The Islington Audit and Risk Committee met to discuss the council's finances, risk management, and audit reports. The committee approved the draft external value for money risk assessment report, and members noted the internal audit annual report, the new risk management framework and strategy, the treasury management outturn report, and the annual fraud report. The bi-annual whistleblowing monitoring report was also discussed, but the details were kept confidential.

Risk Management Framework and Strategy

The committee reviewed a new draft risk management framework and risk appetite strategy, a refresh of the last review in 2022. The strategy aims to clarify risk management responsibilities, improve risk identification and escalation, and ensure risks are actively considered in decision-making.

Matt, a council officer, explained that the intention was to create a framework that was:

very clear, simple to understand, could be followed easily, and particularly in terms of who's doing what, whose responsibility is it in terms of different areas of risk, how do you identify risks in your department, how do you escalate them upwards, and then how are they managed, how are they managed effectively.

The risk appetite strategy is based on HM Treasury guidance¹ and categorises risks based on the council's corporate plan headings. Councillor Paul Convery, Chair of the Audit and Risk Committee and the Pensions Committee, raised concerns about the scoring system, which multiplies likelihood and impact on a scale of 1 to 5. He suggested this linear approach might lead to an overabundance of risks falling within scope, potentially diluting oversight of medium and lower-scale risks. He gave the example of falling pupil roles, which was scored 27th on the risk register, despite its significant impact on school closures.

Councillor Caroline Russell, Business Manager, Independent and Green Group, echoed this concern, emphasising the need for the committee to have sight of departmental risk registers to ensure attention is paid to important issues.

Matt responded that the scoring criteria would be made more specific to provide more objective measurements.

Paul, a council officer, added that the aim was to focus on risks that genuinely keep people up at night while ensuring departmental risks are still actively managed.

The committee discussed the importance of differentiating between inherent and residual risk and aggregating risks by category to assess headroom against risk appetite.

There was also discussion about the risk appetite for legal and governance, with Paul suggesting the cautious category might be more appropriate than minimalist to enable a more positive and enabling approach.

Ultimately, the committee delegated final approval of the risk management framework and strategy to the Corporate Director of Resources, in consultation with the Audit and Risk Committee Chair, before it goes to the executive in November.

Internal Audit Annual Report 2024-25

The committee reviewed the internal audit annual report for 2024-25, which outlines the work undertaken by the internal audit team. The Head of Internal Audit's opinion was that the council's systems of internal control, risk management, and governance were adequate, with some improvement required.

Councillor Paul Convery noted the improved levels of assurance in schools and tenant management organisations (TMOs). Councillor Pardeep Bhatti, co-opted member of the committee, inquired about a TMO with six late audit submissions, and was told that this was unusual and would be followed up.

Councillor Paul Convery noted that TMOs are relatively small organisations that handle significant amounts of housing revenue account money, which represents a considerable risk.

The committee noted the report.

Annual Fraud Report

The committee reviewed the annual fraud report, which details counter-fraud activities across the council. The report highlighted that reactive investigations led to detective savings of around £192,000.

Councillor Paul Convery expressed satisfaction with the housing-related fraud numbers, noting the increasing detection and recovery of properties. However, he suggested that there may be a wider scope for investigations, given the anecdotal evidence of potential fraud.

Councillor Janet Burgess MBE, Carers Champion, asked for clarification on savings and overpayments, and was told that the metric refers to savings identified by corporate investigations, with mechanisms in place for recovering the money.

Councillor Nurullah Turan asked about the high number of investigations in community wealth building and resources, and was told that this was due to the inclusion of council tax and benefit fraud in those areas. He also raised concerns about the low number of prosecutions.

Councillor Flora Williamson, Executive Member for Finance and Performance, commended the housing fraud team for the impact of their work on residents.

The committee noted the report.

Treasury Management Outturn Report

The committee reviewed the treasury management outturn report for 2024-25, which was largely positive. The council met all of its prudential indicators and achieved a positive carry from its interest.

Matt, a council officer, highlighted the main risk as the need for more borrowing, given the completed capital schemes using internal resources. He noted that interest rates remain uncertain and that borrowing costs could increase.

Councillor Paul Convery noted that the council's borrowing is for good purposes, such as building homes and investing in infrastructure. He also commented on the turbulent economic background and the challenges of forecasting interest rates.

Paul, a council officer, explained the link between capital spending and the revenue position, noting that every million pounds of capital spend essentially costs the council £100,000 of revenue money in the long term.

The committee noted the report.

External Value for Money Risk Assessment

The committee considered the external auditor KPMG's value for money risk assessment report. Rashpal Khangura, a Director at KPMG, presented the report, stating that no significant risks or weaknesses had been identified in the council's arrangements.

Councillor Paul Convery noted that the report focused more on internal officer processes than elected member involvement in budget setting. He suggested mentioning the pre-budget scrutiny by the CREs Scrutiny Committee and the risk review by the Audit and Risk Committee.

Councillor Caroline Russell picked up on the peer review's observation about ambiguous delineations between the roles of members and officers, and the need for all members and officers to have a clear understanding of governance standards.

The committee approved the draft report.

Verbal Financial Update

Paul Karp, the Acting Corporate Director for Resources, provided a verbal financial update. He reported that the consultation around fair funding² was the biggest thing that had happened in local government finance since the last audit committee meeting. He noted that a paper on the executive agenda discussed the council's prevailing MTFS gap and the potential impact of the consultation. The update on the core gap is £75 million over five years, with an estimated £45 million cost from fair funding.

The in-year position is looking slightly better due to a slight fall in the number of people in temporary accommodation, although this is offset by an increase in the average cost. The local government pay award was also slightly lower than estimated. Overall, the council's bottom line is slightly below balanced, with a slight underspend.

Bi-annual Whistleblowing Monitoring Report

The committee discussed the bi-annual whistleblowing monitoring report, but the details of the discussion were not made public.