Agenda item

The Chairman initiated discussions with the Committee regarding the use of acronyms within the audit report, noting that several had been used without explanation and requested clarification for the benefit of all attendees.  The external auditors for the Council, Ernst and Young (EY) acknowledged the oversight and committed to ensuring that acronyms would be explained throughout future reporting. 

The Committee were informed in further detail that the Ministry of Housing, Communities and Local Government (MHCLG) was a government department involved in coordinating the reset and recovery of the local audit system, particularly in relation to backstop dates and clearing audit backlogs.  The National Audit Office (NAO) was a Central Government body responsible for setting the Code of Audit Practice, which outlined the roles and responsibilities of auditors.  The Financial Reporting Council (FRC) acted as the regulator for audit firms, inspecting their work to ensure high quality audits, who had also contributed to the sector wide reset and recovery efforts.

The report provided a background and status update on the 2023/24 audit for the Council and context regarding the Government’s legislation aimed at clearing the backlog of local audits and establishing a sustainable audit system.

It was noted that the Council had missed Phase One of the recovery deadline, as the 2021/22 and 2022/23 accounts were signed in January 2025, beyond the 13th December 2024 backstop date. This delay impacted the 2023/24 accounts, which were not published until mid-January 2025, with the inspection period ending on 27th February 2025. Consequently, Phase Two of the recovery had not been met.

The audit commenced in June 2025, following onboarding delays. Challenges were encountered which included management resources being prioritised toward meeting the 30th June 2025 deadline for publishing 2024/25 draft statements, conflicting annual leave schedules and delays in the provision of requested information.

It was acknowledged that the Council had not been subject to audit for several years, which had impacted capacity and created challenges for the management team, however, efforts to address the issues was ongoing.

Despite the disclaimer of opinion on the 2023/24 financial statements, EY confirmed that auditing standards required certain procedures to be performed, which were currently underway. The local regulations also required Value For Money (VFM) work to be completed, which was also in progress.

Following the presentation Members raised the following queries:

• Several governance issues were highlighted on page 40 of the report, including high staff turnover, public correspondence and challenges with the finance system, particularly around compliance with taxation laws, which required further explanation. - EY explained that these issues related to significant weaknesses identified by Grant Thornton in the 2022/23 financial reporting.  Members were also informed that high staff turnover had led to a loss of corporate knowledge, particularly due to interim arrangements in statutory positions during the 2020–2024 period.  Correspondence had been received from a member of the public outside the formal inspection period which raised concerns about governance arrangements, including fraud policies. The audit team was assessing whether follow-up procedures were necessary and considering the correspondence in relation to both 2023/24 and 2024/25 arrangements. 
• If fines had been issued to the Council due to delays? -  It was confirmed that no fines had been issued to the Council due to delays in presenting audited accounts. The Government had not indicated any sanctions when setting backstop dates and the delays had not impacted the Council’s ability to borrow or apply for grants.
• Whether the issues reported would affect the new authority under Local Government Reorganisation (LGR)? - It was clarified that the Council had caught up with outstanding accounts and was working to complete the 2024/25 accounts before the statutory deadline of 26th February 2026. The aim was to ensure a clean set of accounts for BDC closure in 2028, with transitional arrangements in place for the new unitary authority.
• Concerns were raised about the reliability of other authorities’ accounts and the implications for future decision making. - Assurance was provided that although some authorities had disclaimed accounts, VFM assessments would still be conducted. The Government would make final decisions following the Council’s business case submission on 28^th November 2025.
• Further clarification was requested for the VAT returns. - It was explained that the Council had not submitted VAT claims for approximately three years, resulting in His Majesty’s Revenue and Customs (HMRC) owing money to the Council. The Council had received its refund and ongoing assurance work was being conducted with HMRC. Monthly VAT returns were being submitted and finance staff would be receiving further training.
• Clarification was sought on the seriousness of the public correspondence received by the auditors.  – It was confirmed that while there was no obligation to formally respond, EY was considering the contents and discussing relevant matters with the Council.  A Member suggested that the whistleblowing policy should be used as a framework for addressing such concerns.  Members were also informed that the internal audit plan included a review of the Council’s counter-fraud, bribery and corruption framework, which would provide an independent report to Members and management.

RESOLVED that the Annual Update Report 2023/24 be noted.