Audit Committee - Wednesday 10 December 2025, 6:30pm

Audit Committee
Wednesday, 10th December 2025 at 6:30pm

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Okay, welcome everybody

This is our extraordinary committee meeting

Audit committee meeting. Thank you very much for

returning here

seven days after the last meeting

My name is Barry Barry quirk, and I'm the independent chair of this committee

It's only my second meeting. So please bear with me for

the usual

Infelicities I may make

now

What we have to start with

First of all is that we're now being webcast

Which means that this is a meeting held in public in full public now as its webcast and

And I'd like to thank both the people that are here and people on screen as well for joining us.

But do I start with any apologies for absence?

Thank you, Chair. Yes, we have apologies for absence from Councillor Mohamed Chowdhury, we have Councillor Asma Islam's shooting.

We also have a police for absence from Councillor up to a heed and we have Councillor. I'm a dog on substituting

Thank you very much

Now I wonder if you could when you do

Speak I wonder if you could introduce yourselves if you do don't feel obliged to but if you do

And I think it's important everyone

You can contribute to this, but if you do,

please introduce yourself so that people who are not

in the room can hear.

OK, let's start with the, and I take it

that declaration of interest will be done an unusual way

as we go through items rather than in advance

on every blanket item.

The auditor, our external auditor is EY,

and Stephen Rees and one of their managing partners and I wondered Stephen

if you could introduce your report which is a really important report for this

committee thank you. Thank you chair and good evening members so and the first

report on the agenda this evening is our auditors annual report now my proposal

chair is that we don't spend any time at this meeting on the auditors annual

report. The auditor's annual report is issued at a point in time and is required under the

annual guidance to be issued by the end of November. Clearly at that point in time the

audit was not complete, so the intention is that we will bring an updated auditor's annual

report for consideration at future meeting of the Audit Committee. The main content of

the auditor's annual report is the information that was reflected in the interim value for

money report that was presented to committee last week and also the audit results report

which is the next item on the agenda which focuses on the consideration of the financial

statements which is before the committee tonight so I propose to through you chair that that's

the area of focus and then the third report is the audit results report and in respect

of the pension fund and my colleague is on the meeting to take committee through that

in due course as well. Would you like to take us through the items,

as you say, focusing particularly on the audit results report?

Thank you, Chair. So turning to the audit results report, which is item 2 .2 in the committee

pack. So the provisional audit results report is for the year ended 31st of March 2025 and

provides a summary of the main findings arising from the 24 -25 external audit. As I indicated,

it follows on from the interim value for money report, which was presented last week to this

Committee which highlighted ten significant value for money weaknesses

and four statutory recommendations in respect of the council's arrangements.

Before I go into detail I wanted to frame the discussion. So the audit

process is a cornerstone of transparency and accountability and while the council

has understandably sought to present progress positively my role is to

provide an independent and evidence -based view. It's also important to acknowledge the context,

so at the start of the 24 -25 audit the former Section 151 officer was in post and demonstrated

strong engagement with me as the appointed auditor and in my view drove forward progress on a number

of historical issues including addressing the significant backlog in the publication of historic

financial statements. I wanted to place on record my thanks to her for her

support during that period. As I indicated last week her departure

together with the lack of a permanent replacement have negatively affected the

progress continuity and capacity within the authority. I also wanted to take this

opportunity to thank Abdul -Razak and the rest of the finance team for

their help and support throughout the 24 -25 audit. Their cooperation and I

would emphasise there is a good working relationship between the external audit

team and the finance team has been essential in enabling me to discharge my

responsibilities. So the report then summarises as I've indicated the

current status of the audit work and the matters arising today. Our audit is

substantially complete and the report is provisional and will be updated

following the signing and finalisation of the financial statements which we

anticipate signing the opinion on tomorrow subject to the receipt of

approved financial statements, signed management representation letter,

satisfactory completion of subsequent event considerations and other standard

finalisation procedures. The purpose of the report is to support the Audit

Committee in discharging its governance responsibilities and considering the

financial statements. So in terms of the form of opinion I am anticipating

issuing on the financial statements given the pervasive limitations on

evidence and historic disclaimers I expect to issue a disclaimer of opinion

in 2024 -25 similar to that opinion issued in 2023 -24 and on the annual

governance statement given the matters giving rise to the disclaimer and the

significance of the weakness reported I'm not in a position to

issue an opinion on whether the annual governance statement is misleading or inconsistent with

other information forthcoming from the audit or our knowledge of the council. Clearly I

will also, in my formal opinion, be reporting by exception on the significant value for

money weaknesses that were considered last week by the committee.

So turning then to the key messages. In terms of the audit opinion, despite some progress,

the scale of challenge means that we as I've indicated anticipate issuing a

disclaimer of opinion on the 24 -25 financial statements. This reflects some

pervasive gaps and assurance over opening balances and limitations on the

evidence for some key areas in 24 -25 including property valuations, pensions

and grant income. In relation to the quality of the financial reporting

Compared to prior years there have been improvements by officers and in certain

working papers and including engagement from officers and I wanted to

acknowledge that publicly. However these improvements haven't yet translated into

the level of assurance needed to move away from a disclaimer of opinion. The

quality of financial reporting does remain a significant concern and while

While the draught financial statements were published by the statutory deadline, the Executive

Summary Table in my report highlights several areas requiring improvement in respect to

the progress around the financial statements.

So in terms of the timeliness of the draught financial statements, they were published

on time but a number of adjustments were required which does raise questions in my mind about

the readiness for their publication.

There were internal inconsistencies, typographical and arithmetical errors and missing disclosures

such as exit packages which suggests to me there was an opportunity to enhance the internal

quality review arrangements.

Working papers delivery against agreed timelines while in some areas was good was inconsistent

and the overall quality in a number of working papers requires improvement including in such

areas as the housing revenue account, debtors, creditors and exit packages and evidence for

key estimates, particularly pensions and property valuations where management concluded that

work should not proceed obviously resulted in contributed to the form of opinion which

I'm expressing. So as I said these issues collectively demonstrate that while some progress

has been made compared to prior years the council does need to embed stronger quality

assurance processes and governance over its financial reporting. In relation to

value for money as I've indicated our work identified ten significant

weaknesses alongside a further statutory recommendation taking the total

recommendations to four and while management has outlined actions, the pace

and depth of response to truly embed the improvement needs to accelerate to match

the scale of the challenge in my view. The council is on an improvement journey

but achieving an unqualified opinion will require sustained effort over multiple years.

Building capacity, strengthening governance and embedding robust financial controls is

critical.

So let me just turn to Hayley, who is online, to take you through some of the detail before

handing back to me for some closing remarks, Chair, if I may.

Stephen, thank you for that.

Hayley Clark from EY.

Thank you, Chair.

Good evening, everyone.

So yes, Hayley Clark from EY and I work alongside Stephen on the audit.

So if I just touch on a few areas of our report before I hand back to Stephen then.

So section two of our report summarises the audit status and key risks that have been identified

as part of our audit planning report that the committee would have seen back in July.

Whilst we've been able to perform procedures to address some of the risks identified, we've

been unable to obtain assurance through completion of all planned procedures over several key

areas, including those associated with fraud and significant risks. Section five of our

report sets out misstatements that we have identified through the course of our audit

in those areas where we've been able to undertake our procedures. We have identified

several misstatements, the most significant of which have been set out in section 5. And

whilst there are none that are individually material, we have identified a number of misstatements

in areas such as debtors and creditors, including those associated with the council's approach

to bad debt provisions. Section 6 of our report provides information on control observations

arising from the work that we've been able to complete, as well as an update on prior

recommendations as well. And at the conclusion of our audit, there are 18 open control points of

which four of those have been rated high, 10 have been rated moderate and four are low rated issues.

