The Audit Committee of Tower Hamlets Council met on Thursday 20 July 2023 to discuss the progress of financial audits, the internal audit annual report, school audits, risk management, insurance, and the code of corporate governance. Key decisions included noting the progress on outstanding financial accounts, approving the internal audit annual report with a recommendation for improvement, and endorsing the revised code of corporate governance for publication.

Update on Financial Accounts and Audits

The committee received an update on the ongoing audits of the financial accounts for the years 2018-2019, 2019-2020, and 2020-2021. Caroline Holland, Interim Corporate Director of Resources, explained that the sign-off for the 2018-2019 and 2019-2020 accounts was still pending due to issues with the pension liability valuation. Michael Ingram, a pensions specialist from Deloitte, elaborated on the discrepancies found between the 2016 and 2019 pension valuations, noting that over 1,000 pensioner members appeared to have received no increase or even a decrease in their pension, which suggests inconsistencies in the data used for these valuations. The council is awaiting a response from the actuaries to clarify these differences. Despite these challenges, the audit for the 2021 accounts has commenced, with the council aiming to present these accounts to the November committee meeting.

Internal Audit Annual Report 2022-2023

David Dobbs, Head of Internal Audit, presented the Internal Audit Annual Report for 2022-2023. He highlighted that the Head of Internal Audit's opinion for the year was reasonable assurance, an improvement from the limited assurance received in the previous year. This positive outcome was supported by the fact that 65% of audits completed during 2022-2023 resulted in reasonable or substantial assurance, a level not seen since the 2018-2019 financial year. However, Mr. Dobbs cautioned that the council's significant programme of change and transformation is likely to cause turbulence in the coming year, potentially weakening internal controls and making it challenging to maintain this level of performance. The report also noted three areas where further work is needed to ensure full compliance with public sector internal audit standards: adequacy of resources, coordination with other assurance providers, and an overdue external quality assessment.

Schools Annual Audit Report

The committee reviewed the Schools Annual Audit Report, which detailed the audits conducted by the council's co-source partner, BDO. During the period, 15 audits were undertaken, with 10 receiving reasonable assurance, one receiving substantial assurance, and four receiving limited assurance. David Dobbs explained that the limited assurance audits indicated high-priority recommendations that require prompt implementation. He also noted that the council aims to audit each school once every five years, with approximately 120 schools within the Local Education Authority (LEA). The lower number of audits in this period was attributed to re-establishing audit arrangements post-pandemic.

Risk Management Annual Report

David Dobbs also presented the Risk Management Annual Report. The report indicated that while risk management practices are established, they are not yet fully embedded or mature across the council, leading to inconsistent levels of engagement with the underlying processes. This means there is limited confidence in the accuracy and usefulness of the data held on the JCAD risk management software. An action plan has been developed to address these issues, including the appointment of a risk champion, the recruitment of a dedicated Risk Officer, and a review of the JCAD software. Councillor Asma Islam raised a question about the increased risk rating for the Children and Culture department, which Caroline Holland, Interim Corporate Director of Resources, attributed partly to the insourcing of leisure services and the creation of the youth service. Councillor Mufeedah Bustin inquired about overdue control reviews, with Mr. Dobbs expressing concern about the significant minority of overdue reviews and the need for better engagement with the JCAD system.

Insurance Annual Report

The Insurance Annual Report was presented by David Dobbs. The report detailed the council's insurance arrangements, which include self-insurance and externally insured risks. The in-house team handles claims up to the policy excess, with highways and housing being the main areas for claims, often related to potholes, trips, falls, fire damage, and water leakage. The repudiation rate for claims stands at approximately 63%. Emerging areas of risk include data protection breaches and safeguarding claims, which tend to be higher value and more complex. Councillor Kabir Ahmed raised questions about the recording of claims and payouts, and whether there has been an increase in damp and mould claims, with Mr. Dobbs promising to provide further clarification on the data recording methodology.

Code of Corporate Governance

Stephen Bramah, Corporate Head of Strategy and Improvement, presented the Code of Corporate Governance. He explained that this annual review sets out the council's commitment to upholding high standards of good governance, building on the framework established in 2018. The code adheres to the Chartered Institute of Public Finance and Accountancy (CIPFA) best practice, focusing on seven key themes related to the conduct of individuals in public life. The review incorporates changes such as new board structures and ensures that policies and procedures are up-to-date. The committee was recommended to review and comment on the revised code, endorse it, and agree to its publication on the council's website. Councillor Abdul Wahid raised a point about the timing of audit committee training sessions, suggesting a review to ensure better attendance and preparation, particularly in relation to other council meetings.

Audit Committee Work Plan

The Audit Committee noted its work plan for 2023-2024.

Any Other Business

Under Any Other Business, Councillor Jill Bailey raised a point regarding the timing of meetings and the preparation of papers, suggesting a review to ease the burden on councillors.