The committee noted all of the reports. They agreed to delegate authority to the Chair of the committee, Fiona Marsh, and the Section 151 Officer, Conrad Hall, to approve the 2022/23 Statement of Accounts and Annual Governance Statement once the external auditors, Ernst & Young, have completed their work.

Complaints Handling

The committee considered the Annual Complaints Report for 2023/24.

The committee heard that the council received 6,283 complaints in 2023/24, an increase of 2.5% on the previous year. 80% of stage 1 complaints were answered within the timescale set, but only 32% of stage 2 complaints. The committee heard that performance of stage 2 complaints had been affected by a large turnover in staff, but that improvements to the case management system were expected to drive up performance in 2024/25.

The committee discussed the increase in complaints that had been escalated to the Local Government and Social Care Ombudsman (LGSCO), noting that Newham was now performing better than the average for London.

The committee discussed a finding in the LGSCO's annual letter that:

for the fourth consecutive year, I must raise concerns about your Council’s response to our investigation inquiries. We received late responses in 11 of the 23 requests we made during the year.

The committee heard that the delays had been caused by inexperience in the new team, and that training and development were expected to improve matters in the future.

The committee heard that the council had seen an increase in the Housing Ombudsman's¹ maladministration rate from 33% to 87%, and a corresponding increase in the number of orders for compensation issued by the Housing Ombudsman from 27 to 138.

Performance Development Scheme

The committee discussed the Performance Development Scheme (Appraisals) Update.

The committee heard that the completion rate for appraisals had risen to 78% in 2023/24. They expressed concern that this figure was still too low, and that there were no sanctions for staff who failed to complete appraisals, which could lead to:

a culture of non-compliance

The committee sought assurance that data was collected on protected characteristics in the appraisal process, to identify any trends and issues. The committee heard that this was not currently done, but that it could be implemented.

The committee discussed the findings of a report on the internal complaints system, Tell Jane, which had found a high level of toxic management in the council. They sought details of what actions had been taken to address this, and the proof that they had been effective. The committee were told that work was ongoing, including a project to:

unearth some of this stuff, because not all of it is going to come up in Tell Jane

The committee heard that the council was developing a workforce strategy in conjunction with unions and senior leaders, which would be used to review the appraisal system, to ensure that it is:

meaningful and gait appraisals like you say, and just ticking the boxes because you want to get them done

Mandatory Training

The committee considered the Mandatory Training report.

They were told that overall completion rates had risen from 19.2% in June 2022, when 16 courses were required, to 43.9% in September 2024, when only 5 courses were required. The committee acknowledged that comparing completion rates from different periods was difficult. They expressed concern that 43.9% was still too low, and suggested that using the council's IT system, Oracle Fusion, to prompt staff to complete training could be a solution. They sought an update on how the council would improve completion rates.

The committee heard that a number of steps had been taken, including arranging mandatory training spotlights, where staff were sent calendar invitations encouraging them to complete a specific course in a given hour. They heard that reporting functions had been improved to enable managers to track completion rates, and that work was ongoing to get Oracle Fusion to send reminders to staff who had not completed their mandatory training.

Internal Audit

The committee considered the Internal Audit Progress report for the period to 30 September 2024.

The committee heard that two limited assurance reports had been issued for Park Primary and Salisbury Primary Schools.

Park Primary School had five 'priority two'² findings:

• A lack of evidence of scrutiny by the schools' governors;
• Purchase orders not being raised consistently;
• Poor evidence to support purchase card transactions, including potentially inappropriate spend;
• Examples of expenditure by staff outside normal procurement routes; and
• No contract register.

Salisbury Primary School had one high priority³ finding:

• A number of unknown transactions were identified on the schools' purchase card. These were investigated by the bank, who replaced the card and refunded the charges, but the bank's investigation was inconclusive. The school had failed to report the incident to the council's fraud team.

The other four findings at Salisbury Primary were 'priority two' findings:

• Poor finance committee arrangements;
• A late submission to the Schools Financial Value Standard;
• Gaps in the evidence to support recruitment decisions; and
• A need to strengthen the schools' business continuity plan.

The committee heard that both schools were working with the council to address the issues identified, and that the new Director of Education and Inclusion had been liaising with the schools to identify themes in the audits and would be sharing best practice.

The committee heard that the Internal Audit Team had certified three grant claims for the Supporting Families programme. The council receives £800 per family, if it is able to demonstrate improvement in a set of criteria. The committee were told that 356 families had been claimed for, which would generate £284,800 for the council. The committee heard that Internal Audit had been required by central government to carry out a 10% check of the families claimed for, to confirm that improvements had been made. Six of the 51 families reviewed had to be removed from the claims, and testing had been extended.

The committee discussed the progress made in implementing previous Internal Audit recommendations. They heard that 15 of 29 recommendations rated as 'not implemented' were 'high priority' recommendations. The committee heard that 7 of these related to cyber security, and 7 to GDPR, and that all were subject to a third follow up, the results of which would be reported to the committee at a future meeting. They heard that the other 'high priority' recommendation related to Housing Allocations, where 458 potential duplicate records had been identified on the housing register. They were told that these would be investigated when resources were available.

The committee discussed the new Global Internal Audit Standards that were due to be implemented on 1 April 2025, and heard that these would be reviewed by the UK Public Sector Internal Auditing Standards Advisory Board (IASAB) to identify any material that needed to be adapted for UK public sector use.

