The Hackney Council Audit Committee convened to discuss the auditor's annual report, financial updates, risk management, and future audit plans, with a significant focus on the council's financial sustainability and the challenges posed by increasing demand for services. The committee approved the proposed internal audit annual plan for 2025/26 and noted the contents of the annual report of the Audit Committee for 2024/25.

Here's a breakdown of the key topics discussed:

• Auditor's Annual Report 2023/24
  • Suresh Patel from Farvis Mazars presented the Auditor's Annual Report 2023/24, confirming an unqualified opinion on both the council and pension fund accounts, issued on 25 February.
  • Hackney was one of only 10 London boroughs to receive an unqualified audit opinion.
  • The report highlighted no significant weaknesses in value for money but noted increasing challenges to the council's financial sustainability.
  • Two objections received on the accounts for 2023/24 are under consideration.
  • Councillor Anthony raised concerns about a deficiency in the valuation of assets, where only 20% are valued per year, but officers clarified that the valuation doesn't impact the council's borrowing ability.
  • Councillor Maureen asked about uncorrected misstatements and their impact on residents, with clarification given that these were extrapolated errors and didn't suggest underlying weaknesses.
  • Councillor Lucas asked about confirmation from the National Audit Office (NAO) on the approach to selected sampling components, which is still awaited and prevents certifying completion of the audit.
  • The committee recommended noting the contents and recommendations in the report.
• Financial Update and Treasury Management
  • Naeem Ahmed, the group director for finance and resources, provided a finance update, a treasury management update, an overview of the capital on borrowing deep dive, and the capital programme.
  • The overall general fund position for 2024/25 showed an overspend of just under £37 million, requiring the use of reserves to manage.
  • Mitigations included pausing revenue contributions to the capital programme and revising the minimum revenue provision.
  • Demand-led services, particularly children's and education, adults health and integration, and climate homes and economy, were major drivers of the overspend.
  • The group director for finance and resources warned that reserves could be exhausted in two to three years if overspending continued at the current rate.
  • The latest general fund balance as of 31 March was £154 million.
  • Spending reduction initiatives are underway, including reviewing agency assignments and non-essential spend.
  • Agency spend across the general fund was £45 million, with adult health and integration agency spend increasing due to backfilling statutory permanent posts.
  • The housing revenue account (HRA) is forecasting a break-even position, but with an operational expenditure overspend of £14.8 million, mainly driven by repairs and legal disrepair costs.
  • The debt portfolio stands at £166 million, with borrowing increasing by £34 million in the quarter.
  • The investment portfolio is just under £46 million, with an average interest rate of 4.5%.
  • New long-term borrowing of £20 million was taken out from the Public Works Loan Board (PWLB) in quarter four.
  • A deep dive into the cost of capital borrowing showed low borrowings but increasing reliance on borrowing for capital investment.
  • The capital programme is £77 million below the revised budget due to economic factors and delivery issues.
  • Councillor Anna Lynch, chair of the audit committee, expressed grave concerns around the risks of borrowing and using reserves.
  • Naeem Ahmed mentioned that Inner Circle Consulting has been commissioned to review the council's target operating model.
  • Councillor Lucas asked about the impact of global volatility on the council's financial position.
  • The committee noted the updates and recommendations in the treasury management update and the content of the deep dive.
• Risk Registers
  • Diane Benjamin, director of social power, presented the children and education directorate risk register, noting no overall change to the profile of most risks.
  • New risks included changes to statutory requirements and capacity to lead implementation.
  • Ongoing risks included delays in responding to subject access requests (SARS) and budget pressures impacting service demand.
  • Councillor Garbett commented on the risk around exclusions and asked about family hubs funding and school estate engagement.
  • Helen Woodland, group director for adults, health and integration, presented the adults, health and integration directorate risk register, highlighting increased demand and the risk of cost shunting from the NHS.
  • Councillor Lucas asked about staffing issues at the iconic mortuary, and Councillor Anthony asked about the impact of the cyber attack on payment processes.
  • The committee noted the contents of both risk registers and controls in place.
• Performance Update
  • Michael Sheffield, corporate head of audit, anti-fraud and risk management, presented the performance update, noting that the capital monitoring report was covered in the finance update.
  • The corporate risk scorecard was summarised, with one change being the de-escalation of the Synergy risk.
  • Councillor Garbett raised concerns about the lack of a target and reporting for repairs completed first time.
  • Councillor Lucas drew attention to street cleanliness measures and a notable uptick in detritus and litter.
  • The committee considered the performance report, risk management scorecard, and capital monitoring update.
• Audit and Anti-Fraud Progress Report
  • Michael Sheffield presented the audit and anti-fraud progress report, noting that completion of the audit plan stood at 66%, below the KPI target.
  • There was an increase in limited and no assurance audit reviews, often concerning third-party organisations or IT arrangements.
  • The implementation of recommendations continued to be good.
  • Estimated benefits from investigation work were £0.76 million.
  • Councillor Lynch asked about the postponed review of complaints handling for housing.
  • Councillor Lucas asked about capacity issues within the team.
  • Councillor Anthony asked about reporting to the national fraud database and proceeds of crime act applications.
  • The committee noted the contents of the report.
• Whistleblowing Annual Report
  • Michael Sheffield presented the whistleblowing annual report, noting that whistleblowing represents a small volume of referrals.
  • There were five referrals received through the independent reporting hotline during 2024/25.
  • The committee noted the whistleblowing annual report.
• Internal Audit Annual Plan 2025/26
  • Michael Sheffield presented the internal audit annual plan for 2025/26, derived from risk assessments, management requests, and governance issues.
  • Councillor Garbett asked about the scope of the permanent exclusions work and the private rented sector one.
  • The committee considered and approved the proposed plan and key performance measures.
• Annual Report of the Audit Committee 2024/25
  • Michael Sheffield presented the annual report of the audit committee, highlighting the committee's role in overseeing the council's management of performance, risk, and finances.
  • The committee noted the report, which will go to full council in July.
• Audit Committee Work Programme
  • The committee noted the audit committee work programme.

Councillor Lucas thanked Councillor Lynch for her excellent chairing of the committee. Councillor Garbett echoed this and suggested that the independent members be added to the front of the reports.