Agenda item

To consider the report of KPMG (enclosed).

The external auditor introduced the External Audit Year End Report 2024/25, noting that the report had previously been considered by the Committee in November and that most content was unchanged. Members were advised that new material was highlighted in green, particularly pages 30 to 32 of the report, which explained the statutory backstop an d the process for rebuilding assurance. The auditor confirmed that a full audit had been completed for 2024/25; however, assurance could not yet be rebuilt on certain comparative figures affected by previous disclaimers. As a result, a disclaimed audit opinion would be issued, although the auditor emphasised the substantially improved position compared to the prior year and expressed confidence that assurance should be capable of being rebuilt in the 2025/26 audit cycle.  Page 40 of the report confirmed that related party testing had now been concluded however a declaration form had not been received from one councillor and from one member of the senior management team who had subsequently left the Council (although alternative procedures had been performed and the results of these were satisfactory). 

The report was considered and the following issues raised:

·         Members queried whether agreed lines of response were in place to respond to any external questions regarding the 2024/25 disclaimed audit opinion.

o   The Director of Finance (S151) advised that no draft statements had yet been prepared; however, any response would focus on national audit issues, the historic context, and the significant progress made in strengthening the 2024/25 accounts, with work continuing to ensure improvements were maintained into future years.

·         Members raised concerns regarding the non?return of Related Party Transactions forms.

o   The Head of Finance Delivery explained that all councillors were contacted at year?end with a March issue date and an April deadline, supported by follow?ups as required. As a result of this finding, guidance would be expanded for 2025/26, and escalation processes strengthened to ensure completion of outstanding forms.  In addition to a question from the Independent Co-opted Persons, officers advised that any requirement on them to complete a form annually would be clarified.

·         Members asked what penalties might apply where an individual refused to complete a Declaration of Interest/Related Party Transaction form.

o   The Director of Finance (S151) noted that options were limited; however, a failure to declare an interest that later resulted in financial gain could constitute a serious matter, and non?completion placed the individual at personal risk.

·         Members sought assurance regarding progress on the £32,000 rebuilding?assurance work (detailed within the Fees section) and whether associated fees represented value for money.

o   The external auditor confirmed that a full rebuilding?assurance risk assessment had been undertaken during 2024/25, that worked to rebuild assurance and would feed into 2025/26, resulting in an unmodified audit opinion going forward.  With regard to Value for Money and who paid this fee, it was paid by the Council who had received a government grant which contributed to the associated costs. A separate report would be presented in the 2025/26 cycle in terms of the rebuilding assurance work.

·         Members asked whether, with regard to the risk around Valuation of Land and Buildings, the absence of floor plans was the main factor affecting valuation accuracy.

o   The Head of Finance Delivery clarified that not all valuations required floor?area measurements; however, discrepancies in the 2024/25 valuation had arisen and were being prioritised. Work with the internal valuer had already corrected identified issues, and further improvements were planned for 2025/26.

·         Members raised concerns that delays between officers, valuers and councillors may have contributed to additional audit costs.

o   The Head of Finance Delivery advised that management actions were being monitored closely, with significant improvement already achieved compared to previous years. Earlier audit completion for 2024/25 had also created additional capacity to prepare effectively for 2025/26.

·         Members queried discrepancies in the number of properties recorded between the valuer and the Council.

o   The Head of Finance Delivery confirmed that the difference resulted from an error in preparing the draft accounts, which had since been corrected.

·         Members asked whether a specific list of issues to be resolved ahead of the 2025/26 audit had been established, in order to avoid a disclaimed audit.

o   The Head of Finance Delivery confirmed that this work would be driven by KPMG’s information requests and would form a two?way process over the coming months.

·         Members requested clarification on whether any known or suspected material misstatements had been identified in the accounts.

o   The external auditor confirmed that the disclaimer stemmed solely from a lack of prior?year audit evidence and that no issues found in 2024/25 would have resulted in a modified opinion.

·         Members sought information on what assurance still needed to be rebuilt and why this had not been completed earlier.

o   The external auditor explained that the main outstanding matter related to the split between usable and unusable reserves, with further work required on certain prior?year PPE additions.

·         Members queried potential consequences if further disclaimers were issued beyond 2025/26.

o   The external auditor advised that sector?wide discussions were ongoing but emphasised the Council’s strong position and proximity to rebuilding assurance.

·         Members asked what changes in systems, controls or data quality had strengthened the assurance position.

o   The external auditor reported significant improvements in financial?statement preparation, audit?evidence quality and valuation processes, with the 2024/25 closing valuation of land and buildings found to be materially correct.

·         Members asked how the Council’s position compared to the wider sector.

o   The external auditor advised that the Council was in line with sector norms and in a comparatively strong position, having completed the majority of required procedures and faced fewer years of disclaimer than some authorities.

·         Members requested an update on the Risk ‘Efficiency Programme 2023-24’ with an October 2025 status of ‘Not Implemented’.

o   The external auditor advised that the most recent update had been obtained shortly before the November committee meeting and that the matter would be followed up as part of the 2025/26 audit.

·         Members asked what procedures were viable to mitigate the risk of management override of controls.

o   The external auditor confirmed that this was a presumed risk within all audits and that no additional specific risks had been identified. Standard procedures had been applied.

·         Members queried the progress of related?party declarations.

o   The Head of Finance Delivery that a deadline was set, and confirmed that work was underway and that they were confident the process remained on track, with deadlines to be clearly emphasised for 2025/26.

·         Members requested an update on the Section 113 management?recharge control process.

o   The Head of Finance Delivery advised that work was ongoing for both the 2025/26 year end and 2026/27 budget cycles and expected to be completed for year?end.

AGREED:

That the External Audit Year End Report 2024/2025 be noted.