The Audit Committee of Tower Hamlets Council met on Thursday, 10 October 2024, to discuss the progress of audits, risk management, and treasury management. Key decisions included noting the progress of internal audits, the results of an external quality assessment, and the findings of a fraud awareness survey. The committee also reviewed corporate and directorate risk registers and the council's treasury management performance for the 2023-24 financial year.

Audit Planning and Progress

The committee received updates on the audit planning for the 2020/21, 2021/22, and 2022/23 financial years from Deloitte. Jonathan Gooding, representing Deloitte, explained that due to the backstop provisions introduced by the government, auditors would be required to issue a disclaimer of opinion for these outstanding audits by 13 December 2024. He assured the committee that this situation was common across local authorities and would not adversely affect Tower Hamlets.

EY, represented by Hayley Clark and Dan Spiller, presented their audit planning report for the year ending 31 March 2024. They highlighted a Close Monitoring risk rating for the audit, the highest possible, due to factors including the council's public profile, prior year qualifications, and the recent Best Value Inspection. This rating necessitates more extensive audit procedures. The materiality threshold was set at £7 million, with performance materiality at £3.5 million. EY confirmed they had not yet seen the Best Value Inspection report. The committee was informed that the audit fieldwork was scheduled to conclude by the end of November to meet the February 2025 backstop date, but there was a risk of opinion modification due to the ongoing work on opening balances.

Internal Audit and Anti-Fraud Update

David Dobbs, Head of Internal Audit, Anti-Fraud and Risk, provided an update on internal audit activities for 2024-25. He noted that progress against the audit plan had been slow, with 11 Limited Assurance opinions issued out of a total of 14 audits completed. This was attributed to resourcing issues and delays, posing a risk to the plan's delivery.

A significant positive development was the External Quality Assessment (EQA) conducted by Validera, which concluded that the Internal Audit service Generally Conforms with professional standards, the highest possible grade. This indicates a sound system of governance, risk management, and control.

The results of the Fraud Awareness Survey were also presented, showing that 66% of respondents were aware of the council's counter-fraud arrangements, and 58% had received fraud awareness training. However, only 45% believed the council had a zero-tolerance approach to fraud, with 42% unsure. The survey also highlighted that 50% of respondents identified avoiding process and controls as the leading cause of fraud.

The committee resolved to note the progress report, the EQA findings, and the fraud awareness survey results.

Risk Management

David Dobbs presented the Corporate Risk Register and the Communities Directorate Risk Register. He noted that the Corporate Risk Register had increased from 14 to 15 risks, with the addition of Community Cohesion, People First Transformation, and Civil Contingencies. The Building Safety Act and Protection of Freedoms Act risks were relegated to directorate level.

Jesper Glasius, a Risk Consultant from Zurich Municipal, presented the findings of a health check on the council's Enterprise Risk Management arrangements. He described the council as being in the first steps of a long journey to restore risk management processes, but acknowledged positive initial steps and the potential for rapid maturation. He highlighted the need for clearer leadership in risk management, an updated risk strategy, and more robust governance and oversight, particularly regarding members' understanding of their roles. The report recommended a concerted effort to drive a new risk management culture and empower officers.

The committee resolved to note the Corporate and Communities Directorate Risk Registers, and the Zurich Municipal health check report and action plan.

Treasury Management Outturn Report

Paul Audu, Interim Head of Pensions and Treasury, presented the Treasury Management Outturn Report for 2023-24. He noted that Bank Rate had increased to 5.25% and remained at that level throughout the year. The council's investment portfolio stood at £219.7 million as of 31 March 2024, earning an income return of 4.98% and a total return of 5.74%. The council maintained a low-risk approach to borrowing, with no new external borrowing undertaken during the year. The report confirmed full compliance with the Treasury Management Strategy Statement and Investment Strategy.

The committee resolved to note the treasury management activities and performance, and the council's investments as at 31 March 2024.

Audit Committee Work Plan

The committee noted the updated Audit Committee work plan for 2024-25.

Exclusion of Press and Public

The committee resolved to exclude the press and public from the remainder of the meeting for the consideration of restricted items, as these contained exempt information.

The meeting concluded with the agreement and approval of restricted minutes from previous meetings and a verbal update on Adult Social Care Procurement.