Hastings BC Auditors Annual Report 2024-25 v1.1

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The report describes Hastings as a borough council with a population of 91,000 residents, under no overall control since 2022, with a Green Party minority administration formed after the 2024 election. p30

From November 2024, Hastings has shared its Chief Executive with Lewes and Eastbourne Councils. p30

In September 2025 the Council submitted a joint Local Government Reorganisation proposal to central government alongside other East Sussex district and borough councils and East Sussex County Council. p30

Elections for a shadow unitary council are due in May 2027, with the new council starting on 1 April 2028. p30

The report states that homelessness in Hastings is significantly higher than in neighbouring areas and nationally, and has significantly affected the Council's financial sustainability through demand for temporary accommodation. p30

The auditor found a significant weakness in financial sustainability, describing the Council's financial position as fragile, with reserves of some £3m a year used to fund recurring expenditure since 2018/19. p95p96

Projections show the General Reserve falling from £5.4m in 2024/25 to £1.7m by 2026/27, with full depletion expected by 2027/28 and a £3.5m budget gap. p95

The Council reported a £210k overspend on its 2024/25 General Fund against a £16.3m service budget, a 1.3% variance, with temporary accommodation costs reaching £7.8m, a 19.3% overspend. p95

The auditor raised Key Recommendation One, stating that if the Council does not reduce its reliance on reserves for the 2026/27 budget, the auditor will consider using its statutory audit powers. p122

The statutory deadline for publishing the 2024/25 group accounts was 30 June 2025, and as at the final draft dated 24 November 2025 the group accounts had not been published. p60

The auditor raised a Key Recommendation stating it will consider using its statutory audit powers if the 2024/25 financial statements are not published by 15 January 2026. p60

The auditor also raised improvement recommendations on the use of scenario planning in financial planning and on the timeliness of the Annual Governance Statement. p133p164

Further improvement recommendations covered annual effectiveness reporting by the Audit Committee and the Overview and Scrutiny Committee, and procurement and contract management arrangements. p166p168p187

The auditor did not make any written statutory recommendations, did not apply to court or issue advisory notices, did not apply for judicial review, and did not identify any issues requiring a Public Interest Report. p67p68

