Transcript

in the Council Chamber, so we're usually in a smaller room, but thank you for your patience. Before I move to introductions, I just want to make a couple of points. Firstly, I want to thank Councillor Harun Miah for his leadership on this committee over the last two and a half years. It's a shame he's not here tonight, but I think he has led with friendliness and openness and has always made space for debate. And we appreciate that and we thank him for his service. The second thing I want to say is that since the last meeting, the Best Value Inspection Report has been published. I think I recognise, as many of you do as well, that there are a number of governance matters that have been raised within that report, not least about the function of this audit committee. I think it's imperative that all of us look to improve the functioning and operation of this committee. Now more than ever. I think I also recognise that at times, issues raised in audit committee have been politicised. And I'd like to remind the committee that this is not a forum for politicisation. There are other forums for that, and you will know more than anyone else that I will take advantage of those forums, but not in this committee. Whilst we serve on this committee, we must remain objective. So with hopefully the approval of the outstanding financial statements tonight, and with the bringing of a new chair, I hope we can draw a line under the past and work together to bring about objective and robust governance and accountability. So with that, I will now ask the committee present to introduce themselves. Please, can you also state any declarations of interest that you may have in the agenda items and the nature of that interest? And I'll start with my right, please. Hello, good evening. I'm Fahana Zia, the Democratic Services Officer, Supporting Audit Committee. Councillor Kabir Ahmed, no DPAs. Julie Lorraine, Corporate Director of Resources and Section 151 Officer. David Dobbs, Head of Internal Audit and Risk. Victoria Lewis, Risk Officer. Paul Oude, Interim Head of Pensions and Treasury. Andy Grant, Interim Programme Director for Procurement. Stephen Reid from EY, the External Auditor from 2324 Financial Year. Angus Fish, Audit Manager from Deloitte for the years prior to that. Jonathan Gooding, External Audit Partner from Deloitte. Asan Khan, Corporate Head of Financial and Technical. Councillor Mark Francis from Boat Eastwood. Jill Bailey from Legal. Thank you. And then if I can move online, please. So, Charlotte, would you like to give us? Sure. Charlotte Webster, I'm the independent person and nothing to declare. Thank you. And Councillor Rahman? Councillor Rahman, Bethlehem Green Ward, nothing to declare. Sorry I'm not able to make it to the committee in person today due to some technical issue. Well, we're glad you're able to join us online and then I'm very sorry, but I can't see who the third member is joining us online. Hassan Rahman from EY, responsible for the pension fund audit. Brilliant. Brilliant. Thank you and welcome. Thank you and welcome. Farhana, are there any apologies for absence, please? Yes, Chair, we have received apologies for absence from Councillor Ohid Ahmed, Councillor Haroon Mia and Councillor Asma Begum. And we have Councillor Amina Ali who is substituting for Councillor Begum. Thank you, Farhana. Thank you, Councillor Amina Ali, for joining us this evening as well. So, we have already done the declarations of interest with the introductions, so I will move swiftly on to the next item, which is point two, unrestricted minutes of the previous meeting. Can I invite members to approve the unrestricted minutes of the meeting held on 10th of October? Apologies, Jill. Can I point out that I was actually present at the last meeting, but I don't seem to be on the minutes. Thank you. Can we make a note of that? Farhana. And then subject to that amendment, are members happy to approve the unrestricted minutes of the meeting held on the 10th of October, 2024, as an accurate record of proceedings? I have a comment, if you don't mind. Please, Charlotte. Yeah, sorry. I can't see your hand. No, that's fine. That's fine. I'll just shout out. Yeah, I was down as apologies for the last meeting, which I didn't send any apologies. I was actually received a cancellation, that the meeting had been cancelled. We haven't managed to get to the bottom of how that happened, but I just wanted that to be noted. Okay, thank you, Charlotte. We will note that as well. Are there any matters arising for Hanna? Chair, other than the two that have been pointed out, one that Jill Bailey was in attendance on the 10th of October, and secondly, that Charlotte didn't send apologies. She's got a cancellation of the meeting. I don't think there is any further matters arising. Thanks. Yes, please, Councillor France. Thank you, Chair. Thank you for the comprehensive minutes for Hanna. So, one of the things that I think is done on overview and scrutiny committee is that there's an action log that draws together all of the actions kind of on a single page, and then over time, we get an update on those. I think it's useful to kind of for us to be able to see those. So, I don't know if we could request that that happens going forward, and maybe the last meeting where it's kind of obvious what those ones still are. I know most of it is on the agenda with an item the next time around, but it's still helpful to see them. Thank you. Thank you, Councillor Francis. Yes, I agree. That would be really helpful if you could make that change. That would be useful. Thank you. So, I will now move on to item three, which is auditors' items for consideration. There are three reports from Deloitte and two from EY. So, we shall begin with the reports from Deloitte. So, these – I'm going to take those together, if I may. So, the 3.1 report to the audit committee on the 2020-21, 2021-22, 2022-23 audits issued on the 25th of November 2024. And also, 3.2 auditors' annual report for the years 2020-21, 2021-22, and 2022-23. We will take these reports as read, but I would appreciate, Jonathan and Angus, if you could draw the committee's attention to the key points that you would like us to be aware of. But also, I think it would be useful to outline the differences in the report and the purposes of them as well. Thank you. So, can I invite Jonathan Gooding and Angus Fish to present those reports? Thank you very much. Good evening, everybody. Yes. So, we have three reports. The first of those is a detailed report on our audit for those three years that you referred to. The second, the annual auditor's report, effectively is a summary of the first report, but with some more detail on – and commentary on the value for money arrangements of the authority. I don't propose to go through that one in detail, because it's largely a repeat of the first report. The third report is on the pension fund. So, if I take the first of those reports, that's the main report on the council. So, we've presented previously a summary of the situation regarding the national backstop for audits for past years of account. As a reminder, there is now a deadline of the 13th of December, by which councils need to assign their accounts. Where audits are not completed, which is the case here for these three open years of account, we're required to issue a disclaimer of opinion. This is consistent with many other authorities across the country. To enable us to do that, there were certain procedures that we have been required to perform, which are set out within the report and were set out within our planning report. We also summarise other details, such as materiality level, which was set at $24 million for each of the three open years of account. From our procedures and knowledge from past years, we've identified misstatements in the accounts. Those that are material are referred to in our audit opinion, or rather our audit report. And other immaterial audit adjustments and corrected misstatements are set out in the appendix to the report. The main material issues that we will refer to in our audit report relate to the lack of group accounts, the disclosure of revenue recognised from service recipients, officer remuneration disclosures in relation to higher paid employees, and the membership data used in determining the pension liability. In addition to those matters, we report a number of other significant control recommendations. With regards to value for money, our value for money responsibilities, we've identified significant weaknesses in the authority's arrangements in respect of, firstly, the council's processes and systems to ensure reliable and timely financial reporting. We've made recommendations to the authority with respect to implementation and monitoring of the implementation of past recommendations. Secondly, with respect to the council's arrangements for identifying and managing risks, including maintaining a sound system of internal control. We've made recommendations with respect to the implementation and tracking of internal and external recommendations, including the assurance received by and reported from this committee. And thirdly, in respect of the council's arrangements to ensure compliance with the authority's best value duty, given the concerns raised by the best value inspection report. And we've recommended that an action plan is prepared, implemented and monitored in respect of those matters. With respect to our report on the pension audit for the three open years of account, which is included in your supplementary pack, again, we expect to issue a disclaimer of opinion on those years for the pension fund. Similar to the pension report, our pension report sets out the limited procedures we have performed and the findings from those procedures, including the misstatements and disclosure deficiencies that we have identified, which are included in the appendix, and the control weaknesses we have identified. For those audits, we set a materiality level of 19.5 million for 2021, 20.2 million for 2022, and 19.3 million for 2023. Similar to the council accounts, we will issue a disclaimer of opinion, which will also make reference to the issue with respect to the membership data referred to. Those are the key points I wanted to draw to your attention. I'll take the report as read. Happy to take any questions. Thank you very much. Can I ask that? Blah, blah, blah. Does the committee have any questions or comments it wishes to ask? Councillor Francis. Thank you. So, I'm only relatively recently back on audit committee after several years away, and I haven't been able to keep fully up to date with all of the changes that are happening at a national level that have resulted in this. I just wondered, I've read through the report and the explanation about the government's position and why the government is allowing this approach to take place. I just wondered, though, if you could try to explain to me what the decision that you've made, that it's to give a disclaimed opinion, is there an equivalence to that that we might draw upon? Because this seems to be a relatively new approach. So, just to understand that and for our residents to understand what that means in practice. So, giving a disclaimed opinion basically means that we've been unable to complete an audit and give an opinion on the accounts. In this situation, we have performed a small number of limited procedures on the accounts. For example, casting them and checking that they agreed to some underlying records and asking some questions about them. And also, we've got accumulated knowledge from previous years where there were issues in previous accounts that we feel or that we can see would apply to these open years of account as well. So, we're required to report any of those issues. But we've not completed an audit on those open years. On the first of the years, we did some procedures, but essentially we've not completed an audit on those open years of account. And that's why we have to issue a disclaimer. And that is consistent with a large number of other authorities. So, I have a couple of other questions about the specifics as well. But just to better understand the national context. So, you said there's a large number of authorities. Can you just remind me how many local authorities are affected by this? Roughly, how many statements of accounts and auditors' opinions that that relates to in total as well? I don't have the exact numbers, but I would say hundreds. I'm happy to hand over. Does anyone else have any questions, or can I allow Councillor Francis to continue? Okay. So, really, I do understand that. And having sat on the committee up until 2019, I think, some of the discussions that were being had about the difficulties that there were in reaching those opinions, and the government has obviously decided it wants to draw a line and it wants to move on so that people can be assured, the focus can be on giving people assurance in the future, which is, I agree with, and is understandable. And I just, so one of the things that you've referenced quite a lot in this report is the best value inspection and how that's had a bearing on your own decision. So, this, the best value inspection was only published a few weeks ago, and this set of accounts relates up until, well, a couple of years ago. So, I just wondered if you can explain how the relevance of the inspection or why the inspection has, the best value inspection, has featured so prominently in your own commentary here? Okay, so, we're required to consider reports by external bodies, as you'd expect, and we're required to consider matters that come to our attention up to the point that we sign the accounts and assess whether or not those matters would be relevant to any of the open years of account. And in the case of the best value inspection, we feel that some of those findings were applicable to the year, to the 2023 year, where we are providing a report on that year. So, it's applicable to that year. Thank you. So, I guess we're in a unique situation where we're auditing prior years with today's information and at today's standards, in a way. So, that, I think, gives us a different level of insurance that we may have had three years ago if we were auditing them at that time. I have a couple of questions, if I may. One was around sort of group accounts. So, as I understand it, this was an issue that goes back a number of years. So, why are we still, why haven't we seen group accounts for the prior years come out? That might be a question for you, Julie. So, in terms of prior year accounts, it was an issue with timing in terms of the preparation for group accounts. So, we went through the process. So, my understanding was initially it was deemed to be immaterial to prepare group accounts. So, we went through a process with Deloitte. And effectively, the determination was it was material. So, in terms of when we published our initial 2021 draft accounts, we did publish it with group accounts. But in light of the backstop dates, we had to publish 2021, or republish 2021, publish 21-22 and 22-23 as well. So, effectively, and this was presented to the committee a couple of committees ago, the plan was to present those accounts without group accounts. We have addressed that issue moving forwards now. So, in 23-24 accounts, we have picked up group accounts. And that is part of the process. So, it has been fixed, in essence. And the plan is to continue to prepare group accounts onwards. Thank you for that explanation. I think the other point for me that comes out really clearly in Deloitte's reports is around the tracking of external audit recommendations. And I feel that that's something that we as a committee really need to get a better handle on. So, I'm not sure how or who we can task with that. But I think it would be useful for the committee to at least see a cut of a tracker of some sort and understand where there may be delays with implementing recommendations or where decisions are taken not to implement recommendations and what that leaves committee with in terms of assurance as well. Could we note that as an action, please, for Hannah? Any other questions for Deloitte? I'm just looking at them. Amina, please. Councillor Arlie. Oh, sorry. Could I ask a question that maybe the layperson would ask? So, maybe if I was a resident at home listening to this. Why did it take Deloitte so long to complete? So, there's a long history to this. So, our first year of auditing was 1819. That was the first year we were appointed to do the audit. And in performing the 1819 and 1920 audits, we found a number of issues in the accounts, a number of errors and control weaknesses. And that caused a delay, caused the audit to take longer as those things were rectified. At the same time, there was COVID, which was clearly a disruption for the authority. And the pandemic impacted all authorities and had a further impact on timetable. There were also changes in people at the authority. An awful lot of work has been done by the authority and also by my team to get to that position of signing those accounts, but it took a long time. And that then had a knock-on effect for future years as well. Councillor Francis. Thank you. I'm so sorry. I hadn't realised that we were also dealing with 3.2 as well. So, I just have a query on that. So, this is a really interesting report as well from you on this. And I can see, I think this is about 20 recommendations that have been made in the course of the report for 3.2, so from page 107 onwards. I just wondered if you, so they all seem very sensible. They all seem like they're going to require resources and capacity from the council, from the team that would normally take this forward. So, I just wondered if you could say yourselves what response have you had so far from the council corporately to the recommendations that have been made here. Thank you. Sorry, which page was it, Councillor? 