Agenda item

Members were presented with Forvis-Mazars Auditor’s Draft Annual Report, which summarised the work they had undertaken as the auditor for Stockton On Tees Borough Council for the year ended 31 March 2025.

Forvis-Mazar’s audit was conducted in accordance with the requirements of the code, and international standards on Auditing (UK) (ISAs). The purpose of the audit was to provide a reasonable assurance to users that the financial statements were free from material error.

Officers noted that due to the report being a draft that the issue date of the audit report was blank currently, but they were confident that they would be able to present the full report at the next meeting.

The Value for Money section of the report was broken down into three sections, and they were, Financial Sustainability, Governance and Improving economy, efficiency and effectiveness.

There were no identified risks or significant weaknesses highlighted for Governance and Improving economy, efficiency and effectiveness. But in the Financial sustainability section of the report Officers highlighted the ongoing pressure and need to manage the 2025/26 budget in line with the revised MTFP.

From initial enquires Forvis-Mazars expected to see similar pressures, and a further deficit to be reported in 2024/25 from the last update in December 2024 the Council projected an overspend of £6.6m. Officers were forecasting an overspend in 2025/26 mainly owing to the continued pressure in Children’s and Adult Services which was the case for most local authorities.

Forvis-Mazars was satisfied from discussions with Council Officers and reviews of reports that the Council have an understanding of the drivers of these pressures. Work had been undertaken to deliver financial sustainability such as the Powering Our Future Programme which had identified savings of £5.8m by 2026/27, with further work ongoing to identify the remaining savings (£2.3m). This would leave the Council with a budget gap of £0.9m by 2027/2028 as per the most recent MTFP update in February 2025. Additional savings were anticipated from transformation work within Children’s Services and mitigation work to reduce external pressures in relation to cost of children in care.

Officers also noted that the Council had been reviewing its existing senior management arrangements in place where continuous reviews for further improvements in existing processes are in progress. This had allowed the Council to collate better quality data which had been used for more accurate forecasting of future costs and understanding growth in demand.

The strain from the Dedicated Schools Grant (DSG) deficit was also touched on in the report. As of 31st March 2025, the Council had reported a cumulative DSG deficit of £6.72m. There currently was a statutory override in place which requires the Council to ‘ring-fence’ the DSG deficit from its general fund, which means that it does not have to consider it when setting a balanced budget. Central Government has signalled its intention to extend the period that the override covers to 31st March 2028, but without action to address the cumulative deficit a the end of this period there is a risk that the Council will be unable to set a balanced budget.

The Council have agreed to a detailed DBV plan with a number of mitigations which, if successful, would reduce the cumulative deficit to nil by the 2028 deadline.

Members AGREED to note the report.