Members are reminded to consider the categories of interest, identified in the Code of Conduct for Members to determine: whether they have an interest in any agenda item and any action they should take. For further details, see the attached note from the Monitoring Officer.

Members are also reminded to declare the nature of the interest at the earliest opportunity and the agenda item it relates to. Please note that ultimately it is the Members’ responsibility to identify any interests and also update their register of interest form as required by the Code.

If in doubt as to the nature of an interest, you are advised to seek advice prior the meeting by contacting the Monitoring Officer or Democratic Services.

No declarations of disclosable pecuniary interest were made by the members.

For the record, Councillor Marc Francis stated his wife Councillor Blake was a member of the Cabinet. Councillor Kyrsten Perry stated she is the Chair of the Pensions Committee.

To confirm the minutes of the Audit Committee held on 28^th January 2021.

The minutes from the previous meeting of 28^th January 2021 were agreed as an accurate record of the meeting and were signed off by the Audit Committee.

Mr Jonathan Gooding, external auditor from Deloitte presented their external audit report. Mr Gooding said the report provided an update on the audit years 2018/19 and 2019/20. The information within the report commented on various aspects of the audit, some of which was required under the standards. He said the report provided an update on the issues reported to the Committee in July 2019. It identified other issues that had arisen since and the significant risk areas that had been identified as part of the audit plan. Mr Gooding said the report also reported on the progress made, despite the pandemic, on the control recommendations and findings to date in terms of the status of the work in progress.

He said since the last meeting the more complex and challenging areas had been focused on and a great deal of work had been done by the authority in those areas, with the number of resolved issues and adjustments being made to the accounts. Mr Gooding said that through a ‘sprint’ approach, in the next few months it was hoped other outstanding areas would also be addressed and said the timetable for this was being developed with the authority. Mr Gooding added the report provided an update on the value for money conclusion and said he was expecting this to be a qualified value for money conclusion which specifically reported on the challenges and issues faced with financial reporting and weaknesses identified. Mr Gooding stated icons had been used in his report to identify any misstatements that had been corrected, uncorrected material items and areas of uncertainty.

In response to questions and comments from the Members the following was noted:

• Mr Jonathan Gooding stated the prospect of achieving the July deadline for the accounts was still possible however the timetable had slipped from when the Committee last met. He said the complex and challenging areas had been addressed however more issues had been identified. He said it was difficult to predict if the new issues were not going to impact on the final accounts, so there remained a risk to meeting the deadline.
• Regarding the adjustments made to prior year accounts and the figures involved, Mr Gooding referred members to page 39 of the agenda and said some big numbers were involved, the largest being in relation to property valuations. He said some adjustments would not impact the General Fund however some would have an impact on the balance sheet.
• Mr Kevin Bartle, Interim Corporate Director for Resources and Section 151 Officer commented that the finance team had done its best to assist members in understanding the difference between matters that won’t impact the bottom line and those that will. He referred members to pages seven and eight of the supplementary agenda and stated the team had set out the impact on the bottom line in the report. He said some numbers were significant, but information was provided in the supplement agenda.
• In response to the value for money work, which  ...  view the full minutes text for item 3.1

Mr Kevin Bartle, Interim Corporate Director for Resources and Section 151 Officer presented the update on the progress made with the 2018/19 and 2019/20 accounts and the audit of the accounts. Mr Bartle said the report should be read in conjunction with the update report from Deloitte, the appointed external auditor.

Mr Bartle said he was pleased to bring forth the latest version of the accounts which should be considered as the ‘provisional’ final version but not the final version per se, as there was still work on-going before the accounts could be finalised and signed off. Mr Bartle said the Committee would hear from the Interim Chief Accountants on the changes made to the accounts and said this was an opportunity for the members to  examine the accounts over the next few months before they are presented at the July 2021 meeting. He said the timetable to deliver the changes had slipped however it was the intention of Officers to continue to stick to the plan and prepare the final accounts for 2018/19 and 2019/20.

The Committee then heard from Mr Tim Harlock, Interim Chief Accountant for the account year 2019/20. Mr Harlock highlighted the changes made to this set of accounts and said one of the biggest changes was to the Property, Plant and Equipment (PPE) valuations. He said this did not impact on the bottom line however a lot of work had been undertaken to rectify the errors. He said this related to schools’ floor space measurements which had not been undertaken over the last ten years but had come to light over the past eighteen months.  He said the school buildings had been revalued and as such this was a significant adjustment.