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• p30Reorganisation and Devolution Many councils in England will be impacted by reorganisation and / or devolution, creating capacity and other challenges in meeting business as usual service delivery. Funding Reform The UK government plans to reform the system of funding for local government and introduce multiannual settlements. The state of national public finances means that overall funding pressures are likely to continue for many councils. Auditor’s Annual Report Year ending 31st March 2025 Local government has remained under significant pressure in 2024/25 Hastings is a borough council with a population of 91,000 residents. The Council has been under no overall control since 2022. Following the 2024 election a Green Party minority administration formed to run the council. From November 2024, Hastings shares its Chief Executive with Lewes and Eastbourne Councils. In September 2025, in response to Local Government Reorganisation (LGR), the Council submitted its joint LGR proposal to central government, alongside all local district and borough councils and East Sussex County Council (ESCC). Elections for a shadow unitary council will be held in May 2027 with the start of the new council on 1 April 2028. The rise in homelessness is significantly higher in Hastings than it is in neighbouring areas and nationally and this has significantly impacted the Council’s financial sustainability in terms of demand for temporary accommodation. It is within this context that we set out our commentary on the Council’s value for money arrangements in 2024/25. National Local FuturePresentPast Guidance Note The national context content is for the whole sector. So, there is no need to delete national issues that don’t impact on an individual council eg LGR/devo.
• p60Executive Summary Auditor’s Annual Report Year ending 31st March 2025 We set out below the key findings from our commentary on the Council’s arrangements in respect of value for money. The statutory deadline for the publication of the 2024/25 group accounts was 30 June 2025. As at the date of final draft (24 November 2025), the group accounts is yet to be published. We raised a Key Recommendation (KR3) in response. If the 2024/25 financial statements are not published by 15 January 2026, the latest date elector rights can be exercised to meet the statutory deadline of 27 February 2026, we will consider the use of our statutory audit powers.
• p67|© 2025 Grant Thornton UK LLP Commercial in Confidence Core Core Purple Core White Primary Bright Purple Dark Purple Secondary Teal Coral Neutral Dark Mid Light Yellow Auditor’s Annual Report Year ending 31st March 2025 This page summarises our opinion on the Council’s financial statements and sets out whether we have used any of the other pow ers available to us as the Council’s auditors. Executive summary – auditor’s other responsibilities Opinion on the Financial Statements Use of auditor’s powers We did not make any written statutory recommendations under Schedule 7 of the Local Audit and Accountability Act 2014. We did not make an application to the Court or issue any Advisory Notices under Section
• p6828 of the Local Audit and Accountability Act 2014. We did not make an application for judicial review under Section 31 of the Local Audit and Accountability Act 2014. We did not identify any issues that required us to issue a Public Interest Report (PIR) under Schedule 7 of the Local Audit and Accountability Act 2014. Our audit of your financial statements commenced in October and is planned to conclude in December 2025. Thereafter, we will issue our audit opinion following the Audit Committee meeting on 15 January 2026. Our findings are set out in further detail on pages 11 and 12.
• p95|© 2025 Grant Thornton UK LLP Commercial in Confidence Core Core Purple Core White Primary Bright Purple Dark Purple Secondary Teal Coral Neutral Dark Mid Light Yellow We considered how the Council: Commentary on arrangements Rating identifies all the significant financial pressures that are relevant to its short and medium-term plans and builds these into them The Council reported a £210k overspend on its 2024/25 General Fund against a £16.3m service budget, equating to a 1.3% variance. The main pressure continues to be temporary accommodation costs where costs reached £7.8m being overspend of 19.3%. To fund the 2024/25 budget shortfall, the Council used £3.8m of earmarked reserves, with a further £376k unbudgeted reserves to fund variances at the year end. Rising homelessness expenditure remains a critical concern, prompting the creation of a Homelessness taskforce and engagement with Government for additional funding. Despite these measures, the Council’s financial position is increasingly fragile. Reserves, of some £3m a year, have been used to fund recurring expenditure since 2018/19. Projections show the General Reserve falling from £5.4m in 2024/25 to £1.7m by 2026/27, with full depletion expected by 2027/28. This creates a £3.5m budget gap In March 28, rising to £7.5m by 2029, leaving little capacity to absorb unforeseen pressures. Earmarked reserves are low at £13.8m on 31 March 2025 and these are subject to a full annual review to ensure that allocations are still relevant. Homelessness demand is forecast to grow further, in 2025/26, requiring an extra £1.7m budget allocation. Without significant savings, additional income, or service reductions, the Council faces unsustainable spending levels. The Council has acknowledged that it cannot eliminate its significant reliance on reserves to fund the annual budget shortfall, but it still needs to reduce the level of use each year.