107. 107. I might have a different page numbers. I think we're on the annual auditor's report, aren't we? Yes. Okay. So, that's the summary of our recommendations from the annual auditor's report. So, we have, so in this form, we've shared these recommendations more recently as part of this report. Clearly, these are things for this committee and officers to consider at this stage, having received this report. So, throughout recent time, certainly, our recommendations around the accounts process and control findings, we've felt that they've been taken seriously and resources have been put in place and a lot of work has been put in place to try and implement and respond to those. But at this stage, we're not in a position to give an opinion on whether or not these have been implemented for a lot of work. So, just for clarity's sake, so you haven't had feedback from town and council officers at this stage whether these are being taken forward. We can, we'll find a check with our own officers as well, but there hasn't been any interaction. These are just the conclusions of your report and your table in the... This is the conclusion of our work, that's correct, and recommendations, particularly from our work around Valley for Money, and a number of these points are regarding taking the recommendations from our work and internal audit and other agencies, implementing those and monitoring and tracking the implementation of those. Thank you. We're also taking report 3.3 as well, so Jonathan did include that in his presentation. So, if anyone has any questions on 3.3. May I ask a question specifically around members' data? So, this was something that was raised previously, and I would appreciate your comments around whether it's a material risk, what's the liability, what direction it goes in, you know, what's the issue for audit committee that we need to be aware of? So, we've reported in previous meetings on the member data issue. We did some testing in that area and involved a specialist in doing further detailed testing. We did enough work to determine that there were errors in the data, but the volume of data data and complexity of the errors meant that it wasn't possible, and it would take a lot longer to determine the full extent of the errors. So, we aren't able to quantify it, and also there was no one clear direction of the errors, so we're not able to give a view on whether it's an increase or decrease in liability, for example. So, I mean, we're in a situation where we're being asked to approve financial statements that have disclaimers on them, so we as a committee haven't had the assurance that we would normally have, and we understand that that is a government direction, and that is what we need to do, and that's the situation we're in. In relation to the pensions and the issues that you've identified, what is the best way for us, as a committee, to get assurance over that going forward? Well, I think that the action plans and the work from officers, you would be seeking assurance that they've implemented our recommendations, they've taken those actions and seeking those assurances from officers. Thank you. Did you want to come in, Julie? Yeah, I just wanted to say it is an important issue, and members should be assured you will be receiving the outcome of an independent review that we've undertaken into all of the issues flagged around the pension, and you'll also be looking at EY's view of pension, but it is something that we have taken forward and considerable resources put into it, you just haven't seen that as a source of assurance yet, but please be assured we're not sitting there doing nothing. It is taking place. Thank you. And do you have an idea around the timescales for that? Paul, do you know when Hyman's will conclude? Hyman's and the original T, what are they called? The company that's done the assurance that began in 1819, ITM, when will that final report come to Audit Committee? Thank you, Jay. We are currently targeting somewhere around May time because of the comprehensive work they're having to do on the data. Okay, so I think the actual position is we're picking this directly with EY. That third-party review is currently under place. It will conclude, it has to conclude in time for the upcoming triennial revaluation so that we don't end up in the same position as we currently are. And that is on track and underway. And I know that I'm happy with progress. So we think that the timescale, we should expect to see the outcome as officers is March 25. Asana, I don't know whether you want to... Yeah, so that third-party work that Julie refers to, we have shared that with the EY team in terms of taking this forward to ensure that the data is correct for upcoming triennial valuation for the 24-25 accounts process. So in terms of taking this forward, it will be with EY colleagues and we've already engaged in that process and shared that information from the third party. Thank you. We look forward to receiving the report. Could we just make a note of that as a little bit of that, please, just so we don't lose track? Thank you. Any other questions? Yeah, Councillor Francis? One of the questions, so it's not on the pensions one. Because I think you're drawing to a close on the Deloitte's reports, is that right? Is this the last time that Deloitte's will be at the committee? All going to plan, yes. Okay, well, maybe I'll hold my breath then. Well, look, I just, if it is, I don't know whether you were going to say anything yourself, but obviously, like, they came in, Deloitte's team came in at a very difficult time with accounts that were, that hadn't been signed off over a prolonged period. And I just wanted to say, I think, you know, having come back to this at a very late stage in the process, that I really appreciate the effort that's gone into this. I think there's, is it three lots of accounts that have been signed off and two that have reached this, sorry, three that are at this stage where they will be done in a slightly different way. So, you know, I really do appreciate the effort that's gone in to try and to resolve the situation and also to inform us about the progress and the challenges that we're continuing as well. Thanks. Thank you, Councillor Francis. And absolutely, I just want to echo that as well. So, thank you very much, Jonathan and Angus, for all of your hard work and persistence over the last six years with Tower Hamlets. I think we've all valued your time and your commitment. And particularly, I understood that Angus had actually retired a few years ago. So, thank you for coming out of retirement to support with the closure of these audits. So, I wish you both well. Thank you. You're very welcome to stay for the remainder of the meeting, but I totally understand if you need to leave. Thank you. So, just to end that part, can I ask that the comments of the committee are noted, please? I will then move on to 3.4, which is the EY Audit Status Report for the year ended 31st of March 2024. And then also the EY Tower Hamlets Pension Fund Provisional Audit Planning Report year ended 31st of March 2024. Before I introduce Steve Reid, Julie, did you want to come in at this point? Yes. So, just in an earlier discussion that I'd had with the new chair, I just wanted to make clear that it feels like, and it's great, you know, one line in the sand and then we move on and it's all different, but actually there are some connections between the two periods and some disconnections. So, the first one is, as EY will explain, the materiality threshold for EY is much lower than it was for Deloitte's. And that then explains why some of the issues EY will flag in their current work, one in particular, have resulted in an adjustment to prior years that affected Deloitte's, but don't feature as a material adjustment for Deloitte's. And that relates particularly around one aspect, which I just wanted to take the time to explain. And it was around, councillors will recall, as members, all of you supported a change at budget time to the way we treat the minimum revenue provision, MRP, in our housing revenue account. And that decision has been reviewed by EY. And consideration was then available to us to make that adjustment for prior years, which we did, which affected the Deloitte's account. And I just want to make clear what that was. So, when we set the budget, we explained that councils, this council had applied an accounting judgment that said, when we borrow money in our HRA, we pay off the interest, that's called servicing the debt. And the council also chose to set aside a notional proportion of the capital repayment, even though that capital repayment wasn't due in that year. There was no requirement for the council to do that. So, by changing it, the HRA becomes better. And also, because we've changed it for prior years, you will see, actually in the Q2 report, we refer to it in the current year, a gain of 8.9 million into the HRA. So, I just wanted to be quite clear, it was an accounting rule. And although there's differences between EY and Deloitte, it's not because either of them is wrong, it's because the materiality threshold for each of them is different. And I'm happy to answer any questions that you've got. Thank you, Julie. So, I will, can I invite Steve Reed to present the report and then we'll take questions after that presentation. Thank you. Thank you, Chair, and good evening. So, the report before members provides a summary status update of the 23-24 audit. Members will recall that to a previous meeting of this committee, we presented a plan setting out the approach to the audit. Following this meeting, so at the next meeting of the audit committee, which is the end of January, the intention would be to bring back a full audit results report, which sets out the final findings from our audit and thereby allowing members to consider approval of the financial statements in advance of the backstop date for the 23-24 financial year, which is the 28th of February

1. So, as with any change in auditor, it creates a different approach to the historic issues and also requires officers to work in a different way with new auditors. And the first point I want to make, as we've said out here, Chair, is the positive engagement we've had from Julie and the rest of the finance team in respect of getting us up to speed with the operations of the authority and as we've started to undertake the audit. As Julie referred to, clearly, our risk assessment drove us to a lower materiality than your predecessor auditors and that in itself has represented a number of challenges for management. And we set those out in here in terms of their ability to respond to the volume of sample requests to allow us to complete our testing and the timeliness of those responses. As a result of that, we've discussed with management a prioritised approach to focusing our audit work on mutually beneficial areas of the financial statements, which will support the build-back of assurance in subsequent years. And I'll come back and say a little about that later. In the report, we set out the specific status against each of the different risks that we identified, audit risks in the plan. And I don't intend to go into those in detail. I'll take them very much as read and very happy to take any questions on those areas. One of the areas I was going to pick up was MRP, but I think Julie's done a great job on summarising that position there. In respect to value for money, our work in that area has commenced. We've identified a number of significant risks to significant weaknesses, as we set out within our provisional audit plan, and as we set out in here. Our work is still ongoing, so I'm not able to conclude at this stage, but we will conclude by the end, by the next audit committee meeting. However, based on the work to date, there are indications that we will be reporting significant weaknesses and some value for money arrangements in some areas, building on both the work of Deloitte, but also the work and the report, the best value report. In respect to the appendices chair, draw your attention to Appendix A, which is page 59 of the pack, or page 27. This summarises the level of assurance that we currently have, and this will continue to evolve over key areas of the accounts, and very much that prioritisation approach agreed with officers in terms of those areas of the financial statements where we should seek to try and provide substantial assurance, those areas where that assurance is only going to be partial because of some of the challenges in responding to the audit requests, and then those areas where there will be no assurance again because of some of the challenges that I've outlined. I've also provided a timetable on page 30 of the report, or page 62, which just seeks to set out for members the, I guess, the trajectory, with a fair wind behind the authority, so this is not guaranteed of when the authority might be starting to look to get back to an unmodified opinion position. Our intention is for 23-24 that we will also issue a disclaimer of opinion, and there are two reasons contributing to that. One, clearly the opening balances, which were the closing balances of 22-23, have no assurance over them because they have been disclaimed by your predecessor auditor, so that is one reason for us disclaiming, and the other reason is obviously that because there are some areas of the financial statements, because of the difficulties I've outlined that we have not been able to obtain assurance over. So those are the two reasons for the disclaimer of opinion that we will eventually provide on the 23-24 financial statements. So with those comments, let me pause there. I'm very happy to take any questions or observations. Thank you for your presentation. Does the committee have any questions or comments it wishes to ask? Councillor Francis. Thanks for that. It's frustrating though, as a layman, to think that even after accounts have begun to be signed off, we're still essentially in a very similar position with new auditors. And I understand the reasons that have just been given why. So I have a couple of questions. The first of them is around some on the specifics of why we weren't able to achieve any assurance at all. So one of those where this happened was on reserves. So I'm looking at the Appendix A that you pointed us to page 61. So I just wondered, yeah, if you could give us some more