Tower Hamlets Council's Audit Committee has flagged red
assurance levels in several key financial areas, according to the latest external auditor's report. The Audit Results Report for the year ending March 2025, presented by EY, highlights significant weaknesses in the council's financial reporting and internal control systems, leading to a disclaimed audit opinion for the 2024/25 financial statements.
This means the auditors could not obtain sufficient assurance over the council's financial position. EY was unable to complete all planned audit procedures due to a management-imposed limitation of scope
in areas including Property, Plant and Equipment (PPE), pensions, grant income, and creditors. Management either could not provide sufficient evidence or concluded that work should not proceed due to unresolved issues from prior years. Furthermore, delays in procuring and onboarding a new contract partner, coupled with a vacancy in the Internal Audit team, impacted the delivery of planned audit engagements for 2025-26. The audit report also noted persistent difficulties with the quality and structure of working papers, with multiple documents provided without clear reconciliation to audited figures, and some resubmitted multiple times before appropriate evidence was received.
Key areas of concern include:
- Statutory Financial Reporting: The council continues to struggle with reliable and timely statutory financial reporting. EY noted pervasive issues over opening balances, comparators, and in-year movements, with a significant weakness remaining from the previous year. Recommendations include re-assessing roles and resources within the finance team, ensuring sufficient and appropriate audit evidence is available, and timely implementation of audit recommendations. The disclaimed audit opinion for 2024/25 was also contributed to by unresolved issues in both debtors and creditors, including balances within the Collection Fund. Specifically for the Collection Fund, the partial assurance rating was due to a need for
opening balance assurances
and the necessity togo back to those initial years in terms of disclaimed opinions to build back that assurance.
Issues raised in the 2023/24 audit regarding the valuation of land and buildings within PPE also remain unresolved, with the Council not providing adequate support for these valuations. - Risk Management: Significant weaknesses persist in the council's arrangements for managing risks effectively and maintaining a sound system of internal control. EY's report highlights that action plans to address external reviews of risk management are still being implemented, and the Audit Committee needs to annually consider the strategy's fitness for purpose.
In response to these findings, the council has developed a Value for Money Response Mobilisation Plan, structured around four workstreams: Financial Management & Accountability; Audit, Investigations & Assurance; Procurement & Contract Management; and BVI, Key Services & Capacity. The council has allocated £4.5 million over three years to support this plan, with implementation targeted for completion by June 2026. The plan has moved from the mobilisation phase to the implementation phase, with varying progress across workstreams: Workstream 1 (Financial Management & Accountability) is 33% complete, Workstream 2 (Audit, Investigations & Assurance) is 20% complete, Workstream 3 (Procurement & Contract Management) is 84% complete, and Workstream 4 (BVI, Key Services & Capacity) is 47% complete. The £4.5 million allocation includes £2 million in 2026/27. A dedicated Programme Director will lead the programme, and senior leadership posts are intended to be in place by April 2026. Progress will be subject to ongoing oversight from the Audit Committee and external review.
Further details on the agenda and supplementary items can be found in the Agenda frontsheet, Supplementary Agenda - Items 4.1, 4.2 and 4.3, Supplementary Agenda - Item 3.1 and Item 4.6, and Supplementary Agenda - Item 4.5 Work Plan.
