Croydon Council's Audit and Governance Committee has significantly strengthened its oversight of the council's treasury and internal audit functions, a move prompted by new national guidance and the council's ongoing financial challenges.
Amendments to the committee's terms of reference, approved by Full Council on Monday 20 July 2026, align with new guidance from the Chartered Institute of Public Finance and Accountancy (CIPFA) and the Institute of Internal Auditors (IIA). These changes were recommended by the Constitution Working Group to bolster the committee's scrutiny of internal audit and treasury functions, in line with new CIPFA guidance and the Council's Financial Regulations.
The enhanced measures come in the context of Croydon Council's financial situation, which has necessitated 'exceptional financial support to deliver its budget'. The Scrutiny and Overview Committee has been actively monitoring finances and the transformation programme due to the 'highest level of exceptional financial support and the appointment of Commissioners' in the past year.
Key updates to the committee's terms of reference include requiring annual reviews of internal audit effectiveness and mandating meetings between the Head of Internal Audit and the committee without senior management present. Previously, the committee was required to 'review and contribute to the quality assurance programme' and 'provide free and unfettered access to the Committee Chair for the head of internal audit'. The new terms mandate that the committee will 'annually review the results of the Head of Internal Audit's assessment of conformance against the Global Internal Audit Standards (GIAS) and the Application Note: Global Internal Audit Standards in the UK Public Sector, including any action plan and to satisfy itself on the effectiveness of internal audit'.
The Global Internal Audit Standards (GIAS) detail that 'senior management must work with the chief audit executive to ensure that the charter sets out the arrangements the function needs to achieve internal audit's purpose.' The mandated meetings are intended to facilitate a more direct and candid discussion regarding the independence and effectiveness of the internal audit function.
Regarding treasury management, the committee will now formally approve the annual treasury management strategy and regularly review borrowing and investment activities. Previously, the committee was tasked to 'review and advise on the Council's treasury management strategy and policies'. The strengthened terms require the committee to 'annually approve the Council's Treasury Management Strategy' and 'regularly (at least every 6 months) review the Council's borrowing and investment activities and compliance with CIPFA's Prudential Code for Capital Finance in Local Authorities and the various strategies and policies agreed by the Council'.
The Annual Treasury Management Review 2025/26 report, which was approved by Full Council on 26 February 2025, details the council's financial activities. During 2025/26, Croydon Council maintained an under-borrowed position, using cash reserves as an interim measure to fund its capital borrowing need. This strategy was deemed prudent as near-term investment rates were generally lower than medium to long-term borrowing costs. New borrowing was structured over periods of 1–6 years to balance cost management with risk, reducing exposure to refinancing debt at potentially higher interest rates. Interest rate forecasts initially suggested gradual reductions, but inflation concerns in March 2026 prevented significant rate reductions across the curve.
Investment activity saw returns generally ranging from 4.5% to 5% for periods of 1 to 12 months in spring 2025. By March 2026, deposit rates became volatile, influenced by Middle East conflict concerns that suggested energy-driven inflation might lead to higher interest rates. Gilt yields also experienced volatility throughout 2025/26.
These amendments underscore the council's ongoing commitment to good governance and financial standards, ensuring robust oversight of its financial health and operational integrity. The specific criteria for assessing internal audit effectiveness are informed by the CIPFA Code of Practice, requiring the committee to review the Head of Internal Audit's assessment against GIAS and consider any action plans to address recommendations. The formal approval process for the annual treasury management strategy involves review by the Audit and Governance Committee, the Executive Mayor and Cabinet Lead for Finance, and ultimately noting and approval by Full Council.