detail or more of an explanation about why there's no assurance at all there on the reserves position. And then similarly, there are a couple of others that sort of stand out to me. One of them is short-term debtors, and the other one is short-term creditors, where there's also none assurance. Thanks. And I'll come back with another question after. You're very happy to pick that up. So the position on the reserves, it's a complicated accounting consequence of the predecessor's disclaimer. So when you disclaim a set of financial statements, the unwinding of a disclaimer process on a normal set of circumstances would take around three years, all things being equal. Because the opening balances would, you would have no assurance over the opening balances, you would then need to do the work in year to get assurance over the I&E position. You would then have no assurance necessarily over the comparatives. And then you would build that back in year three and be in a position where you would have the necessary assurances. And that would also provide assurance over the reserves. The FRC published several months ago now, a guide for elected members on the consequences of the government's decision to put in place backstop to reset the local government financial reporting and audit environment. And I think, Chair, it might be useful. I'm guessing that has not been distributed to members. So that might be something that members might feel particularly helpful. Because to the councillor's question, that does explain the period it's going to take for all local authorities who have a disclaimer to build back. And current estimates, as Jonathan said, are in the hundreds, I think it's going to be about 450 authorities will be subject to a disclaimer, of which Tower Hamlets clearly is within that number. And therefore, in the guidance that has been issued by the FRC and the discussions between the various system partners, it's recognized that building back assurance on the reserves is going to be particularly difficult in local government, because local government has very complex reserves compared to a company, where the reserves are usually the balancing number at the bottom of the balance sheet. For local government, as you'll be aware, the reserves are subdivided into many different areas. So, the reason that there is no assurance on the reserves is because that will almost be the final area to be able to have the build back undertaken, because that will be relying on all the other work that you need to do over the next three to four years to build back. The FRC, the National Audit Office and other system partners are currently looking at if there might be some other ways to more quickly get to a position to provide assurance on reserves given the disclaimers. Just to probe on this one before I let you come on to short-term debtors and creditors. In this appendix, it doesn't have any commentary about outstanding items, and that's because you didn't think it, it didn't feel that it was appropriate to start trying to unpick this in the first place, because you knew that there was going to be carry over or the reserves situation was going to be dragged down by what had gone on before. So, if I look at the appendix A, on the right-hand side of the pages, it says about outstanding items, and it's not because you haven't had information back from from the team. It's just, it didn't feel that it was an appropriate time to start trying to do that audit. Even if we had been able to complete the audit because officers had been able to provide the supporting evidence, then reserves would still have been, had a red there, because of the time it will take through the unwinding of a disclaimer process under the accounting rules. So, sorry, just to clarify then, on the appendix A, where it's blank, where it says, where it says outstanding items and it's blank, does that mean there hasn't been the work done or does that mean there's no outstanding items? That means that the, the, either there has been no work done or there are no outstanding items, but most likely on these areas, it's areas that we've agreed with management to de-prioritise and focus the, the, the resource and the attention on other areas. So, so there's limited work being completed in those areas. And then in relation, Chair, to the other two questions on short-term debtors, and I think it was short-term creditors, we do provide on the, in, in, in, in the final column on that table, um, um, um, the, the, the reasons for that, um, broadly management might want to comment. Clearly, there was larger samples, uh, but actually there was also, uh, challenges in, uh, the authority being able to provide, uh, listings of outstanding debtors and creditors, as at the 31st of March, 2024, and then, uh, a list that could be used by us to identify a sample, the sample executed, and the supporting evidence for those items that were being tested in that sample. Okay, so I, I think that's obviously something we need to take up with officers and appreciate all of the challenges that there have been in terms of trying to get closer to closing the previous years, um, and, but as I understand it, additional resources were put in so that there was a separation in terms of meeting your requests and meeting Deloitte's requests, but we can come back to that with our own team. So the final thing I just wanted to ask then, uh, ask you is around, um, the timetable of communication and deliverables. So it's saying that we're working towards an unmodified audit opinion for 27, 28, which does seem quite a long way in the future. Is that just, uh, are you just, um, managing our expectations with that time frame or is it, uh, unrealistic to expect that it could be done at all more quickly than, than that in that year? Um, it's an interesting question because, um, um, when the, um, government first identified that this was the way forward in the solution, um, to, to allow the, um, audit and financial reporting framework to be, um, reset, there was various debates about when, um, the, uh, local government market would get an unmodified, uh, uh, audit opinion position. Um, one of the factors in that timeline was at the, uh, outset of the development of the proposals, uh, was to simplify the financial reporting framework in local government. I think we all agree financial statements are incredibly complex in, in local government because they're trying to do, in my personal view, too many things for too many people. Um, now there has been no reduction or simplification of the financial reporting framework, um, and therefore if you consider there is no more auditors, there are no more finance professionals, but they need to prepare financial statements and do additional work collectively each year over those areas which are outstanding from previous years. I think the timeline will at least be 27, 28, unless the, unless, government, um, implements, uh, some form, uh, of measures to address, uh, the, uh, the building back of, of the assurance. Thank you. Um, I did want to ask about the valuation of land and property and may I ask Asan, could you just give us an update on the work that you've been doing in that area, please? Sure, Councillor. So, um, it's an issue that we haven't been able to resolve in terms of accuracy of valuations, uh, to the content of EY. So, EY have a, uh, real estate team. Uh, we contract with Wilkshead and Eve. Um, so we have two sets of professional valuers here who fundamentally disagree on certain things when it comes to judgments and assumptions. Um, so that's clearly played a part in terms of the 23, 24 accounts. Um, EY have looked at this post us publishing our accounts. Um, that's something that we're already picking up with EY colleagues and the EY audit teams in terms of 24, 25. So what we need to get to is ensure that we get that engagement. We are already getting that engagement from EY colleagues to address these fundamental assumptions and judgments between the two sets of valuers, whoever our valuers may be. So that's something that we're looking at as well. So we need to address this early, this side of publishing accounts to ensure that we don't have these issues. So we're already engaging with the EY audit team, with the real estate team to try and resolve these fundamental differences between the two sets of valuers for the 24, 25 set of accounts. Thank you. Councillor Kabir Ahmed, would you like to ask a question? Thank you. Um, this question more towards officers now, and I see on the one hand, um, in terms of the HRA, we've, uh, essentially gained, uh, 8.9 million. But on the other hand, uh, in relation to the signing off accounts, uh, kind of due dates are set around 27, 28. Um, does that pose any risks to the council in terms of our financial status or borrowing or any other consequences in relation to that, particularly, um, in relation to reporting back to central government and other sort of financial mechanisms? Um, so if I can pick this up, ironically, uh, I think the answer is far less than ever before. This puts us completely in line with the rest of the pack. So, uh, those risks will be the same risks that some 400 and odd local authorities face. They're all in that position. And Tower Hamlets, uh, through the work done, draws a complete line in the sand and the issues become issues shared by others rather than anything specifically related to Tower Hamlets. Uh, in terms of risks, far less risks than not having a position where anything's been audited, but we have made it clear in our ATS statements, we've made it clear about the risks of those opening and closing balances, which is what's been referred to. In terms of our financial standing, if it affects the rest of the pack, it won't make a difference. A bigger risk to our financial standing is the materiality threshold set by EY. Not because, um, um, it's not for them to set, it's entirely for them to set. It's always lower when you get new auditors. The fact that a BVI inspection hadn't concluded when they set that threshold was something they took into account. Um, but those levels of materiality threshold drive a significant number of, um, testing demands on the team, uh, drive a significant number of demands in audit days from EY. So there are consequences of that. But the 27-28 timeline will be the same for, I would say, almost every authority and Tower Hamlets won't be any different. So we won't be singled out. And just to conclude and pick up, give Councillor Francis some assurance. Uh, in terms of the, um, what the team have done and, uh, progress made, I just want to put in context, the demands of a three million pound materiality threshold on an organisation of this size. Please don't underestimate that. Um, it, it is significant for both the auditors as well as the team. Any team facing that would find it difficult. The team team facing that and closing prior period accounts and going through a significant and very thorough BVI inspection all at the same time and emerging still intact, I think, um, is one that we need to put in context. And in terms of substantive testing and areas, Councillor Francis particularly picked up on about what's been waiting, put into context. If, if we're still waiting on six, or we're still waiting on 25, I'm sure Aslan can recall with great pain of how many hundreds or thousands of requests. They are outstanding. So I just want to, I'm under no illusions that where we are with the rest of the pack, where we are in addressing very specific to our Hamlets things. I am confident in the team's ability to be able to do that. 27, 28 doesn't make us any different than any other council. Um, another issue that was raised previously, uh, was in terms of staff leaving and organizational memory. And I've raised this probably previously as well. What assurances can we as a committee get, that the council's record keeping is accurate? Um, so again, a lot of the chair referred to, actually was at quite a senior level, I think it's fair to say, wasn't necessarily at a transactional level. Pensions aside, I'll come on to that in a minute. Um, but at a senior level, the council has actually put in place additional permanent resource. A son is one of those permanent appointments. He was promoted, as was Chris Leslie, who you all know. You've got a permanent director in Abdul Razak. You're a permanent corporate director in me. None of those things were in place. One thing I would emphasize is the team that have delivered this for you, largely is the same team that's always been there. Nobody's been dismissed. Nobody's been taken away. Uh, we have been able to move to permanent from a lot of agency appointments. That's been an absolute strategy. So what we have now is probably a very, very stable finance team. The most stable that's been in place for, for, um, for some time. And, uh, I think you stuck with them. And in terms of systems, so individuals, yes. Members of staff, yes. But the systems, uh, have we got robust systems in place that can record information, not lose it, or suddenly disappear? So again, I can give you, uh, assurance in terms of, uh, three elements. And some of them you'll see from David, from David's report. So one of the things that we've been doing each time we address issues is look at what happened, what control was not there or should be there to flag that up to us in the event it happens again. So we don't just address things and then ignore the fact that we need to make sure there is a robust control framework in place. We put those controls in place. The most significant thing we've done, and you will hear more of this following David's report, is move to a real time data information system, um, linked to Power BI for all of our finances. Um, pensions slightly different. So pensions is large, complex and, you know, multi, multi, um, year, um, issues. Um, I think it's fair to say on a transactional level, I've had to ramp up the additional results on the pension team in order to try and get stability and avoid temporary temporary agency chain. What we've equipped Paul with is a number of very strong independent external consultants. So we use Hyman's, um, they're one of the best in the industry. Um, when we get to a point on the pensions where we've addressed those issues, next triennial valuation, we know it's accurate. That's the point at which to determine what that permanent team will look like. But today cancer, it is bolstered significantly by some very professional big hitting external consultants, internal finance, I think, um, solid, stable team, uh, robust reviews in place on internal controls. And most importantly, the method by which in real time, we can keep those what you will hear later when we talk about risk, we talk about David's report is how those things will come together in that real time dashboard. And that will be your systems side. Okay. Thank you, Julie. And you know, you're right. We do need to acknowledge the time and effort and work of the finance team as well. So thank you for making us aware of that. Is there anything that you need from us in terms of an audit committee to support management on the finance team? Um, no, I think, I think all told, um, you're all probably nearly as exhausted as the finance team councillors. Um, but, um, no, I think we would like very much to establish a sound working relationship with our audit committee. It's important to us. It's important to the council. It's important to the public and we've certainly got that commitment from me and the whole team. So we would just ask for that. Um, joint working to be a reciprocal, um, based on mutual respect, trust, and confidence. Thank you. I think we can all commit to that. Um, yes, Councillor Francis. So you come into the end of this section. I just wanted to ask, um, uh, EY, whether, um, so the summary of recommendations that Deloitte provided to us about, um, about changes that ought to happen, including quite a lot of recommendations about what this audit committee should be receiving as a matter of course. Um, are those recommendations that you agree with? I don't know if you would have seen them if they're in the other auditor's report, but so there's 