This meeting of the Audit and Risk Committee is largely concerned with the council's finances. The external auditors will be presenting their reports on the Council and Pension Fund accounts, the committee will discuss the council's proposed budget for 2025/26 and the Medium Term Financial Strategy and they will also confirm the council tax base for the coming year.

Council and Pension Fund Accounts

The external auditors will present their reports on the council's main accounts and the Pension Fund accounts. These accounts are statutory documents required by the Local Audit and Accountability Act 2014 and the Accounts and Audit Regulations 2015.

Draft Budget Report (post-settlement)

The committee will be asked to note the draft budget report. It includes a summary of the council's Medium-Term Financial Strategy which forecasts significant budget gaps from 2026/27 onwards.

The council’s budget report also details earmarked reserves, which are funds held for specific purposes. Islington currently has £86.229 million of earmarked reserves. They are currently forecasting a reduction in earmarked reserves to £68.331 million by 2027/28. The report also identifies an absolute Minimum General Fund Balance and Earmarked Reserves Level of 25% of core spending power.¹

The draft budget report includes a balance sheet analysis showing how the council is financing capital expenditure projects like schools, roads, libraries, and leisure centres. Capital expenditure can be financed through borrowing, using the council’s own resources (internal borrowing) or through grants, developer contributions, and capital receipts.

The report notes that:

Although the CFR and the level of external borrowing has increased in 2023/24, the level of internal borrowing is still relatively high.

The report also discusses the council’s investment properties, which can be used to generate rental income. Islington Council owns a small number of investment properties. The report makes the point that:

investment income only accounts for a small part of Islington’s revenue income.

Council Tax Base Report and CF Forecast

The committee will discuss the council tax base for 2025/26. The report asks the committee to confirm that Islington Council will charge a 100% premium on second homes and empty properties, for which the Levelling Up and Regeneration Act 2023 gave councils discretionary powers. They will also be asked to confirm that the collection rate assumed in setting the council tax base for 2025/26 will be 97%, meaning that the council expects to collect 97% of the council tax owed.

The Council Tax Base report includes a forecast of the council tax collection fund, which is the total amount of council tax collected by the council. They are currently forecasting a £2.959 million surplus in the collection fund, which will be transferred to the council’s Core Funding Reserve. The largest component of the surplus is a -£1.585 million increase in council tax income, which is explained as:

mainly from growth in council tax through additional premiums and new properties since the taxbase was set for 2024/25.

Annual Governance Statement Mid-Year Review

The committee will receive a mid-year review of the Annual Governance Statement. This statutory document reviews the effectiveness of the council's governance arrangements. The mid-year review updates the committee on the 16 governance issues identified in the council’s 2023/24 Annual Governance Statement. One of these is the council’s financial sustainability:

Islington Council, in line with many other local authorities, is facing a significant forecast financial savings requirement to arrive at a balanced revenue budget for 2025/26 and over the medium term.

The report sets out a number of actions that will need to be completed by the council, including delivering a balanced budget for 2025/26, agreeing to savings proposals and increasing council tax.

Another key issue identified in the statement was the council’s handling of complaints. The council has previously faced scrutiny from the Local Government and Social Care Ombudsman (LGSCO) and the Housing Ombudsman (HO) for backlogs in responding to complaints. The report says that:

Of the Stage 2 complaints received, 98% were responded to within timescales given in the complaint policy.

However, it says that:

A further review of the management of complaints will be completed by 31 March 2025.

Islington Polling District and Polling Places Review 2024

The committee will discuss the proposed changes to polling districts and polling places following a statutory review of polling districts and places required by the Electoral Registration & Administration Act 2013. They will consider six representations submitted by local people, organisations and Councillors, including a request from Councillor Paul Convery for an extra polling district in Caledonian Ward. The report notes that:

These are reflected in the polling districts which were adopted following the last ward boundary review and they make good sense. And the polling stations are located in (generally) good locations within each of the polling districts. However, the polling districts are of quite varying sizes (although there is no legal requirement for them to be of equal size) and the SCAB polling district has a particularly large electorate.

The report proposes dividing the SCAB district into two, and designates the Lewis Carrol Library as a polling place for the new SCAD polling district. The report also explains why residents of the Miranda Estate cannot vote at Caxton House in Hillrise Ward because it is outside their ward, following a request from Councillor Janet Burgess MBE.

Local Audit Reform Consultation

The committee will discuss a consultation on the government's proposed reforms to the local audit system set out in its recently launched Local Audit Reform Strategy.

The strategy proposes establishing a new Local Audit Office (LAO), to “streamline and simplify the audit system” which would have responsibility for appointing auditors, setting the Code of Audit Practice and overseeing quality in the audit system.

The government is seeking the council’s views on the strategy, including:

Should the LAO also take on the appointment and contract management of auditors for smaller bodies in the longer term?

and

Should the LAO oversee a scheme for enforcement cases relating to local body accounts and audit?

The strategy also includes a proposal to review the format and content of local authority accounts to ensure that they are “proportionate and relevant to account users”. The government is seeking views on this, including:

Should the Accounting Code be freely available if it is not transferred to the LAO?

The strategy also proposes “supplementing private sector audit with public provision”. The government is asking whether:

Should the market include an element of public provision?

It also asks:

If yes, should public provision be a function of the LAO?

The report notes that the fees for the council’s audit in 2024/25 will be £494,000 for the Council and £85,000 for the Pension Fund, a significant increase on the previous year’s fees.