limited assurance rating from internal audit, now in its sixth year, indicating ongoing control environment failures. Two improvement recommendations were also made around improvements in the capital reporting to increase the granularity on slippage in the capital programmes and to ensure that action plans were in place around the LGA peer review recommendations.

The Engagement Lead acknowledged the positive steps taken by the Council and detailed in the management responses, such as establishing an Improvement Board, implementing spend control panels, and developing an Improvement Plan, but stressed the scale and urgency of the financial challenge. 

The Chairman described the report as a "very sobering moment" for  ...  view the full minutes text for item 67.

The report of the Head of Policy and Governance is attached.

Contact:  Barry Hanson 07990 086409

The Committee received the report of the Head of Policy & Governance which summarised Internal Audit’s 2025/26 work to date.  Lower audit assurance levels were highlighted, providing members with an opportunity to challenge.

The Head of Policy and Governance reported that seven final internal audit reports had been issued since the last committee meeting, as set out in paragraph 8. 4 of the report, with four draft reports awaiting management responses which would be included within the next performance report.  There were 5 good or reasonable assurances (71%) which represented a significant increase in the higher levels of assurance compared to the same reporting period of 2024/25 (33%) and the previous years’ outturn of 58%.  This was offset by a corresponding decrease in the number of limited and unsatisfactory assurance levels (29% compared to 67% in 2024/25.  He drew attention to paragraph 8.14 which considered the year-to-date trend in assurance opinions which showed that the number of lower assurances to date was 58% which was higher than the outturn for 2024/25 (42%) and continued to be of concern.

A total of 54 recommendations were made within the seven final reports (detailed at paragraph 8.4 of the report and broken down by service area).  It was confirmed that two fundamental recommendations had been made (set out at paragraph 8.11 of the report) related to key supply contracts and the adult social care outturn position.  Unplanned projects and advisory work had been undertaken in the period including an internal audit of the Adult Social Care outturn 2024/25 at the request of the former Chief Executive with a further management update being presented to the Committee later in the Agenda.

Positive progress was reported in updating management responses and implementation dates for recommendations, with oversight from the Interim Chief Executive and Statutory Officers’ Group. Members were asked whether they wished to seek any further assurances from managers on the limited and unsatisfactory assurance levels detailed in Appendix A.

The Head of Policy & Governance informed the Committee that recruitment to the vacant internal audit posts had been successful, with three qualified and experienced senior auditors having been appointed, with two already in post and one starting in December.

According to the direction of travel table (paragraph 8.14), it was noted that for the past six years, good and reasonable assurance levels had remained consistently around 60%. However, this figure had declined to approximately 40% in the current year, prompting an inquiry into the underlying causes.  The Head of Policy & Governance explained that it was too early to pinpoint specific causes for this year's trend, and more clarity was expected by the next meeting in February and the quarter 4 work at the end of the financial year.  It was noted that the higher proportion of limited and unsatisfactory assurances was a concern.

Members requested updates on key supply contracts and the Shirehall disposal for the next meeting and thanked the internal audit team for their work.

RESOLVED:

a)   To endorse the performance of Internal Audit  ...  view the full minutes text for item 68.

The report of the Interim Chief Executive is attached.

Contact: Tanya Miles (01743) 255811

The Committee received the report of the Interim Chief Executive which provided an update on progress made to date with addressing the issues that contributed to the significant change in financial monitoring positions between period 11 and period 12 during 2024/25.

The Interim Chief Executive discussed the significant deterioration in the adult social care outturn position for 2024/25, where the overspend increased by £15 million between period 11 and period 12, prompting an internal audit review that found misalignment in savings monitoring and reporting, with £11.7 million of projected savings found to be non-cashable.  These issues were not identified until year-end reconciliation.

Six recommendations were made, including a fundamental recommendation to report actual expenditure and income alongside forecasts.  This was implemented from period 6 and reflected in the quarter two finance monitoring report.  Other recommendations addressed high-risk budget assumptions, verification of savings, improved monitoring, and system simplification, with most expected to be fully implemented by the next meeting.

