Agenda item

To receive an update on the progress in finalising the External Audit Findings Report and Council’s Statement of Accounts for the year ended 31 March 25.

(Please note the agenda was republished to include the attached report on 2 February 2026)

Before inviting the External Auditor’s (Grant Thornton) to present the report, David Ewart (as Chair) commenced consideration of the item by expressing the Committee's appreciation for the work undertaken to date by both Grant Thornton and the Council’s Finance Team in seeking to progress the audit and sign off of the Council’s Statement of Accounts given the extensive and challenging nature of work required.  Members were reminded that the necessary delegations had already been authorised in relation to completion and sign off of the final statement of accounts following completion of the external audit process and issuing of the Audit Findings Report, with the update being provided at the meeting therefore focussed on current progress.

Sophia Brown (Key Audit Partner, Grant Thornton), Sheena Phillips & Louis W. Niven (Grant Thornton – External Auditor) were then welcomed to the meeting and invited to provide a further update for members on the current status of the audit, with the following issues noted:

·            An update was provided on the Value for Money work as set out in the Auditor's Annual Report presented to the Committee in September 2025 with members advised that since presentation of the initial report additional work had been required in relation to procurement which had been completed during November 2025 as a piece of added value work at no additional cost to the Council.

This work had been focussed on development and implementation of the Council's procurement improvement plan, with Grant Thornton having assessed the first two stages of that plan (establishment and stabilisation), which were found to be largely complete. Management had now progressed to work on the subsequent two phases of improvement and embedding, which were scheduled to run for up to 24 months. It was recognised that the Council’s procurement function was evolving towards a more strategic approach including the implementation of new controls, processes and arrangements with the review undertaken by Grant Thornton focused on the necessary controls, policies, management oversight, monitoring and risk management arrangements to support that process.  Controls within the first two phases of establishment and stabilisation had been found to be compliant with expected standards. In examining the improvement and embedding phases, which were recognised as being in progress, Grant Thornton (whilst not identifying any improvement recommendations) had identified a comment and insight with it noted that Brent's current approach to procurement risk consideration was project-focused, and it observed that management was in the process of developing a comprehensive procurement-specific risk register.  As part of this process, Grant Thornton had identified a need to include consideration of the Council's readiness for implementation of the Economic Crime and Corporate Transparency Act and for further consideration to be given to enterprise risk management with the updated Annual Report incorporating this additional work due to be presented to the Full Council meeting on 23^rd February 2026.

In thanking Sophia Brown for the update provided in relation to the Value for Money arrangements, the Chair advised that the update had also been useful in supporting the Committee’s own review of progress in relation to development of the Council’s procurement strategy, which was due to be provided at their next meeting in March 2026.

Discussion then moved on to progress with the Audit Findings Report, with Sheena Phillips (Senior Audit Manager, Grant Thornton) outlining the updates made to the report following its presentation to the Committee on the 3^rd December 2025.  Members were reminded that the accounts audit had commenced in July 2025 with completion now planned during February 2026. In terms of the findings to date ten adjustments had been identified in relation to the financial statements, resulting in a £0.1m adjustment to the Authority’s Comprehensive Income and Expenditure Statement but which had not affected the level of Authority’s usable reserves.  Whilst audit work remained ongoing, no matters had been identified as requiring modification of the audit opinion, subject to the outstanding areas of work identified in relation to Plant, property and equipment (PPE), PFI assessments; final disclosure in relation to financial instruments, the Movement in Reserves Statement (MIRS), borrowing confirmations, receipt of the consolidated Group Accounts and completion of the remaining audit testing in the areas of Group Accounts, Capital Financing Requirement, Minimum Revenue Provision being completed alongside the review of the final narrative report, audit work and receipt of management’s letter of representation.

As a further update, members were advised that the MIRS checker had now been received with the fully updated financial statements required to confirm figures due to be provided by the end of the week and the outstanding borrowing confirmations also having been provided.  Whilst there remained work to be completed, the audit was stated to be in a substantially more advanced position than had been the case at the beginning of December 2025. Sophia Brown highlighted that, given it was now February 2026, there was a very concentrated effort to complete all outstanding work in advance of the final backstop deadline on the 27^th February 2026.

In terms of the significant challenges identified as part of the current audit, members were advised these had included the ongoing focus around the valuation of PPE, following the deficiencies identified during the previous audit which had led to numerous errors and disclosure misstatements. While the significant efforts made by management to address these issues had been recognised, the late completion of the 2023-24 audit in February 2025 meant there had been limited time to implement the required changes.  This had been compounded by the delay in delivery of the draft 2024-25 financial statements due to ongoing challenges in relation to the valuation process, which had included the receipt of incorrect valuation reports, duplicate property valuations, difficulties in reconciling the fixed asset register with the valuer’s report, and delayed responses from the valuer.  The implementation of IFRS 16 was also acknowledged to have added further complexity, requiring complete revision of the leases disclosure with efforts to resolve the IFRS 16 position resulting in further issues within the Authority’s capital processes, and additional errors within the accounts. Taken together these combined factors had caused delays to the audit timetable, required unplanned audit resource which in turn had driven increased audit costs.  In relation to PPE valuations, work had been completed and this area had progressed. However, prior period adjustments in relation to PPE work remained ongoing. This therefore remained a significant element of work requiring completion.

