The committee noted the external auditor's annual report for 2022-23, the audit progress update for the year ending 31 March 2024, and the external audit plan and strategy for the Southwark Pension Fund for 2023-24. They also noted the internal audit progress reports for 2023-24 and 2024-25 and the internal audit annual report and statement of assurance for 2023-24. The committee also noted the draft statement of accounts for 2023-24, approved the annual governance statement for 2023-24, and noted the report of the corporate anti-fraud team and special investigations team. Finally, they noted the HRA update and appointed Councillor Dora Dixon-Fyle MBE to the vacant positions on the audit, governance and standards (standards) sub-committee and the audit, governance and standards (civic awards) sub-committee.

Governance Conversation: Strategic Director of Environment, Neighbourhoods and Growth

Toni Ainge, the interim strategic director for environment, neighbourhoods and growth, presented to the committee.

Officers agreed to publish parking reports to the Southwark Council website within their statutory deadlines, aiming to publish them earlier whenever possible.

Officers also agreed to provide the committee with information about consultations that have taken place with area fora¹ regarding the TfL delivery plan.

Auditor's Annual Report on Southwark Council 2022-23

Grant Thornton, the previous external auditors for Southwark Council, presented their annual report on the council's financial sustainability, governance, and arrangements for securing value for money in 2022-23. The report is attached as Appendix A to the agenda pack.

The committee noted their extensive conversations on community housing schemes and TMOs[^3] at previous meetings.

Officers agreed to provide the committee with information about the TMO liaison management committee.

The committee thanked Grant Thornton for their work as external auditors for the council.

The committee also thanked the member of the public who raised the issue with the 2021-22 accounts for their attention and support.

Progress Report on Implementation of Recommendations from External Audit Action Plan

The committee reviewed the progress report on recommendations made by Grant Thornton in their audit findings reports for 2021-22 and 2022-23. The full list of recommendations and responses from the council are attached as Appendix A to the report.

The report noted that:

The audits of both the 2021-22 and 2022-23 statements of accounts provided clean, unqualified opinions and Southwark’s audits are all up to date.

The most significant area of audit concern highlighted in the audit findings reports related to processes around the valuations of property and our records of fixed assets.

The report described a number of measures the council has taken to improve the quality and timeliness of property valuations and the accounting for fixed assets.

Audit Progress Update for the Year Ending 31 March 2024

KPMG, the council's external auditors, presented their progress report on the audit of the council’s financial statements for the year ending 31 March 2024.

The report noted that KPMG has:

Finalised [their] risk assessment procedures, including reviewing the work performed by the predecessor auditor on the financial statements.

Review[ed] the draft financial statements, sharing [their] feedback with officers.

Commenced [their] audit procedures over taxation income, HRA rental income, fees and charges income, Council (as opposed to school) payroll, and non-pay expenditure.

Started inspecting the Council’s valuation of land and buildings.

The committee noted the report.

External Audit Plan & Strategy for Southwark Pension Fund 2023/24

KPMG presented their external audit plan and strategy for the Southwark Pension Fund for 2023-24. The plan is attached as Appendix A to the report.

The committee noted the plan.

Internal Audit Progress Report 2023-24 and 2024-25

BDO, the council’s internal auditors, presented their progress report for 2023-24 and 2024-25. The report is attached as Appendix A to the agenda pack. The report states that BDO have:

issued all final reports [for 2023-24].

The committee noted the report.

BDO also agreed to update the bottom paragraphs on pages 102 and 103 of the agenda (pp 13-14 internal numbering).

Officers agreed to bring a full report on cyber-security and IT hardware asset management to the committee.

Internal Audit Annual Report and Annual Statement of Assurance 2023-24, and Schools Annual Summary Report 2023-24

BDO presented their annual report and statement of assurance for 2023-24 and their schools summary report for 2023-24. The statement of assurance is attached as Appendix A to the report, and the schools report is attached as Appendix B.

The committee noted both reports.

