The Audit Committee of Tower Hamlets Council met on Thursday 12 March 2026 to discuss the external auditor's annual report and audit results for the 2024/25 financial year. The committee also reviewed the progress of the action plan in response to external recommendations, the corporate risk register, and the internal audit plan and charter for 2026-27. Key decisions included noting the external auditor's reports and approving the internal audit plan and charter.

External Auditor's Reports and Value for Money Commentary

The Audit Committee received the final 2024/25 Auditor's Annual Report and Audit Results Report from EY, the Council's external auditors. These reports highlighted significant challenges in rebuilding assurance over the Council's financial statements, leading to a disclaimed audit opinion for 2024/25. EY noted ten significant weaknesses in the Council's arrangements for securing value for money, with particular concerns raised regarding:

• Reliable and timely statutory financial reporting: EY reported a significant weakness, stating that the Council does not have effective processes and systems to support its statutory financial reporting requirements. This stems from historic issues and a lack of timely and sufficient audit evidence.
• Managing risks effectively and maintaining a sound system of internal control: Similar to the previous year, significant weaknesses persist in these areas.
• Contract Management and Procurement: This area also showed significant weaknesses, with EY identifying issues related to procurement waivers and a lack of evidence for contract management.
• Best Value Inspection: The Council's arrangements were found to have significant weaknesses, reflecting concerns raised by the Best Value Inspectors.
• Social Housing: A significant weakness was identified following an inspection by the Regulator of Social Housing, highlighting serious failings in meeting consumer standards, particularly concerning safety and quality.
• Effectiveness of the Internal Audit Function: EY concluded there was a significant weakness, recommending a critical assessment of the Head of Internal Audit's assurance opinion and a further independent external review.
• Annual Governance Statement (AGS): A significant weakness was identified due to the Head of Internal Audit drafting the AGS, which EY stated impairs professional independence. EY also noted that the AGS did not sufficiently articulate the root causes of issues raised by external reports.
• Capacity of the 'Golden Triangle': EY identified a significant weakness due to significant turnover in statutory officer roles and the interim appointment of the Section 151 Officer, creating uncertainty and potential exposure.
• Audit Committee effectiveness: EY noted several weaknesses, including political focus in discussions, uneven member contributions, and a lack of consistent senior officer attendance. They recommended enhanced training, a review of committee membership, annual reporting to Full Council, and strengthened oversight of recommendations.
• Effectiveness of the Council's process for conducting internal investigations: EY identified a significant weakness, noting a lack of clear accountability, inconsistent policies, and a failure to conclude investigations promptly. They recommended a review of the investigations team, strengthening of policies, ensuring transparent decision-making, and clarifying oversight and reporting arrangements.

EY also issued four statutory recommendations in February 2025 and a further one in December 2025, relating to financial reporting, internal control, procurement, and investigations. The Council has developed a Value for Money Response Mobilisation Plan to address these issues, with full implementation targeted by June 2026.

Internal Audit and Anti-Fraud Progress Report

David Dobbs, Head of Internal Audit, Anti-Fraud and Risk, presented the progress report for 2025-26. He noted that while the focus had been on following up on management actions, this had caused some slippage in planned audit engagements. The report detailed assurance opinions for completed audits, with 12 Reasonable Assurance and 11 Limited Assurance opinions issued. The implementation rate for management actions was reported as 97% for 2023-24, 85% for 2024-25, and 62% for 2025-26. Members raised concerns about the lack of clarity on the materiality of certain issues and requested more detailed information on outstanding management actions. EY also provided feedback, recommending that all recommendations be followed up regardless of their assurance rating and that changes to the Internal Audit Plan should be approved by the Audit Committee.

The committee resolved to note the progress report and the assurance opinions.

Risk Management – Corporate Risk Register

David Dobbs presented the updated Corporate Risk Register, noting that the number of corporate risks remained at 13, with one risk escalated and one relegated within the Housing & Regeneration Directorate. The report also detailed the introduction of risk appetite into the framework, with varying levels set for different risk categories. A significant new risk, HRHOH0002, concerning the increasing cost of temporary accommodation due to demand and market pressures, was added to the register. A risk related to private sector tower blocks (HRPSRC0001) was relegated. The committee discussed the implications of these risks and the approach to risk appetite.

