The Audit & Governance Committee of Croydon Council met on Thursday 14 March 2024 to discuss the 2019/20 financial statements, IT controls, and the council's anti-fraud strategy. Key decisions included the delegation of authority to sign the 2019/20 Council accounts and the approval of Croydon's refreshed Anti-Fraud & Corruption Strategy.

Financial Statements 2019/20 - External Audit Findings Report

The committee received an update on the 2019/20 financial statements, which had undergone further amendments since the draft reporting in July 2023. Jane West, Section 151 Officer, highlighted that the completion of these accounts provided clarity on Croydon's financial position and would serve as a foundation for completing subsequent years' statements. The council still had no general reserves, and a request for a further capitalisation direction of £9.4 million from the Department for Levelling Up, Housing and Communities (DLUHC) had been agreed to finalise corrections related to a contractor dispute.

Grant Thornton, the external auditor, issued a 'Disclaimer' opinion on the accounts due to an ongoing police investigation stemming from previous Reports in the Public Interest (RIPI 2) and Kroll reports. Sarah Ironmonger from Grant Thornton explained that a 'Disclaimer' opinion was a rare occurrence and undesirable for the council. The report also highlighted 'Emphasis of Matter' sections concerning valuations with material uncertainties due to the COVID-19 pandemic lockdown, and an 'Adverse' audit opinion regarding value for money.

The committee discussed the potential impact of the 'Disclaimer' opinion on future accounts, with Grant Thornton anticipating a similar opinion for the 2020/21 accounts, but expecting a 'clean opinion' from 2022/23 onwards. The completion of the 2019/20 accounts was deemed crucial for enabling the council to address subsequent years' financial statements and provide assurance to residents and members.

The committee also queried the journals mentioned on page 20 of the report, which indicated officers had posted journals without clear rationale. It was explained that these related to the complex accounting of Croydon Affordable Homes, and the journal policy had been reissued to ensure correct record-keeping.

Regarding the government's proposals for a backstop date for auditing local authority accounts by 30 September 2024, Grant Thornton advised that while the 2020/21 accounts were expected to be completed before this deadline, the 2021/22 and 2022/23 accounts would likely require extensions until 2025/26. Croydon, in collaboration with the Improvement and Assurance Panel (IAP) and Grant Thornton, had written to the government outlining its challenging position and requesting dispensation. The committee expressed support for this request.

The committee resolved to delegate authority to the Section 151 Officer, in consultation with the Chair, to sign the 2019-20 Council and Pension Fund accounts and letters of representation to Grant Thornton LLP. They also noted the 2019-20 Audit Findings Report and the External Audit Plan for 2020-21.

Core Business Systems Assurance Review Update

Jon Martin, Interim Head of Specialist Systems, presented an update on the assurance review of the council's core IT business applications. The committee had previously requested assurance on the effective utilisation of these systems. The report highlighted that 50% of core applications were managed by individual services rather than the central IT function, necessitating robust governance processes. The Digital Internal Control Board (DICB) was actively championing improved IT system governance across directorates.

Concerns were raised about the council's reliance on service-led system management and the need for clearer demarcation of responsibilities, particularly with the increasing use of cloud-based technology. A work plan for 2024/25 was proposed to address these areas, including the development of a 'Systems Dashboard' and a 'Systems Support Framework'. The committee requested six-monthly reporting updates on this review.

The committee resolved to note the scope, measurement approach, and work undertaken to date, consider the proposed work plan for 24/25, and agreed that updates would be presented annually.

Internal Audit Annual Plan, Strategy and Charter

Dave Phillips, Head of Internal Audit, presented the Internal Audit Charter, Strategy, and the plan of audit work for 2024/25. The committee noted that the plan was risk-based and discussed the need for clearer justification for prioritised areas and their link to key assurance requirements. Officers agreed to provide narrative on the scope of each audit and circulate previous years' audit plans. The committee approved the Internal Audit Charter, Strategy, and the 2024/25 plan, subject to these actions.

People and Cultural Transformation Update

Dean Shoesmith, Chief People Officer, provided an update on the People and Cultural Transformation Strategy 2022-2026. The report highlighted achievements such as management training, improvements in reasonable adjustments, the launch of positive action talent development programmes, a reduction in sickness days, and simplified recruitment processes. Benchmarking data had been provided, and officers confirmed that SMART reporting was being developed to measure progress against targets. The committee commended the quality of the strategy and noted its link to the wider transformation work.

Gas Safety Contract Risk Deep Dive Update

Sue Hanlon, Interim Director of Housing, Assets & Repairs, presented an update on gas safety compliance. The committee noted the encouraging progress and innovative improvements, while also querying learnings from contract management. Officers explained that initial challenges with contractor resource had been addressed, and compliance was improving. The committee also asked about legal penalties for non-compliance, with officers confirming close monitoring by the regulator and a push for 100% compliance.

Anti-Fraud & Corruption Strategy

Malcolm Davies, Head of Insurance, Anti Fraud and Risk, introduced the refreshed Anti-Fraud & Corruption Strategy. The strategy had been updated to reflect the establishment of the Counter Fraud Shared Service with Lambeth Council and placed a greater emphasis on fraud prevention. The committee queried the impact of prevention activities and suggested benchmarking data for this area. Officers confirmed that high-risk services were identified collaboratively and that data analytics, including the London Fraud Hub, supported prevention activities. The committee resolved to approve Croydon's refreshed Anti-Fraud & Corruption Strategy.

The meeting concluded with the committee noting the contents of the risk presentation on Sustainable Parking Income and resolving to note the update on the People and Cultural Transformation Strategy. The item on the Auditors Annual Report 2022/23 was deferred to the April meeting.