The Audit Committee of Ealing Council met on Thursday, 26 September 2024, to review the council's treasury management activities for the financial year 2023/24 and the first quarter of 2024/25. The committee also received updates on the national audit backlog, the progress of external audits for the financial years 2022 and 2023, and the council's draft Statement of Accounts for 2023/24.

Treasury Management Outturn Update 2023/24

The committee received an update on the council's borrowing and investment activities for the financial year ending 31 March 2024. All treasury management activities were conducted within approved limits. The council's investment balance stood at £511.686m as of 31 March 2024, with £442.100m invested with the Debt Management Office (DMO). The report noted a slight decrease in long-term debt from £877.532m to £869.226m, primarily due to the repayment of maturing Public Works Loans Board (PWLB) loans. The council earned an average investment return of 4.813% on short-term investments, slightly below the average SONIA overnight rate of 4.959%, attributed to investments made at lower rates before interest rate increases. The council currently holds no direct investments with overseas financial institutions. The Prudential Indicators for 2023/24 were maintained within the limits set by Full Council.

Treasury Management Q1 Update 2024/25

An update was provided on treasury management activities for the quarter ending 30 June 2024. All activities were within approved limits. The council's investment balance stood at £526.928m as of 30 June 2024, with £441.000m invested with the DMO. The report included economic forecasts predicting reductions in interest rates over the next 18 months. The council's investment return for the quarter averaged 4.882%, underperforming the benchmark SONIA rate of 5.199%, attributed to investments at lower rates prior to interest rate increases.

Audit Backlog Update

Emma Horner, Assistant Director of Technical Finance, presented an update on the government's efforts to address the significant backlog of unaudited local government accounts in England. The report detailed immediate actions being taken by various bodies, including proposed secondary legislation to facilitate timely audits and set backstop dates. For Ealing Council, this means auditors Deloitte LLP (for 2021/22 and 2022/23) and Forvis Mazars (for 2023/24) intend to issue disclaimed opinions for these years due to time and resource constraints. While this is a national issue and not expected to have an adverse impact on the council, it means stakeholders will not have independent assurance on the council's financial position for these years. Proposed backstop dates have been set, with the earliest for financial years up to and including 2022/23 being 13 December 2024.

External Audit Update Financial Years 2022 and 2023

Deloitte LLP, the council's appointed external auditors for the financial years 2022 and 2023, presented reports outlining their approach to delivering the audit of the financial statements for the Council and the Pension Fund up to the December 2024 proposed backstop date. They also provided an update on audit progress. Due to the time constraints and the anticipated disclaimer of opinion, Deloitte LLP will not be performing full audit testing of underlying balances, transactions, or disclosures. The report noted that no objections had been received in respect of the published years of account. Deloitte LLP confirmed their independence and provided details on audit fees, noting that scale fees are subject to variation due to the backstop provisions.

Statement of Accounts (Q4)

Emma Horner presented the draft 2023/24 Statement of Accounts for the committee's note and comment. The statement provides details of the council's overall financial position, including the balance sheet and revenue activities for the year, covering the General Fund, Pension Fund, Collection Fund, Housing Revenue Account, and Group Accounts. The council's external auditor for 2023/24 is Forvis Mazars.

Quarter 4 Reports

The committee received updates on the work of internal audit and investigations for Quarter 4 (1 January 2024 – 31 March 2024), as well as the Head of Audit's Annual Opinion for 2023/24. The internal audit service provided reasonable assurance on the council's overall control framework and key financial systems, an improvement from the previous year's limited assurance. The investigations team reported actual and notional savings of £2.88m for the year. Proactive anti-fraud work, including the National Fraud Initiative data match, identified several instances of potential fraud, leading to cancellations of blue badges, housing waiting list applications, and council tax reduction claims. Enhanced vetting processes for new recruits also identified cases that failed to progress due to issues such as benefit fraud and false employment history.

Risk Management (Q1)

An update was provided on the strategic risks for the council, which are owned and managed by the Strategic Leadership Team (SLT). There were no material changes to the risk register since Quarter 3, although a number of mitigations had been updated. The report highlighted key risks including financial resilience, cyber/data protection, service demand, regulatory compliance, and transformation/major projects. The SLT was actively engaged in reviewing and managing these risks, with mitigation actions in progress or implemented.

Annual Work Programme (Q1)

The committee agreed the draft indicative work plan for 2024/25, which outlines the proposed audit activities for the year.

External Audit Verbal Update Financial Year 2024

Suresh Patel from Forvis Mazars provided a verbal update on the external audit for the financial year 2024. He explained the challenges posed by the revised backstop dates for completing accounts, noting that Ealing Council, like many others, would likely receive a disclaimed audit opinion for the outstanding years. He assured the committee that this was a national issue and not expected to have an adverse financial impact on the council. He also highlighted the importance of rebuilding trust in the audit process, which could take several years.

In summary, the meeting covered a comprehensive review of the council's financial management, audit progress, and risk management strategies, with a particular focus on addressing the national audit backlog and ensuring robust internal controls.