The Audit and Risk Committee of Barking and Dagenham Council met on Wednesday 25 March 2026 to discuss the progress of the 2025/26 audits for the Council and Pension Fund, review the 2025/26 audit plan and accounting policies, and approve the draft internal audit charter, strategy, and audit plan for 2026/27. Key discussions focused on the ongoing challenges in rebuilding audit assurance following disclaimed opinions in previous years, the accelerated timeline for the 2025/26 audits, and the strategic direction for internal audit services.

Progress on 2025/26 Council and Pension Fund Audits and Sector Update

Grant Thornton, the Council's external auditor, presented a progress report on the 2025/26 audits for both the Council and the London Borough of Barking and Dagenham Pension Fund. Representatives from Grant Thornton, including Paul Dossett, Ellen Millington, and Zargham Malik, outlined the audit team's approach and the challenges ahead.

A significant focus of the discussion was the ongoing effort to rebuild audit assurance following several years of disclaimed audit opinions for both the Council's financial statements and the Pension Fund. This situation, stemming from national backstop arrangements, means there is no audit assurance over the opening balances for 2025/26, which fundamentally constrains the ability to issue an unmodified audit opinion for the current year. Grant Thornton indicated that the government has a strong focus on authorities with disclaimed opinions, expecting assurance to be rebuilt over the next two years.

The audit team is currently undertaking planning work for the 2025/26 financial statements audit, including understanding key business processes, accounting estimates, and the IT general control environment. They are working with the Council's management to identify and assess risks, with the outcome to be reported in the Audit Plan in June 2026. The audit will focus on in-year income and expenditure, as well as in-year movements on assets and significant balances, and where feasible, closing balances.

On the Value for Money (VFM) side, Grant Thornton's Auditor's Annual Report for 2024/25 identified five significant weaknesses in the Council's arrangements for securing economy, efficiency, and effectiveness in its use of resources. Key recommendations included finalising the transformation plan for financial sustainability, the Strategic Asset Management Plan, improving the finance team's capacity and capability, strengthening oversight of subsidiary companies, and enhancing procurement oversight. VFM planning for 2025/26 has been completed and will be reported in the Audit Plan in June 2026.

For the Pension Fund audit, while both 2023/24 and 2024/25 received disclaimed opinions, the fund does not face the same challenge with opening balances as the Council. Grant Thornton anticipates being able to issue an 'Except for' audit opinion for the 2025/26 financial statements, subject to satisfactory evidence supporting the opening balances. Planning work is underway, with interim testing focused on member data, expenses, benefits, contributions, and investment income. The target for completing the Pension Fund audit is November 2026.

Audit fees for 2025/26 were noted as £501,208 for the Council audit and £91,182 for the Pension Fund, reflecting the increased work required and the scarcity of audit firms.

2025/26 Audit Plan and Accounting Policies

Shabana Kausar, Director of Financial Services and Deputy Section 151 Officer, presented the report on the preparation of the 2025/26 Statement of Accounts and the associated audit plan. The report highlighted the statutory backstop dates for the publication of audited accounts, with the 2025/26 accounts having a statutory deadline of 31 January 2027. However, Grant Thornton has set an accelerated target of 30 November 2026 to support a smoother transition to future reporting cycles.

The accelerated timeline introduces a significant risk due to constrained staffing and specialist capacity within the Council. To mitigate this, the Council has implemented several improvement measures, including lessons learned sessions with the finance team and Grant Thornton, quarterly balance sheet reviews, early liaison with subsidiaries, and enhanced training for finance staff and service managers. Specialist support has also been secured for the Collection Fund and the adoption of IFRS 16, alongside additional interim staff to supplement the in-house team.

A key change in the 2025/26 Accounting Code of Practice relates to the measurement of non-investment property assets. This introduces indexation for non-investment property asset measurement in the years between formal revaluations, requiring a full revaluation at least once every five years, supported by indexation in intervening years.

The Committee was asked to approve the Accounting Policies for 2025/26 and delegate authority to the Strategic Director, Resources (S151 Officer) to make necessary amendments during the accounts production or audit process.

Draft Internal Audit Charter, Strategy and Audit Plan for 2026/27

Bash Fowora, Interim Head of Audit, presented the draft Internal Audit Charter, Strategy, and Audit Plan for 2026/27 for approval. The Internal Audit Charter has been updated to reflect the new Global Internal Audit Standards, which require adoption from April 2025. The Charter sets out the purpose, authority, and responsibilities of the internal audit function.

The Internal Audit Strategy outlines how the service will be delivered, including its resources, approach to planning and delivery, quality assurance, reporting, and performance monitoring. A significant change in the strategy is the expansion of the Cross Council Assurance Service (CCAS) framework to include PwC, KPMG, and Mazars, providing greater scope and flexibility for external support. The in-house team currently has three full-time vacancies, including the Head of Assurance and Risk post, which has been successfully recruited to.

The Internal Audit Plan for 2026/27 is risk-based and has been developed in consultation with management, considering historical assurance outcomes and emerging risks. It includes a significant contingency to allow for flexibility in responding to evolving risks and planned service redesigns. The plan covers a wide range of areas, including financial resilience, cyber security, housing compliance, and safeguarding.

During the discussion on the Internal Audit Charter, a point was raised regarding the Audit and Risk Committee's involvement in the recruitment of the Head of Assurance and Risk, as stated in the Charter. It was noted that members were not directly involved in the recent appointment, and it was agreed that the wording of the Charter would be reviewed and potentially amended to better align with current practice and terms of reference.

The Committee was asked to approve the Internal Audit Charter, Strategy, and Audit Plan for 2026/27.

Other Matters

The Chair noted that this was the last meeting of the municipal year and that the work program for 2025/26 had concluded. He highlighted that oversight of the accounts of the Council's company subsidiaries would be incorporated into the work program for 2026/27, reflecting recommendations from Grant Thornton and the Council's own acknowledgments. There are 15 subsidiaries, grouped into four categories: B First, BD Group, Reside, and BD Energy. A draft work program will be shared with current committee members before the end of the municipal year.

The Chair also mentioned that future meetings would include reporting on the annual governance statement, counter fraud, and internal audit, with officers undertaking a mapping exercise to ensure the committee's terms of reference are met. An action log will also be produced to track agreed actions.

The meeting concluded with thanks to members and officers for their support.