And in summary, those recommendations focus on strengthening the quality of assurance processes,

improving documentation and training, enhancing reconciliation processes and ensuring timely

action on open recommendations. If I then move us on to appendix A which sets out a

potential timeline and I guess a journey through to an unqualified opinion assuming that the

council is able to support the completion of all audit procedures for each year and

what that timeline highlights is that the council is behind the national audit office's

timetable for achieving unqualified opinions across the sector. And therefore, the council

will need to consider the factors Stephen has previously set out on building capacity,

strengthening governance and embedding robust financial controls. And then lastly, I'll

just touch on appendix B, which sets out the indicative assurance matrix at the time of

drafting our report. And as indicated in our report, we were still in the process of concluding

our internal review procedures and will provide an updated final position on that matrix in

our final audit results report prior to signing. That will include some changes to the indicative

assurance level shown in this version where we have been unable to achieve full assurance

to provide some of the substantial assurance ratings. I think the main thing that I would

asked the committee to take away from this appendix is that the

council needs to be able to support the audit process such

that all audit procedures across all financial statement areas

are completed for a minimum of two years. That means having at

least two years worth of those columns across those two slides

green. Once we're in that position, then we can consider

to move away from a disclaimed audit opinion.

And only at that point will we be in a position

to consider other procedures that will be required

to undertake to build back assurances on the prior years

that have been disclaimed.

And that's the only, once we've done that,

we'll then be able to move closer to an unmodified opinion.

Now I'll hand back to Stephen.

Thank you, Gia.

Thank you, Healy.

So to conclude then, while progress has been made in some areas, the overall

picture remains challenging. The council's ambition to present a positive

narrative is understandable but the evidence in my view shows significant

weaknesses persist. My role clearly is to ensure transparency and to support

improvement and we will continue to work constructively with management and

the Audit Committee and indeed colleagues in finance to help the

will move forward towards full assurance in future years and with those comments

chair very happy to take any questions thank you very much Stephen and you

Hayley as well thank you for adding that questions from the committee

and yourselves

Counsellor Boston

Counsellor busted Thank You chair

So I'm the feeder busting on the council of Island Gardens. Thank you, Stephen and Haley for your

presentation I wanted to pick up on appendix a

So we knew at the beginning of this year that we were going to have a disclaimed opinion on these

audit on these financial statements.

We knew that was going to happen,

and we know it's going to happen next year and the year after.

What I can't quite recall is when

we were looking at this timetable last year,

where were we predicting that we would have

the first unqualified opinion?

Because it looks to me like that's shifted back now,

because I didn't think it was 2029 30 I thought it was earlier than that is that

is that correct so through you chair and I can't recall the exact but the

principle that it's moved back is absolutely correct and as Haley said

until we are in a position where we can complete all planned procedures and have

green and then then it's very difficult to see it will continue to move back and

were very difficult to see a route to an unqualified opinion without that being

achieved first of all. So that I mean that's really disappointing I think

because like you said we had you know we there was a lot of focus on this a lot

of progress had been made what in your opinion has hampered that what set us

back so to speak? Well I think let me offer and maybe officers will want to

come in here. Clearly there was certain areas which officers sought to prioritise and the

principle of prioritisation I think is absolutely the right one so I'm not critical of that.

I think possibly those decisions could have been taken earlier in the year which would

have allowed officer resources to be more focused on those areas where we were certain

to get to or more certain to get to a level of assurance. So that would be one observation

in relation to but I think fundamentally you know some of the pervasive issues

that we reported last year continue to exist and you know we've talked about

capacity we've talked about and finance the scale of the issues that are being

addressed some of which are historic some of which relate to the control

recommendations which as Haley's talked about continue to remain a work in

progress and therefore until the council can move forward with all of those

and provide evidence to you as an audit committee,

and then to me as external auditor,

then it's difficult to see how there will be

a sufficient pace and change

to arrest the position that we see here.

May I just say one thing, so I find

my appendix being really helpful.

To me, I think we've got a really clear

way of monitoring how we can get

to those unqualified opinions.

and I wonder whether between yourself and officers we could look to maybe have a

regular report on that to audit committee just to see how progress is going to be

Improved sort of quarter -by -quarter so we we can keep on top of that

So we're not at this point in 12 months time seeing yet another set back

There's a very helpful

observation and and suggestion because the what the

what it shows and what Hayley said was you need two years of green to get into

that unqualified and that means sustained action not just a plan that we

all rush to implement but sustained and disciplined action over a long period

and I I think that's a very helpful thing and I'm certainly we'll set

something up with offices to make sure that that's progressed.

Other observations?

Abdul -Razak Kassim.

Thank you, Chair, and thank you, Stephen, and the team.

I think – sorry, let me just bring this closer.

I just want to thank our auditors and also the committee for your support in the last

18 months.

and I think it's really important we acknowledge the journey we've been through.

I mean, just for context, again, you know, in two years we managed,

the team has managed to really get to the backlog of about five years of accounts,

some of which had, you know, historic recommendations

and hence what we've got statutory recommendations.

And I think even at the start of this journey,

the plan was that, you know, we were expecting us to be on a journey of improvement

and you will see from today, as confirmed by the auditors,

that there has been an improvement,

and not to the scale that we wanted to.

I think going forward, it's a learning process for us,

and working with our auditors.

And later I will introduce Steven Hughes,

who's also here to enable us with that capacity.

He's on the screen, and I'll let him come in.

So we do have a plan to really get into a faster pace,

to get to a process where we can take off

a lot of these substantial areas, but that will take time,

you know, and we need to really manage expectations.

From last year to this year, there has been about 50 %

or 60 % improvement in terms of areas that we've covered.

And the key for us is to ensure we publish on time

so auditors have enough time to really go through

the audit process and welcome the fact

that we'll be reporting back as part of the action plan

on that progress.

Any other questions

Could you met could you say for the benefit of others are not in the room sure. Thank you

chair

Councillor could be Ahmed. I think we can do introductions. Okay, councillor could be Ahmed

So, I mean I've got a raft of issues that wanted to bring up

So that's why I thought I'd give others an opportunity.

So the first thing I wanted to pick up

is the issues around the 10 weakness areas.

And I mean, it's quite concerning

that we have additional weaknesses.

And I can get where that direction comes from.

But also, I think context is important as well.

And I think managing expectations is also important.

So I appreciate that timeline that's put in the appendix,

because some of these complex issues and concerns

aren't fixes that can happen literally overnight

and with simple clicks on computer keyboards

and calculators.

These are certain ingrained issues.

