The Audit Committee of Hackney Council met on Wednesday 17 April 2024 to review the Council's financial health, audit progress, and risk management. Key discussions included the external audit status and plan, a finance update covering the General Fund, Housing Revenue Account, and capital programme, and deep dives into public interest reports and school budgets. The committee also reviewed risk registers for various directorates, performance updates, the internal audit annual plan, and the audit and anti-fraud progress report.

External Audit Status and Plan

The Audit Committee received an update on the external audit for the years ending 31 March 2022 and 31 March 2023. Suresh Patel from Mazars, the Council's external auditor, confirmed that the 2021/22 audits had been signed off with an unqualified opinion. The audit for 2022/23 was nearing completion and was also expected to receive an unqualified opinion, with no significant weaknesses identified. Mazars noted that while Hackney was not directly impacted by delays in other boroughs' audits, there was an indirect effect. The indicative external audit plan for 2023/24 was also presented, outlining the audit approach, timeline, and identified risks, including management override of controls, valuation of property, plant and equipment, investment properties, and net defined benefit liability valuation. The committee noted the increase in audit fees, which reflected current market rates and was factored into the Council's Medium Term Financial Plan (MTFP).

Finance Update

The committee received a comprehensive finance update, highlighting an anticipated £7.3 million overspend on the General Fund for 2023/24, primarily driven by pressures in Adult Social Care, Corporate Parenting, Housing Benefits and Revenues, and Homelessness Prevention. The Housing Revenue Account (HRA) was forecast to break even after drawing down £1.2 million from reserves. The report also detailed the Council's Medium Term Financial Plan (MTFP) gap, estimated at £22 million in 2025/26 and £52 million in 2027/28, assuming a 2% growth in government funding and a 2.99% Council Tax increase. The capital programme forecast for Quarter 3 was £175 million, £37 million below the revised budget, largely due to economic factors and inflation in the construction industry.

The committee also discussed the deep dives into Public Interest Reports (PIRs) and School Budgets and Financial Sustainability. Recurring themes from PIRs included cultural and governance issues, failure to manage risks associated with council-owned companies, financial capacity and capability weaknesses, and Audit Committee effectiveness. For school budgets, the number of schools in deficit had increased from 9 in 2020/21 to 15 in 2023/24, driven by falling pupil numbers, lack of inflationary increases, energy costs, unfunded pay increases, and the cost of living crisis.

Risk Registers and Performance

The committee reviewed the risk registers for the Adults, Health and Integration Directorate and the Children and Education Directorate. For Adults, Health and Integration, sustainable funding was identified as the single biggest risk, with demand for services exceeding available resources. For Children and Education, risks included overdue inspections, delays in Subject Access Requests following a cyber attack, increasing costs of children in residential care, and the financial unsustainability of children's centres without changes to provision.

The Performance Update highlighted work to review the performance management framework and its alignment with the Council's new strategic plan. Key risks identified included the ongoing impact of the cost of living crisis, housing property repairs, and the education case management system. The climate action plan score remained red due to long-term pressures.

Internal Audit and Anti-Fraud

The Internal Audit Annual Plan for 2024/25 was presented, outlining proposed audits based on risk assessment and management requests. The plan included reviews of insourcing, SEND, temporary accommodation, and housing disrepair. The Audit and Anti-Fraud Progress Report to March 2024 indicated a 70% completion rate for the 2022/23 audit plan, with recommendations being implemented in 90% of cases. The estimated benefit from fraud investigations in the last quarter was £0.83 million, primarily from tenancy fraud. The committee also discussed proposals to appoint two independent members to the Audit Committee to enhance its skills and independence, a move supported by CIPFA guidance and anticipated future legislation.

Whistleblowing and Annual Report

The Whistleblowing Annual Report for 2023/2024 was presented, noting that whistleblowing referrals represented a small proportion of overall referrals. An updated Whistleblowing Policy was approved. The committee also reviewed and noted the Annual Report of the Audit Committee for 2023/24, which detailed the committee's work in overseeing governance, risk management, and financial reporting throughout the year. The Chair highlighted the committee's involvement in budget management, overseeing the Council's response to the cyberattack, and reviewing financial statements and external audit reports.

Audit Committee Work Programme

The committee reviewed its work programme for the upcoming municipal year, with scheduled discussions on finance updates, performance reports, risk registers, treasury management, internal and external audit, and deep dives into specific areas of concern.

The meeting concluded with the noting of the Audit Committee Work Programme.