Agenda and draft minutes

There were no apologies for absence. 

Councillor Ashok Patel attended the meeting remotely and he left the meeting before the private session of item 8.

If a Councillor has a disclosable pecuniary interest in a particular item, whether or not it is entered in the Authority’s register of interests, or any other significant interest which they consider should be declared in the public interest, they should declare the existence and, unless it is a sensitive interest as defined in the Member Code of Conduct, the nature of the interest at the commencement of the consideration of that item or as soon as it becomes apparent.

At meetings where members of the public are allowed to be in attendance and speak, any Councillor with a disclosable pecuniary interest or other significant interest may also make representations, give evidence or answer questions about the matter.  The Councillor must then withdraw immediately from the meeting before the matter is discussed and any vote taken.

Where Members of the public are not allowed to be in attendance and speak, then the Councillor with a disclosable pecuniary interest should withdraw from the meeting whilst the matter is under consideration. Councillors who have declared other significant interests should also withdraw from the meeting if they consider their continued participation in the matter would not be reasonable in the circumstances and may give rise to a perception of a conflict of interest.

Councillors are not obliged to withdraw from the meeting where a dispensation to that effect has been obtained from the Standards Committee.

There were no declarations of interest.

To approve the minutes of the previous meeting and to note any outstanding actions.

Matters Arising

Sukvinder Kalsi (Strategic Director of Finance) advised that the External Auditor had issued an unqualified opinion on the Statement of Accounts 2021/22 Accounts on 22 February 2024.  The Committee noted the supplementary update on the conclusion of the audit of the Statement of Accounts 2021/22.

RESOLVED

That the minutes of the previous meeting held on 27 November 2023 were agreed as an accurate record.

This report presents the London Borough of Hammersmith & Fulham’s 2022/23 Statement of Accounts, including the Pension Fund Accounts and Annual Governance Statement for approval.

Sukvinder Kalsi (Strategic Director of Finance) presented the report which presented the 2022/23 Statement of Accounts of London Borough of Hammersmith and Fulham (LBHF), including the Pension Fund Accounts and Annual Governance Statement for approval.

Andy Conlan (Senior Manager, Grant Thornton) briefed members that the Audit Findings Report (ISA260) (Main Financial Statements and LBHF Pension Fund) 2022/23 (Appendix 2) had been completed during October 2023 through to February 2024.  While it was a challenge for both sides to work collaboratively on the audits for both 2021/22 and 2022/23 concurrently, it had allowed the latter audits to be substantially completed more efficiently. It was expected the unmodified opinion would be signed off in line with the Government timetable by end of March 2024. Having caught up all the audits to the current year, the External Auditor would start planning for the 2023/24 audits shortly. Andy referred members to “Follow up to prior year recommendations” on pages 193 to 195 and “Audit Adjustments” on pages 196 to 200.  He noted that given the concurrent preparation of the statements, some of the prior year recommendations were ongoing in the 2022/23 financial year.  He also noted that there were a small number of unadjusted misstatements and minor misclassification and disclosure amendments. The External Auditor considered it was reasonable to leave those issues unadjusted as they were below materiality.

Referring to the “Fees and non-audit services” on pages 201 to 202, Councillor Ashok Patel sought explanation on the difference between the proposed and final fees. Paul Dossett (Key Audit Partner, Grant Thornton) highlighted the complexity of the process in setting the audit fee for local governments.  He said that the fees in this report reflected the five-year contract made by the Public Sector Audit Appointments (PSAA) for the period between 2018/19 and 2022/23. The fee schedule therein comprised a base scale fee plus additional charges arising from new audit requirements as a result of regulation or changes in auditing standards.  Paul noted that according to the PSAA, the contract from 2023/24 onwards had a new set of scale fees allowing some degree of resilience to avoid major deviations from those in the next contract period.

In this connection, the Chair remarked that following the exit of certain market players, the number of auditors who possessed the specialist skills to undertake audits for local governments became very limited. He understood that a vast majority of councils had subscribed to PSAA’s service and those that had not did struggle to meet their statutory obligations for audits. 

Echoing the Chair’s views, Councillor Florian Chevoppe-Verdier appreciated the difficulties due to the complicated auditing process, the increasing reporting requirements and diversity in the auditing market. He considered that transparency and democracy came with a cost. Separately, he was pleased to note the Council’s performance from the Statement of Accounts 2022/23.  While some councils had gone bankrupt a year after COVID, this Council, despite operating with a 10% funding cut, had managed to stay in positive financial situations and continue its  ...  view the full minutes text for item 4.

