Newham Council's 2024/25 accounts have been flagged with concerns by external auditors, Ernst & Young (EY), raising questions about the council's financial practices and long-term sustainability. The concerns were raised at a meeting of the Audit and Governance Committee on Monday 30 June 2025.
Faced with cost pressures in temporary accommodation and social care, Newham Council has had to make difficult choices, scaling down its 'Building a Fairer Newham' Corporate Plan from 132 commitments to 99, with 10 commitments paused indefinitely and 25 changed to reflect residents' priorities.
The auditors' report, part of the draft external audit report, identifies significant risk areas that require special attention. While the council expects to have sufficient resources to manage risks over the next 12-18 months, a longer-term financial strategy is needed to ensure financial sustainability.
Key Concerns
According to the Draft Statement of Accounts, the auditors issued a disclaimed audit opinion for the 2023/24 annual accounts, and the 2024/25 statement of accounts will not receive an unqualified opinion. This means the auditors were unable to form an opinion on the truth and fairness of the financial statements.
The auditors stated that they did not gain assurance over the closing balances in 2023/24. Consequently, we do not have assurance over the opening balances for 2024/25. This means we do not have assurance over in-year movements and some closing balances for 2024/25.
Several key areas are identified as contributing to the auditor's concerns:
- Financial Sustainability: The council's financial position remains challenging and unsustainable in the longer term. The local authority sector is under significant pressure from social care and housing costs.
- Best Value Notice: Newham Council was issued a non-statutory Best Value Notice by the Ministry of Communities, Housing and Local Government (MCHLG) on 8 May 2025, highlighting areas needing focus and action. The notice requires the council to:
- Improve its financial sustainability, as reflected in the council's medium-term financial strategy.
- Work with its voluntary and independent Improvement & Transformation board, using its expertise and responding to its recommendations.
- Review and clarify roles, responsibilities, and scrutiny processes for more effective decision-making.
- Continue implementing and measuring cultural change, particularly improving relationships between members and between officers and members.
- Ensure the effectiveness of officer and political leadership by developing a comprehensive retention strategy and managing leadership changes.
- Deliver at pace against recommendations from various reviews/inspections and action plans, meeting milestones and measuring the impact of change.
- Engage constructively with MCHLG quarterly to discuss progress.
- Treasury Management: Public Works Loan Board (PWLB) rates rose sharply in 2024-25, maintaining elevated borrowing costs.
Council's Response
The council acknowledges the challenges and is taking steps to address the concerns. These include:
- LGA Peer Review Action Plan: The council is working to implement the 11 recommendations from the Local Government Association (LGA) Peer Challenge in December 2023, as detailed in a comprehensive Action Plan. Progress against each recommendation is outlined in the LGA Action Plan Progress Update. A second Progress Review from the LGA Peer Team is expected in the summer of 2025.
- Exceptional Financial Support: The council is seeking Exceptional Financial Support from the government to cover revenue expenditure from the sale of council assets. In February 2025, the government announced that Newham Council would receive Exceptional Financial Support to cover £51.2 million in 2025/26 and £16 million in 2024/25 of its revenue expenditure from asset sales.
- Transformation Programme: The council is implementing a transformation programme to deliver services more efficiently and reduce costs.
Financial Position
Despite the challenges, the council expects to have sufficient resources to manage risks over the next 12-18 months, and it is appropriate to prepare the accounts on a 'going concern' basis, according to the Going Concern Report.
As at 31 March 2025, the council's combined treasury portfolio was £1.324bn, including £80.6m in treasury principal investments and £1.405bn of debt, according to the Treasury Management Year End Report.
Audit Committee's Role
The Audit and Governance Committee is responsible for reviewing the council's corporate governance arrangements, risk management framework, and internal control environment. The committee also oversees the financial reporting and annual governance process.
The committee is expected to discuss the draft external audit report and provide comments to the Corporate Director of Resources on the level of assurance provided by the plan.
The Audit Committee will continue to monitor the implementation of the LGA Peer Review Action Plan and the progress of the transformation programme.
Further details on the Audit and Governance Committee, including the Year Ahead Forward Plan, can be found on the council's website.