Counter Fraud

The committee considered the Quarterly Counter Fraud Update

The committee heard that the Counter Fraud Team had recovered 15 properties as a result of unlawful subletting between 1 April 2024 and 20 September 2024. The committee were told that this amounted to £630,000 of notional savings⁴. They were told that the team was currently working on 138 housing investigations, 27 of which were waiting to be heard at civil court.

The committee discussed the Temporary Accommodation Project, which is designed to reduce the cost of temporary accommodation and ensure that the right people are in the right homes. They heard that the Counter Fraud Team had reviewed 534 applications from data matching, and that 13 housing applications had been closed and 10 tenancies terminated, with a further 29 referred to the housing department for action. 111 cases remained under investigation, with 381 closed with no further action.

The committee heard that the council tax investigation officer had investigated 918 cases, resulting in the identification of £576,179.41 of underpaid council tax due to discounts being applied inappropriately. This included cases where the single person discount had been applied to properties where someone in the household had turned 18, exemptions applied after residents had died that had not been reviewed, and cases where the single person discount had been applied to properties where HMRC data showed more than one person registered for tax purposes.

Risk Management

The committee discussed the Risk Management Update.

The committee discussed the risk that the council may not deliver on its net zero targets. They heard that there was a significant risk that the council would not meet its targets, due to the high costs associated with decarbonisation. They discussed the Just Transition Plan that the council had adopted, which focuses on mitigating the consequences of climate change, as well as reducing carbon emissions. They heard that:

Newham residents have the lowest carbon footprint in the country.

The committee discussed the risk register and inherent risk register, and the risk registers for transformation projects, community wealth building projects, and the HRA capital programme. They heard that a new risk manager role would be created, to ensure that the control and risk mitigation measures on the active risk register were implemented, providing assurance to the Corporate Leadership Board and Audit Committee.

Savings Delivery Programme

The committee considered the Quarterly Report on the Savings Delivery Programme.

The committee heard that £32 million of savings had been approved as part of the 2024/25 budget, including £9.7 million of savings rolled over from the previous year. The committee were told that the savings tracker indicated delivery of £26.7 million of savings (84%), with a slippage of £3.6 million (11%) and risk of non-delivery of £1.7 million (5%).

The committee expressed concern that a number of undelivered savings remained from previous years. They were told that the slipped savings in marketing related to:

timing issues. Staff restructures take place, late meetings in the year.

The committee heard that the savings that had not been delivered in Central related to senior management posts that had been removed. They were told that:

a full year's worth of saving from that [would be made next year].

The committee expressed concern that there was:

a culture of we don't really have to hit the savings.

The committee heard that action was being taken to improve savings delivery, including withholding pay increments from managers who had not delivered savings.

Local Audit Backlog

The committee considered the Local Audit Backlog Rebuilding Assurance report. They heard that the government had introduced backstop dates by which local bodies were required to publish audited accounts. They heard that this was expected to lead to hundreds of disclaimed audit opinions, and that recovery from the backlog could take a number of years.

They discussed the implications of a qualified or unqualified audit opinion on the council's borrowing requirement. They heard that whilst there was no direct impact on the cost of borrowing from the Public Works Loan Board, it could make it more difficult to borrow from external lenders. The committee were told that the Financial Reporting Council and the Comptroller and Auditor General were aware of the issue, and that there was work ongoing to communicate the context to financial institutions.

Statement of Accounts 2022/23

The committee discussed the London Borough of Newham Statement of Accounts 2022/23. They noted that Ernst & Young would be issuing a disclaimed audit opinion on the 2022/23 accounts, but had completed the Value for Money work, and had audited the Newham Pension Fund.

Update on the 2023/24 Accounts

The committee considered the Update on 23/24 Accounts. The committee were told that Ernst & Young would be issuing a disclaimed audit opinion on the 2023/24 accounts, due to the amount of work required to clear the backlog and the revised backstop dates. The committee heard that some work had been done on the accounts, and that the value for money work and audit of the Newham Pension Fund had been completed.

The committee discussed the delays to the completion of the council's accounts, and the reasons why this had happened. The committee were told that:

an audit process can only ever follow a financial statement production process.

They heard that the 2021/22 audit had been delayed, and that this had had a knock-on impact on the 2023/24 accounts. They were told that if the government's proposed backstop dates had been in force for the previous 7 years, the council would only have had one set of audited accounts.

The committee heard that the capacity of the finance team was the main reason for the delays, and that it was not a competency issue. They discussed how much additional investment would be required to address the capacity issues, and heard that it could be in the region of £150,000 per year, which would fund:

a good quality team to do the work

They were told that it would be a couple of years before the additional investment would result in unqualified audit opinions being issued.

The committee discussed the potential for automation to speed up the completion of the accounts. They were told that some elements were already automated, but that the preparation and consolidation of the accounts were largely people-driven. They discussed whether chatGPT could be used to write the report, and whether it would be possible to train it on the Council's previous accounts. The committee were told that this had not been considered, but that it was a good idea.

Year Ahead Forward Plan

The committee considered the Year Ahead Forward Plan.

The committee confirmed that they would be considering the Regulator of Social Housing's inspection report at a future meeting.