Croydon Council’s 2025-26 accounts are set to receive no audit opinion for the sixth consecutive year, with Grant Thornton unable to gather enough evidence to establish whether they are free of material error. Its proposed disclaimer leaves unresolved questions over the financial statements of a borough that has received £525.7 million in Exceptional Financial Support.
The auditor has identified £245.9 million in government capitalisation directions that have not yet been confirmed, alongside missing lease accounting entries. It has also found significant weaknesses in the council’s continued reliance on government support and its management of the schools high needs budget.
The findings will go before the Audit and Governance Committee at Croydon Town Hall, Katharine Street, on 12 November at 6.30pm. They come as residents are being consulted on the council’s 2027/28 budget, including a proposed 4.99 per cent council tax rise.
Gaps in the accounts
A disclaimer of opinion means the auditor cannot obtain sufficient evidence to give an opinion on the accounts. It does not establish that every entry is wrong, but it means the accounts do not carry the assurance that an audit opinion would normally provide about whether they contain material errors.
Croydon’s accounts received disclaimer opinions for 2020-21 to 2024-25 under government backstop rules. The latest proposed disclaimer would extend that sequence into 2025-26, continuing the absence of an audit opinion across successive sets of annual financial statements.
The unconfirmed capitalisation directions cover 2023-24 to 2025-26. Of the £525.7 million in Exceptional Financial Support received between 2019-20 and 2025-26, £279.8 million has been confirmed. The remaining £245.9 million has been approved in principle only, with confirmation still outstanding from the Ministry of Housing, Communities and Local Government.
Capitalisation directions allow councils to treat specified spending as capital expenditure rather than meeting it through their normal revenue budgets. The distinction between support approved in principle and support formally confirmed is therefore relevant to how Croydon presents its finances.
Grant Thornton also cites missing accounting entries for leases under IFRS 16. That accounting standard governs how leases are recognised in financial statements. Alongside the unresolved government directions, the missing entries form part of the issues identified in the auditor’s assessment of the accounts.
Debt and government support
The auditor identifies continued dependence on government support as a significant weakness, describing the resulting position as an “unsustainable debt burden”. This is a finding about the council’s financial arrangements as well as a concern within the wider examination of its accounts.
Debt stood at £1,769 million at the year end, including £328 million of short-term debt. Usable reserves were £218.7 million, down £40.6 million. Those reserves represent resources available for use, although individual reserves can be held for particular purposes rather than being freely available for any spending.
The figures show why the audit position matters beyond the preparation of annual accounts. Borrowing, reserves and government support are central to the council’s ability to manage its budget. Without an audit opinion, residents and councillors lack the usual external assurance over the financial statements setting out that position.
High needs budget pressure
The other significant weakness concerns the schools high needs budget. The council missed its safety valve targets and overspent by £29.4 million in 2025-26, taking the cumulative deficit from £28 million to a provisional £57.6 million.
The high needs budget supports provision for children and young people with special educational needs and disabilities. Its cumulative deficit is a separate measure of pressure from the council’s overall debt, but the auditor has identified its management as a significant issue alongside reliance on government support.
The committee is also being asked to note a £49,750,756 High Needs Stability Grant due on 30 November. Its consideration will sit alongside the findings on missed targets, the annual overspend and the provisional accumulated deficit.
Councillors will consider the audit papers on 12 November, while the budget consultation remains open until 30 November. The proposed council tax increase is still subject to that budget process, and formal confirmation of the outstanding government capitalisation directions remains unresolved.
