The committee approved the 2021/22 and 2022/23 Statement of Accounts for Ealing Council and the London Borough of Ealing Pension Fund. The committee also noted a report on the council's treasury management activities for quarter 2 of 2024/25, discussed audit strategy memos for both the council and the Pension Fund, received progress updates on internal audit and anti-fraud work, and reviewed the strategic risk register for quarter 2.

Treasury management

The committee noted that treasury management returns were expected to decrease because the Bank of England's base rate had fallen in November 2024. This reduction would lead to lower treasury management income moving forward.

Bridget Uku, Group Manager for Treasury & Investments, stated:

...the returns were expected to decrease because base rates had dropped in November, leading to an anticipated reduction in treasury management income moving forward.

The committee heard that the Bank of England had signalled that the November budget was expected to be inflationary, and the Monetary Policy Committee (MPC) would likely stabilise interest rates for the foreseeable future.

Audit strategy memos

Ealing Council

The committee received the audit plan for 2023/24, which, as expected, would result in a disclaimer of opinion. Suresh Patel, external auditor at Forvis Mazars, explained that Section 3 of the report outlined the limited work required to issue a disclaimer. He confirmed that the audit team would still conduct value-for-money work, including following up on issues and recommendations from the previous year's auditors, Deloitte.

Pension Fund

The committee heard that the 2024 pension fund audit would be a full audit. Rajesh Arora, external auditor at Forvis Mazars, explained that the audit would follow a risk-based approach, with a focus on the areas of the financial statements deemed most susceptible to material misstatement.

The audit plan highlighted two significant risks:

• The risk of management override of controls, a default risk considered in every audit
• Valuation of Level 3 investments, which lack readily available market prices.

Katie O'Leary, external auditor at Forvis Mazars, confirmed that:

They expected to set overall financial statement materiality at 1% of the pension fund's net assets, consistent with the benchmark used by Deloitte in previous years.

This level was determined based on this being a first-year engagement and the previous year’s audit opinion being disclaimed.

Annual Audit Closing Report

The committee approved the 2021/22 and 2022/23 Statement of Accounts for Ealing Council and the Pension Fund.

Jonathan Gooding, external auditor at Deloitte, presented the audit reports for 2022 and 2023. He reiterated the context of the government's backstop arrangements, which would lead to a disclaimer of opinion for both years.

The report identified a significant weakness in the council's value for money arrangements for 2022 and 2023. These weaknesses were related to:

• Managing risks
• Maintaining an adequate system of internal control
• Taking effective corrective action
• Complying with relevant laws and regulations, specifically in the areas of fire safety and housing.

Deloitte recommended:

...the implementation of remaining recommendations from internal and external reports, as well as monitoring the effectiveness of changes to arrangements following the implementation of the council’s action plans.

Dina Peuters, external auditor at Deloitte, provided an update on the Pension Fund audits. She highlighted two new findings from the 2022 audit related to the Goodwin and Virgin Media rulings. A disclaimer of opinion would also be issued for the 2023 audit, as several issues from 2022 remained unresolved.

Accounting policies

The committee noted a report on the council's accounting policies for 2024/25. A key change was the introduction of IFRS 16, a new accounting standard that alters how leases are treated. This standard would require leases to be brought onto the balance sheet, similar to finance leases.

Internal Audit and Anti-Fraud

The committee received a progress report on internal audit and anti-fraud work for quarter 2 of 2024/25. Mike Pinder, Assistant Director of Audit and Investigations, highlighted the lower assurance reports issued during the period, specifically two with no assurance and one with limited assurance.

He explained the different levels of assurance used by the internal audit team:

• Substantial Assurance: No major issues.
• Reasonable Assurance: Controls are mostly in place but require some improvement.
• Limited Assurance: Significant weaknesses are present, potentially affecting the delivery of objectives.
• No Assurance: Major weaknesses are likely to impact the delivery of objectives.

Mr Pinder acknowledged that performance was slightly behind schedule due to delays in recruiting the internal audit team. However, four out of five positions had been filled, and progress was being made on outstanding recommendations. The report also noted an increase in fraud cases investigated, with over £335,000 in notional and actual savings.

Risk Management

The committee reviewed the Strategic Risk Register for quarter 2. There were no changes to risk scores since quarter 1.

Mr Pinder reported:

...some high risks related to temporary accommodation had been added, which aligned with findings in the internal audit report.

He explained that updates to the risk register had been delayed but not due to a lack of action; rather, there had been a lack of timely updates. A new process was being implemented to improve the tracking of mitigations and reporting.