The Havering Council Audit Committee met to discuss the external audit plans for 2024/25, the annual treasury management report for 2024/25, and the head of assurance annual report for 2024/25. The committee also reviewed its own effectiveness and planned work for the upcoming year.

External Audit Plans 2024/25

The committee reviewed the external audit plans presented by Ernst and Young (EY) for both the London Borough of Havering and the Havering Pension Fund. The audit plan outlines the scope of the audit, any significant risks inherent in the audit, materiality and value for money arrangements.

For 2024/25, the EY Audit Partner for the Pension Fund audit has changed from Mark Hodgson to Hassan Rohimun.

The scale fees for the 2024/25 audit will be £452,308 (prior year £421,745) for the Council and £96,974 (prior year £85,945) for the Pension Fund, subject to the Council and Pension Fund delivering a good set of financial statements and working papers.

The audit plans identified several significant risks:

• Misstatement due to fraud or error
• Incorrect capitalisation of revenue expenditure
• Accounting adjustments made in the 'Movement in Reserves Statement'
• Valuation of Investment Property
• The accounting treatment and valuation of Inventory held in the group subsidiaries
• Consolidation procedures in the Group Statement of Accounts

The audit plans also identified several inherent risks:

• IFRS 16 Implementation[^1] [^1]: IFRS 16 Leases is applicable in local government for periods beginning 1 April 2024. Where the Council are the lessee, these will now be recognised on the Balance Sheet as a 'right of use' asset and a lease liability reflecting the obligation to make lease payments.
• Valuation of land and buildings and Council dwellings
• Pension Liability valuation
• Accounting for the impairment of Receivables (Bad debt provision)
• Going Concern disclosure

EY's Hassan Rohimun noted that the firm planned to issue the 2024/25 audit opinions by December 2025, two months prior to the government's backstop date of 27 February 2026.

Annual Treasury Management Report 2024/25

The committee received the Annual Treasury Management Report 2024/25, presented by Kathy Freeman, Strategic Director of Resources and S151 Officer. The report covered the delivery of the Treasury Management Strategy Statement (TMSS) in 2024/25, activity on treasury managed investments and borrowings, and the associated monitoring and control.

Key highlights from the report included:

• Investment income from treasury investments received for 2024/25 was £4.2m
• Interest payable as a result of debt for 2024/25 was £16.6m
• The Authority's long term debt is fixed at an average rate of 3.70%.
• During the period December 2024 through to March 2025 new 1 year PWLB[^2] loans were taken totalling £293m at an average rate of 4.55% to refinance maturing debt of £118m and to finance historic capital spend. [^2]: PWLB stands for Public Works Loan Board. The PWLB lending facility is operated by the UK Debt Management Office (DMO) on behalf of HM Treasury and provides loans to local authorities, and other specified bodies, from the National Loans Fund, operating within a policy framework set by HM Treasury.
• During the year treasury exceeded its Investment benchmark of 3 month SONIA[^3] @4.82% delivering a yield of 5.26%, (+0.44%) [^3]: SONIA stands for sterling overnight interest average rate, the average rate at which banks offer funds in the overnight sterling market.
• During 2024/25 this Authority's treasury activities remained within the treasury limits and prudential indicators set out in the TMSS.

The report noted that the Bank of England (BoE) Monetary Policy Committee (MPC) started easing monetary policy, cutting the Bank Rate in stepped reductions of 0.25% from 5.25% in April 2024 to 4.50% by the end of the financial year.

The report also noted that UK Inflation as measured by the CPI¹ was range bound during the year starting at 2.3% and reaching a low of 1.7% in September 2024 before moving higher ending the financial year at 2.6%, slight above the (BoE) target rate of 2%. The committee noted that the Authority's debt portfolio as at 31st March 2025 is fixed at an average rate of 3.70% with an average duration of 12.6 years.

The possibility of debt rescheduling was regularly discussed with the council's treasury advisor, MUFG corporate markets, but the current PWLB rules on redemption remain prohibitive and costly.

The Authority holds a £7m LOBO² loan with Danske Bank at a rate of 3.6%. Danske Bank has the option to propose an increase in the interest rate at set dates, while the Authority then has the option to either accept the new rate or to repay the loan at no additional cost.

Head of Assurance Annual Report 2024/25

The committee considered the Head of Assurance Annual Report 2024/25, presented by Jeremy Welburn, Head of Assurance. The report summarised the outcomes of internal audit and counter fraud work completed during 2024/25 and the Head of Assurance's annual opinion.

The Head of Assurance opinion provides an assessment of the overall adequacy and effectiveness of the organisation's framework of governance, risk management and control.

The report noted that last year's (2023/24) annual opinion concluded that reasonable assurance could be provided that there was generally a sound system of internal control across the Council, but that procurement processes and contract management arrangements continues to be an area of significant risk to the Council.

The internal audit programme of work for 2024/25 identified the following areas where only limited assurance could be provided on the control environment:

• Court of Protection: Deputyship and Appointeeships
• Engagement of Consultants via Matrix
• Procurement Processes
• Tenant management Organisations.

Based on the work undertaken and finalised reports at the end of the 2024/25 financial year, reasonable assurance could be provided that there is generally a sound system of internal control across the Council.

However, instances of potentially fraudulent activity identified in the final quarter of 2024/25 and a control failure in the Temporary Accommodation service do highlight a weakness in the management of budgets across the Council. Given the issues identified, the Head of Audit can only provide limited assurance on the overall effectiveness on the control environment, specifically the management and oversight of departmental budgets and expenditure.

The report also included updates on risk management arrangements, governance arrangements, and the work of the Audit Committee.

Audit Committee Annual Report 2024/25

The committee reviewed its own effectiveness and planned work for the upcoming year. The report covered the period July 2024 to May 2025 and outlined information relating to the Audit Committee, the coverage of work undertaken by the Audit Committee, actions taking during the year, including training, to ensure the effectiveness of the Audit Committee, and future planned work and challenges.

The committee has regularly reviewed:

• Progress against the audit plan and performance;
• Key findings/issues arising from each audit undertaken;
• Progress against implementation of the recommendations;
• Anti-fraud and corruption activity, including frauds investigated and outcomes;
• Treasury Management activity; and
• The Accounts closedown timetable and progress reports.

Specific reviews and reports during the year included:

• the Statement of Accounts;
• the Annual Governance Statement;
• the Annual Audit Plan.

The committee also received assurances via:

• Annual Report from Internal Audit that includes the Annual Assurance Statement; and
• The work of the Council's External Auditors (Ernst & Young).

The Audit Committee is currently scheduled to meet on four occasions over the next municipal year. Officers will continue to ensure all members on the Committee, and their nominated substitutes, are adequately trained. The Committee will continue to oversee the effectiveness of the audit team and wider fraud resources in accordance with the Public Sector Audit Standards Audit and Accounts Regulations 2015. Fraud prevention and detection will continue to be high on the Audit Committee's agenda going forward.