Lambeth Council's financial statements for the year ending March 2026 have received a disclaimed opinion from external auditors Forvis Mazars. This means the auditors could not express an opinion on whether the accounts present a true and fair view.
The disclaimed opinion, which follows similar outcomes for the previous two financial years, signifies that auditors were unable to obtain sufficient appropriate audit evidence to base an opinion on. This is due to historic challenges in preparing the accounts and ongoing issues with the Pension Fund's sundry debtors and creditors balances.
Forvis Mazars noted that while the Council has addressed two of the five previously identified weaknesses in its value for money arrangements, three remain outstanding. These are:
- Budgeting for growth and achievable savings: This weakness, identified in 2023-24 and continuing into 2024-25 and 2025-26, saw an overspend of £35.3 million and unachieved planned savings. The medium-term financial strategy projects a cumulative shortfall of £93.2 million by 2029-30, with external consultants identifying only £11.9 million in additional savings.
- Timely and accurate financial reporting: The 2025-26 accounts were published on 22 July 2026, three weeks after the statutory deadline of 30 June. While improvements have been made, this issue is not fully resolved.
- Homes for Lambeth (HfL): An independent review in July 2022 highlighted governance weaknesses in managing HfL's performance. The Council is currently undertaking an options appraisal for HfL's future use, which has not yet been addressed.
Actions being taken to address these include rebuilding General Fund reserves to £45 million, establishing a financial risk reserve, and increasing HRA unallocated reserves. However, credible plans for closing budget gaps without further extraordinary financial support (EFS) are still lacking. The Council has strengthened governance and financial management, including improved internal audit opinions and a new Audit and Risk Committee, but weaknesses in the consistent application of controls persist, and HfL's future remains under consideration. A procurement improvement programme is underway, but issues with purchase order compliance, contract management, and supplier performance monitoring continue.
The auditor also reported that two objections relating to the 2023/24 Statement of Accounts are still in progress. One objection concerns unrecognised liabilities, specifically to leaseholders on the Council's housing estate, estimated at a minimum of £10 million. The auditor noted these liabilities remain unrecognised. The second objection relates to the Council's financial position. The process for resolving these objections has been protracted, requiring extensive legal advice from both Mazars and the Council. The potential implications for leaseholders are that they may have been wrongly charged costs, and for the Council, there are ongoing legal matters and potential reimbursements.
The external auditor acknowledged the frustration regarding the length of this process, attributing it to the complexity of the objections and the extensive work required. The final meeting between Forvis Mazars and the Council regarding these legal matters is pending, with an expectation that all will be concluded before the next meeting, followed by a written response. The auditor has committed to keeping objectors informed and ensuring resolution.
The ongoing issues with the Pension Fund's sundry debtors and creditors balances stem from the complexity of prior period adjustments, particularly concerning lease assessments and the application of IFRS 16. While the Pension Fund has made significant progress in identifying balances for write-off, the lack of certainty over when these balances will be finalised for 2025/26 and prior periods means there has been insufficient time for the auditor to complete necessary procedures. This has led to the auditor intending to issue a disclaimed opinion on the Pension Fund's financial statements.
To ensure the timely and accurate preparation of future financial statements, the Council has implemented a revised Closedown and Accounts Improvement Plan. This plan strengthens year-round accounting processes, improves balance sheet reconciliations, and enhances disclosure preparation. A dedicated team has been established for accounts preparation and audit servicing, with ongoing work to align skills and capacity. Interim resources are being used to supplement permanent staff, facilitating knowledge transfer. A revised methodology for key year-end estimates and provisions is being implemented for earlier review and challenge. Enhanced quarterly reviews of capital expenditure, asset recognition, and financing requirements are in place. A structured review of lease arrangements, particularly for temporary accommodation, is being conducted to ensure consistent application of IFRS 16. An improved quarterly reconciliation framework for intercompany balances between the Council and Homes for Lambeth (HfL) is being implemented to support timely group accounts preparation. A standardised template for Consolidated Financial Statements and disclosure notes is being developed. Working papers are subject to multi-level review, with improvements incorporated into templates. Proactive engagement with external auditors is underway to improve audit readiness, evidence preparation, and query management. A shared tracker for audit queries and a clear escalation protocol are being established for timely issue resolution.
