Southampton City Council: External assurance review

We recommend that the council undertake further scenario modelling to understand the impact of requesting EFS for future years to meet this gap.

Therefore, it is imperative that the assumptions built into the MTFS are regularly revisited. The council have recognised this and for 2024/25, quarterly updates on the MTFS will be presented to Cabinet. It is important that senior leaders use this to look beyond just the next financial year, as it may be necessary to make difficult decisions now, to realise the impact further into the future. The aim should be to close the budget gap for several years ahead not just for 2024/25 and 2025/26.

The council should further develop business partners to ensure they can support services fully, and embed financial management skills within service areas, to achieve more effective business partnering relationships.

The council has begun embedding the fundamental component of accountability for budgets as part of overall improvement of financial management, however this should be supported by a suite of training for budget holders, well-developed relationships with technically skilled business partners and access to timely budgetary information and support with deficit recovery planning.

Budget managers should be more actively involved in budget setting at an earlier stage in the process. This will help to ensure that budgets are deliverable and compatible with the service delivery levels and performance standards, but also that there is sufficient buy-in from service managers.

The organisation needs to make further provisions to enhance the capacity of the finance team and increase its resilience around treasury management activities.

We recommend that the council reviews all service strategies to ensure that they are aligned with the key focus areas of the Corporate Plan, both in terms of the financial challenges facing the council and the outcomes it seeks to achieve from its transformation activity.

The council should present the Corporate Plan alongside the budget in February/March to ensure the two remain aligned, particularly as the financial realities change in the future due to the current uncertainties. This is planned for February 2025.

The council should also ensure that the medium-term financial planning process is an integral component of the corporate and business planning processes to guarantee financial planning is realistic and based on horizon scanning so there is a balance between ambition and reality to help achieve successful implementation of desired outcomes.

Immediately begin succession planning for all interim members of the Executive Management Team and the departing Adult Social Care Director. Develop a long-term strategy for reducing dependence on interim staff by investing in permanent leadership recruitment and retention.

The council should seek to further develop the benefits realisation plan with a more in depth focus on non-financial benefits.

The council should ensure individuals in keys roles such as Heads of Service and Director roles, who deal with pressure from above and below, are sufficiently supported and empowered, particularly as the Executive Management Team continues to deal with instability.

Significantly reduce the reliance on external consultancy and external contracts. Build and use internal capacity.

Conduct a capacity assessment and invest in additional operational staff to support the execution of transformation projects at the service level.

Ensure a structured knowledge transfer process from external consultants to internal teams, embedding long-term sustainability within the organisation.

Accelerate the completion of business cases and create detailed delivery plans to mitigate risks associated with project delays and incomplete implementation planning.

The Council should clearly define the key objectives and route map of its transformation programme, in order to demonstrate a plan that is truly transformative.

The council do not currently have a permanent HR Director in post to drive effective strategic workforce planning with a focus on upskilling, retaining and retraining, the council should consider additional HR expertise to help develop career opportunities and drive effective succession planning.

Foster close collaboration with the Independent Improvement Board to balance external oversight with internal operational control, ensuring timely and effective decision-making.

We recommend that the council undertakes a review of the delivery and monitoring arrangements of the capital programme and establishes a governance framework that improves accountability and delivery of projects to reduce the level of slippage.

Mandatory briefings should be provided to all members on the scale of the financial challenge including the implications of EFS funding on revenue, alongside specific training, particularly to members of the new Audit Committee who will have a key governance role.

We recommend the council to keep its borrowing levels and cost of borrowing under constant review to ensure that it remains affordable as does not place undue increased pressure on the revenue budget.

The council should continue to consider the most appropriate and prudent approach to calculating MRP whilst considering both the short-term and long-term implications on the revenue budget.

Ensure that the planned review of governance arrangements including the Constitution is carried out in 2024/25. The council needs to keep schemes of delegation under regular review, as changes are made in line with the transformation programme.

The council need to ensure political clarity between officers and members particularly as priorities may shift.

The council need to ensure that delegated decisions are recorded in line with the Constitution and legal framework

We encourage the council to a) review the membership of the audit committee by considering the merits of appointing at least one independently, ideally two, co-opted independent members to its Audit Committee and reconsidering appointment of ex-Cabinet members b) ensure that the Audit Committee reports directly to full council and that this is documented within the Constitution. c) include quarterly presentation of the Strategic Risk Register to the Audit Committee.

The council should review the decision to not make the Monitoring Officer a full-time member of the Executive Management Team.

The council should ensure robust co-ordination of workplans for the Governance, Audit and Oversight & Scrutiny Committees. The audit committee should oversee systems, processes and controls to gain assurance that the right systems are in place and are working. Whereas scrutiny should focus on policies and outcomes, by understanding if the outcomes are both right and deliverable.

Additionally, the OSMC should look to focus more on delivery of achievement of outcomes and performance metrics in future to ensure to hold the executive to account for delivery of the objectives in the refreshed corporate plan.

The council have now established a 'management action' tracking system for Internal Audit actions. They should also emphasise to all staff the importance of Internal Audit and that identified actions can be used for continuous improvement within service areas, which will support the overall transformation programme.

The council should review and publish a Risk Appetite Statement to support informed decision-making, reduce uncertainty and improve consistency.

The council should ensure that risk management practices across the council are clear and regularly monitored to prevent inconsistencies or confusion in practice. This should include review of the newly introduced directorate risk registers to ensure they are fit for purpose.

Additionally, the Audit Committee should review the corporate risk register on a quarterly basis in order to be kept up to date with significant areas of strategic risk and any major operational or project risks, in order to seek assurance from officers that these risks are being appropriately owned and effectively managed (as part of recommendation 18). It is also good practice to regularly conduct 'deep dives' into directorate level risk registers.

Resolving issues with quality of housing stock and voids in a timely manner is crucial to ensure that the council can understand affordability to both the capital programme and the Housing Revenue Account (HRA). There is a need for the council to decide on how the required improvements to the housing stock are best delivered. It is likely that the council will need to dispose of housing stock and understand whether the Direct Labour Organisation (DLO) is the most efficient and effective service delivery model.