And I would say to an extent, some institutional issues,

which is also impacted with political culture and a whole range of other

habits that are involved within that. There's also I believe external factors

which are mentioned in here as well. So and I think it's important to

acknowledge that this is a living process that's happening with changes

that are ongoing and challenges that will come ad hoc. So one of the issues I

pick up on is the transference of power from the LLDC for example. So although

not seen as a serious weakness it is an area that was picked up on for example

and I think it's quite interesting that EY and Hayley's with us because Hayley

was the individual who signed up the accounts for the LLDC so there is a

level of transition in that and I think those lessons that we need to learn when

we are sort of transferring over those powers. I mean what would be interesting

to find out is how other local authorities also benchmarked in relation

to that transfer of power as well. So in terms of other areas and I think

Stephen's highlighted those areas that some of these are legacy issues although

we want to look at the present we can't always look at that in terms of a vacuum

and also government regulations which are involved here as well, particularly

in line with the backstop which kind of resulted in a mandatory disclaimer for a

number of accounts we had which hadn't been signed off, I'm not sure of the

correct terminology for that, and I think had a discussion prior to this about

this and I think that by default put us at minus three to start off with and I

don't think it was realistic from day one for us to get those resolved

accounts done within a matter of a year and I think something I brought up last

time as well was the timeline that we were operating in and these accounts

identify years 20 or 25. And I think the timeframe that we were operating because

we had auditors change within that period as well was we had literally just

over a month as a council in order to respond to that. So I want to take this

opportunity to thank our officers as well because I think under those extreme

circumstances, they have adapted and tried to deliver the best they can

within those times. And I think again going back to managing

expectations, that period of time of just over a month, I think Stephen also

alluded to this, wasn't really realistic I think last meeting, that it wouldn't be

realistic to within that short period of time to fully meet those standards. I

that we consider within this is how we are also reacting now to this as well.

And sometimes it can come across as quite defensive and I think maybe as a

council we need to consider that. But also I think some of the positives

within that journey is important to highlight as well. And as sort of an

audit committee member I think my role is not only to scrutinise but also

knowledge, hard work that happens, both by officers but also sort of try to seek

assurances from the external auditors as well if we're going in the right

direction. So with that I want to just come into the how significant, and this

is for the auditors, how significant was the impact of the government rule

changes around the backstop in relation to our disclaimers,

particularly for the years 22, 23, 21, 22, 20, 21.

They were captured within the backstop.

But I think it's important to also acknowledge

that the previous years dating back from 2016 to 20 from 2016 on to 20 tax year

2019 and 2020 was signed off properly in 2023 so there was still quite a gap left

and I mean I was quite new to when I first came into the Audit Committee to

understand how previous years you can't produce the current years or sign that

until the previous ones were signed off. And that in itself becomes a challenge

because of the lack of agreement between your baselines of things like pensions

and how that's articulated and arguments of accuracy and so on so forth of what

your various different budgets the baseline should be around that. Stop me

if you want, Jay, I do go on a bit.

I do think that the expert on sequencing of accounts

and auditing them is Stephen, so it might be useful

if you can just address that point.

Yeah, there's a couple of observations.

So, historically the council,

before the backstop legislation came in,

had qualified accounts, so it was nothing to do

with the backstop legislation.

The backstop legislation brought about by the government

was purely to focus on a reset of the local audit market and to arrest the situation where there were

significant delays in the finalisation of financial statements dating back many years.

In relation to the reasons around your opinions that were received on the accounts prior to 2324

you would need to speak to your former auditor.

But I would surmise that it would be interesting if that backstop legislation hadn't been brought

in, what the current position would be in relation to the outstanding financial statements.

Please, my old manes, I don't know how long big your raft is.

You said there's a raft of questions.

No, I know, I know.

So I think I want to commend the auditors.

I think it's important when they speak about the audit committee as well.

And I think as a whole, I think a number of us may have forgot to put our political hats outside

and we brought it inside.

And I think that's a learning curve and that's an area that I suppose I'm very mindful of in any chamber

I walk into now

You know that recommendation is well deserved. I would say

In terms of

the

housing element of it

Which was put in there. I think

I'm a little bit in two minds with that, although that's your, you know, valid sort

of authority to put that in there. I think if benchmarked against a number of

other local authorities, and I know you're making a comment on a statement

of fact within that, I think we reacted quite appropriately and as quickly as

And I don't know if you've taken into consideration the liaison with the housing regulator

That happened between the council and the

The housing regulators as opposed to just the referral itself

Okay, can we have Stephen first and then you want to yeah

It's just I raised this at the last meeting. There's a reason why good practise

Talks about not having a cabinet member in this committee

We just had a briefing before we came into this meeting talking about seeing in this committee

Independently away from our politics leaving that the door. I just find it really tough that

He's able to ask these questions and make that comment around housing when he's not just an ordinary counsellor

He's the cabinet member for housing. Okay. Can I just say in relation to that that?

The counsellor actually mentioned

Detaching himself from from politics in relation to this and actually as an executive member

He's completely entitled to be on this committee and on other committees

and he

By all means he can mention issues on housing. There's not it's not a

an issue at all. I understand the sensitivity about it. I do understand that.

There's a lot of defence in that. That's what I picked up on.

I do understand that. And I think you are putting some context to this.

All context gives reason, but we don't want context as an excuse.

Yeah? And it's a fine line between reason and excuse.

And I think that the officers have actually set out,

After as I can she set out

The plan he's got to improve on these things and that's what I think we should be looking at really

Otherwise, we're into layered

Understandings of accounts over years and I think you've introduced some really important things. So

Please continue with that and then we'll have councillor Francis

Thank You chair

So then the next area is in

relation to the timeline and I know you've highlighted there was typographic

and various other errors in the draught submission so what I ask is were there

any material errors within the accounts that were submitted in the draught and by

nature does the drafting tell that it would need sort of iterations of the

accounts and in terms of your expectations which you laid out earlier

on is there any specific areas that you would or standards you would expect that

draught to be submitted

Thank You chair so let me deal with the most immediate question and then I want

just come back to the housing point with your permission. So in relation to

the draught financial statements that were published I had to comment in my

introductory remarks and also in the report in the table within the report

that actually enhanced quality assurance arrangements would have

resulted in a more robust set of financial statements. There were material

emissions from the financial statements in terms of some of the notes that were

missing and there were also material narrative disclosures which had to be updated in the

draught financial statements as well. There were no numerical material matters within

the financial statements that had to be adjusted and clearly we've had extensive discussions

here about the content of the annual governance statement for which I'm not providing an opinion.

So in short, yes there were material matters in the financial statements which were not

addressed in advance of the audit process. If I may, moving back to the

matter on housing, I think the Member is largely focusing on the report that was

discussed last week which was in relation to value for money rather than

the reports that are on the agenda this evening. In relation to the housing,

the point that I made in the report last week and that was mentioned is that the

legislation changed on the 1st of April 2024 so that was a considerable period of time

ago and the council would have had advance warning of what was coming down the line.

There was also an explanation given which implied that the housing, it was only addressed

as a result of housing coming back within the council. The housing sat within a subsidiary

of the council and therefore the council retained responsibility for the governance of the housing service that was being delivered by the council subsidiary and

And therefore that is why I've made the remarks and the recommendations and the report relating to housing

And I found the significant weakness that I have

Thank you for that, thank you

Councillor Francis Thank You councillor on it. Thank you very much. I think the chair

I think the point that was being made was that

last week's meeting the lead member for housing declared that and said he wasn't

going to speak on that and those aspects of the value for interim value for money

report and yet here we heard this evening a lemme defence which is

entitled to do but obviously people watching wouldn't necessarily have been

aware that he's the lead member so I want to ask a couple of questions around

the positivity and optimism element of the critique here.

But before I do that,

I just wanted to say a couple of things as well.

So first of all, we received a report last week

on Interim Value for Money

that was published a few days before that.

So that took us a lot of time to absorb that information.

The team has a mobilisation plan and they presented that

and they presented the progress

that they felt had already been made on those aspects. I found several aspects of

that really quite convincing particularly from Mr. Qasim, Mr. Khan, Mr.

Lloyd in terms of the progress or the ambition, what they their understanding

of what needs to change to turn things around and moving in the right direction.

