This item was considered after the financial forecasts.
4.1 David Austin (Head of Corporate Resources) introduced the report, the following key points were noted:
· The report had been commissioned by Ian Thomas (the Council's previous chief executive) within narrow but specific terms. It was carried out by Bill Roots, the Chair of the Internal Control Board.
· It reviewed financial planning, the budget, the monitoring of the budget and internal controls. Findings from the report related to these areas.
· It acknowledged that the current environment was challenging for councils.
· It found that the Lewisham’s financial systems were clear and that the relevant information was available. However, it also noted that there were areas for improvement.
· There were five areas in which recommendations were made but officers had considered the full report and developed 21 actions.
4.2 Councillor Hall addressed the Committee, the following key points were noted:
· He had contributed directly to the report by meeting with Bill Roots.
· The report found significant weaknesses in internal control and was damming in its findings.
· The report should be referred to Mayor and Cabinet. It should also be considered by full Council. The Council should take ownership of the action plan.
· Councillors should listen closely to advice from external experts.
· An independent report should be commissioned on the housing revenue account (HRA).
· He was concerned about the information available to the Council's Audit Panel.
· The Council should consider full cost accounting for its regeneration schemes.
· There had been a failure of the Council's internal financial controls.
4.3 David Austin responded to questions from the Committee, the following key points were noted:
· The Internal Control Board was formed of the Council's Executive Management Team (EMT) chaired by an independent person (Bill Roots). Its role was to ensure that EMT considered wider governance and control issues guided by independent oversight.
· Officers had produced the action plan that accompanied the report.
· The issues raised in the report were of importance but they did not constitute a failure of internal control.
· He would hand over responsibilities for internal control due to his increased management responsibilities.
· The issue of full cost accounting could be revisited. If the Council was going to be more commercially minded it might want to return to this form of accounting. It was labour intensive to do and was stopped previously as part of efficiency savings.
· The regulations around the HRA meant that funds could not be transferred to the general fund.
· The Council could not (and would not) use accounting technicalities to move funds from the HRA to the general fund. Officers did not believe that this is what was proposed in the report but further consideration would be given to the recommendation.
· Lewisham Homes accounted for HRA expenditure and there were clear boundaries around its spending and the Council's general fund.
4.4 In the Committee discussions the following key points were also noted:
· Further consideration should be given to the accounting of funds between the HRA and the general fund.
· Members expressed concerns about the Council's finances and its future ability to manage overspending.
4.5 Resolved: That the report should be considered by the Audit Panel and Mayor and Cabinet. The Committee agreed that it would share its views with Mayor and Cabinet as follows:
· The Committee welcomes the financial control review. It recommends that Mayor and Cabinet should give it careful consideration before seeking detailed responses on each of the issues raised, including: the finances of children and young people's services; adult social care; the housing revenue account; health services; income generation; IT and the general culture of monitoring at the Council.