The Committee agreed to receive a further update on progress in June 2026 and to monitor the implementation of recommendations.

RESOLVED:

a.     To note the update provided in the report.

b.      Members requested an update to the next meeting.

The report of the Property Services Group (PSG) Facilities and Maintenance Manager is attached.

Contact: Matt Jordan (01743) 252668

The Committee received the report of the Property Services Group Facilities and Maintenance Manager which provided an update on the 2024/25 follow-up audit of The Lantern, assessing progress on recommendations made in the 2021/22 audit.

The Head of Property and Development introduced and amplified the report.  He informed the meeting that the Lantern was a PFI asset in Shrewsbury with booking spaces for staff and the public. The original audit (2021/22) and a follow-up (2024/25) identified weaknesses in control procedures, systems, and financial management, especially around the booking system.  The follow-up audit had reported limited progress, but as of August 2025, all 13 significant and 8 "requires attention" recommendations had now been addressed, mainly due to the implementation of a new booking system and updated procedures.

One recommendation about backup procedures in case of ICT failure was addressed as far as practical and would be reviewed in the next follow-up audit.

The Committee agreed that future progress would be reported directly to the Chair and only brought back to the Committee if problems arose.  It was confirmed that the next internal audit follow-up was scheduled for the new year and would be reported to the Committee in June/July.

Members noted that the longstanding issues appear resolved, attributing progress to the new management approach and focus on clearing outstanding recommendations.

RESOLVED:

a. to note the corrective actions already undertaken and planned with all recommendations either complete or in progress of completion based on the implementation of the new booking system with assurance audits in place.

b. that progress be reported by Internal Audit in June or July to demonstrate improvements in governance and financial control to finalise the improvements with the new booking system implemented which would provide the new structure and framework for all internal and external bookings across Shropshire Councils entire portfolio of properties.

The report of the Team Leader for Business Support is attached.

Contact: Kim Russon (01743) 254649

The Committee received the report of the Team Leader for Business Support which provided an update on the 2024/25 follow-up audit of Deferred Payments, assessing progress on recommendations made in the 2021/22 audit.

The Service Manager for Commissioning and Governance and the Team Leader for the financial assessment team addressed actions taken to improve the deferred payments process, focusing on financial controls, governance, and oversight within the financial assessment team in adult social care.

It was reported that the 2024/25 audit had made 19 recommendations (9 significant, 10 requiring attention), mainly concerning income management, invoicing, interest calculation, documentation processes, policy gaps, legal matters, and system controls. The assurance level was unsatisfactory. 

All recommendations had either been completed or were in advanced progress; Ongoing monitoring and a continuous improvement program was now in place and included improvements around robust financial controls, regular audits, prompt debt recovery, enhanced documentation, streamlined systems, and improved management reporting.

In response to a query, the Committee was informed that the value of deferred payments was in the hundreds of thousands of pounds. It was confirmed that Internal Audit would revisit the area in quarter 2 of 2026/27, after the new policy had been in place, and would report back to the Committee.

RESOLVED:

a.     to note the corrective actions already undertaken and planned with all recommendations either complete or in progress.

b. that progress be reported by Internal Audit at a future meeting to demonstrate improvements in governance and financial control to finalise the improvements to the deferred payment agreement processes.

The report of the Executive Director of Resources (Section 151 Officer) is attached.

Contact:  James Walton (01743) 258915

The Committee received the report of the Executive Director (Section 151 Officer) which provided Members with an economic update for the first six months of 2025/26, along with reviews of the Treasury Strategy 2025/26 and Annual Investment Strategy, the Council’s investment portfolio for 2025/26, the Council’s borrowing strategy for 2025/26, any debt rescheduling taken and confirmed compliance with Treasury and Prudential limits for 2025/26.

RESOLVED:

To agree the Treasury Strategy activity as set out in the report.

The report of the Executive Director of Resources (Section 151 Officer) is attached.