So I found that element really persuasive. There are other elements

which I found much less persuasive and which I might want to come back to in

the course of this but one of those is around something that was mentioned last

week and again referenced today by EY which is around the kind of optimism

element of this. So strangely this audit, the committee's deliberations last

week attracted media attention and the council then puts out a response to to

the media interest that had been generated including the disclosure of

the significant weaknesses and another statutory recommendation and the

spokesperson unnamed said this report covers a period 20 months ago to eight

months ago and therefore does not reflect the council's current position

as significant improvements have been made since that time including for

example children's services being rated by Ofsted this year is that the kind of

First of all, do you think that's a fair reflection of what other officers were saying in last

week's meeting about their understanding, the recognition of the scale of the challenge

that the authority faces and the direction that they intend to take their mobilisation

plan?

Is that one of the things that you're, the kind of example of what you're talking about?

Thank you. So in my opening remarks I have noted the Council's ambition to present a

positive narrative both last week and this week, while also recognising the recommendations

and in my view in discussion with officers accepting those recommendations. My role will

be to provide an objective and independent view in due course on the progress or lack

of progress which is made both in relation to the mobilisation plan and the other outstanding

control recommendations which we have made and which was referenced earlier. But as I

indicated previously, I think the Audit Committee has an important role in that and the Audit

committee should be receiving reports from officers on a timely basis to allow

you to evaluate whether or not you are satisfied with the progress that is

being made before I come along and provide an external audit view on those

issues. So I suppose in some respects hopefully that's helpful

Councillor in terms of my view on this but the Audit Committee has a very

important role here and it's important that you're aware of that role and that

there are processes and arrangements in place to provide you with that

information to allow you to discharge that responsibility. That's great, thank

you. So I'm doing my best, I'm not an accountant and trying to like look into

the figures and to observe the need for improvement and what that means in

As I said, I was really impressed with or persuaded by it should we say a lot of the content of the mobilisation plan last week.

So I'm not impressed with this kind of statement which seems to have taken us quite a long way back in the journey.

This seems to be the sort of statement that was incorporated in the annual governance statement, which you which we criticised for a couple of months and then you rightly criticised yourself.

and then officers took that away and did something else with so I just would like to I guess I'm I would like to throw it

open so

So the officers in the room is this does this statement reflect?

The content of the mobilisation plan that you're working towards or is this something different is this coming from a different place?

If I could say I think you're being

Are so very difficult. I mean, I think the way in which Steven if I could just say this

Counsellor the way in which Steven reads explained this I think was absolutely right that the authority want to put a positive

Narrative forward on the progress. It's making it's understandable. Our role is to stick to the evidence

the facts

People can choose their own opinions. They can't choose their own facts

And the important thing is that when they interpret the facts, that they do so in a

way that's honest and truthful and clear.

And we, as an audit committee, we hear impartial objective evidence and we respond to that.

And that's what we expect from our officers as well.

And so, by all means, feel free to comment on those issues, Abdur -Azak.

Thank you, Chair, and thank you, Councillor Francis.

Just to be clear, the mobilisation plan is in response to the recommendations by the auditors.

And the reason why we've got Stephen Hughes today, and if you let me, it would be helpful if he says a few words, because he's been quite close to this.

Our objective now is really evidence -led mobilisation plans.

So we had two phases.

One was a scoping phase.

The second element was actually the granular action plan to really address what the auditors have recommended us to address.

But I'm not sure of that, where the commentary came from, Councillor Francis, about this.

But I can't really comment on that.

our role now going forward is really focused on the improvement plan, work with Stephen

Hughes, work with our auditors and work with the wider organisation to enable us to get

to a good place. So if you would welcome Stephen Hughes to say a couple of words on the mobilisation

plan.

Stephen Hughes, you've been giving financial advice to Abdur -Izak about your background.

And explain your background first, and then say the detail

about how you've approached this issue about mobilisation plan

to respond to the auditors' critiques, let's say.

Thanks, Barry.

So my name is Stephen Hughes.

I've been in local government virtually all my career,

largely in finance.

I've been a director of finance of London Borough.

I've been a chief executive of a large metropolitan authority and most recently I was a finance

commissioner at Liverpool City Council.

So I've been asked by Tower Hamlets to be essentially a strategic advisor around implementing

the recommendations that come out of not just EY but in some sense the internal audit recommendations

and even going back to Deloitte and any other regulator recommendations, the intention through

building this action plan is to cover all those, have an effective way of tackling them

all and that is well advanced. I think the first version of that, a complete version

of that is going to be done before people break up for the holidays. The harder part

is then going to be both properly resourcing it so that it's capable of being implemented,

and then actually carrying out the recommendations and ensuring that they are embedded across

the organisation.

I've been asked to quality assure the plan once it's been built, and also to continue

to give advice on how it should be implemented, and importantly, of course, how it should

be signed off which would include bringing progress to the Audit Committee as well as

to the Transformation Advisory Board and other stakeholders to demonstrate there is substantial

progress. I mean I don't think I need to go into the detail of it now because at some

point you're going to get to see it all but hopefully that gives you some kind of assurance

that this is being taken seriously by the council.

And it is, these recommendations are being taken at face value.

And we're trying to understand exactly what needs to be done in order to achieve success

and get them signed off.

So am I right in, thank you very much for that, Stephen.

And I write in there for saying that what we're looking at is the absolute detail of

how we're going to achieve what's in Appendix A, which is the point that you made first

off, which is this progress chart, this path to the future where we can be unqualified

by 29, and if we do even more work that we can do in the year before that, that will

be you want to set stretching targets, not just ones that can be met if you don't actually

do anything.

So I think it's really important that we've heard that and we've had reassurance from

Abdur -Izak has seen that actually the officers are moving quickly and they are also going

to be doing it.

I think the point that was made by Stephen is looking at the resource for that, whether

There's the capacity and the capability of doing that and making sure that that's in place because this means so much to this authority

Making sure that it's financial

Accounts its controls are absolutely correct. Did you want to add something else cancer?

Thank you chair, and I had two questions. So

Steven it's good to meet you. I'm glad to have your focus on this

We've got an audit committee at the end of January. I think

What are we, what are you, will we be seeing anything from your work at that meeting?

I just want to get a better understanding of like what we're going to see as an audit committee.

We've got these significant weaknesses, an additional statutory recommendation.

We haven't actually seen detailed action plans around how they're going to be resolved and the weaknesses improved.

approved, will the work that you are doing, Stephen, come to our committee in January?

Well, yes, one of the themes within the action plan around the effectiveness of the audit

committee itself is ensuring that there is an effective tracker process so that you get

to see what is happening and can question the progress that is taking place and influences.

So hopefully by, I mean, I can't, I don't know exactly which date it is in January.

If it's early January, it might be difficult to show significant progress.

But the intention is that the reporting on progress is, comes to the Audit Committee amongst other places.

Thank you. And who are you reporting into?

What's your, who's overseeing your work and who's holding you to account on it?

I think it's Abdul Razzak, is it?

Well, I think it's the chief executive, in fact.

Sorry, chair. We are working together with Stephen Hughes, but Steve is also overseeing this as a team.

Thank you. Can I ask one more question to Abdul Razzak?

So we've heard from the auditors about capacity in the team.

What is, could you just explain to us, you know,

what is the capacity of the team at the moment?

These are obviously, we've had a number of audit committees

over the last almost four years now.

We keep coming back to this question about,

is the team properly resourced?

