External auditors lift statutory recommendations at council in light of governance improvements

External auditors have lifted all statutory recommendations made for Sandwell Metropolitan Borough Council in light of "appropriate progress", but have warned that urgent steps are needed to deliver delayed financial statements.

Grant Thornton published a report in December 2021, setting out significant weaknesses in the council's governance arrangements.

An initial follow-up review took place in Autumn 2022, and a second follow-up review was carried out in Autumn 2023 to assess progress.

The three statutory recommendations made in 2021 called for the following:

1. Senior officers and senior members to take effective corporate grip of long-standing service issues and prioritise corporate effort in managing a number of issues the auditor had identified.
2. The council to ensure the learning in relation to commercial decisions, procurement and contract management highlighted in the 2021 report was understood.
3. Senior leadership, both officers and members, to demonstrate they can continue to work together effectively, that they operate in line with the council's values, codes, policies and procedures, and that there is zero tolerance for inappropriate behaviours. This included changing the organisational culture in relation to complaints so that they restore balance and proportionality.

In its most recent report, issued in December 2023 and considered by Sandwell's Cabinet on Wednesday (7 February), Grant Thornton said it was satisfied the council had made appropriate progress against the three statutory recommendations, and it lifted them.

On the first statutory recommendation, the auditor reported that the council had continued to make progress since its last report in 2022, which was also positive.

It noted progress relating to the council's improvement plan, performance management framework, constitutional review and member decision making.

It also highlighted "greater rigour" behind financial planning and the identification of savings.

However, the report said there has been less progress in some areas, "in particular, there has been slow progress in improving the financial statement process and the finance team continues to rely on interim appointments".

It later added: "The council should take urgent steps to resolve the issues relating to delays in providing and the quality of financial statements production.

"If the 2021/22 accounts are not made available for audit by 31 December 2023 or are of poor quality we will need to consider the further use of our statutory powers."

Turning to the third statutory recommendation, the auditor said Sandwell incorporated lessons learnt in its annual business planning process and had been effective in sharing the lessons from a SEND transport procurement programme.

Contract management of major contracts "is also more effective", and the council shows greater awareness and responsiveness to contract management weaknesses, the report said.

However, Grant Thornton stated that progress on an overarching commercial strategy "has not progressed and from our stakeholder meetings there appears to be confusion over what the term commercial means". It recommended the council consider developing an agreed definition of 'commercial'.

On the final statutory recommendation, the auditors found the cabinet and leadership teams "are continuing to work well both collectively and via their individual Director and Portfolio Lead roles".

It added: "There continues to be a more mature engagement between the leader, cabinet, committee chairs and senior officers, supporting good planning and work programming across different council committees and a greater level of professionalism in how business is conducted by these committees."

Concluding, the report noted that councillors and the senior leadership had responded to government intervention "in a commendable way, and the council is now more responsive and has a much better understanding of what good looks like".

The report said that the intervention may conclude at the end of March 2024.

"We are satisfied that the council has made appropriate progress against the three statutory recommendations, and these can now be lifted."

However, it did make the following four (non-statutory) recommendations:

1. The council must ensure that the changes in train relating to transformation are concluded so that the transformation strategy, transformation business cases, and associated cultural and behavioural changes become successfully embedded and result in identifying and realising the organisational changes and savings required, so that the council remains financially sustainable in the medium-term.
2. The council should place renewed focus on its efforts to improve the full customer experience.
3. The council should retain corporate focus and attention on key service and operational risks.
4. The council will need to manage the risks associated with the Senior Management restructure, including organisational change fatigue and resistance, the loss of corporate memory, and the retention of key staff during this period of change.

Shokat Lal, Chief Executive of Sandwell Council, said: "The first phase of our improvement journey has been about responding to the issues raised through external reviews and intervention, and we've had a real focus on becoming brilliant at the basics.

"Part of that has been about fixing some of our governance processes; but fundamentally we know that it's not simply new policies, strategies or procedures that help you deliver excellent services, it's about people and our organisational culture and making sure we're all working together to make a difference and help change people's lives for the better.

"We are now moving to a second phase of our journey which is about fully embedding a culture of continuous improvement, embracing transformational change and becoming a modern, efficient and agile organisation that has consistent high customer service standards."

Adam Carey