The Audit and Risk Committee meeting on 27 January 2026 reviewed the council's financial position, audit reports, and treasury management, with a clean audit opinion anticipated for the year-end reports. Key discussions included the council's financial resilience, the progress of internal audit recommendations, and the council tax base calculation for the upcoming year.

Year-End Report and External Auditors' Report

The committee received the Council's IC262 report and the external auditors' report for the 2024-25 financial year. Subject to the completion of some minor outstanding work, the council is expected to receive a clean audit opinion, with no significant weaknesses identified in its value-for-money arrangements. The auditors noted they are approximately a month ahead of schedule compared to the previous year, which is beneficial given the earlier deadline for the next audit.

Several findings and recommendations were highlighted. These included an issue regarding a £6 million asset that had been consolidated into the accounts and some points concerning the processing of floor area data, which is a key assumption for valuing assets on a Depreciated Replacement Cost (DRC) basis. While these did not constitute significant issues, they resulted in improvement observations.

Regarding the valuation of post-retirement benefit obligations, the auditors reviewed the council's assumptions and found them to be within a reasonable range, with one assumption regarding the inflation curve (CPI index) being slightly more optimistic but still acceptable.

A standard audit risk concerning management override of controls was discussed. While no specific issues were identified at Islington, the report noted an underlying weakness in the journals controls environment, which is expected to be rectified with the implementation of a new general ledger that will improve segregation of duties. Observations were also raised regarding related party transactions, with one picking up from a previous year's point.

The adoption of new accounting standards (IFRS) and other audit risks were also reviewed, with the auditors comfortable with the processes adopted and the underlying lease arrangements. Presentational changes to the financial statements were made by officers.

In terms of uncorrected audit misstatements, these were considered not significant in the grand scheme of things. The report detailed a £15,600 factual misstatement and a projected misstatement that, even if realised, would not prevent a clean audit opinion. Corrected misstatements included a £6 million asset valuation issue, a £3.5 million adjustment for unfunded pension liabilities, and categorisation adjustments, including a significant one related to cash. The auditors also addressed prior year adjustments concerning Housing Revenue Account (HRA) garages, concluding that these should be reflected as in-year numbers rather than prior year adjustments.

Audit fees for the 2023-24 period were discussed, with a reasonable fee variation noted due to additional work required, including that related to ISA 600 revised and FRS 16. The confirmation of independence was also presented, with no concerns raised.

Internal Audit Interim Report

The committee received an update on the 2025-26 Internal Audit Interim Report. The report provides assurance opinions on the implementation of internal audit recommendations. While a good level of implementation was noted across the board, the report highlighted that actions for audit HN 23-1, concerning new homes contract resilience, have taken longer to implement despite good engagement from officers. The committee also discussed the balance of the internal audit function between value-added focus and governance, suggesting this as a topic for further consideration.

Council Tax Base Report and CF Forecast

The Council Tax Base Report for 2026-27 was presented, providing a mid-year update on progress. The report detailed assumptions and forecasts for council tax revenue. Discussions touched upon the potential for revenue generation from properties owned by offshore entities, with a recognition that while these entities are liable for council tax, there can be challenges in collection. The committee noted the importance of accurate forecasting and the impact of assumptions on financial resilience.

Draft Budget Report

The committee reviewed the Draft Budget Report, which included appendices on previously agreed General Fund Savings, new General Fund Savings Proposals, and General Fund Management Actions for 2026-27 to 2030-31. The report also covered the Medium Term Financial Strategy for the same period. Discussions focused on the assumptions, risks, and mitigation strategies related to the budget. The council's financial resilience was a key theme, with an emphasis on the need for cautious assumptions given the uncertainties in local government finance. The report also touched upon the narrative around ballooning costs for temporary accommodation and adult social care, and the council's efforts to manage these.

Annual Governance Statement Mid-Year Review

The committee reviewed the mid-year update of the Annual Governance Statement (AGS). This statement provides assurance on the council's governance arrangements. The report indicated that the council is on track with its governance responsibilities.

Treasury Management Mid-Year Review

A mid-year review of the council's Treasury Management function was presented. The report indicated that the council had outperformed its expected earnings on interest and had managed to reduce its interest expense. Medium-term borrowing remains expensive, but there have been some positive signs in recent weeks. The council has strategically borrowed for shorter terms to take advantage of lower interest rates, which has resulted in a higher proportion of short-term borrowing. This strategy has been implemented over approximately four years and aims to manage maturities to avoid significant refinancing needs on any single date.

Arsenal Polling District and Polling Places Review

The committee considered a report on the Arsenal Polling District and Polling Places Review. This review is a statutory requirement to ensure that polling districts and places are fit for purpose and accessible for voters. The report likely outlined proposals for any changes to these arrangements within the Arsenal ward.