Do you have enough people to do the work?

and we've always had assurances from you that that has been the case. Is that still the case or is

there something else that we need to be doing to support you to get the resource that you need?

Thank you, thank you, Councillor Mofida. So I think like you know Stephen said as our auditors,

the scale of the challenge is quite enormous now.

And we really need to move at pace, so we are going to add additional resources

to enable us to have different work streams.

The first work stream is obviously get all the recommendations completed.

The second work stream is to make sure we've got enough to actually publish our

accounts for 25, 26.

And I think those two will have to run in parallel now.

So we will be adding additional resources at the back of the mobilisation plan.

So the mobilisation plan is in two phases.

So phase one is scoping and understanding what resources we need to enable us to move at pace by June 26.

And the other element of the current team will be focusing on actually publishing the accounts for 25, 26.

So, thank you.

And just in terms of timing, so when do you anticipate having had that scoping exercise completed and knowing what resource you need?

So that's 19th of December for phase one and at the back of that once we have

enough time we'll bring that report back in the January committee. Thank you

that's reassuring. Councillor Ahmed you indicated first and then Councillor Islai.

Thank you chair. So the other I wanted to focus also on the areas of statutory

recommendation in particular and this is page 51 of the overall report page 25 of the EY report.

So it's the particular area was around contract management and procurement. Now I understand again

So the home care contract which dated back to 2016 to 2021 and there was another contract

regarding next wage which was mentioned in the previous meetings papers which dates back to 2017.

I want to ask officers since then to now what effective controls and measures have you put

in place because this is still showing as a statutory recommendation.

And this time next year, can we evidence that we have robust policies in place in order

to overcome this statutory recommendation?

Can I ask Andy Grant to comment on that, if you don't mind.

Thank you, Chair.

Andy Grant, Corporate Ad procurement.

So they are two distinct issues.

The home care contract was a formally let contract through a tender process resulting

in several suppliers, five plus a load of small suppliers being in contracts in 2017.

And the issues that came up through that were predominantly around overpayment, lack of

controls, of essentially balancing the load of the clients to the various different contractors

throughout that period.

So the response to that has been very much with the brokerage team to looking at

to make sure that the

The current clients are distributed evenly amongst the contractors

There is a more regular

Reconciliation every six weeks with the finance team against what the invoices are saying compared to what we think we are

purchasing in terms of hours

And in relation to the actual contracts going forward, tightening of controls around more

robust sanctions, interventions from the authority if there's a sense of impropriety or some

of their – they get any quality commission issues come up.

So much more robust opportunities for the authority to intervene and pick up on issues

Sorry

So I don't I mean I'm not necessarily asking for the details of those specifics

but what I want to know is from a council perspective and

from a procurement and a

Contract management perspective. Do we have enough controls in place now or what have we learned from that?

for either of those two areas because they were cited within the report and it's put down as a statutory recommendation.

So contract management generally across the organisation, we're rolling out a programme of training for all staff.

There are currently eight modules, four sessions in each module, going up to ten modules and possibly twelve by the time we get to the end of that.

Rolling out proper toolkits for staff across the organisation to make sure that they are carrying out the contract management

In the appropriate way, they have the tools to do it and that it is correctly monitored across the organisation

Centrally by the procurement team as we embed the new structures going forward

In relation to the next wage. That was a differently procured arrangement. That was throughout what was called our request for quotes system

And we have subsequently put in significant role controls over that

Predominantly now we have much more procurement oversight,

so anything that goes over 5000 now comes via procurement,

and we do several cheques on that to make sure

that we're not being repeatedly using the same supplier,

or if we are, what are the reasons for it,

and are there any other ways of procuring those goods

more compliantly?

And also to make sure that we've got all the right people

recorded against those things so that we now record

not just the person who's actually putting it

into the system, but the person who's requested it,

and the budget holder and the cost centre.

And all that analysis is going on

through the procurement team so we can identify

through our Power BI dashboards

any variances or discrepancies.

Okay, Abdul Raza.

Thank you, Chair.

I just wanted to add a couple of comments

and I think this is really important,

going back to EY's recommendation,

is it's a culture of embedding.

And I think one of the things is

we can put the controls in place

but also we need to raise awareness across the organisation.

This is that culture of learning,

and we are doing all the comms and providing all the training as well,

so that will help.

Yes, I drew particular attention myself to the section six,

which is about the internal control environment.

There were 12 deficiencies there,

and I was particularly looking at those ones that are high,

that are judged to be high.

And I guess that your when you're looking at this issue you're going into the you know

Doing this on a risk, you know commensurate to the risks. It's doing about

Evading controls or whatever on not taking account of controls and so

Am I right in thinking that those things that are marked red under section 6 and assessment of control environment that?

Those things will take you know, the most urgent priority attention. Is that right?

Yeah, okay

That's reassuring thank you very much for that. Are there any other questions to um, uh stephen reed

Counsel, thank you chair. My name is counsellor. I mean from beth from greenwest

Um, can the auditor comment on the improvements observed in the quality and timelines of the council's financial reporting?

since take

Took over at the end of 2023. Thank you

So I think, Chair, both in my report and in my opening remarks I typify that while some

progress has been made, the significantly more work is required by the authority to

address the issues both in terms of the control recommendations and also within my report

and the executive summary there is a table which sets out the process which summarises

my view on the significant areas of improvement that are required in relation to the financials

and the council's arrangements over financial reporting.

When you're on slippery ground it's best to get onto rough ground. That way you make progress.

That's what we're trying to achieve here so let's do that. Okay, Councillor.

Yes, thank you, Chair. I'll ask some questions and please let me know if it's in the wrong

I do want to come back on one thing and it's about reassurance and the capacity.

What more can we do for the team here in order to be able to get on this improvement journey?

And I want to come back to Councillor Francis' point about the council statement and trying

to think from audit point of view. When we talk on factual facts here that you

significant improvement and significant weaknesses. They're two ends of the spectrum. And I'm going to

ask officers about the capacity that they need in order to be able to do this. But there is something

here about setting the culture right as well because this team will have the capacity, this

team will want to make those changes, but it's also about the entire organisation. So chair,

I guess for you, how as a committee can we try and monitor that as a wholesome project

of improvement instead of having assurances from our officers here who work really hard

and absolutely want to see the best and want to see this turned around, but then it's not

aligning with the actual organization's environment as a whole?

I would say that successful organisations have a view and a narrative about improvement,

but they also at the same time know what they're doing isn't good enough. And that's quite

a difficult place to be, but it's the only way that organisations like local government,

this is multifunctional, multipurpose, democratically accountable, how they can improve. They must

have a positive way forward but they must also at the same time know what

they're doing isn't good enough and that's quite difficult for people in

leadership positions that's important for us because when you're knowing

what's not good enough you know that because you're comparing yourself with

others you're comparing yourself with a normal target that you've set and you're

comparing yourself with what you did last year so you need to have all this

in place you need to objectively look at the realities of what we're doing and you need to say it in respect of

Here is in respect of financial accounts of only for money

Audit risk management and we're going to say is what we're doing good enough and it isn't

So we're trying to improve on that and the officers have got a detailed plan

My worry may be they may be too detailed.

The issue is because they've really got to change approaches across the organisation.

It's not just changing approaches within internal audit and within the finance team.

It's changing the whole organisation to be much more disciplined about the finances and

the reporting of them and how they approach risk.

We, I think, do have this broad, this appendix A, is a very broad route map for us and what

we need are the steps from Abdul -Razak to show us the way and we need to follow that,

support it and critique it to make sure that it's not overly optimistic, blindly optimistic

about what's going to be achieved.

