The Audit and Governance Committee of Newham Council met on Monday 30 June 2025 to discuss progress on the LGA Peer Review Action Plan, review the Treasury Management Year-End Report, and consider the Council's Going Concern Assessment. The Committee also received the draft External Audit report and the draft Statement of Accounts for 2024/25, and discussed the Draft Annual Governance Statement.

Progress on LGA Peer Review Action Plan

The Committee received an update on the progress made since the Local Government Association (LGA) Corporate Peer Challenge in December 2023 and a subsequent progress visit in October 2024. The report indicated that seven out of the eleven recommendations from the LGA Peer Challenge have been completed, with the remaining seven on track for completion by Autumn 2025. The Council is working to increase the pace of delivery, particularly in areas facing financial pressures such as temporary accommodation and social care. The Ministry of Housing, Communities and Local Government (MHCLG) has issued a non-statutory Best Value Notice to the Council, highlighting areas requiring concerted focus and accelerated action. The Council has committed to working closely with MHCLG to demonstrate improvements.

Treasury Management Year-End Report

The Committee noted the Treasury Management Outturn for 2024/25. The Council's borrowing increased to £1.405 billion, while temporary borrowing decreased. The report indicated that the Council's borrowing remains within the approved prudential indicators and is in line with the capital programme. The Council's investment priorities remain security, liquidity, and then yield, with 100% of investments held with other local authorities or the Debt Management Office. Officers will continue to seek to optimise yield on the Council's investments to reduce the impact on the General Fund.

Going Concern Assessment

The Committee considered the Council's Going Concern Assessment for 2024/25. The assessment concluded that the Council has sufficient reserves and has received agreement in principle for Exceptional Financial Support (EFS) from central government, allowing the use of capital receipts to support revenue expenditure. This, combined with sufficient capital assets available for disposal, provides a reasonable expectation that the Council will have adequate resources to continue in operational existence for the next 12 to 18 months. However, the report highlighted that the continued reliance on reserves and capital receipts is not a sustainable long-term strategy, and a more sustainable funding strategy for the local government sector is needed.

Draft External Audit Report

The Committee received the draft External Audit report from Ernst & Young LLP (EY). The report identified several audit risks, including the risk of fraud in expenditure and revenue recognition, and the valuation of property assets. EY noted that due to national capacity issues affecting local authority audits, they expect to issue a disclaimed audit opinion for the 2024/25 financial statements, as they did for 2023/24. EY will continue to work on rebuilding assurance over historical positions as guidance is issued. The report also highlighted the significant audit focus on the valuation of property assets, council dwellings, and the net pension liability.

Draft Statement of Accounts 2024/25

The Committee reviewed the Draft Statement of Accounts for 2024/25. The narrative report highlighted a net overspend of £40.8 million against the budget, primarily due to pressures in temporary accommodation and social care. This overspend has significantly reduced earmarked reserves. The Council's net asset value has decreased, and the report noted the trend of unsustainable overspending over the last three years. The Council's usable reserves total £467 million, with specific reserves earmarked for particular purposes. The Capital Receipts reserve, which includes £94 million from HRA and £109 million from General Fund, is being used to fund the capital programme and support EFS. The report also detailed the Council's investments in subsidiaries, including Populo Living Limited, which reported a loss of £11.5 million in 2024/25.

Draft Annual Governance Statement

The Committee discussed the Draft Annual Governance Statement (AGS) for 2024/25. The AGS is a self-assessment of the Council's governance arrangements and identifies progress in managing significant issues. The report noted a broadly positive direction of travel in terms of more robust governance, including an improved approach to risk management and stronger financial controls. However, it also highlighted ongoing challenges, such as budget pressures in temporary accommodation and social care, and the impact of the non-statutory Best Value Notice issued by MHCLG. The Committee raised concerns about the phrasing and lack of specific financial details in relation to a legal settlement mentioned in the AGS, and requested a redraft for the final version.

Year Ahead Forward Plan

The Committee reviewed the Year Ahead Forward Plan, noting that the September meeting has been cancelled due to changes in audit backstop dates, and will be replaced by an online training session. A query was raised regarding the appropriate committee for considering the Regulator of Social Housing report, which will remain with Overview and Scrutiny. Members requested that the forward plan include deep dive sessions on areas such as agency staffing, commercial issues, and contract performance, as well as follow-up reporting on significant governance issues.

Date of Next Meeting

The next meeting of the Audit and Governance Committee is scheduled for 16 July 2025.