Mr Kevin Bartle, Interim Corporate Director for Resources and Section 151 officer provided the Committee with a verbal update relating to the improvements made to accounting systems. He said the report in front of the Committee was the follow up report from the independent review conducted by Mr Peter Worth. He said the report provided a narrative of the progress made since the last review which was conducted in September 2020. He said there were two significant areas the Council needed to consider; (1) a restructure of the finance team and (2) whether the Council ought to move to an ERP – enterprise, resource planning system. He said a move to an ERP system would cause significant upheaval but may be the solution that the Council requires. He said an independent organisation had been appointed to advise if an ERP solution was best for the Council.

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

• Mr Bartle reassured members that the errors talked about at page 30 of the agenda were not physical losses of cash. He said it referred to revisions and re-classifications of entries on the balance sheet for that year. He said these had been corrected and restated. He said the 2018/19 accounts were almost complete and he hoped they could be presented at the January 2023 meeting of the Committee.
• Councillor Saied Ahmed commented the report by Mr Worth was valuable in understanding the current position. He said he was concerned the auditing of the 2021/22 accounts had not commenced owing to the backlog of accounts awaiting approval.
• Referring to point 2, financial systems, Councillor Saied Ahmed asked what had been done to address the two outstanding issues relating to reconciling items. He also asked about the TechForge system and if this was being used.
• Mr Bartle responded stated the two issues identified on page 29 had been resolved however the progress on the TechForge system for asset management had stalled. Mr Bartle said senior managers had met to reinvigorate this piece of work. He said this would not impact the opinion of the external auditors.
• Mr Bartle said the late approval of the accounts had had a significant impact internally such as officer time, resources, cost, plus the headache of solving the issues etc but externally the impact was reputational risk. He said whilst local authorities had to produce their accounts to a deadline, there was no formal commitment for external auditors on how long they took to complete their reviews.
• In relation to the 2 outstanding issues, Mr Bartle explained one was a national issue relating to ‘infrastructure assets.’ He said this related to council’s accounting for roads, highways etc and practically these assets were difficult to define. Mr Bartle said the Government acknowledged this and were expected to announce and publish a statutory instrument (expected in December 2022) whereby these assets do not need to be accounted for. Mr Bartle said this would go some way to reduce the burden on Council’s to quantify these types of assets.
• Regarding the second issue, Mr Bartle said this specifically related to Tower Hamlets called ‘experienced item’. Mr Bartle explained that every 3 years the actuary provided a figure for the value of the pension fund. However, Deloitte’s wanted enhanced paperwork to validate the figure provided. Mr Bartle said this would take time to produce. 
• Referring to the KPMG accounts of 17/18, 19/20 and the final certificates, Mr Bartle said the accounts were complete, but much depended on Deloitte’s who may raise further queries. If they do not, then the certificates can be issued.
• Mr Nisar Visram, Director for Finance, Procurement and Audit added that once the accounts are produced, they are audited by external auditors, who will refer their audits to a senior partner within their organisation for independent verification. He said its questions from this process that are generating further queries and delays in the accounts being finalised.
• Mr Bartle stated he was hopeful the 2018/19 and 2019/20 accounts would be signed off by January 2023, but he said he’s been in this position before and therefore was unable to commit that this would be the outcome. He said his confidence had been shaken by the past missed deadlines.

The Vice-Chair thanked Mr Bartle for the update.

The Audit Committee RESOVLED to:

1. Note the contents of the follow-up report on the external independent review of the Council’s closure of accounts processes.