External audit gives another disclaimed opinion for North Northamptonshire Council's accounts

This comes as external auditors warned they were unable to undertake sufficient work to get full assurance and form an opinion on NNC’s financial statements.

The report was discussed at a meeting of the council’s audit and governance committee last week (February 23).

Mark Stocks, from external auditor Grant Thornton, acknowledged the authority’s ‘difficult starting position’ with local government reorganisation and the merger of the seven legacy councils.

He said that the complexity of these issues, together with some staff absences, had shown in their findings report and resulted in several areas where more progress could have been made.

He added that, while the position was ‘no worse than it was last year’, there needs to be demonstrable progress for next year’s 2025/26 audits, with the pressure only getting greater.

Auditors reported that there were still outstanding enquiries and evidence requests affecting NNC’s accounts by the backstop deadline in February 2026.

They also said they ‘encountered significant difficulties in obtaining appropriate audit trails and evidence for balances’ and had not seen the progress expected in the provision of evidence.

According to NNC, external auditors made more than 1,200 requests for sample testing, but only around 90 per cent of samples were able to be responded to within the timeframe.

The report refers to a number of areas carrying ‘significant risks’ for the council, many of which relate to legacy issues with the former councils still cropping up.

One of the risks relates to the valuation of land, buildings and investment properties that could be misstated, after a sample of 20 assets weren’t able to be tested due to capacity issues within the finance team.

Grant Thornton said there were risks that some assets had been valued using the incorrect methodology. In response, NNC officers are currently undertaking a review of all investment properties to ensure that they are correctly classified.

Further risks were identified in relation to the cash balance reported in the council’s financial statements, including a £6.64m difference between the bank reconciliations (which is the process of matching a company’s internal accounting records with its bank statements) and the amount reported in the general ledger.

External testing found that NNC’s cash balance for schools had not been updated since March 2021, as the transactions were incorrectly mapped in the ledger, as well as two maintained schools where no reconciliation had been undertaken.

Auditors were also unable to test the legacy Corby bank account reconciliation, worth £4.3m, after the bank account was closed during the year and officers were not able to provide evidence of the reconciling items.

Another concern raised related to £74m of Section 106 funding, which is money committed from developers off the back of planning applications. According to the report, officers were unable to provide a breakdown of these balances both this year and last year.

In the auditor’s annual report, three significant weaknesses across the council’s financial stability, governance and efficiency and effectiveness were identified.

The first discusses the council’s track record for delivering savings plans and how it will tackle gaps in the medium term financial plan going forward. It says NNC must progress its transformation plan and develop business cases for projects in the future to avoid using large amounts of reserves to bridge budget gaps.

Another weakness in the remit of financial sustainability is the council’s Dedicated Schools Grant (DSG) deficit, which will surpass a £40 million cumulative deficit by the year end. Despite the statutory override and the government’s commitment to fund 90 per cent of the national deficit, Grant Thornton has still encouraged NNC to monitor its governance and oversight on this area and reduce the need for specialist school places.

Lastly, auditors warned of the ‘significant difficulties in obtaining appropriate audit trails and evidence for balances’, in particular, the issues with the S106 agreements and property valuations that were previously mentioned. It asked the council to review its capacity and resilience within the finance team to counteract this and support the audit process.

Chief finance officer, Claire Edwards, said the council would start the audit process earlier this year to avoid running into the same issues with the backstop date.

She also said that the finance team would be fully recruited from this month, in comparison to ‘severe gaps’ in staff over the last year which meant resources had to be focused on the council’s ‘biggest risk’ areas.

She added: “The team are really now in a place where we can start to focus 100 per cent just on North Northants transactions and we’ve not got all of those legacy items that are just cluttering the conversation.”

Grant Thornton also issued a disclaimer of opinion for 2023/24 due to the government backstop legislation. As a result, there is no assurance on the opening balances of North Northamptonshire’s financial statements or on the closing reserves balance due to this uncertainty.

The audit papers added that a lack of improvement in 2026 is likely to result in the external auditor issuing statutory recommendations to the council, which would be mandatory.