Agenda, decisions and minutes

1.1  Apologies for absence were received from Cllr Polly Billington.

1.2  Cllr Margaret Gordon joined the meeting remotely.

1.3  Councillors accessing the meeting remotely, were reminded that they were not counted as being ‘present’ for the purposes of the Local Government Act 1972 and may not vote on any item under consideration. At the discretion of the Chair, may however contribute to the discussion and participate in non-decision making capacity.

Members are invited to consider the guidance which accompanies this agenda and make declarations as appropriate.

2.1  There were no declarations of interest.

To consider the minutes of the previous meeting held on 18 January 2023

RESOLVED: That the minutes of the previous meeting be agreed as a correct record.

RESOLVED: That the minutes of the meeting held on 18 January 2022 be agreed as a true and accurate record of proceedings.

Presentation by the Group Director of Finance and Corporate Resources

RESOLVED: To note the update on the overall financial position

4.1    The Chair decided, at the request of the Group Director of Finance and Corporate Resources, and with the agreement of the Committee, to take agenda item 4, Finance Update, agenda item 8, Deep Dive – Council Reserves, and agenda item 9, Treasury Management Update Report, as one agenda item for discussion.

4.2   The Group Director of Finance and Corporate Resources gave a presentation, which had been circulated to members in advance, highlighting the following:

·  The Council continued to find itself in a challenging financial position, on the back of the cyberattack, the higher than anticipated pay award, and cost pressure from issues related to inflation.

·  2022/23 General Fund Forecast; the  forecast as reported to March Cabinet was an overspend of £7.916m, but the Council continued to contain any increase in the overspend. 

·  The Housing Revenue Account (HRA) continued to see significant pressures, and was forecasting an overspend in net operating expenditure of £10.728m.

·  Inflation has started to plateau, but not significantly reduce, and costs remained more expensive than one year ago.   

·  Counter-inflationary measures have been introduced by the Bank of England, which had seen the cost of borrowing rising to 4% in February 2023. 

·  For residents the Energy Price Guarantee would cease at the end of March, and a £2,500 cap would apply before increasing to £3,000.   

·  The National Budget in March 2023 set out plans for departmental revenue expenditure to 2027/28, but the increase of 10% was in cash terms, so before any adjustment for inflation.   

·  The Government also expected Council Tax income to increase by at least 5% in each year following 2024/25.   

·  The Council cannot expect any future funding increases from the Government to offset any unaddressed budget overspends in 2024/25 and beyond. 

·  The £63m Swimming Pool Support Fund was announced during the National Budget, but Officers were still waiting for the key details.   

·  The Council was successful in securing nearly £20m of Levelling Up funding for the Hackney Central area.   

·  Emerging risks for the 2023/24 financial year included the latest pay negotiations suggesting it would be more expensive than anticipated; increases in social care costs; and that the whole insurance market continued to be very challenging for local authorities, with significant increases in insurance premiums that might require the consideration of alternative approaches.   

·  The Council’s capital programme is expected to spend an estimated £150m in the current (2022/23) financial year.   

·  There were continuing challenges in the Housing Asset Management capital programme, particularly in relation to procuring the main planned maintenance contractor.      

·  A number of potential contractors had entered significant financial difficulty. 

·  As set out in the Treasury Update the Council had undertaken no new long term borrowing, but the cost of borrowing continues to rise. 

·  Local authorities were still facing challenges with getting their accounts signed-off by external auditors. 

·  Accounts closure for 2022/23 was underway and progress was being made to make sure they were published at the end of May, in line with the pre-Covid statutory deadlines. 

·  The Deep Dive of Council  ...  view the full minutes text for item 4.

At the time of the agenda publication, Officers were still awaiting information from external auditors.

RESOLVED: The Audit Committee to note the contents of the reports.

5.1    Suresh Patel, Mazars, introduced the report, which was principally focused on the 2021/22 accounts, but which also covered the 2020/21 accounts that were due to be signed off in the next few weeks following the meeting.

5.2    In relation to sign-off of the 2021/22 accounts, it had been hoped that they would be signed-off by this meeting of the Audit Committee, however, the process had proven to be more protracted than anticipated, in part because of the timing of the Pension Fund Triennial Revaluation meant that the Council’s estimated share of the liability in relation to both the Hackney Pension Fund and the London Pension Fund Authority may need to be revised.

5.3    This has been an issue for the whole sector as a consequence of the delays to auditing 2021/22 accounts.

5.4    Stuart Frith, Mazars, discussed the status of the audit and highlighted what work was still required, but confirmed that work on property, plant and equipment; revenue grants, income and creditors; and provisions had all now been completed.

5.5    The Committee also received confirmation that auditing of 2020/21 accounts would need to be completed before the 2021/22 accounts were signed-off.

