The Audit Committee of Havering Council met on Tuesday 13 October 2026 to discuss the council's progress in rebuilding audit assurance following historic disclaimed audit opinions and to review the internal audit progress report. The committee noted that while progress is being made, a return to unqualified audit opinions is unlikely before 2029-30.

External Audit: Reset to Recovery and Rebuilding Audit Assurance

The committee received a report from external auditors Ernst & Young LLP (EY) detailing the council's progress in rebuilding audit assurance following previous disclaimed audit opinions. EY highlighted that Havering faces a longer recovery journey than many authorities due to limited audit procedures being completed across multiple financial years. Assurance gaps remain in key areas, particularly concerning reserves, property, plant and equipment, and income and expenditure.

EY acknowledged improvements in the council's audit readiness, financial reporting, and engagement with the audit process. However, they noted that the council's progress is behind the expected national timetable, and a return to unqualified audit opinions is unlikely before the 2029-30 financial year. The auditors identified higher inherent risks in several reserves, including the General Fund, Earmarked Reserves, Housing Revenue Account, Capital Receipts Reserve, Major Repairs Reserve, Capital Grants Unapplied Account, Dedicated Schools Grant Adjustments Account, and the Revaluation Reserve, due to the cumulative impact of unaudited transactions over multiple years.

The committee was informed that the council's focus for the 2025-26 financial year should be on producing high-quality financial statements and working papers to facilitate the audit process and allow for the natural rebuild of assurance. EY also noted an increase in audit materiality for 2025-26 to £13.2 million, with a reporting threshold for misstatements of £0.66 million. The valuation of land, buildings, and council dwellings was reassessed from a significant audit risk to an inherent risk.

The committee agreed to note the findings and observations contained within EY's reports.

Internal Audit Progress Report

The committee received an update on the internal audit progress report for the period ending Quarter 2 of the 2026-27 financial year. Sarah Hughes, Head of Assurance, presented the report, highlighting that 15% of the original internal audit plan had been completed, with a further 10% at draft report stage and 22% underway.

Several overdue high-priority recommendations were discussed, primarily relating to the Temporary Accommodation and Budget Management audits. Officers from the relevant services were present to provide updates on progress. It was noted that while some progress has been made, the overdue status is based on original implementation dates. The committee was assured that formal follow-up reviews are underway for these audits, and updated positions will be reported at the next meeting.

A specific concern was raised regarding the Tenancy Management Organisation (TMO) audit, where Petra TMO had failed to provide final accounts and transfer outstanding funds. Internal Audit was unable to provide full assurance due to these outstanding issues.

The committee also discussed the Counter Fraud team's outturn report, with a particular focus on fraud and anti-bribery training completion rates. Councillor Luke Barry, Chair of the Audit Committee, expressed strong dissatisfaction with the low completion rates, especially within the People directorate, where 57% of staff had not completed the mandatory training. He called for a significant improvement within six months, emphasizing that this is a cultural issue that needs urgent attention. Kathy Freeman, Strategic Director of Resources, acknowledged the unacceptable figures and outlined plans to improve compliance, including direct follow-ups with reporting managers and incorporating training into staff objectives.

The committee noted the contents of the report and agreed to the recommendations presented.

The meeting concluded with the committee agreeing to the recommendations as set out in the report on page 4 of the supplementary agenda.