The Audit Committee of Hackney Council met on Wednesday, 17 April 2024, to review the Council's financial performance, audit progress, and risk management strategies. Key discussions included the external audit status and plan, a comprehensive finance update, and deep dives into public interest reports and school budgets. The committee also reviewed risk registers for various directorates, performance updates, and the internal audit plan for the upcoming year.

External Audit Status and Plan

The Audit Committee received an update on the external audit for the years ending 31 March 2022 and 31 March 2023. Suresh Patel, from Mazars LLP, the Council's external auditor, confirmed that the 2021/22 audits for both the Council and the Pension Fund had been signed off with unqualified opinions. The audit for 2022/23 was nearing completion and was also expected to receive an unqualified opinion. No significant weaknesses were identified in the Council's arrangements for ensuring value for money. The committee noted that while national delays in audits were impacting other boroughs, Hackney was not directly affected, though Mazars' involvement with other audits created indirect pressures. The indicative external audit plan for 2023/24 was also presented, outlining the audit approach, significant risks, and proposed fees. The committee was informed of a significant increase in audit fees, which had been factored into the Council's Medium Term Financial Plan (MTFP).

Finance Update and Deep Dives

A comprehensive finance update was provided, highlighting an anticipated £7.3 million overspend on the General Fund for 2023/24, primarily driven by pressures in Adult Social Care, Corporate Parenting, Housing Benefits, and Homelessness Prevention. The Housing Revenue Account (HRA) was forecast to break even. The report also detailed the Council's Medium Term Financial Plan (MTFP) gap, estimated at £22 million in 2025/26 and £52 million in 2027/28, with future funding prospects looking challenging.

The committee undertook deep dives into several critical areas:

• Public Interest Reports: This review examined recurring themes from public interest reports and best value interventions across various local authorities. Common issues identified included cultural and governance weaknesses, failures in managing risks associated with council-owned companies, financial capacity and capability issues, and the effectiveness of audit committees. Hackney was assessed as performing well overall against these themes, with Green ratings for Culture & Behaviours and Governance & Decision-Making, and Amber for Risk associated with Council-owned companies and Chief Officer capacity, experience and skills. Areas for improvement were noted, including the recruitment of a permanent Chief Executive and ensuring officers appointed as company directors receive appropriate training.
• School Budgets and Financial Sustainability: The report detailed trends in school balances, noting a forecast decrease in overall balances for 2023/24. The number of schools in deficit had increased, with primary schools being most affected. Key financial challenges identified included falling pupil numbers, a lack of inflationary increases in funding, rising energy costs, unfunded pay increases, and the impact of the cost of living crisis. Benchmarking against other London local authorities indicated Hackney was in a similar position. Robust procedures were in place for monitoring school balances and supporting schools in financial difficulty.

Risk Registers and Performance Updates

The committee reviewed the risk registers for the Adults, Health and Integration Directorate and the Children and Education Directorate. For Adults, Health and Integration, the primary risk remained sustainable funding, with demand for services exceeding available resources. For Children and Education, key risks included overdue inspections, delays in Subject Access Requests following a cyber attack, increasing costs of children in residential care, and the financial sustainability of children's centres.

A performance update was provided, highlighting work to review the performance management framework and align indicators with the Council's strategic plan. The Corporate Risk Manager presented the Corporate Risk Scorecard, identifying the economy and cost of living crisis as significant risks. Risks related to Adult Social Care budgets and the Synergy education case management system were noted as new additions to the register. The capital programme forecast for Q3 2023/24 was £175 million, £37 million below the revised budget, largely due to economic factors and the reprofiling of projects.

Internal Audit and Anti-Fraud Progress

The Internal Audit Annual Plan for 2024/25 was presented and approved, outlining proposed audits based on a risk assessment methodology. The Audit and Anti-Fraud Progress Report to March 2024 detailed the work undertaken by the Audit & Anti-Fraud Service. The report indicated a 70% completion rate for planned audits, with a further 100% of the revised plan being in progress. The implementation rate for high and medium priority recommendations was strong. The Anti-Fraud Service reported significant financial benefits from investigations, particularly in tenancy fraud and Council Tax discounts. The committee also considered a briefing on the potential appointment of two independent members to the Audit Committee, a move recommended by CIPFA and supported by the government as good practice.

Whistleblowing and Annual Report

The Whistleblowing Annual Report for 2023/24 was presented, noting a low number of formal whistleblowing referrals, with most concerns being raised through other channels. An updated Whistleblowing Policy was approved. Finally, the committee reviewed and noted the Annual Report of the Audit Committee for 2023/24, which detailed the committee's activities and achievements throughout the year, concluding that the committee had fulfilled its role effectively. The committee also noted its work programme for the upcoming year.