Agenda item

To consider the report of the Chief Finance Officer (copy enclosed).

The Chairperson drew Members’ attention to a replacement report that had been circulated and replaced the version circulated when the agenda was printed.

The Committee considered the report of the Director of Finance, which presented KPMG’s (the appointed external auditor) draft External Audit Plan and Strategy for the year 2025 / 26 (attached as Appendix 1). Members noted that the audit findings and recommendations would be reported later in the year, with the final audit opinion expected by the statutory backstop date of 31 January 2027. The estimated audit fee of £219,000 was also highlighted.

The Director of Finance took Members through his report and commented that the performance of the Council throughout the 2024/25 accounts had been strong and there were a number of positives to be taken from this. The Committee was informed of the wider context of local government audit, including significant increases in audit fees since the end of the Audit Commission regime and a marked decline in unmodified audit opinions across Greater Essex. Members noted that audit contracts continued to be managed nationally by Public Sector Audit Appointments (PSAA), and that the International Financial Reporting Standards (IFRS)-based accounting framework remained in place, adapted through the Chartered Institute of Public Finance and Accountancy (CIPFA) Code for local government needs.

It was also reported that a new Local Audit Office would replace the current PSAA-led arrangements from 2028/29, with expectations of improved engagement with councils. The Committee acknowledged that the audit supported the Council’s governance objectives and that the associated financial implications had been accounted for within the budget.

The Director handed over to Emma Larcombe, Director of KPMG to present her draft plan for the audit review of the accounts 2025/26. Ms Larcombe highlighted how it was essential to look ahead to the work planned as part of the audit and drew Members’ attention to specific areas including:

·                Audit materiality – highlighting performance materiality and how this level had been increased as a result of the work carried out in the previous year, moving the threshold up to 75%.

·                Key audit risks were consistent with what had been seen the previous year.

·                A Value for Money (VFM) risk assessment had not been presented and would be reported at the next meeting. Members were advised that there were no VFM concerns in the previous year.

·                Audit timeline – this had been developed based on management’s financial reporting timetable with an absolute backstop being the end of January 2027.

·                Fees – It was noted that these were set by the Public Sector Audit Appointments and considered reasonable for the statutory audit and VFM work required. Ms Larcombe informed the Committee that there were a number of different assumptions but KPMG had provided an estimate of the maximum fees.

·                Build back Assurance – Build Back Assurance had experienced several periods of disclaimed audit opinions, but the Committee was advised that the Council had now begun to make progress through the ‘rebuilding assurance’ process started last year. Members noted that significant work had already been completed on the 2024/25 audit, and that KPMG aimed to complete all risk assessment work in time to determine whether the Council could move away from a disclaimed opinion at the point of signing. This would be presented at the next meeting of the Committee and shared with the Ministry of Housing Communities and Local Government who would give the Council a grading.

In response to a query Ms Larcombe provided further details regarding the scale of fees. The Director of Finance advised that the PSAA website contained some further information regarding fee transparency, and the Council did not have the opportunity to disagree or argue with the fees. There was some discussion regarding the fees and in response the Director agreed to produce a briefing note for Members setting out the basis of the fee scale, charges and the way in which additional charges were added. In relation to the rate card included in the KPMG position for the likely fees he agreed to also provide some breakdown of the basis behind the chart.

The Chairperson then put the recommendation set out in the report. This was duly seconded and agreed.

RESOLVED that Members considered and commented on the DRAFT – KPMG External Audit Plan and Strategy for the year ended 31 March 2026 (attached at Appendix 1 to the report).