Barking and Dagenham Council is targeting 2027/28 to move away from disclaimed audit opinions, a goal outlined in a strategy presented to the Audit and Risk Committee on July 1, 2026. The council has faced disclaimed audit opinions for six consecutive years, from 2019/20 to 2024/25.
These disclaimers are attributed to the local audit backstop arrangements
which limited the time available to complete all audit procedures, particularly concerning opening balances and outstanding external confirmations. The complexities for the Council around the group and lease arrangements
have also been cited as contributing factors. The cumulative impact of several years of backstop-related disclaimers, combined with the scale of in-year audit work required
demanded significant effort. Furthermore, the absence of audited opening balances
for 2025/26 directly stems from the unaudited closing balances of 2024/25, and there is expected limited assurance over the closing reserves position due to uncertainty over opening balances. The historic loans between the Authority and its Pension Fund
and IFRS 16 implementation challenges
have also impacted the level of assurance.
Grant Thornton, the council's external auditor, presented a strategy for rebuilding audit assurance. The plan aims to transition from disclaimed opinions to qualified opinions by 2027/28, with a focus on gaining assurance over in-year transactions and closing balances. The auditors have assessed the council as Category D in the MHCLG capacity assessment framework, indicating practical constraints rather than systemic problems, but acknowledging technical complexities and capacity challenges. Specifically, the technical challenges
include an intricate group structure and complex lease arrangements
for which audit assurance could not be gained in previous years due to the national backstop arrangements and the availability of supporting working papers.
Additionally, the Council has been unable to gain sufficient assurance over other significant areas including property and pension valuation, income, expenditure and working capital (creditor and debtor) balances.
The practical constraints
are linked to the Authority's capacity, where a high volume of misstatements and control deficiencies have been identified during the audit process.
The Authority's draft financial statements have not been published in accordance with the statutory deadline in any of the years where the audit opinion has been disclaimed.
The strategy involves a three-year trajectory. The primary goal for the 2025/26 audit is to complete the full audit of the in-year transactions and the closing balances
by November 30, 2026. If this is achieved, the aim is to move away from a disclaimer of opinion by obtaining sufficient audit evidence over matters that were previously impacted by the backstop, including obtaining outstanding confirmations relating to the pension fund cash balances.
For the Pension Fund, the objective is to move away from a disclaimer of opinion by obtaining sufficient audit evidence over matters that were previously impacted by the backstop, including obtaining outstanding confirmations relating to the pension fund cash balances.
The Regaining Assurance Strategy
outlines a plan to rebuild a firm foundation on which the phased build-back of assurance in line with the NAO LARRIG guidance can be based.
This involves developing a sustainable audit process to gain assurance over in-year transactions and closing balances in each year.
The strategy aims for a potential transition to a qualified opinion
by 2027/28, subject to satisfactory progress.
The lack of audited opening balances
for the 2025/26 audit means that we will have no assurance over the opening balances for 2025/26 as these are directly derived from the unaudited closing balances of 2024/25.
This is expected to result in a disclaimer of opinion
for the 2025/26 audit. The report states, We expect to have limited assurance over the closing reserves position, as uncertainty over the opening balances will continue to affect our ability to conclude on movements during the year.
The Regaining Assurance Strategy
indicates that the plan would be to develop a process as to how to tackle the opening balances as part of the 2026/27 audit.
The absence of corporate knowledge through staff turnover in that extended period
since the last unqualified audit in 2018/19 will also need to be considered, potentially resulting in a longer period to gain full reassurance.
This is intended as a dry run for future years, aiming to establish a sustainable process for delivering a full audit. The auditors noted that while they anticipate a disclaimer of opinion for 2025/26 due to the lack of audited opening balances, the work on in-year transactions will be a crucial step in rebuilding assurance. If the 30 November timetable for 2025/26 is not met, the timetable would slip back by another year. If the goal of moving away from disclaimed audit opinions by 2027/28 is not met, the Regaining Assurance Strategy
suggests that the timetable for achieving this will be pushed back by another year for each year where this is not possible.
The strategy also notes that if the full audit of in-year transactions and closing balances is not achieved in 2025/26 and 2026/27, then this timetable would slip back by another year.
The report indicates that a disclaimer of opinion is expected
for 2026/27 and potentially for 2027/28, with a potential for transition to qualified opinion if full audit of in-year transactions and closing balances is achieved in 2025/26 and 2026/27.
Key risks identified for the 2025/26 audit include management override of controls, valuation of assets, IFRS 16 implementation, and group accounts consolidation. Improvements implemented include earlier and more structured planning, strengthened engagement with subsidiaries auditors, enhanced training and guidance, quarterly balance sheet reviews, and the introduction of an audit risk register alongside additional specialist and interim resources.
Specifically for IFRS 16 implementation, further work was done and we appointed an external expertise to support us to do that. And we brought in a system as well to record IFRS 16 transactions.
For group accounts consolidation, the Council is strengthening the preparation and supporting evidence for the group accounts
and has reached out to them [component auditors] and had initial conversations with them about the scope of that work and they are on board with what we are trying to do, on board with the time frames and things like that.
For asset valuation, early engagement with valuers through the year-end timetable and guidance process
and clear deadlines issued to property valuation teams and subsidiaries
are in place. Regarding management override of controls, the audit plan outlines procedures to evaluate the design and implementation effectiveness of management controls over journals entries;
and analyse the journals listings and determine the criteria for selecting high risk unusual journals.
Read the full Public reports pack for the Audit and Risk Committee meeting on July 1, 2026: Public reports pack Wednesday 01-Jul-2026 19.00 Audit and Risk Committee
See the agenda frontsheet for the meeting: Agenda frontsheet Wednesday 01-Jul-2026 19.00 Audit and Risk Committee