The following is presented by the external auditor for discussion and noting:

·       External Audit Progress and Sector Update March 2024

Councillor Florian Chevoppe-Verdier referred to the consultations issued by Department of Levelling Up, Housing and Communities and National Audit Office on measures to address the delay in local audit.  He was interested to note the point of view from Grant Thornton and requested it to circulate its response, if any. Paul Dossett (Key Audit Partner, Grant Thornton) confirmed the firm had provided a formal response. He agreed to check whether the response was a public document and revert.

ACTION: Grant Thornton

The Chair expressed appreciation on the delivery of audits in a timely manner and hoped that this would continue.

RESOLVED

That the Committee noted the External Auditor Progress Report and Sector Update.

This report summarises the status of work included in the 2023/24 Internal Audit Plan as at the end of February 2024.  Six audits have been finalised, two of which received a Substantial assurance opinion and four receiving Satisfactory assurance, with a further three audits at draft report stage.

Moira Mackie (Head of Internal Audit) presented the report which summarised the status of work included in the 2023/24 Internal Audit Plan as at the end of February 2024. The Committee noted that six audits had been finalised, two of which (Council Tax and Housing Benefit) received a Substantial assurance opinion and four (Digital: New Systems Acquisition, Randolph Beresford Nursery, Community Safety – Anti-Social Behaviour and Climate Change) received Satisfactory assurance, with a further three audits at draft report stage. She also briefed members on the finalised audits (Appendix 1) and the status of the remaining planned audits (Appendix 2).

The Chair noted that certain plan areas needed to be deferred for different reasons.  He was concerned whether the capacity of the audit team would be able to cope with the workload in dealing with these deferred audits in addition to the regular ones.

Moira Mackie remarked that the team took a risk-based approach to the audit plan. So, a plan area which was lower down on the priority list because of the risks at the time of assessment might be due for an audit later in the following year. For some which had been carried forward for more than one year and were not so significant or just a cyclical piece, some assurances could be obtained from other sources without comprising the plan. She was confident the allocated resources would be sufficient to meet the needs.

The Chair noted that some schools had requested to defer internal audits due to staff changes.  He asked how the new incumbents managed to prepare for the audit according to the accounting and audit practices.  Moira Mackie remarked that the in-house audit team would not arrange audits for schools having had some significant changes and give sufficient notice when they were ready. In undertaking an audit with these schools, the audit team, apart from liaising with the Council’s governance and finance teams, would reach out to the school and its finance team, and if necessary, provided close support to the new staff. 

Councillor Ashok Patel noted that to ensure the Annual Audit Plan 2023/24 being more responsive to changing risks and challenges, it had been developed as a ‘3 plus 9-month’ plan (page 381). He considered a 6+6-month plan might help avoid duplication of work.

David Hughes (Director of Audit, Fraud, Risk and Insurance) explained that the 3+9- month approach started during COVID having regard that the risks of plan areas in local governments were changing much quicker that that in the past.  As such, the annual plan set out in clear details the scope of work to be done in the next quarter while leaving more flexibility on the tasks to be undertaken in the remaining nine months. The plan was reviewed and updated every quarter.  In this way, team resources could be deployed effectively by focusing on the key risks identified by the service directors for the next quarter. 

Councillor Adrian Pascu-Tulbure sought information on the recommendations particularly high priority  ...  view the full minutes text for item 6.

The Strategic Audit Plan documents significant, persistent risks that the Council faces and the business areas to be covered over a five-year period.  The Strategic Plan supports the annual planning process and ensures that internal audit continues to provide assurance over the breadth of the Council’s operations.

Moira Mackie (Head of Internal Audit) presented the Strategic Audit Plan which documented significant, persistent risks that the Council faced and the business areas to be covered over a five-year period. The Strategic Plan supported the annual planning process and ensured that internal audit continued to provide assurance over the breadth of the Council’s operations.

David Hughes (Director of Audit, Fraud, Risk and Insurance) added that the way of flexible planning and focusing on key risks was now commonly adopted by the sector across London and in line with the new global internal audit standard. It helped to demonstrate assurance around the Council’s objectives and key priority areas. He informed members that a paper on the new global internal audit standard, together with the requirements and best practices of internal audit as well as the role of audit committees would be prepared for this Committee’s consideration in due course.  

Councillor Florian Chevoppe-Verdier noted that one of the changes to the way of delivering the Internal Audit Service was to increase the attendance on working groups to provide advice and constructive challenge where real time input to projects and initiatives would be useful (page 390).  He was concerned about the transparency of these working groups, including the membership, meeting details and minutes.

