The Audit Committee of Somerset Council met on 28 August 2025 to discuss the audit progress, governance arrangements, and financial management of the council. The committee was scheduled to review the draft annual governance statement, waivers and breaches of contract procedure rules, and the audit committee workplan. Also on the agenda was an update from the external auditors, Grant Thornton LLP, on their audit progress and a review of sector updates.

Draft Annual Governance Statement

The committee was scheduled to review and comment on the draft Annual Governance Statement (AGS) 2024/25, the Action Plan for 2025/26 and 2026/27, the supporting evidence, and the Local Code of Corporate Governance. The AGS is required by the Accounts and Audit (Amendment) (England) Regulations 2015, and provides assurance that the council has a sound governance framework in place to manage risks.

The draft AGS 2024/25 stated that the council had made improvements to its governance framework and arrangements, but acknowledged that further improvements were being addressed. It noted that the council was committed to good governance and for meeting the best value challenges ahead.

The AGS identified several areas which could present significant corporate risks during 2025/26 and future financial years, including:

• Financial Emergency
• Improvement and Transformation Programme
• Exceptional Financial Support
• Statement of Accounts 2023/24
• External Auditors Annual Report 2023/24 (which includes 2 statutory recommendations)
• Internal Audit Annual Opinion Report for 2024/25
• Anti-Fraud and corruption
• Review of the Council's Constitution
• Managing risks through internal control
• Statutory Officers Board with oversight of AGS and actions

The AGS included the opinion of the Interim Chief Finance Officer, Clive Heaphy, that the council continued to operate sound internal controls and good public financial management, but that some areas required improvement. He noted that the internal control framework needed to be further strengthened to deliver improvement from the current 'limited assurance' assessment by Internal Audit to at least 'reasonable assurance' for the 2025/26 financial year, and to embed a compliant culture across the organisation. He also noted that the council was currently unable to demonstrate a financially sustainable operating model, with a forecast General Fund budget gap of £101.384m in 2026/27 rising to £190.041m by 2029/30.

The AGS also included the opinion of the Monitoring Officer, Alyn Jones, that the council had complied with its Constitution and had corporate governance arrangements in place, but that further improvements were needed, and action plans were being implemented.

The Draft AGS Action Plan 2025-26 outlined actions to be taken by the council in 2025/26 to address governance issues, focusing on building a strong culture of compliance and assurance, addressing audit and external review recommendations, promoting values and behaviours, strengthening procurement compliance, completing the review of the scrutiny function, and developing a more robust approach to priority setting.

Waivers and Breaches of Contract Procedure Rules

The committee was scheduled to receive two reports on waivers and breaches of the council's Contract Procedure Rules (CPR) and procurement legislation.

The first report, the Waivers and Breaches Update Report Q1 2025-26, summarised reported waivers and breaches for the first quarter of 2025/26. Waivers represent non-adherence to procurement rules where a permitted reason justifies the deviation, while breaches indicate non-adherence without acceptable justification. The report included a breakdown of waivers and breaches by directorate, with associated contract values.

The second report, the Waivers and Breaches Annual Report as at 31 March 2025, provided an annual overview of waivers and breaches for the year ending 31 March 2025. The report included a summary of the actions being taken to control adherence to procurement rules and legislation.

The annual report noted that the changes in procurement legislation brought in on 24 February 2025 had meant a focus on training for officers involved in the procurement process, and had also prompted a review of CPR, all procurement documentation and processes to ensure compliance with the new legislation.

Audit Progress Report and Sector Update

The committee was scheduled to receive a report from Grant Thornton LLP, the council's external auditors, on their audit progress and a review of sector updates.

The Audit Progress Report and Sector Update August 2025 provided an update on the audit of the council's financial statements for the year ended 31 March 2024. The report noted that Grant Thornton had issued a disclaimed opinion on the council's 2023/24 Statement of Accounts on 28 February 2025.

The report also set out the significant risks associated with the audit of the council's financial statements for the year ended 31 March 2025, including:

• Management override of controls
• Land and Buildings Revaluations
• Council Dwellings Revaluations
• Investment Properties Revaluations
• Valuation of the Pension Net Liability
• Misstatements in Grants, PPE Additions and REFCUS expenditure
• Group Vehicles, Plant and Equipment Valuations (Opium Power and Fareham Energy Assets)

The report also provided an update on the approach to the review of the council's Value for Money arrangements, and noted that Grant Thornton proposed to issue an interim Auditors Annual Report in October 2025, describing key outputs of the audit, including commentary of the council's Value for Money arrangements.

The report also included a series of sector updates in respect of emerging issues which the committee may wish to consider, including homelessness, housing targets and housing enquiry, the changing face of adult social care, free nursery places, and complaints data from the Local Government and Social Care Ombudsman.

Audit Committee Workplan

The committee was scheduled to consider the Audit Committee Workplan August 2025, which details the forward plan of items currently on the Audit Committee workplan for the remainder of the financial year.