Agenda item

Officers presented the external audit update on accounts.

In 2023/24, there had been 216 disclaimed audits, which represented 46% of all Councils in England. Only six audits had been completed for 2024/25 out of approximately 400 councils by the end of September. The low completion rate was attributed to the extensive work required to rebuild financial processes following previous disclaimed opinions. It was noted that, given the Council’s two consecutive disclaimed opinions, it was likely that it would take another two years to achieve a clean audit opinion, which was consistent with the national situation.

The Council’s accounts had been submitted on 22 September. The public inspection period had taken place, during which four detailed sets of queries had been received from the public, including two face-to-face meetings. Officers were working through these queries. Government guidance had been received during the process, but it had arrived too late to influence the current audit. The majority of the audit had been focused on transactions within the year, rather than opening and closing balances. The volume and nature of queries had changed week by week, and officers were actively working with external auditors to address them. All external audit items and samples needed to be completed before Christmas to allow EY to complete their governance processes after the holiday period.

Officers emphasised the importance of improving the audit results report, which covered 36 to 38 areas reviewed by external auditors. In the previous year, 20 areas were rated red, 10 yellow, and six green. The aim was to increase the number of positive ratings in the current audit. Looking ahead, officers had begun preparations for the next year’s accounts, including a ‘soft close’ at the end of September, with the goal of reducing queries and ensuring a smoother closure process.

EY reported that audit testing had been underway for five to six weeks. The quality of working papers and supporting documentation had improved compared to the previous year. While some minor delays had occurred, these were being managed and were not expected to impact overall delivery. No significant findings had emerged so far, and only minor differences were being addressed with management. Nothing material to the financial statements had been identified at this stage.

The next Audit Committee meeting was scheduled for February 2026, at which the audit results report would be presented, summarising key findings, audit differences, and control recommendations. The National Audit Office required all local government auditors to issue an annual report, even if the audit was incomplete, by the end of November. A draft auditors’ annual report was with officers for factual accuracy checks, with the intention to issue it before 30 November.

Members asked whether sufficient immediate action had been taken to comply with recommendations issued in July under Section 24, specifically regarding the Council’s understanding of its current financial position and the need to prevent further depletion of reserves. EY noted that work was ongoing and that their view would be reflected in the forthcoming report, which was being finalised before the end of the month.

When asked how any additional government grants would be managed within the accounts, officers explained that the audit covered the accounts and a number of grant statements, some of which were also reviewed by internal audit. When new grants arose, appropriate audit arrangements were made, including securing new external auditors for housing benefit where necessary.

Councillors asked for clarification on the circumstances under which external auditors may issue further statutory notices such as section 26, 27 and 28 of the Local Audit and Accountability Act 2014, and what these notices meant in practice. EY explained that they had a range of powers under the National Audit Office’s Code of Audit Practice, including issuing recommendations, applying to a court for a declaration of unlawful action, and issuing public interest reports. Some powers had never been used. The previous recommendations had been issued in July, and the Council should be given time to respond. The forthcoming report would provide an update on the Council’s arrangements up to 31 March 2025 as it would cover the 2024/25 financial year. EY would report on the Council's arrangements during 2025/26 as part of their 2025/26 audit, which would start as soon as the 2024/25 audit was finished.

RESOLVED: That the Audit Committee noted the progress on the audit of the 2024/25 Accounts and the work being undertaken to cover previous years’ External Audit recommendations