The Audit Committee of Tower Hamlets Council met on Thursday 24 September 2026 to discuss the external auditor's reports and the Council's progress on addressing identified weaknesses. Key items included noting the interim value for money report, the Reset to Recovery briefing, the EY audit planning report addendum, and the Pension Fund audit plan. The committee also reviewed the Council's progress on its action plan for addressing external recommendations and noted the Treasury Management outturn report for 2025/26.

Interim Value for Money Report (Year Ended 31 March 2026)

Ernst & Young (EY), represented by Partner Stephen Reid, presented their interim report on the Council's value for money arrangements. Mr. Reid highlighted that ten significant weaknesses and four statutory recommendations had been identified over the past two years, with all but one of these weaknesses remaining. He emphasised that for these weaknesses to be considered resolved, new arrangements needed to be embedded and effective for a sufficient portion of the financial year.

Members raised questions regarding the identification of social housing as a significant weakness, despite the Council's proactive self-referral to the housing regulator. Mr. Reid clarified that the assessment was based on governance and timeliness of action, not solely the C3 rating itself. The report noted that improvements in areas such as the 'golden triangle' leadership team and internal investigations were progressing but required more time to be fully embedded. The committee resolved to note the content of the report.

Reset to Recovery Audit Committee Briefing

EY Partner Stephen Reid also presented a briefing on the Reset to Recovery initiative, analysing the Council's position within the broader local government audit recovery context. The report highlighted that Tower Hamlets had not achieved an unqualified opinion for several years, contributing to its current challenges. While progress was acknowledged, Mr. Reid indicated that the Council was on a journey and that officers were focusing on the balance sheet as a key area for rebuilding assurance. The committee noted the report, and Mr. Ahsan Khan, Corporate Head of Financial and Technical Accounting, mentioned that Grant Thornton had been commissioned to review the actions and improvements made to the balance sheet.

EY Audit Planning Report Addendum (2025/26)

This report provided further details on EY's risk assessment procedures concerning opening reserve balances, in response to prior-year disclaimed audit opinions and in accordance with the National Audit Office's (NAO) Local Authority Reset and Recovery Implementation Guidance (LARRIG 01). Mr. Reid indicated that it could take until 2028/29 or potentially 2029/30 for the Council to achieve an unqualified opinion, depending on the audit of the balance sheet this year. The committee resolved to note the report, with members finding the chart on the Audit Committee's role particularly helpful.

Pension Fund Audit Plan (31 March 2026)

Hassan Rohimun, Partner at EY, presented the audit plan for the Pension Fund. He outlined the audit strategy, risks, materiality thresholds, and scope. Members inquired about the timeline for resolving the IAS 26 disclosure risk related to actuarial present value of promised retirement benefits. Mr. Rohimun stated that an actuarial specialist had been engaged and an update would be provided at the next meeting. Regarding level three investments, Mr. Paul Audu, Interim Head of Pensions and Treasury, confirmed that these were within the acceptable range for exposure as per the Council's Investment Strategy. The committee resolved to note the report.

Progress Update on Action Plan Delivery in Response to External Recommendations (Q2 2026/27)

Mr. Satinder Jas, Director of Compliance, presented an update on the Council's progress in addressing EY's statutory recommendations and significant weaknesses. He reported considerable progress had been made, with a coordinated improvement programme now in place. However, he noted that all four statutory recommendations and six significant weaknesses remained open, with the focus shifting to demonstrating sustained operating effectiveness and embedding changes. Mr. Jas indicated that not all statutory recommendations were expected to be completed by the end of the financial year 2026-27, as the Council needed to demonstrate the continual embedding of actions. The committee resolved to note the Council's approach and progress made in delivering the action plan developed in response to the external auditor's statutory recommendations and identified areas of significant weaknesses.

Treasury Management Outturn Report (2025/26)

Mr. Paul Audu presented the Treasury Management Outturn report for 2025/26. He highlighted that all treasury management activities complied with the approved strategy limits and prudential indicators. The report noted that external borrowing remained unchanged at £68.7 million, and no new borrowing was undertaken, avoiding higher market rates. Investment income exceeded the budget by £1.7 million. A key future issue identified was managing the timing and cost of anticipated new borrowing as reserves reduce and the capital programme progresses. The committee resolved to note the Treasury Management outturn position for 2025/26.

Audit Committee Work Plan

Independent Chair Barry Quirk asked members to note the work plan for the committee. Councillor Kamrul Hussain requested that the issue of 'internal controls' be added to the work plan. The committee resolved to note the work plan for 2026-27.

The meeting concluded with no other urgent business being raised.