14 recommendations that some of which are relate to, um, areas of significant weakness and some of which are not. Um, thank you, Councillor. So clearly I didn't undertake the audit of the years, uh, which Deloitte did, and that's what's generated those recommendations together with their professional, uh, view and, uh, judgment. Um, so it's not my role to decide whether or not I agree with their recommendations. What we will do as part of the 23, 24 audit, um, is consider the recommendations that Deloitte have made and importantly, the action which we have seen demonstrated by the authority to address those either by way of a framework, which the chair talked about earlier, uh, or indeed the, uh, actual implementation of those recommendations. We will of course be making recommendations as part of our 23, 24 audit. Uh, so I think that the the chair made a very good point in terms of a robust mechanism is important to capture and monitor, uh, the, all your recommendations that are coming from, um, any, um, form of external, uh, assurance provider. Thank you. So that was item 3.4. So can I answer the comments of the committee on noted please? And then on 3.5, the Tower Hamlets pension fund, so EY Tower Hamlets pension fund provisional audit planning report year ended 31st March, 2024. Um, Steve Reed, is there anything you want to present on this item? I'll hand over to my colleague Hassan, who is online, uh, chair if I may, as he's responsible for this audit. Thank you. Uh, thank you, Steve. And thank you, uh, chair. I will, uh, briefly, uh, take you through, uh, our provisional audit plan. Um, so starting, starting off on, uh, your page 69 of the plan, which provides an overview of our strategy and the risks that we've identified at, uh, this stage of the, um, of the process, uh, our, as I said, it's a provisional plan. So that means that we haven't yet completed all of our planning procedures, uh, but these are the risks that we've identified, uh, to date. Um, so the first there is the misstatements due to fraud and error. Um, second, uh, the valuation of level three investments, uh, level three investments are hard to value, um, investments where there is no observable market, uh, data, uh, assurances over opening balances. As the committee has, um, has heard the previous, uh, years, uh, financial statements are going to be, uh, disclaimed and which means that we need to undertake additional work over opening balances as, uh, Stephen has also outlined in terms of the context of the main council audit. Uh, we also highlight there as a, as another risk area in respects of the actuarial, uh, valuation, which, uh, which, uh, does is impacted by the membership, uh, data issue, which, uh, members have, uh, uh, have, um, received from, uh, uh, from, from, from Deloitte. So that's an issue which we'll need to consider as part of our, our audit. And, uh, the other, um, risk area there is the valuation of, um, of level two, uh, investments. I'll come back to, uh, in a, in a short while in terms of our response to those risks as they're outlined within section two of the, of the report. Um, your page 70 of the report, um, outlines, uh, provides you with details of the materiality, uh, levels which we'll be applying, uh, in undertaking our work. So the planning materiality of, uh, 21.4 million. So that's our overall materiality level in terms of what we will be, um, assessing whether or not, um, the, any kind of errors, you know, in which may occur in that, in that order that will represent, uh, an error which will be a material to our opinion. The performance materiality level of, uh, 10.7. So this is the level which predominantly drives our testing strategy. So it, uh, drives the identification of our significant accounts and also, um, drives the, testing of the sample sizes which we, uh, which we apply in, in undertaking our, our audit. Um, we can, uh, either set that performance materiality level at 75% or 50% and for the reasons outlined on, on the, um, on the page there, we've, uh, decided to set that at the lower level of 50, 50%, which means, um, it will be, it will be resulting, uh, more testing for us. Um, and then the audit difference, uh, level of 1.1 million will be the level at which we'll be reporting differences, uh, to the, to the committee, any other trusted, uh, or uncorrected misstatements. The next page on the overview, which I want to draw your attention to, is on, uh, pay your page, uh, 72. Um, so we did initially, we were looking to undertake our, uh, start our audit and planning procedures in July 24. However, we weren't able to progress the audit as, um, as originally planned as there was a delay in, uh, receiving responses to our requests. So we did, uh, withdraw our team and had, uh, discussions with, uh, management in terms of when it would be a good time to come back in to undertake the audit and particularly, uh, getting some assurances on, uh, some of the strengthening of the, uh, team, which has been, uh, referenced, uh, earlier on. So we commenced the audit in, uh, on the 18th of November. Um, the timeline in terms of, uh, when we're looking to conclude the audit is set out in section six. Um, the, on the slide 72, on page 72 there, it says that we'll be looking to, uh, conclude by November 24, but that was the original timeline. So we're now looking to conclude in February, uh, next year. And we will update the committee if there are any changes, uh, to that, uh, to that timetable. Um, in terms of, uh, section two of the reports and the responses to the, the risks, uh, on your page seven, 75, uh, we outline there the procedures that we'll be undertaking in terms of the, um, level three investments. Those are the, uh, heart of value investments. So that's set out there in terms of the, uh, specific procedures we'll be undertaking in relation to that risk. On page 75, again, you know, um, referencing the fact that opening, opening balances and assurances over that is a, is a risk. So we again, highlight the procedures that we're planning to undertake, uh, there, um, now that, uh, well, once Deloitte's have concluded their audit, that will include a review of, uh, of, um, of their files in relation to work that they aren't, that they've undertaken, which may be, uh, relevant to our audit. On page 77, um, outlining the risk in terms of, um, the IS 26, the actuarial valuation and the procedures that we'll be undertaking in response to that risk. One of the procedures that are highlighted there is understanding the progress which, uh, management have, uh, made in response to, in terms of the action plan that has been established to address the, um, issues that have previously been reported by Deloitte. Um, as the committee's, um, already heard the timetable for, um, concluding on that action plan is looking to be undertaken by the next triannual date with a report coming to, um, the committee in, uh, May, May next year, uh, given that, um, action is still in progress to address the issues. It is, um, it may well be the case that some of the issues that have previously been reported may well, um, still be there for the, uh, 23, 24, um, uh, 23, 24 financial year, which is the year of, uh, year of audit that this plan covers. So it may well be, uh, a point that we'll be kind of coming back to in our reporting back to the, uh, to the, to the committee. Um, so they are the key points, which I would like to, um, um, which I've just wanted to bring to the attention of the committee. Um, I'm not planning on doing a page turner on the rest of the report. I'll take that as read, but happy to answer any questions which members may have. Thank you so much for your presentation. Does the committee have any questions? Julie, please. Uh, thank you. And I just want to put into context, um, for members, because it, um, can seem daunting when you just hear a load of statistics about pensions, but just want to give you some assurance as to the degree of assurance you are about to get on your pension fund for the next valuation. The level of materiality that's being operated to in relation to the pensions, um, compared to previously, um, is, is significant. So the level of reportable audit differences go to 0.05 percent of pension assets of over 2.1 billion pounds. And I just want you to bear in mind the level of scrutiny and detail that is going to be gone into in that pension fund. So when things come back, um, the level of assurance you will get will probably be the highest I've seen on a pension fund and certainly, um, the 3 million materiality for this year. And, and our auditors know my ambition is that next year that materiality threshold will change, but, but just be assured. And the reason for that, it's alarming, isn't it? When you hear an audit strategy and you hear them talk about potential for management, fraud, and override of controls, that's the strategy. That's the area they're going to give you assurance on. It's not because they think they do. Um, so I just want to make that point as well. Thank you, Julia. These points are recognised and noted as well. Any other comments? No, thank you. In that case, can I ask Farhana that the comments of Julia noted? And can I thank Stephen and Hassan for your presentations? And we look forward to seeing you in January for a fuller discussion of your findings. Thank you. So now I will move on to section four. So 4.1 statement of accounts for 2020, 21, 2021, and 22, and 2022, 23. So could I ask Julie, Lorraine, and Assan Khan to present this report, please? So, um, this report presents the expected final updates, uh, to the statement of accounts for 2021, 21, 22, and 22, 23. Uh, it includes updated annual governance statements, uh, which need to be, uh, up to date and the latest position at the time of sign off. Um, it takes into consideration the work performed by Deloitte, which they covered in their earlier item. Uh, these statements have been updated to ensure they are still appropriate to reflect the circumstances at the date, uh, of sign off. Um, one point particularly to note around the annual governance statement is it has been updated particularly to take into account recruitment and BVI report. Thank you. Would you be kind enough just to point us to the relevant page where that change has been made? Please. So apologies. I don't have the full pack right in front of me. Maybe Julie can help me out here, but it's the final page of the AGS. I did turn the corner of the page over. So it's just before the conclusion items 12 and 13. So I'm just looking for where I turn the corner of the page. It is the same adjustment that's been made exactly the same words and across all AGS statements. Page one, uh, page three, two, four in the main pack is, is one of the examples. It's the same wording, obviously. Page three, two, four. And in this case, it's exactly the same wording. And we included, oh yeah, three, two, three. Three, two, three, three, three, two, four. So if you look at, um, 14, you can see that we've given the reason for the change. We've given you the wording of the change related to procurement issues that you're familiar with and we'll be looking at in part two. And also relating to the outcome of the best value inspection. I think this is in line with comments very much that audit committee wanted when you saw the draft AGS and you asked why reference hadn't been made to the inspection. We gave you an assurance that we would update the AGS to reflect the outcome of the inspection. And I hope you're assured that we took that on board and have done so. Jeff, can I just ask a quick question? Yes, yes, I was going to invite questions. Thank you. So, um, I've got the, um, annual governance statement for the first of those years, but can you just flag up again, what pages are the AGS for the second and third of those years, please? Thanks. Around 500, page 500. 500? Page 500 circa. And then page double six, nine, around about then. So 500 and double six, nine? Yeah, and around, around page, um, double six, nine is also, um, in the middle of the final years, um, AGS. It's actually, um, 506 and goes on to 505 and 506. Identical wording, Councillor, we didn't, we've been consistent with the word and across all periods, it has not changed. And then page six, double seven, six, double eight. And then pages six, double seven, six, double eight for the equivalent wording in the, uh, third year of AGS. Um, thank you for this, so obviously this has been a, um, something that, that, um, the committee has looked at repeatedly in its deliberations over the last couple of years, each of these, these, um, first three. And, um, um, but it's not just this committee that's looked at them, that's talked about, um, this situation or not. So I was in the council chamber here a couple of weeks, three weeks ago, and we were told at that point that, um, that the accounts are going to, are ready to be signed off now. Um, and we weren't told the context, um, within which we've heard this evening about the backstop that the government's introduced and about effectively that curtailing any further work or meaning that it's not, it wouldn't be fruitful to continue to do that work, uh, and, uh, it wouldn't deliver the outcome. So that's a different kind of thing than what I think has been argued in public, um, by, by people in this authority. And so I just wanted to understand, um, so this is essentially, um, not even a qualified assurance around these accounts. This is a disclaimer that an opinion can't be given on these accounts for entirely understandable reasons, but this isn't the culmination, this isn't, um, similar to what was done with 1819 and 1920, this is a completely different sign-off process. So that, that's my first question. So, so I think two things, um, you've got to have something to sign off, councillor, and what you've got is accounts that were then prepared because there were no drafts. So the team, the drafts stopped. So the team got the audited opinion before the backstop rules came in, as you've said, and produced all the draft accounts. And I've got the opinion available to us, the same opinion available to every other council. It's no different. Our hamlets isn't singled out, uh, and, and it's no different in that. Are we collectively, am I, as Section 151 officer, feeling more assured than I was? Yes, because I've got draft accounts that have been subject to a process. Does anyone more than me wish it was more, um, robust assurance? Yes, but I can't change the fact that we're in exactly the same position as over 400 other authorities. So for me, I just want to say what you haven't got a situation where a finance team has done less for you than it should have done at all. Thank you, Julie. And I think this goes back to my sort of opening comments really about the politicization of information that is discussed in this meeting. And I think we've seen it not just on the financial statements, but also on the home care issue as well. I'm not saying that's by anyone in this room or in this chamber, but we know that the issues that just get discussed here do get politicized. So we all need to be aware of that and work, I think, as a committee to reduce that wherever possible as well. Councillor Francis. Thank you. And I'm, I'm really conscious of the point that you made right at the start of the meeting. And I'll, I'll try to stay on the, on, on your right side, uh, around this. I think, you know, Julie's, Julie's explanation there is really helpful in terms of bringing clarity and factual information to the discussion, as was the contributions from Deloitte's and EY earlier as well, because there's been an awful lot of hyperbole. And as I've said, when I first rejoined the committee in, in May, people were raising issues around the, around the accounts not being signed off six years ago now. And people on the committee were dissatisfied with the progress that was being made in moving towards a resolution there. There are a whole load of, there's a whole load of, um, story that goes on leading up to the, that point, let alone what's happened since then. But it's really helpful to have on the record that we are a number of authorities, hundreds of authorities, according