Having noted the overview of significant and other risks identified within the updated Audit Findings Report, reference was then made to the audit adjustments and adjusted misstatements with the most significant of these involving the valuation of garage blocks which had involved an adjustment of £6.9m.  In addition, several errors relating to lease liabilities had been identified with an adjustment of £19.8m also having been identified in relation to the undervaluation of HRA properties.

In terms of the Action Plan, identified within the report, members were advised that seven new control points had been added to those presented in December. These included the strengthening of lease management arrangements and enhancement of review processes relating to the draft accounts along with inclusion of “asset last revalued” details, review of the depreciation policy, implementation of a formal rent review control process and school expenditure reconciliation.

In terms of the impact of the ongoing work on the estimated audit fee Sophia Brown advised that this had resulted in an additional fee of £71,000 (representing an increase from £545,235 to £616,235) being identified with it confirmed that, whilst unlikely, should any further fees be incurred in completion of the audit the Committee would be informed.

Having concluded their presentation, the Chair thanked Sophia Brown and Sheena Philips for the update provided before then inviting questions and comments from members with the issues raised summarised as follows:

·            Opening the comments, clarification was provided regarding the approach towards materiality as part of the audit process and Councils status in terms of the assessment of a Council as a going concern. In response, Sophia Brown confirmed that this assessment was broadly correct, however it was explained that Grant Thornton assessed matters from the perspective of material correctness. The materiality figure was shown in the Audit Findings Report and that represented the threshold to which they worked. In terms of going concern, Grant Thornton were required to assess whether the Council constituted a going concern. Practice Note 10 was utilised when undertaking that assessment, and as an entity within the public sector, there was limited risk that Brent Council would not be considered a going concern, given the availability to seek exceptional financial hardship support (if required). There was, therefore, a distinction in how going concern was assessed for local authorities compared with commercial companies that could fully liquidate their assets.

·            Referring to the recommendations made as part of the 2023-24 audit, members highlighted that a number of the issues identified had also been raised as continued challenges during the current audit process, with specific reference made to IFRS16 and PPE valuations and details therefore sought on the way in which implementation of the management response on these issues was being monitored and delivered.  Whilst aware of the challenges identified, details were sought on the role it was felt Internal Audit could undertake in providing the necessary oversight to ensure these matters were fully addressed.  In response, Darren Armstrong (Deputy Director of Organisational Assurance and Resilience) recognised the constructive nature of the suggestion but felt it important to recognise that the implementation of management actions were matters that fell within the remit of the relevant officers assigned those actions.  The focus for Internal Audit remained in ensuring the key themes being identified were reflected within the Internal Audit plan and necessary controls, systems and processes were in place to address them which was where it was felt Internal Audit could provide greater value and assurance as evidenced through the review of the PPE valuation process currently underway.

In continuing the focus on the need for a mechanism to drive delivery of improvement recommendations and management actions, members were keen to explore what role Internal Audit would be able to play in support, again with reference, as an example, to the concerns and challenges identified in relation to PPE.  In response, Minesh Patel (as Corporate Director of Finance & Resources) took the opportunity to acknowledge the concerns expressed in relation to the delays created through the PPE issues identified but also felt it important to highlight that the changes being implemented would require a long term focus in terms of their resolution.  Whilst significant progress was being made, the process still required significant work to ensure all assets were appropriately categorised, with accurate valuations and correct positions on the balance sheet in the specific manner required.  However, it was noted that the actual physical work of ensuring all records were correct, properly assured and processed was going to require time. Cross Departmental Working Groups had already been established in collaboration with Corporate Property to lead on the process and system change required, with the Committee assured this was being treated with the utmost seriousness in order to mitigate against the same type of delays and issues being experienced on an annual basis moving forward.  This would include utilisation of the findings from the Internal Audit review with a determined effort to address the issues and challenges experienced moving forward being driven at senior management level across the organisation focussed around the development of a Corporate Landlord Model in order to provide a single point of accountability and maintain enhanced control and consistency in terms of the way data was being held and recorded and the Committee supportive of the approach outlined.

·            Having noted the update provided in relation to audit fees, further clarification was sought on the basis of the additional fees incurred as a result of extra audit work which had been outlined with specific reference to creditor and debtor sample selections and testing given what was felt to be the routine nature of this activity. In response, Sophia Brown advised that the additional fees identified related to the additional activity which it had been required to undertake beyond that originally planned and included within the fee scales and allocation of resource.  For debtor and creditor sample selection, the situation that had arisen was that Grant Thornton had not been able to proceed with sample selection and subsequent testing until after reviewing previous work, and they had been required to raise a control recommendation in that regard due to certain unexpected issues that had been identified in relation to this. Additional fees were therefore a consequence of the issues that had been encountered rather than standard audit work and had required the deployment of significant additional audit resource with members keen to ensure this clarification was added to the final report.

