The Audit and Risk Committee meeting on 18 February 2026 primarily focused on the external audit progress for the 2024/25 and 2023/24 financial years. Grant Thornton, the external auditor, presented their findings, highlighting that a disclaimer of opinion is unavoidable for the 2024/25 accounts due to limitations in obtaining sufficient assurance over opening balances and the inability to complete all planned audit procedures within the statutory backstop timeframe. The committee was asked to note management's responses to the audit findings, approve the audited statements of accounts for both the Council and the Pension Fund for 2024/25 and 2023/24, and approve the letters of representation.

The meeting also addressed the significant challenges faced by the Council in its financial reporting, including historical issues with unaudited accounts, delays in evidence provision, and complexities arising from the Council's subsidiary structures. Grant Thornton noted that while the 2023/24 audit outcome remains a disclaimer of opinion, the Council has made demonstrable improvements in 2024/25, strengthening financial reporting discipline and governance, which positions it better for a fully assured audit opinion in future years. The Pension Fund's audit also resulted in a disclaimer of opinion for 2023/24 due to similar legacy issues and constraints.

Audit of Council Statement of Accounts and Pension Fund for 2024/25 and 2023/24

Grant Thornton presented their audit findings for the 2024/25 financial year, confirming that a disclaimer of opinion is anticipated. This is primarily due to the inability to obtain sufficient assurance over opening balances, a consequence of previous years' unaudited accounts and the statutory backstop legislation. The auditors noted that while in-year transactions were tested, the lack of assurance over opening balances prevents an unqualified opinion. Management acknowledged the findings but highlighted that many issues stemmed from historic problems and the compressed audit timetable, rather than fundamental control design weaknesses. They also pointed to improvements made during 2024/25 that strengthen financial reporting and governance, positioning the Council better for future audits.

For the 2023/24 financial year, Grant Thornton also reported that a disclaimer of opinion is expected. This is due to similar issues with opening balances and the inability to complete all necessary audit procedures before the statutory backstop date. The report highlighted that the predecessor auditor had previously issued disclaimed opinions for years 2019/20 to 2022/23, citing unlawful transactions between the Authority and the Pension Fund. While these specific loan arrangements have ceased, the legacy impact on opening balances continues to affect the current audit.

The committee was asked to note management's responses to the audit findings, approve the audited statements of accounts for both the Council and the Pension Fund for 2024/25 and 2023/24, and approve the letters of representation. Authority was also delegated to the Strategic Director of Resources, in consultation with the Chair, to finalise the accounts with Grant Thornton for publication and formally sign off the audited documents.

Management's Response to Audit Findings

Management provided responses to the audit findings, acknowledging the challenges but also highlighting improvements made during the year. For the 2024/25 Council accounts, management noted that many of the issues raised by the auditors were due to system reporting limitations and timing constraints rather than fundamental control weaknesses. They stated that adjustments identified were primarily presentational or classification errors that did not impact the core financial statements. Management also highlighted the strengthened governance arrangements for subsidiary entities and the ongoing work to improve group account consolidation for 2025/26.

Regarding the Pension Fund audit, management acknowledged the legacy issues from previous unaudited years but pointed to significant progress made during 2024/25 in strengthening processes and rebuilding assurance. They noted that while some areas require further attention, the Fund is better positioned for a fully assured audit opinion in future years. Management also addressed specific audit findings regarding membership data, stating that while discrepancies existed, they were due to the live nature of the Altair system and personnel changes, not data quality issues.

Work Programme 2025/26

The committee reviewed the work programme for the upcoming year, noting that it would include future reporting on subsidiaries, counter fraud, and internal audit, as well as a request for contract management training for members.

Other Business

No other public or private items were discussed, and the meeting was declared closed.