to EY, that are in a very similar position, at least in relation to presumably 22, 23. It might be earlier ones. Other people have got earlier ones as well. So that there is, that this is not about, or what has happened here is not about mismanagement by anybody who might have been in, uh, positions of authority in this council previously. This is part of a pattern that's happened in local government, which we might have had a more serious, more serious implications here in Tower Hamlets than elsewhere, but nevertheless is part of that wider pattern. And I think it's, you know, it's fine. It's, it's really good that we finally have that as a statement of fact in this committee tonight. And I think that's, um, that's something, that's one of the reasons in my observation, reading through the best value inspection, why it reached the conclusions that it did, including the conclusions about the way that this committee does its business as well. And the things it chooses to, uh, look at the way that it manages its own agenda as well. So I think it's really good. I'm happy that given what the government has said to say that they're right to say that we should draw a line, that our own officers and, uh, and auditors are right to say that let's just draw a line. There's not really an alternative in relation to, to these three years worth of, of accounts that we should do that. Um, and I'm happy to endorse that. I think we're, this is up for us for approval, isn't it? Um, so I'm happy to just, uh, put that on the record. I would just say one other thing though, which is about the annual governance statement. So when I raised this about whether, um, uh, there was a statement, um, I think which said that the government had, um, uh, commissioned the best value inspection of town on its council. That was what was in the annual governance statement at the, um, at that point in time when we were looking at, um, or that was the provisional one that was being drawn up. And I think that's one of the reasons why I push so hard. And I appreciate Mr. Dobbs, like giving us, you and I, the opportunity to feedback and to say what we felt needed to be included, because it really does need to be included. And to be honest with you, I still believe that the, um, that the minister's original letter instructing that, um, should be included as an appendix to the, um, to this annual governance statement as well. But I'm not wedded to it. We've kind of reached a, a, a point where it's actually the outcome is more beneficial than the fact that it's flagged up in here. I just think that it should be for the record. I've been included here too. Thank you, Councillor Francis. I think it's also worth sort of noting that the annual governance statement isn't something for audit committee to approve. So it's not a document that we as a committee are approving. This is a document that comes from the chief executive and from the mayor. So we are noting it as part of the financial statements as well. So we, I think we can, you know, we, if we had more time and if this had, was available perhaps earlier, months earlier, maybe we could have gone into a deeper discussion around some of the points raising it as we did with the 2324 version that we saw earlier in the year. Yeah. Sorry. I know you don't want to prolong it too much. I like just to say, I, so I think that goes to the heart of what the best value inspectors concluded in relation to governance of this authority. If this committee collectively reaches a decision that a majority decision that something needs to be changed in the annual governance statement, I think it's then incumbent on the chief executive to come back to this committee and explain why that, um, why that isn't included. Like, I think that's, that's our, that's, that's the kind of, that's the way that it ought to work. Um, and, uh, and I hope it does work like that in future. So I think that's a really good point. And I think like we, as a committee need to have a bit of time to do some self-reflection and really think about what can we do as a committee to really strengthen our work and to make sure that we're getting the assurance that we need, but also that we're holding management to account as well. So what I would like to suggest, and this will be for later in the meeting is that we members with some support from officers as well, and maybe some external support, we take some time aside outside of the normal committee meeting structure really to, to, to, to sit aside and think about what's been working well and what needs to improve substantially and really look to make those changes as quickly as we can. Because I think the comments that you're making, Councillor Francis, you know, that it doesn't take a lot to make those changes and put those in place. And I hope that we can move quite quickly to do so as well. So can I just respond to, to understand the request and provide an explanation? So we've stated, I have stated in this part quite clearly, in line with the SIPFA rules, the basis on which we've made adjustments to these AGS statements. And it, and it's about issues that we're aware of today, that affect previous reporting periods. And the fact that a best value inspection was called, had no effect on previous reporting periods. The fact that the best value inspection concluded that there were some issues such as the ones we've all been talking about, the, um, period of no accounts, the, um, generational, I think is the phrase used of some of the governance issues. That's what lends itself to direct reference to the findings of the BVI, not the process. And that's why those statements are, are, are in here. It's not because the, um, uh, Secretary of State's initiation of the BVI affected those periods. It didn't. Its outcome did. And that's what's been reflected in accordance with the findings of the BVI. Okay. I know you don't want back and forth. I'm going to, I'm going to draw a line there. I think we need, we need to draw a line under decisions that have been made previously. As I said at the beginning, this is a new audit committee and I think we need to move forward. I think we have to agree to disagree on some of the decisions and the input into the governance statements that were made previously. but we're here today. And I think the, uh, information in the governance statements has been updated. I would, uh, make the point that it, if it was me writing it, I may have written it differently, but it is not my governance statement. It's not my report. Um, so I would like to bring that to a close, please. Thank you. So any other comments? Thank you. So then the audit committee is recommended to approve statement of accounts for 2020, 21, 2021, 22, and 2022, 23 within the statutory backstop deadline date of 13th of December, 2024, 2024, which takes into consideration work performed by the external auditors, Deloitte's. Are you all happy to approve those? Thank you. And then the second point on that is really to note the changes, the updated annual government statements for 2020 to 21, 2021, 22, and 2022 to 23, which have been inserted within the respective statements of accounts. These statements have been updated to ensure they are still appropriate to reflect the circumstances as at the date that the statements of accounts are approved, particularly related to procurement and the BVI report. So moving on now to 4.2 internal audit and anti-fraud progress report. Can I invite David Dobbs to present this report? Thank you, chair. Um, I'll take this report largely as read. This is our progress report to the end of November and just draw your attention to, um, a couple of key points. Um, this report includes the summaries of the five reports finalized with limited assurance opinions that were issued since we last reported to committee in October. Um, those reports are loan working arrangements, King George's Field Trust, capital consultants, housing repairs, um, and the procurement and commissioning of barristers and solicitors. You'll see the audit summaries in the report, but just to, um, remind committee members, um, at the request of this committee and since the last meeting, we are now making full audit reports separately available to all committee members should they wish to review them. They can do so via a SharePoint site. So that is up and running and accessible for all members of the committee who wish to see the full audit reports. Um, we mentioned in the report two areas of concern, um, the increasing number of limited assurance audit reports and the, the diagram on page 686 indicates on a year-to-year basis that only 24% of audits currently completed have been issued with a reasonable or substantial audit opinion. Um, so clearly, um, a position there which is in decline, but just to caution you, this is a figure which is volatile and will fluctuate between now and the end of the year. It may improve, it may decline, it may stay the same. I think the other thing to say is, um, and I'm not making excuses here. I've thought long and hard about an explanation for this. We did at the start of the year produce a risk-based plan, uh, the intention of which was to direct our audit resource to those areas where there are known risks, concerns or issues. And I think in the context of that, you would expect some turbulence and some deterioration possibly in the audit opinions that we are issuing. Nevertheless, it is clear that that level of 24% is much lower than management would hope it to be. And we're suggesting that that should be at a benchmark level of around 50%. And we'll see where that lands when we report at year end in July's audit committee. Um, the second matter to mention, uh, which is detailed in paragraph 2.4 on page 687, um, is around some delays we encounter in undertaking and completing audit work. And you'll see there we've highlighted the dates at which we've issued some of the draft reports. Now we allow, um, 15 days for responses to draft reports. Um, and in some cases there's a good reason why we exceed those days. Um, but you will see that that is frequently or much more frequently becoming an issue in terms of timeliness of responses. Um, and the concern for that really revolves around the fact that the longer it takes management to respond, the longer there is a risk exposure and the longer the issue remains unresolved. On a positive note, um, the longstanding audits of supply chain cyber control and RCDA is detailed on page 688, which have been outstanding for some time, have since the time of drafting this report now been completed. Um, I'm very grateful for Andy Grant for his assistance in pulling together, um, some of the muscle needed to gather responses flat and to complete those audit reports. Um, I'm quite happy to pause there and take any questions, Chair. Thank you, David. Does the committee have any questions or comments it wishes to ask? Councillor Francis. Um, so I want to say a couple of things about this. First of all, thank you. This is really, um, comprehensive and it's really good to see that you've included the, um, the date that the draft report was issued. And so effectively how long you've been waiting to, um, to get the action plan on the back of that, as I understand it. So the number of these that are limited is really worrying. Thanks also to you, sorry, I should have said for allowing us access to see, um, to see the reports. I don't need to see a report as I said at the last meeting, but the summaries are, are, are really important or really useful for us as we can see from those that are here. Um, there's a lot of limited assurance in those that have come back so far. And one of the things that, um, that I remember is that we used to spend quite a bit of time doing deep dives into some of those that were coming back in this way. And I just wondered, um, is that something that the team themselves think would be appropriate for the committee to do? And if so, what's the kind of mechanism by which that, that would happen? Thank you, Chairman. Thank you for the comment. Um, so there's a couple of things really what we've done previously at the committee and it, and it's, it's the behest of the chair really is invite officers back. Um, and it could either be the operational manager or the director to explain, um, a bit more about the audit that's been undertaken and some of the remedial actions they've put in place. Um, and I don't think there has to be a confrontational process. It's more of a case of, uh, providing information to the committee and a bit of assurance, um, that those actions have been taken and that they are now embedded. Um, so that's one thing, and that's obviously something we can look to do and to reintroduce in the future. I think other than it's quite important. And again, this is something we've discussed recently is sort of tracking the implementation of those recommendations, particularly the high, the medium priority ones where there are limited assurance audit reports. Now, I did a bit of a calculation earlier in terms of live audit recommendations at any one time, simply from our team. And you see, there's a number from the external audits already. Uh, there'll be upwards of 300 live internal audit recommendations at any one time. Now, primarily to get assurance as to whether or not those are being implemented, that needs to come from the managers themselves. But what our team can do is provide a targeted follow-up of those where there are limited assurance audit reports, where there are high priority recommendations just to ensure that we are picking off those high risk areas and making sure those recommendations are being properly implemented by management. Thank you, David. I think, um, committee with the best will in the world, I think there are a number of limited assurance audit reports here and being able to go into detail on them within the restrictions of our current committee meeting structure and agendas, I think is going to be really challenging. Um, I'm also kind of conscious that a lot of this committee's time has been spent on financial statements. It's also been spent focusing on other matters that have been brought to our attention. And as a committee, I think we have lost track perhaps of, um, that process that David explained about asking management to come to committee and explained to us about the actions they're taking to correct the assurance that has been, uh, the assurance opinion that has been given by audit. So what I would like to suggest, and I'd be happy, I'd be really keen to hear your views, is to have a really separate sort of extraordinary, um, committee meeting really to delve into some of these audit reports and arrange in advance for certain managers to come to those meetings to present to us. I think we need to have a think about what the agenda would be, what we would ask, um, managers to present, which of the reports we want them to present on as well. I'm also particularly interested in where draft reports have been outstanding for a number of months, why that is the case and why they haven't been finalised, and I'd like to incorporate that into that meeting. Councillor Alain Lee, I can see you've got your hand up. Oh, thank you, um, chair. Yeah, I think that's really important. I think it's very important. Back in 2014, when I was chair of audit, most of the, um, committee time was the deep diving, and we were able to bring managers in and officers in to explain, and then chase up the most urgent ones to make sure that the actions had been followed. And I thought that was really, really good way of actually reassuring that we don't have as many limited, um, references in the report as well. So I would recommend that. I mean, I'm just visiting here today, but I do recommend that you do have that process at some point in your kind of committee stages. Thank you, Councillor, and we hope you'll visit us frequently. Yes. Any other comments on the reports? I did have a comment. I know you can't see my hand. Thank you, Charlotte. Yes, please come in. Um, yeah, just, just to sort of reiterate that it's absolutely essential. We get into a rhythm of, of, uh, of review and challenge over the actual sort