To consider the 2024/25 Audit Completion Report (DFP/15/2526).

Director of Finance and Procurement, Mike Rea, introduced the report noting that the Auditor’s Completion Report confirmed that Forvis Mazars had completed the audit of the Authority’s financial statements. Mike Rea noted that Forvis Mazars anticipated issuing an unqualified opinion following this Audit Committee, confirming that the 2024-25 financial statements gave a true and fair view of the financial position of the Authority as of 31^st March 2025.

Members noted that the Audit Completion Report identified internal control weaknesses within the production of the 2024-25 Statement of Accounts and Mike Rea confirmed that the team was committed to addressing this through targeted improvements in the 2025-26 production process, ensuring timely production and full compliance with the updated codes and regulations.

The report also identified several additional areas for attention and Members were aware of the significant team changes over the last 18 months. These, alongside vacancies and long-term sickness impacted the 2024-25 production timeline and the team were working on forward planning to prevent future re-occurrence.

Members noted that Forvis Mazars identified no significant weaknesses regarding the Authority’s value for money arrangements, specifically, the Auditors found the systems for securing economy, efficiency and effectiveness in the use of resources to be sufficient, requiring no formal recommendations. Mike Rea welcomed Audit Partner for Forvis Mazars, Karen Murray to present the Audit Completion Report.

Karen Murray was pleased to present the Audit Completion Report which concluded their work. She advised that she received the Authority’s accounts on 2^nd July, which was past the deadline of 30^th June, however, this wasn’t a particular concern. It was acknowledged that this audit had been much more difficult than in previous years and so, the Authority would receive more amendments in this set of accounts than usual.  Concerns were raised about the quality of the accounts that were presented this year and the technical capacities in the team to support what was a very complex set of accounts, however, Karen recognised that there was a commitment to getting it right.

Karen Murray noted that four significant areas of risk had been identified in the Audit Strategy Memorandum. The first one was in respect of the management override of controls, and the risk was around matters where management could directly influence the accounts and make decisions that changed the figures within the accounts. Karen confirmed that this work had been completed with no problems identified.

The second area of significant risk was in relation to the Authority’s pension scheme and the assets and liabilities that the Authority disclosed in respect of the two pension schemes. Karen confirmed that all the work had been completed. The only challenge was that updated information became available as time went on due to relying on work that the actuary does at a point in time. This resulted in some amendments to the accounts, however Karen reassured Members that it was very unlikely that there would ever be a situation that no amendments would ever be required in this area.

Karen Murray explained that the third area of significant risk related to the valuation of the Authority’s land and building and some amendments were required within the accounts for this area.

The fourth and final area of significant risk was the implementation of IFRS 16. Karen explained that this was a change to the way the Authority accounted for leases and noted the biggest change to the Authority’s accounts this year was that the draft accounts did not include the remeasurement of the PFI asset on the right basis under IFRS 16.

Members noted that there was a further issue around the rest of the asset register as some assets included in the Authority’s asset register had been fully depreciated and had a net book value of nil but was still in use. Karen Murray advised that these assets should have had a residual value and indicated that the depreciation had been applied too quickly, meaning that adjustments had to be made.

It was explained that Forvis Mazars intended to give an unqualified opinion on the Authority’s accounts on receipt of the Authority’s approved Statement of Accounts and signed Letter of Representation.

Karen closed with thanking the Authority’s team for their hard work.

Councillor Chris Page thanked the team for a very helpful report and asked Karen whether she thought that working with Mike and his team, that the Authority would be in a better position to cope with the IFRS 16 this time next year. Karen clarified that IFRS 16 was new and particularly complex and she hoped these challenges would not arise in future years.

The Chair, Councillor Jeanie Bell, drew Members’ attention to page 29 of the agenda which detailed misstatements, and she asked whether this would reduce going forwards. She also asked what the key drivers were behind those misstatements and asked if the issue around team capacity would be addressed and if there was any support required from the Authority.

The Director of Finance and Procurement advised the Chair that some of the misstatements were a result of reclassifying amounts between different lines within the accounts and that it was a change to the way the amounts had been reported for several years.  Mike advised Members that the team had been through several changes over the last couple of years and was therefore a relatively new team, with staff turnover in the Accounting Team and Exchequer Services Team.  He re-assured Members that the team were undergoing relevant training, with some courses already completed and others scheduled for the coming weeks.  He added that himself and the Head of Finance were reassessing the capacity of the team.

The Chair thanked Mike for his response and added that this gave her a lot of confidence and reassurance. She drew Member’s attention to page 31, where it mentioned the significant control deficiencies on fully depreciated assets, and it explained that there would be a new internal control to ensure that assets reaching the end of their predicted life were physically verified before being treated as nil value and that monitoring progress on the improvements would ensure that the financial reporting controls remained robust. She wondered how this would be reported to the Audit Committee in the year going forward and asked for assurance to prevent the reoccurrence of this in the 2025-26 audit.

Mike Rea explained that several vehicles, originally due for disposal based on their service life, have had their use extended. This decision followed lead-time delays for replacement vehicles and had allowed the Authority to achieve greater value for money from these assets. The team had met with the Fleet Manager to review existing assets and would continue these discussions over the coming weeks to plan for the next year. An update on this asset exercise would be brought back to the Audit Committee. Members also noted that the Authority was due to take delivery of several new vehicles over the next 12 months.

RESOLVED that the contents of the Auditor’s report be noted.