5.6    Tom Greensill, Mazars, highlighted issues related to infrastructure assets, confirming that this was a national issue across all accounting firms and clients, and noted that gross book value and accumulated depreciation of assets had been overstated. 

5.7    Confirmation was received that the Government had introduced a statutory override to allow local authorities to make prior period adjustments to the balances without the need to disclose the amounts and of the methods Mazars had employed to manage associated risks.

5.8    As a result Mazars were now satisfied that the balances and associated disclosures were materially accurate and appropriately accounted for within the financial statements.

5.9    Suresh Patel highlighted the summary of an objection received regarding the 2021/22 accounts, which related to the Council issuing Penalty Charge Notices (PCNs) in the Mount Pleasant Lane area.

5.10   The Chair welcomed the report, and the assurances that came from the presentation, highlighting the work that had already progressed since the papers were published.

5.11    Committee members sought reassurances relating to pension values, which the Group Director of Finance and Corporate Resources provided.

RESOLVED: The Audit Committee to note the contents of the reports.

RESOLVED: To consider the performance indicators presented in Appendix 1, the Risk Management Scorecard in Appendix 2, and the current capital monitoring update in Appendix 3.

6.1  The Corporate Head of Audit, Anti-Fraud and Risk Management confirmed that the update on the full corporate register would be presented at the next meeting of the Audit Committee, but highlighted the risks that are new to the register or have escalated in their score:

New to the register

·  Falling schools rolls; the biggest impact being that the funding model means that if a school is unable to fill places its financial viability can be questioned.

·  Escalating cost of residential care, with specific reference to  looked after children; the risk is related to financial cost and the impact in the number of places the Council can afford.

·  Power outage; added to the register in January and reflected the concerns about the nationwide storage of natural gas and the possible consequences of power cuts.

Escalating risks

·  Temporary accommodation; there are increasing pressures on both demand and supply and there is also higher competition for accommodation space.

·  Climate change; despite the good work the Council is undertaking, the Climate Action Plan remains at the consultation stage, and whilst that is the case assurance cannot be provided that we will do all that has previously been agreed.

6.2  Members of the committee asked questions on what more can be done to mitigate the risks associated with Temporary Accommodation; the impact of the increasing cost of residential care; when the work related to climate change would be agreed; the accuracy of the figures related to domestic waste; staff sickness; and complaints.

6.3  In response the Group Director Finance and Corporate Resources, the Group Director of Climate, Homes and Economy, the Corporate Head of Audit, Anti-Fraud and Risk Management, and the Head of Business Intelligence, Elections and Member Services highlighted that;

·  In relation to Temporary Accommodation Hackney is already doing all that it can, but we are now having to place people outside of Hackney, and outside of London, and there is no one action that can alleviate the increased demand.

·  There had been a recent Council wide communication from the Head of Benefits and Housing Needs that laid out the cross-Council work that is underway.

·  The impact of the cost of care increasing raises questions as to whether we can provide the same number of places in the future, or whether we exceed the allocated budget.  A more complete answer will be available at the next Audit Committee meeting.

·  The Climate Action Plan is due to be taken to Cabinet in May, followed by submission to Full Council.  There will also be an implementation plan coving the next three years.

·  Decreases in the tonnage of domestic waste being recycled are also being seen in other local authorities, and partly reflects the overall reduction of packaging.  Residents are still recycling the same percentage, but the tonnage has decreased.

·  Waste collected from public bins represent a very small percentage of waste collected by the Council, and skips, and associated waste, are not Council responsibilities.

·  Work is underway focusing on long-term sickness, which is the biggest  ...  view the full minutes text for item 6.

RESOLVED: The Audit Committee to note the contents of the report, and the attached risk register and controls in place.

7.1  The Chair welcomed the Group Director, Climate, Home and Economy to his first meeting of the Audit Committee.

7.2  The Group Director for Climate, Home and Economy presented the report as laid out, but highlighted the new risks that had been added to the risk register:

  New risks

·  Cost of living crisis; reflecting the impact on services and residents, but highlighting the support available including through the Money Hub, the work to help residents maintain tenancies, and the work to reinvigorate the support to help sustain businesses.

·  Damp and mould; reflecting the additional attention following recent high profile incidents but highlighting that the Council was aware of the issue, has put in measures that have been developed to identify damp and mould early, including a 24hr leaks response initiative, and is working to procure an asset maintenance contractor.

7.3  Members of the committee asked for clarification on how the Council plans to tackle void turnaround times; sought reassurance that the Council is engaging in joined up working in relation to damp and mould; shared concerns on dealing with voids too quickly; asked about interactions with Housing Associations; queried the role of the landlord licensing scheme; and asked about the viability of Hackney Living Rent, and the impact of the transfer of Growth Borough functions.

7.4  The Group Director of Climate, Home and Economy responded and highlighted that;

·  There has been improvement in void turnaround times, decreasing from 190 days to 140 days, though this is still not acceptable as the target is 65 days.

