Agenda item

This report presents the London Borough of Hammersmith & Fulham’s 2024/25 Statement of Accounts, including the Pension Fund Accounts and Annual Governance Statement for approval.

Councillor Rowan Ree (Cabinet Member for Finance and Reform) remarked that an important part of good governance of a borough was to publish its annual statement of accounts and subject them to scrutiny.  He said the audit reports of this council in previous years and the reviews by LGA peers earlier this year had provided a lot of reassurance to residents and stakeholders that the London Borough of Hammersmith and Fulham (LBHF) was a well-run borough with well-managed services delivered in a ruthlessly, financially efficient manner. He thanked the hard work of officers and cabinet members in managing the budget effectively over the course of each year, and the efforts of Grant Thorton (GT), the External Auditor, in going through the accounts thoroughly and providing the assurance.

Sukvinder Kalsi (Executive Director of Finance & Corporate Services) highlighted the extensive range of services provided by the council to its residents and the complexity of its finances which were prescribed by all manner of regulations and legislation. It was therefore important to provide complete assurances to LBHF’s residents, business and visitors that the finances of this authority were well-run.  Sukvinder noted that GT’s anticipated financial statements audit report opinion would be unmodified, and there were some minor recommendations. He said that some adjustments in terms of the records of some debtors and creditors had been made which however would not affect any of the figures set out in the statement of accounts.  He extended his thanks to GT for their absolutely thorough efforts as reflected in the number of queries received and reviewed by the Finance Office.

Paul Cuttle (Key Audit Partner, Grant Thornton) outlined Grant Thornton UK LLP Audit Findings Report (ISA260) (Main Financial Statements 2024/25) (Appendix 2) which was driven by various standards that all auditors, including GT, were required to work to. He said that the document linked well to the External Auditor’s Plan presented to this Committee earlier this year. Paul noted that GT’s work was substantially complete, and the final set of accounts and representation letters would soon be signed off which shall put LBHF in a strong position ahead of most London councils which all started the auditing work at a similar time. Paul highlighted the positive experience working with LBHF that its draft set of accounts provided were of a good quality, noting some expected adjustments made in the review process.  He stressed that there was no concern that would challenge GT’s conclusion to issue a qualified opinion. This council demonstrated again the amount of hard work it had undertaken to complete the work, just like the previous efforts of clearing the backlog by completing five sets of accounts in two years. 

Paul Cuttle continued to introduce the Grant Thornton UK LLP Audit Findings Report (ISA260) (LBHF Pension Fund 2024/25) (Appendix 3) and the two Draft Letter of Representation 2024/25 (Appendices 4 & 5). He remarked it was a good experience in auditing the pension fund accounts and the report would soon be signed off after clearing two outstanding items. There was nothing unusual in the two representation letters which comprised standard things.

Charlotte Moar (Independent Member) appreciated the hard work of all as both of the statement of accounts and the pension fund were clean accounts.  She referred to an unadjusted misstatement where there was about £1.6 million relating to capital expenditure which was picked up from the work on bank payments completeness testing (page 208).  Charlotte was concerned whether there were any underlying issues that might impact the cash/bank payments.

In relation to the completeness error, Paul Cuttle highlighted that it was an isolated case and probably caused by the timing relating to an accrual. He noted that there was quite a lot of work around expenditure completeness and assured more testing would be undertaken if GT had any concerns relating to cash reconciliation element or actual recognition of expenditure within the periods in question.

Noting that a number of councillors had not returned the annual related party declarations and the recommendation for the management to strengthen the declaration process (page 211), Charlotte Moar asked if the management could be supported to stress the importance of related party declarations to enhance both the council’s transparency and protection for individual members.

In response, Sukvinder Kalsi said he recognised more rigorous control should be put in place. As such, through the Cabinet Member for Finance and Reform, the internal reporting process would be streamlined and made clearer so that the few councillors who had not completed the declarations could do so soon.  Councillor Ree recalled he had spent some evenings chasing down individual members to sign the declarations and he was prepared to double that efforts in the coming year.

Councillor Lisa Homan noted from the age profile on page 22 that a majority of LBHF staff were 50+ and asked if LBHF had considered this a risk and devised strategy to deal with this. Sukvinder Kalsi advised that most of the staff considered LBHF a wonderful borough to work for and spent more than 20 years of their working life here. To ensure succession planning and to encourage staff to progress through ranks, the council had put in place relevant arrangements, like apprentice schemes and Getting Ahead programmes.  While the staff age profile would be kept in pace with the needs, Sukvinder highlighted the experience brought by staff aged 50+ and their knowledge about the borough allowed them to run the services more efficiently. In reply to Councillor Homan’s further question, Sukvinder undertook to provide a comparison on staff age profiles across London boroughs.

ACTION: Sukvinder Kalsi

Councillor Adrian Pascu-Tulbure referred to the section on managing information (page 147) and noted that due to an incident taken place two years ago, the Information Commissioner’s Office was unable to compliment LBHF at its report issued in May this year.  He asked if this section should cover the incident and recommend steps to address the issues. 

Councillor Ree assured that this section mainly dealt with information security and cyber security to ensure the council’s cyber security systems were performing well. He remarked that the council could get some 20,000 potential attacks a day and be able to repel all of them.  The incident referred to by Councillor Pascu-Tulbure had happened long time ago.  The related systems and the processes had been changed since then. He stressed that technology was evolving fast, hence the council was constantly updating the systems and processes to keep pace with technological advancement.

Replying to Councillor Callum Nimmo’s questions, Sukvinder Kalsi noted that earmark reserves, usually limited in scope, were normally used for a specific purpose.  For example, there was an earmark reserve for the 3-year laptop replacement digital programme and resources in the relevant reserve could be used for the purpose.  Other examples of reserves included insurance fund and investment projects.

On Councillor Nimmo’s concern about the current level of reserves, Sukvinder noted that following the contribution of some £1 million over the past three years from underspends and revenue etc, the general balance of reserves right now stood in a comfortable and right level of the median position.  He assured members that the council would continue to keep a close eye on the level of reserves and compare it across neighbouring boroughs.

In this connection, Councillor Ree stressed it was worth noting that when many local authorities were taking monies out of reserves in order to balance the books, the fact that LBHF had been able to put monies from a surplus budget onto its reserves for the last three years in a row was really an important achievement from which its residents could take reassurance.

Concluding the discussion, the Chair thanked Paul Cuttle and his GT team for their work in completing these annual reports, further to clearing the five sets of accounts in the backlog without any backstops and bringing LBHF’s accounts up-to-date and on track.  This meant money spent in LBHF was now fully accounted for.

RESOLVED

That the Committee agreed

1. To approve the 2024/25 Annual Governance Statement which is included in the Statement of Accounts (Appendix 1).
2. To approve the Statement of Accounts for 2024/25, including the Pension Fund Accounts (Appendix 1).
3. To note the content of the external auditor’s ‘Audit Findings Reports’ (ISA260), (Main Audit and Pension Fund) including the auditor’s findings, recommendations and the Council’s response to those recommendations (Appendices 2 and 3).
4. To approve the 2024/25 management representation letters (Appendices 4 and 5).
5. To approve the Pension Fund Annual Report 2024/25 (Appendix 6).
6. To note that the accounts remain ‘unaudited’ until final sign-off by the external auditor.
7. To delegate authority to the Chair of the Audit Committee, in consultation with the Executive Director of Finance & Corporate Services to approve any further adjustments to Appendices 1, 2, 3, 4, 5 and 6 which may be required as part of the completion of the audit work.