This meeting of the Audit and Risk Committee will receive updates from Internal Audit on its completed work programme, including reviews of a number of the Council's services, and will discuss the financial risks to the Council presented by its Parking Services and Commercial Property portfolio.

Risk Deep Dive: Parking Services

The Committee will hear a report about the financial risk to the Council's budget presented by Parking Services, which has been exacerbated by the interaction of Islington Council's transport policies and an overall decline in car use in London. The report pack projects a £1.551m shortfall in revenue against budget at the end of Q1 2024/25, mainly due to a shortfall in parking suspensions and paid for parking, such as pay and display machines. The report pack says this trend:

is positive in terms of a reduction in overall car use and ownership, which directly contributes to Islington's transport and clean air objectives/policies

The report pack predicts that these trends will continue, with income levelling off in future years, making it difficult to make accurate budget predictions for the service.

The report pack explains why the implementation of new Liveable Neighbourhoods has been delayed, slowing the installation of new CCTV enforcement. Although they are not intended to generate income for the council, Liveable Neighbourhoods, (previously called Low Traffic Neighbourhoods or LTNs) do generate revenue through Penalty Charge Notices. The report pack describes how, due to the public health emergency and government advice to implement road schemes quickly, the first Low Traffic Neighbourhoods were installed with consultation following after implementation. The report pack says that the new Liveable Neighbourhood schemes are being implemented in more challenging environments and that local politics can have significant impacts on timescales.

The report pack also discusses the risks posed to the parking service's income by the number of drivers who do not register their cars with the DVLA.¹ It says that as the DVLA does not hold details of the owners of these vehicles, Penalty Charge Notices cannot be served on them, meaning they become uncollectable debt. It describes how the Parking Service has created a Nuisance Vehicles Working Group to find ways of recovering debt from persistent evaders.

The report pack concludes that the Parking Service will continue to monitor trends and take decisive action to address the challenges. It says that the Service is trying to mitigate the financial risk through a range of actions, including closer working with its enforcement contractor, NSL, enhancing debt recovery activity and the introduction of new paid for parking schemes.

Risk Deep Dive – Income Risks

This section of the meeting will discuss the risks posed to the Council's Medium Term Financial Strategy (MTFS)² by a potential shortfall in revenue from the Council's commercial property portfolio. The report pack states that the 55 properties in the portfolio currently generate an annual income of £3.12m against a budget of £4.37m.

The report pack explains how the budget figure is out of date and does not reflect current market conditions. The report pack also discusses how the recent loss of the Council's largest tenant, who paid £940,000 in rent for offices at 41-69 Old Street, has contributed to the shortfall in revenue. It says that part of this lost revenue has been recovered through a deal with Covalt Management Services, who are collecting rent on behalf of the Council at the property. The report pack says that Covalt are currently paying the Council £320,000 per year, and that:

Extensive work is underway to mitigate risk and to maximise opportunities from the portfolio

The report pack highlights how a small number of properties generate a large proportion of the income from the portfolio, creating significant financial risk for the Council. It describes how the Council is attempting to mitigate this risk by:

• Reconciling its finance and assets system data.
• Actively marketing vacant properties, such as the office space at 7 Newington Barrow Way.
• Reviewing rent charges.
• Potentially selling assets, including land in Stansted Mountfitchet.
• Generating additional income from advertising.

The report pack explains how a new policy regarding social value rent discounts is being developed. It says that in many cases the Council has historically let properties at discounted rents to support Voluntary Sector Organisations and commissioned Adult Social Care providers, but that a new policy is required to:

provid[e] clear and consistent justifications for discounting any rents linked to tangible social value benefits

The report pack says that Islington has appointed a specialist surveying practice to assess the potential for increasing advertising revenue from its assets across the borough. The surveyors are also reviewing the Council's existing agreement with advertising company Clear Channel.

The report pack concludes by saying that:

Given the (likely medium term) risks associated with the commercial portfolio, consideration needs to be given to tactical disposals as a potential mitigation as well as income generating opportunity

2023-24 Progress Report on the External Audit

This part of the meeting will receive an update on the progress of the external audit of Islington London Borough Council and Pension Fund's accounts for the year ended 31 March 2024. The document, prepared by auditors KPMG, focuses on the significant risk areas the auditors have identified in the accounts. It says that they are still working on valuing the Council's post retirement benefit obligations³, but have not yet identified any problems. It confirms that KPMG have reviewed the opening balances of the Council's accounts and have not identified any misstatements.

KPMG say that they have identified an unadjusted audit difference arising from lagged valuations in their audit of the pension fund's Level 3 Pooled Investment Vehicles.⁴ They say that this difference arises from a mismatch between the date of the pension fund's accounts and the date of the valuations of the underlying investments. They confirm that they are reviewing the audited financial statements of the Pooled Investment Vehicles and have not yet identified any other significant issues.

Internal Audit Annual Report 2023-24

This section of the meeting will hear a report on the work that Internal Audit has undertaken in the 2023-24 financial year. The report pack says that the purpose of the report is to:

provide Audit Committee with assurance over the Council’s governance, risk management and internal control environment

It says that the Head of Internal Audit (HIA) has concluded that the Council's internal control, risk management and governance arrangements are adequate, with some improvement required. This is the same conclusion that the HIA reached in the previous year. The report pack explains that the HIA reached this conclusion by considering the outcome of a programme of audits which provided assurance on the actions being taken to mitigate the principal risks to the Council.