Another area that required reclassification were long-term investments which related to pooled funds of about £50m. Mr Harlock said these had to be reclassified and had been adjusted through profit and loss so would stay in the same place on the balance sheet. The presentation of cash on the balance sheet had also been adjusted, with an increase in cash assets of £20M and an increase in the cash liability of £20M. Mr Harlock said, this being the same amount, results in a net zero impact however it was important to get the presentation correct as it impacted on resources. In addition to this, a considerable amount of work had been done to the Community Infrastructure Levy (CIL) plus errors in accounting for VAT, with a reclaim of £3M from HMRC.

Mr Craig Tucker, Interim Chief Accountant for the account year 2018/19 said the issues highlighted above also effected the 2018/19 accounts and therefore these had been worked through. He added another technical accounting adjustment which related to the 2018/19 accounts was the adjustment to the pensions reserve relating to early repayment. Mr Tucker said this related to spreading the repayment over the different years and as such had a zero impact on the General Fund.

Mr Bartle concluded the presentation and asked members  ...  view the full minutes text for item 4.1

Mr Will Tuckley, Chief Executive introduced the report stating plans had been drawn up in response to the Independent Review of the 2018/19 year-end closure of accounts. Mr Tuckley said it was heartening to hear from Deloitte’s the progress which had been made and thanked Mr Bartle and his team for their continued efforts in producing the 2018/19 and 2019/20 set of accounts, which were appended to the supplement agenda.

Mr Tuckley said clearly there had been huge difficulties experienced in relation to the accounts which were unacceptable and disappointing. He said the 2020/21 accounts were progressing well and significant improvements had been made to processes and procedures plus the recruitment of additional staff.

Mr Tuckley said the report by Mr Worth had led to a detailed improvement plan being developed which was phased into immediate improvements and those which would take a longer time to achieve. He said the Grant Thornton report from June 2018 and the CIPFA report from 2017 were also attached for information. Mr Tuckley said it was clear the issues highlighted in the previous reports were still issues that the Council needed to address. Mr Tuckley commented that several internal audit reports had stated that not enough progress had been made regarding key governance issues including the Grant Thornton review which was commissioned by a former Corporate Director of Resources. He said this report had neither been to the Corporate Leadership Team (CLT) board or to the Executive i.e. Council or Cabinet or indeed the Audit Committee. Mr Tuckley said clearly this ought to have been the case. He said the recommendations within these reports plus the recent report looking at the year-end accounts had been worked into an improvement plan with the assistance of Internal Audit. He said the improvement plan was designed to ensure there was a sustainable and focussed attention to the key governance issues that had been highlighted in the reports. He said issues such as the declarations of officer interests, issues relating to hospitality registers and policy reviews that go towards the core set of ethics and culture of the council plus the implementation of internal audit recommendations and application of risk management had been discussed by the CLT board in recent weeks.

Mr Tuckley said work relating to the financial recovery had been prioritised as well as the governance issues that had been highlighted in the reports. Mr Tuckley said there was a strong commitment across the council to address this and said he believed progress had been made, especially regarding the 2020/21 accounts. In relation to the previous reports Mr Tuckley said he was at a loss as to why the reports had not been made available to the CLT Board or Executive and said he had investigated the passage of the reports. He said the reports had not been to the Resources Directorate’s DLT (Directorate Leadership Team) board either and other than stating the facts, he could not add anything further to this.

Lastly, Mr Tuckley said  ...  view the full minutes text for item 4.2

Mr Ahsan Khan, Chief Accountant presented the accounting policies in relation to 2020-21. He said the Committee was required to review and note the accounting policies in readiness of the review of the 2020-21 Statement of Accounts.

Mr Khan said this was a technical document looking at accounting standards to be applied across the board. He said no major changes had been made to the accounting policies appended at Appendix A, expect to add clarity and updates.

• Members had no questions for Mr Khan.

The Audit Committee RESOLVED to:

1. Review and note the draft accounting policies for 2020-2021 as appended at Appendix A.

Mr Paul Rock, Head of Internal Audit, Fraud and Risk presented the Internal Audit and Anti-Fraud progress report. Mr Rock said the report provided an update on the progress made against the delivery of the 2020/21 Annual Internal Audit Plan and highlighted any significant issues since the last report to the Audit Committee in January 2021. He said an update on anti-fraud activity was also included.

