The Audit and Risk Committee meeting on 26 November 2025 addressed significant concerns regarding the Council's financial statements for the years 2019-20 to 2022-23, with auditors BDO issuing a disclaimer of opinion due to time constraints and unresolved issues. The committee also reviewed the progress of the 2024-25 audit by Grant Thornton and discussed management's responses to the auditors' findings, including historical transactions with the Pension Fund.

BDO Audit of Council Statement of Accounts (2019-20 to 2022-23)

Auditors BDO issued a disclaimer of opinion on the Council's financial statements for the years ended 31 March 2020, 2021, 2022, and 2023. This was primarily due to the time constraints imposed by the Accounts and Audit (Amendment) Regulations 2024, which set a backstop date of 13 December 2024 for the publication of audited financial statements up to 2022-23. BDO stated they were unable to perform all necessary audit procedures within this timeframe to obtain sufficient appropriate audit evidence.

A significant finding related to transactions between the Council and the Pension Fund. BDO concluded that the Council did not have the legal power to prepay employer contributions and advance loans to the Pension Fund, deeming these transactions unlawful. While BDO has taken legal advice on this matter, the Council's own legal advice from King's Counsel, obtained in December 2024, stated that the Council had acted lawfully regarding inter-fund borrowing and lending. The Council also noted that all prepayments and loans have been fully recovered, and a revised Treasury Management Strategy has been implemented to prevent future occurrences.

BDO also identified significant weaknesses in the Council's arrangements for the preparation of its financial statements, citing inadequate quality control, insufficient resources, reliance on temporary staff, and a lack of adequate supporting working papers. These issues contributed to multiple material adjustments in the 2019-20 financial statements.

Regarding Value for Money (VFM) arrangements, BDO issued an adverse conclusion for 2019-20 and reported significant weaknesses for the years 2020-21 to 2022-23. These weaknesses were identified in areas including financial sustainability, governance (particularly concerning subsidiary companies and compliance with the Home Standard), and the preparation of financial statements.

Management Response to BDO Audit Reports

Shabana Kausar, Director of Financial Services and Deputy S151 Officer, presented management's response to BDO's audit reports. She acknowledged the historic nature of many of the issues, noting that the staff involved at the time are no longer with the Council. Despite the challenges of a lack of corporate memory, the current Finance Leadership Team has reviewed documentation, sought independent legal advice, and implemented improvements to governance and financial controls.

Regarding the audit opinion, management acknowledged the disclaimer but stated that it was driven by exceptional national circumstances and the backstop date, rather than systemic failures in current arrangements. They are committed to restoring timely annual audit assurance.

On the Pension Fund transactions, management reiterated their disagreement with BDO's conclusion, citing the King's Counsel legal advice that confirmed the Council acted lawfully. They also highlighted that all prepayments and loans have been recovered and governance has been strengthened.

Management also detailed actions taken to address deficiencies in financial statement production and valuation, including implementing quality assurance checks, recruiting permanent staff, and strengthening internal review processes. They noted that subsequent Value for Money reviews by Grant Thornton have acknowledged these improvements.

Grant Thornton Audit Progress Report (2024-25)

Paul Dossett and Ibukun Oluwasegun from Grant Thornton provided an update on the 2024-25 audit progress. The primary focus has been on in-year transactions and closing balances, with fieldwork commencing in October 2025. While progress has been made, there were delays due to issues with the quality of supporting documentation and third-party confirmations. Grant Thornton anticipates issuing a disclaimed opinion for 2023-24 and 2024-25, consistent with BDO's approach for prior years, but aims to rebuild assurance for future audits. They also noted that the Council's capacity and capability in finance remain an area of focus, with ongoing recruitment and training initiatives.

Work Programme 2025-26

The committee noted the proposed work programme for 2025-26, which includes plans for an additional committee meeting on 18 February 2026 to accommodate the signing off of two years of accounts from Grant Thornton. Councillor Rocky Gill raised a point about the lack of specific references to reviewing the accounts of subsidiaries in the work programme, which was noted as an area for future consideration.

Other Matters

The meeting concluded with the Chair, Councillor Jack Shaw, thanking Christopher Martin, Head of Assurance, for his six years of service to the Council before he moved to a new position with the London Borough of Islington.

The committee was asked to note the reports and approve the audited Statement of Accounts and Annual Governance Statement for the London Borough of Barking and Dagenham and the Pension Fund for the financial years 2019-20 to 2022-23. Authority was delegated to the Strategic Director of Resources, in consultation with the Chair, to finalise and sign off these documents and the letter of representation.