Agenda item

Report of the Director of Finance and Resources

(Note: The Chair of Scrutiny Co-ordination Committee, Councillor G Lloyd, and the Chair of Finance and Corporate Services Scrutiny Board (1), Councillor A Jobbar, have been invited to attend the meeting for this agenda item. Councillor A Jobbar is a Member of the Committee.)

The Audit and Procurement Committee considered a report of the Director of Finance and Resources (Section 151 Officer) that sought approval for the 2024-25 Statement of Accounts for publication on the Council’s behalf. Appendices to the report form the External Auditor, Grant Thornton, provided: the Coventry City Council’s Statement of Accounts 2024-25; the Audit Findings Report 2024-25 for Coventry City Council; and the Auditor's Report 204-25. These documents detailed the position in relation to 2024-25 and dealt with the necessary matters required in advance of the Government deadline for the completion of audit work. Officer from Grant Thornton attended the meeting to support this item of business.

In 2024, the Government passed legislation designed to address the backlog in the completion of local authority accounts. This legislation specified ‘backstop’ deadlines for the completion of audit work relating to particular financial years. The deadline for the Statement of Accounts 2024-25 was set as 27th February 2026. In the event of uncompleted audits, auditors would be required to issue either qualified opinions or disclaimers, as appropriate.

Grant Thornton had provided an Audit Findings Report for the work carried out on the audit of 2024-25 accounts since 1st July 2025. As part of this, and due largely to the tight timescale surrounding the backstop, they had drafted a partially disclaimed opinion for 2024-25 and proposed ‘management letters of representation’ for the Council to review.

At the time of publication of the report, the Auditor’s Report 2024-25 (Appendix 3 to the report) has not been received from Grant Thornton. In light of the backstop date for the publication of the 2024-25 audited accounts being 27th February 2026 and with the agreement of the Chair, Councillor Lakha, the Auditors Report 2024-25 was circulated and published separately and prior to the meeting in order to ensure that sufficient time was provided for the Committee to give full consideration to the document and the contents of the report.

Although a significant amount of audit work had been carried out on the 2024-25 accounts this had not been sufficient for the auditor to issue an opinion without disclaimer. As a result, Grant Thornton was intending to issue a disclaimed opinion, reflecting the fact that there had been insufficient time to gain full assurance.   Appendix 1 to the report detailed the work that had been carried out on the 2024-25 accounts and clarified which items remained incomplete.

There were no regulatory penalties for missing the accounting deadlines. However, failure to comply with the accounting deadlines would likely result in additional work for officers and the Council’s auditors, which would be reflected in additional audit costs.

Coventry City Council remained classified as a Public Interest Entity (PIE) in 2024/25 due to an historic issue of bonds which were freely tradable on the Stock Exchange. This classification required the Local Authority to meet a number of ethical standards specific to PIE organisations. One of these ethical standards related to a 70% cap on non-audit fees for PIEs for the average of the fees paid in the last three consecutive years of audit fees. The cap was used to control non-audit spending (for Coventry City Council, this related to Teachers Pension Audit and Housing Benefit Audit work) to ensure it didn’t exceed a certain percentage of the audit fees.

Due to the audit backstop legislation, and the subsequent reduced audit fees for 2021/22, 2022/23 and 2023/24, presented to Audit and Procurement Committee on 25th November 2024 (minute 35/24 referred), the non-audit fees for 2024-25 were in breach of this ethical standard. In these exceptional circumstances, owing to the backstop, Grant Thornton had been awarded an exemption by the Financial Reporting Council (FRC). The waiver on the fee cap was awarded on the grounds of the specific costs involved and the circumstances around the backstop. There is an obligation on the Council through the work of the Audit and Procurement Committee to satisfy itself as to the continued independence of Grant Thornton UK LLP to act as auditor, given the nature of fees earnt by Grant Thornton UK LLP in relation to the fees cap, as applicable in these exceptional circumstances.

As a result of the backstop legislation passed in September 2024, a disclaimer of opinion was issued for 2023-24. For the 2024-25 audit, Grant Thornton had continued to rebuild assurance, focusing on in-year transactions including income and expenditure, journals, capital accounting, payroll and remuneration and disclosures; and closing balances. As was expected, they had not concluded all the necessary work including reserves, grants received in advance and capital financing requirements due to the disclaimed opinion on opening balance in 2023-24. This ‘limited assurance’ over the opening balances for 2024-25 resulted therefore in ‘no assurance’ over the closing reserves balance also due to the uncertainty over the opening amount.

In June 2025, the National Audit Office (NAO) published its “Local Audit Reset and Recovery Implementation Guidance (LARRIG) 06” for auditors which set out special considerations for rebuilding assurance for specified balances following backstop-related disclaimed audit opinions. This included assessments over risk of material misstatements of opening balance figures and reserves; designing and performing specific substantive procedures, such as proof-in-total approach; special considerations for fraudulent reporting, property, plant & equipment, and pension related balances. It was expected that Grant Thornton’s strategy for rebuilding assurance would be discussed, as part of the planning for 2025-26 audit plan.

The Council had received claims in respect of Equal Pay. Due to the process currently being at an early stage, it was management’s view that there was no reliable assessment of the validity, potential success or value of claims at this stage. Disclosure of Counsel advice regarding open litigation was excluded under the Local Audit and Accountability Act 2014 to prevent undue influence on the outcome of claims. Grant Thornton had not received management’s assessment of the probability of the claims being successful or an estimation of any associated liabilities and had therefore not concluded work in this area.

Members asked questions and received responses at the meeting from officers and Grant Thornton on matters that included: valuations of land and buildings; equal pay claims process and liability; officer access to the accounts; IFRA 16; the pension scheme; future backstop dates for the accounts; external auditor fees. The Committee received assurance that these were a good set of accounts and financial management at the Authority was robust.

The Committee thanked Grant Thornton and the Council’s Finance Officers for the work they had undertaken on the accounts.

RESOLVED that the Audit and Procurement Committee:

1)  Notes the details presented in the 2024-25 Audit Findings Report.

2)  Accepts the disclaimed opinions provided by the external auditor in relation to elements of the 2024-25 accounts.

3)  Grants authorisation for the requested letter of representation for 2024-25, to be signed and returned to the external auditors.