The Audit Committee of Tower Hamlets Council met on Thursday 24 September 2026 to discuss the external auditor's reports and the Council's progress on addressing identified weaknesses. Key items discussed included the EY Audit Planning Report Addendum for 2025/26, the Pension Fund Audit Plan for 31 March 2026, and the Treasury Management Outturn Report for 2025/26. The committee also received an update on the Council's progress on its action plan to address external auditor recommendations.

EY Audit Planning Report Addendum – 2025/26

Ernst & Young LLP (EY), the Council's external auditor, presented their Audit Planning Report Addendum for the year ending 31 March 2026. This report detailed risk assessment procedures concerning opening reserve balances, undertaken in response to prior-year disclaimed audit opinions. Stephen Reid, Partner at EY, explained that the Council's progress was behind expected timescales, with the earliest possibility of an unqualified audit opinion being 2028/29 or 2029/30, rather than the previously anticipated 2026/27. This was attributed to the limited audit procedures completed in previous years and the ongoing work to rebuild assurance over the balance sheet. The report highlighted that the audit scope for 2025/26 would focus on closing balances, with the Comprehensive Income and Expenditure Statement and associated areas excluded to prioritise the balance sheet. The Audit Committee noted the content of the report.

Pension Fund Audit Plan for 31 March 2026

Hassan Rohimun, Partner at EY, presented the Pension Fund Audit Plan for the year ending 31 March 2026. The plan outlined the audit strategy, identified risks, materiality thresholds, and the scope and timeline of the audit. Members raised questions regarding the time required to complete the exercise related to IAS 26 Disclosure risk, with Mr. Rohimun confirming that an actuarial specialist had been engaged and an update would be provided at the next meeting. Regarding Level 3 investments, Mr. Rohimun clarified that these were hard-to-value investments, such as private equity, and that their exposure was within the acceptable range according to the Pension Fund's investment strategy. Paul Audu, Interim Head of Pensions and Treasury, added that these levels were within the acceptable exposure for Level 3 assets. The Audit Committee noted the report.

Progress Update on Action Plan Delivery in Response to External Recommendations Q2 2026/27

Satinder Jas, Director of Compliance, presented the progress update on the action plan for delivering on external auditor recommendations. He reported that considerable progress had been made in addressing the four statutory recommendations and six significant weaknesses identified by EY. Mr. Jas indicated that not all statutory recommendations were expected to be completed by the end of the financial year 2026-27, as the Council needed to demonstrate the continual embedding of actions taken. He noted that Workstream 4 – Investigations was considered a quicker area to reconcile, whereas Workstream 3 – Procurement would take longer due to the need to build the internal team. Members thanked officers for the report, finding it clearly set out. The Audit Committee noted the Council's approach and progress made in delivering the action plan.

Treasury Management Outturn Report – 2025/26

Paul Audu, Interim Head of Pensions and Treasury, presented the Treasury Management Outturn report for 2025/26. He highlighted that all treasury activities complied with the Council's approved strategy limits and prudential indicators. External borrowing remained unchanged at £68.7 million, with no new borrowing undertaken to avoid higher market rates, although this created a future refinancing risk. Investment income exceeded the budget by £1.7 million, reaching £6.58 million against a £4.88 million budget. The main future issue identified was managing the timing and cost of anticipated new borrowing as reserves reduce and the capital programme progresses. Members questioned the future refinancing risk if interest rates increased, and Mr. Audu explained that the offices would continue to monitor cash flows, the capital programme, market rates, and liability benchmarks, taking advice from advisers where appropriate. Councillor O'Connor noted that while debt was below the authorised limit, there had been a decrease in investments. Mr. Audu clarified that this was expected due to the capital programme and the continued use of internal borrowing, which had generated substantial short-term savings but meant the Council remained significantly under borrowed against the liability benchmark. The report indicated a potential additional borrowing requirement of around £126.7 million by 31 March 2027. Councillor George inquired about a jump in usable reserves in 2029 in table nine, which Mr. Ahsan Khan, Corporate Head of Financial and Technical Accounting, explained included revenue and capital reserves, such as Section 106 and CIL receipts, and represented the best projection of incoming reserves. The Audit Committee noted the report.

Audit Committee Work Plan

Barry Quirk, Independent Chair of the Audit Committee, asked members to note the workplan and if they had any suggestions. Councillor Hussain requested that the issue of 'internal controls' be added to the workplan. The Audit Committee noted the workplan for the committee for 2026-27.

Any Other Business

There was no other business for the Audit Committee to discuss. The meeting concluded at 7:51 p.m.