The committee resolved to note the updated Corporate Risk Register and the approach to risk appetite.

Internal Audit Plan and Charter 2026-27

David Dobbs presented the proposed Internal Audit and Anti-Fraud Plan and the Internal Audit Charter for 2026-27. The plan was developed using a risk-based approach and aligned with global internal audit standards. It acknowledged the need for flexibility to address emerging risks and the government's statutory intervention. The committee noted suggestions for future audit areas, including secondary school places, registered social landlords, members' enquiries, and acting-up/honoraria payments.

The committee resolved to agree the Internal Audit & Anti-Fraud plan and the updated Internal Audit Charter for 2026-27.

Corporate Code of Governance Update

Jonathan Lloyd, Strategic Director, Change & Improvement, presented the updated Corporate Code of Governance for 2025/26. He explained that the code, based on CIPFA/SOLACE guidance, had been reviewed annually since 2018 and was designed to be accessible. The report highlighted the Council's response to the Best Value Inspection and draft directions from the Secretary of State, emphasizing the need to strengthen oversight and accountability. Members praised the clearer distinction between fact and interpretation, the removal of assertive wording, and the improved explanation for the public.

The committee resolved to review and comment on the revised Code of Corporate Governance, approve it for publication, and delegate amendments related to new directions to the S151 Officer in consultation with the Chair.

Audit Committee Annual Report

David Dobbs presented the draft Annual Report for 2025-26, highlighting its purpose in providing assurance on the committee's effectiveness and impact, as recommended by CIPFA. Members requested the inclusion of Part 2 audit discussions, clarification on areas where challenge was exercised, and noted the changes in committee membership.

The committee resolved to approve the Annual Report, subject to agreed final changes, before its submission to Full Council.

Progress Update on Action Plan Delivery in Response to External Recommendations

Abdulrazak Kassim, Director for Finance, Audit and Procurement, presented an update on the Mobilisation Action Plan, which addresses EY's ten significant weaknesses and four statutory recommendations. The plan is structured around four workstreams: Financial Management & Accountability (33% complete), Audit, Investigations & Assurance (20% complete), Procurement & Contract Management (84% complete), and BVI, Key Services & Capacity (47% complete). The primary delivery risk identified was securing sufficient capacity, with £4.5 million allocated to support the plan. Members raised concerns about the clarity of workstream goals, resource allocation, and the effectiveness of the 'Golden Triangle' in addressing challenges.

The committee resolved to note the Council's progress against the action plans and approve Phase two of the mobilisation plan.

Treasury Management Strategy, MRP Policy Statement and Annual Investment Strategy 2026/27

Paul Audu, Interim Head of Pensions and Treasury, presented the Treasury Management Strategy, Investment Strategy, and Capital Strategy reports. Concerns were raised about the lack of detail in the Capital Strategy regarding project funding and rationale. The committee resolved to approve and adopt the Treasury Management Strategy Statement, Investment Strategy Report, Capital Strategy (including MRP Policy Statement), Prudential and Treasury Management indicators, and the Treasury Management Policy Statement. Authority was delegated to the Corporate Director of Resources for necessary updates to the Council.

Treasury Management Mid-Year Review 2025/26

Paul Audu presented the mid-year review, noting the fluctuating cashflow but emphasizing close monitoring of balances. The committee resolved to note the contents of the treasury management activities and performance against targets, as well as the Council's investments.

Audit Committee Work Plan

The Chair, Barry Quirk, asked members to note the workplan and if they had any suggestions. The committee resolved to note the workplan for 2025-26.

Exclusion of Press and Public

The committee resolved to exclude the press and public for the remainder of the meeting to discuss exempt information.

Restricted Minutes of the Previous Meeting(s)

The committee resolved to agree and approve the restricted minutes of the previous meeting.

Fraud Investigation Update - Operation NextWage

The Chair informed members that this item was no longer on the agenda.

The meeting concluded at 8:52 p.m.