The report pack says that Internal Audit completed a review of Islington's Tenant Management Organisations,⁵ concluding that the arrangements put in place to monitor them were inadequate. They made three high priority recommendations to improve the arrangements. Internal Audit also reviewed the medical assessments for housing allocations. They found these to be inadequate, making four high priority recommendations to improve the arrangements. They also reviewed the Council's key housing repairs IT system, NEC.⁶ They found this system to be inadequate, making three high priority recommendations to improve it.

The report pack summarises Internal Audit's opinions of each of the areas it reviewed. It highlights audits which concluded that the systems were inadequate, including:

• The Supporting Families programme, which received a compliance opinion.
• The way that changes to bank details are handled outside of MyHR, the council's HR system.
• Adult social care market stability.

The report pack concludes by providing a summary of Internal Audit's progress against its work programme for the year. It explains that a number of audits were deferred, including a review of the Anti Social Behaviour service, which has been delayed at management request until 2024/25 due to the ongoing transformation of the service. The report pack says that it was agreed that a repeat audit of Duncombe Primary School, which was requested by the school, should not be carried out and that the school should go through the standard follow up process. It explains that the planned audits of the Council's Financial Regulations and its Information Governance arrangements were not carried out because reviews of these systems had been carried out elsewhere in the council.

Annual Fraud Report 2023-24

This section of the meeting will receive the Council's Annual Fraud Report for the 2023/24 financial year. The report pack describes how the Council operates three separate investigation teams, covering corporate, housing and parking. It says that the Corporate Investigation team sits within the Internal Audit, Investigations and Risk Management service.

The report pack says that the Council's Corporate Investigation team received 98 fraud referrals during the year and 24 whistleblowing referrals. It says that they investigated 34 of these, including:

• 8 employment referrals.
• 17 payment and financial irregularity referrals.
• 2 contractor referrals
• 7 impropriety referrals

The report pack explains how 14 of the investigated referrals contained allegations made by members of the public against other members of the public, companies or organisations. It says that one of these allegations was substantiated and that five were not. The remaining eight are still being investigated.

The report pack says that the Corporate Investigation Team substantiated four allegations made against Council employees and services. Ten were not substantiated, one was dropped due to lack of evidence and five are still being investigated.

The report pack describes how the Corporate Investigation Team enhances the Council's control environment by issuing investigation reports to service management and HR which include recommendations about how to prevent fraud from reoccurring. It says that lessons learned from fraud investigations are fed into the work of Internal Audit.

The report pack also describes how the Council's Housing Investigations Team, based within the Homes and Neighbourhoods Directorate, recovered 47 properties during the year, compared to 48 the previous year. It says that the team's performance has been affected by a shortage of bailiffs.

The report pack says that the Housing Investigations Team prevented two Right to Buy applications during the year, compared to six the previous year. The report pack states that the average cost to the Council of recovering a property through the Housing Investigations team is £10,096.

The report pack concludes by describing the work of the Parking Fraud Investigation Team, which it says investigates all forms of parking fraud in Islington. The report pack says that the team investigated 140 cases during the year, issuing 124 PCNs, removing 59 vehicles from the road and confiscating 65 Blue Badges.

Biannual Whistle blowing Monitoring Report

This part of the meeting will receive an update on whistleblowing referrals made to the Council between 1 February and 31 July 2024. The report pack states that the Head of Internal Audit, Investigations and Risk Management is the Council's Whistleblowing Officer.

It explains that there are separate reporting mechanisms for adult and child protection allegations and that information about whistleblowing can be found on the Council's intranet.

The report pack says that 18 new whistleblowing referrals were received during the period, of which 10 are still open, while eight were closed because the allegations were unsubstantiated. The report also provides an update on seven referrals that were open at the time of the last report to the Committee, in March 2024. It says that five of those allegations were not substantiated and two were substantiated.

Forward Plan

This section of the meeting will discuss the Committee's Forward Plan for the 2024/25 financial year. It says that the Committee will hear a Risk Deep Dive into Health and Social Care Integration at its November meeting, and a Risk Deep Dive on a yet to be confirmed topic in May.

Audit and Risk Committee Response Tracker

This section of the meeting will receive an update on the Committee's progress in addressing queries it has raised in previous meetings.

It shows that the Committee requested a method of monitoring indicators of social care market instability in March 2024 and that officers responded in June 2024, saying that the Islington Provider Quality Oversight Board's remit had been extended in 2023-24 to include financial concerns.

The Committee asked officers to review whether members' training was up to date. Officers responded, confirming that the Committee had received training from CIPFA on Internal and External Audit in March 2023 and had been invited to training on Scrutiny, Financial Scrutiny, and other topics since then.

The Committee requested a progress report on key governance issues in May 2024. Officers responded, confirming that the Annual Governance Statement Mid-Year Review would be discussed at the Committee's November meeting.

The Committee asked whether a public statement could be made to reassure members of the public about data security and the Council's ability to provide business continuity. Officers responded, confirming that a statement had been produced.

The Chair of the Committee wrote to the Chief Executive in July 2024 requesting an update on the mitigating actions being taken to address overspends and shortfalls in income.

External Audit Update

This part of the meeting will receive an update on the progress of the External Audit. The report pack confirms that the audit is progressing and that the auditors expect to issue their audit opinion in December 2024.