Auditor raises concern over governance risks and “third layer” position of monitoring officer at council

Dudley Metropolitan Borough Council's external auditors have said they are "particularly concerned" over the local authority's financial governance, standards of conduct and the ability of its monitoring officer to fulfil their role.

Writing in an annual audit report covering both 2021/22 and 2022/23, Grant Thornton auditors warned that the local authority’s financial position had deteriorated significantly over the last two years.

It raised a series of recommendations that were considered by councillors at a Cabinet Meeting last week.  

On governance, the report recommended that the monitoring officer should report directly to the chief executive as accountable officer.

At Dudley, the monitoring officer role “continues to sit at the third layer in the council's management structure,” the report said.

The report also identified 'significant risk' relating to financial governance.

Grant Thornton noted that a number of options were suggested to close a budget gap for 2023/24. Several were either agreed to initially and then stopped or were refused outright on the prompting of members, with no credible alternatives put forward, the report said.

"We are concerned that this is indicative of members not being adequately focused on resolving the financial challenge," the report said.

Grant Thornton also found "significant weakness" relating to the council's use of reserves.

In a previous annual report for 2020/21, Grant Thornton highlighted that "urgent action" was needed to reduce the council's reliance on reserves and recommended the council approve saving schemes and introduce tight scrutiny of additional spending proposals.

"We have continued to monitor the Council's financial position [and we] note that the Council overspent its budget in 2022/23 and has continued to reduce the level of its available reserves," the report said.

"It also recently reversed (July 2023) 2023/24 savings plans agreed in March 2023. We consider that this represents a significant weakness in the governance of the council and have raised a key recommendation."

Concerns were also raised about the "inappropriate behaviour" of some members towards officers at the council, which the auditor said indicates a cultural problem.

The report found officer and member relationships "weak, with a lack of clarity and understanding, leading to a significant weakness in the Council's governance arrangements".

It called for urgent action, including the development of a charter and a joint statement from the leader and leader of the opposition, to restore trust, respect, and productivity between members and officers.

Meanwhile, the report noted that Dudley achieved the majority of its priorities in its 'council plan' for both 2021/22 and 2022/23.

Although it said some areas of the council's strategy "do not appear to be adequately linked".

The report added: "In particular, the council's ambition to be a low spending authority impacts on its financial sustainability and key aims such as the regeneration and the sustainable improvement in Children's services.

"In some instances, it also appears to have impacted on the performance of services, for example, the Regulatory Notice on the health and safety of its housing and the need to improve housing stock. The council will need to reflect on these conflicting priorities."

Overall, Grant Thornton said the council has appropriate structures and policies to ensure it is appropriately governed.

It added: "In most instances these have operated effectively, however, we remain particularly concerned with regard to the Council's governance of its finances, standards of conduct, the effectiveness of its risk management, and, due to his place in the management hierarchy, the ability of the Monitoring Officer to fulfil his role."

Adam Carey