of bread and butter of the committee work, which is, you know, big, big old chunk of that is internal audit. Um, I just want my, my view, and, um, David, I know that you've alluded to the same, is that this is a risk-based plan. And as such, I'm, I'm absolutely comfortable with the amount of limited, um, reports that are coming back. I think the, the number of sort of reasonable ones should be, um, uh, if you do the risk planning properly, you are looking in the right areas and those areas are where there are issues. Um, and of course, um, getting positive assurance when you find, um, have reasonable results is, is also welcome that we're getting the basics right. Um, and so, or some areas have improved from last time, et cetera, but I, I, I, I don't think that this, um, opinion profile will indicate anything other than a smarter use of, of, of resources. Um, just finally, I wanted to comment and, and support, um, the, uh, the, the need, I think, for this committee to look at the actions. Um, I, I think not for next time. It takes a bit of time to work these things out, but I think we absolutely need as a barometer to see how many outstanding actions there are and why, uh, and you, it could be a problem with the actions. It could be a problem with the managers or it could be other issues, but I, I think that that is a really useful, quick measure. Um, and then if, if we drill down, then that, as you just described, that's something that we can easily do, but it's, it's a very useful, easily understood, um, uh, measure to bring to, to, to committee, I think. Thank you, Charlotte. And I think that's an important reflection on the quality of the audit work and the focus of them as well. So thank you for your contributions. Councillor Francis. Thank you. Um, uh, so I, I'm not sure I entirely agree with Charlotte about that. Actually, I think that I, um, as I understand it, this approach is, is being embedded and, um, uh, there's, there's, it's, it's, it's clear, it appears to me that, um, that, that, that the choices that have been made don't always necessarily reflect the highest risk areas to this authority. Um, but, you know, we take, um, Mr. Dobbs' view that, or, or assurance that that's going to be, that's the approach that's going to be taken and implemented. And I'm sure that's going to happen, but I want to just, so on that point, uh, there's a number here that have differed and a number of these that are differed are areas in which I would say potentially there is actually quite a high risk. So if I look at, um, those that are, that, um, just immediately, uh, to mind, employee well-being and satisfaction, council tax, cost of living relief fund, domestic violence contract monitoring, youth service, living care service, housing allocations, bidding process, damp and mold management. Like each of those are areas where I could say, um, people have come to me, um, whether constituents or, um, I'm aware of staff members that I've spoken to who've raised concerns around those issues as well. So just wondered, so they've deferred for the moment, um, are they likely to be coming back early in the next year? Um, what, what do, well, I'll wait for an answer. Um, they'll be reconsidered as part of the plan for the next cycle. Um, so whilst they're deferred, it doesn't mean necessarily mean they'll be reintroduced in the plan, but they'll be certainly be under consideration. Now, what I would say is you don't have the information that sits behind that. So perhaps when we've been deferring them or when we defer them in future, we can provide a bit of narrative just to give you the context as to why we're deferring them and why we think it's a good idea. We don't just simply accept management saying we can't do that audit. Now, there'll be a dialogue, there'll be a discussion. And, you know, we've got to be, uh, convinced and have compelling reason why we're deferring the work. And I can certainly come back and provide some narrative around the audits that have been deferred in future meetings. Um, is it appropriate for the, this committee to, um, uh, to encourage you to, um, to, um, to try to prioritize some of those that are deferred? Or is that really something that's an operational decision for officers themselves? I would have thought that's an operational decision. Excuse me. Sorry, I have a bit of a view on that. Sorry to jump in. That's okay, Charlotte. You go ahead. Um, yeah, my, my, um, comment on that would be, um, that the audit plan was proposed and brought to the committee and, and agreed at the committee. And, uh, and of course a plan of this size, things change, assumptions change. Um, uh, but I would suggest it could be appropriate that for, um, any deferment to be brought back to the committee before it's set in stone so that we can understand why it's deferred, um, and get assurance, um, that, you know, that internal audit have taken an objective view that it's appropriate. We can ask questions as to why, um, and, and also track the, those deferments. I, I, I just think it's, yeah, I, I, I, I believe you, but I think, um, uh, that, that it's absolutely appropriate for, for us to ask, well, why and, and when is it going to, when are these important areas going to be done? Thank you, David. Yes, please. Yeah, I mean, uh, just to clarify, when we, we had the, um, the last meeting of the audit committee, um, we had a discussion around resourcing. I did say we wouldn't be able to complete the plan, and at that point it was agreed, um, and I don't wish to labour the point. It was agreed that I would have discretion in rationalising the plan. Now, I admit that it may need some explanations to why certain audits have been deferred, and I'm quite happy to provide that explanation to future meetings. Um, this is largely an operational decision, but of course the audit committee would have power, if it wishes, wishes to do so, to sort of say to me, David, we think you should carry out an audit in such an area, and of course I would, um, consider that quite rightly. Thank you, David. So I was just looking at the work plan. So I think the internal audit annual plan comes back to committee in April. So as part of that, I think it would be useful to consider the deferred audits from this year, and to perhaps provide us with an explanation as to why they have or haven't been included in the 25-26 plan, please. Thank you. Councillor Rowley. In that same meeting, when you do come back, can you give us like urgent timelines? So, because some of these are really serious, and I think it would be a disservice to the people of this borough if we aren't auditing, especially in housing. And as Mark Francis said, Councillor Francis, we get so many people coming in, and it kind of makes sense to me now. We don't know the audit was happening in service, so it makes sense that people are coming in. We can't really, um, have an understanding on what's going on in the service if it has, if it's not being audited correctly. And around children's services, it's always a red flag when children's services have issues. So I think that's really important. And so I'll be really interested to know why that these services were deferred. They'll be really interested to find out, and when they will be looked into, because I think that's quite a serious point. So yeah, when we produce the plan, we do include indicative timings. Now we've got to work with officers who will have competing priorities. We have a, um, reasonably, um, slimline audit team in terms of our resources. So we need to coordinate with officers. There may be competing priorities, as I've said. We go into some areas and suddenly they have to drop everything because there's an inspection. Might be housing regulator coming in, could be Ofsted and so on and so forth. So there's a myriad of things that would affect our time. But certainly we are very mindful of the risk and the urgent areas or areas where there is an immediate risk or immediate concern would get priority in terms of our timing. But when we bring the plan back, it will give indicative quarterly timings for the work that we include in it. Any other comments for David on that report? Thank you. So we are, can I ask that comments of the committee are noted please, as well as the actions that came out of that discussion. So the committee is recommended to consider and note the internal audit progress report, including details of the assurance opinions for audits carried out as part of the 2024-25 audit plan. Thank you. So now we are moving on to 4.3 risk management and the corporate risk register. So can I invite David Dobbs and Victoria Lewis to present this report, please. Thank you, Chairman. Once again, I'll take the report largely as read. This is, in effect, I suppose, a holding report because there isn't or there hasn't been time for us to produce a deep dive, which we normally bring to the committee, owing to the change of date. So what you'll see here is the latest corporate risk register, which has had some minor updates since the October meeting, and these are reflected in the register and the narratives included in the report. The report also confirms that we have started a structured program of risk management training, which Victoria sat on my right, has been excellent in organizing that and working with an external provider to get that off the ground. And that's been made available to all officers, and we plan to continue that into 2025 so we can reach as much of the organization as possible in terms of that training program. In this report, we also provide a preview of our proposed approach for codifying what's called risk appetite. But I'm not going to dwell on this. But this was something which was raised in the risk management health check that we had at the previous meeting that was carried out by Zurich. And it will be included in the updated risk management strategy, which we will consult on during the next year. In very broad terms, if we take the example of safeguarding or compliance risks, what risk appetite says is it's a way of ensuring that for those particular risks, we are sufficiently risk averse in putting in controls that are sufficiently robust to manage the residual risk to a low level. Conversely, with risks around, for example, innovation and performance, we will effectively be what's probably or probably could be called risk hungry. We will tolerate more risk, and we'll be more content to manage the net risk to, if we'd like, what's known as a higher net risk position. There will be, in effect, probably fewer controls because we are, in effect, looking to gain the upside of that position. Now, this is something which we socialise in this report just as a draft. As I said, it will be part of the revised risk management strategy, and we will consult on that with officers and members of this committee, and we hope to release that in April next year. So that's something that will be coming your way shortly. And, of course, the risk categories and the appetite levels will be discussed with officers and properly set out in the updated strategy. I'm happy to pause there for questions, Chair. Thank you. So, before I invite committee members to ask questions, I have two. So, with the risk appetite, what is audit committee's role in that, and what do we need to be doing, I suppose, in terms of our own education, training, awareness? And then my second question is for Victoria. So, with the training that you have been delivering, what levels of engagement have you been receiving from management? Thank you. So, in relation to the first one, we work with directors first to put in place, I suppose, proposed risk appetite levels that would be included within the strategy. It's then for this committee to review and consider whether or not those are appropriate. So, it's as simple as that, really. We will work with directors across the leadership teams to ensure that there's a consistent approach and we reach a consensus. This committee can then consider it in the round and think about whether or not those risk appetite levels are appropriate. In terms of the second question, I'll pass over to Victoria. In terms of engagement, we've had two sessions so far and in those two sessions we have had 47 attendees and we are intending on running sessions every two months into 2025 and hope to obviously get a lot more officers involved. I suppose I was trying to get to, is the engagement in those sessions, is it passive or is it active? Are people asking questions? Do you get a sense that managers are taking this seriously, that they are really looking to increase their learning and education around this? That is definitely the feel that I'm getting. There is very positive engagement and we're getting quite good feedback as well. Yeah, it's a very, it's a two-way sort of conversation. It's very engaging and I'm getting some very positive feedback, which I'm happy about. Thank you. So, does the committee have any questions or comments it wishes to ask? Julie? Julie? I just wanted to add Victoria and the team have done a sterling job. We've had Zurich, we've had Victoria, but also for committee's further assurance, it's not just training that happens. So, going forward, every DLT meeting has a fixed standing agenda item that is reviewing the risk register for that directorate and that will also be tied to outstanding audit recommendations and that would be part of their Power BI dashboard that I spoke to you about. And hopefully at your next meeting, or certainly at the, if you want to host one around risk and audit, I'm sure Abdul Razak will be happy to give you a demo of that so you can see how that works in practice. But I just want you to know that every single DLT has a standing item on reviewing the risk profile and audit recommendations at every meeting. Thank you. David? Yeah, thank you, Chairman. Really, it was just to say in terms of the overall risk management strategy, and I know some members of this committee were involved in the risk management health check. We'd be happy to take a read and get in those members that have time and capacity to do so. We'd be happy for them to provide their input to the risk management strategy so they feel involved and they can actually assist in shaping it as we produce that document and we release it. Hopefully, hopefully, in April next year. So, quite happy for members of this committee to get involved and we can work on that outside of the meeting. Thank you, David. I think that's a really good offer and I hope that members of the committee will take that up as well. Any other questions? Councilor Francis? Thank you. Thanks for this report. So, I have a question, sorry, because I'm coming back new. So, the corporate risk register summary is there for us, but then there's the individual directorate summaries. Are they summaries or are they everything underneath the ones that are in detail from page 711 onwards? It's two versions of the same document. So, you've got the summary corporate risk register, then in effect what is a detailed report from the system we use for collating risks, which is called JCAD. So, it's the same information. The second report is obviously much more detailed and contains details of those controls and mitigating actions that the first one doesn't. Okay, so, I have a question about housing services and bearing in mind that the recent decision to self-refer our housing directorate to the regulator, what, is it, is it unreasonable, am I wrong to have expected that that at some point will come on to this risk register? And has that been considered already? And if it has been considered, but hasn't made it this far, is there a rationale for that? So, Victoria and I attend the directorate leadership teams of all the directorates regularly. I'm sure if this hasn't made it onto the DLT register, it will be there very shortly. And, of course, as part of that process, it will be considered as to whether it needs to be included on the corporate risk register. My colleague tells me it has been drafted. It's just not being approved yet for inclusion on the risk register. Are you able to give us an indication about what the risk is at this stage, or does