The Audit and Governance Committee of North Northamptonshire Council met to discuss the external audit plan for 2024/25, the internal audit annual report for 2024-2025, the internal audit progress report, and the internal audit strategy. The committee approved the Internal Audit Strategy for 2025-2028.

External Audit Plan 2024/25

Mark Stocks, a partner with Grant Thornton and responsible for the council's external audit, presented the external audit plan for 2024/25. The plan outlined the key audit risks and provided an overview of external audit activity.

Key points covered:

• IFRS 16 Leases: A new accounting standard, IFRS 16, is coming into force for local government, requiring leases to be accounted for on balance sheets. The standard will affect how the council accounts for assets and liabilities, and the auditors will be working with the council to ensure it is correctly implemented.
• The Backstop: Due to a backlog in local government accounts, the government introduced legislation to allow auditors to disclaim opinions on accounts that have been open for too long. The council's 2023-24 accounts have been disclaimed, and it will take time to rebuild assurance.

• Significant Risks: Auditors work by identifying and focusing on risks. The significant risks identified for the audit include:

  • Management override of control: This is a standard risk relating to the ability of management to manipulate accounts through assumptions, estimates, and accounting policies.
  • Valuation of land and buildings: Land and property valuations are large estimates in the accounts, requiring significant audit attention.
  • Pension fund net liability: The pension fund is a substantial figure in the accounts, requiring careful auditing of assets and liabilities.
  • Section 106 arrangements: Balances held under Section 106 agreements[^1] will be examined in detail. [^1]: Section 106 agreements are legal agreements between local authorities and developers, used to mitigate the impact of new developments on the community and infrastructure.
  • Cash: Auditors were not satisfied with cash handling in the last audit, so this will be examined in detail.
  • Agency income and expenditure: Auditors will look at agency income and expenditure in detail.
  • Division of assets: Because North Northamptonshire is a new authority, auditors will look at the division of assets between North and West Northamptonshire councils.

• Value for Money: Auditors will assess whether the council is securing economy, efficiency and effectiveness in its use of resources. Key areas of focus will be the Children's Trust, funding of schools via the Dedicated Schools Grant[^2], and housing. [^2]: The Dedicated Schools Grant (DSG) is a ring-fenced grant that funds the majority of local authorities' school budgets.

Councillor Michael Whitworth, Independent Person, asked how the council got into a position where a backstop was needed. Mark Stocks said that when the council was set up as two new unitary authorities, it was required to complete the old accounts of the district councils, which took a while, leaving limited resources to focus on the 2023-24 accounts.

Another councillor asked about the timescale for resolving the asset liability split between the councils. An officer said that decisions were made on what was known at the time of the disaggregation of the balance sheet, and the Section 151 officer would address any material changes that may arise from further audit work.

Another councillor asked about Section 106 monies and whether any of the money should be going back to the developer due to time limits on the agreements. Mark Stocks said he did not know, but the reason for looking at it was because the council had inherited a lot of information from the county that wasn't put in a detailed way.

Councillor Michael Whitworth asked about the amount of time being spent on field testing. Mark Stocks said that the time was the 'relapsed time' rather than the on-site time, and that the audit was a big, complex one that would take at least four to five months to complete.

Councillor Michael Whitworth also asked what the committee could do to keep pressure on the Northamptonshire Children's Trust (NCT) to contain expenditure. Clare Edwards, Section 115 Officer, said that the children's trust was a separate organisation, but the council had a responsibility to ensure that it was financially stable.

The committee noted the external audit plan.

Internal Audit Annual Report 2024-2025

Rachel Ashley Caunt, Chief Internal Auditor, presented the Internal Audit Annual Report 2024-2025. The report provided an overview of internal audit activity and findings from 2024/25. The assurance opinion given was of a moderate assurance level.

Key points from the report:

• The opinion is based on the outcome of planned audit assignments, actions taken by management, and other sources of assurance.
• The report is broken down into financials and other systems.
• A limitation on the scope of the opinion relates to IT systems hosted by West Northamptonshire, as the council's internal audit service does not have rights of access to perform audits on their network and security.
• The report includes an overview of the implementation of agreed management actions, with 76% of agreed actions due having been completed during the year.
• The report reflects on the performance of the internal audit service, with feedback scores from completed audits being of good or outstanding quality.

Councillor Michael Whitworth asked if the 24% of agreed actions due that had not been completed would be added into the workload for the coming year, stretching resources. Rachel Ashley Caunt said that it would be factored in, and resources would be allocated accordingly.

Councillor Michael Whitworth also asked about the summary of audit opinions, where 50% were moderate, meaning there were gaps in the internal control framework. Rachel Ashley Caunt said that it was a high number, but it reflected the challenges the council faced.

A councillor asked about the lateness of the 10 greatest overdue actions. Rachel Ashley Caunt said she could provide a breakdown of the reasons for the delays.

The committee noted the annual audit report.

Internal Audit Progress Report

Rachel Ashley Caunt presented the Internal Audit Progress Report, providing updates on the activity of internal audit. The report provided the outcomes of audit reports that have been finalised since the last committee meeting.

Key points from the report:

• The committee did not approve the new internal audit plan for 2025-2026, so a full copy of the plan approved by the last member of the committee was included.

• The key findings of finalised reports were summarised, including:

  • Data security standard (PCI DSS): Procedures were in place, there was a good audit trail, and no significant concerns were highlighted.
  • IT asset management: Issues were identified around record-keeping, located assets no longer at the authority, and duplication errors.

A councillor noted that the home-to-school transport had been raised as a concern previously, with concerns about drivers not having Disclosure and Barring Service (DBS) checks¹. The committee noted the internal audit progress report.

Internal Audit Strategy

Rachel Ashley Caunt presented the Internal Audit Strategy, outlining the vision for the service and how it can be the best possible service and give the best service as a committee.

Councillor Michael Whitworth asked about the risk matrix, which was colour-coded and included in previous reports. Rachel Ashley Caunt said that it was not included in this document, but it was in the risk management strategy approved by the committee.

The committee approved the internal audit strategy.