• p96The reliance on reserves in the medium term to fund recurring expenditure is a significant weakness in financial sustainability and we raise a Key Recommendation on page 19. The Council has yet to decide on the future of its subsidiary, Hastings Housing Company, which is a significant weakness brought forward from 2023/24, as discussed on page 20. We understand Members are due to consider and decide the future of the company in December 2025. R Financial sustainability – commentary on arrangements Auditor’s Annual Report Year ending 31st March 2025 G No significant weaknesses or improvement recommendations. A No significant weaknesses, improvement recommendations made. R Significant weaknesses in arrangements identified and key recommendation(s) made. Guidance Note This should be maintained as one page if at all possible and no more than two. If we are saying more (where there are amber or red assessments, insights or notable practice ) then the detail will go on the following pages. Use this slide to introduce the fact that there is more detail, not to provide it.
• p1225,614 2,589 KR1: The Council must make difficult decisions in setting the budget for the 2026/27 financial year and in its Medium-Term Financial Plan to reduce its reliance on the use of reserves to support budget shortfalls. The continued use of reserves is unsustainable, and if maintained at the current level will deplete the General Fund Reserve by 2027 and leave a forecast funding gap of £7.54m by 2029. If a reduction in the use of reserves is not achieved for the 2026/27 Budget Council meeting on 11 February 2026, then we will consider the use of our statutory audit powers. The Council should also implement, as a priority, more significant transformational changes and modernisation of service delivery. A dedicated transformation team, supported by robust governance, is needed to develop strategies to deliver more change and savings. There needs to be a pipeline of substantial, recurring savings , supported by approved business cases. Close control and project management of deliverable savings will be critical in helping to close the Council's projected medium-term funding gap. Key recommendation 1
• p133Copy this slide to other criteria SWs but change the area it relates to. 21 Area for improvement: Use of scenario planning in the Council’s Medium Term Financial Plan Key Finding: Scenario planning allows the Council to better predict funding gaps when future costs are modelled using realistic and worst-case scenarios Evidence: The Council’s main financial pressure in 2024/25 was homelessness, where costs reached £7.8m (19.3% overspend). When the 2025/26 budget was set in December 2024, the Council had 500 households in privately procured temporary accommodation (PPTA) and set a forecast for the remainder of 24/25 of a reduction of 10 households a month. The Council, therefore, forecast having 470 households in PPTA at the start of April 2025. However, due to higher-than-expected need for temporary accommodation the Council started the financial year at 535 households. The possibility of a higher case load of 65 households had not been factored into the Council’s financial planning. Reporting on the true scale of the Council’s financial challenge would be better represented using scenario planning, which helps identify a range of funding gaps for each year using realistic and worst-case scenarios. This would fit well with predicting costs for demand pressures in temporary accommodation. Impact: The use of scenario planning with realistic and worst-case scenarios may give a better understanding of the range of the annual fundings gaps and target savings to aim for. Improvement recommendation 1 IR1: The Council should use scenario planning with realistic and worst-case scenarios to better identify the range of the annual fundings gaps and the annual target savings required. This should allow the Council to improve its decision making through better understanding of the critical financial risk the Council faces.
• p164|© 2025 Grant Thornton UK LLP Commercial in Confidence Core Core Purple Core White Primary Bright Purple Dark Purple Secondary Teal Coral Neutral Dark Mid Light Yellow Key Finding: The Annual Governance Statement (AGS) was presented to the Audit Committee on 9 October 2025, three months later than the statutory deadline of 30 June. Evidence:. The Accounts and Audit Regulations require the AGS to be published by 30 June each year. Timely year end reporting give officers and members the assurance required but also allow more time for identified governance issues to be implemented within the current financial year and reported on as such. Impact: Members and officers do not have timely assurance that the Council’s governance arrangements are effective. Area for Improvement identified: timeliness of the production of the Annual Governance Statement Governance – Improvement recommendation Auditor’s Annual Report Year ending 31st March 2025 IR2: The Annual Governance Statement should be reported to Members by 30 June each year so that the Council complies with the Accounts and Audit Regulations, and so the Council has sufficient time to complete the actions before the end of that financial year.
• p166Impact: There is currently a gap in assurance reporting from both the Audit Committee and the Overview & Scrutiny Committee to Council. IR3: The Council should produce annual reports for both the Audit Committee and for the Overview & Scrutiny Committee on the effectiveness of their work. The reports should compare each committees’ performance to their terms of reference and good practice, such as the CIPFA Position Statement for Audit Committee and the MHCLG Overview and scrutiny: statutory guidance for councils. These annual reports should be reported to Council and also inform the production of the Council’s Annual Governance Statement. Improvement Recommendation 3 Area for Improvement identified: Annual reports for the Audit Committee and the Overview and Scrutiny Committee
• p168Area for Improvement identified: Regular reporting of single tender waivers and updated contract procedures rules Governance – Improvement recommendation Auditor’s Annual Report Year ending 31st March 2025 IR4: The Council should improve procurement arrangements by:
• p187Area for Improvement: Contract Management Auditor’s Annual Report Year ending 31st March 2025 IR6: The Council should strengthen contract management arrangements to ensure: