The Audit Committee of Bath and North East Somerset Council met on Wednesday 23 September 2026 to review the Council's financial statements for the 2025/26 year, including those for the Avon Pension Fund and the Council's wholly-owned companies. Key discussions included the external audit findings, treasury management outturn, and the ongoing Dedicated Schools Grant deficit.

The committee approved the audited Statement of Accounts for the Council and the Avon Pension Fund for 2025/26, noting the expected unqualified audit opinion from Grant Thornton. They also noted the annual audit report, which highlighted a continuing significant weakness in the Dedicated Schools Grant (DSG) deficit, which had increased to £46.5 million. The committee was updated on the Council's treasury management performance, which remained within approved limits, and noted the positive returns on operational investments. The audited accounts for the Council's wholly-owned companies, Aequus Developments Ltd (ADL), Aequus Construction Ltd (ACL), and Aequus Group Holding Limited (AGHL), were also noted. The committee reviewed the internal audit update report, which indicated progress in delivering the 2026/27 assurance plan, and approved the Audit Committee's Annual Report covering the period May 2025 to May 2026. Finally, the committee noted the draft workplan for 2026/27.

Audit Findings and Financial Statements

The Audit Committee received an update on the 2025/26 audit findings from Grant Thornton, the Council's external auditors. Beth Bowers from Grant Thornton reported that an unqualified and unmodified audit opinion was expected imminently for both the Council and the Avon Pension Fund. This positive outcome was attributed to the efficient work of the Council's finance team and the successful management of the audit process alongside significant Council projects.

The audit highlighted a change in the codes for land and building valuations, requiring a five-year rolling programme of valuations supported by indexation. A recommendation was raised to revisit asset areas where suitable indices were not readily available. While no material adjustments were made to the Council's financial statements, some disclosure amendments were noted for the Avon Pension Fund, primarily related to the transition of assets from Brunel Pension Partnership to LPPI Ltd. The committee approved the audited Statement of Accounts for both the Council and the Avon Pension Fund, including Letters of Representation.

Dedicated Schools Grant Deficit

A significant concern raised was the continued increase in the Dedicated Schools Grant (DSG) deficit, which rose by £13.7 million in 2025/26 to £46.5 million. This deficit is primarily driven by Special Educational Needs and Disabilities (SEND) cost pressures. While the Council has submitted a SEND Reform Plan to the Department for Education (DfE) and anticipates potential High Needs Sustainability Grant (HNSG) funding to cover 90% of the deficit, the underlying issues contributing to the deficit are not yet fully resolved. The Council was urged to continue working with the DFE to ensure its management plan is agreed and that actions within the plan are progressed to address the root causes of the deficit.

Treasury Management

The Council's treasury management performance for 2025/26 was presented, showing that all prudential indicators were within target levels. The Council's external borrowing totalled £288.977 million as at 31 March 2026, which was below the authorised limit. Investment performance for operational investments was 4.03%, exceeding the SONIA benchmark rate. Strategic investments, while slightly below budget, still contributed to overall positive returns. The report noted that the Council's borrowing was in line with its liability benchmark, indicating effective management of borrowing costs and risks.

Council Companies (Aequus)

The audited annual accounts for the Council's wholly-owned companies – Aequus Developments Ltd (ADL), Aequus Construction Ltd (ACL), and Aequus Group Holding Limited (AGHL) – were presented. ADL reported a turnover of £1.8 million, with a profit before tax of £14,569, and an increase in asset value. ACL reported a turnover of £5.1 million and a loss before tax of £204,942, with a reduction in net assets. AGHL, as a non-trading holding company, reported a net profit of £681,000. The committee noted these accounts on behalf of the Council.

Internal Audit and Counter Fraud

An update on the Internal Audit Service's planned work for 2026/27 was provided, highlighting that work was well underway. One audit report resulted in a 'limited assurance' opinion concerning debt management and staff overpayments, with actions underway to address the identified issues. The National Fraud Initiative (NFI) exercise for 2026/27 had commenced, with data matching reports expected from December 2026. The implementation of previous audit recommendations was reported as progressing positively.

Audit Committee Annual Report and Workplan

The Audit Committee approved its Annual Report covering the period May 2025 to May 2026, which will be presented to the Full Council in November. The draft workplan for 2026/27 was also noted, outlining the committee's planned activities for the upcoming year, including reviews of external audit plans, internal audit updates, treasury management, and corporate governance.