It's realistic.

You can't move. I mean we know this in you can't move from running at 10 miles an hour to running at 25

It just can't be done. You know, you can just gradually increase your pace. You can change the way you work

And that may mean this being owned by broader groups of managers across the organisation

I've mentioned to it's been mentioned earlier this I think you use the term so budget holders

Yeah, I

Said to Abdul Razzak I abolished the term budget holders. It means you just hold the budget

No, you manage the budget

You know, what does managing the budget mean? It means much more than holding it

So I know this is a requirement of some of these systems like SAP and Oracle and all this sort of thing

the budget holders, but people have to have an approach across the organisation of responsibility.

It's the public money, not theirs.

And we've got to get this as an audit committee into the organisation through the mechanisms

that Abdul -Razak is setting up.

So I think I would say we support him when we do so as a critical friend.

And the other two questions I had was around audit differences and audit reporting.

I know when it comes to reporting we've had historical issues in the Council.

Is there any context around IT and system change?

Because I know it's been part of assurances in the past for this committee about the changes

that we've made and the upgrades we've made.

And I don't know if Abdu Razaq wants to comment to that.

Thank you, Councillor. Sorry, in terms of system change, you mean?

Like how we're using, so I know IT, how we've upgraded our IT in our systems.

Has any of that been part of what we see in the report when it comes to the audit difference,

or is there other underlying issues that have caused this?

Thank you. So the audit differences in terms of critical judgments, in terms of how we

look at accruals, for example, or debtors, and some kind of methodology. And there's

also some errors, human errors, that when we prepare the working papers resulting in

differences where the auditors are picked up and highlighted, you know, in terms of

the methodology. Those, as, you know, EY said, were not material, but they were immaterial,

how we've adjusted them.

Where our system changes really helped is going back

to what Barry was saying in terms of the budget management

and culture of accountability,

where budget holders are accountable for,

sorry, budget managers,

accountable for managing delegated budgets in real time

and enabling them to really help us

close the accounts quickly

by having that live input into the forecast

and what their calls will look like.

So it did help the implementations that we've done

in the last 18 months, especially the dashboards.

When it comes to closing the accounts and working papers,

that's slightly different.

Now we could move to the pension fund accounts before we,

sorry, you've got one other question, okay.

And you've got one other question.

So two questions.

Maybe I'm just, I wanna make a point,

but before we move on from this,

I wanted to say so as I understand the timeline and the work streams that have

been set up the full work streams so by the 19th of December you'll have a

outline where you're at and then you'll plough ahead from the new year onwards and

I'm looking at those work streams as they were presented to us last week

makes a lot of sense how they've been broken up so hopefully that's a some

positive feedback for the team and the financial management and

accountability elements of this I have a lot of confidence going into the new

year that you'll make some progress on that and the audit investigations and

assurance element of that I have confidence on from what was said last

week in several of those areas one of those areas is audit committee

effectiveness and I don't think what I heard last week was sufficient to give

me enough assurance that this committee is being supported in the way it needs

to be supported to be able to provide the challenge whether that's training

for us as elected lay members or other aspects as well including the way that

the meetings themselves are sequenced and managed. As we talked about last week

a gap from the 28th of July until the 3rd of December while all of this was

being discussed by officers and others behind closed doors.

It's not appropriate and needs to not happen again.

The other one I want to mention, though,

is around the golden triangle element of this.

So last week was really good because we

had the whole of the corporate leadership team in the room.

It felt like there was an acknowledgment

of the scale of the problem and buy -in to the solution that

was being put on the table.

And yet my confidence, I've got to say,

massively undermined by the statement that was made on Monday. I don't see how

what was said last week is compatible with this statement. It's a corporate

statement, an unnamed Tower Hamlets Council spokesperson is saying all of

this stuff without mentioning serious significant weaknesses, without

mentioning a mobilisation plan, without mentioning work streams, without

mentioning timelines for action or any of this stuff and that is what I think

is the kind of change that needs to happen to give me some confidence as a

member of this committee that this element is going to move forward and

ultimately I don't think I mean this talks about this being a golden triangle

I said last week for me it's about a corporate leadership team and this

ultimately lies in the hands of the chief executive with this authority and

That's what I want to see that that kind of statement that came out on Monday

Which is completely at odds with what we were told last Wednesday

Doesn't keep on happening because it's been repeatedly happening in this committee and in other committees in the council

Thank you very much. Now. We'll report back to the

Executive I

Think now thank you very much

Steven I think I'd like now to have

the pension fund accounts would that be appropriate so hasan rahiman and suesh maharaj um i think you

are uh reporting to us on the pension fund uh thank you accounts yeah thank you chair yes uh

yes yes we are um so the members of the committee don't know me um my name's hasan rahiman um

partner with EY responsible for the audit of the pension fund accounts. So I'll take

you through our report and I'm happy to take any questions which you may have. Before doing

so, just the overall context, we're anticipating issuing a disclaimer opinion on the pension

fund accounts. The reason for doing so, because of the disclaimer in prior years, and also

the impact in terms of some of the opening balances on the pension fund

accounts and particularly on note 14A, note 16C of the pension fund account and

also note 20 and note 20 relates to the IS 26 disclosures which I'll come on to

on a bit. That said we've completed the planned procedures which were

outlined in our auditor planning report section C of our appendix C sorry of our report outlines

the assurances which we've obtained in undertaking our audit procedures and also the progress to

all things being well in the future being in a position where we may be able to issue a

modified report. So on your page 96 in terms of the executive summary,

outline there the scope update. So receiving the financial statements,

we updated our materiality levels. That includes the levels at which we

report the misstatements to the committee. We also highlight the

status of the audit, the procedures which are outstanding in order for us to issue

our opinion and further details are included in Appendix B of our report.

We do also note that in comparison to the previous year there has been

improvements in terms of the responses that we received from members of the

pension fund team. So we'd like to thank them for their cooperation during the course of the audit.

In terms of the audit differences, there were a number of differences in relation to disclosure

misstatements which were identified during the course of the audit and management have agreed to

amend those differences. There was an uncorrected misstatement which we're bringing to the

attention of the committee. The misstatement related to timing differences in the valuation

of level three pooled investments and this isn't uncommon in terms of pension fund accounts where

in preparing the accounts management have details at a point in time and then when we come to do

our audit procedures we have some more up -to -date information available but on the basis of that

management have decided not to amend the accounts for that difference but we're bringing it to your

attention as it is above our reporting threshold and asking the letter of rep that you now find the

reasons for not amending. On page 97 of the executive summary we outline the significant

risks and areas of focus which were included within our audit plan providing a summary of those

and the position that we've come to in terms of our conclusions, in terms of undertaking our

procedures. So we've found no indications of management override of controls in relation

with respect of the presumed risk of management override on the level three investments. We've

completed our work and as I've just outlined we did identify an audit difference in relation to

level three investments on IS 26 disclosure. That's a note 20 of the

pension fund accounts as outlined in our audit planning report

with the knowledge that there was an agreed issue in relation to the

membership data that was submitted for the 2022 China evaluation.

We decided it would not be appropriate to undertake any testing

because the IS26 disclosure is based on the, you know, is updated each year and

based on that triennial valuation. So it's not until there's a next full

triennial valuation which is currently in progress the March 2025 triennial

valuation with the expectation that membership data that has been submitted

to the actuary the issues that were there in the previous submission have been corrected.