Mr Rock referred Members to the tables at paragraph 3.1 and said several reports had moved to the draft stage and were being discussed with management. He said (1) the Place Directorate Governance (2) the Contract Monitoring of Children’s Commissioned Services (3) Private Sector Compliance with Fire Risk assessments and (4) the Drugs and Alcohol Service – contract monitoring, audits had all been completed. Mr Rock said of the two reports where management responses were awaited, management responses had been received and reports were being finalised. He said he was pleased the Treasury Management audit had achieved a substantial rating and said significant improvement and strong controls were now in place.

Mr Rock said presently he’d be inclined to give an overall ‘limited assurance’ opinion for this year however there were a total of fifteen reports in the pipeline which could sway his opinion, when he presented his final opinion report to the Audit Committee in July 2021.

In reference to Anti-Fraud activity, Mr Rock said this had been hindered by the pandemic however a further property had been recovered bringing the total to twenty. In relation to the Governance report, Mr Rock said Internal Audit had supported management with advice and guidance pertaining to the improvement plan and the reviewing of financial procedures. Mr Rock said he had attended the Finance Improvement Board and had observed the Board, providing challenge and advice to them.

The Chair thanked Mr Rock for his report before inviting the Officers to address their individual reports which had received ‘limited’ assurance following Internal Audit’s assessments.

Staff Declaration of Interests

Ms Amanda Harcus, Divisional Director for Human Resources and OD said the Chief Executive had touched on the issues experienced with automation of systems. She said the switch to providing an online platform had significantly made a difference in the service’s ability to report and monitor declaration of interest returns from officers in the organisation.

In response to questions and comments from Members the following was noted:

• Councillor Wood asked if the system evidenced an employee’s secondary employment, as direct level authorisation was required from managers. He asked if employees were not declaring secondary employment and how many employees had outside interests that maybe of concern to the Council? Ms Harcus responded stating when using the paper-based system a 95% completion rate had been achieved, however this required a lot of manual resource. She said with automation, the declaration was part of the annual review process and therefore prompted employees to complete it. She said thorough checks were undertaken when new employees joined the organisation with responsibility to complete  ...  view the full minutes text for item 4.4

Mr Paul Rock, Head of Internal Audit, Fraud and Risk presented the Corporate and Resources Directorate Risk Registers. He said the Corporate Risk Register had been updated to include a reference to the Building Safety Bill which was referenced as PLC0023. Mr Rock said this was an important piece of legislation, with significant consequences for everyone at the Council as well as occupiers, particularly if appropriate action isn’t taken. He said there was a lot of preparation to do and as such this had been included onto the corporate register.

In response to questions and comments from members the following was noted:

• Councillor Edgar asked for an explanation regarding risk CSD0016, on page 283 of the agenda and asked why the current risk score of 25 and the target risk score 16 were red rated and how the control measure could remain so high. In response Mr Rock stated the target date in the required control measures column referred to the date the control measure should be delivered by. The colouring in the target risk column was simply the colouring of the 1 to 25 rating. Mr Rock said it did not present how likely the risk would be achieved.
• Ms Charlotte Webster raised the same query regarding this control and said this had been asked about at a previous meeting of the Audit Committee. She said it was important understand how the impact could be reduced, if possible. 

• ACTION: Following further discussion, it was agreed the Corporate Director for Children and Culture Directorate, Mr James Thomas be invited to a future meeting of the Committee to discuss this risk.

• In reference to page 297 and 298, and risk RS0061 and RSBR0007, Councillor Wood commented that these were big risks, considering the future loss of income from offices, shops and restaurants. He said this would have a significant impact on Tower Hamlets and said Councillors needed to play an active part in the changes as other East London boroughs had. He said it was important to attract new businesses to the area as well retain existing ones.

The Audit Committee RESOLVED to:

1. Note the corporate risks, and where applicable request risk owner(s) with risks requiring further scrutiny to provide a detailed update on the treatment and mitigation of their risk including impact on the corporate objectives at the next Committee meeting (or separately before the meeting if urgent).
2. Note the Resources Directorate risks and where applicable request risk owner(s) with risks requiring further scrutiny to provide a detailed update on the treatment and mitigation of their risk including impact on the directorates objectives at the next Committee meeting (or separately before the meeting if urgent).
3. Note the progress made against the Annual Action Plan for Risk Management.

