Merton Council's journey to rebuild its audit assurance is ongoing, with significant progress being made in addressing past disclaimed opinions and strengthening internal controls. The Governance Standards and Audit Committee met on Thursday, September 3, 2026, to review the Internal Audit Progress Report, which detailed the council's efforts and current standing.
The council has been actively working to rebuild audit assurance following previous disclaimed opinions. The external auditor, EY, has been instrumental in this process, focusing on a natural
rebuild by completing planned audit procedures for each respective audit year. For the 2024/25 audit, a qualified opinion was issued, highlighting insufficient appropriate audit evidence concerning depreciation and valuation movements within the CIES from assets last valued in 2022/23, and the classification of reserves between usable and unusable reserves stemming from the disclaimed audit in 2022/23. The council's progress is considered to be in line with the expected timescales set out in the NAO's LARRIG 01, with the focus now on addressing these specific areas. Full audit assurance, leading to an unqualified audit opinion, is targeted for the 2026/27 accounts.
Margaret Culleton, Head of Internal Audit, presented a report indicating that the audit plan was progressing, with eight assurance reviews and one advisory review completed. Of the eight assurance reviews, two received 'Substantial Assurance' and four received 'Reasonable Assurance', while two were issued with a Limited Assurance
opinion.
These 'Limited Assurance' opinions, concerning Arboriculture Risk Management and Direct Payments, signal significant gaps and weaknesses in governance, control consistency, monitoring arrangements, and a dependency on a small number of key officers. For Arboriculture Risk Management, this highlights a significant corporate health and safety risk area
due to key risk management arrangements not keeping pace with the increasing complexity of the council's tree stock. Recommendations for this area include implementing new inspection procedures and improving record-keeping for the council's tree stock. For Direct Payments, the identified weaknesses require management attention to strengthen assurance over a growing service supporting approximately 400 direct payment recipients and expenditure exceeding £8.4m.
These issues may affect the Council's ability to demonstrate effective risk management, maintain service continuity and respond consistently to emerging challenges.
and 2024-25 (orange).")
Councillor Nick Thomas raised concerns about the potential deferral of audits, specifically mentioning planning and parking permits. Margaret Culleton explained that the planning audit was suggested for deferral due to an ongoing restructure within that department. This restructure involves changes in personnel and organizational shifts, making it not an ideal time for a meaningful audit. The parking permits audit was considered for a later date as parking income had already been reviewed on and off street parking this year,
a review deemed sufficient to defer a full audit of parking permits to a later date.
The reliance on spreadsheets in the Direct Payments system was identified as a significant risk, contributing to the noted weaknesses in governance, financial control, and monitoring. Management has accepted recommendations to address this, including implementing new Mosaic work steps to manage operational processes within the system. This is expected to significantly reduce reliance on manual spreadsheets and where appropriate eliminated, improving data quality and process efficiency.
The target implementation date for these changes is November 30, 2026.
The Governance Standards and Audit Committee receives updates on audit progress and findings. Internal Audit monitors all Priority 1 recommendations, which are significant matters requiring senior management attention, and will monitor the implementation of agreed actions through its follow-up process. While the committee receives these updates, specific mechanisms for measuring the effectiveness of the committee's oversight of recommendation implementation are not detailed.
For more information, please refer to the Agenda frontsheet and the Public reports pack for the Governance Standards and Audit Committee meeting.