That will then mean that the position in relation to the IS26 disclosure would be in a position

to actually be auditing that and without the underlying data quality issues. So there is

a rectification programme which management have put into place in relation to that and

they'll be in a position to update the committee in terms of how that is progressing. In terms

of the control observations, we have not identified any significant deficiency in internal controls,

which the committee is not already aware of. And within section six of the report, we do

provide an update on our prior recommendation, which is related

to the IS 26 position and the rectification programme. In

relation to independence, there are no issues that we wish to

bring to your attention and within section seven of the

report, there are further details in relation to our

independence considerations. So I've just taken you through the

I'm not planning on doing a page turner in terms of the rest of the report, but I'm happy

to take any questions which members may have.

I have, obviously this is the audit of the pension fund.

It's not a report on the efficacy of the pension fund and its investment profile.

I understand that.

In relation to the bringing of things in house, including I think from Greenwich Leisure,

were these bodies, were the employees of these organisations already in an organisation's

admitted body and therefore didn't have an impact on the fund?

Or was that one of the issues that you had in relation to

I think there were some errors in workers and so on.

Errors in workforce data, data cleaning issues.

Was this anything to do with bringing things in house or not?

Is this chair in relation to the IS26 disclosure and the information that was submitted to the actuary?

Yes.

So the if members may be aware that the issue was previously identified by Deloitte's in

prior years where they identified issues in relation to the membership data relating to

the 2022 triennial valuation. Following those issues that were identified there were an

action plan that management then put in place in order to investigate and address those

data quality issues. As I said, management will be in a better position to outline to

the committee the progress of that rectification plan and the subsequent work that's been undertaken.

We haven't actually, knowing that there are issues in the underlying data and that the

that the quantum of that issue couldn't be evaluated.

We didn't plan to undertake any procedures

in that particular area.

Okay, thank you.

Does any members of the committee have a question?

Councillor Ahmed.

Thank you, Chair.

Just wanted to pick up page 32 of the report.

Last year gave us three reds on the bottom.

And once changed to substantial one remains red and one is partial and I know chair you picked up on that

But what I want to understand is

And there's also a timeline just in the page below that which says expected modified or order opinion

So, I mean are we gonna get to a stage where we can agree that

baseline because I know they were pre in previous audit committee meetings and

with the previous auditors as well there were gaps in terms of what information

we were getting back from the aturist in terms of the calculations that were

happening and what the actual amounts were are we gonna get that resolved or

because without having that resolved we're gonna have those gaps going on

year after year after year.

So I just wanted to understand that.

And hopefully, I mean, it's showing that by next tax year,

we should have a different opinion.

And I'm hoping for a more positive opinion on that.

But so this question goes to both the auditors

and the officers as well.

Are you gonna see that middle ground around that?

Hi, George.

Thank you, Chair.

So if I may just pick up the data claims issue, which

has been referenced today.

So that has an impact on the pension fund,

but also has an impact on the main statement of accounts.

And that goes back to 2016, where there was,

we meant to do GMP reconciliations,

which is a technical term.

But February this year, at the back of the audit from 23,

24, we've commissioned a full data claims project.

That will look at all the reconciliations.

we look at member data sets, working both with ourselves and the actuaries to make sure the three -year evaluation

which is coming up has the latest clean data set. That is expected to be completed end of January.

And we're working with the actuaries to make sure that in terms of their materiality

there's hardly an impact, but from an accountancy perspective, there's a different materiality.

So once that data cleanse project is completed, which we are tracking now and is on track,

that will give our auditors and also our actuaries the confidence of the data

clients project. I will report that back in future committees.

Thank you. So I just had a couple of questions. One was around the same point

around the unmodified audit opinion. So I think there was one audit committee we

were in where we talked about the pension audit and how that is reliant on

the overall audit. So where the, well, and one of the reasons that it was unmodified

on the pension audit side, or the, sorry, the pension audit was qualified was because

the underlying reports were qualified as well. But in here we're seeing a different sort

timeline towards an unmodified audit opinion. We're seeing 26, 27. So could someone just explain to

me, I don't know if this is a question for Hassan or Stephen or you, Hassan, as to why that difference

in timeline is there? What's changed from our previous discussion about the related nature of

two audits? I'm happy to come in there. So the within in terms of the actuarial, the

actuarial triangle valuation, so that's report in the pension fund accounts that's reported

in the under IS26. So within I said, no 20 of the pension fund accounts within the main

Council's accounts that that will be accounted for under IS -19 so there'll be an IS -19 disclosure note.

So the and if there are issues in relation to the actuarial valuation there are uncertainties in

respect of the actuarial valuation and what's reported in those two notes and that's its

material, then that will be an issue which we'll be considering in terms of whether or not the

accounts are qualified. If the accounts of the pension funder qualified for that particular issue,

then the accounts of the council would likely also be qualified for that issue because the same

figures are reported, as I said, within the pension funder, within the main council's account under

IS -19. So we're potentially in a position where if the rectification programme project progresses

as it is currently being reported, it's progressing where the data kind of quality

issues in relation to the actual evaluation would have been addressed and if they have been

address, then that would mean that we may be in a position to

issue a modified opinion in 26 -27. That said, the pension

fund accounting just forms an element of what's in the

council's accounts. And as Stephen has outlined in

previously, there are other issues which are impacting the

council's accounts, which the council audit team has come into

consideration is considered in relation to their timeline and I think Stephen's

already outlined those considerations to you in his responses earlier.

Thank you, that's really helpful and I think what we're seeing here on the

pension fund is that progress and that improvement that perhaps we haven't seen on the main

account so that's you know that's really positive and that's that's progress and

That's good. Thank you to Asan and Abdul -Azhar and the team for that.

One thing I wanted to pick up was on page 18,

where it has these unadjusted differences.

There's a small note in there that says,

we ask that the Audit Committee request of management

that these misstatements be corrected or a rationale

as to why they are not corrected be considered and approved

by the Audit Committee.

Has that been included in the letter of representation?

it might just help actually to have just someone speak to why those haven't been corrected, please.

Thank you, Chair. Paul Aoudeau, Interim Head of Pensions and Treasury.

Councillor Bostin, thank you for your question. The timing difference of 2 .1 million as reported

by the auditor will remain uncorrected for the simple reasoning that it was not

an error, it was to do with the fact that this update was provided way after the

window for you know putting the accounts together you know had passed and we have

to be consistent in preparing accounts and if we were to sort of hop from you

know valuation to valuation and sort of keep this open -ended you know

arrangement for managers to come and go we've updated valuation they will never

close the books so we have to have a hard cutoff point so that we can meet

statutory deadlines so it is not an error it is simply a timing difference

and next time around then that would correct itself.

So to the extent that it was one manager,

say the risk of sort of trying to adjust for that

would then inadvertently introduce an element

of moral hazard into the process

because we'll rightly then need to go to other managers

and say, oh, can we have your updated valuations as well,

which means we'll never close our books.

So we have to have a hard cutoff.

But of course, it's noted that that timing difference exists,

but it is not an error.

And I believe the auditors quite rightly acknowledge that.

Thank you, Che.

The Audit Committee into a position

of agreeing something that

You present us with a moral hazard, it seems to me.

Abdur, is that going to sound?

So, Asan Khan, corporate head of financial and technical accounting.

So, I think this was, Sam, the partner, detailed an explanation to how it's allowed for in the reporting framework.

And as Paul detailed out, it's a timing difference.

So, these things will naturally work themselves out for a cycle, and it's a point in time.