Contact: James Walton (01743) 258915

The Committee received the report of the Executive Director (Section 151 Officer) which asked Members to review and comment on the self-assessment of good practice questionnaire attached to the report.  The questionnaire allowed Members to assess the effectiveness of the Audit and Governance Committee and to identify any further improvements that could be made which would improve the Committee’s overall effectiveness.

The Executive Director (Section 151 Officer) confirmed that most assessment questions were answered positively, with some areas marked as partial compliance and which were detailed in Appendix B along with proposed actions; Appendix C summarised committee members’ self-assessed skills and knowledge, using colour coding to indicate confidence levels (red = low, amber = moderate, green = high). Areas marked red indicated the highest priority for further training or support.

RESOLVED:

To approve the self-assessment of good practice attached at Appendix A and D having identified any errors or amendments required.

The report of the Head of Policy and Governance is attached.

Contact:  Barry Hanson 07990 086409

The Committee received the report of the Head of Policy and Governance which outlined the measures undertaken to evaluate the potential for the occurrence of fraud, and how the Council managed those risks with the aim of prevention, detection, investigation and subsequent reporting of fraud, bribery and corruption.

The Committee reviewed the updated Counter Fraud, Bribery and Anti-Corruption Strategy, which was assessed annually and underpinned the Council’s commitment to preventing fraud, bribery, and corruption. Minor changes had been made to the Strategy and supporting policies, procedures and guidance, mainly due to digitalization, and could be found on the Council’s website (along with the whistleblowing and anti-money laundering procedures and guidance).

Concern was raised that without operational resources the policy could not be applied appropriately and figures on Council tax single person discount savings were requested along with information around the outsourcing of match reviews.  Officers agreed to seek further information about these issues and circulate to the relevant Member outside of the meeting.

RESOLVED:

To endorse the Counter Fraud, Bribery and Anti-Corruption Strategy along with the measures undertaken and detailed within the report to manage the associated risks with the aim of prevention, detection, investigation and subsequent reporting of fraud, bribery and corruption.

It was agreed to take Agenda items 15, 17 and 18 next, (15 and 17 together) before item 14.

The report of the Executive Director of Resources (Section 151 Officer) is attached.

Contact: James Walton (01743) 258915

The Committee received the report of the Executive Director (Section 151 Officer) which provided an update on the approval of the 2024/25 Statement of Accounts, following completion of the audit of the accounts.

The Committee approved the final statement of accounts, noting the minor amendments and the unadjusted misstatement that was below the materiality threshold.

RESOLVED:

a.  to approve the 2024/25 Statement of Accounts and agree that the Chairman of the Audit and Governance Committee signs them (in accordance with the requirements of the Accounts and Audit Regulations 2015).

b.  to agree that the Executive Director (Section 151 Officer) be authorised to make any minor, non-material adjustments to the Statement of Accounts prior to publication of the audited Statement of Accounts.

c.  to agree that the Executive Director (Section 151 Officer) and the Chairman of the Audit and Governance Committee sign the letter of representation in relation to the financial statements on behalf of the Council and send to the External Auditor.

The report of the Engagement Lead is attached.

Contact: Avtar S Sohal (0121) 232 6420

The Committee received the report of the Engagement Lead which set out the progress with the audit of the Statement of Accounts for 2024/25, the current findings arising from the audit, and the timeline for the audit opinion being agreed for the accounts.

The Engagement Lead introduced the Audit Findings Report, stating the audit for 2024/25 was substantially complete, with only a few minor queries outstanding which were not expected to result in any material errors or adjustments.

One unadjusted misstatement of £2.2 million had been identified due to incorrect valuation data, but this was below the materiality threshold and did not require adjustment. This was standard practice and was disclosed in the letter of representation.

The final audit opinion was pending receipt of a capitalization directive letter from the Ministry of Housing, Communities and Local Government, after which the audit opinion could be signed off, hopefully in December.

