The Audit and Risk Committee met to discuss external and internal audits, the annual governance statement, and customer feedback. The committee raised concerns about the quality and timeliness of financial reporting, contract management, and the need for improved risk management and governance across the council.

External Audit Update

Richard Harbord, Strategic Director for Resources and S151 Officer, provided a verbal update on the external audit of the Council Statement of Accounts for 2019/20 to 2022/23, noting that BDO¹ had made no progress since the last meeting and were holding up audits by Grant Thornton². Councillor Rocky Gill, Deputy Chair of the Pensions Committee, expressed dissatisfaction with the lack of a written report and questioned the urgency BDO was placing on completing the audits. Councillor Jack Shaw, Chair of the Audit & Risk Committee, said he would ensure BDO attends the next meeting.

Grant Thornton Interim Audit Annual Report

Paul Dossett of Grant Thornton presented the Interim Auditor's Annual Report ending 31 March 2025. The report highlighted significant weaknesses in financial sustainability, governance, and improving economy, efficiency and effectiveness, assigning a red judgement to all three. Despite the alarming first impression, Mr Dossett noted the council had made positive progress in addressing the recommendations from the prior year. Councillor Josie Channer questioned whether the progress was enough to turn things around and cautioned against sugarcoating the situation. Mr Dossett clarified that while challenges remain, management recognises these challenges and is taking steps to address them.

Key recommendations from Grant Thornton included:

• Finalising and agreeing a credible plan for transformation to achieve longer-term financial sustainability.
• Finalising and agreeing the Strategic Asset Management Plan.
• Urgently addressing capacity and resilience within the Finance Team.
• Completing the assessment of loans and leases for all subsidiary companies³ and finalising new key performance indicators and performance management arrangements for each company.
• Strengthening procurement governance and ensuring compliance with the Procurement Act 2023⁴.

Mr Harbord assured the committee that the council was not complacent and was actively working to address the recommendations. Councillor Gill raised concerns about weaknesses in the finance team and the lack of a procurement strategy. Mr Dossett confirmed that the lack of an up-to-date procurement strategy was a concern. Councillor Phil Waker requested training for councillors on contracts, procurement, and the Procurement Act 2023.

Mr Harbord responded that the council had been without a permanent head of procurement for two years, but that the post had been advertised and there were qualified applicants. He also noted that all council companies have now had their own accounts audited.

Councillor Dorothy Akwaboah asked about the previous chief accountant leaving without completing working papers. Mr Harbord confirmed this was the case and that an interim member of staff was working to produce those papers. Councillor Channer asked about the staffing of the finance team and what was being done to stabilise it. Mr Harbord explained the reorganisation of the finance team, the difficulty in retaining professional accountants, and the plan to train accounting technicians and trainees.

The committee requested an update on out-of-date strategies.

Grant Thornton Audit Progress Report

Ibukun Oluwasegun of Grant Thornton presented the Audit Progress Report and sector updates. She noted delays in finalising the audit plan due to ongoing issues within the council. She highlighted the importance of regaining assurance for the 24/25 audit. Councillor Gill raised concerns about the uncertainty regarding reserves and the lack of funding due to previous years' accounts remaining open.

Update on 2024/25 Statement of Accounts

Mr Harbord presented an update on the 2024/25 Statement of Accounts and outstanding accounts audit. He said this was a management response to the previous paper. Stephen Warren raised concerns about the new leasing standard and the progress being made. Mira Skura, interim financial accountant, said the council had started the work on implementing IFRS 16 late, but had incorporated the numbers into the financial statement that was published. Councillor Gill said there was no detail about timescales for the final implementation of IFRS 16 and no real urgency to get this done. Mr Harbord said this was a matter of negotiation between the external auditors and staff. Councillor Akwaboah expressed concern about the lack of tightness of the language being used.

Grant Thornton Update on 2024/25 Pension Fund Draft Accounts

Mr Dossett presented an update on the 2024/25 Pension Fund Draft Accounts. He said the pension fund audit was in a different place to the council audit and there was a huge opportunity to regain assurance a lot quicker on the basis that there are no reserves for the pension fund. Councillor Gill asked about a timescale for regaining assurance. Mr Dossett said that if assurance was gained over the transactions in year and the closing balances this year, then for 25/26 it gives Grant Thornton the opportunity to give an opinion other than disclaimed.

Grant Thornton Lessons from 2023/24 Auditors' Annual Reports

Mr Dossett presented a report on lessons from the 2023/24 Auditors' Annual Reports. He summarised the key findings and noted that the average number of key recommendations was up to 1.9 per council from 1.3 in the prior year.

2024/25 Annual Governance Statement

Christopher Martin, Head of Assurance, presented the 2024/25 Annual Governance Statement. He highlighted five headline governance challenges: staffing, preparation of timely high-quality accounts, financial resilience, value for money, and subsidiary company governance. Councillor Gill asked if he agreed with the recommendation from Grant Thornton that the directors of the subsidiary companies should come to the audit committee like they do the scrutiny committee. Mr Martin said he thought it would be a very sensible recommendation. Councillor Waker asked if the council was in a good position in terms of governance in allowing what's happened with contracts. Mr Martin said that next year he wouldn't be surprised to find a degree of procurement or contract monitoring within the statement.

Internal Audit Annual Report 2024/25

Mr Martin presented the Internal Audit Annual Report 2024/25. He said that control was generally satisfactory with some improvements required. Of the 42 internal audits, one was issued a no assurance opinion and 13 limited assurance opinions. Councillor Gill touched upon the contract management audit that was given no assurance and quoted from the report. She asked how realistic the timescales were for the recommendations to be implemented. Mr Martin said the timescales were challenging but realistic. Councillor Waker raised concerns about the limited assurance given to housing repairs and maintenance and asked what progress was being made on monitoring BDMS data. Mr Martin said progress was being made and he expected them to hit the deadline.

Customer Feedback Team Annual Report

Natalia Monvoisin and Danielle Bridge presented the Customer Feedback Team Annual Report. Ms Bridge said there had been a 3% drop in the overall complaint volumes, but timeliness still remains the main challenge. Councillor Waker said it was good that they're prepared to uphold or partly uphold 54% of cases, but wondered if lessons are being learned. He also raised concerns about the way the 10 working day response target has been extended for members casework. Councillor Gill said the complaints have gone down, but the response times are still 20% shy of the actual target. She asked if that was because of the complexity of complaints.

Work Programme 2025/26

The committee noted the work programme and agreed to add an item to bring the directors of the subsidiary companies to a meeting.