The Audit Committee of Newham Council met on Wednesday 22 January 2025 to discuss social value subsidies in leasing arrangements and treasury management. Key decisions included noting the mid-year treasury management report and commenting on the draft Treasury Management Strategy Statement for 2025/26.

Social Value Subsidy in Leasing Arrangements

The committee received a report outlining the application of Social Value subsidies awarded to Voluntary and Community sector organisations occupying Council premises. The report detailed the principles of the Social Value policy and its application across three services: Resident Engagement and Participation, Property, and Inclusive Economy. It explained how properties are assessed for eligibility for a Social Value subsidy, the process for deciding occupancy, and the situation for organisations occupying ineligible properties.

Councillor Rita Chadha, Cabinet Member for Health & Adult Social Care and Transforming Newham for the Future, raised concerns about the transparency and fairness of the property allocation process. She questioned the annual audit of groups and specifically asked about Applecart Arts, which had closed, and whether their financial troubles had been identified through the process. Giles Clark, from the Property perspective, explained that while the subsidy is reviewed annually, the organisation itself is responsible for its financial submissions. He noted that Applecart Arts was an exception, as its lease was structured differently and did not require the same level of feedback.

Councillor Nate Higgins, Green Group Leader, inquired about the evaluation of the matrix used for assessing suitability and the amount of discount a tenant might receive. He questioned how the council assesses if the matrix is right and if it is achieving best value. Mohamed Hamaddam, an officer, explained that the matrix is based on council priorities and has been reviewed when priorities change. However, he acknowledged that the council has not evaluated the totality of the work done by organisations under the matrix.

Councillor Carleene Lee-Phakoe expressed concern about the lack of definitive answers regarding the audit of the social value policy and the potential reputational risks. Jason Strelitz, Corporate Director Adults (DASS), Commissioning, Health & Social Care, highlighted a distinction between the application of the policy in community centres versus commercial properties, noting its success in bringing community centres back into use.

Councillor Chadha also raised the point that the policy is supposed to be financially net neutral, but a proposed cut of £200,000 suggests it is not currently net neutral. Giles, an officer, clarified that the £200,000 represents the potential saving if the subsidy were removed, meaning community centres would also be let at a higher charge. He explained that the subsidy covers all properties, not just those that could be let commercially.

The committee noted the report, with a commitment made to further work on the social value policy after the budget outcome.

Treasury Management Mid-year Report

Andrew Ward, Deputy Director of Finance, and Stephen Wilde, an officer, introduced the mid-year report on Treasury Management for the 2024-25 financial year. The report detailed the projected outturn for Treasury Management, including prudential indicators and treasury limits, and highlighted the long-term borrowing drawn down from the Public Works Loans Board (PWLB) to finance the 2024-25 Capital Programme.

Stephen Wilde noted that £246 million in PWLB debt had been drawn down at favourable rates, close to the lowest points on the PWLB curve. He stated that this borrowing was timely, as rates had surged following the UK budget. He also mentioned that the council's treasury advisers anticipate rates remaining higher for longer, making it prudent to take down short-term debt with a view to refinancing into longer-term debt later.

The report indicated that the council had stayed within the parameters of the Treasury Management Strategy Statement set in the budget report. The committee was requested to note the projected outturn and the long-term borrowing drawn down.

London Borough of Newham Statement of Accounts 2023/24

Meinir Hall, Chief Accountant, presented the Statement of Accounts for the 2023/24 financial year. She explained that due to national issues affecting local audits, Ernst & Young LLP (EY), the external auditors, had not been able to complete the audit and would be issuing a disclaimed audit opinion by 28 February 2025.

The report recommended that the committee consider the contents of the report and the Statement of Accounts, delegate authority to the Chair and the S151 Officer to approve the Statement of Accounts once EY had completed their work, and approve the final Annual Governance Statement for 2023/24.

Year Ahead Forward Plan

The committee discussed the draft Year Ahead Forward Plan, which outlines future audit committee activities.

Date of Next Meeting

The date of the next meeting was scheduled for 12 February 2025.