So at the balance sheet date the valuation taken was the condition that existed that balance sheet date. So we're

Yeah, no, I understand that that was exactly what he said

So I understand that

But we're having to approve it

Thank you chair just just to give you confidence on page 17 and page 107 of the park

clearly states the timing difference does not have a material impact on the financial statements

and does not affect our audit opinion and this is from EY.

So I'm quite, I think you're okay to approve it unless Hassan says otherwise.

So in terms of undertaking our testing we haven't identified any additional misstatements that we kind of wish to bring to your attention.

this particular issue was above our reporting threshold. We've reported on the difference,

as I've said previously, it's not uncommon for us to identify these timing differences in terms of

the valuation of some level three investments. Hasan, thank you very much.

It still exists that this committee holds the moral hazard now.

Anyway, are there any other questions on this, I think?

If not, can I thank EY, Stephen, yourself and Hayley, and Hassan and your colleague

for the presentation you've done this evening. It's been, we've really, in questioning, we've

been able to get under the skin of very, very thick documents that contain an awful lot

Information and I'm really pleased that the committee's been able to do that. So thank you very much

we've got quite an important issue now, which is the to consider the

Council statement of accounts. Is that right? That's the next item

And so I wonder if we could move. I don't know if outdoors like if you're going to present this

I've actually read all through it

But by all means, you present what you think are the key issues.

Thank you, thank you, Chair. I think we've covered most of the issues and recommendations earlier.

Our paper just kind of acknowledges that we have accepted all the recommendations from the auditor.

And we are on the journey of improvement and we are committed to getting us to a good place.

And I think I take the papers read just in the interest of time.

But if there's any questions, I'll be happy to take them.

the first of them is to approve the statement of accounts which I get and the committee's

role but in the past we've had some discussion about whether it was actually our role to

approve the management representations and especially the annual governance statements

so just wanted some clarity on that. Are we approving or are we just noting?

I think in real in relations. This is a statutory documents. I think we have to approve them as my understand

There are many other issues where we're noting what management are saying but we do have these responsibilities of signing the

Approving particularly statement of accounts, but also other documents as well

Realised I've left my

So in past meetings we have been advised that we don't approve the annual governance

Statement because that is a statement by the mayor and by the chief executive rather than by this committee

But maybe that's changed

Let's wait, let's see when we get to that.

But I certainly think it is the case of the statement of accounts.

Yeah.

Okay.

So let's agree on that and then let's get to the next one.

Okay.

So on the statement of accounts, are there any questions about the statement of accounts?

Think document organ agree it is the

Some substantive comments as well

Got them repeatedly to introduce myself as counsellor Mark Francis from both Eastwood apologies for not saying that earlier

And so I wanted to just pick up on a couple of things which I guess are left

Unconcluded so first of them

around the budgeting I guess and the scenario options that are put forward there so that's

in paragraph 3 .6 I believe so I wanted to strongly support this I mean it seems the

team itself supports this it's useful I'm sure I've seen this in private sessions previously

I think it is appropriate that it's also put into the public domain so that people can

see the kind of the range of positions that are being taken and also so that

the team and the executive can say you know which of those scenarios they feel

is the most likely that they're kind of working towards. So that's the first one.

The second one is about the transfer of monies from the London Legacy

Development Corporation which part of which is in was in covering my ward. So

So this is about the transfer of those balances.

And I think the expectation is that that's

all pretty straightforward.

And I would agree with that.

But I do think that it's reasonable for officers

as part of their process to look at what questions were asked

within the Capital Strategy Board that

oversaw the transfer of these monies and the projects,

specific projects that they were allocated towards so I think just as

part of that assurance process I think obviously some were kind of completely

committed like signed and signed on the dotted line others were more kind of

moving towards an agreement and it would be useful if that could happen and then

if we could get a note on that included as and when that gets reported back but

overall in terms of the statement of accounts I

Am content with it

I'm happy to support it as a statement of accounts as we talked about last week. I'm less persuaded

I mean I was happier on the basis of having a what a bird in the bush is worth to it in that

Sorry, but in the hands worth doing the bush

I was prepared to accept the the kind of the changes that have been made which I would acknowledge really are quite significant to the

Annual governance statement and but I'm quite keen to hear the views of others about whether they are equally satisfied

And I really don't ultimately think that we need to vote on it. I think that was a decision that was taken

last time

Thank you

Thank you that council Francis cancer Ahmed. Yeah, I just want to say as I alluded to earlier on in the meeting

the LL DC accounts

If we can get assurances and reassured, it was Ernest's LLDC accounts and as I mentioned

Hayley Clark was the individual who signed over the accounts and I would be quite reassured

as there are external auditors now that that sign off was done correctly.

So just for the record, I'm certainly not questioning accounts that were signed off

by a member of EY.

What I'm saying is that once those monies came to Tower Hamlet, I think it would be

useful for the team to look at the process that went through at the Capital Strategy

Board to determine how those monies were used.

That's what it's talking about here.

Thanks, Chair.

Will definitely bring a note back in terms of the assurance

Counsellor Francis and in terms of the scenario modelling we will be implementing that in IMT FS

Okay, thank you are there any other questions about the statement of accounts

No, okay in which case do we agree them approve them is that approved yeah, thank you

The annual governance statement is that the next item

No yet, so so we

Yes, there's the management representations letter in relation to the council and the pension fund accounts

Do we approve that?

yes okay and now we go up okay as I read it that statement comes from the mayor

that he was active and you okay okay okay does that does that include the

No, that's a separate issue

So do we approve that manager response, yep

Okay, and now the annual governance statement where the contentious issue is in relation to

whether we approve it or not because we're not the signatures of it and I'm

Which seems we're in the face of it to be

There's no point pointing at it. I can't even read it from this distance.

You might as well be pointing up there. Sorry, what is it?

The regulations say that if the relevant authority referred to in the review,

it must approve the annual governance statement prepared in accordance with the paragraph by resolution of one,

a committee or members of the authority meeting as a whole.

So it sounds as though yes, it does need to be improved by a committee

This is regulation six to be of

The accounts and audit regulations

That's the relevant officer in relation to this because in my experience this went straight to council

But you may have a different

I mean I wasn't here last time but my understanding it didn't go to full council last time it

was approved by this committee.

SIP for guidance is approved by the committee or recommendation of approved recommend aid

or that the committee recommends it's approved.

So SIP for guidance dictates that but the historically it was approved it was approved

Audit committee and didn't go to full council

So the issue is whether this is approved by this

Is it is it so approved?

those in favour

those against

Those who abstain

It's approved

For those who aren't aware that the independent chair doesn't have a vote

I mean I'm really

Trying to shepherd the discussion

And include as many

Views as possible

But thanks chair I wasn't gonna go

You want to list all the changes that we've made based on

Counsellors feedback I can go through them if you prefer

Yeah, great

there's one change though that we that we should make under set for guidance and that is the the

Update on the disclaim to order opinions which propose that we put in we put in based on this on this meeting if agreed

That's right. That's absolutely right

And the word local was got a small L and the second second word in the first sentence other than that. I've got no

Think we've concluded the business of the meeting. Thank you so much everyone and

for the

When is the next meetings late January? I understand

I think the top of my head is the 29th of January give me a second 29th of January which is Thursday.

Thank you. See you on Thursday the 29th.

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Audit Committee - Wednesday 10 December 2025, 6:30pm - Tower Hamlets Council webcasts

Audit CommitteeWednesday, 10th December 2025 at 6:30pm

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Audit Committee
Wednesday, 10th December 2025 at 6:30pm