The Audit Committee of Scottish Borders Council met on Monday, 22 September 2025, to discuss a range of audit-related matters. The agenda included presentations and reports on risk management, treasury management, external and internal audits, and the implementation of audit recommendations. Additionally, the committee was scheduled to consider reports from the Accounts Commission on workforce challenges and flooding in communities.

External Audit Annual Audit Report 2024-25

The Audit Committee was scheduled to consider the External Audit Annual Audit Report 2024-25 from Audit Scotland. The report, prepared by John Boyd, Audit Scotland, was expected to present the findings from the audit of the annual accounts.

The report noted that the audit work was substantially complete, pending resolution of a few outstanding items:

• Responses to ongoing queries
• Subsequent events procedures
• Final engagement lead quality review
• Receipt of revised annual accounts

The report was expected to highlight any significant issues identified during the audit, including any uncorrected misstatements. According to the report, there were two unadjusted misstatements arising during the audit, but management had concluded that these were not material to the financial statements.

The report also sought confirmation from the attendees on several matters:

• Awareness of any instances of actual, suspected, or alleged fraud
• Awareness of any subsequent events that have occurred since the date of the financial statements
• Agreement that the methods, assumptions, and data used in making accounting estimates in the annual accounts are appropriate
• Confirmation that all related party relationships and transactions are reflected in the annual accounts
• Awareness of any non-compliance with laws and regulations

A draft letter of representations from the Director of Finance was attached, for signature and return prior to the Independent Auditor's Report being signed. The proposed Independent Auditor's Report indicated that the audit opinions on the annual accounts for the council and its group were expected to be unqualified, meaning the accounts were free from material misstatement for the year ended 31 March 2025.

Annual Treasury Management Report 2024-25

The Audit Committee was scheduled to review the Annual Treasury Management Report 2024-25, prepared by Suzy Douglas, Director of Finance. The report presented the treasury management activities undertaken during the financial year, as required by the CIPFA Code of Practice on Treasury Management in the Public Services.

The report highlighted that treasury management activity for the year had been undertaken in compliance with the approved Treasury Management Strategy and Policy. The council remained under-borrowed against its Capital Financing Requirement (CFR) at 31 March 2025.

Key Prudential Indicators (PI) and Treasury Management Indicators (TI) detailed the impact of capital expenditure activities during the year:

The report included an analysis of performance against targets set in relation to Prudential and Treasury Management Indicators, and showed the council's borrowing requirement to fund capital investment, how much the council actually borrowed, and the level of external debt within approved limits.

The report recommended that the Audit Committee note that treasury management activity in the year to 31 March 2025 was carried out in compliance with the approved Treasury Management Strategy and Policy.

Internal Audit Work to July 2025

The Audit Committee was scheduled to receive a report from Jill Stacey, Chief Officer Audit and Risk, providing an overview of recent internal audit activity for assurance purposes. The report covered the period from 1 April to 31 July 2025, and related to the delivery of the approved Internal Audit Annual Plan 2025/26.

Four final Internal Audit assurance reports had been issued:

• Financial Sustainability
• Revenues - Council Tax Refunds
• Paths Asset Management
• UK Government Shared Prosperity Fund (and Multiply)

The report noted that there were zero recommendations made associated with these reports.

The report also detailed internal audit consultancy and other work carried out, including engagement in meetings of change programmes and projects, 'critical friend' consultancy relating to the Management of Corporate Appointeeship, and a presentation to the Council Management Team on the status of in-progress Internal Audit recommendations.

The report recommended that the Audit Committee note the executive summaries of the final Internal Audit assurance reports, the internal audit consultancy and other work carried out, acknowledge the assurance provided on internal controls and governance arrangements, and approve minor amendments to the Internal Audit Annual Plan 2025/26.

Progress of Implementation of Internal Audit Recommendations Q1 2025-26

The Audit Committee was scheduled to receive an update on the progress of implementation of internal audit recommendations as of Q1 2025-26, as detailed in a report by Jill Stacey, Chief Officer Audit and Risk.

The report indicated that eight internal audit actions had been completed, fourteen actions had shown an increase in % progress, four actions had had an extension to due date granted, and zero internal audit actions were overdue.

The report recommended that the Audit Committee acknowledge the progress made by management in implementing internal audit recommendations, and consider whether it was satisfied with the progress or whether any further action was required.

Accounts Commission Report 'Delivering for the Future: Responding to the Workforce Challenge'

The Audit Committee was scheduled to consider the Accounts Commission report 'Delivering for the Future: Responding to the Workforce Challenge', published 7 August 2025. The report highlighted the challenges facing councils regarding workforce and considered the 2023/24 thematic reviews on workforce.

The report noted that recruitment and retention of staff continues to be a challenge, and most councils have an ageing workforce. Councils are actively considering their future workforce requirements, including the need to make reductions, so they can ensure workforces are the right size and shape, and their staff have the skills they will need for the future. In addition, the use of more digital technology is an area being used across councils to support workforce pressures including ensuring staff have the digital skills necessary for the scale of changes ahead.

The report recommended that the Audit Committee note the content of the report, and consider whether to make any specific recommendations, and note the SBC-specific reports relating to this Best Value Workforce Innovation theme.

Accounts Commission Report 'Flooding in Communities: Moving Towards Flood Resilience'

The Audit Committee was scheduled to consider the Accounts Commission report 'Flooding in Communities: Moving Towards Flood Resilience', published 28 August 2025. The report examined how well the Scottish Government, councils, central government bodies and their partners are working together and with local communities to address flooding in communities.

The report noted that flooding in communities is a significant climate change risk for Scotland, and that there are good examples of public bodies and councils working well with each other and with communities to tackle flooding, but that they face gaps in resources, skills and capacity.

The report recommended that the Audit Committee note the content of the report, and consider whether to make any specific recommendations, and note the internal audit assurance work in recent years as SBC-specific information relating to this theme.