that need further analysis by the team? I'm quite happy to explain that, but it'll have to be outside of the meeting to give you the precise wording. Yes, please. Yeah, good. Any other questions or comments, Charlotte? No? Okay. Thank you. Okay. The audit committee is recommended... Sorry, apologies. Can I ask that the comments of the committee are noted? The audit committee is recommended to consider and note the corporate risks and applicable... And, where applicable, requests for risk owners with risks requiring further scrutiny to provide a detailed update on the treatment and mitigation of those risks, including impact on the corporate objectives. The latest updates to the Council's risk management arrangements, as described in this report, and the proposed approach in relation to the Council's risk appetite within the development of a revised risk management strategy and framework. And then we will move on to 4.4, New Global Internal Audit Standards. Can I invite David Dobbs to present this report? Thank you, Chair. Once again, I'll probably unrealistically take this paper as bread. This contains what I would describe as some rather technical and abstruse content. And whilst it's my fervent wish that every member of this committee reads and digests this report, that may take some time for people to do so. Suffice to say, these are the updated internal audit standards, which we adhere to as audit professionals. You may recall that we had a quality assessment not so long ago, and those were under the old standards. These standards will now be in place, effective from the 9th of January next year. What that means in technical terms is we will require an assessment of our compliance with these standards no later than, I think it will be, 2029. So we've got a little bit of time to get our house in order. But if you remember that report that we had from the consultancy that performed our quality review, they said we are well placed to ensure that we are compliant with them. And we will be working to ensure that we are compliant with them as from that date. There are some revisions in there, and the report details one or two notable points. The things I'd like to draw your attention to are in paragraph 3.2, 3.3 of my report on page 742. And that really is that one of the game changers in these standards is the emphasis they place on the importance of audit committee and senior management in working with and supporting internal audit. And they also emphasise the importance of what's called appropriate governance arrangements for the internal audit function to be effective. And that requires effective work, not only with this committee, but also with senior managers in the council. So there's a couple of takeaways there, both for the audit committee and both for corporate management team as well. The challenge, as it mentions in paragraph 3.3, the challenge really is, is that, you know, to be effective, you do need the right buy-in, both from this committee and from senior management. And it goes on to say, the standards are helpful in continuing to promote the need for ongoing conversations about internal audit's role and its important contribution to governance, the management of risk and better business performance. In layman's terms, in layman's terms, it means support is required for internal audit to be more effective. And we describe that in a little bit more detail through the report. And the appendices contain materials here to support the audit committee in actually providing that support. And also some of the technical detail in terms of how internal audit should be positioned within the council as well. There's an appendix which refers to a thing called domain 3, which is particularly pertinent for audit committee members to understand and look at, which is the one that looks like that. And the diagrams at the bottom, I think, are quite poignant. They refer to the fact that the audit function needs to be authorised by something called the board. The board is an Americanism for the audit committee. It needs to be positioned independently, which it is here at Tower Hamlets. And it needs to be overseen by the board, overseen by the audit committee, which is here as well. But I think there's a lot of granularity here that we probably need to work through at some future point just to make sure that the audit committee, myself and senior management, are comfortable in terms of the working relationships and how internal audit functions. And obviously we've had some of those discussions tonight, how to be more effective in how we report to this committee and how we can add value to what this committee does, making sure we're meeting our obligations at the same time to Julie and the rest of senior management. I'm quite happy to pause then and take any questions, Chair. Thank you, David. So are you suggesting that you come back to committee with a more sort of detailed action plan around this report in particular? Not an action plan as such. I think what we'll do is at some point we will come back with details of where we are in our compliance journey, Chair. Okay, thank you. Okay, thank you. Let's make sure we don't lose track of that in terms of our work plan as well. So, Fahal, if you wouldn't mind noting that as an action, that would be very helpful. Any questions or comments from the committee on this report? I think it's really helpful to see this, for us to understand it. Yeah, I mean, whether what's needed is a formal report back to the committee or something that happens in between committee sessions, I'm pretty relaxed about. But I think the necessity of it is driven home by the best value inspection, I would say that. And Mr. Dobbs mentioned about this committee's independence, I hope that's always been the case, but I'm not sure that is the reality. I think it will be going forward. It's been kind of picked up, both in terms of the position of the Chair, but I don't think we should make an assumption that it is as independent as it needs to be. Thank you. Comments are noted. Any other comments or questions? Councillor Rowley. Yeah, just on the back of that, I think it's really important that we are aware of the best value report inspection. And, you know, the Order Committee is one of the most important committees in Council. So, I think it's really important that it is a neutral committee. And it serves both the officers and members that, you know, we perform to the best and we work together, as you said before, and I think that's really important. And I think going forward, that's actually really good. And I think this is quite welcoming. That's the kind of vision that you have as well as officers. I think it's important. Thank you. So, before I move on to the decision, I just want to thank David and Victoria for your reports on this. I think over the last 12 months, we've certainly seen a progress in both the audit reports that come to committee, the risk reports that come to committee. And now I think this additional standards will certainly improve that as well. So, I would just urge you to make sure that if you're not getting what you need from audit committee, that you vocalise that either to me outside of these meetings or as part of the committee as well. Thank you. So, can I ask the audit committee – the audit committee is recommended to consider the report and the related implementation guidance attached in Appendices A to C. So, 4.5, Treasury Management Report and Mid-Year Review. Can I invite Paul Odu to present this report? Thank you, Chair. This report is in the pack, pages 103 to 124. The Treasury Management Strategy for 2024-25 was approved by Council on 28th of February 2024. Chair, I would like the report to be taken as read, but just to make a few quick points. The media report covers the period, 1st of April to 30th of September 2024, and the report is produced in line with the SIPFA code. If I may draw the committee's attention to Table 2 in paragraph 3.20, that's on page 107 of the supplementary pack. The table there summarises the Council's borrowing and investments for the period under consideration. And there you'll see the summary balances specified. Then I would just like to mention briefly that over the half-year period to the end of September 2024, the income-only investments totals £6.4 million, which was above the budgeted £4.9 million, that is in paragraph 3.39 on page 111. And then just finally to mention that throughout the reporting period, all transactions were conducted in line with the approved limits and prudential indicators set out in the Council's Treasury Management Strategy Statement, as demonstrated in the compliance section from paragraph 3.44 onwards, and that's on page 112. Thank you, Chair. I'm happy to take any questions. Thank you. Thank you. Does the committee have any questions or comments it wishes to ask? No. So, Paul, I always feel with this report that this comes towards the end of the agenda, after quite a lengthy debate, and we perhaps don't give it the level of scrutiny that it deserves. I don't think that's a reflection on your work or your report. I think that's a reflection on where it sits in the agenda, and I think maybe we can look to bring it up, the agenda, at various times in the course of the year. I also wanted to flag with committee members that Julie and Asan have kindly provided training on Treasury to councillors, to all members. And that may be something that we as a committee want to have our own session on, specifically thinking very much around this report and what level of assurance we want to be getting around it as well. Thank you, Chair. Thank you. Can I ask that the comments of the committee are noted, please? And the audit committee is recommended to note the contents of the Treasury management activities and performance against targets for the half-year ending 30th of September 2024. And note the Council's investments are set out in Appendix 1. The balances outstanding at 30th of September 2024 were £194.007 million. Moving on to Item 5, Audit Committee Work Plan. So, are there any suggestions that members wish to make on the work plan? We've discussed a few already. So, just to ask for clarification, so you were suggesting yourself, I think, that there needed to be an additional extraordinary meeting to look at the internal audit reports? And is that something that we need to formally resolve happens here? Yeah, thank you, Councillor Francis. I just think because we've got the meeting in January, which is very much going to be around the 23-24 financial statements, the next meeting is not actually until the 24th of April, so that's quite a big gap. So, I think it would be helpful for us to convene just to focus on those internal audit, limited assurance reports, as well as the reports that haven't been finalised. And maybe we can think about if there's any other aspects of the agenda that we want to have more of a deep dive into as well. There are some elements around risk, I think, that we've discussed as well that might make sense to have that meeting towards the end of February-March time, depending on what else is going on. For Hannah, can I ask you to liaise with committee members and officers on that? I think in order to decide what we want the agenda to be and what we want officers to prepare in advance of that meeting, I think we as a committee should take some time, perhaps in January, to meet, to have that informal discussion and really think about what we want to see going forward as well. Is that something you're open to? Who, me? January is very tight for me, to be honest. February or March is what you're saying. But, I mean, I agree with that. I'm sort of catching up after several years away. And so, like, these agendas are quite challenging. And it's obviously, it's getting late tonight. And so, yeah, I agree that that's an appropriate way forward. But my kind of recollection, though, from scrutiny is that that isn't necessarily something that happens automatically, that obviously there's additional resources that need to go into kind of facilitating the meetings and all of the rest of it. And I guess that we've already had one extraordinary meeting added in some way this year. So, yeah, but I would certainly endorse your suggestion and hope that that can actually happen. Do you want to come in? Do you want to come in? Only to say, and I'm sure you will, I think it's really good that audit members are engaged in what they want to see on an agenda. And that needs to align with the terms of reference of the audit committee. And also, there will be elements of certain things that are seen in more than one place. And the best value inspection, obviously, is one of them. And to look through the audit lens at what this committee's role in that is rather than see it as a duplication of reviews, maybe by scrutiny, that might happen from a slightly different perspective. It would just have a question. Okay. In that case, I think could the committee's recommendations and comments please be noted. And then we will look to implement those where possible into the work plan for 2024-2025. Thank you. Item six. Any other business the chair considers urgent? I have one item that I wish to discuss, which is on the best value inspection report. And is there any other business from anyone else? Councillor Francis? Yeah, I have one as well, which stems from that, but also stems from the recommendation that Deloitte make in their report back to us as well about the composition of the committee. But happy to let you go first with yours, because maybe it's already something in your mind. Well, really, what I want to get to, and what I want to get in my understanding, is in terms of the best value inspection report and the recommendations that it makes, obviously the council and the leadership will be taking an approach to implement an improvement plan. So what do we as an audit committee, as our role, rightfully, what should we be expecting in terms of information coming out of that implementation plan? I think there's two things for me. I think that the report makes a lot of recommendations around risk, around controls, but also specifically around governance. So I haven't quite got in my mind what is audit committee's role in that. So I'd really like to open that up for discussion and would welcome any comments from our auditors, past and present as well. Councillor Francis. So I agree. I've kind of argued that there was a problem before and that that problem is revealed. And I do think that this committee has a role and has a role as as powerfully independent as it needs to be. So we don't yet know exactly what the directions will be, although there's an indication. I think the really important thing is that the Transformation and Assurance Board has an understanding that it, or that there needs to be a link between this committee and the Transformation and Assurance Board that is being set up with some external people and some councillors as well. And I think that it's really important that there's that line of accountability so that if there are issues that concern this committee, that they go to the Transformation and Assurance Board and likewise back to us if there are things that are raised there that people don't think could be inadequately addressed. So I really do think that kind of, I think that's what Julie was suggesting, that there should be some kind of update once it comes from the department about exactly what's going to happen, about what the interaction is. So I think that's, yeah, I agree with that. I think that's a really good idea. I'll leave it at that for the minute. I've got one other point I want to make. Thank you. Any other comments from officers, members, auditors? Stephen, please. Very happy to give a view. I think Julie touched on it. I think in the committee giving consideration to its role, it needs to be seen through the lens of your terms of reference and your responsibilities as a committee. And I guess on a very outlined basis, then your role is around the governance of the, and the governance framework. And therefore, I think your role, in my view, needs to be aligned to that in terms of