Mr Paul Rock, Head of Internal Audit, Fraud and Risk presented the Internal Audit Charter report and said the Public Sector Internal Audit Standards required him to set out the purpose, authority and responsibility of the internal audit activity that had been undertaken. Mr Rock said this was a key document which had been reviewed and which remained fit for purpose, other than a few typo’s that had been pointed out to him. He asked the Committee to review and approve the updated internal audit charter.

In response to questions and comments from members the following was noted:

• Councillor Wood commented that further to a letter written to the former Corporate Director for Resources, in 2017 it was positive to see senior officers from the Corporate Leadership Team, the Mayor and the Chief Executive attend Audit Committee meetings.
• Mr Tuckley said he would continue to attend future meetings of the Committee, when invited to do so.

The Audit Committee RESOVLED to:

1. Review and approve the Internal Audit Charter.

Mr Matthew Mannion, Head of Democratic Services presented the Code of Corporate Governance Annual Review. He said the code set out the Council’s commitment to uphold the highest standards of good governance and was annually reviewed as part of a suite of documents which sit under the Annual Governance Statement. He said the code was split into various themes and had been updated in consultation with officers from across the council. He asked members to review and comment on the code presented to them.

In response to questions and comments made by members the following was noted:

• Councillor Francis stated that he did not agree with the contents of the report particularly paragraph 3.1 and questioned the ‘effectiveness’ of the Council’s corporate governance arrangements. He said he did not believe it was effective and felt the council needed to strive harder to achieve this, with evidence showing how the seven core principles appended to the report were being met.
• He questioned if Principle B of ‘ensuring openness and comprehensive stakeholder engagement’ had been demonstrated adequately. He said he did not believe this to be the case and cited member enquiries as an example. He said his request for information were often delayed by the need to demonstrate why it was needed. Councillor Francis said whilst steps had been taken to improve stakeholder engagement, he did not feel the Council had achieved this principle.
• Regarding the other principles, Councillor Francis said the list of documents cited in the report did not say how the Council had achieved them. For example, referring to Principle D and performance management at senior and political level, he questioned if challenge was robust i.e. were chairs of committees challenged sufficiently. He said he believed more work was required on performance.
• Councillor Francis added that praise of Overview and Scrutiny did not reflect his experience and said there was a distinct separation between the Executive and Overview and Scrutiny. He said there should be more recognition of the work of Overview and Scrutiny as well as backbenchers and the value that others can bring to the political structure of the council.
• Councillor Francis said he’d encourage senior managers and CLT to re-examine the code and reflect on if the council was achieving the principles as well as look at ways to improve the governance of the Council.
• Ms Charlotte Webster, Independent Person referred to the Foreword and said the sentence saying the council continued to ‘uphold the highest possible standards of good governance’ was incorrect, especially following the discussions that had taken place at this meeting and at previous meetings. She said it was important to move forward and be candid about the challenges facing the Council.
• Councillor Wood referred to the Croydon and Liverpool reports and asked if something similar happened at Tower Hamlets would the Council’s governance structures, be able to recognise and stop it?  He said in his opinion he did not think this to be the case. Councillor Wood cited an example of  ...  view the full minutes text for item 4.7

The Chair Councillor Val Whitehead deferred this report. She said she had previewed the report with Mr Paul Rock, Head of Internal Audit, Fraud and Risk and had agreed the report was over-long and contained inaccuracies which required further attention. Councillor Whitehead said Mr Rock would confer with Legal for their input and would bring the report back to the Committee once it had been amended.

The Audit Committee RESOLVED to:

1. Defer the Anti-money Laundering policy report to a future meeting of the Audit Committee, once it had been redrafted.

Ms Agnes Adrien, Head of Litigation, Legal Services said there were two reports attached to the agenda. The RIPA Policy 2021 and the RIPA authorisations reports. Ms Adrien explained the RIPA policy allowed for surveillance to be conducted using covert human intelligence and as such the policy set out what those powers were. She said it was proposed that a RIPA social media policy be introduced and said this was appended to the report.

