The Audit Committee of Bath and North East Somerset Council met on Wednesday 11 February 2026 to review external audit progress, the treasury management strategy, risk management updates, and the internal audit plan. Key decisions included endorsing the external audit plan for the council and the Avon Pension Fund, and approving the draft internal audit plan for 2026/27.

External Audit Update

Beth Bowers from Grant Thornton provided an update on the external audit plans for both the Council and the Avon Pension Fund. She noted that Bath and North East Somerset Council has been classified as a major local audit due to its role as the administering authority for the Avon Pension Fund, which necessitates additional procedures and a higher audit fee. Ms Bowers also addressed independence considerations, explaining that while she and a colleague have family members in the Pension Fund, an internal ethics review had cleared them to continue their roles. She also confirmed that she would be rotating off as Key Audit Partner after the 2026/27 audit period.

The committee discussed the Dedicated Schools Grant (DSG) deficit, with Ms Bowers explaining that the Council intends to apply for the High Needs Stability Grant / DSG Deficit Support Grant, which could write off up to 90% of the deficit. An outstanding objection from 2023/24 relating to the Pension Fund was also mentioned, with the Council in the early stages of drafting a response. The committee resolved to endorse the 2025/26 External Audit Plan for the Council and the Avon Pension Fund.

Treasury Management Strategy Statement 2026/27

The committee reviewed the proposed Treasury Management Strategy Statement for 2026/27. The strategy is guided by the Chartered Institute of Public Finance and Accountancy's (CIPFA) Treasury Management Code of Practice and aims to balance risk management with cost-effectiveness. The report outlined the council's current borrowing and investment position, as well as forecasts for interest rates and economic conditions. It also detailed the approved counterparties for investments and the associated limits. The strategy includes options for Environmental, Social, and Governance (ESG) focused investments, aligning with the council's declaration of a Climate Emergency. The committee noted the Treasury Management Indicators and recommended the proposed actions within the strategy to the Council.

Risk Management Update: Financial Management System

An update was provided on the proposed replacement of the Council's key financial management system. The report highlighted the importance of this system for financial controls and the external audit process. The committee was reminded of the Council's overall risk management framework, which operates on a Three Lines of Defence Model and focuses on the effective identification and management of risks. The Corporate Risk Register, which contains 28 risks owned by the Corporate Management Team and 7 risks under a watching brief, was also discussed. The committee was asked to note the report and receive a further update in six months on the implementation progress of the new financial management system.

Consultation on the Development of the Internal Audit Plan 2026/27

The committee was consulted on the methodology for compiling the Internal Audit Plan for 2026/27, which is based on the Reasonable Assurance Model. This model assesses themes based on good governance and considers factors such as materiality, inherent risk, and audit history. The report highlighted key risk areas identified by the Chartered Institute of Internal Auditors, including cybersecurity, human capital, digital disruption, regulatory change, and business resilience. The committee was asked to provide input on any areas or themes they wished to be considered for inclusion in the plan. The committee resolved to approve the Internal Audit Plan 2026/27.

Annual Governance Statement Update

The report informed the committee about the process for the Annual Governance Review and the publication of the Council's Annual Governance Statement for 2025/26. The statement is based on the Council's 'Local Code of Corporate Governance' and adheres to guidance from CIPFA and SOLACE. The report referenced previous 'significant' reportable issues from the 2024/25 statement, including Financial Challenge and the Dedicated Schools Grant (DSG) deficit, noting that progress had been made in these areas. The committee was asked to note the report and the process for the Annual Governance Statement.

Audit Committee Draft Workplan

The draft workplan for the Audit Committee for 2025/26 was presented for comment. The workplan ensures that the committee's terms of reference are met and includes items such as external audit progress updates, treasury management strategy, internal audit plans, and risk management reports. The committee resolved to note their 2026/27 workplan.