·            In response to further details being sought on the audit adjustments and unadjusted misstatements further clarification was provided in relation to:

Ø  the Housing Revenue Account (HRA) valuations with it confirmed this had related to an error made by the Council’s valuer with no material impact identified on remaining assets;

Ø  the adjustment relating to a Building Cost Information Service (BCIS) which again had been identified as a valuation issue involving an error in cost information;

Ø  the adjustment relating to other land and building valuation, which it was confirmed had also involved an error in the valuation process.

Given the nature of the issues and explanations highlighted members (recognising previous concern raised and the issues discussed at the previous Committee meeting) queried the performance of the Council’s valuer given the recurring themes identified. The Council was stated to be at a stage where the following year's valuation work was being scoped and it was acknowledged that these changes would be major contributors, not only to time taken, but also to consequential effects on fees.  As such members were keen to ensure the valuers continued to be held to account for their performance and quality of service as part of the management and fees relating to the existing contract and that the issues were also addressed as part of the procurement of the new service, once that was undertaken (recognising this would not be possible in time for the work required on the 2025-26 accounts), which officers advised had already been identified and escalated as key actions.

In response to a further query, confirmation was provided that the concerns raised in relation to performance of the valuers had not been the sole reason for the increase in audit fees which also reflected issues with the quality and consistency of data held internally across the Council with work (as already outlined) also underway to address these issues albeit requiring a medium to longer term approach, recognising the progress already made.  In terms of the wider approach towards implementation of the management actions identified, the challenges in rectifying matters as part of the annual audit process whilst also correcting historical data and addressing prior period adjustments were noted with the approach initially focussed around those assets with the highest value and most significant impact.  Following this, the focus would move to other smaller assets which whilst not as material, could still impact on the accuracy of the valuation process.  Whilst officers expected the 2025-26 audit process to reflect many of the changes being introduced the revised timeframes relating to sign off of the accounts would still require considerable work to in relation to the asset register.

In relation to the timeframe for the 2025-26 accounts Sophia Brown advised that discussion had already been held with senior Finance Officers (including Minesh Patel) regarding the timescales for the audit process, in order to clarify the resources that would be available and work required to ensure the audit was completed in advance of the statutory deadline and backstop arrangement. As such, assurance was provided that discussions would continue in order to ensure the collaborative approach developed continued and the 2025-26 audit was as efficient as possible.

As a final comment, Minesh Patel was then invited to provide a brief update on the Local Government provisional multi-year financial settlement which had been announced on the 17^th December 2025 and impact on Brent.  Referring to the settlement, members were advised that full details had been included within the budget report scheduled to be considered by Cabinet on 9^th February 2026 with the settlement in relation to Brent more favourable than had been previously anticipated and reflecting the outcome of the Government’s Fair Funding Review aimed at directing more resources to councils with the highest levels of need, simplifying the funding system and resetting business rates.  For Brent this had reflected issues such as housing costs, deprivation and inequality and had resulted in a £67.9 million increase in core funding between 2025/26 and 2026/27 with the net additional funding identified as £22.9 million.  Whilst the additional funding had been welcomed and would be used to address immediate service pressures, including those in relation to social care and homelessness, it was felt important to highlight that it would still not meet the full cost of the pressures and challenges identified as detailed within the Q3 Financial Forecast.  As such, Minesh Patel noted that whilst this had not fully resolved the issues, the settlement had provided greater reassurance with the final settlement scheduled to be confirmed in February 2026 and the additional funding received for 2026-27 effectively offsetting the budget pressures identified during the current financial year.

In drawing consideration of the item to a conclusion, the Chair once again thanked Grant Thornton for the substantial effort and support on the audit along with Minesh Patel and the Finance Team.  In noting that work remained on course with the aim of completing sign off of the 2024-25 accounts in advance of the final backstop on 27 February 2026 the request was made for all members of the Committee to be updated when that position was reached with the importance in maintaining a focus on the challenges needing to be addressed in relation to PPE valuations and leases also highlighted moving forward.  Whilst the concerns highlighted in relation to the additional audit fee were also noted, it was felt these would need to be accepted given the nature of the additional work which had been required and ongoing reality in terms of the data quality and consistency issues outlined.

Prior to ending consideration of the item, Sophia Brown also took the opportunity to express appreciation to the Council's Finance Team for their support, acknowledging they had continued to work collaboratively with Grant Thornton in supporting completion of the audit process.

With no further issue raised, it was RESOLVED:

(1)    To note the updated External Audit Findings Report and Value for Money assessment.

(2)    To note the expectation that final sign-off of the Council's 2024-25 Statement of Accounts would be achieved in advance of the backstop deadline of 27 February 2026 along with additional audit fees incurred as a result of the supporting activity required and all members of the the Committee to be informed when final sign-off of the Council's 2024-25 Statement of Accounts had been completed.