·  The Council is looking at the resources available in the Building Maintenance Team to help target that turnaround period with dedicated resource, whilst balancing the increased volumes of enquiries that have been received regarding damp and mould.

·  The Council is seeking to expand the Direct Labour Organisation (DLO) in order to have additional operatives to tackle the increased demand on services.

·  The Council is engaged in joined-up working across different work areas in relation to damp and mould, and at the end of 2022 a group of senior Officers from Housing Needs, the Private Rented Sector (PRS) Housing team, and Housing Services was formed to develop an effective action plan that reflects Hackney’s housing stock.

·  A whole block approach is being taken, and the significant backlog of repairs that built-up during the pandemic is being worked through.

·  A new culture of intellectual curiosity needs to be developed in the Service area to better identify and mitigate issues earlier, and then develop suitable systems to manage associated work.

·  It would be concerning if tenants were being moved into properties that weren’t fit for habitation.

·  There is a common challenge in relation to damp and mould, and the Council and other landlords are trying to tackle the issue first time.

·  In relation to the PRS the Council encourages residents to alert Officers about issues, and additional resource has been put into the enforcement service to assist.

·  The challenge of providing an intermediary rent scheme, like Hackney Living  ...  view the full minutes text for item 7.

RESOLVED: To approve the proposed Internal Audit Annual Plan 2023/24 and key performance measures.

8.1  The Corporate Head of Audit, Anti-Fraud and Risk Management introduced the report which sets out the work that the division will undertake in the year ahead, and welcomed the strong engagement from Service Heads through the Council.

8.2  The plan was derived from a number of sources, including wider management, the risk register, and an analysis of threats to organisational objectives.

8.3  There has been particular focus placed on areas that have been identified through the annual governance statement process as likely to see significant change.

8.4  The plan includes themes that the Audit Committee have recently considered, including progress against the Net Zero target, work on public interest reports, and financial pressures impacting Service areas.

8.5  The plan is also designed to be flexible and dynamic, to best respond to changing requirements.

8.6  Members of the committee asked about the timing of the work on the Integrated Learning Disability Service and other Service areas; the Right to Buy audit; operational time available to deliver audits; and equal pay.

8.7  The Corporate Head of Audit, Anti-Fraud and Risk Management, and the Group Director for Finance and Corporate Resources responded, highlighting that;

·  Due to the number of Service areas it is not standard to automatically review every five years, and the plan is instead based on an analysis of risk, meaning some areas will be reviewed much more frequently.

·  The plan is high-level, and full details of specific audits have not been finalised, but the audits will provide assurance of the controls that are in place in a Service, including Right to Buy

·  In relation to Right to Buy applications the Investigations Team have been very successful in declining fraudulent applications, building on the successful investigations into tenancy fraud.

·  The gross days available to operational delivery reflects officer annual leave allocation, but makes no formal allowance for sickness or other reasons officers may be away from work, though for planning purposes a certain amount of sick days and training days are accounted for.

·  On management advice and time, there is a lot of work set aside at the conclusion of each audit assignment to check the validity of the report, confirm that the proper checks have been done, and ensure the paperwork is in order.

·  That all protected characteristics will be analysed in the equal pay audit. 

·  All protected characteristics will also be a part of the analysis of pension inequality, but it will depend on the datasets that are available.

ACTION:  6. The Group Director for Finance and Corporate Resources to provide and update to the Audit Committee on work related to Right to Buy, in the next municipal year.

RESOLVED: To approve the proposed Internal Audit Annual Plan 2023/24 and key performance measures.

RESOLVED: To consider and note the progress and performance of the Audit & Anti-Fraud Service to 31 March 2023.

9.1  The Chair decided, with the agreement of the Committee, to take agenda item 11, Audit & Anti-fraud Quarterly Progress Report, and agenda item 12, Whistleblowing Annual Report 2022/23, as one agenda item for discussion.

9.2  The Corporate Head of Audit, Anti-Fraud and Risk Management explained that the Whistleblowing Annual Report is required to be produced annually, highlighting the small number of investigations but also providing reassurance that suitable arrangements are in place to ensure Council staff are comfortable voicing concerns.

9.3  The reports were introduced as set out.

RESOLVED: To consider and note the progress and performance of the Audit & Anti-Fraud Service to 31 March 2023, and to note the Whistleblowing Annual Report.

RESOLVED: To note the Annual Report of the Audit Committee as set out.

10.1  The Chair thanked the members of the Audit Committee, Peter Gray, the former Governance Officer, and senior Officers for their support

10.2  The Chair introduced the report as set out.

RESOLVED: To note the Annual Report of the Audit Committee as set out.

RESOLVED: To note the proposed work programme.

RESOLVED: To note the work programme.

There was no urgent business for consideration.