Tower Hamlets Council is grappling with 'significant weaknesses' in its governance and financial management, according to a new report from external auditor Ernst & Young LLP (EY). The Audit Committee convened on Wednesday, 3 December 2025, to address the Audit Committee Report External Audit Dec 25 and the Interim Value for Money Report, Year ended 31st March 2025, which highlighted persistent issues and proposed a new statutory recommendation regarding the effectiveness of internal investigations.
According to Steve Reid from EY, without urgent and sustained action and clear accountability, the Council risks remaining in a cycle of statutory intervention and limited assurance.
The EY report identified ten significant value for money weaknesses across governance, financial sustainability, and efficiency. These include concerns about reliable financial reporting, risk management, internal controls, procurement, contract management, and the effectiveness of the internal audit function. The report also raised concerns about the capacity of the 'Golden Triangle' leadership team and the council's handling of internal investigations.
The 'Golden Triangle' leadership team is comprised of the three statutory officers - the Chief Executive, the Section 151 Officer, and the Monitoring Officer. The report mentions capacity issues, stating: We have also commented on audit committee effectiveness and the capacity of the Golden Triangle leadership team are both not where, in our view, they need to be.
Specifically, the report notes: Since the most recent Mayoral election in 2022, there has been significant turnover within the 'Golden Triangle', with interim appointments made to each of the three statutory officer roles. Most recently, a permanent Monitoring Officer has been appointed, coinciding with the unexpected departure of the Section 151 Officer. This development resets the dynamic within the 'Golden Triangle' and introduces further uncertainty, particularly as the Council seeks a permanent replacement for the Section 151 Officer.
Stephen Reid from EY told the committee that many of the weaknesses were long-standing, and that the pace of improvement had not matched the scale of the challenges. He warned that without urgent action, the council risked remaining in a cycle of statutory intervention and limited assurance.
Hayley Clarke from EY, speaking online, highlighted a significant weakness in the council's process for conducting internal investigations, noting insufficient pace and urgency in progressing investigations, as well as inconsistencies in how investigations are scoped, conducted, and reported. EY proposed an additional statutory recommendation to address this, including a review of the Internal Investigations Team to assess its structure, resources, and equipment; strengthening investigation policies and procedures; ensuring transparent decision-making; and clarifying oversight and reporting arrangements.
Abdurraza Kassim, the Acting Corporate Director of Resources, outlined the council's response, detailing progress made in closing accounts, enhancing training, and improving resource allocation. He emphasized that the council had closed all accounts up to 2024-25 before the statutory deadline. He also noted improvements in key areas, with a rise in substantial assurance from auditors, from four areas last year to six and a half this year.
David Dobbs, Head of Internal Audit, Anti-Fraud and Risk, addressed concerns about internal controls and risk management, highlighting improvements in the implementation of internal audit recommendations and the development of a comprehensive action plan. He also noted that the council had won the Public Sector Risk Management Award in November 2025.
Evelina Subjan and Andy from Lumensol presented on procurement and contract management improvements, detailing streamlined processes, standardized documentation, and enhanced transparency through Power BI dashboards. They noted a nearly 50% reduction in the use of RFQs (Requests for Quotation) in the last quarter, indicating a shift towards more strategic procurement practices.
David Joyce addressed concerns about social housing, stating that the council had engaged positively with the housing regulator and had issued a comprehensive self-referral. He acknowledged serious failures, including an inaccurate understanding of the condition of its homes and failings in meeting the Safety and Quality Standard, particularly in managing remedial actions related to electrical safety, fire safety, and water hygiene. He emphasized that the council had a plan to address them. Other failures include weaknesses in the delivery of services in relation to monitoring reporting in respect of the Neighbourhood and Community Standard, weaknesses in the consistency of services that tenants receive, weaknesses in providing information to tenants in line with the Transparency, Influence and Accountability Standard and weaknesses in complaints handing performance.
Councillor Kabir Ahmed sought clarification on the issues raised in the EY report, particularly regarding internal investigations and the capacity of the Golden Triangle. Steve Halsey, Chief Executive, responded, outlining the actions taken to support the statutory officers and improve governance arrangements.
Councillor Mark Francis expressed concerns about the timing of the report and the lack of briefings for elected members. He proposed focusing on each significant weakness individually to ensure proper attention.
Councillor Asma Islam echoed Councillor Francis's concerns and emphasized the need for a longer conversation to grasp the issues fully. She questioned the risks and controls that were missed in internal investigations and the reasons for delays in concluding investigations.
The Audit Committee resolved to note the EY reports, consider the additional statutory recommendation, and consider and approve the council's update and response to the external auditor's recommendations. The committee also noted the Value for Money Response Mobilisation Plan and the actions taken to address the challenges highlighted in the interim VfM report. The VFM Response Mobilisation Plan v4 Dec 25 sets out a plan to address the recommendations, with work organized into four workstreams: financial management and accountability, audit investigations and assurance, procurement and contract management, and Best Value Inspection, core services and capability.
The Interim Value for Money Report, Year ended 31st March 2025 can be read in full on the council's website.
