Agenda item

To receive and consider the External Auditors Annual Report (AAR) for 2024/2025.

The EA introduced the report bringing the disclaimer of opinion to the Committee’s attention. This was largely given over lack of assurances on opening balances. There was significant Value for Money weakness in relation to financial reporting.

Cllr Fredericks asked how they were still in that position after a number of years, querying what was outstanding and what they were doing to rectify the issue. The DFR said certain areas of the audit working papers didn’t meet the standards. Due to time pressures, and the backstop date, work on the audit was closed. Those issues would remain for the 25/26 audit. In response to a further query from Cllr Fredericks, the DFR confirmed that, ultimately, responsibility to ensure the papers met the required standards sat with him. Staff shortages and experience in specialist roles hindered their ability to complete the necessary work for 24/25 but he confirmed they had now filled the vacancy of chief technical accountant who had a key role in the audit process.

The DFR explained that auditing standards, and quality of papers required, had shifted dramatically and the council had to change and adapt to meet those standards. They were to concentrate on the year ahead, at the suggestion of the external auditor, rather than focusing on filling gaps from previous years. Workshops had been arranged for staff with the EA so they knew what was expected of them. Cllr Penfold commented that he hoped that this was just a blip not to be repeated.

Cllr Cushing felt another disclaimed report did not offer great value for money and if there was a resource issue that needed to be fed back. He believed officers should be accountable for ensuring papers are submitted to audit on time and met the required standards. The EA did say there was potential for a natural rebuild and although NNDC were 1 or 2 years behind it had capacity to improve. 

The Chair agreed that this could not continue and asked if the finance team needed some resilience. Cllr Holliday referenced the financial statements which still had some work to do and both process and outcome seemed ineffective. The DFR said they aim to take a ‘right first-time’ approach and focus on audit testing where they can add most value with the resources they had, rather than concentrating on anything historical. He did warn that this was an inherent risk of being a small council and local government accounts was a highly specialised area for which it was very difficult to fill vacancies in a highly competitive market.

In response to a query from Cllr Holliday the EA confirmed many smaller authorities, like NNDC, often struggled to meet audit requirements compared to larger authorities but it wasn’t impossible. The EA agreed to share a report on where the sector sat, based on their findings, so the committee could compare where the Council was against other local authorities in the audit process.

Cllr Cushing suggested interim staff as a possible solution but the DFR warned that many interims would demand a higher salary.

It was noted by Cllr Holliday that the risk on the governance was not high enough on the risk register and did not reflect the external audit outcomes.

The Committee received and considered the External Auditors Annual Report (AAR) for 2024/2025 and Agreed to Recommend, unanimously that the Chair should discuss with DFR, and Portfolio Holder for Finance, the possibility of releasing funding to support additional capacity into the finance team.

This was proposed by Cllr Bütikofer and seconded by Cllr Fredericks.