Draft 2023/24 Statement of Accounts for Southwark Council

The committee considered the draft Statement of Accounts for 2023/24, attached as Appendix B to the agenda pack. The report provided an update on the Accounts and Audit Regulations 2015 and the government’s plans to introduce legislation to change the statutory deadlines for publishing audited accounts.

The committee noted that:

[t]he current Accounts and Audit Regulations 2015 require that the Council must prepare and publish its approved draft and audited accounts by 31 May and 30 September respectively.

due to the national backlog of audits, the ministry of housing, communities and local government intend to bring in legislation to amend these statutory deadlines e.g. the deadline for publishing the 2023-24 audited statement of accounts is expected to be 28 February 2025.

The report also explained why the council had published its draft statement of accounts late:

This is because the council, like many other local authorities, faced the challenge of catching up with a backlog of unaudited accounts, following the disruption caused by covid-19 virus and changes in the public sector audit market generally.

The committee noted the draft statement of accounts.

Officers agreed to:

• arrange an informal session for members outside of the meeting to discuss the accounts,
• confirm before the November meeting whether there had been any questions or challenges raised about the accounts,
• confirm references to specific data within the accounts before the November meeting, and
• bring back a report on the risks and governance around updating the council through the Southwark 360 programme to the February 2025 meeting.

Annual Governance Report 2023-24

The committee considered the Annual Governance Report 2023-24. The report states that:

Every year, each local authority is required by law to conduct a review of the effectiveness of its system of internal control and to publish a statement reporting on the review, the annual governance statement, with its financial statements.

The annual governance statement is therefore a mandatory statement that recognises, records and publishes the council’s governance arrangements as defined in the CIPFA/SOLACE framework for good governance in local authorities.

The committee approved the statement.

2024-25 Q1 Report of the Corporate Anti-Fraud Team and the Special Investigations Team

The committee considered the 2024-25 Q1 report of the Corporate Anti-fraud Team (CAFT) and the Special Investigations Team (SIT).

The report states that:

This report summarises the work of the Corporate Anti-Fraud Team (CAFT) and Special Investigations Team (SIT) for the first quarter 1 April 2024 to 30 June 2024.

The report includes the number of referrals the team received across several areas of work including Right to Buy applications, Blue Badge applications, and suspected tenancy fraud. The report also provides an update on the National Fraud Initiative (NFI).

The committee noted the report.

Housing Revenue Account Update

The committee considered a report on the Housing Revenue Account, which they had requested at a previous meeting.

The report noted that:

Members asked to be kept informed on progress made in relation to improving the financial health of the Council’s Housing Revenue Account.

This matter was flagged as a risk in a recent external auditor’s report.

It was agreed that periodic information update reports be brought to Committee to provide Members with visibility of progress being made.

The report explained the various factors that have impacted the HRA in recent years, some of which are outside the council's control. These include:

• rent caps imposed by the government,
• the cost of fire and building safety works, and
• rising interest rates.

The report stated that the council has taken immediate action to address the pressures, including:

• strengthening governance arrangements,
• agreeing revised cash limits for services to operate within, and
• introducing a moratorium on non-essential spend.

The report also provided an overview of the HRA’s financial performance in 2023-24, stating that:

The gross overspend on tenant facing budgets of £31.3m was partially offset by financing and one-off underspends, showed a final adverse variance of £16.4m before mitigations to bring the HRA into a balanced position.

The report describes the council's plans to mitigate this overspend, including using reserves and reducing the revenue contribution to the capital programme.

The committee noted the report.

Officers agreed to bring a further update on resident engagement on the HRA, including the budgets for detailed issues such as cleaning, estate care, and damp and mould.

Membership of Audit, Governance and Standards Sub-committees for 2024-25

The committee considered the report on membership of the audit, governance and standards (standards) sub-committee and the audit, governance and standards (civic awards) sub-committee.

The committee appointed Councillor Dora Dixon-Fyle MBE to the vacant position on the audit, governance and standards (standards) sub-committee and to the vacant position on the audit, governance and standards (civic awards) sub-committee.