being comfortable with the overall framework that is an operation, rather than any detailed scrutiny of the actions. Thank you, that's helpful as well. I think we might need to come back to this as part of our considerations informally and formally in the future as well. Charlotte, do you have any comments on it that you want to make at this point? I think I agree with everything that's been said. I think it's absolutely really important both for this committee's learning and to support the sort of the forward agenda that we remain as sort of we can operate to ensure we are aligned and that we are responsive insofar as is appropriate, what the mechanism for that is that Councillor Francis was alluding to. I don't know what the appropriate level would be, but I would support that absolutely. I think that is certainly my observation, the comment that's just been made that we are looking at a framework level and whilst if you have particular interests in particular audit areas, it's a great opportunity to sort of lift the lid and get really down in the weeds. That's not really what our time is for. And so I think as I'm getting the sense that this committee is sort of being reformed in a way, I think it's absolutely appropriate if people have the time or if they can make the time to have some of these discussions off the record, where it's not a lot off the record, as in like a secret discussion, but just a working group to say, OK, what is it that we need to do? You know, if people are asking things, it might not be right for this committee, so where else can they get that information? I think it's a good opportunity and I'd certainly be very keen on sort of bringing what I've seen work well elsewhere, as I'm sure everybody else would as well. But I think that is the way forward. If we can get some momentum to actually do some of this, roll our sleeves up and do some of this work outside of the committee, then the committee can then focus on its terms, reference duties. Thank you, Charlotte. I appreciate that. I think your insight is going to be valuable in that regard, so thank you. Councillor Francis, did you want to come back on your point? So, yeah, so just to say one other thing, so first of them, just to come back to where you started this evening, like I think there is a change and that change is represented by you being in the chair, which was something that was recommended not just by the best value inspectors, but by the LGA peer review previously. They put the caveat in that they didn't know where that happened elsewhere, but they thought it was something that would be really beneficial in this authority and it didn't happen then and it has only happened not because of anything, I need to get my terminology right here, the council corporately has done, but it's done, it's happened because of politics and that isn't really going to be sufficient, a way of relying on this sort of situation going forward. So, I think the council needs to, the council corporately needs to come to a view as well about how it can maintain that or rather than defend what would the approach that was taken previously and I think, you know, that's kind of why the envoys are there and other external people as well, but, you know, I think we're in a different place now in this committee at least and we can begin to move things forward. I want to say one other thing, though, I've tried under your instruction to be consensual as much as it's possible for me, but there was another recommendation that was in the LGA peer review and it's been picked up by the Best Value Inspectors and picked up by Deloitte in their report as well, which is about cabinet members being a member of this committee and that's something that I raised myself. Like, you'd had, as the predecessor committee, you'd had a discussion and you'd reached a kind of a, I guess, a kind of a compromise position and I really understand that and, you know, Councillor Ahmed has made really valuable contributions this evening and has done in the past as well. Nevertheless, I think there is a point of principle that's been flagged with us and I've got it here in front of me if I can just get my computer back open. No, I can't. There is a point of principle which I think comes from SIPFA's guidance about the separation of executive and non-executive functions. Here we go. So, the audit committee, this is, I'm reading from Deloitte, I think. Audit committee included three members of cabinet during 2022-23. The audit committee considered a report on its membership in January 24 which included consideration of SIPFA guidance on audit committees and local government which recommended that members with executive roles should not sit on audit committee to safeguard the committee's independence. The council subsequently decided in May 24 to limit the number of cabinet members who can sit on the audit committee to one. So, that's noting progress but noting, I guess, that we continue to not be in line with SIPFA's guidance. Thank you. When do the terms of reference come back for review and when do they go to full council for approval? I'm looking at you, Jill, but I don't know who I should be looking at. I'm not sure but at least it's not going to be more than once a year. But that's certainly something which could go on to the work plan of things to consider. Okay, are you calling for that to come sooner then, Councillor Francis? So, I think people can see what the guidance is and I would encourage everyone that sits on the committee or might sit on the committee or might be appointed to the committee in future to think about how there's a way of bringing this committee into line with that guidance. I mean, like I said, I think people's contribution is really valuable but I also think that it's valuable for us as a committee to have the lead member for resources come to these sessions as well if there's items on the agenda and the Councillor Ahmed there are items potentially on the agenda in relation to his own portfolio. And that really, I think, is something that needs to be, ought to be reflected upon perhaps by the time of the 30th of January. Councillor Arley? Yeah, I just wanted to emphasise that point. I think it's really important going back to when I was, we didn't have any cabinet members and I think I did find that quite surprising. We're not scrutiny but we are auditing portfolios that cabinet members are leading on and I think it's really confusing for people to be able to be on a committee as well as answer questions sometimes alongside officers when they are being audited and I think maybe we need training around this, maybe the council wasn't aware of this. I don't know where that changed but I think it's something that we shouldn't really take lightly especially with the best value. I think we need to show that we are actually trying to work to build a better council for residents and that might mean good kind of audit work as well. So just flagging up that report again. Thank you, Councillor Ahmed. Thank you, Chair. Without visiting the past, I think proportionality has a great deal to do with the number of people who sit on committees and a kind of rotation system around that. So when certain political parties in any council either slightly hold the majority or don't hold the majority yet are the administration. There is only a limited number of individuals with the vast number of committees that this council has in terms of populating those committees. So it does at times need people from different political parties as well as the administration party and I believe other councils along with this council in the past when numbers were short. However, in more recent times there were greater volumes of administration members and therefore that luxury was available. I hear points made and I will certainly take those points back and reflect on those points. It's also about effectiveness. We as councillors wear multiple hats. We hold professional jobs and I think when we enter any particular committee from licensing to strategic development committees a number of committees we pretty much accept the roles those committees provide and I believe we as members also attempt to do the best we can in the committees we're at. I appreciate others externally may like it or may not like it and that could be various different observers and I appreciate that but unless there is a specific law or there is a specific judgment that bars a member from sitting at a committee I would actually challenge those positions. So I think there's a few actions that come out of this so I think Julie it would be helpful for you to if you could take back the some of the committee's discussions to senior management as well and for those considerations and comments to be included in discussions around the improvement plan as well I think we've talked as well about having Charlotte called it a secret committee meeting to talk about what we want to see in terms of improvement from this committee and I think we should include that as a discussion point within that forum as well and then I think when it comes to reviewing the committee's terms of reference I think that's a point when we need to be looking at this as well in line with the recommendations from the best value inspection report the improvement plan that comes out of that and also our own committee's intentions and ideas around an improvement as well Charlotte would you mind just admitting are you able to admit the person who's in the lobby on team yes thank you yeah it's done I'm happy to take back the messages I would say for the record the full recommendations came to the audit committee and it was the audit committee that took the decision secondly I cannot emphasise strongly enough the role of the audit committee is not to hold the executive to account the role of the audit committee is to ensure that management who are responsible and accountable for putting in place effective systems of internal control and assurance are doing so and I think it's I just want to emphasise and I appreciate Councillor Francis picked up that it's not a scrutiny function and I suppose my only nervousness was when the audit committee felt it was cabinet members that should come to be held to account by an audit committee that's not the responsibility of the audit committee the responsibility of the audit committee would be to identify areas where you feel there are weaknesses in control and for those who are responsible for maintaining those controls to sit there and be held to account and within the council their officers that's operational responsibility I just wanted to make that really clear Councillor Arley thank you for all due respect I have been a cabinet member in this council and I do know that you're right it is officers who are but it's also cabinet members sitting with directors and director of services talking about certain agendas certain areas within that portfolio cabinet members don't just sit there they do play a role as well with the officers so do you see do you understand to say that it's just the officers only the buck doesn't stop with officers officers are neutral if things go wrong in this council it's members who are held accountable not officers that is a reality and it's executive that will be held more accountable than backbenchers and that's the reality and I think that's why in audit for example when we look at some of the audit that we had here about deferring blah blah a lot of them were in housing that's where Councillor Ahmed resides over he might not be aware of that because he might be down the food chain but if anything goes wrong he will be pulled up on that so I think that's the reality we're not scrutinising we're just making sure we get all the right safeguards in place do you like know what they're talking about why would they bring it up in their report why would it be flagged up by the best value report you know there's people higher pay grades than me or you who are bringing this up it's not something that we have plucked out of the air we're just talking about what other professional people who audit other councils have already raised and I think for us to ignore that and put our head in the sand is detrimental to this council and the people that we serve outside this town hall I appreciate that councillor and just for the record I just repeat it's not this committee's responsibility to audit it's the responsibility of the auditors intel and external to audit it is this committee's responsibility to ensure that those systems of assurance the effectiveness of those audits taking seriously the recommendations and the frameworks of control are in place yes when things go wrong people in the council have got to look at them but it's not this committee's responsibility to look at what goes wrong it's this committee's responsibility to look at failures in control and improvements in those frameworks of control that can stop it going wrong again and I just want to be very clear the committee can choose to disagree but it's my job as the council's section 151 officer to ensure effective systems of internal control that is not the responsibility of the cabinet member for resources and I just wanted to be very very clear where that responsibility sits I'm kind of conscious of time so if you could keep it brief please council of finances okay so I think I mean I have a fundamentally different opinion to that and the reason I've got a fundamentally different opinion to that is because previously cabinet members used to attend the committee not to be put under the spotlight and scrutinised but to be part of the process of engagement of this committee in carrying out exactly the work that Julie is talking about there it isn't just for officers that the officers hold the responsibility yes narrowly for the things that have been described there but not in terms of the effective good governance of this authority all executive power ultimately sits in the hands of the mayor of the executive mayor and he appoints people as cabinet members and we accept those appointments as cabinet members because people are going ahead and doing overseeing the work of the teams for me it's really incumbent that the lead member for resources is at least invited to attend and encouraged to participate in the discussion I think it's healthy in terms of us as elected members having a better understanding of everything that's going on but I know you don't want to prolong this discussion like we'll save it perhaps for another time if people intend to continue with this approach which is not in line with SIP for guidance as I've read out earlier Thank you Councillor Francis so I think we've thought of some ways forward and some actions there so I think we can take this offline as well and have a private debate about it and then decide what we want to do in this formal setting as well so item 7 before I move on to item 7 Fahana could you just explain to us where we are in terms of timing with late starts and adjournments and everything please yes chair so the meeting commenced at 1841 we had a short adjournment and then recommenced at 1847 it's now 2129 in the interest of the committee completing its business the remainder of the part two agenda you're recommended to suspend standing orders and extend your meeting but you need an agreement with your members as to how long that extension will be thank you so we've got 17 minutes to consider the next items do we want to extend that by 13 minutes to half an hour so we've got the time should we need if necessary yeah thank you so item 7 exclusion of press and public in view of the contents of the remaining items on the agenda the committee is recommended to adopt the following motion that under the provisions of section 100a of the local government act 1972 as amended by the local government access to information act 1985 the press and public be excluded from the remainder of the meeting for the consideration of the section 2 business on the grounds that it contains information defined as exempt in part 1 of schedule 12a to the local government act 1972 do you need to stop the word masterpiece 8 . police or the door ''