The Hackney Council Audit Committee convened to discuss key financial and governance matters, including the external audit plan, financial updates, and risk management strategies. The committee reviewed and approved the minutes from the previous meeting, and also noted the terms of reference for the municipal year 2025/26. The committee also reviewed the proposed work programme for the coming year.

Financial Sustainability and Budget Overspends

The committee was presented with a finance update by Naeem Ahmed, Group Director of Finance and Corporate Resources, which highlighted significant financial pressures facing the council. The general fund is currently facing a £37 million overspend, driven by demand-led service pressures in temporary accommodation, children's social care, and adult social care.

Ahmed also touched on the dedicated schools grant (DSG) and the special educational needs and disabilities (SEND) deficit, which currently stands at £19 million. He noted that the statutory override for SEND funding is due to expire in March 2026, and that the council is lobbying the government for a sustainable solution beyond extending the override.

If I'm honest with you, if the statutory override was to come to an end in March 2026, we'd be possibly in a position where probably half of local authorities would almost tip into exceptional financial support, requiring some sort of government intervention, or even to a greater extreme of requiring a Section 114, which is essentially bankruptcy for local government.

Naeem Ahmed, Group Director of Finance and Corporate Resources

Ahmed outlined several measures being taken to address the financial challenges, including spend reduction initiatives, a review of agency assignments, and the establishment of a budget recovery board. He also noted that the council's reserves are limited and would be exhausted within two years if the current spending rate continues.

Councillor Chapman, the Cabinet Member for Finance, noted that the OFP report for March 2025 showed an improvement, with the deficit reduced to £27 million, but that this did not change the overall serious financial position.

Housing Revenue Account (HRA)

The HRA is forecasting an overspend of £13.7 million, with significant pressures in repairs and maintenance and legal disrepair. Ahmed highlighted the establishment of a HRA Finance Improvement Board to address these issues.

Treasury Management

Pradeep, provided an update on treasury management, noting an increase in external debt due to the increasing capital financing requirement¹. He also noted a drop in investment balances and interest income due to decreasing cash balances and interest rates.

Misanor, added that as the council spends more on its capital programme, it needs to pay for that from revenue, and that borrowing is not as cheap as it was a few years ago.

Corporate Transformation Programme

Kieran Reid, the council's director for corporate strategy and transformation, presented an update on the Corporate Transformation Programme, which aims to modernise the council, improve services, and contribute to financial sustainability. The programme includes initiatives such as developing a target operating model, reviewing prevention and demand management, and growing in-house capacity.

The Corporate Peer Challenge encouraged the council to step up the scale and pace of the programme. The flexible use of capital receipts strategy includes provision to fund transformation activities.

Corporate Risk Register

Matt Powell, the Corporate Risk Manager, presented the Corporate Risk Register, which identifies key risks facing the council. The top risk remains the financial position of the council, followed by ICT risks, workforce risks, and housing repairs.

Councillor Smith raised a point about the lack of colours related to the risks in the documents, and Powell confirmed that the online version has colours.

Internal Audit Annual Report

Michael Sheffield, the corporate head of audit, anti-fraud and risk management, and Adamola Ayindi, the internal audit manager, presented the Internal Audit Annual Report for 2024/25. The report noted that 50 audit reviews were completed during the year, with 86% receiving reasonable or significant assurances. Five reviews received limited assurances and two received no assurance.

The report also highlighted changes to the professional guidance for internal audits, which have been incorporated into the updated internal audit charter and strategy.

Annual Fraud and Irregularity Report

Sheffield presented the Annual Fraud and Irregularity Report, highlighting outcomes from investigations into tenancy fraud, blue badge misuse, and no recourse to public funds. The estimated total benefit from counter-fraud investigations this year is £2.6 million.

Councillor Smith asked why blue badge misuse was at its worst level ever, and Sheffield responded that it was due to increased emphasis being given to tackling it.

NatWest Declaration of Interest

Councillor George Gooch declared an interest as both himself and his partner are employed by NatWest Group and own shares and other stock options in NatWest Group, which is a direct competitor of some of the institutions mentioned in Agenda Item 8, and so he abstained from that item.