This meeting was about the final accounts for 2023/24 and the early stages of planning for the 2024/25 audit. A report by KPMG, the Council’s external auditor, was provided that described its audit of the 2023/24 accounts, the value for money arrangements at the Council and its plans for the 2024/25 audit. The Committee were also provided with an update on the work of internal audit and the Corporate Risk Register.

External Audit Update

The Committee were provided with a report by KPMG on the completion of the 2023/24 external audit of the Statement of Accounts, the Pension Fund and the Value for Money arrangements at the Council.

The report included the formal management actions in response to KPMG’s audit recommendations.

KPMG’s report described two significant risks that it considered as part of its audit of the accounts. These related to:

• The valuation of land and buildings.
• The risk of management override of controls, specifically in relation to the Housing Revenue Account.

The Year End Report to the Audit & Risk Committee explained that there had been a £23.2m adjustment to the valuation of council dwellings because of indexation movement between January and March 2024.

“This was identified by the management specialist and impacts the council dwellings valuation”

The report also noted a presentational error in the property numbers disclosure. The property numbers disclosure in the audited accounts was for the 2022/23 year, and not for the 2023/24 year. This has now been corrected.

The report also highlighted that there was not an effective management review control in place to challenge the valuation assumptions, and an other audit risk was identified in relation to IFRS 16 pre-transition disclosures¹

The report noted that the Authority had not included complete pre-transition disclosures and a recommendation was raised to address this.

KPMG also considered, with the support of its actuarial specialists, the actuarial assumptions used in the valuation of the Council’s pension obligations. The report highlighted that one of the assumptions used was considered to be “cautious but within reasonable range”, which relates to the mortality future improvements assumption.

Management review and challenge of valuation instructions and report

The Committee was provided with a report that considered a recommendation raised in KPMG’s audit. This related to the Management review and challenge of valuation instructions and report. The report explained that the auditors were unable to identify a management review control to challenge the assumptions used in the valuation.

The report stated:

“We recommend that in the future, formal records are maintained and followed up with correspondence confirming the instructions. We also recommend that ahead of the next revaluation, a paper should be approved by Council or the appropriate Committee which covers the valuation approach.”

The report set out the management response to this recommendation, as well as an outline of the assumptions used in the valuation and the Terms of Engagement issued by Wilks Head & Eve, the Council’s appointed valuers.

Management review of actuarial assumptions

This report was prepared in response to another audit recommendation raised in the KPMG audit.

The report explained that

“Auditing standards define a management review control to include independent assessment of underlying assumptions by management.”

The report noted that

“there is no criteria or threshold developed for investigation/identification of outliers for pension assumptions.”

The report then set out the management actions for responding to this recommendation, which included demonstrating “appropriate challenge of the assumptions underlying the valuation”.

The report also included the Briefing Note prepared by Hymans Robertson, the actuary to the Local Government Pension Scheme and the Employer Briefing Note prepared by Barnett Waddingham, the actuary to the London Pensions Fund Authority. The Council uses both Hymans Robertson and Barnett Waddingham to assess its pension liability for accounting purposes.

External Audit Risks - Early Reflections 2024/25

The Committee were provided with a report by KPMG that set out its early reflections on the external audit risks for the 2024/25 audit.

The report highlighted three areas that KPMG considers to be significant risks. These related to:

• The valuation of Council dwellings
• The risk of management override of controls
• The valuation of post-retirement benefit obligations.

The report also highlighted an other audit risk related to the presentation of IFRS 16 disclosures. The report noted that

“The risk in relation to IFRS 16 disclosures has increased during the year.”

It went on to explain that this increase was because of the control deficiencies identified in the 2023/24 audit.

The report also included a draft timetable for the audit and an indicative fee.

Internal Audit Update

The report described the progress in delivering the 2024/25 internal audit plan. The plan had been approved by the Committee in September 2024.

The report included details on the completed audit engagements, including one audit of Kilmorie Primary School that identified “significant weaknesses that require action to address”.

The report also described the work to adapt to the new Global Internal Audit Standards, which will become mandatory in the public sector in April 2025. Internal audit are preparing for this by revising and refreshing procedures.

Corporate Risk Register

This report provided an update on corporate risk and risk management at the Council.

The report noted that Kelly Thompson, the Council’s first dedicated risk officer, was appointed in January 2025. The report also described that there are a number of service risk registers being developed.

The report identified the following as the highest rated risks on the Corporate Risk Register:

• LBL001 (Failure to achieve full regulatory compliance for Council Housing Stock) – relates to the failure to meet statutory health and safety requirements following the transfer of the Council’s housing stock from Lewisham Homes, and the ongoing remedial actions that are being taken by the Council.
• LBL009 (Significant Cyber Security Breach)
• LBL011 (Loss of overall financial control) – due to significant overspends that are insufficiently responsive to control and demand management efforts.

The report also noted that a new risk (LBL024) has been added to the Register. This risk relates to “Core service systems are not up to date with timely, accurate and complete data at year-end”, and is due to the new Housing Management Software.

The full Corporate Risk Register was provided at Appendix A.

Minutes

The Committee were asked to approve the minutes of the meeting held on 12 December 2024.

Declarations of Interest

The Committee were asked to declare any personal interests they had in the items to be discussed during the meeting.