Agenda item

To review the external audit of the financial statements for 2024/25.

The Chair invited the EA to comment on the 2024/25 External Audit Report.

The EA referred to the context of the audit as detailed in the report, including proposed reform of the regulatory environment and that this was the first audit undertaken in 4 years and it was important to remember that this was the first step in rebuilding that. He referred the Committee to the scope of the audit and the change in the materiality assessment which is a usual and an expected change. He confirmed that the weakness detailed during their value for money work concerning the Council’s financial reporting arrangements remained.

He referred the Committee to the report outlining the status of Audits undertaken and provided an update on areas where work had been ongoing, noting that they had been unable to finish the testing in respect of Capital Grant receipts in advance nor in connection with IFRS 16- Leases, however the other outstanding areas had been completed.

The EA brought pages 30-31 of the report to the attention of the Committee, confirming this was a new analysis assessing key areas which support timely and accurate provision of working papers and facilitate the rebuilding of the audit process in the Council. It identified the weaknesses and discussions with Officers were ongoing to improve these areas.

He similarly drew page 64 of the pack to the Committees attention, this detailed the fastest process to a full assurance, based on the National Audit Office (NAO) guidance.  The Council was behind that timeline at the moment. Pages 65-67 set out where the assurance came from, with areas turning amber or green in terms of the level of assurance.

Cllr Fredericks thanked Officers and External Auditors for their work. She asked the ADFA whether there were sufficient resources in place to continue with the trajectory of improvement. He confirmed the Finance team was focussed on improvement and in terms of resources, the challenge was like other Councils, and the team were doing the best possible. The DRC thanked the Finance team for their work in supporting audit field work and finalising the budget simultaneously, noting that whilst there were gaps in resources, the team now had both a S151 Officer and a deputy.

The IP asked for information on what happens next and by when to ensure momentum is maintained. The ADFA confirmed that the accounts were yet to be signed, and on completion, concrete plans would be put in place but referred the Committee to the Annual Governance Statement (AGS) on the agenda which had some of the actions reflecting the audit. They would look at individual items after the audit and possibly bring back that action plan to the committee when that was completed, and it was known what they were looking to implement and to change.

Cllr Holliday asked the EA if, given that this was the first audit for 4 years, whether any of the findings were a surprise. The EA stated that he had hoped for a positive trajectory and had seen that.  In the future they hoped to provide a comparison as to where the Council was compared to others and some best practice case studies. He identified that within 2 years the period for completing the work would be 3 months shorter and this would require fundamental improvements to be made across all Councils. It was the EAs fear that the level of assurance would begin to dip again as they had less time to build assurance. At the request of Cllr Holliday, the EA confirmed that benchmarking exercise would be shared with the council.

The EA confirmed, following a question from Cllr Cushing, that this would be a disclaimed report, noting that this was always going to be the case given the lack of assurance over opening balances and that the Council was in a very similar position to others. Cllr Cushing asked for information as to whether the factual misstatements noted in the report were surprising and made any difference to the current budgeting process. The ADFA noted page 52 showed the net impact of those issues, noting the majority was moving the line from one area to another. The DRC confirmed that some matters were timing issues but there were lessons to learn regarding cut off procedures and year end close cash balances, for which they had an action plan in place to implement those for the coming year end, as well as valuations and classifications of assets.

The CEO noted that given LGR he couldn’t give Cllr Cushing the reassurance he was seeking that the Council would continue improvement.  He noted that the reorganisation proposed would require significant Member and Officers involvement and therefore the stretch targets identified would be difficult given the external environment. The IP suggested an action plan which identified the things that mattered the most to get close to a qualified audit next time. The External Auditor suggested that section 6 of the report could form the first step of such a plan.  The DRC confirmed an intention to draft an action plan for the next 12-14 months and committed to present that to the Committee. The IP noted that the Council had a project management team who might be able to support that process.

Cllr Fredericks was pleased to note that there would be a Grants register for the Council and asked that be prioritised if possible.

Cllr Holliday asked for assurance that the Statement of Accounts reflected the audit.  The EA confirmed that the final process of checking was being undertaken, the ADFA confirmed that the Accounts reflected the audit adjustments subject to final checks.