This was a meeting of the Audit and Governance Committee in which a number of reports were scheduled to be considered, the majority of which related to the council's financial position and controls. A number of financial risks were considered as part of a quarterly review of the council's Corporate Risk Register. The committee was also asked to review the council's use of surveillance powers under the Regulation of Investigatory Powers Act 2000 (RIPA)¹ and its Treasury Management Strategy.

Draft Statement of Accounts 2023/24 and External Audit Update

The Audit and Governance Committee was asked to note the Audit Strategy Memorandum for the audit of the 2023/24 Statement of Accounts, as submitted by the council's external auditors, Forvis Mazars LLP.

Forvis Mazars advised the council that they would not be able to complete a full audit of the main financial statements by the statutory ‘backstop’ deadline of 28 February 2025. In order to meet the backstop date, the auditors proposed issuing a ‘disclaimed’ audit opinion on the council’s main financial statements and then conducting ‘recovery’ work as part of the 2024/25 audit to rebuild assurance over those statements. A full audit of the Pension Fund, and the value for money self-assessment, would still be completed.

The auditors proposed limiting their audit of the main financial statements to compliance with laws and regulations, minimum revenue provision, revenue expenditure funded from capital under statute, cash and counterparty investment balances. They would not audit a number of areas that would normally be subject to detailed audit, including:

• Debtors and Creditors
• Fixed Assets
• Income and Expenditure Statement
• Useable and Unusable Reserves
• Housing Revenue Account
• Collection Fund
• Group Accounts

The committee was asked to consider the implications of a disclaimed audit opinion for the council’s activities in financial markets, its reputation, and the costs of recovery work in the 2024/25 audit. The Audit Strategy Memorandum document describes the audit strategy in greater detail.

Quarterly Monitoring of Corporate Risk Register – September 2024

The committee was asked to note the council's updated Corporate Risk Register (CRR), which contains the risks that could have the greatest impact on the council's ability to achieve its objectives. One new risk was identified since the previous quarter, the risk of a ‘limited assurance’ audit opinion from the external auditors on the council's accounts for 2023/24.

The UK government has introduced measures to address the backlog of unaudited local authority accounts up to 2022/23 due to issues in the local audit market that have built up over a number of years. External Auditors must issue opinions or disclaimers by December 2024 for 2020/21, 2021/22, and 2022/23 accounts. There will be phased deadlines for subsequent accounts through to 2027/28. This aims to restore timely financial reporting while managing sector resources. For Hounslow, the first set of accounts to be impacted by the arrangements will be 2023/24, as it is in a minority of local authorities to have received a full audit for all accounts up to and including 2022/23.

This new risk was added to the CRR because it may hinder the council's ability to raise funds in financial markets and may also damage its reputation. The score of the risk relating to a material in-year budget deficit was increased, due to a projected overspend of £20.5 million, reflecting the financial challenges facing local authorities in London.

The risk register contains a number of other risks that could affect the council's ability to deliver its objectives. These include the risk of failing to deliver regeneration ambitions, the risk of cyber security incidents, the risk of failing to safeguard children and adults, the risk of failing to respond to climate change and the risk of financial exposure to the Lampton Group² of companies.

Treasury Management - Review of the Policy and Strategy

The committee was asked to note the council's proposed Treasury Management Strategy for 2025/26. The council’s investments were reported to have increased by £11.3 million during the nine months to 31 December 2024, to a total of £70.5 million. This included a £20.7 million increase in money market funds, an increase in overnight cash balances of £6.3 million and a modest increase of £0.5 million in the council's bond fund. The increase in money market funds reflects a strategy of holding cash in liquid assets pending future expenditure.

The report also notes the council's disinvestment from the Fidelity International multi-asset income fund in November 2024 at a loss of £3.9 million, which will be reflected in the accounts for the current financial year.

The council's borrowing was projected to increase by £117.3 million during the financial year to 31 March 2025, to a total of £665.9 million. This is to support capital investment by the council and its subsidiary companies, including the delivery of new homes and infrastructure projects. The report also sets out borrowing forecasts for subsequent years, with total borrowing projected to reach £1,080.2 million by 31 March 2028.

The report also described the council's plans to launch a Community Municipal Investment in June 2025, which will allow local residents to invest directly in local green infrastructure projects.

Progress Report on the Work of Internal Audit and Anti-Fraud

The committee was asked to note the work of the Audit & Investigations Shared Service for quarter 2 of 2024/25.

The service is on track to meet its performance targets, with 5 (21%) of the 24 planned audits for the year completed or at draft stage by the end of September.

The Shared Service also provided an update on the implementation of recommendations from its audits in the 2023/24 financial year. The committee was informed that 46% of high risk recommendations had been fully implemented, while a further 54% were in progress.

The Anti-Fraud Team received 250 fraud referrals in the first six months of the financial year, a 6% increase compared to the same period in the previous year. Sanctions were applied in 21 cases with a total value of £759,572. These sanctions included:

• 2 tenancy applications rejected
• 8 council properties recovered
• 3 Right To Buy applications rejected
• 8 council tax discounts ended.

Use of Regulation of Investigation Powers (RIPA) Surveillance

The committee noted that no authorisations under RIPA had been made or refused since January 2024. It was informed that the council's RIPA Policy was last updated in January 2022, and that the council's compliance with RIPA was last inspected by the Investigatory Powers Commissioner's Office (IPCO) in December 2022. IPCO did not identify any concerns regarding the council's compliance with RIPA.

Minutes of the Meeting Held on 7 October 2024

The committee noted the minutes of its meeting held on 7 October 2024. The minutes included a discussion about the council’s financial position. Executive Director of Finance and Resources Jake Bacchus told the committee that the council’s finances were resilient, but that there was no room for complacency. He said that the council was facing a perfect storm of inflation and rising demand, which was projected to lead to an overspend of £30 million in the next financial year. Mr Bacchus added that the council needed to develop plans to replenish its reserves.

The minutes also included a discussion about the council’s relationship with the Lampton Group of companies. Mr Bacchus told the committee that the Lampton Group had recorded losses since 2021, and that the council was supporting the companies through challenging times. He did not advocate that the council provide any more money to the Lampton Group, and felt that their relationship needed to become more balanced.