Ms Adrien referred to the authorisation report and informed members no RIPA authorisations had been applied or approved since 2017. No authorisations had been granted under CHIS – Covert Human Intelligence sources.  However there had been one authorisation under the interception of communication, since 2017 and this was granted in 2019 in relation to a Trading Standards matter.

Ms Adrien continued saying Members maybe wondering why the powers have not been used and said RIPA was a policy and process which could only be used as a last resort. It could only be used for crimes where the sentencing would be more than six months and could not be used for minor offences. She said the policy had had the desired effect.

She informed Members the policy recommended the reporting of authorisations be on a quarterly basis and if none were granted then to report to the Committee on a half-yearly basis, as well as the annually review of the policy.

In response to questions and comments from Members the following was noted:

• The RIPA policy is inspected every three years and the last inspection was in 2020. At the time, Tower Hamlets use of RIPA powers was comparable with other local authorities. With respect to social housing fraud cases, investigation and enforcement is often undertaken without the need to use RIPA.

• ACTION: Ms Adrien to provide clarification with respect to what the term ‘spiritual counselling’ refers to in the policy.

• Councillor Francis commented that the report was clearly presented and said he’d be uneasy if the powers were being overused. He said it was reassuring they were infrequently used as they are intrusive. He said it was sensible to have a social media policy as part of the RIPA policy.

The Audit Committee RESOLVED to:

1. Consider and comment on the proposed amendments to the RIPA policy and the introduction of the Social Media policies as appended at appendix 3; and
2. Note the authorisations and information provided in the authorisations report.

Mr Mark Norman, Legal Adviser and Deputy Monitoring Officer presented the Whistleblowing annual report. He said the report provided Members with an update on the Council’s whistleblowing arrangements in accordance with paragraph 6.1 of the Council’s Whistleblowing Policy.

He said the appended report ought to show the track changes of where the policy had been amended however it appeared the report attached to the agenda did not show these changes. Mr Norman proposed to circulate the track changed document via email and said he would welcome any comments in relation to this.

Regarding the report, Mr Norman said the report provided an update on the number of Whistleblowing cases received and investigated since the last report to the Audit Committee.

In response to questions from members the following was noted:

• Councillor Whitehead asked why issues were raised by residents when the policy was aimed at staff? Mr Norman responded stating all complaints are logged via the Council’s Website and then filtered according to if the complaint required a direct response from the service area or if the complaint was a whistleblow. Mr Norman said under the whistleblowing policy, access to lodging a complaint had to be available to all – residents, staff, contractors etc and as such whistleblow cases were filtered out. He said the number identified as whistleblow cases had reduced substantially since changes made in July 2020.
• In reference to paragraph 3.5, Mr Norman said the investigation was undertaken by the directorate however he had oversight of the whistleblow.

• ACTION: The Whistleblowing Policy showing the track changes to be circulated to members for comment.

The Audit Committee RESOVLED to

1. Consider and note the content of the report; and

2.    That the Whistleblowing Policy be approved and that the Corporate Director for Legal be delegated authority to make minor changes to the policy, following consultation with the Chair of the Audit Committee, should there be any final comment by Audit Committee Members before publication.

The Chair, Councillor Whitehead presented the Audit Committee Annual Report for 2020/21. She said the report reflected on the achievement of the Committee and would be reported to Council. She said the report related to the activity of the Committee in 2020/21.

Councillor Whitehead said the report assumed the draft accounts of 2018/19 and 2019/20, considered at this meeting, would be presented and approved in July. However, should the accounts not be approved the Chair’s report would be amended accordingly.

There were no questions from Members.

The Audit Committee RESOLVED to:

1. Note and approve the Chair’s Annual Report, before this is presented to Council.

The Chair asked if there were any suggestions for the 2021/22 work plan for the Audit Committee. She said the Committee’s work plan would be drafted and circulated to members for comment.

Mr Kevin Bartle, Interim Corporate Director for Resources asked for the Annual Financial Accounts for 2018/19 and 2019/20 be added to the July 2021 meeting along with the Deloitte report.

Councillor Wood suggested that the Committee receive a briefing on the Croydon and Liverpool reports plus some feedback on the £140m spent in 2017 in relation to social housing, from a value for money perspective.  

There were no urgent business to be discussed.