In response, David Hughes cited the example of the Civic Campus project where good governance arrangements and records had been in place such that officers, having recognised the key risks, continued to review the effectiveness of mitigation actions taken. Another example was the Housing’s repairs service.  Instead of doing the audits, the internal audit team worked proactively alongside with them in the last 12 to 18 months to make sure the risks were assessed and tracked, and the action plans were robust and monitored.   The internal audit team had actively been involved in these working groups but no formal report had been prepared at the end of the process.  David suggested adding the working groups’ updates to the progress report.  Councillor Chevoppe-Verdier supported as it helped enhance the Committee’s understandings of the working groups and reflected the internal audit team’s strength in interventions.

    ACTION: David Hughes / Moira Mackie

Noting from the Draft Internal Audit Plan 2024/25 that it was planned to review readiness for voter ID and postal voting controls in the second quarter, Councillor Ashok Patel considered the timeframe was rather late given the mayoral election was happening on 2 May and the general election any time before January 2025. David Hughes remarked that again, instead of doing traditional audit, the team would work alongside officers to review the process and improve controls while giving assurance. As the issue of voter ID was more significant on the general election, the internal audit team would work with elections colleagues during the process to make sure the postal votes and the elections came through successfully.  

Councillor Rowan Ree (Cabinet Member for Finance and Reform) said he understood that over the last few months, the election and registration team  ...  view the full minutes text for item 7.

The purpose of this report is to provide members of the Audit Committee with an update on risk management across the Council.

This item includes appendices that contain exempt information. Discussion of the appendices will require passing the proposed resolution at the end of the agenda to exclude members of the public and press.

David Hughes (Director of Audit, Fraud, Risk and Insurance) introduced the report which provided an update on risk management across the Council.  Jules Binney (Risk and Assurance Manager) briefed members on changes made to the Corporate Risk Register since November 2023.  

Councillor Florian Chevoppe-Verdier referred to Risk No. 8 ((Failure to identify and address internal and external fraud).  While appreciating a lot of progress had been made in this respect, he was concerned that fraud had become the number one crime in the country.  It was important for the local authority to continue sharing fraud data with the London Fraud Hub which matched a number of data sets across councils in London to highlight potential fraud cases for investigation.  David Hughes gave a detailed account on the development of the National Fraud Initiative back in 2019 and the uptake barrier due to predative cost. Now about 20 London boroughs had signed up at reasonable price. Data sets, including those from agency members, were shared and matched every month to detect tenancy fraud, parking fraud or moonlighting etc.  Consideration was given to putting more data sets to enable frontline staff to check people’s eligibility for services to prevent fraud access to the same service in different councils.

In response to Councillor Chevoppe-Verdier’s question whether data from private sector could also be shared and matched, David Hughes said there was a business case for the National Fraud Initiative to consider particular areas of concern such as NHS.  By putting the relevant data together, the Council could then take actions proactively and reactively. David added that H&F’s BI team was establishing an internal fraud hub such that investigation underway would be made known to other teams serving the same client. It could also help in debt recovery.

Councillor Rowan Ree (Cabinet Member for Finance and Reform) appreciated the sharing of extra data across the borough which shall give the Council chances to look at all sort of services and track down fraud cases.  He shared with the Committee that a former tenant was recently found guilty of committing tenancy fraud and sentenced to 16-month suspended imprisonment. 

Councillor Ashok Patel referred to Risk 12 (Unable to retain talented people in key posts at LBHF) and sought explanation of “‘deep dive’ to analyse churn more closely”.  In response, David Hughes remarked that there were particular skill shortages across London councils and audit specialist was a case in point.  Social care, environmental health and information technology were other areas experiencing skill shortage.  People from permanent employment were diverted to work for agencies which offered higher pay rates.  The Council, apart from providing apprentice training for skills in demand, was also looking at how to make the offers as attractive as possible for these areas.

The Chair noted that some risks had reduced its scores and a risk had been removed from the list.  This reflected the effectiveness of Corporate Risk Register as a tool used by various departments to manage and mitigate  ...  view the full minutes text for item 8.

The following meeting dates have been scheduled:

·       17 June 2024

·       16 September 2024

·       9 December 2024

·       10 March 2025

The Committee noted the dates of future meetings:

· 17 June 2024

· 16 September 2024

· 9 December 2024

· 10 March 2025

Proposed resolution:

The Committee is invited to resolve, under Section 100A (4) of the Local Government Act 1972, that the public and press be excluded from the meeting during the consideration of the following items of business, on the grounds that they contain the likely disclosure of exempt information, as defined in paragraph 3 of Schedule 12A of the said Act, and that the public interest in maintaining the exemption currently outweighs the public interest in disclosing the information.

Please see item 8.