Agenda item

To receive and consider the Indicative External Audit Plans (including the Pension Fund) for the year ending 31 March 2025.

As additional background, members are also being asked to note the External Audit progress and assurance report along with relevant sector updates which has also been attached for consideration.

(Agenda republished to include the External Audit Progress and Sector Update Report on 15 June 2026)

Sophia Brown (Key Audit Partner, Grant Thornton) introduced the External Audit Progress update for the Council including the External Audit Plan for both the Council and Pension Fund for year ending 31 March 2026.  In presenting the report the following key points were highlighted:

·            The significant risks identified for the 2025–26 audit were standard risks for local authorities, with no Brent-specific risks this year; the fraud risk relating to income recognition had been fully rebutted, with audit work focused on the risk relating to cut-off of non-pay expenditure.

·            A change to the accounting code meant land and buildings would, in intervening years between five-yearly valuations, be revalued using an appropriate index (or desktop valuation where no suitable index existed) for the first time in 2025–26 as a change applying to all local authorities with the audit team working closely with finance officers on the processes and controls supporting this and the fixed asset register.

·            Regarding the audit fee, which was set via Public Sector Audit Appointments (PSAA), this was noted to be £560,502. Planning materiality for the Council had been set at £23.2 million (subject to revision once gross expenditure for the year was confirmed), with a “clearly trivial” threshold of £1.16 million and a specific, lower materiality of £20,000 applied to senior officer remuneration and termination benefits, given the public sensitivity of this information.

·            Two significant weaknesses had been raised in relation to 2024–25: one concerning financial sustainability (medium-term financial planning and the development of a pipeline of recurrent savings and income generation) and one on the “economy, efficiency and effectiveness” area, relating to the Council's self-referral to the Regulator of Social Housing. Improvement recommendations had also been raised regarding the property strategy, reflecting the Dedicated Schools Grant deficit and Housing Revenue Account planning within the Medium-Term Financial Plan, and strengthening capacity and capability within the finance team to meet statutory reporting deadlines.

·            As an update on progress, the draft 2025–26 financial statements were confirmed to have been received from the finance team, representing welcome progress. Whilst the statutory deadline for completing the 2025–26 audit remained the end of January 2027, Grant Thornton were aiming to have substantially complete their work by mid-September 2026 with the findings reported to the Committee in September, a considerably shorter timeframe than in recent years, supported by early interim audit work already undertaken.

·            An independence consideration was noted: Sophia Brown had previously been part of the audit team prior to becoming Key Audit Partner for the Council, representing a potential familiarity threat; a two-year extension to the standard five-year engagement period had been approved by Grant Thornton's ethics function and by PSAA, with agreed safeguards set out in the plan.

Having thanked Sophia Brown for the plan, the Chair invited questions, with the following issues raised:

·            In seeking further clarification relating to the independence disclosures, officers assured members that the specific point regarding the standard cap on non-audit work did not apply to housing benefits work, which formed the majority of the other work identified, and confirmed the point being raised related specifically to the continuity safeguard described above.

·            Moving on, members inquired over the specific risks associated with using an index, rather than a full valuation, for land and buildings in intervening years. Officers explained that this would prompt new lines of audit enquiry, including whether the most appropriate index had been used and whether alternative indices might have been more suitable, with these questions being discussed with the valuer in advance. Officers were asked whether the implementation of IFRS16 presented issues unique to Brent. Officers confirmed this had been implemented for the first time across all local authorities in the 2024–25 financial statements, representing a significant risk at the time, and noted that NHS bodies had implemented the standard slightly earlier, providing a useful point of comparison. The Chair clarified, for the avoidance of doubt, that the draft financial statements referred to were not yet complete or final, with the majority of single entity accounts provided so far; the statements would be published once finalised, and final approval resting with the Audit and Standards Committee.

Matt Dean (Key Audit Partner – Pension Fund) was then invited to present the indicative audit plan for the Pension Fund, noting the following key points:

·            The principal significant risk related to the valuation of Level 3 investments (those valued by fund managers or other experts, in the absence of an observable market price, such as private equity holdings), reflecting the greater estimation uncertainty involved.

·            A triennial actuarial valuation of the Fund's assets and liabilities had been completed during the year, as required of all Local Government Pension Scheme funds every three years, the results of which would be reflected in the 2025–26 accounts and would set employer contribution levels from 2026–27 onwards; this had required additional audit testing of the data used by the actuary and an associated additional fee, applicable to all LGPS funds nationally.

·            Materiality for the Fund had been revised this year.  This had involved planning materiality of £23.9 million for the Fund Account, with separate, lower materialities for contributions (£8 million) and benefits payable (£5.9 million), based on 10% of prior year values (a change from the blanket 5% approach applied last year), and a “clearly trivial” threshold of £1.1 million.

·            Recommendations raised in the prior year's audit remained in progress and would be revisited as part of the year-end audit. A standard PSAA fee uplift applied, together with a standard additional charge applied nationally to all clients in relation to testing of the triennial valuation.

Having thanked Matt Dean for the update the Chair the invited questions, with the following issues raised:

·            As clarification, Members were advised that whilst the Pension Fund was managed through a separate Sub Committee oversight of the Fund's external audit and accounts currently remained with the Audit and Standards Advisory Committee pending the implementation of a wider programme of “Fit for the Future” reform which would include separation of oversight for the Pension Fund and Council Statement of Accounts. Members asked whether issues arising from the Pension Fund audit would ever feed into the Council's Value for Money conclusion with officers confirming that whilst the Pension Fund was not subject to its own VFM opinion, a formal link existed enabling any significant Pension Fund issue to be included as part of the Council's VFM work.

Sheena Phillips (Senior Audit Manager) then presented the External Audit Progress and Sector Update report, noting the following key points:

·            Planning work on the audit of the Council’s Statement of Accounts had been completed in April 2026, with interim testing now underway and the requested evidence having been provided, subject to accruals and housing benefits evidence still being outstanding. The External Audit team at Grant Thornton was aiming to substantially complete the 2025–26 audit in September 2026, with Value for Money work running alongside the financial statements audit.

·            Key deliverables remained the Audit Findings Report in September 2026 and Auditor's Annual Report covering Value for Money in November 2026.

·            In relation to grants work, the 2024–25 Housing Benefit subsidy claim audit remained under review by the engagement lead with the 2025–26 grants audit work having not yet started.

With no further questions or comments raised, the Chair concluded the discussion and thanked Sophia Brown, Matt Dean and Sheena Phillips for their update and work in support of the audit process. The Committee then RESOLVED to note the indicative audit plans for the London Borough of Brent and Brent Pension Fund for the year ending 31 March 2026 and the External Audit Progress and Sector Update report.