The Committee discussed the increase in money owed to the Council (debtors), which rose by £30 million in year.  In response, the Executive Director (Section 151 Officer) reported that the need for improved debt recovery and cash flow management was being addressed, as it did impact on the Council’s financial position and costs and was included as part of the Council’s Improvement Plan.  He agreed to provide a breakdown of where those key areas of debt were sat within the sundry debtors, but he stressed that this was separate to Council Tax debt.  It was confirmed that Internal Audit were conducting a review of debt recovery, the results of which would be reported to a future meeting.

The Committee approved the Statement of Accounts and noted that it was progressing well compared to other Councils.

RESOLVED:

To note the contents of the Audit Findings report.

The report of the Internal Audit Manager is attached.

Contact: Katie Williams 07584 217067

The Committee received the report of the Internal Audit Manager which provided a brief update on current fraud and special investigations undertaken by Internal Audit and the impact these have on the internal control environment, together with an update on current Regulation of Investigatory Powers Act (RIPA) activity.

It was confirmed that there were seven ongoing investigations and that no investigations had been competed since the previous meeting.

RESOLVED: 

To note the contents of the report.

The report of the Executive Director of Resources (Section 151 Officer) is attached.

Contact: James Walton (01743) 258915

The Committee received the report of the Executive Director (Section 151 Officer) which considered the motion referred to the Audit and Governance Committee by Council regarding the proposal to create a dedicated Counter Fraud Team.

The Committee reviewed options for fraud investigation, including: a dedicated team, sharing a team regionally, outsourcing to an external provider, a hybrid model, embedding within internal audit, and relying on national collaborative schemes (set out in paragraph 2.2 of the report). 

The report outlined advantages and disadvantages for each model, emphasizing the difference between identifying fraud, recovering losses, and preventing fraud through strong internal controls. 

Discussion highlighted that quantifying the value of fraud prevention and recovery was challenging, and that headline savings from other councils may not all be cashable.  A query was raised about the cost of a dedicated team which was estimated at £100,000 for two staff. 

Some Members argued for a dedicated resource, citing examples from other councils and the potential for significant savings, especially in areas like housing and council tax, whilst some felt there was insufficient local evidence to justify a dedicated team and suggested expanding internal audit’s proactive fraud work using existing resources.

The Committee agreed to recommend to Cabinet that a task and finish group be set up to explore fraud investigation options further, involving relevant stakeholders like Star Housing.

RESOLVED:

It was agreed to refer this back to Cabinet to decide on the way forward and to recommend the setting up of a Task and Finish Group.

The next meeting of the Audit Committee will be held on the 5 February 2026 at 10.00 am.

Members noted that the next meeting of the Audit & Governance Committee would be held on 5 February 2026 at 10.00 am.

A review of meeting actions.

Deferred to the next meeting.

To RESOLVE that in accordance with the provision of Schedule 12A of the Local Government Act 1972, Section 5 of the Local Authorities (Executive Arrangements)(Meetings and Access to Information)(England) Regulations and Paragraphs 2, 3 and 7 of the Council’s Access to Information Rules, the public and press be excluded during consideration of the following items.

RESOLVED:

That in accordance with the provision of Schedule 12A of the Local Government Act 1972, Section 5 of the Local Authorities (Executive Arrangements)(Meetings and Access to Information)(England) Regulations and Paragraphs 1, 2, 3 and 7 of the Council’s Access to Information Rules, the public and press be excluded during consideration of the following items.

The Exempt Minutes of the meeting held on the 26 September 2025 are attached for confirmation. 

Contact Michelle Dulson (01743) 257719

RESOLVED:

That the Exempt Minutes of the meeting of the Audit Committee held on the 26 September 2025 be approved as a true record and signed by the Chairman.

The exempt report of the Assistant Director of Legal and Governance is attached.

Contact: Tim Collard (01743) 252756

The Committee received the exempt report of the Assistant Director of Legal and Governance which provided an update on the exemptions sought from the Council’s Contract Procedure Rules and the reasoning for approving or rejecting them. 

RESOLVED:

To note the contents of the report.